Business news 2 February 2023
James Salmon, Operations Director.
Manufacturing activity falls but optimism is up. Switching jobs can pay more than loyalty. Property, Brexit, interest rates, Shell, BT, Adani and more business news.
Manufacturing activity falls but optimism is up
A survey of purchasing managers in the manufacturing sector shows that while activity fell in January as factories reported job losses and new orders fell, the pace of decline slowed and optimism rose. The monthly index by S&P Global rose from an 18-month low of 45.3 in December to 47 in January on a scale where a reading above 50 indicates growth in activity.
Glynn Bellamy, UK head of industrial products at KPMG, said: “It will be some months yet until manufacturers feel that the UK economy has turned the corner, but the first small signs that inflation may have peaked increased optimism slightly in January about cost pressures lowering soon and continuing to fall as the year goes on.”
Switching jobs can pay more than loyalty
Office for National Statistics data shows that those who want to earn more money may be better off switching roles rather than hoping their current job offers them a higher salary. Pay growth stands at 6.6 percentage points higher for job movers than those who stay where they are.
On top of this, those finding a job in a new industry enjoyed earnings growth around 2.1 percentage points higher than those who stayed in the same industry. Meanwhile, a PwC poll suggests that almost one in five UK workers are very or extremely likely to change roles in the next year. Just 45% said they would not be looking for a new job this year.
Property Prices
Nationwide announced that UK property prices fell 0.6% in December to an average of £258,297. The fifth consecutive monthly fall.
Year-on-year price growth slowed to 1.1%, down from 2.8% in December.
Robert Gardner, chief economist at Nationwide, said the affordability of mortgages is set to “remain challenging” in the short term due to higher interest rates.
Pantheon Macroeconomics economist Gabriella Dickens said Nationwide’s figures show that house prices are “continuing to buckle under the pressure of elevated mortgage rates, squeezed real incomes and weak consumers’ confidence.”
Mortgages
UK mortgage approvals dropped to just 35k in December from 46k in November as buyers delayed their home buying plans. Excluding the COVID-19 pandemic this was the lowest level since January 2009.
Brexit
Brexit has caused a £100bn-a-year loss in output, leaving Britain’s economy 4% smaller than it would have been inside the bloc, according to Bloomberg Economics. The analysis showed that since officially leaving the European Union, three-years ago this week, UK-based investment has grown 19% less than the G7 average and the economy has forfeited 4% worth of growth.
EU Brexit Commissioner Michel Barnier said the door remains open for the UK to rejoin the EU.
FED & interest rates predictions for UK
The US Federal Reserve on Wednesday raised its benchmark interest rate by 0.25% and gave little indication it is nearing the end of this hiking cycle. Aligning with market expectations, the rate-setting Federal Open Market Committee boosted the federal funds rate to a target range of 4.5%-4.75%, the highest since October 2007. Federal Reserve Chair Jerome Powell said policymakers expect to deliver a “couple” more interest-rate increases before putting their aggressive tightening campaign on hold.
The dollar weakened despite this on risk sentiment. Cabe is at $1.234. Overnight, the DOW rose 0.02%, the S&P 500 rose 1.05% and the NASDAQ rose 2.00%.
The ECB and BoE are expected to follow suit and raise rates today but by double the amount at 0.5%.
Deutsche Bank believes the 0.5% increase will mark the MPC’s final “forceful” hike in the tightening cycle, while Societe Generale Global Economics expects another 0.5 percentage point increase in March.
Investec Economics believes the MPC will take rates to 3.75% today before peaking at 4% in March, with Philip Shaw, the firm’s chief economist, saying: “Recent weeks have ushered in a greater sense of economic optimism.”
AJ Bell analyst Laith Khalaf said changes in the economic climate since the last MPC meeting will make officials “think twice about pushing rates up too much.”
Shell
Shell announced a $4 billion share buyback, as it reported that revenue in the fourth quarter of 2022 rose to $101.30 billion from %85.28 billion a year earlier. Pretax profit increased to $16.44 billion in the quarter up from $16.27 billion. Full-year revenue climbed to 386.20 billion, up from 272.66 billion year-on-year, whilst pretax profit more than doubled to $64.81 billion from $29.83 billion.
BT
BT reported revenue of £15.59 billion in the nine months to December 31, down 1% from £15.68 billion a year ago. Pretax profit fell by 15% to £1.31 billion from £1.54 billion. BT explained that revenue was helped by price increases and improved trading seen in its Openreach and Consumer divisions. However, this was offset by disposals and the removal of BT Sports revenue due to its new joint venture.
Meta
Meta shares jumped almost 20% in post market trading after it reported above estimate revenues of $32.2 billion last quarter and announced $40 billion in share buy backs..
Adani
Adani shares continued to tumble 28% yesterday (total losses are now $107billion since the Hindenburg report), despite support from other Indian conglomerates who participated in a share issue to bolster the firms capital defenses with the companies dollar bonds falling fast in value too.
Businesses back increased support for asylum seekers wanting to work
A poll by the International Rescue Committee shows that the majority of UK businesses are in favour of allowing asylum seekers to work after waiting at least six months for their claims to be processed. The From Harm to Home report shows that nearly 70% of decision makers at UK business believe the time asylum seekers must wait before working should be halved from 12 months, with 64% saying this would benefit the economy. Tina McKenzie, policy chair of the Federation of Small Businesses, supports the move, saying: “Small firms are faced with a widespread labour shortage, so we’d like to see measures to help small businesses access talents from across the world.” She added: “We’d also like to see a nation-wide refugee entrepreneurship programme to support aspiring refugee business owners.”
British Steel could cut 800 jobs
British Steel is reportedly considering job cuts at its Scunthorpe plant, with the steel producer said to be discussing a consultation on around 800 redundancies. This comes despite the firm remaining in discussions with the Government about a £300m funding deal, one of the conditions of which is believed to be long-term employment guarantees. The Community Union, which represents steelworkers, expressed its concern at the planned cuts, with national officer Alun Davies saying redundancies would represent a “betrayal of [British Steel’s] loyal workforce and their commitments to invest in the business.”
Australia
Australia won’t put King Charles III on its five-dollar banknote, and instead plans to drop the head of the British royal family in favor of a design that honors the culture of the country’s Indigenous people. The new note will replace the portrait of the late Queen Elizabeth II with a tribute to the First Australians, the Reserve Bank said in a statement today.
Premier League’s January spending passes £800m
Premier League clubs spent a record £815m in the January transfer window, according to Deloitte. The biggest spenders were Chelsea, with the club responsible for 37% of the total and the biggest purchase – the British record £106.8m deal for Argentinian midfielder Enzo Fernandez from Benfica. Tim Bridge, lead partner in Deloitte’s Sports Business Group, said: “Premier League clubs have outspent those within the rest of Europe’s ‘big five’ leagues by almost four to one in this transfer window.”
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