Business news 2 May 2024
New UK tech companies hits five year high. UK increases its share of European FDI. UK manufacturing slips back into contraction. And more business news that we thought would interest our members.
James Salmon, Operations Director.
New UK tech companies hits five year high
The number of UK tech businesses formally registered as limited companies reached a five-year peak in the first quarter of 2024, with a surge of 11% to 13,802, according to data from RSM UK. London emerged as the leading location, with 7,253 tech company incorporations, up 16% from the same period in 2023. The South East had the second-highest number with 1,350 new incorporations.
Ben Bilsland, partner and head of technology industry at RSM UK, highlighted the strength of the UK’s tech sector and advised tech entrepreneurs to collaborate and innovate with other tech businesses. In 2023, a record-breaking 51,017 new tech companies were incorporated.
However, Bilsland warned: “High rates of borrowing and uncertainty around inflation can have a detrimental impact on the risk appetite and patience of investors. As interest rates stabilise, inflation slows, and business confidence improves, this bodes well for further growth in the sector.”
UK increases its share of European FDI
The UK was the only major European economy to experience a rise in foreign direct investment (FDI) projects in 2023, with a 6% increase. According to its latest survey of the UK’s attractiveness, EY said Germany and France saw declines in FDI due to the eurozone’s struggling economy. Despite being Europe’s second-largest destination for foreign investment, the UK has not yet reached pre-pandemic investment levels.
However, its share of foreign investment in Europe has grown to 17.3%, with digital services and tech accounting for over a quarter of overseas capital. The tech sector attracted the most FDI in the UK, surpassing financial services.
EY’s chief UK economist, Peter Arnold, attributed the UK’s FDI growth to a resurgence in digital investment. While the UK’s tech project total disappointed in 2022, it rebounded in 2023 due to eased borrowing conditions. However, the UK still experienced an overall drop in high-value investment, particularly in research and development projects and the manufacturing sector. Arnold suggested that overseas companies may have shifted their focus to the US, where the government is offering subsidies and tax breaks for clean technology industries.
UK manufacturing slips back into contraction
New figures confirm that the manufacturing sector slipped back into contraction in April, with S&P’s purchasing managers’ index (PMI) showing a reading of 49.1. The sector has been suffering from uncertain demand and disruption in the Red Sea. The downturn was mainly due to scaled-back output in intermediate goods and investment goods. However, the consumer goods industry continued to strengthen. Exports remained subdued, with new export business falling for the 27th successive month. Staffing levels were reduced for the 19th consecutive month. Meanwhile, input prices accelerated at their fastest pace since February 2023, leading to higher selling prices at the factory gate. James Brougham, senior economist at Make UK, the representative body for the manufacturing sector, said: “The sector seems to be returning to the situation it found itself in only a year ago with low demand, high inflation and no clear route back to prosperity. If supply-side inflation continues, it’s almost certain the Bank will delay any decision to lower rates, or even return to raising them in the extreme.”
Markets
London markets gave up early gains yesterday as investors waited on the latest interest decision from the US Federal Reserve. At the closing bell, the FTSE 100 index was down 0.28% at 8121.24. Trading in Europe was quit with much of the continent enjoying May 1st public holidays.
Then, overnight, the Federal Reserve indicated as anticipated that persistent inflation will mean interest rates will stay higher for longer noting a “lack of further progress” towards its 2% inflation goal in recent months.
Overnight in the US the S&P 500 fell 0.34% to 5018.39, the Nasdaq fell 0.33% to 15605.48. The pound is currently worth $1.2514 and €1.1688. Brent is at $84.25, Gold is at $2305. The FTSE 100 is up 0.55% at 8165 and the Eurostoxx 50 is down 0.17% at 4913.
Shell
Shell reported stronger-than-expected first-quarter profit, despite a sharp downturn in natural gas prices in Europe. Shell reported adjusted earnings of $7.7 billion for the first three months of the year, beating analyst expectations of $6.5 billion, according to an LSEG-compiled consensus. A year earlier, the company posted adjusted earnings $9.6 billion over the same period and $7.3 billion for the final three months of 2023.
QE to cost taxpayers £85 billion
The Bank of England’s quantitative easing program between 2009 and 2021 when it was supporting the economy through the economic crisis will cost British taxpayers as much as £85 billion, according to the BoE’s latest official estimate. This up on the last estimate of £80 billion by the BOE’s . The central bank bought £895 billion in asset purchases to support the economy.
US Payrolls
US Private Payrolls increased at a faster-than-expected pace in April, indicating there are still plenty of tail winds for the US labor market, according to ADP. The payrolls processing firm reported Wednesday that companies added 192,000 workers for the month, better than the Dow Jones consensus outlook for 183,000 though a slight step down from the upwardly revised 208,000 in March.
Wickes
Wickes reported a ‘solid start to retail’ as mixed trends continued, while it reiterated its adjusted pretax profit outlook. The company said it continued to see a decline in Design & Installation and volume growth in Retail. Overall like-for-like sales fell 4.2% in the 16 weeks to April 20 on-year, with both periods including Easter trading. Design & Installation sales fell by 18% due to a ‘particularly strong performance’ a year prior, citing a back then elevated order book.
Dominos
Domino’s Pizza said first quarter trading was in line with expectations, with like-for-like sales falling, while it expects the second quarter to be ‘another tough’ period. First quarter like-for-like sales were down 0.5% from a year earlier, with total orders down 0.8% to £17.7 million. System sales were down 0.4% to £385.1 million.
Standard Chartered
Standard Chartered affirmed its financial guidance for 2024, reporting a strong start to the year. The Asia-focused bank reported operating income of $5.13 billion in the first quarter, a 13% increase from $4.56 billion. The net interest margin increased to 1.76% from 1.63%, outperforming company-compiled consensus expectations of 1.74%. Pretax profit rose 5.9% to $1.91 billion from $1.81 billion, beating the company-compiled market consensus of $1.39 billion. StanChart recorded an underlying credit impairment charge of $176 million during the quarter, compared to $26 million a year before.
Weak growth ahead for Scotland
Scotland can expect a gradual economic recovery and steady growth over the medium term, according to a report by KPMG. The firm’s first ever Scottish Economic Outlook report highlights that economic momentum will be underpinned by consumer spending, thanks to a recovery in people’s real incomes and a relatively low propensity to save. However, the outlook for investment is weaker. The report forecasts growth of 0.4% for the Scottish economy this year, with that rate expected to pick up to 1% in 2025. The challenges to the long-term growth outlook include slowing population growth and a decline in North Sea oil activity. Despite these challenges, there are reasons for optimism, such as solid consumer demand and the adoption of new technologies.
UK house prices fall slightly
UK property prices fell by 0.4% month-on-month in April, marking the second consecutive monthly decline, according to Nationwide Building Society. The annual rate of house price growth also decreased to 0.6% in April, down from 1.6% in March. The average UK house price in April was £261,962. Robert Gardner, Nationwide’s chief economist, attributed the slowdown to ongoing affordability pressures. Peter Arnold, EY UK chief economist, reminds readers that month to month house price reports from lenders can be volatile adding that the latest data is unlikely to mark the start of a renewed fall in property prices.
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The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.