Business news 5 January 2022
James Salmon, Operations Director.
Manufacturers see decline in export demand. Spending and borrowing start to normalise. Grocery sales. Britain’s national debt. No surge in workers returning to offices. And more business news.
Manufacturers see decline in export demand
Data from the latest IHS Markit/CIPS sector snapshot shows Britain’s manufacturers have suffered a drop in export demand, with the pandemic and Brexit having an impact amid supply chain disruption and staff shortages.
According to the survey of 650 manufacturers, inflows of new work from overseas dropped for the fourth month in a row in December. The IHS Markit/Cips analysis suggests that UK-based firms suffered from rising costs for freight, shipping and air transportation amid supply chain disruption.
However, firms also recorded further growth of production, new orders and employment. Hiring was up for the 12th successive month in December, with firms looking to meet improved demand, tackle rising backlogs and address staff shortages. The IHS Markit/Cips manufacturing purchasing managers’ index was at 57.9 in December, with this compared to a three-month high of 58.1 in November on an index where a figure above 50 signifies growth.
Martin Beck, chief economic advisor to the EY Item Club, comments: “Just as the index had benefited throughout most of last year by supply disruption and an associated lengthening of delivery times, an easing in pressure on supply chains in December’s survey weighed on the PMI.” Simon Jonsson, head of industrial products at KPMG, said manufacturers need to focus on how they can absorb or pass on inflationary pressures, adding: “In 2022, productivity improvements will be key.”
Spending and borrowing start to normalise
Figures from the Bank of England (BoE) show that credit card spending increased in November, with spending and borrowing showing signs of normalising after being distorted by pandemic-driven support measures.
The report shows that £1.2bn was borrowed in November, with £900m going on credit cards. This was the highest total since July 2020 and lines up with pre-pandemic averages. The Bank also revealed that households collectively saved £4.5bn in November, with this below the six month average of £7.9bn.
Reflecting on the spending data, RSM economist Thomas Pugh said: “Combined with stronger retail sales data for November, this suggests that consumer spending was reasonably strong in November. But this could just have been driven by earlier Christmas shopping and it seems apparent that the emergence of the Omicron variant caused consumers to retreat in December and January.”
Martin Beck, chief economic adviser to the EY Item Club, said that while some households cut back on saving and increased borrowing amid a squeeze on household finances, “it also appears to be indicative of a more bullish consumer mindset”.
Grocery sales
UK Grocery Sales in the lead-up to Christmas were down on a year before but up from the same period in pre-pandemic 2019, figures from market research firm Kantar showed this morning. Grocery sales reached £11.7 billion in the four weeks to December 26, Kantar said. In the longer 12-week period leading up to Boxing Day, sales totalled £31.07 billion, down 3.0% from a year before, when the UK was under various degrees of lockdown. However, this was up 8.0% on a two-year basis.
Covid
The prime minister said the U.K. can weather a record wave of Covid-19 sweeping the country without tighter restrictions, even as he warned the National Health Service is under growing strain. The country’s booster vaccination program and the rules in place since before Christmas appear sufficient for now, Boris Johnson said, adding “The weeks ahead are going to be challenging,”.
Meanwhile, the World Health Organisation said there is growing evidence that the Omicron variant of covid-19 causes relatively mild symptoms. And amusingly in France, Macron, the president declared his strategy is to “emmerder” – a rather vulgar term translated “p*** off” – the un-vaccinated in his country. In his interview with Le Parisien on Tuesday, Mr Macron said that while he would not “vaccinate by force”, he hoped to encourage people to get jabbed by “limiting as much as possible their access to activities in social life”.
Britain’s national debt hits £2.3tn
The cost of servicing Britain’s national debt looks set to hit almost £1,000 per person this year, with the debt pile rising from just £354bn at the turn of the century to £2.3trn today.
KPMG analysis suggests that debt interest payments will total £64bn in 2021/22 – with this equating to £955 for every person in the UK. The total is up from £39bn last year.
KPMG economist Michal Stelmach said the impact of higher inflation and rising interest rates on the cost of servicing the national debt could add £11bn to borrowing in 2022/23. John O’Connell, chief executive of the Taxpayers’ Alliance, said: “Taxpayers will be alarmed that Britain’s debts are reaching astronomical heights,” adding that the figures “should serve as a massive wake-up call” for the Government. He urged ministers to “get public spending under control and stop the debt from spiralling further,” warning: “If they don’t it will only continue to weigh down taxpayers for generations to come.”
No surge in City workers returning to offices
The Guardian’s Joanna Partridge looks at the number of workers returning to the City yesterday, saying that while Tuesday would have normally marked the first day back in the workplace after the Christmas break for many office-based employees, staff at most large offices appeared to be continuing to work from home amid concern over the Omicron coronavirus variant. Data from Transport for London shows that the morning rush hour in London remained well below pre-pandemic levels, while figures from satnav maker TomTom show that morning rush hour congestion on roads in city centres including London, Birmingham, Manchester, Glasgow and Cardiff remained at half the levels seen in early January 2020.
Critical workers could get priority Covid tests
Millions of critical workers could get priority Covid testing through their employers, with ministers drawing up plans designed to tackle staff shortages. With it reported that officials have drawn up a prioritisation list including health workers and those working in critical infrastructure, a Government source has said that while a prioritisation plan has been put together, there was no plan for imminent implementation. While schools are set to receive kits this week, the British Medical Association and Royal College of Nursing have called for health staff to be prioritised for rapid tests to ease staffing issues. Sources suggest that critical businesses including police, transport workers and haulage could also be given access to priority testing under the proposed plans.
Tax and inflation could hit workers in 2022
Stephanie Hawthorne in the I warns that 2022 could see UK workers face a “double whammy” of one of the highest ever sustained tax takes and the highest level of inflation for 20 years. She cites PwC analysis showing that headline inflation rates could rise to around 5% to 6% before dipping back in the next couple of years. Ms Hawthorne goes on to detail an increased tax burden that will see National Insurance rise by 1.25% in April, the dividend tax rate increase and various rates and reliefs frozen at 2021/22 levels until 2026, including personal tax thresholds, the pensions lifetime allowance and the annual exempt amount for capital gains tax.
Shaun Moore, a tax and financial planning expert at Quilter, says further changes could be on the way, saying: “There has been a significant amount of attention from the Office for Tax Simplification on both capital gains tax and inheritance tax, which may well encourage the Chancellor to make changes.”
Markets
The FTSE 100 hit 7500 for the first time since the covid-19 crash back in the first quarter of 2020. Stock markets rose around the world from Europe to Asia, shrugging off worries the Omicron coronavirus variant could choke the global economic recovery. In the US , while the DOW surged to new record high overnight, the S&P 500 and NASDAQ closed lower. Sterling is benefiting from buying against the the Euro.
Apple
Apple has become the first company to hit a stock market valuation of $3trillion. The firm’s share price has risen by around 5,800% since co-founder and former chief executive Steve Jobs unveiled the first iPhone in 2007.
First-time buyer numbers at highest level since 2006
The number of first-time buyers snapping up homes has reached the highest level since 2006, according to Yorkshire Building Society (YBS) analysis. The research shows that there were 408,379 mortgaged first-time buyers in 2021, with this up from 300,307 in 2020. This marks the first time in 15 years that the total has passed the 400,000 mark. The report notes that first-time buyers now make up half of mortgaged house purchases, up from just over a third in 2006.
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