Business news 11 July 2023
James Salmon, Operations Director.
Unemployment. Hunt: Reforms will boost pensions by £1,000 a year. Bailey and Hunt join forces to demand UK wage restraint. Small business owners optimistic about growth. UK Stocks cheap. And more business news that we thought would interest our members.
Unemployment
Unemployment unexpectedly rose to 4.0% in the three months to May. Market consensus had expected it to remain unchanged from 3.8% in the three months to April.
In the three months to May, annual growth in average total pay, including bonuses, accelerated to 6.9% from an upwardly-revised reading of 6.7% in the previous three-month period. May’s figures topped consensus of 6.8%. Excluding bonuses, average earnings rose 7.3%, matching the upwardly revised figure for the previous month. This was above the consensus of 7.1%.
The pound rose to the highest versus the dollar since April 2022 ahead of the next interest rate decision in August.
Hunt: Reforms will boost pensions by £1,000 a year
The Chancellor on Monday set out a series of measures that he said could release as much as £75bn from UK pension plans for investment in high-growth companies.
In his first Mansion House speech, Jeremy Hunt claimed average earners will be more than £1,000 a year better off in retirement as a result of the reforms while improving access to investment for British businesses. The initiative involves the UK’s largest pension providers committing to invest 5% of their so-called default funds for defined contribution pension savers to unlisted equities by 2030. This would be up from just 0.5% invested now. The Government believes this deal could unlock up to £50bn of new investment.
Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, and M&G have all signed up to the plans. The Chancellor also wants local government pension schemes to double existing investments in private equity to 10% and has set a March 2025 deadline for dozens of local authority pension funds to pool their assets so they can benefit from economies of scale.
David Postings, chief executive of UK Finance, said: “We welcome the plans… These reforms will help support economic growth and bolster our capital markets by delivering more investment and making it easier for companies to grow and list here in the UK.” But Tom Selby, the head of retirement policy at the broker AJ Bell, said the fall of star fund manager Neil Woodford showed “the challenges big investments in illiquid assets can have, and investors will not thank the Government if this policy hits the value of their retirements pots”.
Bailey and Hunt join forces to demand UK wage restraint
In his Mansion House speech last night, Andrew Bailey warned that further interest rate rises could be on the way as inflation remains “unacceptably” high. The Bank of England governor said Threadneedle Street had to “see the job through” explaining that the “unexpected resilience” of Britain’s economy had exacerbated wage and demand pressures, contributing to “sticky” high inflation.
However, he did say that he still expects inflation to drop markedly in 2023, despite inflation in the UK being stickier than in other G7 nations due to supply constraints.
Speaking at the same dinner, Jeremy Hunt said he and Mr Bailey would do “what is necessary for as long as necessary to tackle inflation” and bring it back to the Bank’s 2% target. The Chancellor said: “That means taking responsible decisions on public finances, including public sector pay, because more borrowing is itself inflationary.” Bailey said he expects lower energy prices will help headline inflation fall markedly over the rest of the year and that lower commodity prices should feed through to lower food prices too.
Small business owners optimistic about growth
Small business owners are more optimistic now than they were this time last year, with eight in 10 expecting their company to grow over the next year, according to a survey by American Express and Small Business Saturday UK. Despite the challenges faced by small businesses, such as inflation and business rates, the number of owners expecting growth has increased by 13 percentage points from 2022.
Michelle Ovens, director of Small Business Saturday UK, praised the resilience and determination of small business owners and called for more support and recognition of their impact on local communities and the wider economy. Amanda Salt, Vice President at American Express, highlighted the positive signs in the research, with business owners feeling confident about the future and planning to invest in various areas of their operations.
UK Stocks cheap
Markets have turned against the UK for the second time in under a year as the outlook for inflation and growth darkens for an economy that’s already lagging behind the other Group of Seven nations.
UK stocks are the cheapest in the world, according to Morgan Stanley. UK equities have a long-standing reputation of having relatively attractive valuations but poor investor sentiment toward the macro environment for much of the last 5 to 10 years has made them even cheaper than normal.
Analysts at the American investment bank said that already cheap UK assets had been discounted further in the face of investor reluctance, leaving British stocks and bonds the cheapest in the world relative to the returns they generate. However, analysts said the current pessimism could shift quite meaningfully over the next few months if inflation starts to drop.
Retail sales in Britain rise as warm weather boosts spending
Retail sales in Britain rose last month as warm weather boosted spending on barbecue food, swimwear, beach towels, outdoor games and garden furniture. Sales rose by 4.9% compared to a 1% fall in the same month last year, according to the British Retail Consortium and KPMG. Like-for-like retail sales grew by 4.2%, up from 3.7% in May. Paul Martin, the UK head of retail at KPMG, said: “Consumers have so far remained resilient, but the triple threats of further interest rate hikes, resolute double-digit food inflation and an economy recovering at slower rate than predicted could hamper a return to much needed profitable growth across the retail sector.” Separate figures from Barclays showed consumer spending on debit and credit cards rose 5.4% year-on-year in June, with spending on groceries up 9.5%, the most since February 2021.
Thames Water
Thames Water Ltd. said it needs “significant additional funding” in the years ahead to service its debts and fix leaky pipes, even as investors agreed to put an extra £750 million into the nations biggest water utility.
Easyjet
Easyjet has confirmed it has cancelled 1,700 flights. The airline has axed flights during July, August and September, travelling to and from Gatwick airport. Easyjet blamed constrained airspace over Europe and ongoing air traffic control difficulties, which are causing regular cancellations.
Climate
The first week of July was the hottest week ever recorded on the planet, according to the World Meteorological Organisation. The world had already experienced the hottest June on record, said the UN body.
HSBC downgrades property companies
HSBC downgraded a slew of property companies on Monday warning the industry is facing a “particularly precarious” period as higher interest rates point to “another round of asset price mark-downs across the sector”. The bank downgraded Land Securities Group and British Land two steps to the equivalent of a “sell” rating due to their “higher exposure” to the retail and office sectors.
High taxes are driving away key workers
Matthew Lynn says in the Telegraph that if the UK Government doesn’t act on high taxes soon more potentially mobile workers will choose to work abroad. The number of “digital nomad” visas on offer is growing all the time, with Canada joining the likes of Spain, Portugal and Greece in the past month alone, he says. “Given that most of the visas come with generous tax breaks, it may well be the only way that a whole generation of entrepreneurs and freelancers can opt out of the moribund big-state, high-tax models that countries such as Britain are set on – and they may be the only people who can finally force governments to face up to the bankruptcy of that model.”
UK employers pressed to hire more prison leavers
Employers are being encouraged by government ministers to train and hire ex-offenders in a drive to help prison leavers plug labour shortages and move into stable work.
Nearly two-fifths of finance chiefs experience delays in month-end reports
A survey of 1,000 UK-based finance decision-makers has found 39% plan, manage and take over a week to prepare and submit month-end reports. Nearly one in five (17%) reported that it can take more than a fortnight to complete them, with unreliable data being the most significant cause of delay. According to Iplicit, the accounting software provider that conducted the survey, delayed month-end reporting places “additional and unnecessary” pressure on finance teams. Paul Sparkes, commercial director at Iplicit, said: “A lack of rapid insight into business performance is not only hugely frustrating, but it creates a significant risk which is not something any business should tolerate. I question whether UK finance decision-makers are being held back by their accounting and finance systems and processes.”
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Why should you become a CPA member!
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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When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.