Business news 13 September 2023
James Salmon, Operations Director.
Wages outstrip inflation for the first time in over a year. Economy could stagnate for two years. Value of mortgage arrears up by a third. Grocery inflation. And more business news that we thought would interest our members.
Wages outstrip inflation for the first time in over a year
Wage growth has caught up with rising prices for the first time in nearly two years, according to Office for National Statistics (ONS) data. Regular pay, excluding bonuses, rose by 7.8% year-on-year in May to July, matching the inflation rate for the period. Darren Morgan, director of economic statistics at the ONS, said earnings continued to increase at record rates, while inflation has started to come down, meaning that real pay is no longer falling. Separate ONS data shows that the headline unemployment rate in the May-to-July period climbed to 4.3%, up from 3.8% in the previous three-month period. The number out of work is now just below 1.5m.
At the same time, the number of job vacancies has dropped below 1m. Reacting to the ONS figures, Chancellor Jeremy Hunt said: “It’s heartening to see the number of employees on payroll is still close to record highs and that our unemployment rate remains below many of our international peers.” He added that while wage growth “remains high,” for real wages to grow sustainably “we must stick to our plan to halve inflation.”
Martin Beck, chief economic adviser to the EY Item Club, said that given the ongoing strength in pay growth, the latest figures “don’t change the likelihood” of the Monetary Policy Committee opting for another interest rate rise. He added that “growing evidence of the adverse effect of policy tightening on the labour market is one factor which means interest rates should soon peak.”
Yael Selfin, chief economist at KPMG, expects the Bank to raise rates by another 0.25 percentage points this month as high pay growth “continues to present a conundrum for ratesetters.”
Breaking news – GDP contracts
The UK Economy contracted by more than expected in July, according to the Office of National Statistics. Monthly gross domestic product contracted by 0.5% in July, having grown by 0.5% in June. This came in worse than consensus, which had expected just a 0.2% contraction in GDP for July. The main contributor to July’s fall was a 0.5% contraction in services output, after growth of 0.2% in June, the ONS explained. The news was blamed on the strikes and wet weather. More tomorrow.
Economy could stagnate for two years, says BoE’s Breeden
Sarah Breeden, the Bank of England’s incoming deputy governor for financial stability, says the UK faces two years of economic stagnation due to inflation. While she said the UK was not on track for a recession, Ms Breeden has warned MPs on the Commons Treasury committee that the economy would remain sluggish, saying: “I would expect relatively flat GDP in the UK over the next couple of years, as the impact of past increases in bank rate increasingly push down on demand, and supply remains very weak.” With wages growing at a faster pace than previously expected, increases in both inflation and interest rates are considered likely.
Value of mortgage arrears up by a third
The strain on household cashflow is demonstrated as Bank of England figures show that the value of UK mortgage arrears jumped by almost a third in April-June compared with the same period in 2022, with outstanding mortgage debt now at £16.9bn – the highest total since 2016. New arrears cases equated to 16% of the total outstanding mortgage debt in April to June, with the quarter-on-quarter jump in the proportion of mortgages in arrears the highest since 2018.
Grocery inflation
The pace of grocery price inflation has eased to its lowest level in more than a year. Prices were 12.2% higher than a year ago over the four weeks to September 3. This is down on the 12.7% increase recorded a month earlier and marks the sixth consecutive decline since the 17.5% peak seen in March, according to survey data from Kantar. During the same period, take-home grocery sales increased by 7.4% from a year before, rising from 6.5% a month ago.
Poundland owner snaps up 71 Wilko sites
Pepco, the owner of Poundland, is to take on the leases of 71 Wilko sites, with these to be converted into Poundland branches in a move that could throw a lifeline to some of the 1,800 staff. B&M has bought 51 Wilko stores in a deal worth £13m, with these to become B&M stores. Wilko’s administrator, PwC, said it will “continue to engage with other retailers around any interest in other Wilko sites.” Administrators added that they are confident of completing a sale of the Wilko brand and intellectual property “within the coming days.” Sources say The Range is the frontrunner to acquire the Wilko brand and online assets.
Labour would scrap minimum service levels law
Deputy Labour leader Angela Rayner says the party would scrap the minimum service levels law within its first 100 days in office if elected. The recently introduced law means ministers can implement minimum staffing levels for certain roles, including the emergency services, during strikes. Ms Rayner told the TUC conference that Labour would ask Parliament to repeal the “anti-trade union laws.” She also said that a Labour government would deliver a new workers rights package within the first three months in power, calling this a “cast iron commitment.”
City faces decline, financial services leaders warn
The City of London is at an “inflection point,” with nearly two thirds of financial services leaders warning that the City’s star will wane without intervention. According to Lloyds Bank’s financial institutions sentiment survey, 64% of sector leaders think that the City will stagnate as a global financial centre compared to rivals. A quarter of firms said they would relocate some of their UK-based staff overseas if London loses its status as one of the world’s leading finance hubs in the next five years. Nearly 80% of respondents said better relations between the UK and EU would help enhance London’s status, while two fifths said that there should be a relaxation of immigration rules for skilled workers. Chancellor Jeremy Hunt announced a package of reform in December and the Government has already passed its flagship Financial Services and Markets Bill, which empowers regulators to make decisions previously made at an EU-wide level. Lisa Francis, managing director, Institutional at Lloyds Bank Corporate and Institutional Banking, said: “The City of London’s status as a leading financial centre is at an inflection point.”
Triple lock will see state pension rise by 8.5%
The triple lock guarantee means the state pension is likely to rise by 8.5% in April. The pledge ensures the annual state pension increase is the highest of average earnings, inflation or 2.5%. Total pay including bonuses has hit 8.5% and the inflation figure is unlikely to be higher. This means the basic pension is set to increase by £691.60 a year to £8,814.
BP
BP said Chief Executive Bernard Looney has resigned “with immediate effect”, after admitting that he had not been “fully transparent” about historical relationships with colleagues.
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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.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
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You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.