Business news 14 April 2023
James Salmon, Operations Director.
Banks see increase in defaults. Economy will avoid recession. BoE economist expects inflation to fall. Worlds Richest man gets richer. And more business news.
Banks see increase in defaults
Data from the Bank of England shows that banks and building societies have seen an increase in defaults. In the three months to February, lenders said that default rates on secured loans to households, such as mortgages, and unsecured loans, such as credit cards, increased and are expected to increase further in the next three months.
The Bank’s credit conditions survey found that the availability of credit for secured lending remained steady in the period. However, lenders expect it to dip in the next three months. Ashley Webb of Capital Economics suggested this was because lenders expect “wholesale funding conditions to deteriorate further” following the recent turmoil in the banking sector.
While provision of credit for unsecured loans dipped in the three months to February, it is expected to increase slightly in the following quarter. Credit for businesses held steady and is expected to do so again over the coming months.
Economy will avoid recession, says Hunt
Data from the Office for National Statistics (ONS) shows that the economy saw flat growth in February. The 0.02% growth seen in February follows a 0.4% increase recorded in January. Despite February delivering minimal growth, Chancellor Jeremy Hunt said the economic outlook was “brighter than expected,” with the UK “set to avoid recession.” The ONS data shows that GDP grew by 0.1% in the three months to February.
Analysts at Capital Economics believe that the UK “probably avoided recession” but said more interest rate rises were likely as the Bank of England looks to get inflation under control.
Yael Selfin, chief economist at KPMG UK, said the economy was “likely to escape recession but a period of stagnation awaits.” She added: “Economic activity will remain subdued in the near term as households continue to be squeezed by elevated prices and the cumulative impact of past interest rate increases.”
Thomas Pugh, an economist at RSM UK, said: “Looking ahead, growth is likely to bumpy. Bad weather and continued strikes will weigh on GDP in March making it likely that GDP will fall in the first quarter overall, keeping the risk of recession alive.”
Martin Beck, chief economic adviser to the EY Item Club, predicted that the economic recovery would “gain traction” in the second half of 2023.
BoE economist expects inflation to fall
The Bank of England predicts that inflation will ease in the coming months. Chief economist Huw Pill said the Bank expects Consumer Price Index inflation to fall in Q2, “as large rises in energy prices from last year drop out of the annual comparison.” He also suggested that slowing pay growth could mean wage rises will ease as inflation falls. Mr Pill added that the Bank’s Monetary Policy Committee needs to see an increase in unemployment to “reassure” the rate setters that inflation is headed back towards their 2% target.
UK’s goods exports lowest in G7 following Brexit, study finds
With Office for National Statistics data showing that Britain had the weakest export performance in the G7 in Q4, experts at the Institute of Directors say Brexit has “created barriers to trade.”
Hunt: Pay rises above inflation would be a mistake
Chancellor Jeremy Hunt has warned that it would be a “terrible mistake” to give pay rises above the rate of inflation, saying that while strikes are hitting the economy, wage increases that fuelled inflation would have a “more damaging” impact. Mr Hunt said agreeing pay awards without making inflation worse was an “incredibly difficult balancing act that we have to get right.” The Chancellor told the BBC that ministers are aiming to “put this high inflation period behind us,” saying that by sticking to its plan, the Government could bring inflation down from 10.4% to below 3% by the end of the year. He added that the “worst possible thing” that ministers can do for striking junior doctors, nurses, train drivers, teachers is to “manage the economy in a way that they are still worried about 10% cost of living increases, in a year’s time.”
Jeremy Hunt said the government is ready to engage with junior doctors if they lower their opening pay demands, although it will refuse any deal that entrenches inflation and hurts growth. Junior doctors are staging four days of industrial action and demanding a 35% pay increase they say is needed to make up for about 15 years of below-inflation increases.
Worlds Richest man gets richer.
Bernard Arnault, the world’s richest person, has increased his lead over the second richest, Elon Musk. The Frenchman behind luxury goods company LVMH was $12 billion richer yesterday with his wealth climbing to almost $210 billion, a record high and his second-biggest single-day rise ever, according to the Bloomberg Billionaires Index. Tesla and Twitter’s Musk is worth $180 billion. LVMH stock price climbed came after investors were encouraged by quarterly sales figures.
Sunak: I’m a ‘low-tax’ Tory
Rishi Sunak has insisted he is a “low-tax Conservative” despite Office for Budget Responsibility analysis showing that the UK is on course for the overall tax burden to hit a post-Second World War high. The Prime Minister said that while he wanted “to make sure we can lower taxes over time,” it was vital to “get inflation down and get borrowing under control” as a priority, describing rising prices as a “massive problem.” Speaking to Conservative Home, Mr Sunak was asked if he and Chancellor Jeremy Hunt were looking to simplify the tax system and reduce taxes. The PM said: “That’s what the Chancellor set out in the Budget – very significant tax cuts for businesses to stimulate investment,” adding: “That’s how you drive growth; that’s how you drive productivity.” Mr Sunak went on to describe the UK as “pretty much one of the most tax-generous places to invest anywhere in the world.”
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
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