Business news 15 June 2023
James Salmon, Operations Director.
Economy returns to growth. Staff at small firms in the office more often. US holds interest rates steady but UK set to raise. And more business news that we thought would interest our members.
Economy returns to growth
Office for National Statistics (ONS) data shows that the economy returned to growth in April, with a 0.2% increase. This marks an improvement on the 0.3% fall recorded in March. The ONS report also shows that the economy expanded by 0.1% in the three months to April.
ONS director of economic statistics Darren Morgan said GDP “bounced back after a weak March.” Kitty Ussher, chief economist at the Institute of Directors, said April’s GDP data “shows a recovery in consumer-facing services compared to March.” “This suggests that households responded to the improving weather in April by raising their levels of discretionary spending – even in the face of rising costs,” she added. With analysts suggesting that the Bank of England is likely to further hike interest rates,
Chancellor Jeremy Hunt said: “High growth needs low inflation, so we must stick relentlessly to our plan to halve the rate this year to protect family budgets.” He added that the Bank has “no alternative” but to keep raising borrowing costs to curb price increases.
Thomas Pugh, an economist at RSM UK, said he expects rate hikes in June and August to take interest rates to 5%. Yael Selfin, chief economist at KPMG UK, said that inflation “has proven more persistent than originally anticipated, continuing to put pressure on households’ income.” She added that the Bank is likely to continue its “rate hiking cycle, putting further pressure on both households and businesses as they face higher borrowing costs.”
Staff at small firms in the office more often
A poll by property consultancy Lambert Smith Hampton (LSH) shows that workers at small companies are more likely to go into the office regularly than those at larger employers.
In a survey covering companies that collectively have more than 100,000 UK staff, 39% said staff are in three days a week, making it the most common answer. This was up from 42% last year. Among those with fewer than 50 employees, 47% reported office attendance of at least four days a week, while at firms with more than 1,000 staff, two days a week was the most common level of office attendance.
Oliver du Sautoy, head of research at LSH, said the results suggest “larger businesses have more established infrastructures to facilitate hybrid working.” He added: “By contrast, SME culture is arguably more rooted in the physical workplace and the interaction and camaraderie that comes with it.”
US holds interest rates steady
The Federal Reserve has announced it will hold interest rates steady, maintaining the target for its benchmark rate at 5%-5.25%. This marks the first time the US central bank has opted against a rise in more than a year, having increased rates ten times since March 2022. The Fed said it was holding rates steady so it can assess the impact of its previous hikes. But chair Jerome Powell said July’s meeting would be ‘live’ and to expect further tightening. Rate cuts were not likely for the next two years. Powell made clear the Fed would not settle for inflation above 2%.
UK Interest rates & Inflation
Chancellor Jeremy Hunt commented today that the UK has ‘no alternative but to raise interest rates to bring down inflation’. The Chancellor’s remarks were seen as supporting the Bank of England and preparing the country for a further rate hike next week.
China
Foreign Secretary James Cleverly is considering a visit to China next month, with the UK seeking to repair relations with the Asian superpower.
Mobile firms to merge
Vodafone and Three agreed to combine their UK mobile businesses in a deal that will create the biggest wireless company in the country if it passes muster with regulators.
Supermarket Price cap
The Teelgraph reports that the PM is set to drop plans to introduce price caps on basic goods in supermarkets following a backlash from the retailers who said it could cause shortages or the rise in prices elsewhere and wouldnt make a jot of difference.
Brexit
Swati Dhingra, who sits on the BOE’s Monetary Policy Committee has called for a fundamental revisit of the UK-EU trade deal to ensure our Services and Manufacturing can thrive. The suggestion is that the UK replicate Northern Ireland’s position by becoming part of the EU customs territory and single market for goods which could boost gross domestic product by as much as 2%.
Also suggested, was a new services trade agreement covering industries such as finance, business services, education and culture, which would focus on mobility of workers, recognition of qualifications and digital agreements rather than tariffs.
WE Soda
WE Soda, the world’s largest producer of natural soda ash, has abandoned plans to IPO in London less than two weeks after announcing the move.
We Soda reportedly wanted to raise £600m through an IPO, valuing the firm at more than £6bn. However, the company said UK investors “remain extremely cautious” and they were unable to reach a fair valuation, in what is seen as a further blow to London’s reputation as a global financial centre.
No Britcoin without a Parliamentary vote
Lawmakers say a digital pound – the so-called Britcoin – should not be introduced without parliamentary scrutiny. Lord Forsyth told the House of Lords that the notion that the Treasury and the Bank of England could introduce a central bank digital currency (CBDC) “without having proper parliamentary scrutiny… is utterly ridiculous.” He added that it is “very important that we have parliamentary accountability.” The Bank has suggested that a CBDC is “likely to be needed in future” as digital payments become increasingly important in the economy. Chair of the economic affairs committee Lord Bridges said: “We cannot and we must not” leave the digital pound “to be passed by statutory instrument one wet Wednesday afternoon,” saying this would be “an absolute disaster.”
Experts fear small landlord exodus
Experts have warned that higher buy-to-let mortgage rates are likely to drive more and more smaller landlords out of the market. The average buy-to-let five-year fix is now hitting 6.09%, compared to 5.55% for residential borrowers. An average two-year fix for a BTL landlord sat at 3.59% a year ago, according to MoneyFacts, with the average rate now at 6.1%. Chris Norris, policy and campaigns director at the National Residential Landlord Association (NRLA), said that while the organisation was not seeing an “exodus” from the private rented sector, it had seen a significant increase in the proportion of members saying they either have sold, or plan to sell, properties. In Q1, around 25% of landlords with three or fewer properties said they planned to sell at least one in the next 12 months. Jason Harris-Cohen, managing director at the Open Property Group, said he expects that many landlords will face “significant falls in profit once their fixed-term mortgages expire.”
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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.