Business news 30 March 2022
James Salmon, Operations Director.
Consumer lending surges to £1.9bn. Unions criticise plans to tackle fire and rehire. Ukraine. Supermarket inflation hits 10-year high. Grocery sales. And more business news.
Consumer lending surges to £1.9bn
Figures from the Bank of England (BoE) show that lending to consumers rose by the most in nearly five years in February, jumping 90% compared to January. Consumer credit rose by a net £1.9bn, with this driven by a record rise in credit card borrowing, which hit £1.5bn. The Bank said the increase pushed the annual growth rate for all forms of unsecured credit from 3.2% to a two-year high of 4.4%, raising the total outstanding balance of consumer credit to £199.5bn. Reflecting on the BoE report, Martin Beck, an economist with the EY Item Club, said the increase might have been driven by a boost to consumer optimism, but “another possibility is that more consumers had to resort to credit in the face of growing cost of living pressures.” Thomas Pugh, UK economist at RSM, said the figures “suggest that consumers are increasingly borrowing more to protect their lifestyles from the surge in inflation.” Karim Haji, head of financial services at KPMG, commented: “A trend in the early part of the COVID-19 pandemic was an increase in household bank deposits but, with rapidly rising inflation, it seems unlikely we’ll see the same happen this year. Instead, sadly, the numbers we may see increase are defaults later in the year as people struggle to service personal loans and credit cards.”
Unions criticise plans to tackle fire and rehire
Unions have criticised Government plans to tackle the so-called fire and rehire of workers, with Business Minister Paul Scully having revealed legislation to “clamp down” on “unscrupulous” employers who fail to hold meaningful staff consultations. The Department for Business, Energy and Industrial Strategy said a new statutory code of practice would detail how businesses “must hold fair, transparent and meaningful consultations on proposed changes to employment terms.” Labour said the move was “too little, too late” in the wake of P&O Ferries sacking 800 employees without notice, with deputy leader Angela Rayner saying the plans fell “woefully short of stopping the scandal of fire and rehire altogether”. While the Trades Union Congress said the plans “lack bite” and represent a “baby step forward”, Gary Smith, general secretary of the GMB, said the Government’s proposals looked like “futile tinkering, and the scourge of fire and rehire must be barred from the start”. He added that fire and rehire “is a cruel, outdated, Dickensian working practice that should be consigned to the scrapheap of history”, adding a call for “clear legislation to outlaw this abhorrent tactic.” Unison general secretary Christina McAnea said the plans “fall far short.”
Ukraine
Global markets recovered yesterday as talks between Ukraine and Russia showed progress. Oil prices also fell. Russia said that it was willing to radically cut the number of troops stationed around Kyiv, in order to strengthen trust. A Ukrainian spokesperson has said his country needs security guarantees and a ceasefire. Th US urged caution on accepting everything Moscow says at face value,
Supermarket inflation hits 10-year high
Research shows that supermarket inflation has now hit 5.2%, the highest level since 2012. Prices are soaring as manufacturers and grocers are faced with climbing energy costs and higher wages. With costs rising, shoppers are turning to discount retailers and own brand products, with Aldi and Lidl the only supermarkets seeing year-on-year growth in market share. Analysis also shows that own label products now account for 50.6% of all spending, an increase on the 49.9% recorded last year.
Grocery sales
Grocery Sales declined in last few weeks compared to a year before, according to a report from Kantar on Tuesday, with the pace of growth compared to two years earlier also slowing. Some pandemic trends have begun to normalise, though some patterns, such as chunkier sales contributions from online offerings, have lingered. Grocery price inflation, meanwhile, hit a near 10-year high in March.
Post-Brexit City exodus fails to materialise
Data from EY shows that a post-Brexit exodus of financial services jobs from the UK to the EU has stabilised, with analysis showing that Brexit-related job losses amount to just over 7,000, down from the 7,400 it estimated in December 2021. The total falls far short of forecasts made before the Brexit referendum, with PwC having warned in 2016 that as many as 100,000 financial jobs could be lost if Britain voted to leave the EU. The EY Financial services Brexit tracker shows that 44% of the UK’s largest financial services firms have announced plans to move some UK operations to the EU since the referendum, with Dublin the most popular destination. EY said that new local hires linked to Brexit totalled 2,900 across Europe, and 2,500 in Britain. The transfer of assets from London to EU hubs remains about £1.3tn. Omar Ali of EY commented: “Staff and operational moves across European financial markets will continue as firms navigate ongoing geopolitical uncertainty, post-pandemic dynamics and regulatory requirements.”
Demand pushes house prices to £245k
Data from Zoopla shows that UK house prices have hit an average of £245,200, with this marking a year-on-year increase of 8.1%. The report shows that new listings of homes for sale rose 5% above the five-year average last month, with listings for sale across the average estate agency branch up 3.5% in the 28 days to March 20. The stock of homes available to buy was 42% below the 5-year average, compared to 47% lower in December. It was also found that sales agreed in Q1 were up 38% compared to Q1 2020. While Zoopla says buyer demand remains “unseasonably strong”, looking ahead, the firm’s head of research, Gráinne Gilmore, pointed to the “increased economic headwinds”, including the rising costs of living and increasing mortgage rates, saying these mean property price growth “will start to moderate as we move through the second half of 2022.”
UK house prices to continue to outpace inflation, says Bellway
Developer Bellway believes soaring inflation is unlikely to hit the profits of housebuilders as property prices are climbing even faster, although CEO Jason Honeyman said price growth could hit demand.
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