News Headlines – Friday 24th January 2014

Economics

Governor of the Bank of England Mark Carney has ruled out an early increase in borrowing costs, vowing that this week’s faster than expected fall in unemployment will not lead to an automatic interest rate rise that might harm the recovery. Softening his flagship forward guidance policy of linking an interest rate rise to a fall in unemployment rate to 7%, Carney denied that it has caused a headache for the Bank – saying that  “if our forecast is going to be wrong, it’s better for it to be wrong in that direction”. He has also announced that when the Bank does decide to raise interest rates for the first time since the financial crisis, that changes will be gradual. Some City analysts are now expecting Carney to announce that he will lower the threshold at which the Bank would consider raising interest rates to an unemployment level of 6.5%, although the Governor has said that the Bank’s monetary committee will consider all aspects of the labour market and not just the unemployment rate (Telegraph Business p.1, Guardian FP, FT FP, Independent p.4)

 

Personal Finance

Launching a major counter-offensive against Labour’s accusations of a cost-of-living crisis, Department for Business Minister Matthew Hancock writes in the Times today that there is “stark” evidence that after-tax pay grew by more than prices for all but the best-paid 10%.  The Conservatives insist that the recovery is reaching ordinary families and that standards of living are on the rise, as the latest ONS Annual Survey of Hours and Earnings showed that working families’ pay rose a third faster than inflation in the year to April 2013.  The data also shows that growth in take-home pay is strongest in the North and Midlands, and weakest in London and the South, rivalling Labour’s assertions that economic growth is unevenly spread and enhancing the north-south divide (Times FP and leading article, Telegraph FP, Mail p.2).

 

Property

The number of first-time buyers stepping onto the property ladder has surged to its highest level since 2007, as “schemes like Help to Buy provide vital support” according to LSL property Services. The volume of first-time buyer deals in December 2013 was up 30% from a year previously. But while the average deposit for a first-time buyer has fallen by 3.6% since December 2012, their mortgages are getting bigger – jumping by 11.4% in a year (Times p.44).

 

Recruitment

At the World Economic Forum in Davos today, Cameron will claim that fast-recovering Britain offers an opportunity to win back jobs lost overseas, saying “there is a chance for Britain to become the Re-shore Nation”. He will announce that the Coalition’s low business taxes plus the prospect of cheap energy from shale gas are set to decisively reverse the off-shoring trend. He will report that many firms are already looking to relocate call centres as well as high-skilled manufacturing and technology plants back to the UK after years of outsourcing production and services to India and the Far East. 1,500 manufacturing jobs have already been brought back to the UK since 2011, with companies such as food manufacturer Symington’s, model train firm Hornby, and fashion brand Jaeger relocating back to Britain.  More than 1 in 10 SMEs have brought back production to Britain in the past year, more than double the proportion sending it in the opposite direction overseas (FT p.4, Express p.4, Mail p.2).

Paper Summary: 20th December 2013

In Friday’s papers…

Economics

Businesses will be paid to cut their energy use on winter evenings next year, amid warnings from Ofgem of increased risk of power shortages by the middle of the decade. The National Grid will ask businesses to reduce electricity use between 4pm and 8pm – the peak demand period for households – forcing the government to deny that we are heading towards a sustained wave of blackouts reminiscent of the 1970s.  The cost of running the scheme however, is likely to fall on consumers’ energy bills, and the measures would also have serious ramifications for the nation’s productivity and economic recovery.  The fact that these measures are deemed necessary is being viewed  as proof that not enough wind turbines are being built to cover the fall in Britain’s electricity-generating capacity, as many coal and gas-fired stations are closed to meet government promises to cut carbon emissions. (FT p.1., Mail p.2, Guardian p.34, Times p.20)

Personal Finance

The Bank of England has highlighted the rate-setting dilemma facing the government as the economy recovers, warning that heavily indebted homeowners will be hard hit if interest rates start to rise before wages have picked up. Their research finds that if interest rates were raised to 3% from the current record low of 0.5% it would almost double the proportion of “vulnerable mortgagors” (who spend at least 35% of their pre-tax income on repayments) to 16%. The Independent claims that nearly 1 in 6 households would be at risk of losing their homes.  It comes as strong jobs data this week raised the prospect of an earlier rise in interest rates, but Carney has signalled he wants wages to pick up first. (Guardian p.33, Times p.49, Independent p.55, Telegraph Business p.1)

Property

Rents are rising twice as fast as wages, according to the latest buy-to-Let index from LSL Property Services. Rents are up 1.6% over the last 12 months, compared to only 0.8% annual growth in weekly earnings. David Newnes comments that “for many households, the dream of home ownership is still relegated to the imagination”, as the pressure on tenants’ finances make saving up for a deposit a real struggle. (Mirror p.62, Metro p.16)

The British housing market is ending the year strongly with mortgage lending rising by 30% in November, according to the CML.  The Mortgage Advice Bureau revealed that in November the number of mortgages being marketed to borrowers broke through 12,000 for the first time in four and a half years, more than three times the number on offer in April 2009. (Guardian p.33)

Newspaper Headlines – Thursday 14th November

Main Economic/Business
Rate rise signalled for 2014 as UK recovery takes hold – The Bank of England has unexpectedly brought forward its forecast for when it predicts unemployment will fall below 7%, meaning it could raise interest rates as early as next year. Financial Times, p1; Independent, p18; Times, p1

Property

Britain’s housing crisis is the latest subject to be tackled by an annual competition founded by Lord Wolfson, chief executive of Next. Launched this morning, the prize is offering £250,000 to the author of the best plan to create a new garden city. City AM, p6

The developer of the capital’s ‘Cheesegrater’ British Land has reported a 6.6% rise in its underlying pre-tax profits to £146m in the six months to September. Much of the company’s success has been driven by the strength in its London portfolio which includes the Cheesegrater and the large Regent’s Place scheme near Euston station which has already secured lettings to Manchester City Football Club and Facebook. The Times, p51; City AM, p11

Recruitment

Unemployment in the UK has fallen to 7.6% of the workforce, its lowest since May 2009. Most of the jobs taken were full time, although 54,000 were temporary. FT, p2

A sharp rise in the number of jobs that require a degrees as a minimum entry requirement has led to a qualification inflation according to Vince Cable. He said that large number of students were being forced to gain university degrees even though they were superfluous to many careers. Graeme Paton, Telegraph, p6

Personal Finance
Research funded by the Joseph Rowntree foundation shows that a third of the 1.3m families with children in poverty are single breadwinner families. Guardian, p20

Daily Paper Summary: Thursday 7th November

Economics
The Financial Times reports that the Bank of England is keeping a careful watch on the property market, but a policy maker at the central bank said it’s not its job to micromanage fluctuations in asset prices. Donald Kohn, a member of the MPC said the BoE would ensure lending standards did not get too loose and that lenders are adequately capitalised to manage losses that might arise.
IN other economic news, UK manufacturing picked up in September, with factory output returning to growth after an unexpectedly poor August. ONS data showed manufacturing output rose 1.2% between August and September, against forecasts of a 1.1% rise. After the data were released, the National Institute of Economic and Social Research estimated the UK economy grew 0.7% in the three months to the end of October. While this would be less than the 0.8% recorded in the three months to the end of September, the estimate suggests the recent economic recovery remains fairly robust.

Property
The Telegraph’s lead story (and Daily Mail p.2) is focussed on the fact that British households pay the highest property taxes in the developed world with the amount of stamp duty paid on the average house almost doubling since the peak of the last housing boom. UK residents are now paying twice as much as the international average according to Policy Exchange. Property taxes in Britain cost the equivalent of 4.1% of GDP – around £70 billion – in 2011. The OECD average is 1.8%. The average amount paid on housing sales is on course to reach £6,700, up from less than £4,200 in 2007-08 according to the CML. Instead of using taxes to depress demand for housing, Policy Exchange suggests more houses should be built with an aim of hitting 1.5m new homes by the end of the decade. This would require double the current rate of construction. Telegraph, p.1,4 (James Kirkup). In the Times Jones Lang LaSalle is predicting a 5% rise in house prices by 2014, with London prices rising 8%.

Personal Finance
A little outside the box – but very relevant for equity release, care and pensions – according to the ONS the UK population is set to rise 9m (14%) to 73m in the next 25 years. The ONS forecasts an increasingly aged population with the number of state pensioners rising by a third between 2012 and 2037 to 16.1m people. The average age will rise from 39.7 years in 2012 to 40.6 years in mid-2022 and 42.8 by mid-2037. This means the elderly rather than the young will increasingly form the bulk of those dependent on the working age population. The number of working population for each person of state retirement age will fall to 2.7 from the current 3.2. 6.2m people are projected to be aged 80 or over by 2037.

Employment
Research from the OECD has cast doubt on the widespread belief that the British work longer hours than everyone else. The figures show that British workers put in an average of 1,625 hours a year, or a 31 hour working week, well below the OECD average of 1,776. That puts Britain 24th in the table of 34 developed countries. Experts say it is the preponderance and growth of part-time jobs that is responsible for the short working week. Mexicans work the longest hours – 42 hours per week – while workers in the Netherlands have the easiest life, working only 26 hours. The Times, p.6 (Rosemary Bennett)

News Headlines – Friday 6th September

Michael Gove has spoken out claiming campaigners against the planning reforms are stopping children growing tall by forcing them to live in smaller homes with shared bedrooms. He also added that keeping the planning restrictions would have stunted educational growth for many. Telegraph, p1

The Times suggests that all the best people want to display masonry in their homes. Actors like Oliver Thornton and One Direction star Harry Styles have both been attracted by exposed brick. Matt Stanway, sales manager at Urban Spaces believes properties with exposed brick have the edge in terms of desirability. The more loft features – concrete ceilings wooden flooring, steel factory windows – the better. Times B&M, p5

Number of first time buyers has swelled according LSL Property Services. There were 26,100 people buying homes for the first time in July, up 8,000 through the year. Information from Connells Survey and Valuation added to LSL’s figures, suggesting that August had seen 40% more first time buyers than the same month the previous year. City AM, p7; Times, p47; Guardian, p13; FT, p3

Investors, buoyed by the apparent momentum of the economy, expect the first rise in interest rates to come almost two years earlier than the Bank of England indicated last week. Market interest rate expectations suggest the Bank’s Monetary Policy Committee will disregard its new forward guidance and raise the rate in the final months of 2014 or beginning of 2015. Financial Times, p1

New rules to limit pay in the financial sector are being unnecessarily rushed according to the British Bankers’ Association. The lobby group recommends the rules be postponed until 2015. In its submission to the European Banking Authority, the BBA said the EU’s decision to equate earnings with those considered to be a material risk taker meant many relatively junior staff faced having their pay curbed. Telegraph, B1

The European Commission in expected to publish details of new legislation which would ban mobile roaming charges. From 2014, customers would be able to keep costs down by selecting another provider for calls, texts and data while travelling if their own network charges extra for service abroad. Guardian, p31

News Headlines: Sunday 11th August

Economic

Britain’s economy is outpacing all its main competitors including America, according to combined data from Markit and JP Morgan. Britain’s economy is growing at an annualised rate of 2.4%, compared to 1.7% annual growth in the USA and an on-going recession in the Eurozone. Many economists are now upgrading their forecasts for this year and next. “This recovery is broad, and the broader it is, the more sustainable it is”, says Rob Dobson, senior economist at Markit. (Sunday Times p.2)

Personal Finance / Property

With official interest rates at record lows, and now set to remain so until an improving economy brings the unemployment below 7%, savers are bracing themselves for what could be a three more years of a 0.5% base rate. If interest rates did rise in 2016, in total that would mean a seven year wait for higher returns. Sunday Times Money has a full feature on what impact below-inflation returns could mean for savers, focusing on the move into property investments, and the rise of Buy-to-Let borrowing to leverage these deals. Buy-to-Let house purchases are expected to hit 85,000 this year and 100,000 in 2014, fuelled by strong rental yields, currently averaging 5.3% according to the LSL Buy-to-Let Index.

David Whittaker of Mortgages for Business said, “In the last couple of days we have seen a surge in calls for savers looking for advice on getting into the buy-to-let market. Clients want a better return ion savings than they would get by sticking their savings in the bank.” (Sunday Times Money p.1)

Recruitment

Unemployment could fall to a new low in this week’s jobless figures. According to IHS Global Insight the official figures on Wednesday will show a fall in unemployment of 38,000 to a 25 month low of 2.48 million. They also expect a rise in employment levels – predicting 52,000 more people in work to take the total number of people employed in the UK to 29.8 million. (Sunday Express Financial p.1) Tara Ricks, managing director of Randstad Financial and Professional, says “the jobs market is humming” and that this will help “stoke the fires of the economy”. In his column, the Express’s Geoff Ho is more cautiously optimistic saying we should still “keep the champagne on ice” for the time being, highlighting youth unemployment, which is still stubbornly high.

New Headlines – Friday 9th August

Property

Lending to landlords had surged to a near five year high with £5bn of buy to let mortgages advanced in the second quarter of the year. This represents a rise of 21% compared with the previous year and The announcement that the low base rate is likely to continue until 2016 is forcing savers to look for more profitable investments, in particular property rentals. The news comes as LSL figures published today show house prices have risen by 2.6% over the past year. However, it is not all bad news for first time buyers as e.surv figures show a 56% rise in high LTV lending over the past year.

Personal Finance

The baby boomer generation is reaching pension age at record rates according to the ONS. It represents a major cash outflow for the government with pension payments rising by nearly £18bn since the first baby boomer women drew their pensions at the age of 60 in 2005. Over 65s are one of the richest demographic groups and over 50s accounted for nearly half of all household spending in 2012.

Recruitment

More women should be appointed to work at the Bank of England according to Mark Carney. The Governor of the Bank has told George Osborne the lack of women in senior roles is “anomalous.” There are currently just two women in the top ranks of the bank, and the MPC has had no women serving on it for three years. It comes after Carney agreed to put Jane Austen on the new £10 note at the start of July.

Corporate

Tesco’s retreat from overseas expansion continues as it merged its Chinese operation with the state owned rival. It’s 131 store network in China is to be amalgamated with Vanguard, following the closing of its Japanese and American businesses. Last year, growth in China fell 1 per cent compared with the previous year – noted as an ominous sign in such an investment hungry country by Marcus Leroux in the Times. Chief Executive Phillip Clarke is expected to focus more on the UK business, revamping stores in its home market following the move.