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Consumers in the north the most pessimistic about UK economy, says report

CONSUMERS in the north are most pessimistic about the prospects for the UK economy, according to a new report.

Analysis from Which? for 2018 shows that two in five people (42 per cent) in Northern Ireland believed the UK economy was in a poor state last year, while almost two-thirds (60 per cent) expected it to deteriorate in 2019.

By contrast, across the UK as a whole, only half (49 per cent) anticipated the economy would worsen.

Of chief concern was rising fuel prices, cited by three-quarters (74 per cent) of local respondents, compared to two-thirds in the UK (68 per cent).

Brexit was highlighted by seven out of 10 (71 per cent) consumers as a worry, along with public spending cuts, both to a greater degree than in the UK as a whole.

Energy bills and the cost of groceries were also among the most common worries for consumers in Northern Ireland.

More people in the north expected to increase spending on everyday essentials compared to consumers across the UK, according to the report, while hikes were also forecast in the cost of groceries and in relation to rent or mortgage payments.

In spite of the plethora of issues raised by consumers in the north, 71 per cent said they were satisfied with their life overall, compared to two-thirds UK-wide (65 per cent). Local people were also happier about their household financial position, with over half (51 per cent) describing it as good,

just above the UK figure of 49 per cent.

Caroline Normand, Which? director of advocacy, said the latest figures for Northern Ireland were concerning.

“This report highlights a worrying sense of pessimism among consumers in Northern Ireland, with Brexit, fuel costs and public spending weighing on people’s minds more than anywhere else in the UK,” she said.

“With uncertainty around Brexit and Stormont politics looming large, politicians, regulators and businesses in Northern Ireland must take heed of these findings and work to ensure consumers are not getting a raw deal when it comes to essential services.”

Source: Irish News

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United Kingdom unemployment rate falls to 3.8%; wages rise 3.2%

A record 71.8% of working-age women were in employment between January and March this year, according to the Office for National Statistics (ONS). With the United Kingdom hovering close to full employment, the unemployment rate at its lowest since 1974 and the inactivity rate remaining low, there is very little spare capacity in the labour market – and the gap is being filled by ambitious foreign workers who see the chance to build a career in Britain.

The unemployment rate in Britain has fallen to the lowest rate since 1974, with just over a third of those joining the workforce in the previous year coming from outside the European Union.

Excluding bonuses, average weekly earnings for employees rose by 3.3%.

British Employment Minister Alok Sharma applauded the lowest unemployment rate since the 1970s, but called on workers to improve their skills in a bid to “create a modern workforce fit” for new challenges.

Mike Jakeman, senior economist at PwC, said: “It is possible to see the shadow of Brexit in some of these figures”.

Tony Wilson, director of the Institute for Employment Studies, said: “On the face of it, today’s jobs figures look like more of the same – the employment rate is holding steady at a record 76.1%, year-on-year earnings growth above 3%, and unemployment falling yet again, to just 3.8%”.

The strength of the labour market has pushed wages up more quickly than the Bank of England has forecast, leading some economists to think it might raise interest rates faster than investors expect once the Brexit uncertainty clears.

The unemployment rate for women has shown a smaller fall over this period – from 6.4% to 3.7%.

The ONS said that 32.71 million people were in employment, an annual rise of 354,000.

The latest data shows that over the last five years the unemployment rate for men has fallen from 7.0% to 3.9%, the ONS said.

For men the rate was 3.9%, the lowest since mid 1975. This is because falls in the employment rate for men have been roughly offset by population increases. Pension rule changes that force women nearing retirement to work longer have also had an impact.

What is happening to wages and jobs?

While average real wages – adjusted for inflation – were the highest since December 2010, the TUC said the rate of growth was slowing.

“This will come as a relief to employers who have been subjected to increasing pressure from workers to raise pay without accompanying productivity growth”, said Davies. “The last thing workers need is another hit in the pocket when real wages are still lower than a decade ago”.

“The employment rate for young people in Scotland rose to 59.3%, higher than the United Kingdom rate of 54.6%”.

By Marco Green

Source: Click Lancashire

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Further Brexit delay would hit UK economy – BoE’s Broadbent

Britain’s economy risks damage if Brexit is delayed beyond its latest Oct. 31 deadline because companies would continue to hold back on investment, Bank of England deputy governor Ben Broadbent was quoted as saying on Monday.

“It’s pretty clear that investment has been feeling the consequences of the uncertainty about Brexit and particularly the possibility of a bad outcome,” Broadbent told the Press Association news agency.

“If you continually expect news to arrive imminently – a resolution – then that can have quite a depressing effect on investment,” he said.

By contrast, a Brexit deal would lead to “quite a strong bounce-back in investment.”

Broadbent reiterated the BoE’s guidance that future interest rate increases would be limited and gradual, adding the “emphasis is on the ‘gradual’ bit of limited and gradual.”

He said he did know whether the British central bank would need to increase rates or cut them in the event of a no-deal Brexit shock to the economy.

“I don’t know. I really don’t, because I don’t know how much the exchange rate will move,” he said.

Several other top BoE officials, including Governor Mark Carney, have said a rate cut would probably be needed to help the economy weather the shock of leaving the European Union with no deal.

On whether he will put his name forward as a candidate to succeed Mark Carney as BoE governor, Broadbent said: It’s a big job…I have lots of things to think about before I make that decision.”

Writing by William Schomberg; Editing by Peter Graff

Source: UK Reuters

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UK business output growth falls for first time in 2019

UK business output growth has declined for the first time this year.

BDO’s Output Index, which measures UK business output growth, fell to 98.63 in April from 98.74 in March.

Business confidence also registered another decline in April, slipping by 0.36 points to 95.74 – the lowest level the index has been since 2012.

As the imminent threat of a no-deal Brexit was lifted last month, activity in the manufacturing sector is expected to diminish due to unprecedented levels of stockpiling tailing off.

BDO’s Manufacturing Output Index, which tracks output growth in the sector, declined to 97.27 in April. This marks a year-on-year decrease of 8.32 points and compares to its most recent high of 103.26 in September 2018.

In further gloomy news for the manufacturing industry, confidence has hit a 30-month low.

BDO’s Manufacturing Optimism Index, which shows how businesses expect output to develop in the next three to six months, declined to 101.09 in April from 103.73 in March. The index has not been this low since November 2016 and reflects concerns by manufacturers that they expect growth to moderate in the coming months.

Optimism in the UK’s services sector fell for a ninth consecutive month after it plummeted by 4.15 points in March. The index shows that optimism dropped to 95.06, just 0.06 points off negative territory. Despite the extension of Article 50 until October, businesses still don’t have the clarity they desperately need on the future long-term relationship the UK will have with the EU.

Peter Hemington, partner at BDO, said: “The only certainty businesses have at the moment is that the UK government still doesn’t know exactly how or when the UK will leave the European Union. We are seeing the impact of this confusion, with business confidence plummeting.

“An extension of Article 50 alone is insufficient to restore sentiment among businesses. In the coming months, the government should look at further policy interventions, such as increasing the Annual Investment Allowance, to help businesses invest and stimulate the UK economy.”

By Rachel Covill

Source: The Business Desk

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Pre-Brexit rush by factories boosts UK economy in early 2019

UK economy got a sharp one-off boost in the first three months of 2019, official figures showed on Friday, as manufacturers rushed to deliver orders before a Brexit that never came.

Gross domestic product grew at a quarterly rate of 0.5% in the first quarter of 2019 after a sluggish 0.2% in late 2018, in line with expectations from the Bank of England as well as the consensus forecast in a Reuters poll of economists.

Year-on-year GDP growth picked up to an 18-month high of 1.8% in early 2019, up from 1.4% in the last three months of 2018, Britain’s Office for National Statistics said.

Sterling was little changed by the figures, which showed household spending continued to fuel the economy as businesses grappled with Brexit uncertainty.

“The relatively strong growth figures for Q1 may just be a flash in the pan,” said Tej Parikh, an economist at the Institute of Directors.

“Some businesses brought activity forward early this year in preparation for leaving the EU, so higher stocks and earlier orders have artificially bumped up the growth numbers.”

In the event, with just days to go before Britain was due to leave, Prime Minister Theresa May asked the EU for more time to negotiate a deal. Brexit has now been delayed until Oct. 31 unless there is an early agreement.

Finance minister Philip Hammond said the data showed the economy remained robust.

The ONS said factories rushed to complete orders ahead of the original March 29 Brexit deadline, spurring a 2.2% jump in output in the first quarter and marking the sector’s biggest contribution to overall economic growth in nearly 20 years.

Previous private-sector business surveys had shown manufacturers reported building up stocks of goods in case the country left without a transition deal, which they feared could cause chaos at Britain’s borders.

The ONS data showed businesses bought an extra 4.6 billion pounds ($6.0 billion) worth of stocks in the first quarter, the biggest increase since late 2016, which statisticians said added 0.7 percentage points to the first-quarter growth rate.

However, some sectors – such as car dealers, wholesalers and warehouses reported relatively little stockpiling.

Net trade took a record 2.2% off the quarterly rate of GDP growth and Britain’s first-quarter trade deficit hit a record high 18.3 billion pounds, although the severity of the drag reflected imports of gold and vehicles which often cause big swings in the data.

Last week BoE Governor Mark Carney said he expected growth to fall back to 0.2% during the current quarter as the one-off boost from stock-building faded and businesses continued to hold off from investment as economic uncertainty lingers.

However, Friday’s ONS data unexpectedly showed a return to growth for business investment in the first three months of the year, after contracting for every quarter of 2018.

Britain’s economy has slowed since June 2016’s vote to leave the EU, with annual growth rates dropping from more than 2% before the referendum to expand by 1.4% last year.

The euro zone’s economy expanded by 0.4% in the three months to March, rebounding from a patch of sluggish growth in the second half of 2018 caused by global trade tensions and regulatory problems for the auto industry.

In March alone, Britain’s economy unexpectedly contracted by 0.1%, pulled down by a dip in construction and weakness in the services sector that accounts for most economic output, versus expectations for an unchanged reading in a Reuters poll.

Editing by Toby Chopra

Source: UK Reuters

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Positive UK GDP helps the Pound against the Euro

UK GDP figures gave the Pound a lift against the Euro on Friday morning coming out at 1.8% which was an improvement compared to the previous quarter. However, the increase in Sterling was limited as the figures came out as expected.

One of the main reasons for the increase in GDP for the first quarter of 2019 was because this was the period when the Brexit deadline was due to take place on 29th March. Huge amounts of firms were stockpiling goods in the event that the UK would leave the European Union and so the figures were arguably inflated so this lift in GDP could be relatively short-lived.

With the Brexit deadline now being extended until the end of October we could also potentially see another strong third quarter for UK GDP if the same idea of stockpiling happens once again. However, as we are now into the second quarter of 2019 I think this could be a rather worrying period when the figures are released in a couple of months.

The other bit of good news on Friday was the release of UK Industrial and Manufacturing data which came out a lot higher than expected.

After having a difficult week for the Pound vs the Euro it managed to stabilise at just above 1.16 towards the end of Friday’s trading session.

Next week brings with it little in terms of economic data for the UK so eyes will turn towards what is happening on the continent. On Tuesday morning German inflation figures are due out and they have been falling recently and are predicted to fall once again.

As Germany is the Eurozone’s leading economy the impact of negative data will often negatively affect the value of the Euro so Tuesday could be a good short term opportunity if you’re looking at buying Euros in the near future.

Indeed, if inflation falls a central bank will often consider cutting interest rates in order to combat the problem. Therefore, if inflation continues to decrease then this could put pressure on the European Central Bank to consider what to do in terms of monetary policy when it meets next month.

By Tom Holian

Source: Pound Sterling Forecast

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Brexit stockpiling helps UK economy bounce back in first quarter of 2019

Experts hailed the UK economy’s “resilience” today as it rebounded in the first quarter of 2019 with growth of 0.5 per cent, according to the Office for National Statistics (ONS).

That is more than double the low 0.2 per cent rate of quarterly expansion that capped 2018, ONS data showed today.

Meanwhile UK GDP increased 1.8 per cent from the same quarter a year ago, better than the 1.4 per cent growth recorded in the previous quarter.

“The strength in quarterly growth is in part due to the low December 2018 monthly growth in the base period, which makes the current period look stronger in comparison,” the ONS said.

GDP fell 0.3 per cent in December but was followed by rises of 0.5 per cent in January and 0.2 per cent in February before a 0.1 per cent real growth contraction in March.

However, services sector growth slowed to 0.3 per cent, though UK production industries picked up, with manufacturing providing a 2.2 per cent boost.

Brexit stockpiling delivers rush of growth

The ONS said “it is difficult to unpick” the part Brexit stockpiling has played in pushing up manufacturing output, but others said it made a “sizeable contribution” to growth.

Stockpiling pushed the industry to a 13-month high in March, according to a closely-followed index.

PwC’s senior economist, Mike Jakeman, said it reflects companies’ preparations to avoid the consequences of a no-deal Brexit in time for the UK’s original 29 March departure date.

“With warehouses bulging, we now expect inventories to subtract from growth in the coming months,” he warned.

“Manufacturing output was clearly the star performer on the output side of the economy as it markedly outstripped quarter-on-quarter growth in the services sector,” added Howard Archer, chief economic adviser to the EY Item Club.

He said stockpiling “provided a major boost” to the sector.

Construction grew just one per cent while the services sector saw a slowdown to 0.3 per cent growth, though industrial production rose 1.4 per cent compared to the previous quarter.

Consumer spending grew 0.7 per cent quarter on quarter as purchasing power and a record employment rate both helped the economy.

Business spending creeps back up after Brexit uncertainty

Meanwhile business investment rose for the first time in five quarters, growing 0.5 per cent. Archer called it a “very welcome development”, but noted that it was still 1.4 per cent lower year on year due to Brexit uncertainty.

PwC’s Jakeman said the data showed the economy has offered “considerable resilience to acute political uncertainty”.

“The return to growth in the first quarter was not because any certainty was provided by politicians,” he said.

“Instead, firms are likely to have spent more on contingency planning and perhaps decided that some investment decisions could be delayed no longer.”

GDP boost a flash in the pan?

Tej Parikh, senior economist at the Institute of Directors, warned the spur from stockpiling could mean the quarter’s growth is “a flash in the pan”.

“Some businesses brought activity forward early this year in preparation for leaving the EU, so higher stocks and earlier orders have artificially bumped up the growth numbers,” he said.

“In Q2 many firms will be keen to run down their Brexit caches, which will drag on economic growth. Keen consumers also played a key role in lifting sales in the first quarter, but barring temporary boosts due to weather, households will overall remain cautious in the months ahead.”

KPMG’s chief economist, Yael Selfin, concurred, adding: “The worry is that a significant part of that was related to stockpiling activities ahead of an expected Brexit at the end of March, rather than a sign that businesses were finally moving on with their investment plans thanks to renewed confidence.

”Looking ahead, the unwinding of potential stockpiling effects in Q1 is likely to see a weaker Q2, leaving the UK economy only marginally stronger than expectations at the start of the year.”

By Joe Curtis

Source: City AM

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UK business confidence remains negative

The ICAEW Business Confidence Monitor (BCM) suggests that GDP growth could drop from 0.5% in Q1 to 0.2% in Q2, due to the impact of stock building, which “probably temporarily boosted GDP”.

“Businesses I speak to say that there is no sense that things will change much in the next few months and this is reflected in their confidence. Many have stockpiled ahead of the expected March exit from the European Union, but this did not happen. Stockpiling is expensive for businesses, but it did boost GDP growth,” said Michael Izza, ICAEW chief executive.

“However, my fear is that this will have an impact on growth and GDP figures in the rest of the year, so we should not be surprised to see even lower growth than normal while companies use up the excess stock they now have,” added Izza.

Stock building of raw materials and components is most widespread among businesses in the manufacturing sector.

Business confidence remains negative (-16.6) but has not fallen sharply for the first time in year. Transport and storage (-26.7) and property (-26.1) are the least confident sectors, according to the BCM.

Sales growth has been “slow and steady” and is predicted to remain so for the year. Employment is also growing slowly, said ICAEW.

By Raymond Doherty

Source: Economia

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‘Zombie firms’ dragging down UK economy – KPMG

At least 8% of UK companies are displaying ‘zombie-like symptoms’ and are dragging down the country’s economy said the latest report of KPMG.

A zombie company is one has has a static or falling turnover, profitability is persistently low, margins are squeezed, cash and working capital reserves are limited, leverage levels are high, and has limited access to investment in the future.

One in seven UK companies would have collapsed were it not for low interest rates, as they are under sustained financial strain said the report that looked at 21,000 businesses. Possibly as many as 14% of the country’s companies are displaying these ‘zombie-like symptoms’.

These companies threaten to exacerbate a future downturn, said the new analysis KPMG and warned that “the rise of zombie firms in the UK could spell trouble ahead”.

The highest concentration of zombie firms was in the energy sector, where 23 per cent were under sustained financial strain, the automotive sector (17%), and in utilities (15%).

Yael Selfin, chief economist at KPMG in the UK, said: “The threat that zombie companies pose to the wider economy is very real.”

“If interest rates rise further, highly-leveraged businesses may soon find that borrowing will become more difficult to repay, and if the economy continues to stutter, these businesses will be left especially vulnerable to adverse market forces,” she said.

Blair Nimmo, head of restructuring at KPMG’s UK operation, said: “Urgent dialogue is required between regulators, banks and businesses in order to minimise the ongoing drag that these companies have on the economy.”

By Caoimhe Toman

Source: ShareCast

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Region’s business confidence remains above UK average

Business confidence in the region slid three points in April but remains above the UK average, a new report released today reveals.

The latest Business Barometer from Lloyds Bank Commercial Banking shows that companies in Yorkshire reported higher confidence in their business prospects, up four points to 20 per cent, but lower economic optimism, which has fallen eight points to 17 per cent. Together, this gives an overall confidence of 18 per cent, compared with a UK average of 14 per cent.

Businesses’ hiring intentions show a net balance of eight per cent of businesses in the region expect to hire more staff during the next year, down seven points on last month.

Across the UK, overall confidence climbed four points as both firms’ optimism about the economy and their confidence in their own prospects continued to climb from lows recorded earlier this year.

Companies’ economic optimism rose to four per cent, while their confidence in their own business prospects climbed three points to 23 per cent.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

Kelly Green, regional director for Yorkshire at Lloyds Bank Commercial Banking, said: “It’s very positive to see Yorkshire firms increasingly confident about their trading prospects, but perhaps surprising to see this isn’t reflected in their hiring intentions.

“By carefully managing working capital, firms can build their financial flexibility to increase staffing and take advantage of growth opportunities without harming day-to-day spending.

“We’ve pledged to lend up to £1.4bn to Yorkshire firms in 2019, including through working capital tools, to help firms make the most of the opportunities that come their way.”

Across the region, a net balance of two per cent of businesses said they felt the UK’s exit from the European Union is having a negative impact on their expectations for business activity.

By Rachel Covill

Source: The Business Desk