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UK economy probably shrank for first time in seven years – Bloomberg Survey

The latest Bloomberg survey of economists showed that the UK economy probably shrank for the first time since 2012 in the second quarter of this year.

Key Findings:
“Official data this week is forecast by economists to show growth rebounded to 0.3% in May, after a contraction of 0.4% in April.

Still, such a reading would mean an expansion of 0.8% was needed in June just to return a flat result for the quarter as a whole, according to Bloomberg calculations.

The latest poll follows a dismal week of reports in the U.K., with Purchasing Managers’ Indexes showing the dominant services industry barely growing in June, and both construction and manufacturing sectors suffering outright contractions.

The worsening outlook, both at home and overseas, has also left investors and economists rewriting their calls for U.K. interest rates.”

By Dhwani Mehta

Source: FX Street

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Eight in ten finance bosses expect Brexit to damage UK business sector

City finance bosses have said they expect the UK’s business sector to be harmed in the long-term by Brexit, in a stark warning for the Government.

More than eight in ten chief finance officers (CFOs) said they expect the UK business environment to deteriorate because of Brexit, in Deloitte’s latest CFO survey.

The survey of finance bosses for the second quarter of 2019 revealed their greatest level of concern regarding the impact of Brexit since the referendum in June 2016.

Only 4% of CFOs said they think that now is a good time to take a greater risk on to their balance sheet, representing the highest level of caution since the financial collapse in 2008.

The low appetite for risk among large corporates stands in stark contrast to the buoyant mood of equity investors, who have record levels of cash at their disposal.

The survey, which involved 79 CFOs at large UK corporates, also saw 62% of respondents say they expect to reduce hiring over the next three years due to Brexit.

Almost half, 47%, also said they expect to reduce capital spending in the near future.

Ian Stewart, chief economist at Deloitte, said: “Events in the last three years, and recent news suggesting the economy shrank in the second quarter, have added to worries about the impact of Brexit.

“This is not solely a question of the long-term outlook. Brexit has not happened, but it is acting as a drag on corporate sentiment and spending.”

The findings come after the Labour Party and senior economists voiced concern over the UK’s productivity crisis after fresh figures on Friday showed a third straight quarter of decline.

Output per hour fell by 0.2% in the three months to March, compared with the previous year, the Office for National Statistics (ONS) said.

The drop in productivity has added to concerns of a “productivity puzzle” in the UK, which has seen output per hour grow slowly since the 2008 economic downturn.

By Henry Saker-Clark

Source: Yahoo Finance UK

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UK economy shows slowdown signs as recruiters, shoppers turn wary

British employers and shoppers are turning increasingly cautious, indicators showed on Friday, suggesting two of the drivers of the economy during the Brexit crisis are losing momentum.

In a week when business surveys pointed to a contraction in overall output in the second quarter, the latest signals from Britain’s boardrooms and high streets underscored the extent of the slowdown following a strong start to 2019.

That was when many companies were rushing to prepare for the original Brexit deadline in March.

The latest figures showed that the subsequent slowdown in the economy was not just payback for the stockpiling surge.

The number of people hired for permanent jobs via recruitment firms in Britain fell for a fourth month in a row in June, recruitment industry group REC said on Friday.

The figures represented a stark contrast to the robust hiring activity in 2018.

“Brexit stagnation continues to seize up the jobs market as the slowdown in recruitment activity continues,” said James Stewart, vice chair at KPMG which produces the report with REC.

For temporary staff, hiring rose marginally in June, marking the weakest patch of growth since May 2013, when Britain’s economy began to emerge from the after-effects of the global financial crisis.

Britain’s labour market has been one of the strengths of the economy since the 2016 Brexit referendum.

Unemployment fell to its lowest rate since 1975 at 3.8% in the first quarter of 2019, according to official data.

Many economists have linked the jobs boom to uncertainty about Brexit which has made employers favour hiring workers — who can be laid off quickly — over the longer-term commitment of investing in equipment.

But the jobs surge has put more money into people’s pockets which had driven consumer spending, offsetting a fall in investment by many companies.

Data on Friday showed Britain’s high street retailers had a “washout” June, however, as shoppers did not respond to early summer sales discounts.

“We saw retailers discount early on in June, adding further pressure to tight margins, yet they still weren’t able to salvage the month,” said Sophie Michael, head of retail at BDO, an accountancy and business advisory firm.

The survey chimed with another weak reading of retail sales published last week.

The Bank of England has said Britain’s economy probably had zero growth in the April-June period, contrasting with growth of 0.5% in the first three months of 2019.

BoE Governor Mark Carney warned on Tuesday that the prospect of a no-deal Brexit and the rise in protectionist trade policies around the world, led by U.S. President Donald Trump, posed growing risks to the British economy.

Surveys published this week of Britain’s manufacturing, construction and services sectors suggested the economy contracted by 0.1% in the second quarter.

That would be the first fall in gross domestic product since the end of 2012.

A survey published by an employers group showed British businesses turned gloomier, bucking an improvement in sentiment earlier this year.

By William Schomberg and Catherine Evans

Source: Zawya

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UK economy feels the strain of global slowdown as well as Brexit

UK economy has lost momentum and might have shrunk in the second quarter of 2019, according to data that showed the double impact of Brexit and the slowdown in the global economy.

Manufacturers had their worst month in more than six years and consumers increased their borrowing at the slowest pace since 2014.

The value of sterling fell against the dollar and the euro after the data was published.

Howard Archer, an economist with EY Item Club, a forecasting group, estimated that Britain’s economy contracted by 0.2% in the April-June period.

The Bank of England last month cut its forecast for economic growth in the second quarter to zero.

That largely reflected an unwinding of the rush by many factories to get ready for the original Brexit deadline which has now been delayed until Oct. 31.

But economists said Monday’s manufacturing purchasing managers’ index showed how hard Britain’s factories were also being hit by the slowdown in the world economy caused by the trade skirmishes between the United States and China.

The overall PMI slumped to 48.0 in June from May’s 49.4, well below the average forecast in a Reuters poll of economists and its lowest reading since February 2013.

Export demand fell for a third month as manufacturers around the world lost confidence.

Allan Monks, an economist at JP Morgan, said the weak PMI survey challenged his view that manufacturing growth would rebound at the start of the third quarter.

Separate data from the Bank of England published on Monday showed lending to British consumers – whose spending has helped the economy cope with the Brexit crisis – rose by its weakest annual pace in more than five years in May.

The BoE data also showed the weakest increase since April 2017 in net mortgage lending.

Archer at EY Item Club said May’s mortgage data chimed with other figures which suggested the relief from the delay of Brexit had been limited.

“Improved consumer purchasing power and robust employment growth has also recently been helpful for the housing market, but this has recently shown some signs of levelling off,” he said.

Economists said they were waiting for Wednesday’s PMI of Britain’s dominant services industry to gauge the extent of the slowdown in the overall economy.

Chris Hare, an economist with HSBC, said he expected only a slight pick-up which would point to anaemic underlying growth.

“So, considerations about Brexit deadlines notwithstanding, we do not think that now is the time for the Bank of England to be raising rates,” he said.

The BoE has stuck to its message that it expects to raise borrowing costs, assuming Britain can avoid a no-deal Brexit.

Writing by William Schomberg and David Milliken; additional reporting by Alistair Smout

Source: UK Reuters

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Brexit and global slowdown hit UK factories in second quarter – BCC

The proportion of British manufacturers reporting a rise in their domestic orders has fallen to its lowest in seven years as Brexit uncertainty and the global slowdown take their toll, a leading employers group said on Monday.

Factories also showed the weakest picture for export orders in four years in the April-June period while a slight pick-up for services firms was not strong enough to make up for a weak start to the year, the British Chambers of Commerce said.

“These results indicate that underlying economic conditions in the UK remain decidedly downbeat,” BCC economist Suren Thiru said.

Britain’s economy began 2019 strongly, but the growth came largely from a surge in stockpiling by manufacturers seeking to protect themselves against the risk of border delays after the original March 29 Brexit deadline.

That deadline has been postponed until Oct. 31, and progress to resolve a stand-off in parliament over how to leave the European Union is on hold while the Conservative Party chooses a new leader who will take over as prime minister.

The BCC’s Quarterly Economic Survey showed price pressures for services firms and manufacturers fell to their lowest level since 2016.

Thiru said the prospect of muted inflation would help consumers and allow the Bank of England to keep interest rates on hold as it waits for the outcome of Britain’s Brexit impasse.

On Sunday another employers group, the Confederation of British Industry, reported that Britain’s private sector had its worst three months in nearly seven years..

Later on Monday, the IHS Markit/CIPS purchasing managers index for the manufacturing sector, which is due to be published at 0830 GMT, is expected to show the factory sector shrank slightly in June.

The BCC survey was based on responses from 6,846 companies – making it the largest of its kind in Britain – and was conducted between May 20 and June 10.

Reporting by William Schomberg, editing by David Milliken

Source: UK Reuters

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Brexit stockpiling helps UK economy grow 1.8 per cent in early 2019

Brexit stockpiling gave a 1.8 per cent boost to the UK economy in the first quarter of 2019 compared to the same quarter last year, figures confirmed today.

UK GDP rose 1.8 per cent in January to March compared to its corresponding 2018 quarter.

That figure beat the 1.4 per cent quarterly growth between October and December last year, the Office for National Statistics (ONS) said.

The economy grew 0.5 per cent on a quarterly basis, unchanged from the ONS’s initial estimate.

The services sector offered the biggest economic boost, followed by production, thanks to a 1.9 per cent rise in UK manufacturing output.

Brexit stockpiling underpins UK economy

Brexit stockpiling underlined the growth in UK manufacturing ahead of the UK’s potential no-deal Brexit departure on 29 March, the original deadline for leaving the EU.

In fact, stockpiling added 0.9 percentage points to the first quarter growth rate of 0.5 per cent.

Howard Archer, chief economic adviser to the EY Item Club, said: “There was a major boost to first-quarter GDP growth from stockpiling as businesses and, very possibly to a limited extent, consumers looked to protect their supplies in case a disruptive no-deal Brexit occurred at the end of March.

“Additionally, unseasonably warm weather gave a boost to consumer spending in the first quarter.”

Business investment finally grows

Business investment rose 0.4 per cent quarter-on-quarter after dropping in every quarter last year.

Archer called it “welcome news” but added that he was “sceptical” that this was the start of an upturn in spending.

The economist pointed to “ongoing major Brexit, UK domestic political and global economic uncertainties”.

Business investment was still 1.5 per cent lower than it was in the same quarter a year ago.

No-deal Brexit could weaken GDP growth

Tory leadership contest frontrunner Boris Johnson is set to take the UK out of the EU in a no-deal Brexit on 31 October if a deal cannot be reached.

And in the week that Bank of England governor Mark Carney warned market fears of a no-deal Brexit have risen, economists warned of the possible fallout for the UK.

Archer said: “Under a no deal scenario, we suspect that GDP growth is likely to come in at just 0.3 per cent in 2020, with the economy likely suffering stagnation or even mild recession over the first half. Growth is seen picking up to 1.2 per cent in 2021.”

Meanwhile a delay to Brexit would extend uncertainty, sending GDP growth in 2020 to around 1.3 per cent, he predicted.

“Much would depend on how long the delay to the UK’s departure was and what final form Brexit took,” Archer said.

UK inflation rise could cause recession

However, economists and experts warned that the growth could turn into a recession if UK inflation rises.

Nancy Curtin, chief investment officer of Close Brothers Asset Management, said: “With investors already on edge over a global slowdown, they remain eagle-eyed for any further indication of weakness at home. If inflation starts to slide, concerns will increase that we are heading towards a deflationary recession.

“With the no-deal Brexit cause rejuvenated, political uncertainty continues to wrack the minds of investors, and businesses are refraining from deploying capital. The UK economy will likely remain sluggish until the Brexit dilemma is finally resolved.”

By Joe Curtis

Source: City AM

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Brexit cost to UK financial services already £4bn

Around £1.3bn of the money already spent by some of the country’s largest financial services companies has been in legal advice, relocation costs, and contingency provision.

They have spent a further £2.6bn in capital injections on building up non-UK headquarters – most commonly in Dublin, or in Luxembourg.

Omar Ali, UK financial services leader at EY, pointed out that the capital spent on those new headquarters “is value which is not being returned to shareholders or reinvested in UK businesses”.

“Over time some of this capital may flow back to the UK, but currently is a net loss for our economy,” Ali said.

EY’s quarterly Brexit tracker monitors 222 firms, but only 13 have put a figure on the exact financial impact of Brexit on their businesses so far.

The actual overall cost is likely to be far higher and the current estimates “a drop in the ocean”, according to Ali.

“The financial impact of Brexit is beginning to fall to the bottom line, and firms are now making a direct link between financial performance and the tangible commercial impacts of Brexit,” Ali said.

Capital expenditure on planning has cost businesses, but so too has the impact of Brexit on the economy. Slow demand for credit and low interest rates have hit revenues, and EY have noted a further 13 companies reporting financial detriment as a result of Brexit.

Some companies, notably those in fintech, have raised concerns over challenges they face in fundraising and in deferred M&A. Together with the loss of talent and of access to the free market, they potentially face a heavy financial hit.

The extension of the Brexit deadline to the end of October has given some breathing room, and many have paused their planning efforts over the last three months.

The slowdown in planning meant that the number of planned job and asset moves remained unchanged at 7,000 and £1trn respectively since the last quarter. Nonetheless, around 1,000 jobs have already been moved to mainland Europe.

EY noted that many firms are reluctant to make final decisions on relocation until absolutely necessary.

Given the continued political uncertainty, most businesses have had to put temporary contingency plans in place, which are neither efficient nor cheap.

“A more sustainable approach will need to follow once the long-term level of UK/EU market access becomes clearer,” Ali said.

If Britain falls out of the EU without a deal, Ali says, then “overnight, UK firms would lose their ability to passport services and branches into the EU. Neither would they have any EU equivalence determinations to fall back on, putting them at an immediate disadvantage to other third countries, such as the US, Singapore, and Hong Kong.”

“Along with possible political fallout, the EU’s mechanisms for coming to new trading arrangements are complex, requiring unanimity and individual approvals from certain members states’ parliaments. All of this suggests further significant restructuring for Firms in the aftermath of a no deal exit,” Ali added.

Of the companies monitored by the tracker, 29 have either already moved some operations to Dublin, or are considering it. Luxembourg has attracted 23 companies, and Frankfurt 22.

The tracker monitors 143 investment banks, asset managers and insurance providers, 55% of which have publically announced their intention to move operations out of the UK.

By Frances Ball

Source: Economia

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Brexit three years on: markets and the economy in six charts

On 23 June 2016, the UK public voted on whether or not to stay in the European Union (EU). Many expected the UK to remain in the EU, but by a majority of 52% to 48% the Leave campaign won.

The UK was scheduled to leave the EU at 23:00 UK time on 29 March 2019. However, after the UK parliament failed to approve the Withdrawal Agreement, it was granted an extension with a new deadline set for 31 October 2019.

Below is a timeline of crucial dates along the road to Brexit and six charts showing how the UK economy and financial markets have fared over the past three years.

Brexit-timeline-CS1594-770px.jpg

The economy

Azad Zangana, Senior European Economist and Strategist said while the UK economy has remained relatively stable through a turbulent period, real risks remain on the horizon.

“UK economic growth bounced back at the start of 2019 but still remains sluggish. Having slowed markedly in the final quarter of 2018 the UK economy grew 0.5% for the first three months of 2019.

“Growth was helped by stockpiling ahead of the initial Brexit deadline on fears that a no deal could dry up imports, which also led to the biggest quarterly trade deficit since at least 1992.

“But whether the disruption hits or not, a build-up of inventories will lead to de-stocking at some point. This is likely to cause the economy to slow.

“The resignation of Prime Minister Theresa May has raised the risk of a no-deal Brexit. If the bookmakers’ favourite, the former foreign secretary and mayor of London Boris Johnson, becomes the new prime minister, then the hard-line Brexiteer could take the UK out of the EU without a deal.

“If this were to happen, we would anticipate the economy to slow and fall into recession around the turn of the year. While the Bank of England would probably cut interest rates eventually, the expected depreciation in the pound would cause inflation to spike. The household sector has already run down its safety buffer in the form of its savings rate, therefore a contraction in demand is very likely.”

Sterling

Arguably the biggest barometer of Brexit is the value of the British pound. Since the vote to leave it has fallen more than 14% against the US dollar and 13% against the euro.

The strength or weakness of a currency is linked to the health of its country’s economy and the stability of if its government.

GBP-since-brexit-CS1594-770px.jpg

The material is not intended to provide advice of any kind. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Past performance is not a guide to what investors can expect in the future.

What’s happened in markets since Brexit?

FTSE vs sterling

While the weakness in the pound has made traveling abroad more expensive for those who earn their money in pounds, it has provided a boost for UK stocks.

More than two thirds (70%) of the revenues of the companies listed on the FTSE All-Share index are generated overseas. When the profits from those revenues are converted from a strengthening currency back into sterling they are worth more.

The chart below shows how closely the fortunes of UK stocks have correlated with the fall (and sometimes rise) of the pound against the US dollar.

How-currencies-move-markets-brexit-CS1594-770px.jpg

The material is not intended to provide advice of any kind. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Past performance is not a guide to what investors can expect in the future.

Stock markets

In the immediate aftermath of the referendum the FTSE 100 and the FTSE 250 fell 9% and 12%, respectively. But since the close of the market on 23 June 2016, UK shares, as measured by the FTSE All-Share, have risen 28.1% as of 15 June 2019.

The relatively stable global economic backdrop has been helpful. Global investors have bought into the so-called Goldilocks scenario; a “not too hot, not too cold” combination of stable growth, benign inflation and low interest rates.

Support for the UK market and the economy came from the Bank of England (BoE), which has kept monetary policy loose, ensuring businesses and markets have access to funding.

However, the UK stock market has lagged global stocks. Since the Brexit vote, China shares have returned 42.1%, according to Thomson Reuters data; US stocks returned 41.6% and world stocks have returned 32.7%.

UK stocks have returned 28.1%, marginally outperforming emerging market and Japanese shares which returned 27.3% and 26.8% respectively. European stocks returned 17.5%.

Stocmarkets-since-brexit-CS1594-770px.jpg

The material is not intended to provide advice of any kind. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Past performance is not a guide to what investors can expect in the future.

Of course, there are lots of other factors that have influenced UK and other markets during this period. The global nature of UK equities has led to international developments setting the tone for the market, and this continued to be the case since the EU referendum.

Some of the key international drivers over the past three years have included monetary policy decisions by the world’s major central banks, global economic activity and, more latterly, US-China trade tensions.

Domestic vs international earners

Although the UK stock market has held up relatively well, there has been a contrast between domestic companies which earn most of their revenue outside the UK versus those that earn most of their revenues internationally.

As the chart below illustrates, in the period from mid-2013 through to the end of 2015, the UK economy outperformed the global economy, sterling was strong and UK domestic companies outperformed UK overseas earners. Then, as Brexit fears set in and the UK voted to leave the EU, UK domestics significantly underperformed. Exchange rates were a major driver of this, as the market discounted the beneficial translational impact of weaker sterling for companies with significant overseas earnings. However, it was also in large part due to UK domestic companies suffering a “de-rating” amid fears the UK economy would grow at a lower rate going forward outside the EU..

Investors have indiscriminately shunned UK stocks as a consequence of Brexit, and the market overall has suffered a de-rating. Prior to the EU referendum, investors had been prepared to pay approximately 15x the UK stock market’s expected aggregate earnings for the year ahead. Today, this multiple, or “rating” is around 13x, which compares very favourably to the global stock market, trading on approximately 15x expected 2018 aggregate earnings.

UK-domestic-stocks-out-of-favour-since-brexit-new-770px.jpg

The material is not intended to provide advice of any kind. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Past performance is not a guide to what investors can expect in the future.

UK stocks unloved and valuation at 30-year lows

The negativity of international investors towards UK equities is entrenched – global fund managers have been “underweight” the UK for three years, according to Bank of America Merrill Lynch’s global fund manager survey. Investors are said to be underweight an asset class when they are allocating less capital to it than would normally be the case.

Valuations reflect the degree to which investors have shunned UK equities. The chart below tracks the UK market’s valuation discount versus global equities based on the average of three metrics. The metrics used are:

  • Price-to-book value (PBV) ratio – The ratio used to compare a company’s share price with its book value (the book value is the actual value of the company assets minus its liabilities).
  • Price-to-earnings (PE) – A ratio used to value a company’s shares. It is calculated by dividing the current market price by the earnings per share.
  • Price-to-dividends (PD) ratios – A ratio that shows how much a company pays out in dividends each year relative to its share price.

All valuation metrics have their strengths and weaknesses, so combining three reduces the risk of distortions.

UK-stocks-unloved-since-brexit-CS1594-770px.jpg

The material is not intended to provide advice of any kind. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Past performance is not a guide to what investors can expect in the future.

Sue Noffke, Head of UK Equities, said near-term issues persist whilst Brexit remains unresolved but UK shares provide plenty of opportunities.

“Based on this analysis, UK equities are trading at a 30% valuation discount to global peers, close to their 30-year lows. While it is likely to persist until there is some form of clarity over the terms of any Brexit deal, the valuation gap provides an attractive entry point for investors with long time horizons.

“If we do experience a recession in the near term, we would expect it to be local to the UK (possibly the result of a disorderly Brexit) rather than a global one, although we are in the latter stages of the economic cycle. This gives us a degree of comfort that the UK equity market’s yield (currently around 4.5%) is sustainable as the large majority of UK stock market dividends derive from overseas.

“As stock pickers we see plenty of opportunities within the UK – across all parts of the market, large as well as small and mid-sized companies – which could help build portfolios capable of generating superior long-term returns.”

Investments concentrated in a limited number of geographical regions can be subjected to  large changes in value which may adversely impact the performance of the fund.

Equity [company] prices fluctuate daily, based on many factors including general, economic, industry or company news.

Please be aware the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

By David Brett

Source: City AM

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Scottish economy subdued ‘until the fog of Brexit has lifted’

The SCOTTISH economy will remain subdued “until the fog of Brexit has lifted”, the country’s chief economist has warned.

In his latest State of the Economy report, Gary Gillespie reported business confidence was “subdued”, while households’ expectations for the economy have dropped to their lowest level since 2013.

Whether or not the new prime minister can get the Withdrawal Agreement through the House of Commons head of the October 31 Brexit deadline is “central to the outlook for Scotland’s economy over the next 12 to 24 months”, he added.

The Scottish Government’s chief economic adviser said if that does not happen and the UK is unable to secure a further extension to its membership of the European Union the country risks being pushed into recession, with a “corresponding sharp rise in unemployment”.

While the report noted GDP growth north of the border had strengthened to 0.5% in the first three months of 2019, and the employment rate had risen to a record 75.9%, the chief economist said: “Until the fog of Brexit is lifted, growth in the Scottish and UK economies will remain subdued and potentially more exposed to any downturns in international demand and growth.”

The rise in GDP in the first three months of 2019 was “driven in part by temporary factors”, such as pre-Brexit stockpiling and firms completing orders ahead of the original EU exit date of March 29.

Uncertainty caused by the Brexit process has “impacted business investment, with companies pausing key investment programmes”, the report added.

The chief economist also noted business investment has fallen in both Scotland and the UK “for a number of quarters”, saying that since the 2016 referendum “investment has lagged well behind the growth observed in other G7 countries”.

With the number of foreign direct investment projects in Scotland falling by 19% in 2018, he warned “these trends pose a significant risk for future output growth and productivity if they persist”.

The report stressed: “The short-term outlook for the economy continues to be dominated by Brexit uncertainty and the form any exit takes.”

As well as “subdued business confidence”, consumer confidence in Scotland has “continued to weaken over the past year”.

The report noted: “Consumer sentiment has been negative in Scotland since the EU referendum in 2016 and notably weakened in 2018 and into the start of 2019.

“The latest data for Q1 2019 showed a fourth consecutive quarterly fall in consumer sentiment and the indicator now stands at -9.6, its lowest level since the series began in 2013.

“Looking more broadly at households expectations for the next 12 months, sentiment relating to the performance of the Scottish economy and household finances have both fallen to their lowest levels since the series began in 2013 and have weakened for the past four consecutive quarters.”

Finance Secretary Derek Mackay said while the Scottish economy “continues to perform well”, its stability was “seriously threatened by the UK Government’s EU exit plans which, in whatever form they take, will damage the Scottish economy”.

He said: “As this report highlights, business investment has fallen in Scotland since the EU referendum and investment has lagged well behind the growth of other G7 countries.

“The Scottish Government has been clear and consistent that the best option for the future well-being and prosperity of Scotland is to stay in the European Union, otherwise we will see damage to our economy and the future prospects of the people of Scotland suffering.

“The Scottish Government will continue to do all we can to provide as much reassurance as possible as we face the potential of yet further uncertainty over the UK’s EU exit.”

Source: The National

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UK business optimism plummets

Growth expectations among UK businesses has fallen to 49%, from 69% last year

Among private businesses in the UK, optimism is rapidly diminishing, according to new research from PwC. It is falling at more than twice the rate of European counterparts.

PwC polled 2,400 organisations in 31 countries for its European Private Business Survey. Among the 220 UK firms, growth expectations fell to less than half, having been at 69% last year.

Although growth expectations among the other countries also fell, it was by only 8%, from 65% in 2018 to 57% now.

The survey also revealed that across Europe, businesses are facing a widening skills gap. In the UK, PwC estimates, the lack of appropriate skill costs an annual £29bn in lost revenue.

Brexit also remains a concern for businesses. Suzi Woolfson, PwC’s UK private business leader, pointed out that “until there is some certainty around it, businesses will continue to tread carefully.”

Woolfson also highlighted the possibilities that come from uncertainty, “those companies that are agile and flexible can benefit enormously”, she said.

Commenting on the skills shortage that the survey threw light on, she said, “Across Europe we are seeing a skills shortage becoming a significant issue for private businesses and in the UK, while companies say the problem is improving in comparison to last year, overall the impact is still significant”.

UK private businesses are more open than those in Europe to funding from private equity or venture capital for digitalisation, the survey found.

Woolfson said, “Our survey shows that UK private businesses recognise the importance of technology to their long term aspirations, which is why it is important to invest in technology and data to ensure real commercial improvements in systems and processes.

“With their ability to be nimble and decisive, private companies are well-placed to make strategic investments which can lead to substantial benefits”, she added.

By Frances Ball

Source: Economia