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Stamp Duty hikes pushing more London landlords out of their home city

Increasing numbers of landlords who live in London are looking beyond the capital for buy-to-let returns.

Analysis by Hamptons International – based on activity at Countrywide branches – found that 59% of London-based landlords purchased their buy-to-let property outside the capital during the past 12 months.

In contrast, in 2010 just one in four London-based landlords purchased their buy-to-let outside the capital, with 75% investing in London.

However high house prices in London mean that the 3% Stamp Duty surcharge is particularly significant in the capital, and are pushing buy-to-let investors further out.

The proportion of London-based investors purchasing buy-to-lets in their home region has fallen 17% since 2015, the agent said.

The capital is still the most common area, favoured by 41% of London landlords, but 34% now invest in the north and the midlands, which is up 19% on 2015.

Meanwhile, the analysis found the average cost of a new let in Great Britain rose 1.9% annually to £969 per month in March.

This was driven by a 3.7% rise in Greater London to £1,737 per month, the highest level on record.

Scotland was the only region where rents fell, down 0.1% year-on-year.

Aneisha Beveridge, head of research at Hamptons International, said: “April marks the three-year anniversary of the Stamp Duty surcharge introduction for second-home owners.

“Following the tax hike, landlords have been adapting their strategy to find new ways to make their returns. Lower entry costs and higher yields outside of the capital are enticing investors to look further afield than they have previously.”

Region

Where London-based landlords purchase buy to lets

Change since 2010

Change since 2015

London

41%

-34%

-17%

South East

11%

5%

-2%

East Midlands

10%

8%

6%

East

10%

-1%

-2%

North West

9%

9%

1%

Yorkshire and the Humber

6%

6%

6%

West Midlands

6%

5%

2%

South West

3%

-1%

1%

North East

2%

2%

1%

Scotland

1%

1%

1%

Wales

<1%

0%

0%

 

 

 

 

North and Midlands

34%

30%

19%

By MARC SHOFFMAN

Source: Property Industry Eye

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P2P lending offers an attractive entry point into property investment

For investors the current turbulent economic environment has made the trade-off between risk and return somewhat more challenging that it has been for a few years. Volatility in the equity markets at the end of last year saw stocks ricochet from record highs to post their biggest fall since 2008 – with the FTSE-100 ending down 12.5% at the end of December 2018. And while stocks bounced back in the first quarter, many are understandably wary.

In such a climate, it’s not surprising that investors are turning to asset classes that might be considered somewhat more stable such as property or bonds. Yet buying property remains expensive and buy-to-let investment is a far less attractive option than it once was.

This is where P2P lending platforms may offer a solution. Less costly than buy-to-let investment, I believe P2P property platforms provide the perfect entry into bricks and mortar investment while offering highly attractive returns.

Buy-to-let investors under pressure

Traditional routes into property investment are being squeezed as never before. The stamp duty surcharge on additional properties introduced in 2016 has made investing in a buy-to-let portfolio more expensive.

Meanwhile, some landlords now face an uphill battle getting mortgages at all, thanks to tighter lending restrictions ushered in by the Prudential Regulation Authority (PRA) at the start of 2017. And this month sees another tranche of mortgage interest tax relief disappear driving up costs once more for buy-to-let investors.

All of this has led to an 80% fall in new lending on buy-to-let properties in two years from £25bn to just £5bn. As a result, many investors spooked by the volatility in the equity markets and put off by the cost and increasing administration associated with buy-to-let investing have begun to look to alternatives such as P2P lending.

In their simplest form, P2P platforms connect those with money to invest with those looking to borrow, enabling investors to target solid returns without the rollercoaster volatility of the stock market, while benefiting from reduced transaction costs.

Additionally, P2P performance has proven to be robust with many of the largest P2P lenders delivering yields of around 4-5%. In 2015, P2P was approved to be included within the ISA wrapper, so interest earned through eligible P2P platforms can now be tax-free.

The rise of P2P, together with a decade of low interest rates has inspired many would-be savers to seek alternatives to traditional banks saving accounts to boost their income.

Lending is robust too. Last year, P2P lending volumes stood at £3bn, according to figures compiled the UK P2P Finance Association (P2PFA), while P2P lending to date now stands at £15bn and within this property-based P2P lending, in particular, is experiencing healthy demand.

Two main routes into P2P property investment

Property-backed P2P lending has become increasingly popular with investors because the loans are secured against bricks and mortar, reducing risk of capital loss, yet maintaining the healthy returns on offer.

There are two main ways to invest in property through a P2P lender.

The first, property crowdfunding is possibly the most familiar. It allows investors a fractional share of a property along with others over a lengthy period of time. Investors stand to make a profit as a property’s value rises over time, along with a share of potential profits from rent (which could be thought of as similar to a stock’s dividend). Of course, ownership also carries the risk of losses if property values drop, if there are void periods and owning a fraction of a property if things go wrong can create headaches in terms of determining the order in which multiple investors should be compensated.

Considered a simpler method, P2P property lenders advance money to property developers to either build small developments or refurbish old buildings into residential accommodation. The loans are for far shorter periods, so investors lose the potential for a windfall return on the longer-term investment in a buy-to-let property that is gaining in value each year. But the returns are generally more predictable and in some cases the investor, or some P2P platforms such as Blend Network, have the first charge on the loan should anything go wrong meaning the risk of significant losses is relatively small.

Investing outside of London offers greater rewards

We believe the biggest growth has recently been in this second area of lending to the broader residential space, which includes bridge funding, small family builders and developers of flats for sale to buy-to-let landlords.

Of course, all P2P property lending is not without risk. Investors should be aware that many platforms offer loans in higher risk assets and cities, which, as at least one recent high-profile case has shown, run a greater risk of default.

Property developers concentrating on prime, city-centre locations – sectors which generally have peaked in recent years, should in our opinion largely be avoided, while loans on high-value properties we believe should be assessed with caution. Moreover, in our experience, small builders who tend to operate in niche, higher-margin markets are less exposed to market volatility than London’s buy-to-let landlords.

We have developed a different model, which focuses on affordable housing, outside London, in less overbought regions where there is still the potential to secure robust returns. We have so far lent out some £6m, with an average return of close to 12% and had no defaults.

Essentially, P2P property investment can offer robust fixed yields, backed by physical property assets. With due diligence undertaken by the P2P platform and available to potential investors, loans are likely to be advanced to borrowers that have credible plans for their properties and pose little risk to investors while at the same time offering investors greater liquidity and more attractive returns than may be found in traditional property investments. That said, we always advise investors to do their own due diligence.

Source: Mortgage Introducer

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How has the UK property market reacted to Brexit?

Jamie Johnson, CEO and co-founder of FJP Investment, takes a look at what leaving the EU – when we eventually do – will mean for the UK property market.

If we are to reflect on the current state of the Brexit negotiations – which have made very little progress in the last few months – it would be easy to assume that the UK is in a state of disarray. But while this may be somewhat descriptive of the current political deadlock in Westminster, we must be careful not to paint all sectors of the economy with the same brush. After all, many of the UK’s leading industries are striding forward.

The property market, for instance, has shown itself to be a beacon of strength and resilience in the face of economic and political turmoil. Initial fears about the future of the market post-EU referendum were quickly dismissed; since the vote, house prices have been steadily rising, new construction projects are taking place up and down the country, and property continues to attract strong levels of domestic and international investment.

So, while it is easy to let Brexit cast a dominating shadow over the economy, it is important to step back and note the positive long-term developments we are seeing in the real estate market. At the same time, we must also consider the challenges currently facing the market notwithstanding the political standoff – obstacles which should be a priority in months and years to come.

What do recent house price trends tell us?

If we are to look back on the headlines that followed in the wake of the EU referendum, the UK was presented with a cascade of doom and gloom predictions. And while there have naturally been some knock-on effects stemming from the vote – most notably houses prices in the capital stagnating – there have also been noticeable advancements that have strengthened the market. For one, the Midlands and North of England have championed house price growth over the past few years, driving up the national average house price.

Since the 2016 vote, house prices have risen at double-digit rates in many areas; by 16% in Birmingham, followed closely by Manchester and Leicester (both up 15%). The growth in property values can in part be attributed to the influx of investment into regeneration projects, which are reviving housebuilding efforts and supporting the improvement of infrastructure and transport links.

Meanwhile, domestic and foreign levels of investment into UK property have also remained strong. With just weeks to go until the (then) 29 March Brexit deadline, the number of transactions recorded in January 2019 for residential properties was 1.3% more than 12 months prior.

These figures just go to show that, while there is some hesitancy, real estate as a traditional asset class continues to offer attractive investment options for prospective homebuyers. After all, it has demonstrated time and time again that it is able to withstand difficult times with confidence and offer strong returns on investment.

Key priorities for the UK property market

As house prices continue to climb and transactions pick up, the challenge becomes to provide enough suitable housing to meet the needs of the population.

Yet, while construction efforts have been bolstered across the country, the currently imbalance between supply and demand remains a top priority. The Conservative government has long touted addressing the national housing shortage as a key policy agenda; in the summer of 2018, Prime Minister Theresa May reaffirmed this mission by pledging to put 300,000 new homes on the market by the middle of the next decade.

There is no doubt that progress has been made in this sphere. Multi-billion pound funding has been committed to construction efforts, planning reforms have been put in place and councils have been given the freedom to borrow more in order to build homes. As a result, in 2017-18, 220,000 homes were constructed – a number that is higher than in all but one of the last 31 years.

That is not to say that the housing crisis deserves any less attention now, however. The reality is that there are still not enough homes to meet the growing demand for accommodation, while construction efforts are progressing slower than necessary to reach the ambitious 300,000 target.

A recent study by Lichfields found that in 2020, about 50% of local authorities are likely to fail the test for building enough homes – the report revealed that only 44.1% of local authorities had up-to-date plans setting out how they could meet the need for new homes. Meanwhile, SME developers are also struggling, particularly when it comes to sourcing funds; 57% cited access to finance as their biggest obstacle.

Irrespective of the eventual outcome of Brexit, speeding up housebuilding efforts across the country must remain a national priority. Creative reforms are certainly needed, and there are some positive steps that can be taken to ensure that housebuilders and developers have access to the funding they need to continue delivering homes. Debt investment products such as loan notes, for instance – which are issued by private investors to the firms constructing a property – are one such measure that could support construction efforts.

Considering recent property trends demonstrates the resilience of UK bricks and mortar. Looking beyond the initial fears posed by Brexit, real estate continues to offer strong returns for buy-to-let investors and has proven its value as an asset class. So, while we can expect some hesitancy from the market as the details of the final EU withdrawal deal are unveiled, there is little evidence to suggest that Brexit will ultimately dampen foreign and domestic investor sentiment towards property.

By Jamie Johnson 

Source: Accountancy Age

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Government provides £200m for small firms as Brexit threatens EU funding

The UK government has handed over £200m to help support smaller businesses in the 2019-20 financial year as the future of European Union funding remains uncertain.

The Treasury announced today that it has made the cash available to the British Business Bank, which provides loans to small companies looking to increase in size through investment and venture capital firms.

Chancellor Philip Hammond suggested in the 2018 Budget that £200m could be made available “to replace access to the European Investment Fund [EIF] if needed”.

The EIF is an EU agency that has been a significant source of funding for small UK businesses that struggle to get credit, but Brexit means British firms look likely to lose access to this money over the long term. The Federation of Small Businesses (FSB) today voiced concerns over the loss of EU funding.

The Treasury said the money will be available from today and will cover this financial year. Further funding arrangements have yet to be made and will depend on Britain’s future relationship with the EU.

Venture capital and investment firms will be able to approach the British Business Bank, a public-private partnership, to bid for the extra £200m to invest in small UK firms.

Business minister Kelly Tolhurst said: “This funding, supported by the government-backed British Business Bank, will play a key role in supporting innovative firms access the finance they need to grow and thrive.”

British Business Bank chief executive Keith Morgan said: “We welcome HM Treasury’s confirmation today that this allocation of £200 million is now available to increase provision of much-needed scale-up capital for innovative businesses across the UK.”

The national chairman of the FSB, Mike Cherry, said: “The British Business Bank provides vital support for thousands of smaller firms – particularly in parts of the country where funding is hard to come by – so it’s good to see it receive another £200 million following the launch of the £2.5 billion patient capital programme last year.”

“However, with Brexit on the horizon, serious questions regarding future funding for a UK small business support network that’s heavily reliant on the EU remain unanswered.”

He said: “A promised consultation on the post-Brexit Shared Prosperity Fund that would replace EU funding streams is yet to materialise. The £200 million is welcome, but we need to start thinking much bigger about future investment in the small firms that make-up 99 per cent of the UK business community.”

By Harry Robertson

Source: City AM

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UK house prices growing at slowest pace in almost seven years

Annual house price growth is at its lowest level in almost seven years, with London house prices suffering most.

UK house prices were up by just 0.6% in the year to February with an average of £226,000, a much more subdued picture than the 1.7% increase seen in the year to January.

It marked the lowest annual increase since September 2012 (0.4%) according to the Office for National Statistics, the Land Registry and other bodies who released the figures jointly.

The national slowdown is largely due to falling prices in London and the South East of England.

Prices in London were down by 3.8% in the year to February, faster than the 2.2% decrease seen in the year to January.

In the South East, prices fell by 1.8% during the year.

Mike Hardie, head of inflation at the ONS, said: “Annual house price growth has slowed to the lowest rate in close to seven years.

“Growth in Wales and the west of England was offset by a sustained fall in London and falling prices in the South East for the first time since 2011.”

Jamie Durham, economist at PwC, said “uncertainty around Brexit” was weighing on the capital’s housing market but prices there are still the highest in the UK at an average of £460,000.

He added: “Elsewhere in the UK, however, house prices continued to rise. The highest price growth was in the North West, with annual house price inflation of 4.0%. The Midlands also maintained strong annual house price growth, particularly in the West Midlands, with annual growth of 2.9%.”

Paul Smith, chief executive of Haart estate agents said: “While clarity over Brexit would be helpful – it is not absolutely vital. Although prolonging the inevitable is certainly frustrating, this level of uncertainty has become the new normal, and since the New Year, we have seen buyers sweep their fears under the rug and return to the market.

“Pent up demand has been building for months and Brits are ready to move. The extended negotiation period is not going to stop them.”

Ray Rafiq Omar, chief executive of Unmortgage, said: “There’s a real need to think outside the box to help those who are stuck renting and badly want to own their own home.

“The government needs to take greater steps in meeting housebuilding targets and creating some much needed movement within the market.”

Source: Yorkshire Coast Radio

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UK inflation rate holds steady at 1.9 per cent sending Britons’ real wages higher

The UK’s headline annual inflation rate remained unchanged in March, staying at 1.9 per cent, meaning Britons’ real wages are increasing as pay growth outstrips price rises.

Meanwhile the inflation rate including housing costs and council tax stayed at 1.8 per cent, where it has stood since January, monthly figures from the Office for National Statistics (ONS) have shown.

With wages rising at 3.4 per cent, Britons are seeing sustained real wage growth, although weekly pay is yet to return to its pre-financial crisis levels.

While the headline rate is below the Bank of England’s two per cent target, it remains unlikely to change interest rates while Brexit uncertainty clouds the economy.

Both the headline rate and the inflation rate including house prices were 0.1 percentage point below economists’ expectations.

The largest downward contributions to inflation came from falls in recreation and culture, and food and non-alcoholic beverages.

However, there were upward contributions from a variety of categories including transport, principally increases in both petrol and diesel prices, miscellaneous goods and services, and from clothing and footwear.

Mike Hardie, head of inflation at the ONS, said: “Inflation is stable, with motor fuel prices rising between February and March this year, offset by falls in food prices as well as the cost of computer games growing more slowly than it did at this time last year.”

Tom Stevenson, investment director for personal investing at Fidelity International, said: “The Bank of England will view today’s inflation data as the least problematic of the week’s three economic announcements.”

“Prices are rising pretty much in line with the Old Lady’s two per cent target, giving the central bank cover to continue sitting on its hands,” he said. “As such the CPI data sits between yesterday’s employment data – which pointed towards higher interest rates in due course – and tomorrow’s retail sales numbers – which probably won’t.”

Chief economic adviser to the EY Item Club, Howard Archer, said: “Any help to consumer purchasing power is particularly welcome as the economy is likely to be hampered by prolonged Brexit uncertainties following the flexible extension of the UK’s exit from the EU to 31 October.”

“Consumers have generally been the most resilient part of the economy and they have been helped by real earnings growth climbing to 1.6 per cent in the three months to February, which was the best level since mid-2016,” he said.

By Harry Robertson

Source: City AM

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First-time buyer completions up 4.1%

The number of first-time buyers completing mortgages has increased by 4.1 per cent since last year, according to UK Finance.

UK Finance’s mortgage lending trends, published today (April 17), showed that 24,800 first-time buyers took out a mortgage in February 2019 — 4.1 per cent more than in the same month in 2018.

The trade body stated this was the fifth consecutive month of year-on-year growth in first-time buyer numbers.

However, the number of current home owners moving house remained steady, rising 0.1 per cent in the year to 23,660.

The remortgaging market fared better. About 18,200 people remortgaged their home to gain extra funds — 10 per cent up on February 2018 — and those remortgaging without borrowing money increased by 7.8 per cent to 18,360.

On average, those remortgaging had a 43 per cent deposit and their loan-to-income ratio was 2.74.

This was considerably lower than residential mortgages which showed an average LTV of 72 per cent and a loan-to-income ratio of 3.37.

UK Finance stated customer engagement in the remortgaging market remained high with borrowers able to access a wide range of competitive products.

The trends showed buy-to-let mortgages were on the decline as only 4,800 buy-to-let mortgages completed in February 2019 — 7.7 per cent fewer than in the same month in 2018.

More people opted to remortgage in the buy-to-let market as 14,400 remortgages, 2.1 per cent more than the same period last year, were completed in the month.

UK Finance suggested the buy-to-let house purchase market continued to contract due to tax and regulatory changes, while buy-to-let remortgaging increased as borrowers moved from fixed rate mortgages and locked into attractive new rates.

Commenting on the findings, Dave Harris, chief executive of More 2 Life, said: “The growing number of first-time buyers in the market can in part be attributed to parents passing on wealth to their children to help with home purchases.

“With wages still failing to keep up with inflation, the pockets of most first-time buyers aren’t proving deep enough to provide the often hefty mortgage deposits they need to take a first step on the property ladder – but thankfully, this is where parents and grandparents are stepping in to help.”

David Copland, director of mortgage services at TMA, said while activity in the first-time buyer segment continued its upward trajectory, more attention was needed to help the buy-to-let market.

He said: “As previous tax and regulatory changes continue to loom over the private rental sector, advisers will prove essential in guiding these customers towards the best solutions to fit their individual needs.”

Richard Pike, Phoebus Software sales and marketing director, agreed that buy-to-let purchases continued to struggle but suggested that, like many areas that require an element of investor risk, this could have been affected by continued Brexit uncertainty.

He said: “It is difficult to overstate the impact the current negotiations between Westminster and Europe are having on the UK as a whole. We have been in a state of limbo since Article 50 was triggered and there is still no sign of a solution.

“This is, of course, having a knock-on effect and it is highly likely that the figures we will see in the coming months, which reflect the run-up to the original withdrawal deadline, will be more subdued.”

However, Mr Pike added there were positives to be taken from the UK Finance figures as the market had managed to keep ahead compared to 2018 in most areas.

He added: “When you consider these figures only tell part of the lending story in the UK, that is encouraging.”

By Imogen Tew

Source: FT Adviser

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House Sales in Wales up by 6% as Prices Fall

House sales are up by 6% in Q1 of 2019 compared to Q1 2018, with Principality Building Society suggesting first-time buyers are making the most of the opportunity of relatively affordable house prices in parts of Wales.

However, the average house price in Wales has fallen to £185,018, with the annual growth of 0.4% the lowest since August 2013.

The figures have been released from Principality Building Society’s Wales House Price Index for Q1 2019 (January – March), which shows the rise and fall of house prices in each of the 22 local authorities in Wales.

House prices across the country have fallen by an average of 0.8% in Q1 of 2019.  According to Principality’s House Price Index for Wales, the decline in quarterly prices has been caused by uncertainty surrounding Brexit, with many buyers and sellers waiting for a clear decision on the future of the country’s position in Europe before committing to the purchase or sale of a property.

Annual house price growth is low compared to the same period last year due to the sales of more expensive properties ahead of the introduction of the Land Transaction Tax in April 2018, which resulted in a rise in stamp duty for mid to high end priced homes.

Overall, there were 15 local authority areas in Wales where prices fell in the quarter.

Seven local authorities saw a rise in house prices, however, including the more affordable regions of Neath Port Talbot (1.9%), Blaenau Gwent (1.1%) and Merthyr Tydfil (0.5%), which Principality suggests has been helped by first-time buyers remaining keen to get on the property ladder in those areas.

Tom Denman, Chief Financial Officer at Principality Building Society said:

“As anticipated, we have seen a quarterly decline in house prices which is connected to the ongoing economic uncertainty caused by Brexit.

“House sales are up year on year, with Brexit seemingly not having the same negative effect on the number of sales that are taking place in the Welsh housing market as it has in southern parts of England, in particular.

“The south-east of Wales continues to see house price growth as a result of the abolition of the Severn Bridge tolls and the widening commuter belt between Bristol and Cardiff. With political uncertainty continuing, it’s difficult to gauge whether the market will bounce back in quarter two or will continue to show signs of slowing.”

Cardiff (£235,361) and Conwy (£190,125) reached new peak prices in March 2019. In Cardiff, this was driven by a rise in the prices of semi-detached properties and flats. In Conwy, detached homes – the most frequently purchased property type in the area – saw the largest rise, up by an average of £40,000 in March 2019 compared to the year previous.

By  

Source: Business News Wales

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Affordable homes to be built on site of former sports club

Work is under way to build 48 new affordable homes on the site of the former Barton Lane Sports and Recreation Club in Eccles, Salford, which had sat unoccupied since November 2016.

ForHousing is transforming the disused site at Barton Lane into 48 modern apartments for affordable rent, comprising 24 one-bedroom and 24 two-bedroom homes.

The landlord owns and manages 24,000 homes across the North West of England, in Fylde, Knowsley, Oldham and Salford, and provides housing management services on behalf of Cheshire West and Chester Council.

Mangrove Estates is the developer on the site with Watson Homes responsible for the build and Grays Architecture leading on the scheme design.

Nigel Sedman, group director of homes said: “It’s really good news that the Barton Lane development has started on site.

“It will provide greatly needed affordable homes for 120 people and takes our investment into new homes in Eccles to over £20m.”

He added: “At ForHousing we are committed to building high-quality homes, stronger neighbourhoods and working together with tenants to make more things possible for more people.

“In the North West we have developed over 900 new homes to date across a mix of tenures and will be building a further 540 by 2020.”

The Barton Lane development is part funded by a £1.68m grant from Homes England. It is earmarked for completion by Winter 2020.

By Neil Hodgson

Source: The Business Desk

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UK labour market remains strong in face of Brexit uncertainty

Levels of employment in Britain increased 179,000 to a record high in the three months to February, official data confirmed on Tuesday, but economists see ongoing headwinds for households and businesses.

The ILO unemployment rate remained at 3.9% in February, the Office for National Statistics said, with an estimated 32.7m people in some form of paid employment, keeping the employment rate at 76.1% of all people between 16 and 64 years of age.

Excluding bonuses, wages grew 3.4% compared to a year earlier, driven higher as firms in several sectors find it harder to attract and retain staff. Weekly earnings excluding the effect of inflation were up 1.5%, ONS said. Total pay including bonuses stayed steady at 3.5%, while normal pay growth for January was revised up to 3.5%.

By another measure that is watched by members of the Bank of England’s monetary policy committee, wage growth excluding-bonuses on a three-month annualised basis fell below 2% for the first time in almost two years.

Employment numbers, the unemployment rate and wage growth were all pretty much as economists expected.

More timely data from March revealed that the number of unemployment claimants had risen by a larger than expected 28,200, with the claimant count rising to 3.0% from 2.9% in February.

ROBUST JOB HEADLINES…

ONS deputy head of labour market statistics Matt Hughes said: “The jobs market remains robust, with the number of people in work continuing to grow. The increase over the past year is all coming from full-timers, both employees and the self-employed.”

While employment growth was solid, economist Thomas Pugh at Capital Economics, suspect that this “could mark the peak of employment growth as the Brexit uncertainty reached its crescendo”, for now, seeing the surveys turning down sharply in March.

At the same time, annual regular pay growth in the three months to February ticked down to 3.4% from 3.5%, but total pay (including bonuses) stayed steady at 3.5%, and the unemployment rate remained at 3.9%, the lowest since 1975.

He noted that the annual rate of employment growth slipped to 1.4% from 1.5%, suggesting that with employment growing more slowly than the 2.0% output growth in February, that productivity growth should have picked up. “This could ease some of the recent upward pressure on unit labour costs and give the MPC more confidence to hold off raising rates until Brexit has been resolved,” he said. “Indeed, we do not expect the Bank to resume raising rates until the second half of next year.”

BUT WAGES NUMBERS DON’T TELL FULL STORY

Although earnings have now been growing ahead of inflation for over a year now, in real terms, Hughes noted that wage levels have not yet returned to their pre-downturn peak.

Wage data is indeed only half the story, with inflation data on Wednesday due to confirm the degree to which pay is rising ahead of costs. Consumer price inflation printed at 1.8% at the last reading.

Ed Monk, an associate director at Fidelity International, said the decade of lost wage growth means “it may be a while before households feel like they’re getting any richer”.

Monk added: “The state of the UK economy now kind of depends whether you’re a half full or half empty sort of person. Looking on the bright side, it’s a comfort that the pressure on households is easing. On the other hand we know that growth is under pressure and a fall in foreign investment since the Brexit is storing up problems for the future.

“The Bank of England appears unlikely to tightening interest rates in this environment. That helps UK stock market investors in two ways – it gives consumers and companies a hand with lower borrowing costs and it makes returns on risk-free assets like cash less attractive.”

With Brexit uncertainty set to persist, even though it is contributing to the skill shortages that are continuing to boost pay growth, economist James Smith at ING agreed that it is unlikely to be followed up with a BoE rate hike later this year.

Looking at the robust wage growth he saw few reasons to expect this trend to fade imminently, although amid all of the uncertainty, he observed that the number of people on the unemployed claimant count has begun to exceed the number of job vacancies, which was “perhaps a sign of some weakness ahead”.

Smith does not expect a substantial rebound in economic growth over the next few months, with business still facing headwinds including staff shortages, slower global growth and Brexit uncertainty.

He was another who felt it a MPC rate rise was “pretty unlikely” this year – “unless some form of deal is approved earlier than most people expect”, with further gradual tightening impossibly to rule out in the medium term if wages growth rises higher.

By Oliver Haill

Source: ShareCast