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UK economy registers zero growth in final quarter of 2019

The UK economy flat-lined in the final quarter of 2019, data has shown, as political uncertainty driven by Brexit and the December General Election weighed on activity.

Britain’s services sector – which makes up about 80 per cent of the economy – eked out growth of 0.1 per cent, while manufacturing production slumped 1.1 per cent quarter on quarter, the Office for National Statistics (ONS) said.

The ONS said the UK economy grew 1.4 per cent in 2019 as a whole, bettering 2018’s growth of 1.3 per cent. Over the last year, services grew 1.8 per cent but production fell 1.3 per cent in a tough year for UK manufacturers amid repeatedly delayed Brexit deadlines.

“The underlying picture for production was one of weakening throughout 2019, with nine months of the year showing negative rolling three-month growths,” the ONS said.

However, analysts are looking towards January data to give a more accurate sense of where the economy is headed, given that business sentiment and survey indicators have picked up markedly since Boris Johnson’s landslide December election win.

Firms are grateful for at least some clarity over Brexit, which officially happened at the end of last month. Expectations of an economic pick-up led the Bank of England to hold interest rates at 0.75 per cent at its last meeting.

In December, UK GDP grew by more than expected, registering a 0.3 per cent month on month expansion. This beat expectations of 0.2 per cent growth and the 0.3 per cent contraction seen in November.

The pound climbed after the data was released to stand 0.4 per cent higher against the dollar by 9.45am at $1.294.

Ruth Gregory, senior UK economist at consultancy Capital Economics, said: “While the first estimate of fourth-quarter GDP showed that the economy stagnated at the end of last year, the fourth quarter will probably prove to be the low point.”

“The expenditure breakdown painted a pretty downbeat picture, showing that business investment and net trade drove the drop in GDP, subtracting 0.1 percentage points and 0.3 percentage points respectively.”

Uncertainty remains

The weak UK GDP reading came ahead of chancellor Sajid Javid’s 11 March Budget, which will set the tone for the new Conservative administration which has pledged to boost spending.

Tej Parikh, chief economist at the Institute of Directors, said: “The UK economy ended 2019 in a funk, and despite a recent rise in optimism, businesses will be looking for a significant boost from the chancellor next month.”

Britain has entered the next phase of Brexit negotiations, and has until the end of the year to reach a “deep free-trade agreement” with the European Union. Many businesses are concerned that the tight deadline could result in the UK falling into an effective no-deal Brexit.

“This makes the Budget a crucial moment to get the economy moving,” Parikh said. “The chancellor must clear the way for entrepreneurs to create jobs and drive up productivity, by unleashing investment in start-ups, slashing business rates, and revamping our skills system.”

Other uncertainties also linger over the economy. In a worrying sign for policymakers, UK household spending, which drove growth in 2019 as unemployment plumbed record depths, slumped to a four-year low.

Chris Towner, director at risk adviser Chatham Financial, said: “The question now for the first quarter of 2020 is whether we are going to witness a bounce in activity as a reaction to the healthy majority for the more business-friendly Conservative party. Early shoots of a bounce are starting to appear.”

By Harry Robertson

Source: City AM

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UK house prices: Post-election surge breaks records

The decisive result of the General Election sparked a record-breaking surge in UK house prices in December and January, in the latest sign that the UK housing market has been revitalised by a “Boris bounce”

There was a 2.3 per cent monthly surge in the average price of property coming to the market between 8 December and 11 January, the largest jump ever for that time of year since Rightmove records began in 2002.

Nearly 65,000 properties were put on the market during the period, meaning most were advertised for sale following the General Election on 12 December, according to the property platform’s House Price Index.

There has also been a jump in buyer demand since the Conservative election victory.

Enquiries to estate agents between 13 December and 15 January were up 15 per cent compared to the previous year, with an extra 1.3m buyer enquiries following the election.

The number of sales agreed spiked by 7.4 per cent during the same period as buyers made the most of the renewed political uncertainty offered by the election result.

Rightmove director and housing market analyst Miles Shipside: “These statistics seem to indicate that many buyers and sellers feel that the election result gives a window of stability.

“The housing market dislikes uncertainty and the unsettled political outlook over the last three and a half years since the EU referendum caused some potential home movers to hesitate.

“There now seems to be a release of this pent-up demand, which suggests we are in store for an active spring market.”

London’s property market has also benefited following the General Election, as the capital saw a sharp increase in buyer interest and sales prospects. In December, 31 per cent of chartered surveyors saw a rise rather than a fall in enquiries from new buyers, up from minus 12 in November, according to the latest Rics data.

“We have absolutely seen a post-election bounce, quite substantially actually,” Marc von Grundherr, a director at Benham & Reeves in London, said.

“Things usually quieten down before Christmas, but we had three times the number of offers in the last two weeks of December than the first two weeks.

“People have been waiting for stability, and the moment it arrived, confidence in the market has increased significantly.

“There has been a dramatic Boris bounce, so to speak, with real optimism among buyers still getting good value. But it’s also not a bad time for sellers as stock levels are still relatively low.”

By Jessica Clark

Source: City AM

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Confidence rises in UK economy after election, but will it last?

Prime Minister Boris Johnson’s emphatic election win last month has led to a burst of optimism among British businesses and consumers, according to some early signals from the economy.

Johnson’s success in securing a large parliamentary majority, which ended a period of deadlock in Westminster, means Britain is on course to leave the European Union on Jan. 31 and start an 11-month, no-change transition period.

It also ended the prospect of a shift to the left in British politics. The opposition Labour Party had proposed nationalising key industries, taking stakes in many other companies and more state intervention.

However, some economists are sceptical about whether the pickup in confidence will translate into a meaningful boost to growth, which has lost momentum since the Brexit referendum in 2016 and slowed to a crawl in late 2019.

Some businesses worry that Johnson’s refusal to contemplate asking for an extension to the Brexit transition period – even if Britain has not sealed a new trade deal with the EU before the end of 2020 – risks creating another “cliff edge.”

Below are some of the early signals that show an improvement in optimism after the Dec. 12 election.

CFOs CHEER UP

Accountants Deloitte said on Friday that 53% of chief financial officers were more optimistic about their companies’ prospects than three months previously, the highest share since records started in 2008.

The Deloitte survey was conducted entirely after the election and chimed with the business expectations component of the IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) – a closely watched gauge of British business – which hit its highest level in December since September 2018.

The PMI was up markedly from a preliminary reading for the month that was based only on responses before the election, indicating a clear improvement in sentiment after the vote.

Nonetheless, the overall picture of the economy from the PMI remained consistent with no growth in the fourth quarter.

CONSUMERS MORE CONFIDENT

The public became much more upbeat about the prospects for Britain’s economy after the election, according to a survey commissioned by payment card company Barclaycard.

The proportion of people who said they were confident about the economy’s future rose 10 points to 41%, the highest since March 2017, according to the survey of 2,000 people conducted by Longitude Research from Dec. 17 to 19.

However, in recent years analysts have doubted how much consumer confidence in the economy really matters.

Britons have been among the most downbeat about their country’s economic prospects of all European Union countries, according to European Commission data, but their spending has continued to power the economy.

Conversely, while the Barclaycard survey showed an increase in optimism among consumers, the British Retail Consortium reported dismal Christmas trading for major store chains.

JOBS BOOST?

British employers increased hiring of permanent staff from job agencies last month for the first time in a year, a survey from the Recruitment and Employment Confederation (REC) showed, another sign of higher business confidence.

The survey was conducted Dec. 5 to Dec. 17, straddling the election result.

“With a new government in place and the path ahead looking more predictable, some businesses have decided that they have waited long enough,” REC chief executive Neil Carberry said.

Reporting by Andy Bruce

Source: UK Reuters

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General Election result ‘should give confidence boost to housing market’

The Conservatives’ General Election victory could trigger a new burst of housing market activity as confidence flows back into the market, according to estate agents.

Various reports have indicated that housing market activity has been on hold while potential buyers and sellers waited for the political situation to become clearer.

But some property professionals said they now expect to see those who have previously been holding back doing deals before Christmas.

The Tories aim to deliver a million more homes in the next five years.

The party has also promised to introduce “lifetime rental deposits” so down payments can be transferred from one property to the next.

It will also review new ways to support home ownership following the end of the Help to Buy scheme in 2023.

The most important thing for the housing market is that the result brings some stability, albeit short term, at least until we see a clearer timetable for Brexit. This should generate a return of confidence to the market, which is what we have been looking for

Jeremy Leaf, north London estate agent

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, said: “The most important thing for the housing market is that the result brings some stability, albeit short term, at least until we see a clearer timetable for Brexit.

“This should generate a return of confidence to the market, which is what we have been looking for.”

He said he now hoped to see more government moves which would go towards increasing the supply of homes, particularly affordable ones to buy and rent.

Mr Leaf continued: “What we really want to see is more supply and transactional activity.

“This is good for the housing market and for the wider economy as it improves social mobility.

“People have been holding back for some time and demand can only remain pent up for so long – people want to get on with their lives.”

Patrick Alvarado, director of Knightsbridge, London, estate agency Nicolas Van Patrick, said: “We expect buyers who are currently under offer and who might have been holding off in exchanging contracts prior to the election, now getting on with it and exchanging prior to Christmas.

“Foreign buyers who might have hoped for a further reduction in prices and the currency should we have woken up to a hung parliament or Jeremy Corbyn victory will realise this is no longer an option and those wishing to buy will also get on with it.”

Mark Manning, managing director of Leeds-based estate agency chain Manning Stainton, which has branches across Leeds, Wakefield and Wetherby, said: “Today’s result is great news for the housing market – we really needed a majority Government who could push Brexit through and end the uncertainty we’ve experienced for the past three years, and that’s what we’ve got.

“There’s so much pent-up buyer demand in the market, caused by potential sellers sitting on their hands and waiting for the result of the election and more clarity on Brexit before making a move.

“I think, now things are clearer, we’ll see lots of movement in the market as those people who’ve been thinking about selling put their homes up for sale.”

We expect the housing market to benefit in the year ahead as everyone from first-time buyers to seasoned investors who have otherwise been anxiously waiting to see where we stood as a nation can now get on with their lives

Joshua Elash, MT Finance

Joshua Elash, director of property lender MT Finance, said: “We expect the housing market to benefit in the year ahead as everyone from first-time buyers to seasoned investors who have otherwise been anxiously waiting to see where we stood as a nation can now get on with their lives.

“We expect transactional volumes to increase significantly as certainty has been delivered.”

But Richard Donnell, research director at Zoopla, said the election result does little to change the underlying fundamentals of the housing market.

“The challenges for housing vary across the country and there are no simple, national solutions,” he said.

“Record low mortgage rates have boosted house prices, while affordability challenges remain across southern England.

“At the same time, housing has become less liquid, with the average home-owner moving once every 19 years.

“This is a result of long-run economic factors and demographic changes compounded by stamp duty, which is a major barrier to movement, especially in southern England.

“Housing policy needs to cater to the different challenges across the country and focus on barriers to movement and increasing choice across all tenures.”

Source: Shropshire Star

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Buy-to-let industry relieved at election result

Figures within the buy-to-let mortgage industry breathed a sigh of relief when the Conservatives won the General Election.

Michael Lawlor, business principal at Mortgage Advice Bureau, said: “From a buy-to-let perspective a lot of clients I deal with were putting any future purchases on hold at risk of a Labour government.

“They were worried about rent caps and talk of right to buy plans and that resurfacing at some stage.”

Bob Young, chief executive at Fleet Mortgages, added: “In my view, the Conservative majority is good news for the country and our sector.

“This is a strong – in a numerical sense – government that understands business drives revenue for all its spending on behalf of us, the taxpayer.

“It’s my view that, under the Labour Party’s plans for the private rental sector, it would have ceased to exist as we have come to know it, strangled by rules formulated on the belief that it is somehow a bad thing and that all buy-to-let landlords are simply in it for the money at the expense of their tenants.

“A Labour minority government or it leading a coalition may well have resulted in investment from outside the UK into buy-to-let lending being pulled or at least seriously slowed while a complete understanding of the ‘new world’ was digested.

“We feel invigorated by the result and are looking forward to developing our offering and ensuring we continue to support buy-to-let advisers and their landlord clients.”

Richard Hayes, chief executive and co-founder at Mojo Mortgages was pleased about the Tories’ plans for the buy-to-let sector.

He said: “Finally, they’re planning to bring in a ‘Better Deal for Renters’.

“This will include abolishing ‘no fault’ evictions and introducing a lifetime deposit which moves with the tenant, rather than having to put down a new deposit for each property a tenant moves to.

“Again, if this promise is kept, it will be good news for renters who undoubtably want to purchase their own home.”

However Payam Azadi, director of Niche Advice, was worried the new Conservative government might tax landlords more to fund their spending plans.

He added: “Let’s not forget that all of the fundamental changes that have happened in the buy-to-let sector have been implemented under a Tory government.

“Although I think Labour’s plans would have had a huge impact on the buy-to-let market, I’m still nervous that buy-to-let landlords may be used as scapegoats as the government starts searching for ways to pay for all their promises.

“If landlords get taxed further there won’t be marches on ‘save the landlords’.

“I’m worried we can still be seen as easy targets.

“The buy-to-let sector does a valuable job of helping the property sector and that should be helped out and there should be more support for it and the attack on landlords should stop.”

Bea Montoya, chief operating officer at Simply Business, warned the government needs to entice landlords to stay in the private rented sector.

Montoya said: “Buy-to-let landlords contribute a combined £16.1bn to the economy through pre-tax spending, and it’s vital that Boris Johnson and his party recognise their importance to Britain.

“A lifetime deposit would bring about huge change, but with little detail published, it’s hard to see how this will work in practice, or the impact it could have on landlords.

“We know a quarter of landlords already plan to cash in next year due to government reform, tax hikes, and uncertainty in the market.

“The current tax increases imposed by the government are proving counterproductive, but with no promises to prevent those looking to sell from leaving, we could see half a million homes put up for sale next year alone.”

Richard Donnell, research director at Zoopla, said that the rental market has faced a raft of policy changes since 2016.

He said these have stalled new investment, resulting in static rental supply, which is a primary factor behind rental growth reaching a three-year high at 2%.

Donnell added: “Further reforms appear likely and it is important the impact on rental supply is managed in order to avoid an acceleration in rental growth – also known as runaway rents.”

Franz Doerr, chief executive and founder, flatfair, said: “It is crucial that the new Conservative government recognises the power of technology to transform renting and real estate more widely.

“The new government needs to support and work with innovative companies harnessing technology to make the wider real estate market more transparent and modern for all parties involved.”

By Michael Lloyd

Source: Mortgage Introducer

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London economy outperforms rest of UK ahead of General Election

London’s economy continued to outperform the rest of the UK in November, survey data has revealed, with the capital’s businesses enjoying a recovery in new orders as the rest of the country struggled.

New product releases, increased investment in marketing, and higher demand from US clients were some of the factors behind higher sales, according to Natwest and data firm IHS Markit, who produced the survey.

London’s moderate growth in output contrasted with the rest of the UK, where the private sector shrank last month as the General Election brought yet more political uncertainty to British firms.

The UK’s services, construction and manufacturing sectors all contracted in November, according to survey data released by IHS Markit, suggesting fourth quarter growth could be close to zero or even negative.

Yet the London business activity index rose to 51.8 in November from 51.7 a month earlier, Natwest said. A score of above 50 indicates expansion.

Stuart Johnstone, a managing director at Natwest, said: “The comparison with the rest of the country is striking.”

He said: “Despite the grip of political uncertainty affecting business volumes across most of the nation, London companies have seemingly managed well, reporting continued inflows from domestic and foreign clients.”

Natwest said London firms became more positive in November, with optimism about the year ahead climbing to a four-month high.

Firms said the large spending promises from the main political parties ahead of the 12 December polling day could help sales rise next year.

Higher demand for their products also caused firms to take on new workers in November. This again contrasted with the nationwide picture, with the latest data showing a fall in employment.

There are question marks over how healthy London’s economy will be next year, however, as the enormous financial services sector adapts to life outside the European Union and the government attempts to thrash out a free-trade agreement before 2021.

Last week, the EU’s finance commissioner told the Financial Times that the City could be cut off from continental markets after Brexit if the UK chose to “engage in some kind of deregulation”.

By Harry Robertson

Source: City AM