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Latest economic updates

The Energy Bill Relief Scheme

The new Government has announced that households and businesses in Great Britain and Northern Ireland will be supported with their energy bills through the Energy Bill Relief Scheme. This scheme will provide a discount on wholesale gas and electricity prices for all non-domestic customers whose current gas and electricity prices have been significantly inflated in light of global energy prices.

It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial 6 month period for all non-domestic energy users.

The savings will be first seen in October bills, which are typically received in November. To administer support, the Government has set a supported wholesale price – expected to be £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas; less than half the wholesale prices anticipated this winter, which is a discounted price per unit of gas and electricity. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.

National Outlook: September 2022

The Bank of England and British Chamber of Commerce expect that the UK economy to plunge into recession before the end of 2022, with inflation spiking to 14% and lingering weakness in growth expected to continue into 2024.

These predictions for GDP growth are in light of deteriorating economic conditions including:

  • rising energy costs
  • a decline in household spending and real wages
  • weaker export prospects
  • a pessimistic global economic outlook
  • poor investment conditions
  • weakening business confidence and cashflow.

Many of these issues were initially caused by the global response to COVID-19 and have been further compounded by the war in Ukraine.

Local News: September 2022

Labour Markets:

Although unemployment rates continue to fall, recruiting staff is becoming increasingly difficult and problematic for many businesses.

The combination of changed employee expectations (e.g., reduced hours worked, working from home etc.) plus the high demand for labour across sectors and disciplines, are fuelling demands for very high wages and favourable conditions; even from those who are unskilled, inexperienced or new entrants to the labour market.

While some larger firms are able to go some way towards meeting these expectations and demands, smaller firms often lack the financial and developmental capacity to pay high wages for, and then develop, new starters.

Regional business groups have stressed the need therefore to find ways of attracting new talent, both at home and from overseas, in a suite of support from Government that also encourages businesses to invest in their infrastructure and people. Another key approach is maximising equality, diversity and inclusion (EDI) practices, recently explored by the East Midlands Chamber with local businesses.

In addition to widening the labour pool to fill vacancies, successful EDI policies can support businesses to create better workplaces, improved decision making and increased innovation.

Commercial Property:

Tim Gilbertson, Director at FHP has reported that the impact of the current energy crisis and inflationary pressures is certainly starting to be felt in the commercial property market but it’s not all doom and gloom. The underlying trend in terms of industrial and distribution space throughout the region shows that there is still good demand and a lack of space, with demand still strong at the top end of the market from major distribution and manufacturing companies.

For the smaller more local companies, we are still seeing activity but undoubtedly committing to leases or buying premises is a difficult decision to make at present and there is certainly some nervousness in this sector. The office market in the region is still stable although there is stock available, and retail and leisure continues to be challenged by the impact that all individuals and businesses are feeling due to the general increases in costs of living.

In this sort of market it’s the proactive local authorities who can offer support both financially and otherwise to local businesses that will “win” and help their communities benefit. Certainly, the commercial property world would love to see planning departments within local authorities be as proactive as possible, to reduce time and costs in terms of submitting and having decided planning applications which would 'speed up development', this in itself would bring increased life and vitality to the region and hopefully prosperity too.

Global Outlook: September 2022

Global growth has been fallen in 2022 and the outlook for 2023 has also deteriorated.  These downward revisions have mostly been attributed to the ongoing supply shock from the war in Ukraine. The combined effects of supply chain pressures and high commodity prices have compressed margins and fuelled inflation.

There is tremendous geopolitical uncertainty underlying all of these strains and it is unlikely to be resolved in the coming months.  Consumer sentiment has soured around the world as surging costs for essentials e.g., food, energy, and shelter, have cut into household budgets. Rapidly tightening financial conditions have raised debt burdens and clouded prospects, especially for 2023. Although over the summer months we expected to see a burst of activity with fewer public health restrictions allowing for access to more services, the growing squeeze on disposable incomes and less optimism about the future will see household purse strings tighten come autumn and winter.

In China, COVID has continued to dictate the economic trajectory. Their target of roughly 5.5% growth in 2022 looks to be out of reach as there zero COVID policy led to lockdowns in multiple cities in the spring. Moreover, the risk of another wave of infections has loomed as the virus continues to circulate globally.

U.S. inflation is now running close to a 40-year high, while unemployment is at half-century lows. Global economies are reeling from the effect of multiple shocks—the coronavirus pandemic, a massive fiscal and monetary policy response, and the fallout from Russia’s war in Ukraine. Central bankers could soon confront difficult trade-offs between bringing down inflation and preventing a large rise in unemployment. Atlantic Union Bank give an update on the U.S. and global market and economic outlook: