Latest economic updates
This month (January 2023) we have updates on the following topics:
- New energy bill discount scheme
- National outlook and trading environment
- Labour markets
- Property markets
- Global economic outlook
New energy bill discount scheme
The new energy bill discount scheme for businesses, charities, and the public sector has been confirmed on 9 January 2023, ahead of the current scheme ending in March 2023.
- From 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefiting from lower energy prices.
- A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. Businesses in scope for this will receive a gas and electricity bill discount based on a supported price which will be capped by a maximum unit discount of £40.0/MWh for gas and £89.1/MWh for electricity.
- Customers do not need to apply for their discount. As with the current energy scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic / business customers.
For more information, please visit the Government’s website:
National outlook and trading environment
UK economy is entering a recession:
- The economy contracted with a 0.5% quarterly decline in household expenditure and a drop in business investment, dragging on growth.
- Forward looking indicators are suggesting a further downturn. While the UK Composite PMI remained unchanged at 48.3 in November – well below 50 – the forward looking new orders measure fell to its lowest level since December. The Office for Budget Responsibility is forecasting a 7% drop in real disposable incomes over the next 2 years. This will reverse 8 years of gains, with recovery to pre-Covid levels not expected before 2028.
- A marginal improvement in consumer confidence has helped shore up spending in November. CHAPS card data rose by 3% over the month, although this was partly due to higher prices.
- The Chancellor’s Autumn statement delivered a path for fiscal consolidation but most of the spending cuts and tax rises are pencilled in for after the next general election (no later than January 2025), however the withdrawal of energy price support next year will cut into disposable incomes. While many will dip into their savings, people will remain cautious and rein in spending on non-essentials. But for now, savings continue to build and appetite for unsecured lending is muted.
- Labour markets are no longer tightening but fundamentals remain strong.
- Unemployment rose in September 2022, due to a slowdown in hiring activity. Although the labour market is no longer tightening, there is still scope for weakness in business confidence to hit ‘job growth’.
- Redundancies have been steadily rising since May 2022, however they still remain at historic lows.
- Pay growth is still best described as being ‘high’ compared with the past decade, but low compared with inflation.
- Growth in weekly pay (excluding bonuses) has risen from 5.5% year-on-year in August 2022 to 5.7% in September 2022. However, if the ‘slack’ in the labour market does increase, it should limit future wage growth. A slowdown in hiring will also lead to less churn in the job market, easing the pressure on businesses to pay more to retain staff.
- Ashfield has an unemployed figure of 3.64% or 2885 people. We have been reducing our unemployment levels consistently each month since January 2022, which was 4.24%. At the moment we are slightly higher than current regional average of 3.20% but we are moving in the right direction.
Tim Gilbertson, Director at FHP reports 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, 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 is 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 economic outlook
Europe is facing a difficult and uncertain economic outlook. Governments, households, and firms are grappling with the energy and cost of living crisis that was aggravated by the war in Ukraine. As high energy prices are increasingly feeding through to other sectors of the economy, inflationary pressures have become more broad based. In October 2022, year-on-year consumer price inflation in the European Union climbed to a record high of 11.5%.
The cost of energy remained the biggest driver of overall inflation, with energy prices rising by 38.7% from a year ago. Core inflation – excluding energy, food, alcohol, and tobacco – also accelerated, reaching 6%. High and persistent inflation is eroding the purchasing power of households and driving up the production costs of firms, while also adding pressure on central banks to hike interest rates further. Both the European Central Bank and the Bank of England delivered jumbo sized rate hikes of 75 basis points in November 2022, coming on top of increases earlier in the year, while hinting at further increases in the coming months. Against the backdrop of high inflation and rapidly tightening monetary policy, many analysts are expecting European economies to suffer a recession over the winter.
The economic downturn may, however, be less severe than suggested by recent forecasts. In the past few weeks, there has been a string of good news on the energy front for Europe. Natural gas prices have retreated from their peaks in August 2022, gas storage is almost completely filled, and autumn temperatures have been milder than normal. These trends have fuelled hopes that Europe may be able to avoid the worst case scenario of massive gas shortages, rationing, and industrial shutdowns in the coming months. Nonetheless, such positive short term developments should not obscure the challenges Europe’s energy dependent industries are facing due to high gas and electricity prices, which will likely remain elevated for some time. Industries with gas intensive production or with high absolute demand for gas could still see disruptions this winter. Moreover, persistently high prices could create lasting damage, eroding Europe’s competitiveness in high energy manufacturing activities, causing losses in market share, and prompting companies to relocate to countries with lower energy costs.
You can find more information about the latest economic situation and sector forecasts on the following websites:
Key sector updates: Trade associations
- website: Federation for Small Businesses
- website: Logistics UK - research reports
- website: MAKE UK - Manufacturing reports
- website: Medilink – Health & Life Sciences industry magazine
Regional economic updates
- website: D2N2 Dashboard
- website: Nottinghamshire County Council employment bulletin
- website: Midlands Engine Observatory - Latest reports
- website: Midlands Engine Intelligence Hub
National economic updates
- website: Nomis – Official labour market statistics
- website: Varbes – Statistics and trends for UK and Local areas
- website: NatWest Monthly Economic Outlook
- website: The Office for Budget Responsibility
- website: CHAPS card data
Global economic updates
- website: Global & regional outlooks
- website: IMF reports
- website: Trading economics
- website: Weekly economic update from Deloitte
- website: United Nations briefing reports