Monthly business news updates
This month (November 2023) we have updates on the following topics:
- General outlook
- Economic forecast
- Challenges faced by businesses
- Labour markets
- Property markets
- UK growth is expected to slow over the remainder of this year and into 2024. With interest rates reaching their potential peak, attention will turn to fiscal policy, however the upcoming general election could prolong the uncertainty for businesses and delay investment
- Post-pandemic imbalances are starting to normalise, while long-term growth remains a concern
- The GfK Consumer Confidence Index Rose in September supported by strong wage growth and easing inflation but is still way below the long-run average. The recent descent in mortgage rates from their 15-year high has boosted confidence, while a rise in an index tracking households’ desire to make major purchases, looks good for retail ahead of Christmas. In August retail sales increased by 0.4% after falling by 1.2% in July. Meanwhile, the CHAPS card aggregate spend index rose by 0.5% in September
- However, households are trading down to less expensive options, while low housing activity is impacting on the demand for household goods. Also, investment intentions remain weak, because of pressures on cash flow and margins
- UK Consumer Price Inflation (CPI) fell slightly from 6.8% year-on-year in July to 6.7% in August, but the big news was that core CPI inflation fell from 6.9% to 6.2%. But inflation hasn’t gone away – services CPI inflation, an indicator of underlying domestic price pressures, is still elevated. The outlook from here was that the headline rate of CPI inflation should continue to fall sharply, with energy’s contribution set to fall too. However, in September, inflation remained stubbornly at 6.7% defying expectations from the Bank of England of a rapid fall.
- According to The Institute of Chartered Accountants in England and Wales (ICAEW), revised historic figures from the Office for National Statistics (ONS) show that in Q2 2023, UK GDP was 1.8% above its pre-pandemic level at the end of 2019. The ONS revises GDP figures over time as it receives more information about how the economy performed. The latest update means that among G7 nations, the UK’s recovery from COVID-19 is now stronger than Germany and France. While this looks positive, these historic revisions could actually make a recession more likely because the UK can no longer rely on a boost from a post-pandemic catch-up in GDP growth
- After 14 consecutive rate hikes, the Bank of England surprised the markets at its September meeting by pausing interest rates. This suggests borrowing costs may have peaked. The decision was heavily influenced by the lower-than-expected inflation data for the month, but also a less tight labour market and weak Purchasing Managers Indexes. That said, the forward guidance was little changed from August: any higher-than-expected inflation readings will result in more hikes
- Average wages grew faster than inflation for the first time since 2021, rising by 7.8% between June and August 2023
- Combining the signals from business and consumer surveys, the outlook remains that of near-term resilience but persistent challenges. The consensus forecast is for growth of just 0.4% this year, followed by another 0.6% in 2024.
Main challenges faced by businesses:
- Falling demand for goods and services
- Inflation of goods and services prices
- Energy prices
- Interest rates
- Competition with other UK businesses
- Business rates
- Exchange rates
- Property rental costs
- Supply chain disruption
Skills most in demand in our region during the last month:
- Customer service
- Detail orientated
- Personal care
Ashfield's September 2023 figures show that we have 3.8% or 2955 people of working age seeking work; this is lower than in August 2023, which showed 3020 people, but remains slightly higher than neighbouring Local Authorities.
Avison Young report that for both the commercial and residential property markets the high level of economic uncertainty and evidence that prices are correcting have encouraged a ‘wait and see’ attitude among real estate investors.
- Across the various markets there are reports of a mismatch between buyer and seller expectations on pricing
- The impact of the difficult economic conditions seen in the last year and higher interest rates is evident in the investment market indicators
- Occupier markets are for now holding up reasonably well, but this is probably due to a time lag, and it's expected to see a downturn this year
- The retail sector faces multiple headwinds, including the squeeze on consumer incomes and on-going structural changes. We are forecasting these factors to continue to dampen market confidence in 2023 for high street retail and shopping centres
- Conversely, industrial has seen a slight improvement in recent months, likewise retail warehouses
- But pricing remains under pressure for offices, high street retail and shopping centres, according to MSCI data.
Page last updated: 22 November 2023