Spending rate falls to lowest since 2014

UK shoppers were spending less in October than at any point in the last four years, according to a survey by payments provider Visa as reported by Reuters.

Consumer spending fell by 2.0% in October compared to October 2016, according to Visa credit and debit card data; this was the fifth time the spending rate fell in the last six months. Figures were adjusted to allow for seasonal and inflationary effects. Spending was 0.9% down on September levels.

Visa’s chief commercial officer Mark Antipof said: “The figures are a stark indicator of the strain on household budgets even before the Bank of England’s recent interest rate rise.”

Economic experts have warned that high inflation and low growth in wages mean that households are feeling the pinch, especially as the Bank of England recently raised interest rates from 0.25% to 0.50%.

Visa said that the hardest-hit spending categories in October were clothing and footwear, down 9% on the previous year. Food and drink, along with recreation and culture, also saw spending drops.

Visa said that spending in the all-important Black Friday and Cyber Monday seasonal sales would give a fuller picture of spending trends within the UK.

Rise in UK consumer spending

UK consumer spending in September rose at the fastest rate so far in 2017, with the exception of a peak in April around Easter, according to Reuters. A survey revealed that  price rises of food and clothing after the Brexit vote accounted for much of the spending increase.

According to figures from the British Retail Consortium (BRC), retail sales increased 1.9% annually on a like-for-like basis, up from 1.6% in August.

The increase indicates that British shoppers are adjusting to the inflation rise which occurred following the drop in the value of the pound after the Brexit vote in June 2016. The Bank of England is expected to announce its first interest rate increase in a decade in the coming months.

BRC confirmed that growth in total sales in September fell to 2.3% in September from 2.4% in August but was still stronger than in most months of 2017.

BRC chief executive Helen Dickinson said: “Spending is still focused towards essential purchases with consumers buying their winter coats and back-to-school items, but shying away from big-ticket items such as furniture and delaying the renewal of key household electrical goods.”

Food sales increased 2.5% in the three months leading up to September, while non-food sales only increased 0.5%. The Confederation of British Industry announced in September that its retail tracking indicated unexpected growth in sales to a two-year high in September, boosted by sales of food and clothing.

Monarch goes into administration

Monarch Airlines has gone into administration, following a failure to agree a renewal of its package holiday licence with the Civil Aviation Authority (CAA), according to Business Traveller.

The carrier, which operated scheduled and charter flights, cancelled 300,000 bookings for future flights and holidays, affecting up to 750,000 people. Monarch employs around 2,100 people.

Around 110,000 customers are overseas and will require assistance from the CAA to return home in an operation Transport Secretary Chris Grayling described as the UK’s ‘biggest ever peacetime repatriation’.

Monarch reported a £291m loss for the year ending October 2016. In the year ending October 2015 it made a £27m profit. The administration was announced at 4:00 BST on Monday morning – at a time when no passengers were midair.

Grayling said: “Together with the CAA, we will work around the clock to ensure that Monarch passengers get the support they need. Nobody should underestimate the size of the challenge, so I ask passengers to be patient and act on the advice given by the CAA.”

The Monarch website now redirects visitors to the CAA’s page offering advice for affected consumers.

British sugar industry set to boom following quota removal

The UK sugar industry is set to increase production as 50-year-old European Union quotas come to an end, according to BBC News.

The quotas were agreed in 1968. They restrict the amount of sugar that EU producers including the UK, Germany and France can sell around the world, as well as how much imported sugar can be sold in the UK.

There are 3,500 farmers who grow sugar beet, which is processed by British Sugar into a usable product. UK beets account for around 60% of British sugar consumption; 15% is imported from the EU and 25% is sourced from outside the EU. The sugar supply chain in Britain employs 10,000 workers.

Following the end of the quotas, British Sugar plans to increase production to 1.4 million tonnes in 2018, up from 900,000 tonnes this year. The increased production is expected to reduce prices, although this may not immediately translate into cheaper products in stores.

Jane Clark, a sugar beet farmer in Lincolnshire, said: “The UK is one of the most efficient producers worldwide. It should put us in a good place to be competitive.”

Paul Kenward, head of British Sugar said that the industry has learned from the experience of the dairy industry following the removal of quotas in 2015, when the milk market was oversupplied and had made preparations to prevent similar problems.

 

Video content moved out from Sunday Times’ paywall

The Sunday Times has moved some fashion videos out from behind its paywall in a bid to build its audience and boost advertising reach, according to Digiday UK.

Examples of content taken outside the paywall includes backstage footage from London Fashion Week and three-minute makeup tutorials. This content will be free to view on the Times’ Style Play video hub and distributed across Facebook, Twitter and Instagram.

Lorraine Candy, editor-in-chief of the Sunday Times’ Style magazine said: “The luxury market is desperate for video. ‘How do I get to your audience with video’ was mentioned in every meeting [with advertisers]. But they are nervous about putting money behind a paywall.”

The Style Play content will be aiming to focus on metrics such as dwell time, sharing and social media interaction rather than seeking large audience numbers. This is in keeping with the luxury audience targeted by the video content.

Beyond Style, the Times is using video to convert readers to subscribers. Since launching a registered-access strategy in 2016, the news site has gained 1.2m registered-access users who can read two complementary access articles a week in exchange for registering an email address. These users are almost four times more likely to subscribe than non-registered users.

As of June 2017, the Times had 430,000 paying subscribers. Of these, 185,000 were digital subscribers.

London house prices down 2.9% on the month

UK house prices fell 1.2% on the month in September, with a decline of 2.9% in London, according to figures released by Rightmove.

The price drop is the first monthly fall for the late summer/early autumn period since 2013. The average asking price for a UK property is now £310,000. In August, prices fell 0.9% across the country.

The price drop excluding the capital market is 0.5%. London’s more affluent boroughs have seen the steepest price declines, with prices in Kensington & Chelsea down 14.3% on the month, while Hammersmith and Fulham were down 1.5%.

Other London boroughs saw prices increases; Hackney prices rose 5.2% while Fulham properties rose 9.4%. Asking prices rose 1.1% on a year-on-year asking price basis following a 3.1% rise in August.

Miles Shipside, director of Rightmove said: “As we enter autumn selling season it is usual to see estate agents advising new-to-the-market sellers to push up their asking prices. But this year all four southern regions have seen new sellers on average asking less than those of a month ago, reducing the rate of national increase.”

Shipside added that estate agents were likely advising sellers to lower price expectations in the hope that this would generate greater buyer interest.

 

South Wales to get zero-emission black cab plant

Norwegian aluminium company Sapa has announced plans to invest £9.6m in an automotive plant in Caerphilly, Wales in order to produce a new generation of eco-friendly London black cabs.

The new plant will create more than 130 jobs in Bedwas, South Wales on a site which was mothballed by Sapa in 2014 due to tough market conditions and over capacity, according to the Guardian. The plant was previously used for aluminium extrusion but will be refurbished for the change of purpose.

The move comes as manufacturing confidence is faltering due to uncertainty over Brexit. Financial backing of £550,000 from the Welsh government was given as the reason why Bedwas was chosen over another of Sapa’s European sites.

The new factory will be producing cabs for the London Electric Vehicle Company, which is developing a zero-emissions taxi ahead of moves to ban diesel and petrol cars and vans in the UK from 2040. London is already subject to a congestion charge and Low-Emission Zone.

Production will commence at the plant from late 2017, using materials sourced from Spain. Output will increase steadily over the next five years.

Welsh First Minister Carwyn Jones said: “The opening will create a range of new job opportunities and give a new lease of life to the area.”

 

John Lewis Partnership profits fall 53.3%

Profits of the John Lewis Partnership have fallen more than 50% following a major programme of restructuring and redundancies, according to the BBC.

A £56.4m transformation programme meant that profits before tax fell 53.3% to £26.6m for the two quarters ending July 2017. Operating profits for the John Lewis department store rose 10% but Waitrose operating profits fell 18% due to higher costs.

John Lewis Partnership Chairman Sir Charlie Mayfield said that inflation and a weak pound had contributed to the drop: “This is a tough market for retailers. There’s any number of reasons for that. The reason our profits are down is predominantly because of margin, and cost prices are rising. It’s a very competitive market, retail prices are not rising as fast.”

Mayfield said that the retailer had chosen to absorb higher costs caused by inflation, using the Partnership’s cash reserves.

A statement from John Lewis also said spending on the reorganisation was an investment for the future and that the chain was moving forward.

Mayfield said: “While it’s been a difficult first-half, our sales have still been up, our profits are down, but we’ve made some really important progress for the future.”

 

Economists do not expect interest rate rise until 2019

A survey of economists has revealed that UK interest rates are not expected to rise until 2019, despite inflation being above the Bank of England’s target.

A BBC survey found that the majority of economists believed the Bank of England Monetary Policy Committee (MPC) would not raise interest rates while Brexit negotiations are ongoing. Inflation is currently at 2.6%, above the official target rate of 2%.

The base interest rate has been at the record low of 0.25% since August 2016. Prior to that it stood at 0.5% since March 2009.

External MPC member Michael Saunders said in August that he thought interest rates should be raised soon to offset inflation. Saunders told a Cardiff conference: “We do not need to be putting the brakes on so much that the economy weakens sharply, but our foot no longer needs to be quite so firmly on the accelerator in my view.”

However, in the August meeting of the MPC, only Saunders and fellow member Ian McCafferty voted for an interest rate rise. The remaining six members voted to retain the current interest rate.

Saunders said that an increasingly constrained labour market, partly due to fewer EU migrant workers coming to the UK, pointed to a need for higher interest rates. In Q2 2017 the proportion of people aged 16-64 participating in the labour market reached a record high.

UK unemployment falls to record low

The percentage of households with no adults in employment has fallen to a record low of 14.5%, according to data released by the Office for National Statistics (ONS).

Almost 3 million households housing over 4 million people had no working adult, the lowest rate since records began in 1996. The official rate of unemployment is also at a record low of 4.5%, well below the figure of 6.5% generally used by economists to indicate full employment.

While these figures may sound positive, to get a full picture the level of inactive workers should also be considered. This includes people such as students, retired people, part-time workers who would prefer to work full-time, carers and those at home due to sickness or disability.

When inactive workers are included in the figures, the level of joblessness reaches 21.5% of the full workforce, according to the ONS. This figure is around four times greater than the official unemployment figure preferred by the government.

Joblessness is also not distributed equally among the nation’s households but concentrated in around one in seven (14.5%) of homes where no-one aged 16 or over is in employment.

When the ONS began compiling its Labour Force Survey in 1996, the proportion of workless households was 21%. Since then, the proportion of households where all inhabitants are working has risen from 52% to 58%. Particular change has been seen among lone parents; two thirds (68%) of these are now in employment, the highest proportion on record.

Work and Pensions Secretary David Gauke told the BBC that “With record levels of employment, more people across the country now have the ability to support themselves and their families. That means more children growing up with a working adult and more children who can see first-hand the benefits of being in employment.”

Labour’s shadow employment minister Margaret Greenwood said: “While any increases in employment are positive, under this government work is no longer a reliable route out of poverty with over half of those living in poverty coming from a working household.”