Business News Round Up (09/05/2023)
Booming services sector steers UK economy further away from recession
Britain’s economy is running at its strongest level in nearly a year, powered by households still splashing the cash amid the cost of living crisis in another sign the country will skirt a recession. A new survey out last night from consultancy BDO revealed output growth in the UK reached its highest level in eight months in April. The company’s production index hit 99.8 last month, far above the 95 point threshold that separates growth and contraction. Bumper activity in the UK’s services sector – which generates about £2 in every £3 in the country – has hoisted the overall economy away from the bleak forecasts tabled at the turn of the year. Bank of England officials and experts at the Office for Budget Responsibility just a few months ago were warning of a tough recession this year, but those bets have been trashed due to stronger spending. Figures out this Friday are also anticipated by the City to show gross domestic product (GDP) – which measures all goods and services made in the UK – to have edged 0.1 per cent higher in the first three months of this year, putting the country on track to avoid a technical recession in the first half of 2023. However, eleven straight interest rate rises from the Bank to 4.25 per cent and flimsy global supply chains have held back British factories, keeping output growth pegged. Rates are tipped to rise again on Thursday by 25 basis points.
SMEs urge energy firms to renegotiate contracts
Small firms want energy suppliers to renegotiate sky-high fixed tariffs from last year to reflect the fall in wholesale prices in recent months. Thousands of firms are trapped in contracts that mean their latest bills are at last summer’s peak market rate for energy. Prices are falling significantly, and the Federation of Small Businesses wants more help for its members a month after the government cut the support on energy bills for businesses. Since 1 April the Energy Bill Relief Scheme has been downgraded to the Energy Bills Discount Scheme, which changes support to pennies that do not touch the sides of huge bills, says the FSB. The downscaled government support means small firms that signed up to fixed tariffs in 2022 will see their bills revert back to last year’s peak levels. This could be three or four times what they were paying when the more generous government support scheme was in place. FSB’s latest research shows more than one in ten (13%) small firms fixed their energy bills between 1 July and 31 December 2022, during which businesses were quoted up to £1 per kWh for electricity. Of this group, 13% say they could be forced to either close, downsize, or radically restructure their businesses, equating to 93,000 small firms across the UK.
https://dailybusinessgroup.co.uk/2023/05/smes-urge-energy-firms-to-renegotiate-contracts/
Most Scots see North Sea energy industry ‘as a benefit to economy’
Most Scots think North Sea energy firms benefit the economy – and that the UK should work to supply its own oil and gas. Some 61% of adults in Scotland think the energy firms operating in British waters have a positive effect on the UK economy, according to Survation research for True North. Just over 9% of the 1,009 people asked said it had a negative effect, while some 75% of people told the pollster that the UK should meet its demand for oil and gas from domestic production, rather than importing energy from overseas. Just 11% said it should import to meet demand, while 14% said they did not know. Fergus Mutch, managing partner at advisory firm True North, said: “Energy firms operating in the North Sea have been much vilified by governments over the past year, and yet people recognise the key role they play in delivering energy security and creating the revenues and high-quality jobs that are so critical to growing our economy. And, crucially, it will be these companies which lead the way in delivering the government’s objectives in a transition away from oil and gas towards renewables in the years ahead. However, in the here and now, it makes no sense to pull the rug from underneath the energy sector by importing more fossil fuels at a higher cost and carbon footprint, while we have reserves on our doorstep which can satisfy demand and a highly skilled workforce.”
https://www.insider.co.uk/news/most-scots-see-north-sea-29929862
UK sales growth holds steady in April, retailers hope for better summer
British retail sales growth held steady in April but high inflation meant shoppers were getting less for their money, and unsettled weather discouraged many from buying summer clothes, a British Retail Consortium survey showed on Tuesday. The BRC said spending at its members’ stores increased 5.1% in annual terms last month, the same as in March and well above the 0.3% fall a year ago. The figures are not adjusted for inflation, so the rise in sales masked a large drop in volumes. “While retail sales grew in April, overall inflation meant volumes were down for both food and non-food as customers continued to adjust spending habits,” Helen Dickinson, the BRC’s chief executive, said. “Clothing sales underperformed as the poor weather left customers thinking twice before decking out their summer wardrobe,” she added. Like-for-like retail sales – a measure favoured by equity analysts which adjusts for changes in retail space – were 5.2% higher on the year, similar to previous months. The Bank of England has forecast price rises will slow by the end of this year, but British households are currently contending with the highest inflation in western Europe, running at 10.1% in March, more than five times the Bank’s 2% target.