Business News Round Up (15/08/2023)
Unemployment rises even as wages grow
Unemployment increased in the three months to June even as pay grew at the fastest rate since records began, putting more pressure on the Bank of England to rein in inflationary pressures. The UK jobless rate hit 4.2% during the quarter, up 0.3 percentage points from the previous three-month period, according to the Office for National Statistics (ONS). It is the highest since the three months to October 2021, the ONS said, and brings the measure above pre-pandemic levels. Payrolled employees spiked by 97,000 and total pay increased by 8.2% year on year, while regular pay – which excludes bonuses – grew by 7.8%, up 0.1% for the year when adjusted for inflation. Scotland’s unemployment rate was lower than the UK average but saw a bigger rise over the period, coming in at 4%, up 0.9 percentage points. AJ Bell investment director Russ Mould said: “This builds pressure on the Bank of England and has prompted an increase in sterling and gilt yields, as well as a big fall in UK stocks, as it suggests inflation is becoming increasingly entrenched in the economy. However, it is a fine balance. Other elements of the ONS data show signs the labour market could be cooling, with an increase in unemployment and a drop in the number of vacancies. Previous rate hikes are likely to have a lagged impact and this data covers an April to June period which is very much in the rear-view mirror now. It all adds up to a very tricky situation for the brains trust in Threadneedle Street which might only be further complicated by the CPI release tomorrow.”
https://dailybusinessgroup.co.uk/2023/08/unemployment-rises-even-as-wages-grow/
North West sees modest growth in business activity in July
Business activity in the North West continued to rise in July, according to the findings of NatWest’s latest regional PMI survey. The headline North West PMI Business Activity Index registered 51.9 in July, down slightly from June, but remaining above 50.0 threshold, below which indicates a contraction in the region’s economic output. Underlying the modest growth in the regional economy, however, was a third consecutive fall in new work, with firms at their least optimistic this year in their outlook. Confidence in the North West sank to its lowest in 2023 so far and the region posted the greatest month-on-month decline of any part of the UK. The survey found cost pressures on businesses across the region remained high, while increases in prices charged continued to slow, partly driven by discounting in the manufacturing sector. The rate of decline in backlogs of work across the North West private sector also continued to accelerate, with this again led by the region’s manufacturers. Businesses also revealed they were slowing down in their rate of hiring. Despite this, the region again recorded a rise in employment in July, continuing a two-and-a-half-year trend in job creation in the North West and driven largely by hiring in the services sector.
Scottish businesses ‘fight for survival’ post-Covid
During the second quarter there was a year-on-year increase of 6.3% in Scottish businesses experiencing ‘significant’ or early financial distress. The latest Red Flag Alert data from Begbies Traynor explained that type of distress – which refers to businesses showing deterioration in working capital, contingent liabilities, retained profits and net worth – also rose across the UK at the rate of 8.5%. Comparing quarter-on-quarter figures, Scotland’s levels of significant distress increased by just over 1% in the second quarter of 2023, compared with the first quarter of the year. Across the UK as a whole, early distress rose by 3.7% since the previous quarter. Of the 438,702 businesses across the UK suffering from early distress in the second quarter, just over 20,820 were in Scotland. This latest data is sourced from a completely new dataset that has involved deep dive analysis of eight years’ company data by data scientists over the past two years, to track key factors behind company distress and failure rates.
https://www.insider.co.uk/news/scottish-businesses-fight-survival-post-30696914
Shift in customer spending a top challenge for North West businesses
A shift in customer spending is one of the biggest challenges facing North West businesses over the next six months, as the cost of living crisis continues to bite. According to BDO LLP’s bi-monthly Economic Engine survey of 500 mid-market businesses, more than half of regional companies (63%) said a decision by customers to cut back on spending is their biggest concern, alongside rising interest rates and the cost of borrowing (40%). However, for 43% of businesses in the North West, difficulty accessing capital, such as bank loans and equity investment, continues to pose a significant challenge. This comes after the House of Commons Treasury Committee published a report on the venture capital industry, highlighting an ‘unacceptable failure’ to invest in regional businesses. The survey by the accountancy and business advisory firm found that as purse strings tighten, businesses are having to explore ways to save money in the coming months. Nearly half of North West businesses (47%) are reducing their energy usage as a way of cutting overheads, tapping into Government support schemes, such as the Energy Bills Discount Scheme and the Industrial Energy Transformation Fund, to ease the pressure. Changing customer spending habits are also impacting employees, with a third of regional businesses (33%) admitting that they intend to hold off raising salaries and awarding bonuses in order to balance the books.