Business News Round Up (16/10/2023)
UK economy ‘on course to avoid a recession’, says EY Item Club
The UK is on course to avoid a recession this year as wage growth outpaces price inflation and interest rates are expected to have already peaked. The EY Item Club raised its forecast for economic output growth to 0.6 per cent, an upgrade from the 0.4 per cent forecast in July. Falling energy and food prices mean that inflation is on track to fall to about 4.5 per cent by the end of this year, faster than a previous forecast of just under 5 per cent and hit the Bank of England’s key 2 per cent target by the second half of next year. Wage growth will ease but inflation should cool even more, EY has forecast, which should lift household spending. The report was produced before the conflict between Israel and Hamas. The more optimistic forecasts come after the Office for National Statistics upgraded historical GDP data to show that the economy had expanded by 1.8 per cent since the onset of the Covid-19 crisis, faster than Germany and France. Previously GDP was estimated to still be 0.2 per cent lower. Easing price inflation should mean that the Bank of England’s monetary policy committee will hold rates again when it meets next month, EY said. The committee decided to maintain interest rates at 5.25 per cent last month after putting through 14 consecutive increases since the end of 2021. Investment by businesses has also been more robust and is forecast to grow at 5.9 per cent this year, the highest rate since 2016 and significantly better than the 1.4 per cent forecast in July.
https://bmmagazine.co.uk/uncategorized/uk-economy-on-course-to-avoid-a-recession-says-ey-item-club/
Scotland’s tech economy makes ‘significant strides’ but report highlights ongoing rural digital divide
Scotland’s tech economy has made ‘significant strides’ in the last 12 months but a new report has highlighted ongoing issues around the rural digital divide. The latest Local Digital Index by techUK has revealed the estimated 14,504 companies in Scotland’s tech sector – some 400,000 people – have grown by 2.8 per cent this year. Their estimated turnover now stands at £221 billion with the top five performing sectors identified as net zero, clean-tech, energy generation, life sciences, research, and consulting – physical science and engineering, based on the data explorer platform from Data City. According to the Index, comprised from a large range of data sources, including Ofcom, the Office for National Statistics and the British Business Bank Equity Tracker, Scotland has made “substantial advancements in several areas of the digital components the Index analyses”. For Scotland, the economic productivity metric – gross value added (GVA) – showed that it placed sixth out of 12 nations and regions across the UK. The results show that the digital sector GVA per person in London is £9,083 when compared to the West Midlands, £2,055, or Scotland, £1,979, or Wales, £1,348. TechUK says that if the bottom six placed nations and regions were to hit the median GVA value for all 12, it would lead to a £4.8 billion uplift in productivity for the sector across the UK as whole. The annual report looked at six performance areas: digital infrastructure, digital skills, digital adoption, finance and investment, research and innovation and trade.
Cambridge and Manchester launch new innovation cluster to boost investment
A ‘progressive’ new partnership between the innovation clusters in Manchester and Cambridge aims to boost investment in both cities and across the wider UK. The link-up will draw on the research and sector strengths of both cities to help them accelerate the scale-up of businesses and create new local jobs in sectors critical to the UK’s future prosperity. Innovate Cambridge and ID Manchester, a joint venture between The University of Manchester and Bruntwood SciTech that is set to become a ‘world-leading’ innovation district, are launching a strategic partnership to build on the existing links between the two science and tech hotspots. This collaboration, starting this month (October 2023), will connect Manchester’s rapidly growing tech scene to Cambridge’s established ecosystem, which last month (September 2023) was named the most intensive science and technological cluster in the world for a second year running by the Global Innovation Index. Despite the geographical distance between them, the two cities already have a close relationship in this space. Major science and tech firms co-locate in both city regions including life sciences giant AstraZeneca, chip designer Arm and global streaming platform Roku.
Resilient food and drink manufacturers remain confident despite mounting challenges
Eight in 10 leaders in the UK food and drink sector feel positive about the prospects of the industry over the coming year, but mounting pressures including the twin threats of higher energy costs and constraints on consumer spending will continue to test businesses’ resilience, accountancy, and business advisory firm BDO LLP has warned. BDO’s annual Food & Drink Report, which surveys manufacturers in the sector, reports a high degree of optimism among food and drink manufacturers. Although down slightly on last year, 70% of respondents are feeling positive about the future of their own business in the next 12 months. This is buoyed by the big jump in optimism for the sector overall which has increased from 69% in 2022 to 81%. Over a third expect an increase in their gross profit margins over the coming year and, as the buoyant mood continues, a further quarter are planning acquisitive purchases. Almost a third say new product development will be a key driver for growth across the next 12 months, whilst 29% say expanding in non-European Union (EU) markets is a key focus. Despite the confident outlook, BDO’s survey highlights the myriad of challenges businesses in the sector are facing.