Business News Round Up (20/04/2023)
UK economy hinges on manufacturing innovation and investment
The manufacturing industry is a significant driver to the UK economy. Despite the apparent de-industrialisation of the UK, the sector accounts for around 10% of the UK’s total economic output, employing approximately 2.6 million people and generating around £192 billion in annual output. In fact, it is an absolutely vital sector for the UK’s balance of trade, contributing a whopping 45% of the country’s total exports. This makes the industry a critical source of foreign exchange for the country, boosting its GDP and creating jobs for UK residents. Furthermore, the manufacturing industry is critical for research and development, which helps to transition the UK into a high value economy, drive innovation and progress tech in various sectors. The UK has a strong manufacturing base, with a highly skilled workforce, and this has always made it an attractive destination for investment. However, productivity in the manufacturing industry has dragged down growth in productivity across the economy, which has been meagre since the financial crisis, Brexit, and the Pandemic. In the absence of any meaningful trade deals, Brexit also hasn’t helped exporters, so far curtailing our competitiveness within the UK’s largest market.
Scottish business confidence remains negative as challenges persist
Business confidence in Scotland has significantly improved in the last quarter, but remains in negative territory, as companies stay wary of persistent economic challenges. Sentiment tracked by Institute of Chartered Accountants in England and Wales’ Business Confidence Monitor put confidence at -0.2 on the index for Scotland during the first quarter. This marks a vast improvement from the fourth quarter of 2022, when Scottish business confidence hit a 14-year low of -27.8, but the results are still lower than any other UK nation or region; bar London. David Bond, ICAEW director for Scotland, said: “These findings suggest that Scottish businesses are cautiously optimistic, but their confidence remains fragile. While factors including the impressive domestic sales growth provide strong evidence to be hopeful and demonstrate the resilience of companies across Scotland, the continued prominence of challenges including the skills shortages within the labour market, as well as the rising tax burden, indicate that they are aware of the potential for a reversal of fortune.” Scottish businesses continue to navigate a challenging labour market with concerns about the availability of non-management skills and staff turnover more widespread than in other nations and regions. Approximately two fifths of firms cited them as key areas of concern.
https://www.insider.co.uk/news/scottish-business-confidence-remains-negative-29749599
UK businesses raise prices at slowest rate in two years
UK businesses increased their prices for goods and services at the slowest pace in almost two years in March, according to the Lloyds Bank UK Sector Tracker, indicating UK inflation was likely to ease further in the coming months. The Tracker’s measure of price inflation across UK manufacturing and services sectors fell from 62.2 in February to 58.9 in March. This was its lowest level since April 2021, and the largest month-on-month decline since April 2020. A reading on the Tracker above 50.0 indicates price inflation, while a reading below 50.0 indicates price deflation. Of the 14 sectors monitored by the Tracker, 11 registered softer rises in output prices compared to ten in February. Manufacturers of technology equipment and automobiles posted the fastest deceleration in price rises. Firms in these sectors indicated their ability to slow the pace of price increases was supported by improved supply conditions and weaker rises in their own input costs. Notably, the Tracker’s Suppliers’ Delivery Times Index – a measure of supply chain performance – rose to its highest level since records began in 1992 in March, as respondents reported better raw material availability. Mentions of ‘material shortages’ by manufacturers surveyed by the Tracker fell to the lowest level since July 2020. The Tracker’s measure of input cost inflation across UK manufacturing and services sectors also dropped to its lowest level in nearly two years. Of the 14 sectors monitored, ten saw drops in their Input Prices Index in March, with two sectors, household product and chemical manufacturers, seeing overall price deflation.
UK e-commerce companies increase business investment despite economy
Despite high inflation and macroeconomic uncertainty, UK e-commerce companies significantly increased investment in their businesses during Q1 2023, compared to Q4 2022. According to data released by Juni, the financial platform built for e-commerce, British online retailers have increased spending by 43%, with advertising accounting for 45% of total spending, inventory 19% and tax 9.12%. The data suggests that underlying business confidence is growing amongst UK online retailers. Google made up ground on Facebook as platforms compete for UK e-commerce ad investment Advertising spending amongst online retailers typically falls in Q1 compared to Q4, which is traditionally the peak investment period due to Black Friday and Christmas. However, ad spend saw modest gains this year (6.9%), with spend per platform evolving. In Q1 2023, UK companies placed 53% of their ad spend with Facebook, down from 59% in Q4 2022. The second most popular platform was Google (32%), an increase from 25% in the last quarter. TikTok came in third with 3.7% of UK e-commerce ad spend, up from 2.7%. Microsoft was a surprise entry to the top five, securing 2.2% of investment – increasing from 0.45%. While Snapchat claimed 0.7%, a 300% increase from the last quarter. This is a very different picture from Europe, where overall ad spend increased by 20%. Across the EU, Google took 60% of e-commerce ad spend in Q1 2023 (even more pronounced in Sweden at 66.15%), Facebook claimed 31%, Microsoft 2.6%, Taboola 2.1% and Amazon 1%.