Business News Round Up (24/01/2023)
UK business activity falls at fastest rate in two years – flash PMI
British private-sector economic activity fell at its fastest rate in two years in January, a survey showed on Tuesday, as businesses blamed higher Bank of England interest rates, strikes and weak consumer demand for the slowdown. The S&P Global/CIPS flash composite Purchasing Managers’ Index (PMI) dropped to 47.8 in January from 49.0 in December, at the bottom end of economists’ forecasts in a Reuters poll and the lowest since January 2021. Readings below 50 indicate falling output. “Weaker-than-expected PMI numbers in January underscore the risk of the UK slipping into recession,” S&P Global’s Chief Business Economist, Chris Williamson, said. “Industrial disputes, staff shortages, export losses, the rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year,” he added. Britain’s economy grew more than expected in November, according to official data, making it unlikely that statisticians will record two consecutive quarters of falling output – the widely used definition of recession in Europe – for the second half of 2022.
Scottish commercial property investment 12.6% ahead of five year average
Scotland’s commercial property sector saw £2.39bn traded in 2022, marking a 12.6% uplift on the five-year average. The analysis from Savills, which accounts for all commercial property sectors, sets out a year of two halves, with the company recording 81% – or £1.93bn – of the total investment activity in Scotland completing before the end of June 2022. Offices and retail warehousing were the strongest performers by sector over the course of the year, with key deals including Pontegadea acquiring 177 Bothwell Street for £215m (on a 4.5% net initial yield), Realty Income acquiring Great Western Retail Park for £87m (5.96% yield), Eurofund Group and Henderson Park Capital Partners buying Silverburn Shopping Centre for £140m (9.3% yield); Ares Management acquiring Westway Industrial Park in Renfrew for £111m (5.10% yield) and Apollo Global Management paying £161m (4.90% yield) for a CA Ventures Portfolio of three assets including two in Scotland. In total, Glasgow and Edinburgh each recorded 11 office transactions throughout the year. Performance in the second half of 2022 was significantly impacted by the effects caused by the war in Ukraine, coupled with the economic shocks from the sharp rises in both the inflation rate and cost of debt, as investors largely stepped back from the market. The weak performance was down 310% compared to the same period the year previous, Savills reported.
https://www.insider.co.uk/news/scottish-commercial-property-investment-126-29027827
Medicines manufacturing has the potential to drive UK growth over the next 10 years
A new report from the Medicines Manufacturing Industry Partnership (MMIP), ‘Fulfilling the potential identified in the Government’s Life Sciences Vision’ shows that medicines and medical technology manufacturing currently deliver annual exports worth over £30bn for the UK, on top of making a £32.1 billion (gross value added or GVA) contribution to UK economic output in 2019. This is the largest GVA contribution from the life sciences sector. The UK has productive life sciences manufacturing clusters across the UK and recent significant investments made by companies in the UK show the value of the sector for regional economic development. However, the UK has also seen a significant loss of traditional medicines manufacturing capacity over the last 25 years, with 7000 jobs lost and a fall in production volumes of 29% since 2009. It has also seen the global proportion of capital investment fall dramatically in the last few years. Since 2010, the UK has fallen from 4th to 98th place in overall trade balance in pharmaceuticals, due to fierce global competition, with many similar countries, including Ireland, France and Germany, also focussing on boosting manufacturing productivity, output and exports.
City centre office space transactions show double digit annual improvement
Office space transactions in Manchester city centre increased by 15.3% in 2022. New figures from the Manchester Office Agents’ Forum (MOAF) showed that an annual total of 1,213,843 sq ft of office space transactions took place, compared with 1,052,746 sq ft in 2021. In the city centre, the fourth quarter of 2022 saw deals completed on 426,872 sq ft of office accommodation, up from 347,141 sq ft the previous year, representing an uplift of 23%. The figure in Q4 is also up by 30% in comparison with Q3. John Nash, director at Manchester-based office agency Canning O’Neill, said: “The final part of the year heralded a number of large transactions, notably Deloitte’s decision to take 63,066 sq ft at 100 Embankment and two lettings of over 35,000 sq ft in Manchester Goods Yard. “Rental growth has also continued evidenced by a new headline rent set in Q4 to Xero at Landmark at £40 per sq ft.” In Salford Quays and Old Trafford, the annual take-up figure increased to 277,802 sq ft, up from 255,791 sq ft in 2021. There were five deals of more than 10,000 sq ft in the final quarter, with Horwich Farrelly’s 16,040 sq ft at Orange in MediaCity the largest deal of those. The total number of transactions completed in the year was also up at 126 against a total of 87 in 2021.