Business News Round Up (28/10/2022)
Removing trade barriers key to boosting export growth of UK businesses
While barriers to trade affect most firms, overcoming recent EU challenges has led some to expand into new markets, a survey from the British Chambers of Commerce (BCC) and DHL Express has highlighted. The survey of almost 1,000 UK businesses – 92% SMEs – shows almost half (48%) said the top barriers to exporting were costs and disruption, alongside tariffs (48%), and customs procedures (47%). A further 41% of businesses said regulatory issues such as product certification were a hindrance to trade, and 37% cited political, social, economic, or environmental uncertainty. Only 9% of firms surveyed said their business does not face any barriers to exporting. The lack of engagement amongst businesses with Free Trade Agreements (FTAs) is another stumbling block preventing more international sales. Four out of five firms (79%) had not carried out any assessment into what they may need from a trade deal with major international markets. This falls slightly to 69% for UK exporters. However, businesses want their trading journey to be straightforward and allow them access to new markets with ease and speed. More than half (54%) of respondents said ‘smoother customs procedures’ would be a top priority for future trade deals between the UK and other countries, followed by ‘lowering tariffs’ (42%) and ‘reducing technical barriers’ (35%).
Businesses hope for some clarity and stability after recent political turmoil
It has been yet another turbulent few months for the UK economy, with recent political turmoil adding pressure to an already uncertain business environment. Rising inflation coupled with significant political and economic uncertainty means many households and firms are facing increasingly tough financial decisions. Recent estimates suggest the Scottish economy shrank by 0.2 per cent in July, the second consecutive month of negative growth, following no growth in the second quarter of 2022. This was primarily driven by a fall of 0.3% in the services sector, which accounts for around two-thirds of the Scottish economy and tends to be the section of the economy most supported by consumer spending. This was of little surprise, however. In our latest economic commentary, published in partnership with Deloitte, we forecast that the economy would contract from Q3 of this year, which is likely to persist until at least the first quarter of next year. The overall growth picture for 2023 is also forecast to be negative. This means that Scotland is likely already at the start of a recession (defined as two quarters of negative growth in the economy). This was similar to the UK economy, which shrank by 0.3% in August 2022 despite growth of 0.1% in the previous month.
Recent improvement in Scottish shop vacancy rate stalls
In the third quarter, the Scottish vacancy rate remained 15.7% for the second consecutive quarter – and 0.7 percentage points lower than in the same point in 2021. The latest Scottish Retail Consortium (SRC) and Local Data Company figures showed that shopping centre vacancies increased to 20.5% from 20.3% in the second quarter of the year. On the high street, vacancies remained at 14.7%. Meanwhile, retail park vacancies decreased to 11% in the third quarter, down from 11.3% in the second. It remains the location with the lowest rate. SRC director David Lonsdale commented that the incremental recovery in Scotland’s shop vacancy rate over the past year stalled during the most recent quarter. “This is despite it being the second full trading period for over two years in which stores were able to trade without Covid-era restrictions. Scotland’s vacancy rate remains persistently a fifth higher than pre-pandemic levels and above that for Great Britain as a whole, with one in six Scottish stores lying empty and Scotland recording the fourth weakest performance of the 11 parts of the country monitored.” Lucy Stainton, director at the Local Data Company, explained that the pandemic proved the final straw for a number of ailing retailers, with the CVA and insolvency activity which typified the most challenged end of the market in the Covid years causing a significant spike in empty units, which are now slowly being reoccupied.
https://www.insider.co.uk/news/recent-improvement-scottish-shop-vacancy-28349512
UK mortgage growth to hit post-Financial Crisis lows in 2023 amid rising interest rates and historic real income fall
UK mortgage lending is expected to rise 4% this year, following strong demand in the first half of the year, but slow sharply in 2023 with just 0.7% growth due to rising mortgage rates and falling real household incomes, according to the latest EY ITEM Club Outlook for Financial Services. This would be the lowest rate of mortgage growth since 2011 amid the aftermath of the financial crisis. As market demand wanes, banks are also expected to tighten their lending criteria as they contend with higher interest rates, a riskier economic outlook and volatility in markets. On consumer credit, the forecast is for significant growth this year, at a rate of 7.2%, as cost of living and inflationary pressures deepen. This high rate is not expected to be sustained, and as inflation falls back and the squeeze on households’ real incomes eases, the growth rate is predicted to slow to 5.1% in 2023. While a return to growth for business lending is forecast this year (2.2%), levels remain low by pre-pandemic standards. Looking to 2023, a net fall of 3.5% is forecast as businesses’ appetite and ability to borrow is affected by the deteriorating economic outlook, rising borrowing costs and an overhang of debt from the pandemic.