Dip in confidence for financial services firms
Sentiment among financial services firms fell at the quickest pace since September 2019, according to the latest CBI/PwC Financial Services Survey.
Despite declining optimism, the survey of 81 financial services firms – conducted between 1 March and 22 March – found that business volumes had continued to grow in the three months to March, albeit at a slower pace than the previous quarter. Firms expect volumes to be flat in the quarter ahead.
The survey also saw a significant slowing in profitability growth on the previous quarter, with firms anticipating a modest decline in the next three months.
The outlook for investment in the year ahead continues to present a mixed picture. Firms expect to continue investing in IT but are looking to cut back capital expenditures on land & buildings and vehicles, plant & machinery.
Uncertainty over demand (37%), inadequate return on investment (32%) and labour shortages (16%) were cited by firms as the biggest constraints on investment. However, the share of firms citing labour shortages as a factor likely to limit future investment (16%) dropped significantly from last quarter (31%).
Building operational resilience emerged as a key theme throughout the survey, with 92% citing this as the key priority for future business strategy and transformation plans. Firms separately identified ‘responding to new cyber threats’ (81%) and ‘improving detection of cyber breaches’ (71%) as the main priorities to improve cyber resilience and reduce tech risk.
Elsewhere, headcount across the FS sector was broadly unchanged for the third quarter in a row. Expectations are for a significant uptick in employment next quarter.
Rain Newton-Smith, CBI chief economist, said: “While business volumes and profitability held up against the headwinds buffeting the economy, global inflationary pressures and increased geopolitical uncertainty stemming from war in Ukraine have started to take a toll on business confidence.
“With operational resilience becoming an ever more important priority for the sector, there is danger that a ‘wait and see’ approach may dampen growth prospects for the wider economy.
“A lack of preparedness for mainstream use of digital currencies and challenges in developing Net Zero plans suggest a need for swifter policy development in both areas to guide and stimulate industry-wide action.”
Isabelle Jenkins, head of Financial Services at PwC UK, said: “Financial services organisations are right to be careful and cautious as their resilience is once again put to the test.
“As the cost-of-living crisis mounts for households, it’s likely that we may see an increase in non-performing loans, another challenge financial services firms will have to respond to ensure consumers are supported through this difficult time.
“Despite some investment plans reined in for now, this is not the time to batten down the hatches completely, rather firms should continue to look at how they can best use the insight they are gathering to respond quickly and decisively in changing market conditions.”
Retail sales slow as confidence wanes, says experts
The retail sector has been through a great deal of late and the pandemic has meant much of retail bounced between being open and closed, significantly impacting sales and changing consumer behaviours.
In March 2020, non-essential retail stores began to close, pushing many consumers to buy goods online. In this context, while all comparisons are provided on a year-on-year (YoY) basis, those focused on online/in-store have also been compared with March 2019 (Yo3Y). This will be clearly signposted below.
Sales figures are not adjusted for inflation. Given that both the March SPI (BRC) and February CPI (ONS) show inflation running at historically high levels, a portion of the sales growth will be a reflection of rising prices rather than increased volumes.
Covering the five weeks 27 February – 2 April 2022
- On a Total basis, sales increased by 3.1% in March, against an increase of 13.9% in March 2021. This is worse than the 3-month average growth of 6.9% and the 12-month average growth of 10.3%.
- On a three-year basis, Total retail sales grew 5.4% (Yo3Y) during March compared with the same month in 2019.
- UK retail sales decreased 0.4% on a Like-for-like basis from March 2021, when they had increased 20.3%. This was worse than the 3-month average growth of 3.2% and the 12-month average growth of 6.5%.
- Over the three months to March, Food sales decreased 2.6% on a Total basis and decreased 3.1% on a Like-for-like basis. This is below than the 12-month Total average growth of 0.8%. For the single month of March, Food was in decline year-on-year.
- Over the three-months to March, Non-Food retail sales increased by 14.9% on a Total basis and by 8.6% on a Like-for-like basis. This is worse than the 12-month Total average growth of 18.3%. For the single month of March, Non-Food was in growth year-on-year.
- Over the three months to March, In-Store sales of Non-Food items grew 92.9% on a Total basis and 74.9% on a Like-for-like basis. This was an improvement on the Total 12-month average growth of 69.9%.
- On a three-year comparison, over the three months to March, In-Store sales of Non-Food items declined 18.2% (Yo3Y) on a Total basis and 3.9% (Yo3Y) on a Like-for-like basis since March 2019.
- Online Non-Food sales decreased by 29.0% during March, compared with growth of 64.7% in March 2021. This is worse than the 3-month decline of 27.3%.
- On a three-year comparison, Online Non-Food sales increased by 38.9% (Yo3Y) in March. This is broadly in line with the 3-mth average increase of 38.8%.
- Non-Food Online penetration rate decreased to 38.5% in March from 63.0% in March 2021. However, it was up 9.2 percentage points on the 29.3% seen at the same point in 2019.
Helen Dickinson OBE, Chief Executive | British Retail Consortium says:“As consumer confidence continued to sink, March saw sales slow, and while spend remained above last year this likely reflects higher prices. Beauty and fashion items were popular last month, as consumers took to their town and city centres for some retail therapy in the run up to Mother’s Day. While it is promising to see experiential shopping back in fashion, much in-store retail has not recovered to its pre-pandemic level. Online sales also decreased compared to last year but remain well above 2019 levels due to investment by retailers in their digital offer.
“The rising cost-of-living and the ongoing war in Ukraine has shaken consumer confidence, with expectations of people’s personal finances over the next 12 months reaching depths not seen since the 2008 financial crisis. Furthermore, households are yet to feel the full impact of the recent rise in energy prices and national insurance changes. There is also potential for further supply chain disruption, with China putting key manufacturing and port cities into lockdown. Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future.”
Don Williams, Retail Partner, KPMG adds:“Growth on the high street continued last month with total sales up 3.1% compared to March 2021, driven by a strong performance across most non-food categories. However, the drag came from food sales which were down 6.1%, potentially due to the timing of Easter in 2021 and compounded by the impact of the lockdown in March last year.
“Online sales fell across all categories compared to March 2021, but penetration rates remain high confirming the “locked in step up” in online purchasing. This continues to force retailers to focus on finding the most effective mix between physical and online retailing.
“Sales growth in March rose at the slowest rate so far this year, suggesting clouds on the horizon as household budgets come under pressure from rising costs, an increasing tax burden and competition from holidays. There is concern on what this could mean for consumer confidence and the impact on discretionary spend. Additionally, retailers are facing their own battle with rising costs and inflation, and are walking a tightrope between absorbing rising costs themselves or passing these on to consumers, when competition for share of a shrinking wallet is increasingly fierce. The best retailers will continue to balance attention on areas that can yield cost and efficiency gains with a clear understanding of their customer and what they want to buy and how. The primary concern now is whether consumers will choose to reduce their physical and virtual shopping to counteract rising household bills and reduced household income.”
Food & Drink sector performance | Susan Barratt, CEO | IGD
“Food and drink sales struggled in March, partly due to facing strong comparatives to 2021. Not only were sales elevated last year due to lockdown, but Easter was also earlier and we’re yet to see holiday spending ramp up this year.
“It is no surprise that shopper confidence continues to fall and is now lower than the previous low of December 2013 when the horsemeat scandal impacted the food industry. There was a brief peak in confidence when it looked like oil prices might come down, but with 50% of shoppers now expecting food prices to become much more expensive, this optimism was short-lived. These challenges affect shoppers in different ways, with household cutbacks seeing less affluent shoppers skipping meals to save money. This volatile time is set to continue as the reality of the energy price increase, as well as general inflation, hits home for shoppers.”
FSB lobby for sick pay rebates as Covid rates soar.
Soaring absentee rates and the withdrawal of free Covid testing have led small firms’ champion the FSB to call for a sick pay rebate.
Responding to publication of the UK Health Security Agency’s Living Safely with Covid guidance, and the withdrawal of free Covid lateral flow tests in England and Wales, Federation of Small Businesses National Chair Martin McTague, said:“The scaling back of working safely guidance and removal of free Covid tests at a moment when infection rates and inflation are soaring is going to throw up really challenging scenarios.
“Imagine you’re a sole trader struggling to make ends meet as bills spiral – you develop a tickly cough, you don’t have access to a lateral flow test, and at the same moment win a piece of work that would see you through the end of the month.
“Or you’re a part time employee with caring responsibilities who doesn’t meet the lower earnings limit that ensures you qualify for Statutory Sick Pay – you start to feel under the weather, again no access to a covid test, but you feel well enough to work, and working from home is not an option.
“The change in the new guidance from an instruction to “stay home” in the event of a positive test to “try to stay at home” and “talk to your employer about options” if you do want to come in will put stress on employers without the kind of support that’s existed in the past.
“A small firm isn’t like a big corporate – if one or two members of staff are away it puts huge pressure on the business – any more than that and it may consider closing for a while.
“The cost of workplace absence, including finding cover, surpassed £3,500 last year for the average small employer, meaning a collective £5bn cost to the small business community as a whole.
“Those additional outgoings come against a backdrop of the workplace testing initiative and small business sick pay rebate being withdrawn, along with wider Covid support measures.
“Small employers are acutely aware of their duty of care towards their teams. They now need more support to protect employee wellbeing.
“That’s why we’ve worked with TUC to put forward proposals for a comprehensive small business sick pay rebate that would see the lower earnings limit removed.
“Given the circumstances we’re now in, the Government should look again at the future of workplace testing for those who cannot work from home.
“We’re urging the UKHSA and Health and Safety Executive to do all it can to proactively promote best practice around hygiene and ventilation, particularly as we move towards summer and the reopening of outdoor leisure spaces.
“We’d also urging everyone to respect the house rules that each individual small firm has chosen to implement – many have spent thousands from depleted cash reserves to make premises safer.”
Major refurbishment underway at Chesterfield office building
A major refurbishment of The HQ, Rowland Hill House in Chesterfield is underway by property and asset management firm, FI Real Estate Management (FIREM), resulting in a raft of new tenants.
A £1.2m remodelling of the ground and third floors has created brand new reception and meeting space and the ground floor has been split into a series of smaller suites in response to market demand. This is now fully occupied by a diverse range of businesses including software consultancy Forefront Technology and advertising agency, Eehhaaa.
The next phase of works will see a £1m+ refurbishment of the first and second floors that will see the space divided to provide smaller units, with FIREM already in discussions with a number of interested parties from Derbyshire and beyond.
The HQ, Rowland Hill House offers a wide range of refurbished, flexible office space from 400 sq ft up – right up to 60,331 sq ft across four floors. Space can be divided in order to meet specific business requirements, with turnkey and bespoke packages available.
The property also boasts 326 on site parking spaces.
A spokesperson for FI Real Estate Management said: “We continue to see strong demand for high quality office space in prime locations in Derbyshire and the surrounding area, particularly those with ample on-site parking like here at The HQ, Rowland Hill House.
“Local and regional businesses are keen to find first class office environments but understandably want the flexibility to create solutions that are tailored to them and suit their unique needs. We’re able to offer traditional leases as well as bespoke, turnkey packages and are already seeing good interest in floors one and two on this basis.”
Energy strategy to create half a million jobs and wean us off fossil fuels, labelled as ‘recipe for failure’
Scientists, climate campaigners and politicians alike have warned that the government energy strategy, geared to weaning the UK off fossil fuels and creating half a million jobs by the end of the decade, is a ‘recipe for disaster’ and will do little to cut fuel bills or boost the country’s long-term energy independence, security and prosperity.
The government’s British Energy Security Strategy sets out how Great Britain will accelerate the deployment of wind, new nuclear, solar and hydrogen, whilst supporting the production of domestic oil and gas in the nearer term – which could see 95% of electricity by 2030 being low carbon.
The strategy will see a significant acceleration of nuclear, with an ambition of up to 24GW by 2050 to come from this safe, clean, and reliable source of power. This would represent up to around 25% of our projected electricity demand. Subject to technology readiness from industry, Small Modular Reactors will form a key part of the nuclear project pipeline.
A new government body called Great British Nuclear, will be set up to bring forward new projects, backed by substantial funding, and the £120m Future Nuclear Enabling Fund will be launched this month, potentially delivering up to eight reactors, equivalent to one reactor a year instead of one a decade, accelerating nuclear in Britain.
Other plans also include:
- Offshore wind: A new ambition of up to 50GW by 2030 – more than enough to power every home in the UK – of which we would like to see up to 5GW from floating offshore wind in deeper seas. This will be underpinned by new planning reforms to cut the approval times for new offshore wind farms from four years to one, and an overall streamlining which will radically reduce the time it takes for new projects to reach construction stages while improving the environment.
- Oil and gas: A licensing round for new North Sea oil and gas projects planned to launch in Autumn, with a new taskforce providing bespoke support to new developments – recognising the importance of these fuels to the transition and to our energy security, and that producing gas in the UK has a lower carbon footprint than imported from abroad.
- Onshore wind: developing partnerships with a limited number of supportive communities who wish to host new onshore wind infrastructure in return for guaranteed lower energy bills.
- Heat pump manufacturing: A Heat Pump Investment Accelerator Competition in 2022 worth up to £30 million to make British heat pumps, which reduce demand for gas.
“Scaling up cheap renewables and new nuclear, while maximising North Sea production, is the best and only way to ensure our energy independence over the coming years.”
Dr Shaun Fitzgerald FREng, Director of the Centre for Climate Repair says ” “The Energy Strategy launched by the government today is just 3 days after the harrowing IPCC AR6 WGIII report as to what is happening climate-wise and the urgency required for measures to change course. On Monday we learned that emissions need to peak no later than 2025. That is three years from now. “We need to see change, and we need to see it fast. Does the Energy Strategy launched today deliver these changes in the timescales required? “A big story in the strategy involves the procurement of new nuclear stations. Whilst these will be low carbon in operation, they won’t be delivering electricity in the timescale required. It is at least 10 years hence for a new power station. “Furthermore, an Energy Strategy should involve significant efforts in both supply and demand. The Energy Strategy today talks a lot about Energy Supply, but much less on Demand Reduction. Reducing demand (by increasing efficiency) has an immediate benefit not just in terms of the climate, based on the assumption that some of the energy is still provided by fossil fuels, but also in terms of bills. And energy bills are a huge issue for many people right now. The Energy Strategy launched today is really an Energy Supply Strategy. We need more investment, urgently, in energy savings schemes. This would also help reduce our reliance on energy imports. “The pace of change associated with today’s Energy Strategy is nothing like that which we need. And the climate won’t wait.” Prof Sir Jim McDonald FREng FRSE, President of the Royal Academy of Engineering, says: “The UK’s energy system faces a combination of threats from high consumer costs that threaten to worsen energy poverty, disruptions in the global supply chain due to Russia’s invasion of Ukraine, increasing risk to energy security and unsustainably high carbon emissions as a result of fossil fuel dependence, which must fall rapidly and immediately in order to have any chance of meeting the Paris goal of 1.5C. “There are many vital, low-regrets policies that would address all these issues at the same time, particularly:- rapid renewables and energy storage deployment alongside energy network investment;
- home insulation measures which deliver at least half a million retrofits per year, including support for heat pump supply chains; and,
- measures to reduce energy demand and increase energy efficiency across all sectors.
Economic growth to halve this year says leading business lobby group
The UK economy grew more slowly in February, an indicator that the rebound was losing steam even before the impact of Russia’s invasion of Ukraine, says Suren Thiru, Head of Economics at the British Chambers of Commerce.
He said: “Tourism-related industries and accommodation services recorded the strongest improvements in the month as the end of Plan B restrictions, and reduced concerns over Omicron, supported activity. However, this was mostly offset by a significant drop in NHS Test and Trace services and vaccine activity as well as declines in industrial and construction output.
“February’s slowdown is likely to be the start of a prolonged period of considerably weaker growth as rising inflation, surging energy bills and higher taxes increasingly damages key drivers of UK output, including consumer spending and business investment.
“Weakening health sector output following the end of free Covid testing and mass vaccinations, is also set to weigh on UK GDP in the near term.
“The Government must provide urgent financial support, through the expansion of the energy bills rebate scheme, to include small firms and energy intensive businesses, and an SME energy price cap to protect smaller firms from some of the price increases.”
UK trade data from the ONS remained volatile in February 2022 as changes in data collection methods unwind. The figures for February 2022 reported a 25% increase in exports (following a 22% decline the previous month). Comparing the last 3 months data together with that over the same period 4 years ago reveals that exports in goods were £1bn lower (1.2%). It is hard to discern therefore any sustained increase in UK exports of the levels currently occurring in our largest neighbouring trading partners.
Furthermore, the ONS Business Insights and Conditions Survey reveals increasing challenges faced by firms with export and import paperwork respectively. 68% of exporters and 70% of importers reported these challenges in February to March 2022 a rise of 7% and 9% respectively. This echoes BCC data which finds a similar worsening trend.
New Digital Growth Grant worth over £12million
The Department for Digital, Culture, Media and Sport (DCMS) is launching a £12.09 million Digital Growth Grant.
The grant will focus on opening up access to skills training and advice and providing support services to the digital and tech sector over two years.
Bids will be invited to address identified market failures and accelerate the growth of tech start-up and scale-up ecosystems across the regions and nations of the UK. The successful bidder will be awarded up to £12.09 million to be spent over two financial years 2023/24 and 2024/25.
Objectives
The objectives of the Digital Growth Grant will be based around:
- Delivering support services to the digital sector, particularly in transformative/emerging technologies. These services should address key challenges faced by a wide range of companies from seed stage to series A/B, their first or second round of financing.
- Developing the growth of regional support networks for tech start ups and scale ups. Activities should deliver concrete improvements against three or more areas identified in DCMS Regional Ecosystems Report: Investment, Skills, Innovation, Infrastructure and Business Growth/GVA. Interventions should be tailored to local needs and tech specialisms, and developed in partnership with local bodies.
- Ensure founders and firms can access digital entrepreneurship and investment readiness training, with tailored advice to help develop their skills to start and grow a tech business. Clearly signpost start-ups and scale-ups to the digital skills initiatives in private and the public sector (DCMS’ local digital skills partnerships) and share information on the types of roles available in tech companies, the skills required to access these roles, and direction to low/no cost skills provision to acquire those skills.
- Promoting and raising awareness of the strength and competitiveness of the UK tech sector with the aim of boosting investor confidence and inspiring the next generation of tech workers and entrepreneurs.
For further information readers can contact: dcmsdigitalgrowthgrant@dcms.gov.uk
60,000 packs of essential medicines donated to Ukraine by Leicestershire pharmaceuticals business
A Leicestershire pharmaceuticals business has donated almost 60,000 packs, which will provide 1.29 million doses, of essential medicines to communities impacted by the war in Ukraine.
The significant donation by Loughborough-based Morningside Pharmaceuticals came about after the company’s founder and chairman, Dr Nik Kotecha OBE DL, spoke with the Ukrainian Ambassador to the United Kingdom, Vadym Prystaiko, at a business event in London.
Dr Kotecha, who was also recently appointed a Deputy Lieutenant of Leicestershire, said: “The heartbreaking situation in Ukraine has touched us all, and as like so many people in the United Kingdom, we’ve been keen to do everything we can to help the victims of this terrible conflict.
“After speaking to the Ambassador, the Ukrainian Embassy identified a range of Morningside manufactured medicines, which their healthcare system is in urgent need of. The Embassy and our teams at Morningside then worked closely with the Department for Health and Social Care (DHSC) in the UK to ensure the medicines could be shipped rapidly as humanitarian aid.
“I would like to thank our International, Supply Chain and Warehousing teams for turning this around in a matter of days, to ensure those in urgent need of their medicines, received them as quickly as possible.”
The large shipment of medicines has been transported in a secure and temperature controlled environment via Morningside’s logistics partner to the Embassy’s distribution hub in Poland. From there the medicines will be supplied to hospitals, healthcare centres and patients throughout Ukraine, including the regions hardest hit by the Russian invasion.
Morningside Pharmaceuticals has also supported the aid effort in Ukraine by storing a large quantity of supportive goods, such as hundreds of packs of nappies, feminine hygiene packs, sleeping bags and children’s essentials in its Loughborough warehousing.
These goods were donated through Loughborough’s Polish associations and social clubs by members of the public and have now been delivered to support Ukrainian refugees in Poland.
Dr Kotecha added: “We all hope for a swift resolution to the War in Ukraine, which brings an end to the suffering and atrocities taking place there. There has been a huge outpouring of support for people caught up in this terrible conflict, and it’s been humbling to see the enormous generosity of people in the UK for those suffering extreme and often life threatening hardships, due to no fault of their own.”
Ideagen raises more than £4,200 for Red Cross humanitarian effort in Ukraine
Software provider, Ideagen Plc, has raised funds for victims of the Ukrainian war, with more than £4,200 being donated to relief efforts led by the British Red Cross Society.
The Nottingham-based firm, which specialises in risk and compliance software for regulated industries, launched the appeal to its staff at the beginning of March when news begun to unfold of the devastating events in Ukraine.
Ideagen employees across the globe joined the fundraising efforts, while the software firm matched every penny donated, taking the total to £4,204. Staff were encouraged to undertake random acts of kindness or good deeds throughout the month to mark the fundraising campaign.
Ideagen CEO, Ben Dorks, said: “Our hearts are with those affects by the horrific conflict in Ukraine. We believe in harnessing the power of working together to support the humanitarian efforts of the Red Cross which is why we have matched donations made by our staff.
“We stand with and support the people of Ukraine and strongly condemn the attacks by the Russian government. Right now, cash donations are by far the quickest, safest and most direct way to support the work of the Red Cross in Ukraine and neighbouring countries and I am so proud of our staff for their generosity.”
A dedicated JustGiving page was set up for Ideagen staff to contribute, which received donations from its offices across the world, from Australia to the US. Meanwhile, collection buckets for loose change were placed around Ideagen’s buildings too.
New deals show huge demand for East Midlands industrial space
A commercial property agency says it is seeing a huge demand for industrial units in the East Midlands as the country starts to emerge from the pandemic.
Bromwich Hardy says the market in key areas of the region is now becoming just as competitive as that further south and to the west, where demand is running well ahead of supply.
Bromwich Hardy founding partner Tom Bromwich says two deals to lease units at Harrowbrook Industrial Estate at Hinckley – both completed in quick time – shows the strength of the market in the area.
“We have recently concluded deals for our client Mileway on Unit D1 & D2 and D6 and set new groundbreaking rents at the estate on both leases,” said Tom. “Both units are in a fantastic location, benefit from an excellent landlord in Mileway and are in first-class condition.
“Unit D1 & D2, which extends to more than 15,500 sq ft, had just benefitted from a comprehensive refurbishment to bring it up to the highest standards, whilst the 7,500 sq ft on offer at D6 was also hugely sought after.
“In fact, we could have let either of them three times over such was the quality of the offer. The market in Hinckley is now starting to rival those further south like Coventry and Leamington, with its excellent transport links and skilled workforce helping drive demand.”
Unit D1 & D2 has been let for five years at an annual rent of £101,100 to masonry barbecue specialist Buschbeck UK, whilst Unit D6 has also been let on a five-year deal at £47,500/year to Master Auto Glass.
Tom also praised Richard Sidaway, Mileway asset manager, for his role in helping conclude the deals.
“Mileway are a first-class client and Richard in particular is a pleasure to work with, bringing his own knowledge of the property market and its processes to play to ensure everything proceeds smoothly.”
