Investment News

UK industry ‘booms back to life’ as manufacturing drives growth

by International Commercial Investment on January 12, 2017

Source: The Telegraph

UK industry “boomed back to life” towards the end of last year, putting the economy on course to maintain the strong pace of growth enjoyed in the aftermath of the Brexit vote.

Industrial production rose by 2.1pc in November compared with October, driven by strong manufacturing output and the reopening of the North Sea’s biggest oil field following a shutdown.

The Office for National Statistics (ONS) said manufacturing output increased by 1.3pc month-on-month in November, driven by growth in pharmaceuticals, which saw double-digit growth.

Economists at the National Institute of Economic and Social Research said the data put the economy on course to grow by 0.5pc in the final three months of 2016, following growth of 0.6pc in the quarter to September.

This would mean the economy expanded by 2pc last year, which is only slightly weaker than the 2.2pc growth seen in 2015.

Alan Clarke, an economist at Scotiabank, said November’s “boom” in industrial output would help to reverse October’s “poor start” and drive the economy towards an expansion of “at least” 0.5pc in the final quarter of 2016.

However, statisticians described some of the industrial data as “volatile”, while separate figures showed construction output fell by a monthly 0.2pc, against expectations for a rise of 0.2pc.

Official trade data also showed Britain’s trade deficit widened by £2.6bn in November compared with the previous month, to £4.2bn.

This was mainly due to a £3.3bn increase in imports, which was only partially offset by a £0.7bn rise in exports.

Kate Davies, a senior statistician at the ONS, described Wednesday’s data as “paint[ing] a mixed picture of the UK’s economic performance”.

However, Paul Hollingsworth, an economist at Capital Economics, highlighted that the three-month growth rate of goods exports returned to positive territory in November, while growth in import volumes slowed.

“This tentatively suggests that net trade may have made a positive contribution to GDP growth in the final quarter.

“So, overall, the latest figures suggest that economic growth has maintained pace, and is starting to become better balanced.

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International Commercial InvestmentUK industry ‘booms back to life’ as manufacturing drives growth

UK economy grows faster than expected in Q3

by International Commercial Investment on December 26, 2016

Source: RTE

Britain’s economy grew more strongly than expected in the third quarter, showing no sign of any slowdown from June’s Brexit vote, but the country’s current account deficit rose back towards record levels.

The economy expanded 0.6% in the three months to September, the Office for National Statistics said, revised up from an earlier reading of 0.5% that economists had expected to remain unchanged.

But growth was revised down by 0.1% in the first and second quarters of the year to 0.3% and 0.6% respectively.

While the figures confirmed that Britain’s economy performed more robustly than economists expected after the vote to leave the European Union, there was no sign that sterling’s sharp fall had boosted exports.

The figures showed a markedly worse picture for trade and growth was more reliant on domestic demand than previously thought.

“Robust consumer demand continued to help the UK economy grow steadily in the third quarter of 2016,” ONS statistician Darren Morgan said.

Net trade acted as a drag of 1.2% on third quarter growth, the biggest drag since early 2012 and compared with an initial estimate that trade had offered a 0.7% boost to the growth rate.

This reflected corrections the ONS recently made to trade data due to a miscalculation in the trade of gold.

Britain’s current account deficit widened to £25.494 billion from a downwardly revised £22.079 billion in the second quarter.

While lower than the £27.45 billion expected by economists, it caused the deficit to rise to 5.2% of gross domestic product from 4.6% – approaching a record 6% seen in late 2013.

In the run-up to June’s referendum, Bank of England Governor Mark Carney said Britain relied on the “kindness of strangers” to meet its financing needs – something that could fade if Britain became a less attractive investment destination.

Sterling tumbled after the Brexit vote, which most economists think should ultimately reduce Britain’s current account deficit by curbing imports, and boosting exports and the sterling returns from Britain’s overseas investments.

But some economists warn Britain could still be vulnerable if its overseas funders become nervous about their investments – particularly if it looks like Britain will end up with a bad deal in its divorce from the European Union.

Rising inflation caused by the pound’s post-referendum plunge looks set to squeeze household spending and economists said they still expected business investment to slow.

Compensation of employees rose at its fastest annual rate since the second quarter of 2013, up 4.5% on the year but rising inflation meant that in real terms, household income growth on the year slowed to 0.3% – its weakest rate in two years.

Households ate into their savings, with the savings ratio dropping to its lowest since the third quarter of 2008.

Growth in business investment slowed, revised down to 0.4% on a quarterly basis from 0.9%.

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International Commercial InvestmentUK economy grows faster than expected in Q3

Business investment boosts UK economic growth after Brexit vote

by International Commercial Investment on December 2, 2016


Better than expected business investment and consumer spending drove UK economic growth in the three months following the EU referendum, according to detailed figures published by the Office for National Statistics.

Business investment increased 0.9 per cent in the third quarter of 2016 compared with the previous three months, instead of a consensus prediction of a 1 per cent decline.

Business investment has been at the centre of the debates about how the UK economy will be affected by the Brexit vote, with economists expecting companies to slow their investment because of uncertainty about future trade arrangements. There was no evidence of this in the third quarter, however.

“Investment by businesses held up well in the immediate aftermath of the EU referendum, though it’s likely most of those investment decisions were taken before polling day,” said Darren Morgan, head of GDP at the ONS.

Mr Morgan added: “Business investment, coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.”

GDP growth was not revised in either direction from an initial estimate of 0.5 per cent, the release on Friday said.

Business investment covers the creation of new non-financial assets such as buildings, machinery and intellectual property.

“Uncertainty indicators ahead of the referendum and in the immediate aftermath were pointing to the kind of uncertainty that would lead corporates to hold back a bit,” said Peter Dixon, UK economist at Commerzbank. But he added that it was “too early to declare victory” because companies take a long time to adjust their investment decisions.

On Wednesday the Office for Budget Responsibility, which produces independent forecasts for the UK government, published a forecast that reductions in business investment would reduce the country’s long-term economic potential by 1.1 per cent by 2018. This prompted anger among pro-Leave politicians, who accused the OBR of producing “another utter doom and gloom scenario” and called its forecasts worthless.

Defenders of the OBR fought back by pointing out that many of its predictions were noticeably more positive than those made by other bodies, including the Treasury.

For the third quarter the rest of the increase in GDP was explained by household consumption increasing 0.7 per cent, government consumption growing by 0.4 per cent and the UK’s trade deficit narrowing slightly compared with the previous quarter.

However, big swings in the amount of gold held by British households and companies rather than trade in other goods and services accounted for the improvement in the trade balance. This is a very volatile part of GDP and unlikely to be related to any fundamental change in the economy.

Employee compensation — wages, pension contributions and in-kind payments — increased 0.7 per cent, unadjusted for inflation. This was the biggest contributor to growth in incomes. Corporate profits rose 0.2 per cent.

The index of services, which was published the same day, showed growth in the sector had kept pace with recent trends. Services account for about 80 per cent of the UK’s economic output.

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International Commercial InvestmentBusiness investment boosts UK economic growth after Brexit vote

UK third quarter GDP growth confirmed at 0.5%

by International Commercial Investment on December 2, 2016

Source: BBC

The UK economy grew by 0.5% in the third quarter, official figures have confirmed, helped by export growth and stronger consumer spending.

In its second estimate of the health of the economy, the Office for National Statistics (ONS) also says business investment grew by more than expected.

That was up 0.9% following the Brexit vote, against the second quarter, although it was down on last year.

There will be a third estimate of the figures in December.

“Investment by businesses held up well in the immediate aftermath of the EU referendum, though it’s likely most of those investment decisions were taken before polling day,” Darren Morgan, an ONS statistician, said.

“That, coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.”

The figures cover the period from July to the end of September and the ONS said the growth in gross domestic product suggested limited effect so far from the EU referendum at the end of June.
Sharp slowdown

However, it is expected that the effects of the Brexit vote and the fall in sterling will begin to feed through in the coming months.

The Office for Budget Responsibility, which provides independent economic forecasts and analysis, said on Wednesday that it expected the economy to grow by 1.4% in 2017, down from the 2.2% it predicted in March. It cut its forecast for growth in 2018 to 1.7%, down from 2.1%.

The “near-term strength of the economy after the Brexit vote is unlikely to persist”, said Samuel Tombs chief UK economist with Pantheon Macroeconomics.

“The outlook for stagnation in real incomes next year, as inflation rockets, points to a sharp slowdown in consumer spending growth ahead,” Mr Tombs added.
Analysis: Jonty Bloom, business correspondent

The British economy continued to grow following the vote to leave the EU and so has business investment, although there had been fears that both would be hit immediately by the decision to leave the EU.

It is the huge services sector that kept the economy growing. Services increased by 0.8%, driven by a continued strong performance on the British High Street as sales continue to boom. But all the others sectors of the economy, manufacturing, agriculture and construction, are contracting.

It is however the business investment figures which are the most encouraging. They show investment is continuing to grow, despite fears that businesses would slam on the brakes following the Brexit vote, if only temporarily, because they were uncertain about what the future holds.

The ONS says business investment held up well after the vote to leave the EU, although it also added that most decisions on investment in this period were probably taken before the referendum result was known.

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International Commercial InvestmentUK third quarter GDP growth confirmed at 0.5%

Economy to grow faster than expected into 2017 as UK sustains post-Brexit performance

by International Commercial Investment on November 4, 2016

Source: The Telegraph

The UK economy will grow faster next year than official predictions suggest, a pair of leading industry bodies have predicted.

The Confederation of British Industry and the National Institute for Economic and Social Research expect GDP to grow by 1.3pc and 1.4pc respectively next year, higher than the current Bank of England estimate.

The forecasts from both group for 2017 reflect positively on the health of the UK compared to the bearish post-Brexit recession forecasts promoted by HM Treasury in advance of the EU referendum.

These predictions match a wider trend among economists, who typically slashed their predictions immediately after the referendum but have gradually increased them in recent months as stronger economic data are published. Independent forecasts compiled each month by the Treasury show economists chopped their predictions for 2017 GDP to 0.5pc in July, but have now raised them back to 1pc.

The National Institute for Economic and Social Research (NIESR) has upgraded its forecast, predicting an expansion of 1.4pc next year – faster than the 1pc it predicted in August, though still a slowdown compared with 2016’s growth rate of an estimated 1.7pc.

The Confederation of British Industry (CBI) expects GDP to grow by 1.3pc in 2017 – slower than its previous pre-referendum forecast of 2pc.

But the estimates are higher than the 0.8pc the Bank is predicting for next year, based on its latest forecasts in August.

As part of its new forecast, the CBI believes business investment will be flat next year and fall in 2018 as companies wait for the outcome of the EU negotiations before investing. To counter that, the business lobby group wants Philip Hammond, the Chancellor, to announce extra public investment in infrastructure in his Autumn Statement later this month.

Meanwhile strong manufacturing numbers have backed up this trend. Factory output fell by 1pc in the three months after the referendum, but a new survey from IHS Markit indicates the sector has grown strongly again in September and October. Its purchasing managers index stood at 54.3 in October, when any figure above 50 indicates output is growing.

That is down a touch from 55.5 in September but still solidly above the long-term average of 51.5.

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International Commercial InvestmentEconomy to grow faster than expected into 2017 as UK sustains post-Brexit performance

London’s Property Prices Could Double by 2030, JLL Predicts

by International Commercial Investment on October 27, 2016

Source: Mansion Global

Even with the U.K.’s upcoming departure from the European Union, property buyers in London may be able to double their investment over the next 15 years, according to a research released by global real estate consultancy JLL earlier this week.

Using Oxford Economics data based on a “hard” Brexit (meaning the U.K. would leave the E.U. single market altogether, reverting to World Trade Organization rules), JLL said that London’s real estate investment is expected to generate an overall yearly return between 4% and 7%.

And this is a relatively conservative estimate, said Nick Whitten, JLL’s residential research associate director.

“JLL figures show that house price growth in London over the past 35 years has averaged 8% per annum through a period that included three recessions,” he said.

JLL analyzed the forecasted average house price gain in each London borough from 2016 to 2030 to show the winners over the medium-long term.

There is the potential to double the value of a home in some parts of London by 2030, most notably Waltham Forest, Newham and Haringey in the east of London, where prices are projected to rise by 100%, 94% and 91% respectively (See the map below for more price projections).

“The east of London is expected to be a significant driver in terms of the future economic growth of London driven by the rise of the likes of Silicon Roundabout in Old Street, the Queen Elizabeth Olympic Park and the new Crossrail east-west commuter railway,” said Mr. Whitten.

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International Commercial InvestmentLondon’s Property Prices Could Double by 2030, JLL Predicts

Britain will be fastest growing G7 economy this year, says IMF

by International Commercial Investment on October 5, 2016

Source: The Guardian

The International Monetary Fund has predicted the UK will be the fastest growing of the G7 leading industrial countries this year and accepted that its prediction of a post-Brexit-vote financial crash has proved to be overly pessimistic.

But while the Washington-based IMF said Britain would have a “soft landing” in 2016 with growth of 1.8%, it stuck to its view that the economy would eventually suffer from the shock EU referendum result and said expansion next year would be just 1.1% – lower than it expected in the immediate aftermath of the Brexit vote.

Maurice Obstfeld, the IMF’s economic counsellor, said the fund had been right to warn about the risks of Brexit but added: “We are looking at a soft landing for 2016. We are happy about the outcome.”

Looking further ahead, Obstfeld said the uncertainty about the divorce settlement between Britain and the EU would make businesses more cautious and warned that the fall in sterling – which hit a 31-year low on Tuesday – would hit living standards.

The pound sank to $1.274, its lowest level since June 1985. However, the decline provided another boost to companies with sales in dollars and the FTSE-100 soared 90 points to 7074 – its highest close since April 2015’s record high of 7104. The FTSE 100 index is now up nearly 28% since February and has climbed 12% since referendum day on 23 June.

Philip Hammond, the chancellor, said the UK economy had shown its resilience since the referendum but there was no room for complacency.

“There are still challenges ahead, as the IMF note in their estimate for growth in 2017. That is why I stand ready to take action to support our economy through any period of turbulence and will continue to pursue the long-term goals of fiscal consolidation and improved productivity.”

The IMF used its half-yearly world economic outlook (WEO) to warn not just about the impact of the referendum result on the UK and the wider eurozone economies, as well as the weak growth and uneven division of the fruits of growth that caused 52% of those who votedto end Britain’s 43-year membership of the EU.

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International Commercial InvestmentBritain will be fastest growing G7 economy this year, says IMF

Construction and export figures fuel hopes UK economy is growing

by International Commercial Investment on September 15, 2016

Source: The Guardian

Fears of a post-referendum recession have receded further after a rise in exports and a better month for the struggling construction industry buoyed hopes that the UK economy has continue to grow since 23 June.

As the pound tumbled following the Brexit vote, goods exports from the UK to other countries rose 3.4% between June and July. Exports to the EU, made cheaper by the pound’s decline, rose 9.1%, according to official figures. It was the biggest rise in EU exports since October 2010.

In a separate release the Office for National Statistics (ONS) said construction output stabilised in July, defying expectations among economists for another drop. Construction companies also enjoyed the biggest pick-up in orders for three years in the three months leading up to the referendum.
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The ONS said a rise in exports and drop in imports in July helped narrow the UK’s goods trade deficit with the rest of the world to £11.8bn in July from £12.9bn in June, broadly in line with expectations in a Reuters poll of economists.

There was also a narrowing in the deficit on the trade in goods and services to £4.5bn from £5.6bn in June. That gap is smaller thanks to the UK consistently running a surplus in trade in services – an area covering businesses such as financial and legal services – which helps make up some of the trade deficit in goods.

Britain’s international trade secretary, Liam Fox, said: “This data is very encouraging as it shows a major boost for exporters post referendum. However, while these statistics are highly encouraging we need to wait for further trade data to determine whether this is a clear trend.”

Economists have been revising up their gloomy predictions for the UK economy in recent days as news as more positive data rolls in. Consumer spending appears to have held up well and surveys suggest manufacturing and services companies enjoyed a rebound in activity in August following an initial post-referendum slump in July.

Howard Archer, economist at the consultancy IHS Global Insight, said the improved trade performance in July lifted hopes it would make a positive contribution to third-quarter GDP.

“Decent news for UK third-quarter growth prospects as the trade deficit narrowed markedly in July helped by improved exports, and construction output defied expectations of a drop in output,” he said.

Based on recent business surveys published by financial data company Markit, the economy looks likely to have grown 0.1% in the third quarter. That would represent a sharp slowdown from 0.6% in the second quarter.

But Archer also noted the ONS’s warning not to read too much into one month’s data. In its report on trade, the ONS said: “As monthly data can often be volatile, it is unclear whether this is an impact of the depreciation of sterling and it is necessary to look at the trend over the next few months to get a clearer picture.”

On construction, the ONS said: “There is very little anecdotal evidence at present to suggest that the referendum has had an impact on output. You should note that we always warn against overly interpreting one month’s figures.”

Paul Hollingsworth at the consultancy Capital Economics echoed those warnings.

“While we would caution against reading too much into any one month’s figures at the best of times, this is particularly true of trade and construction figures.

“Indeed, the survey evidence suggests that the near-term outlook for construction is poor … The near-term outlook for trade on the other hand looks a little better … The upshot is that while it is still early days, the latest figures give us little reason to alter our view that the immediate impact of the vote to leave the EU will be less severe than many had anticipated.”

Chiming with recent business surveys showing companies are having to pay more for imported materials because of a weaker pound, the ONS trade release showed import prices grew by 3.2% on June 2016.
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Suren Thiru, head of economics at the British Chambers of Commerce, said the UK’s near-term trade prospects would continue to be largely determined by how much the benefits of lower sterling for exporters are offset by higher input costs.

“Over the long-term, the UK’s trade position will be driven by how successful the government is in delivering the best possible terms of trade for the future, both with the EU and with markets further afield,” added Thiru.

The ONS construction figures showed output was flat in July, better than economists’ expectations for a 0.8% drop. It compared with a 1.0% drop in June. Measured against a year ago, output was down 1.5%, the biggest drop since April 2013 but above expectations for a 3.2% drop in a Reuters poll of economists.

Construction orders rose 8.6% in the second quarter compared with the first quarter, primarily boosted by housing.

The figures will reassure Bank of England policymakers meeting to set interest rates next week that they can afford to leave policy unchanged for now.

Interest rates were cut to a new record low of 0.25% in August and governor Mark Carney hinted another cut to take rates close to zero could follow before the end of the year. But economists expect the monetary policy committee to wait until November to cut again.

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International Commercial InvestmentConstruction and export figures fuel hopes UK economy is growing