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UK investment is at a record high. So why has almost no one reported it?

by International Commercial Investment on April 2, 2018

Source: The Spectator

Why is it that whenever some organisation comes up with some half-baked prediction of doom for the UK economy post-Brexit it is splashed all over the news, yet real data on the economy gets ignored? Yesterday, the ONS quietly released the latest figures for Gross Fixed Capital Formation (GFCF) which covers investment across the whole economy, public and private sectors, manufacturing, construction, services and extractive industries.

They showed that contrary to the received wisdom that investors have fled the UK following the Brexit vote, investment grew by 1.1 per cent in the fourth quarter of 2017, to a total of £84.1 billion. Over the course of 2017 it grew by 4 per cent compared with 2016. This was higher than for any other G7 country – with Italy following on 3.7 per cent, France 3.5 per cent, the US 3.2 per cent and the US on 3.1 per cent?

Is this not news? The BBC doesn’t seem to think so. It didn’t make the business news on the Today programme, nor does the story appear on the business section of the BBC website. The Guardian didn’t bother with it, though it did big up statistics showing the UK had the slowest rate of growth in consumer spending in the G7. The Times carried a story about another piece of good economic news – the decline in the UK’s current account deficit – but did not mention the investment figures.

The only paper that did give the investment figures space was the FT – although in a somewhat loaded way, suggesting that it was only really down to a construction boom and that lots of investment decisions in new office space must have been made before the referendum. Somehow, I suspect the FT wouldn’t have taken this line had investment fallen – that would very much have been connected with the Brexit vote. For the record, business investment – which excludes the public sector and the construction of dwellings – accounted for £46.2 billion of the £84.1 billion invested in the fourth quarter of 2017. Over the course of 2017, business investment in the UK grew by 2.6 per cent. The ONS does not compare this particular figure internationally, however, because of differences in how it is compiled.

Brexit is not guaranteed to bring a bonus to the UK economy – far from it, it could still prove a disaster if the wrong decisions are made by a future UK government, shutting us off from the world and bailing out failing industries rather opening up and economy and encouraging growing industries. But it would be extremely helpful to all of us if we could be fed rather less propagandist speculation about the future direction of the economy, made by organisations which have already been embarrassed by the grim forecasts they made ahead of the referendum, and we got to hear rather more genuine economic news.

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International Commercial InvestmentUK investment is at a record high. So why has almost no one reported it?

Services bounce-back boosts UK economy

by International Commercial Investment on March 7, 2018

Source: Sky News

Britain’s dominant services sector has bounced back to keep UK growth on track as it recorded its best performance in four months.

Figures for February from the sector – which covers businesses from law firms and accountants to bars and restaurants – suggested that the wider economy had maintained the 0.4% pace of expansion seen in the final quarter of 2017.

However experts noted that for the first quarter as a whole, GDP growth was likely to take a knock as a result of the cold snap causing some activity to freeze up – if only temporarily.

The services Purchasing Managers’ Index (PMI) recorded a better than expected figure of 54.5 in February, up from 53 the month before. A figure of 50 separates growth from contraction.

There was strong job creation and an upturn in new orders – which, for a sector representing four-fifths of UK output, might be seen as strengthening the hand of Bank of England rate-setters considering a hike in May.

But there were also signs that pressures driving up prices had cooled a little, dampening the argument that an interest rate rise might be needed to curb inflation.

Taken together with the PMI figures from manufacturing and construction the latest data suggested that “a resiliently steady pace of expansion has been maintained” according to Chris Williamson, chief business economist at IHS Markit, which compiles the survey.

He said that it left the possibility of a May rate hike “very much in play”.

But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the case for leaving rates on hold in May remained strong.

He said weighted figures actually painted a picture of growth slowing to 0.3% in the first quarter while inflation remained subdued.

HSBC economist Elizabeth Martins said the survey data pre-dated the recent weather disruption in late February and early March “so there may be an impact not yet showing through”.

But she added that this would be “circumstantial rather than indicative of an underlying slowdown”.

The PMI data also showed the services sector – in recent years the engine of UK growth – reasserting itself as the strongest expanding part of the economy after a Brexit slowdown.

Since the referendum in 2016, the sector has been hit by the tough environment for consumers, as the collapse in the pound has driven up prices.

At the same time, the pound’s weakness has helped exports become more attractive for overseas buyers, boosting manufacturing.

But more recently, the pound has recovered close to levels seen before the referendum, partly reversing the effect in last month’s data.

However, a separate survey on Monday from manufacturing organisation EEF showed that the sector had cooled only slightly from last year’s heights, helped by strong global demand.

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International Commercial InvestmentServices bounce-back boosts UK economy

London property is worth more than Bristol, Birmingham, Glasgow, Manchester, and Edinburgh combined

by International Commercial Investment on February 24, 2018

Source: Business Insider

London’s property market is worth a total £1.5 trillion according to new figures from Zoopla — more than twice the value of the nine other most valuable property markets in the UK combined.

Zoopla’s figures suggest that the value of London property is 13 times higher than that of its nearest rival, Bristol, which has a property market worth £115.2 billion. London represents just over 18% of the entire UK property market by value.

However, London property prices grew the slowest out of any of the top 10 hotspots last year, according to Zoopla’s figures. House prices in the capital rose by just 1.54% over the last 12 months.

Zoopla’s rival Rightmove said last week that London house prices have now moved out of their “boom” phase after nearly two decades of rapid price rises.

Lawrence Hall, a spokesperson for Zoopla, said in a statement: “It comes as no surprise that London is significantly more valuable as a residential property market than any other British city.

“However, the data does show that, in comparison to cities further north and across the Scottish border, the rate of growth in London has slowed. The capital may be worth almost 10 times more than Sheffield, but Britain’s Steel City wins in the growth rate stakes.”

House prices in Sheffield grew by 5.63% last year according to Zoopla. Here’s Zoopla’s full table of the top 10 cities by property market worth:

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International Commercial InvestmentLondon property is worth more than Bristol, Birmingham, Glasgow, Manchester, and Edinburgh combined

Deficit restraint puts UK economy on better course

by International Commercial Investment on February 23, 2018

Source: Financial Times

Strong data on UK deficit reduction, robust productivity growth and continued high employment prompted Britain’s finance ministers to vie for the limelight on Wednesday.

First Liz Truss, chief secretary to the Treasury, cast aside the normal caution at the finance ministry to declare the latest public borrowing figures to be “strong”. Then chancellor Philip Hammond trumped his junior to comment on all the economic data that had been released.

“Best run of productivity since before the financial crisis . . . yearly borrowing reduced by over £100bn since 2010; good economic news as we build an economy fit for the future,” he tweeted.

The good headlines do not stop there. In cash terms, the UK deficit has now shrunk to less than £40bn over the most recent 12 months of data.

This is below the cash rate of borrowing before the financial crisis, the Institute for Fiscal Studies, a think-tank, pointed out.

And at less than £40bn, the deficit is almost exactly 2 per cent of national income: this is the level that the government has pledged to bring underlying borrowing down to by 2020-21. Mr Hammond has a more exacting goal of balancing the government’s books by the middle of the next decade.

In the short term, the much better than expected economic data leaves the Office for Budget Responsibility, the fiscal watchdog, in a race to decide how much to upgrade the outlook for Britain’s economy at Mr Hammond’s spring statement to MPs due on March 13.

The OBR indicated on Wednesday the upgrade will be “significant”, just four months after its much anticipated cut to productivity forecasts led Treasury officials to talk about a “bloodbath” in the public finances.

The first task for the OBR will be to assess whether the improvement in the latest official figures about the public finances will prove permanent — or if they simply represent a temporary blip of good news for the Treasury.

January tax receipts are the most important of the year. This is because they coincide with the deadline for income tax self-assessment payments, but all the talk of strong receipts appeared odd when they were £1.4bn lower last month than a year earlier.

The answer to the puzzle is that the January 2017 receipts were thought to be artificially high due to a move by the previous chancellor George Osborne to increase income tax on dividend payments.

The OBR had expected owners of companies to respond to Mr Osborne’s reform by shifting more dividend payouts into the 2015-16 financial year, and pay tax in early 2017. This would enable them to avoid his tax increase on dividends that took effect in 2016-17.

But with the self-assessment receipts only £500m lower in January 2018 than a year earlier, it is likely company owners did not accelerate as many dividend payouts as feared.

This in turn implies that genuine economic activity was better than previously thought in 2015-16, and there is little sign that it tailed off, so the OBR is therefore likely to view much of the tax receipts surprise as a permanent improvement in the borrowing position.

Economists estimated the government would borrow just over £40bn in 2017-18, down from £45.8bn in 2016-17, and significantly less than the £49.9bn predicted by the OBR at the time of Mr Hammond’s November Budget.

In the past, when faced with a similar upside surprise, the OBR has tended to assume that some of the strength continues, but that some does not.

This implies that when the OBR produces its new forecasts next month, borrowing could be reduced by about £7.5bn in 2017-18 and in subsequent years.

The OBR faces a more difficult decision about whether to raise the UK’s long-term economic growth outlook to reflect the much improved productivity performance in the third and fourth quarters of 2017.

Productivity is a key driver of economic growth, but the OBR is likely to be much more cautious in assuming the recent good data persists into the future, reflecting how quarterly figures tend to be volatile.

Ben Broadbent, deputy governor of the Bank of England, told MPs on Wednesday to be cautious about the recent sharp rise in productivity growth. Reminding the Commons Treasury select committee that it was a quarterly number, which was “noisy”, he said “we should be wary about quarterly measures [of productivity]”.

Howard Archer, chief economic adviser to the EY Item Club, said the productivity data in the fourth quarter looked oddly strong because it was “heavily reliant on an unusual drop in average hours worked by full-time workers”.

With productivity per worker only 0.4 per cent higher in the fourth quarter than a year earlier, the evidence for a sustained pick-up in underlying growth is likely to be too weak to influence the OBR’s main economic projections.

Meanwhile, although the employment rate remains high, at 75.2 per cent in the fourth quarter, other labour market data suggested a less glowing outlook. Notably, the unemployment rate nudged higher to 4.4 per cent, implying labour related tax receipts are unlikely to rise quickly.

But an improvement of £7.5bn a year in the forecasts for the public finances — or roughly half the “bloodbath” downgrade from the November Budget — will be very welcome news for Mr Hammond.

Until the figures are revised again, the latest data will allow the chancellor to have thoughts of giveaways in the Budget later this year.

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International Commercial InvestmentDeficit restraint puts UK economy on better course

Average price of newly marketed home rises above £300,000 again

by International Commercial Investment on February 20, 2018

Source: The Guardian

The average price of a UK property coming on to the market has risen by more than £2,400 in a month to just over £300,000 amid evidence of “record” levels of house-hunting activity, according to Rightmove.

The website, which tracks 90% of the UK property market, said the national average asking price for a home had increased by 0.8% during the past month, following the 0.7% rise it reported in mid-January.

However, some sellers may be over-pricing their properties: the average time to sell has risen once again and is now 72 days, compared with 67 days a month ago and 55 during the summer of 2017. In London, the average has climbed to 83 days.

Rightmove said that while it was the norm for new sellers’ asking prices to be buoyant at the start of a new year, “this first complete month in 2018 is seeing more pricing optimism than the comparable period in 2017”. In general, however, sellers were not being over-ambitious or setting too high a price, it added.

The website, which claims to display a stock of more than one million properties to buy or rent, said the average asking price now stood at £300,001, compared with £297,587 a month ago. It described January as its “busiest month ever”, with a record 141m website visits.

In all the UK regions it tracks, the typical price of a newly-marketed property rose during the past month, with the exception of south-west England, where the figure slipped back slightly. Scotland saw the biggest monthly increase, at 5.1%, while the north-east and Wales managed 3.6% and 3.5%.

However, on a national basis, the annual rate of price growth “remains subdued” at 1.5%, said the website.

Separate Rightmove data for London show that the city’s 32 boroughs have enjoyed mixed fortunes. In Lambeth, asking prices have fallen by 1.4% during the past month, and are down 7.3% on 12 months ago. The average price there is £635,376.

Other London boroughs where typical asking prices have fallen during the past four to five weeks include Tower Hamlets (down 1.2%), Hounslow (down 0.8%) and Brent (down 0.6%).

The figures may also indicate that the areas of London that are home to the most expensive properties are bouncing back from some of their lows; or that some sellers are being greedy. In Westminster and Kensington and Chelsea — the two boroughs where the typical price tag is above £1m — asking prices jumped 3.8% and 2.5% during the past month.

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International Commercial InvestmentAverage price of newly marketed home rises above £300,000 again

U.K. House Prices Surged in January as Few Homes Come to Market

by International Commercial Investment on February 1, 2018

Source: Bloomberg

U.K. house prices rose in January as a shortage of properties coming up for sale offset an underlying slowdown in the market.

Values increased 0.6 percent from December, lifting the annual gain at 3.2 percent, Nationwide Building Society said on Thursday. While that’s more than the December rate of 2.6 percent — and the fastest since March — it’s still well below the pace of recent years.

The property market has been hurt by slower economic growth and a squeeze on consumers’ incomes since the referendum to leave the European Union in 2016. The Royal Institution of Chartered Surveyors said last month that activity remains subdued, and mortgage approvals fell to a three-year low last month.

“The acceleration in annual house price growth is a little surprising,” said Robert Gardner, chief economist at Nationwide. “The lack of supply is likely to be the key factor providing support to house prices.”

The average house price in the country rose to 211,756 pounds ($300,000) from 211,156, the report showed.

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International Commercial InvestmentU.K. House Prices Surged in January as Few Homes Come to Market

UK economic growth exceeds forecasts, ONS says

by International Commercial Investment on February 1, 2018

Source: BBC News

The UK economy expanded by a better-than-expected 0.5% in the last three months of 2017, official figures say.

Economists had expected a 0.4% expansion in the three months to December.

However, the Office for National Statistics (ONS) said the broader picture was “slower and more uneven” growth.

In 2017 as a whole, growth was 1.8% compared with 1.9% in 2016 – the slowest since 2012, the ONS said.

The services sector, which accounts for the bulk of the economy, expanded by 0.6% in the fourth quarter – stronger than the 0.4% rise in the three months to September.

“The boost to the economy at the end of the year came from a range of services including recruitment agencies, letting agents and office management,” said Darren Morgan, head of GDP at the ONS.

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Mortgage approvals at five-year low

Yet consumer-facing parts of the services sector, which include distribution, hotels, catering, transport and communications, posted much slower growth, he said.

Manufacturing also grew strongly, but construction contracted by 1% – its third consecutive fall and worst quarterly performance since the third quarter of 2012.

John Hawksworth, chief economist at PwC, said construction appeared to be the sector most affected by Brexit-related uncertainty, deterring commercial property investment and dampening the housing market, particularly in London.

Samuel Tombs at Pantheon Macroeconomics said the “undeniably strong” quarterly figures increased the chance of the Monetary Policy Committee raising interest rates again as soon as this summer.

However, Hargreaves Lansdown senior economist Ben Brettell described growth as anaemic and doubted there would be more than one rate rise this year, “probably in the autumn”.

Sterling jumped 0.8% to $1.4253 following the release of the GDP figures.

Analysis: Andy Verity, economics correspondent

Choose your comparator. You might, like Bank of England governor Mark Carney, point out that the economy is about 1% smaller than the Bank predicted it would be before the Brexit vote. But that was in the event of a “stay” vote.

Pro-Brexit critics might point out the economy is doing a lot better than his own warnings about the risk of a “technical recession” if the UK voted to leave.

Annual growth of 1.8% may be less than we would like, but so far there is little sign of the Brexit-induced disaster that some predicted.

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International Commercial InvestmentUK economic growth exceeds forecasts, ONS says

London Beats New York Among Foreign Investors in Real Estate

by International Commercial Investment on January 8, 2018

Source: Bloomberg

New York City took a double hit in an annual survey of real estate investors, which saw London overtake it in first place globally and Los Angeles tie it for top U.S. city.

The annual survey of the Association of Foreign Investors in Real Estate asks its members, who are estimated to have more than $2 trillion in real estate assets under management, to rank markets by various measures, such as stability and opportunity for capital appreciation. This year’s poll, the 26th, also saw pricey San Francisco, which had been one of the top five global cities since 2011, fall to 11th place, and Washington, D.C., skid to 25th from 15th place last year, part of a long slide.

Foreign investors are less worried about the impact of Britain’s exit from the European Union than they were a year ago, association Chairman Edward M. Casal said in a statement, referring to London’s jump from third to first place — although Britain did fall from third to fifth among countries offering the best opportunity for appreciation.

The U.S. was first for planned real estate investment in 2018, followed by the U.K., Germany, Canada and France. And New York is no slouch, as the chart shows.

New York’s tie with Los Angeles was a surprise, association Chief Executive Officer Jim Fetgatter said. It was L.A.’s first time in the top spot for U.S. cities, while New York had been named the top U.S. city for the last seven years. Los Angeles can thank its mighty port for the honor.

“With the growth of online shopping, foreign investors continue to rank industrial/logistics properties as their No. 1 investment opportunity,” Fetgatter said in the statement.

In an interview, he said that the recent U.S. tax overhaul is “not necessarily a boon” to real estate, preserving much of the status quo for the industry, but is generally a positive development. Investors will benefit from the far lower corporate tax rate, which will create jobs and increase income, he predicted.

The survey was conducted in the fourth quarter of last year by the James A. Graaskamp Center for Real Estate, at the Wisconsin School of Business.

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International Commercial InvestmentLondon Beats New York Among Foreign Investors in Real Estate