London house prices fell in June and there was a double whammy of bad news from the capital’s businesses and savers today as the economy continues to teeter on the brink of contraction.
Offficial numbers out this morning confirmed the UK dodged a recession in the first quarter of 2023, with overall growth of 0.1%, in line with the reading for the last quarter of last year.
But then came news of a 3.5% annual UK-wide fall in house prices for June from the Nationwide Building Society, which also predicted that rate hikes would add to the drag on the market. The average cost of a house in the capital fell 4.3% to £517,000.
Meanwhile, a Business Barometer compiled by Lloyds Banking Group Commercial Banking found confidence among the capital’s companies in their own prospects faltered at the start of the month.
That reading was taken before the Bank of England lifted interest rates to 5%. That jumbo-sized hike, of half a percentage point, was designed to tame inflation by curbing the spending power as mortgages and loans become more expensive.
Becci Wicks, regional director for London at Lloyds, said: “Headwinds, particularly around inflationary pressures and the tight labour market, are causing concern, but we’re seeing other challenges such as rising fuel and energy costs start to ease.
“Firms should keep a close eye on cashflow and working capital and unlock financial support when they need it.”
Lloyds spoke to 1,200 companies and found that confidence their outlooks fell 18 points to 31%. There was better news over the wider economic outlook, where optimism ticked up one point to 37%. And around a third expected to take on more staff, which Wicks said was “great to see”.
But there was more bleak news on the cost-of-living crisis. New contributions from Londoners to ISA accounts, one of the most popular forms of savings, fell 4% in the first quarter of 2023 according to major mutual Scottish Friendly.
It also found that the number of new stocks and shares ISA savings opened in the Capital accounts fell by 6%, as Londoners struggled to put money away.
Kevin Brown, savings specialist at Scottish Friendly, said: “Financial pressures are mounting on households across the country.” He added:
“The money people would be setting aside for those rainy days is being put to work meeting rising financial demands. It’s unsurprising that purse strings are stretched when you consider households have had to readjust to consecutive base interest rate rises since December 2021 and consumer price inflation remains stubbornly sticky at 8.7% as food and energy prices remain high.”
