Closing summary
Time for a recap.
Britain’s economy is showing slightly more momentum than expected, the Bank of England’s chief economist Huw Pill said this afternoon.
Pill also flagged that pay growth is rising a little faster than the central bank forecast last month. More here.
UK retail chain WH Smith has been hit by a cyber-attack in which company data was accessed illegally, including the personal details of current and former employees.
Shares of crypto-focused bank Silvergate almost halved today, after it said it was evaluating its ability to survive as a going concern, and would miss a deadline to file its annual report.
The oligarch Oleg Deripaska has said Russia could run out of money by next year unless the country secures investment from “friendly” countries as western sanctions bite.
Russia’s central bank chief has revealed that existing capital controls introduced after the full-scale invasion of Ukraine will be extended.
Inflation across the eurozone remained higher than expected last month. The annual consumer prices index rose by 8.% in February, only slightly lower than January’s 8.6%, while core inflation continued to climb.
Back in the UK, more than 3,000 bus drivers will strike in the West Midlands over pay, the Unite union announced.
People in their 50s and 60s are re-thinking their decision to take early retirement after being made poorer by Britain’s cost of living crisis, a thinktank has suggested.
Taylor Wimpey is planning to cut jobs as the housebuilder warned of slowing sales in the latest sign of a downturn in the UK housing market.
ITV has insisted its reputation is intact despite the controversy over Jeremy Clarkson, as the broadcaster said it expected a steep drop in advertising sales this year as the economy weakens.
The world’s largest brewer, AB InBev, has posted its first slump in beer volumes since the pandemic in the final quarter of last year, despite the sales boost from the football World Cup.
And in a blow to the City of London, building materials company CRH is exploring moving its primary stock market listing to New York, to get a better valuation. Shares in CRH have jumped over 7% so far today.
BoE's Pill: UK economy may be stronger than anticipated
The UK economy may be slightly stronger than the Bank of England estimated at the start of February, its chief economist says.
Huw Pill is speaking at Wales Week in London, at the Institute of Directors. And he points out that data released since the Bank’s Inflation Report was issued on 2 February has been better than expected.
Pill says:
Survey indicators that have become available since the publication of the forecast have surprised to the upside, suggesting that the current momentum in economic activity may be slightly stronger than anticipated.
In that February report, the Bank’s forecasts had predicted that real GDP would fall slightly over the coming quarters, as high energy prices and higher market interest rates continue to weigh on spending.
But, the downturn is expected to be rather milder than previous recessions, Pill points out with this chart:
A week after the Bank’s February report, the UK avoided falling into recession after growth stagnated in the final quarter of 2022.
Pill also points out that private sector regular pay growth – which was published after the MPC’s forecast was finalised – was slightly higher than forecast at the end of last year.
But, he adds, some “high-frequency indicators of wages” have fallen quite sharply recently.
Back in the UK, the Institute for Fiscal Studies has spotted signs that the over-50s are returning to the jobs market.
The IFS has analysed the latest UK labour force data, and spotted “a sharp and statistically significant uptick” in 50- to 64-year-olds moving out of inactivity and back into the workforce in October-December.
In total, 197,000 50- to 64-year-olds moved out of inactivity in the latest quarter – and more than half had been out of wok for less than three years. That, the IFS points outs, means they left the jobs market once the pandemic hit.
If it’s the start of a trend, it could be a boost to chancellor Jeremy Hunt who has urged the over 50s to stay in the workplace rather than “going to the golf course.”
NEW: New data show signs of the over 50s returning to the workforce.
— Institute for Fiscal Studies (@TheIFS) March 2, 2023
Read @David_Sturrock and @xiaoweixu_'s briefing on how we might be at a turning point in economic inactivity among older people: https://t.co/MsbFzlUbER
Xiaowei Xu, a senior research economist at IFS, explains:
“New data from the end of 2022 suggest that we may be seeing an uptick in older people returning to the workforce, and that more may follow. If ‘unretirements’ continue, this could ease pressures on the labour market. But if the return is triggered by the cost of living crisis, it is no cause for wider celebration – it is a response to people becoming poorer.
“The more important question beyond the immediate term is whether future cohorts will follow recent cohorts in retiring early. The forthcoming Budget should take a broad view of labour force participation, rather than just focusing on undoing what has happened since 2020.”
Shares in cryptocurrency-focused lender Silvergate have dropped by nearly 50% at the start of trading in New York, after it warned that it could go out of business.
In a regulatory filing today, Silvergate said it does not expect to file its annual report, or Form 10-K, by the deadline of 16 March.
Its shares have dropped to $7.03 each, down from $13.54 last night.
California based Silvergate has been hit by the collapse of the FTX empire late last year and the tumble in the value of many crypto coins.
It says that since the end of last year, “a number of circumstances have occurred” which will negatively impact the timing and the unaudited results previously reported in the Earnings Release on 17th January.
That includes the sale of additional investment securities beyond what was previously anticipated, to repay its outstanding advances from the Federal Home Loan Bank of San Francisco.
Silvergate says:
The Company sold additional debt securities in January and February 2023 and expects to record further losses related to the other-than-temporary impairment on the securities portfolio.
These additional losses will negatively impact the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank (the “Bank”), and could result in the Company and the Bank being less than well-capitalized.
In addition, the Company is “evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements”, it adds.
City experts are warning that more London-listed companies are considering a move to the New York stock exchange.
The decision by FTSE 100-listed building materials group CRH to consider moving its primary listing to New York, covered this morning here, is part of a broader trends, they say.
Bloomberg reports that City dealmakers are handling frequent inquiries from clients asking how they could shift across the Atlantic.
They say:
Just this week, it was revealed that two major companies had picked the US for their main listings ahead of London — CRH Plc, one of Europe’s biggest building materials companies, and Softbank-owned Arm Ltd., a jewel of Britain’s technology industry. It was the latest blow to the UK’s Conservative government which says it’s determined for London to prosper post-Brexit.
One senior banker said a shift in listings away from London has become the most common talking point among companies, and nearly all their clients with main revenue streams outside Britain were considering a move. Even some members of the benchmark FTSE 100 index are thinking about transferring their listings to New York, according to people with knowledge of the matter, who asked not to be identified discussion private information.
“Unless London can be restored to its position as a default financial center,” said Oliver Lazenby, a partner at Freshfields Bruckhaus Deringer LLP, “then the trend away from London, and in particularly toward New York, will likely continue.”
More here: London Dealmakers Say Move to Wall Street From The City Is Just Starting
3,000+ National Express West Midlands bus drivers to strike
More than 3,000 National Express West Midlands bus drivers have voted overwhelmingly to strike over pay, with disruption scheduled to start in two weeks time.
The Unite union has announced that the workers, who voted by 96% for industrial action, will begin all out continuous strike action on Thursday 16 March, the day after the spring budget.
Unite says National Express is only offering workers a real-terms pay cut.
Unite general secretary Sharon Graham said:
“National Express is sitting on mountains of cash and can absolutely afford to give a pay rise to its staff that reflects rocketing living costs. It needs to do just that.
Unite defends our members jobs, pay and conditions to the hilt and the National Express workforce has their union’s total and unflinching support during these strikes.”
National Express reported this morning that underlying operating profits more than doubled last year, to £197.3m.
However, on a statutory basis it made an operating loss of £158.5m, up from a £36.2m loss in 2021.
Somewhat ironically, National Express told shareholders today that it “benefited from strikes elsewhere in public transport in 2022”.
During 2022, it reported a 23% increase in passenger journeys across the Group, with “sustained growth in passenger demand” in Spain, Morocco, the UK and Germany.
Unite regional officer Sulinder Singh says the entire West Midlands bus network will shut due to the strike action, and urges the company to offer a beter pay deal:
“National Express’ greed is the reason why the entire West Midland’s bus network will be shut down and it bears the responsibility for the disruption that will be caused. Our members do not want to strike but National Express has left them with no choice.
The company needs to put forward an offer that our members can accept – it can clearly afford to.”
Updated
The number of Americans filing new claims for unemployment support has dropped, a sign that the US jobs market remains solid.
In the week ending February 25, there were 190,000 new ‘initial claims’ for jobless insurance, the US Labor Department reports.
That’s a drop of 2,000 from the previous week’s level of 192,000, and more than the 195,000 which economists expected.
This has lifted the dollar, pushing the pound down to $1.194, down almost a cent today.
Initial Jobless claims came in HOT at 190K for the week ending 2/25 (-2,000). Insured unemployment was 1,655,000 for the week ending 2/18 (-5,000). #MarketWatch #MarketUpdate #JoblessClaimshttps://t.co/MwIqHueY4y pic.twitter.com/cUCPlsbinI
— Jadid Herrera (@jadid) March 2, 2023
The largest increases in initial claims for the previous week were in Kentucky (+6,099), New Jersey (+1,063), Kansas (+545), Pennsylvania (+496), and District of Columbia (+378), while the largest decreases were in California (-4,706), Michigan (-2,521), New York (-2,105), Minnesota (-1,479), and Wisconsin (-1,420), the report shows.
Updated
AB InBev, the world’s largest brewer, has reported its first drop in beer volumes since the pandemic, despite the benefit of the football World Cup late last year.
AB InBev, which makes Stella Artois and Budweiser, reported today that its US business was hit by poor weather in December, while its Chinese operation was still impacted by Covid-19 restrictions last year.
It revealed that volumes decreased by 0.6% over the final quarter of 2022, compared against the same period last year.
But, the company also reported earnings that beat analysts’ estimates helped by sales of higher-end beer.
Fourth-quarter earnings rose 7.6%, on an EBITDA basis, due to a 10.2% jump in revenues to $14.67bn due to higher prices.
AB InBev says:
Corona and Stella Artois led the growth of our global brands with a revenue increase of 18.6% and 11.7% respectively, outside of their home markets.
Budweiser grew by 2.5% outside of the US, despite the impact of COVID-19 restrictions in China, the brand’s largest market
Underlying profit hit $1.7bn (£1.4 billion) for the final quarter of 2022, despite continued pressure from cost inflation.
In Europe, the brewer saw revenues increase by double-digits as it benefited from the recovery of demand from pubs, restaurants and bars, as well as continued growth for premium drinks.
ECB: Too early to declare victory on inflation.
The minutes of the European Central Bank’s last meeting in February have been released, and show that policymakers remained concerned about inflation.
During the meeting, on 1st and 2nd February, members of the governing council agreed that although the rate of headline inflation had slowed since October, “inflation was still far too high”.
The minutes say:
While the good news ought to be welcome, it was argued that the December assessment of the inflation outlook had not fundamentally changed. Core inflation was still at levels foreseen in December. Therefore, it was much too early to declare victory.
This morning’s inflation data, showing that annual CPI in the eurozone only fell slightly in February from 8.6% to 8.5%, suggests they were right.
Those are not good inflation numbers for eurozone February inflation. Annual headline inflation saw a miniscule drop to 8.5%, driven entirely by energy (itself partly distorted by policy measures in addition to easing commodity prices). Core inflation *rose* to 5.6%.
— Thomas Dvorak (@thomdvorak) March 2, 2023
1/3 pic.twitter.com/FRlrl7HLjG
At the meeting, the ECB voted to raise its key interest rates by half a percent, or 50 basis points.
Chief economist Philip Lane also recommended communicating that the ECB intended to raise rates by another 50 basis points at its meeting in March, to fight inflation.
But policymakers were split over this, with some expressing reservations about communicating plans for the March meeting, as did ultimately happen.
The minutes of February’s meeting also show that ECB policymakers doubted the vew in the markets that inflation pressures were easing, saying:
Two factors raised doubt about the markets’ benign view of inflation.
First, the growing signs that a technical recession in the euro area had become less likely. And second, the reopening of China’s economy.
One reason for caution, it seems, is that European companies have been successful at lifting their prices, driving inflation.
The minutes say the ECB should monitor price growth as closely as wage increases:
Developments in unit profit growth remained very strong, which suggested that the pass-through of higher costs to higher selling prices remained robust.
It was therefore widely stressed that developments in profits and mark-up warranted constant monitoring and further analysis on an equal footing with developments in wages.
oh hi @ecb in the spirit of transparency and expectations anchoring, would be great if you could share those internal slides showing it's corporate profits, not wages, driving inflation https://t.co/JX8Le8A72x
— Daniela Gabor (@DanielaGabor) March 2, 2023
Updated
Russia to extend capital controls, central bank chief says
Speaking of Russia…. the country’s central bank chief has said today that capital controls on cash withdrawals of foreign currency and transfers abroad will be extented.
Governor Elvira Nabiullina told a banking forum near Moscow that current economic conditions meant that existing capital controls must remain in place.
Nabiullina explained (via Reuters):
“Deadlines for restrictions like limits on withdrawing cash currency from bank accounts, money transfers abroad, and restrictions on withdrawals by non-residents from ‘unfriendly’ countries are approaching.
“All of them will be extended.”
Russia introduced strict controls on currency operations last year in response to Western sanctions following the invasion of Ukraine, to support the value of the rouble.
Some have been lifted or eased, after the rouble recovered from its slump in February and March 2022.
Updated
Billionaire Deripaska Warns Russia May Run Out of Money in 2024
Billionaire magnate Oleg Deripaska warned today that Russia could run out of funds in 2024 and needs investment from “friendly” countries, as sanctions imposed by the West following the fullscale invasion of Ukraine bite.
Speaking at the Krasnoyarsk Economic Forum in Siberia today, Deripaska said:
“There will be no money already next year.
We will need foreign investors.”
Bloomberg, who reported Deripaska’s comments, says he also warned that Russia faces “serious” pressure from sanctions.
Bloomberg explains:
Funds are now running low and “that’s why they’ve already begun to shake us down,” said Deripaska, founder of United Co, Rusal International PJSC, the biggest aluminium producer outside China.
Deripaska’s comments are among the most outspoken by a prominent business leader as the government looks to turn the screws on large companies after ending last year with a record fiscal deficit and the budget still deep in the red to start 2023.
Authorities are already planning to raise additional budget revenue with proposed changes to how they tax oil companies and may wrest more money from other commodity producers by means of a one-time levy.
More here: Billionaire Deripaska Warns Russia May Run Out of Money in 2024
Even after recent high-profile hacks, like that on Royal Mail, it is “highly worrying” that vulnerabilities still plague companies like WH Smith, says Keiron Holyome, VP UKI & Emerging Markets at Canadian software company BlackBerry.
Holyome explains:
Organisations need better cyber hygiene as criminals are increasingly being attracted by stores of sensitive data and information.”
Cyber criminals are waiting for organisations and the public to drop their guard. We must not let them seize the opportunity.”
Businesses should not have to suffer the effects of cyberattacks, Holyome argues:
Endpoint detection and response (EDR) focused solutions take action too late and do not prevent breaches. Prevention is the best strategy. With a prevention-first and AI-driven approach, malware can be stopped in its tracks. “
Many cyber-attacks are being conducted by ransomware gangs, points out Jake Moore, Global Cyber Security Advisor at security firm ESET,
Following WH Smith’s cyber attack, Moore explains:
“Large companies are regularly targeted but it is significant to have a succession of big names being brought down recently. If company data has been accessed, it could be used as a bargaining tool to maximise the cybercriminals’ ransom demands.
The fact it potentially includes employee information it could increase the amount dramatically. It is likely that if this was a ransomware attack then the restoration process worked efficiently. However, attackers now tend to steal sensitive information as insurance in case their encryption plans are not as successful or impactful.”
Transcripts released last month showed that Royal Mail had rejected an “absurd” ransom demand for $80m (£67m) from hackers linked to Russia following its cyber attack in January.
The cyber attack at WH Smith shows that no company is immune to such data breaches, warns Ceri Shaw, chief delivery officer at digital skills academy CodeClan.
Shaw says all businesses must take the threat of data breaches seriously, and implement measures that protect their employees’ and customers’ information from the ‘ever-present threat’ of cyber-attacks are an ever-present threat.
There are several practical steps that companies can take to minimise the risk of a data breach, Shaw explains:
Firstly, any data stored on computers and storage devices, as well as data in transit over networks, should be safeguarded. The best way of doing this is to encrypt any sensitive data – such as customer information and financial data – to help protect your organisation against any hackers and unauthorised access.
If your organisation uses any software and security systems, they should be frequently updated to make certain that any vulnerabilities are being patched. Across the organisation, strong and unique passwords should be used to minimise any risk. A password manager is a highly useful tool that will help produce and memorise strong passwords.
Finally, training should be in place for all employees on how to distinguish and prevent cyber threats, along with a plan in place on how to restore systems and contain the breach if one was to occur.
Responding with speed to a cyber-attack will help minimise any risks and disruption, while helping restore levels of consumer confidence.
WH Smith hit by cyber security incident
Books-to-stationery retailer WH Smith has been hit by a cyber attack.
WH Smith has told the City that a “cyber security incident” has resulted in illegal access to some company data, including current and former employee data.
WH Smith, which operates shops on the high street and at airports and railway stations, says it has immediately launched an investigation, engaged specialist support services and notified the relevant authorities.
WH Smith says that its customer accounts and databases are not affected, though.
In a statement to the City, it says:
WH Smith takes the issue of cyber security extremely seriously and investigations into the incident are ongoing. We are notifying all affected colleagues and have put measures in place to support them.
There has been no impact on the trading activities of the Group. Our website, customer accounts and underlying customer databases are on separate systems that are unaffected by this incident.
Such attacks are a growing problem for UK businesses, with a number of high profile hacks in recent weeks.
In January, Royal Mail was hit by a cyber incident which caused “severe service disruption” to international exports for almost six weeks.
Retailer JD Sports also warned in January that around 10 million people might have had their addresses, phone numbers and email addresses stolen in a cyber attack.
Updated
Eurozone inflation higher than expected in February, at 8.5%
Just in: inflation across the euro area only eased slightly last month, as the cost of living squeeze continued to hit households.
Euro area annual inflation is expected to be 8.5% in February 2023, down from 8.6% in January according to a flash estimate from Eurostat.
That’s higher than expected – economists had forecast inflation would drop to 8.2% last month.
Households were hit by accelerating food price inflation, while energy prices eased slightly.
Eurostat says:
Food, alcohol & tobacco is expected to have the highest annual rate in February (15.0%, compared with 14.1% in January), followed by energy (13.7%, compared with 18.9% in January), non-energy industrial goods (6.8%, compared with 6.7% in January) and services (4.8%, compared with 4.4% in January).
Euro area #inflation at 8.5% in February 2023, down from 8.6% in January. Components: food, alcohol & tobacco +15.0%, energy +13.7%, other goods +6.8%, services +4.8% - flash estimate https://t.co/Ix24XxTbtk pic.twitter.com/1QHZtzdBs2
— EU_Eurostat (@EU_Eurostat) March 2, 2023
Core inflation, which excludes energy, food, alcohol and tobacco, rose to 5.6% per year from 5.3% last month:
Core inflation in the Eurozone jumped from 5.3 to 5.6%, oof... Still, quick seasonal adjustment suggests this is mainly due to base effects as the monthly growth rate showed a small decline. pic.twitter.com/8njkBFCFaN
— Bert Colijn (@BertColijn) March 2, 2023
UK firms report rising problems recruiting
UK businesses are struggling to recruit workers, and plan to keep raising wages to attract staff, new data from the Bank of England shows.
The BoE’s last poll of Chief Financial Officers from small, medium and large UK businesses, found that recruitment difficulties started to rise again in February.
Around 45% of firms say they found recruitment ‘much harder’ than usual in February, up from 35% in January.
The Bank says:
In spite of ongoing recruitment challenges, realised employment growth remained strong at 4.3% in the three months to February, although the single month February data were weaker at 3.3%.
Companies expect to raise wages by 5.7% per year, the BoE says – or barely half January’s inflation rate of 10.1%. Over the last year, CFO’s say annual wages have risen by 6.6%.
Encouraging, companies expect to raise their own prices at a slower rate.
The report found that over the next year, businesses expected their output prices to increase by an average 5.4%, down 0.4% from January.
Company’s inflation expectations have also eased, the ‘Decision Makers Panel’ (DMP) found:
DMP members’ one-year ahead CPI inflation expectations decreased to 5.9%, down from 6.4% in January. Three-year ahead CPI inflation expectations also declined to 3.4% in February, from 3.7% in January.
Cost pressures continued to soften in February. Businesses reported that unit costs had grown by 9.8% in the year to February, down from 9.9% in January.
Overall business uncertainty continued to decline in February, with 53% of firms reporting that the overall level of uncertainty facing their business was high or very high, down from 57% last month.
More London-listed companies could choose to follow CRH’s plan and shift their primary stock market listing to New York, predicts Russ Mould, investment director at AJ Bell.
Mould says the London Stock Exchange is “having to work overtime” just to keep the companies it already has, rather than managing to attract new ones by relaxing its rules.
Other companies who do a lot of business in the American economy could easily follow CRH to New York, Mould says, pointing out that the Brexit vote damaged the UK’s reputation with international investors.
“This week has delivered a triple blow to the stock exchange operator. First, we had reports that Shell looked at shifting its stock market listing and headquarters to the US, although that doesn’t seem to be on the table now. Second, reports suggest that chip designer Arm will not return to the London stock market and instead opt for a US listing.
“Now we’ve got the news from construction group CRH that it wants to switch its primary listing to the US. That would mean it no longer qualifies for inclusion in FTSE indices and therefore would leave the prestigious FTSE 100 index.
“There is logic to the move. A large chunk of CRH’s earnings come from the US, so that’s where it spends a lot of time both operationally and talking to investors. There is also the fact that it could get a higher valuation by trading on the US stock market which could come in handy if it wants to issue shares for acquisition deals. Plumbing group Ferguson did exactly the same thing.
“Efforts to relax the listing rules to attract more companies to London come across as a bit desperate. It should be a badge of honour to list in the UK, but that reputation is dwindling fast. Overseas investors lost interest in the trading venue as soon as the UK voted in favour of Brexit, and valuations have got even cheaper. That’s hardly a good sales pitch to attract more big companies to the UK market.
“There are plenty other companies in the FTSE 100 which do business in the US that could easily follow Ferguson and CRH. That’s not a good look for the London Stock Exchange.”
Blow to City as buildings giant CRH plans shift to New York
CRH, the world’s largest building materials company, has revealed it plans to move its stock market listing from London to New York, in a new blow to the City.
CRH manufactures and distributes building materials and products for the construction industry.
In its results this morning, CRH says it has concluded that a US primary listing would bring “increased commercial, operational and acquisition opportunities”.
Currently, CRH generates around three-quarters of its profits, on an EBIDTA basis, in the US – helped by “significant increases in funding at both federal and state level”.
It believes this market will provide continued growth as American factories bring manufacturing back to the US, and as government infrastructure spending rises sharply, so having a primary listing in New York would boost commercial, operational and acquisition opportunities.
CRH tells shareholders this morning:
The US is expected to be a key driver of future growth for CRH and our exposure to this market is likely to increase further driven by substantial increases in infrastructure funding, a renewed drive for the onshoring of manufacturing activity and significant levels of under-build in the residential construction market.
Last May, plumbing and heating product make Ferguson shifted its primary listing to New York.
Gambling giant Flutter is also considering the move, and says this morning that early feedback from shareholders has been supportive.
It emerged earlier this week that oil giant Shell recently explored shifting its listing and headquarters to the US, in an attempt to lift its valuation towards those of US rivals.
CRH says it would remain headquartered, incorporated and tax-resident in Ireland, even if its does shift its primary stock market listing across the Atlantic.
Neil Wilson of Markets.com says CRH’s plans are ‘a bitter blow’ to the City, which has seen a swathe of companies snapped up in takeover bids in recent years.
The fact that world’s largest building materials company plans to abandon London for New York is a bitter blow for the former – just as it was revealed that Shell too thought about the move and Flutter looks to take a punt on the US.
About three-quarters of earnings for CRH derive from North America, - the move is pragmatic for the board but far more symbolic for the London Stock Exchange and the City. It’s a sign of decline and underlines the need to revitalise public markets in the UK. It’s not just companies moving listings abroad like Ferguson, it’s the huge slate of takeovers that has decimated corners of our markets due in large part to the weak pound and depressed UK valuations. Time for major change.
Think tank The Centre for Cities warns this morning that London is falling behind other international capitals, as red tape and years of underinvestment are hampering “superstar” businesses – more on that here.
Updated
Betting firm Flutter burned by ‘Customer-friendly’ sports results
The boss of gambling giant Flutter Entertainment has said he watched the Fifa World Cup final “through my fingers”, after paying out heavily to punters at the end of last year.
The tournament’s classic final game – which Argentina won on penalties after the match with France ended 3-3 – saw lots of payouts for goals for the gambling company, PA Media report.
Flutter chief executive Peter Jackson said.
“While the World Cup final was a real spectacle to watch and very entertaining, I was watching it through my fingers because it was a very expensive event for us with all that goal scoring and Argentina winning,”
Argentina had gone into the World Cup as the second favourite, behind Brazil.
Overall, Flutter says “customer friendly sports results” in December cost nearly £40m, which included a flurry of wins for favourites in the Premier League once games resumed on Boxing Day, Jackson says.
Shares in Taylor Wimpey have dipped by 1% at the start of trading, as the City digests this morning’s full-year results and its outlook for 2023.
UK homebuilders such as Taylor Wimpey are facing a ‘perfect storm’ as house prices drop, real wages continue to fall, and consumer confidence remains weak, with mortgage rates rather higher than a year ago.
Victoria Scholar, head of investment at interactive investor, explains:
“After rival Persimmon slumped 10% after warning that new home sales could fall 40% this year, Taylor Wimpey reported less pessimistic full-year results this morning. While the housebuilder saw its order book decrease to £2.15 billion versus £2.9 billion year-on-year amid weakness in the housing market, CEO Jennie Daly said trading was starting to show signs of improving, stemming a more aggressive slide in its share price.
The housebuilders are facing a perfect storm from weak consumer confidence, the fallout from last year’s mini-budget chaos, declining real wages, rising mortgages rates on the back of the Bank of England’s tightening path and softening house prices. The latest figures from Nationwide this week saw annual house price growth slow for the first time since the height of the pandemic.
However hopes that we could be approaching peak central bank rates provided a tailwind to shares including Taylor Wimpey in the sector at the start of 2023, although that optimism has been tapering off in recent weeks amid signs that inflation is taking longer than expected to normalise.”
Quilter Cheviot: Falling housebuyer confidence weakens 2023 outlook
Taylor Wimpey’s full year results this morning show it achieved a very robust performance in 2022, but faces a “challenging, but manageable, outlook” for 2023.
So says Oli Creasey, equity research analyst at Quilter Cheviot, who flags that the housebuilder hopes to maintain prices, while building fewer homes.
“What is particularly notable is the interplay between volumes and prices.
Taylor Wimpey has indicated that sale prices are likely to remain firm despite recent house price index evidence, with an average price for private completions of £367k – equal to the average over H2’22. However, the company also guided to a significant drop in volumes to a range of 9,000-10,500, a fall of around -30% year-on-year.
That equates to a weekly sales rate of 0.5-0.7x, and suggests further falling confidence amongst buyers given the sales rate for February was 0.66x, at the top end of this range. Likewise, it suggests that analyst consensus figures, which are currently forecasting 11,000+, are too high and will be downgraded this morning.
“The sales price is likely influenced by the level of reservations made prior to completion, which is lower than last year but still equal to over 8,000 homes / £2.2bn. Crucial to Taylor Wimpey’s strategy will be replacing these reservations for next year and at least maintaining or growing sales rates to more normalised levels.”
Taylor Wimpey expects to complete fewer homes this year than in 2022.
It blames the “prevailing market conditions” and “challenging planning backdrop”.
Between 9,000 and 10,500 new homes are expected to be completed in 2023, down from the 14,154 homes it finished last year.
Those completions will be “more weighted to the second half” of this year, due to the drop in sales since the third quarter of last year.
Taylor Wimpey’s order book has also weakened, a sign that sales in 2023 are under pressure.
At 26 February, it had 8,078 homes on total order book, down from 10,934 a year ago. That order book is worth £2.154bn, down from £2.9bn a year ago.
Pret hikes worker salaries to keep within minimum pay rules
Staff at sandwich chain Pret a Manger are getting a pay rise next month, as the company looks to avoid breaking minimum wage laws.
Pret a Manger will increase the salaries of its workers from April 1, when the National Living Wage (NLW) set by the government will increase.
Pret’s “team members” will see pay increase to between £10.60 and £11.90 per hour, up from £10.30- £11.55 per hour at present.
Barista pay will increase to between £11.20 and £12.85, depending on location and experience, up from £10.85-£12.50.
The move will keep Pret on the right side of the law, as the minimum amount companies are allowed to pay people over 23 is set to increase to £10.42.
Pret workers last saw their pay rise in December, as the hospitality sector scrambled to attract workers during the busy run-up to Christmas.
These wage rises should help Pret staff through the ongoing cost of living crisis, at a time when grocery inflation has hit a record 17.1%.
But it may add to the Bank of England’s concerns that inflationary pressures are building in the economy.
Well done 👏👏.
— Simon Lyons (@Acentral76Simon) March 2, 2023
Pret A Manger gives staff third pay rise in a year https://t.co/7uI8eKD5aQ
What a brilliant idea. Recognising tough times for those living on low incomes, and using your profits to ensure they are properly recompensed for the work they do. Would it catch on? Pret A Manger gives staff third pay rise in a year https://t.co/xO6GHPqmpt
— Benjamin Adams ⭐️ (@Mr_Ben_Adams) March 2, 2023
Taylor Wimpey flags slowing sales amid broader economic uncertainty
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
One of the UK’s largest housebuilders has flagged that sales and reservations have weakened this year, as the housing market is cooled by higher interest rates.
But, there are also signs that the market may be picking up after demand slumped at the end of last year.
Taylor Wimpey reports this morning that its private sales rate is running at 0.62 homes per outlet per week so far this year, down from just over 1 per week in 2022.
The cancellations rate is running at 17%, up from 14% for the equivalent period in 2022, suggesting more customers are abandoning plans to buy a home.
Taylor Wimpey says that current trading does show “some signs of improvement from the fourth quarter of 2022” - when the market turmoil triggered by the mini-budget hit demand.
But, it adds, we are only at the start of the Spring selling season:
While it is encouraging to see an uptick in sales and ongoing robust customer interest in our homes, as previously announced, our reservation rate is significantly lower than in recent years as affordability concerns weigh, particularly for first time buyers, and we have reflected this in our build programmes for the year.
As this blog covered yesterday, UK mortgage approvals and lending fell in January while annual house price growth turned negative in February for the first time in almost three years.
Taylor Wimpey’s full-year results show that its pre-tax profits grew by almost 22% last year, to £827.9m from £679.6m.
Pricing-wise, the company expects average pricing for private completions in the first half of 2023 to be at a similar level to the £367k achieved on completions in the second half of last year.
Jennie Daly, chief executive, says ‘tight operational controls and price discipline’ helped to grow profit margins last year. But, she warns that the ‘weaker economic outlook’ will hit demand in the near term.
“In a year marked by two distinct halves, we acted quickly and decisively to address rapidly changing market conditions in the second half of the year and continued to focus on operational excellence and efficiency.
While the weaker economic backdrop continues to impact the near-term outlook, customer interest in our homes remains good and, whilst it is still early in the year, trading has shown some signs of improvement compared to Q4 2022.”
Also coming up today
We’ll hear the Bank of England’s chief economists’ views on the economic outlook today. Huw Pill will give a speech, on whether 2023 will be “a year of growth or survival”, this afternoon.
Yesterday, BoE governor Andrew Bailey signalled that interest rates may have peaked, after being raised 10 times in a row since December 2021.
The latest eurozone inflation data will show if the cost of living squeeze eased at all in February. Annual CPI inflation across the euro area is forecast to drop to 8.2%, from 8.6% in January, still four times the European Central Bank’s official target.
But, the report could be an ‘upside surprise’, fears Michael Hewson of CMC Markets. He points out that food prices continue to climb (as in the UK):
Hewson says:
Much was made of the fact that EU headline inflation saw a sharp drop from 9.2% in December to 8.6% in January, with many taking the view that we could well continue to see sharp declines in the headline numbers over the course of the coming months.
While an encouraging development, along with the sharp declines also being seen in headline PPI, any hopes of that continuing appear to have receded after this week’s flash CPI numbers from France, Spain and Germany, for February all of which saw surprise increases in the headline rate of inflation, driven by sharp increases in food prices.
The recent declines in headline inflation also aren’t being reflected in core prices, and as far as wages are concerned these are still rising.
The agenda
10am GMT: Eurozone inflation rate for February
10am GMT: Eurozone unemployment rate for January
12.30pm GMT: European Central Bank’s monetary policy meeting accounts
1.30pm GMT: US initial jobless claims report
3pm GMT: Bank of England chief economist Huw Pill gives a speech on ‘2023 economic outlook – a year of growth or survival?’
Updated
