Chris Williamson comments on latest UK labour market data

Chris said: “Unemployment continues to fall faster than expected amid yet another bout of record hiring, bringing the jobless total to its lowest since the start of 2009. Weak pay growth and the ‘cost of living crisis’ remains the Achilles Heel of the economic recovery, but it should not be long until we see earnings growth accelerate as the labour market continues to tighten.

“The strong labour market data will fuel more discussions at the Bank of England about the timing of the first interest rate hike, and whether an earlier than currently envisaged hike is warranted to cool the economy. Policy makers will no doubt want to be sure that pay growth is picking up substantially before making the first move in tightening policy, but today’s data will add to expectations the first rate hike will take place this year rather than next.

“The rate of unemployment fell from 6.8% in the first quarter to 6.6% in the three months to April, its lowest since January 2009 according to the Office for National Statistics and below expectations of a fall to 6.7%.

“The number of people in employment meanwhile shot up by 345,000 in the three months to April, the largest jump seen since data were first available in 1971. The latest gain follows a record rise in the first quarter. However, in contrast to prior months, the latest rise was driven by companies taking on staff, rather than a sharp increase in self-employment.

“The improvement follows buoyant survey data, which also point to further labour market gains in the coming months. Recruitment consultancies have reported that the number of people placed in permanent positions has so far this year shown the strongest spell of growth since data were first available in 1997. The Markit/CIPS PMI surveys have likewise signalled the largest rise in employment in 16 years of data collection in May. Unemployment should therefore continue to fall.

“However, the generally positive report was marred once again by disappointing pay data. The annual rate of growth of employee earnings was just 0.7% in the three months to April, which compares with an inflation rate of 1.8% and a rate of 1.9% in the first quarter. Regular pay (excluding bonuses) also rose just 0.9%.

“The good news is that this slowing pay growth is likely to have mainly reflected the impact of last year’s top-bracket income tax change (which boosted pay this time last year).

“Pay growth should pick up in coming months, perhaps significantly. The recruitment industry survey shows that skill shortages are currently rising at the fastest pace since 1997. Pay growth is naturally rising as a result, with new starter salaries growing in the second quarter so far at the steepest pace in seven years.”

Further reforms and investment needed to safeguard jobs and recovery in Europe

A failure to implement fundamental reforms associated with encouraging competitiveness is putting job creation and Europe’s long-term economic strategy at risk, finds The Europe 2020 Competitiveness Report: Building a More Competitive Europe, released by the World Economic Forum.

Published every two years, the report aims to assess the progress of European economies in achieving the goals set by the EU’s Europe 2020 strategy to become a smart, inclusive and sustainable society. This second edition finds a Europe that has largely successfully dealt with the macroeconomic turbulence of the past half-decade, yet is enjoying mixed success in implementing reforms necessary to return the region to the top of global competitiveness.

Margareta Drzeniek-Hanouz, lead economist and director, World Economic Forum, said: “Europe as a whole has made significant strides towards maroeconomic stability. Now it is time for its leaders to address the long-term competitiveness agenda by implementing the right reforms and smart investments to drive productivity growth. There is no room for complacency, even for those countries that are currently performing well.”

In terms of Smart, The report corroborates Europe’s lack of progress in building a more innovation-based, knowledge-driven economy in comparison to other advanced economies. This category, which measures countries in terms of their record in building business-friendly enterprise environments, implementing a digital agenda, encouraging investment in innovation and optimising skills and training, also represents the widest gap between Europe’s most and least competitive economies.

While the EU fares well in providing the foundations for sustainable growth, the picture is more mixed for inclusive growth, says the report. Overall, EU countries continue to depict relatively cohesive societies, although many of them are failing to provide gainful employment opportunities for large shares of their populations.

Underlying the gap in competitiveness between Europe and other advanced economies is a deep-rooted competitiveness divide within the region that has proven stubbornly hard to narrow. This is in spite of impressive achievements by many of the more innovation-poor countries in adopting reforms necessary to achieve stable macroeconomic environments.

According to the report, there is no one-size-fits-all strategy for lifting competitiveness across all member states as national and regional characteristics all play a part in shaping Europe’s economic landscape. However, one common thread is the need for all nations to build institutional capacity and adopt governance mechanisms that will enable more effective implementation of competitiveness-raising reforms.

An important conclusion of the report is that in the long term, there are no trade-offs between building a competitive economy on the one hand and an inclusive and sustainable society on the other. Competitive economies tend to provide more and better opportunities for their citizens, creating more inclusive societies, and fostering further opportunities for innovation and building environmentally sustainable societies.

Nicholas Davis, director and head of the Europe team at the World Forum and co-author of the report, said: “Europe can create more and better jobs, support rising living standards and build economically sustainable societies. We hope this report will encourage business, civil society and political leaders at the European and national levels to collaborate to achieve these goals.”

Government unveils £14.3bn of savings for 2013 to 2014

The government’s programme of Efficiency and Reform helped save hard-working taxpayers £14.3bn in 2013 to 2014, against a 2009 to 2010 baseline, Chancellor of the Exchequer, George Osborne and Minister for the Cabinet Office, Francis Maude announced today.

These unprecedented savings have been delivered by departments across government and coordinated by the Efficiency and Reform Group (ERG), established after the 2010 general election. The group, which works with government departments to make savings and address wasteful spend, is a joint Cabinet Office and HM Treasury initiative led by the Minister for the Cabinet Office, Francis Maude.

The £14.3bn saved is equivalent to nearly £850 for each working household across Britain – that’s enough to fund over half a million nurses or pay for more than three million primary school places. These savings follow £10bn saved with ERG for 2012 to 2013, £5.5bn in 2011 to 2012 and £3.75bn in 2010 to 2011 – all measured against a 2009 to 2010 baseline; some are recurring costs and some are one-off.

Right across government there is a determination to make every taxpayer penny count. For example, ERG is working to help departments reduce reliance on expensive consultants and to make savings on everyday items such as printer cartridges, paper and computers used in schools, hospitals and other government buildings.

Savings have been found in the following ways:

Commercial

£5.4bn has been saved by improving government’s commercial contracts, including a radical overhaul of central government procurement through the new Crown Commercial Service which strengthens the government’s business-like approach to how it buys goods and services.

Digital

Over £200m has been saved by improving government’s digital services and moving more services online, ensuring that citizens’ experience is simpler, clearer and faster. The government has also radically overhauled technology spend to get the best possible value for money. For example, £62m was saved by bringing Directgov and BusinessLink websites ontoGOV.UK.

Property

£0.6bn has been saved through selling empty buildings and exiting expensive rentals in sought-after locations. More government departments are now sharing office space. An example is One Horseguard’s Road which now houses the majority of HM Treasury, the Department of Culture Media and Sport, the Northern Ireland Office, and parts of the Cabinet Office which has vacated other buildings.

Projects

£3.3bn has been saved by tackling waste and inefficiency through large scale projects. For example the Highways Agency Major Roads programme has saved nearly £380m across schemes, including smart motorway projects.

Workforce reform

£4.7bn has been saved by reducing the size of the civil service, now down 16% since 2010, and reforming civil service pensions.

Chancellor of the Exchequer, George Osborne, said: “Tackling waste and inefficiency across government is a key part of our long term economic plan. These savings have helped protect front line services and get our public finances back onto a sound footing.

“There is more to do. But today’s announcement shows that we deliver on the savings we set out to make, so that the taxes of hardworking people are spent on what matters most.”

The Minister for the Cabinet Office, Francis Maude, said: “Eliminating waste and cutting the deficit is a key part of this government’s long-term plan for the economy. This is about backing hard-working people by spending taxpayers’ money responsibly, keeping mortgage rates down so people have more financial security and building a better future for our country.

“For 2013 to 2014 we have saved taxpayers an unprecedented £14.3bn against a 2009 to 2010 baseline – that’s nearly £850 for every working household across Britain.

“I’m proud of what we have done but we know there’s so much more to do.”

Markit chief economist Chris Williamson comments on UK industrial production data

Chris said: “Britain’s factories are booming, enjoying their best spell of growth for four years, according to the latest official data. The data not only indicate that the recovery has strong momentum, but also that the economy is rebalancing, though there is still a long way to go before manufacturing even regains its pre-recession size.

“Data from the Office for National Statistics showed UK industrial production rising 0.4% in April, with manufacturing output up 0.4%. The data were in line with expectations, according to a poll by Reuters.

“Compared to a year ago, manufacturing output has risen 4.4%, which is the best growth seen since February 2011. However, in the latest three months alone, output is up 2.0%, which is the largest increase since June 2010.

“While this growth needs to be seen in the context of manufacturing output still running some 7.0% below its pre-recession peak, the pace of expansion seen in recent months paints a very encouraging picture of how the recovery is gaining further ground. The data support survey evidence which suggests that the economy will have grown strongly again in the second quarter, perhaps by as much as 0.8%, which would take the level of GDP higher than its pre-recession peak.

“While the official data are only available up to April, the Markit/CIPS PMI manufacturing survey, alongside its sister surveys of construction and the services economy, has indicated a continuation of the country’s economic growth surge in May. In recent months the three PMI™ surveys have collectively signalled the strongest spell of private sector business activity growth seen in the 16-years of data collection. This growth spurt has been accompanied by record job creation as firms boost capacity to cope with the rise in demand.

“The official and survey data also help to dispel the notion that the recovery is based purely on consumer credit and the housing market, but is instead being fueled to a large extent by booming factories and industry. This so-called ‘rebalancing’ means the recovery is looking increasingly sustainable.”

New report shows cash still dominates

A new industry report, UK Cash & Cash Machines 2014 confirms the strong role cash continues to play in our society.

Although cash usage levels are down from last year, there has been little change over the past five years with cash remaining as popular as ever amongst consumers. Part of the reason for this may be that people have been using cash to help them monitor their day-to-day spending – helping them budget effectively during the economic downturn of the past few years.

Cash remains our most commonly used payment method and last year 20 billion cash payments were made, representing 52% of all payments in the UK. That amounted to a total of £260bn.

The ATM remains the most popular method for us to get hold of our cash. At the end of 2013 not only were there more ATMs than ever before, but never have so many of them been free to use. At the end of the year there were 67,963 ATMs (up 2.8% on 2012), and 48,012 of those were free to use (an increase of 4.2% since 2012.) 98% of the total number of withdrawals were made from free to use ATMs, an increase of 1%. On average we withdrew £66 per visit. The increase follows continued industry efforts to install ATMs in deprived areas and actively increase the number of free-to-use-ATMs.

David Hensley, head of Cash Services commented: “Despite speculation on declining cash use the reality is that the majority of our everyday purchases are still made in cash, particularly for low value items. Clearly customers need and want cash as much as ever.

“Our role is largely behind the scenes, helping to keep the cash wheels turning and supporting our members and their customers, the Bank of England and The Royal Mint. Cash is important to people and we need to make sure that it is fit for the next generation.”

John Howells, LINK CEO commented: “Access to cash is vital for the majority of UK consumers and LINK is committed to providing a convenient and safe national network of cash machines to support this need. Continued investment and innovation in the ATM network is a priority for LINK to develop this important national service.”

UK Cash & Cash Machines 2014 is published by the Payments Council in conjunction with Cash Services and LINK ATM Scheme. It includes statistics on how, where and how frequently we get our cash, as well as forecasts for how cash use will change over the next ten years.

Tesco Bank launches first current account

Tesco Bank has been wholly owned by Tesco since December 2008 and now serves six million customers in the UK. The launch of the current account means that Tesco Bank now offers a full range of retail banking and insurance products.

The key features include:

Rewards for customers when they spend, and rewards for customers when they don’t

· Clubcard points on debit card spend wherever you use your card – both in and out of Tesco

· 3% AER variable interest on credit balances up to £3,000

Modern and convenient

· A mobile banking app with innovative features that helps customers manage their money everyday

· Online banking

· Contactless Visa Debit card which doubles as a Clubcard

· UK based customer service centres open 24 hours a day, seven days a week

· The ability to make deposits at over 300 Tesco stores

Transparent

· Simple and transparent fees and charges

· £5 monthly fee if customers deposit less than £750 per month. No monthly fee for customers who deposit more than £750 per month

· Free overdraft control feature to make managing the account easier

· Automatic text and email alerts and extended grace period to help customers avoid unarranged transactions fees

Customers can apply to open an account online from Tuesday 10 June (www.tescobank.com/current-accounts/) with 24/7 support available from Tesco Bank’s UK based call centres. To ensure switching is simple and hassle free, Tesco Bank is a member of the Payments Council’s seven-day switching guarantee service.

Benny Higgins, chief executive officer, Tesco Bank, said: “In designing our current account we have listened to more than 20,000 customers to understand what they want. And the account we are launching today offers all the features they told us mattered most. There are no gimmicks; just a simple, rewarding, modern, convenient current account, designed for Tesco customers, by Tesco customers.”

Philip Clarke, chief executive officer, Tesco, said: “Customers have told us that in banking they want Tesco to deliver in the same way we do for millions of customers across the UK every day. They want us to focus on what we do best – offering customers quality products they can trust, providing great service, making things simple and transparent and rewarding them for their loyalty. We’ve taken all these ingredients and used them to help create our first Tesco Bank current account.”

Bank of England launches new framework to test for cyber vulnerabilities

In a speech at the British Bankers’ Association, Andrew Gracie, executive director, resolution at the Bank of England, formally launched a new framework to help identify areas where the financial sector could be vulnerable to sophisticated cyber-attack. This is part of the Bank of England’s response to the Financial Policy Committee’s recommendation to test and improve resilience to cyber-attack.

The new framework called CBEST uses intelligence from Government and accredited commercial providers to identify potential attackers to a particular financial institution. It then replicates the techniques these potential attackers use in order to test the extent to which they may be successful in penetrating the defences of the institution. On completion of the test there will be workshops for the firm to work through the results with the testers and supervisors.

CBEST provides the following:

– access to considered and consistent cyber threat intelligence, ethically and legally sourced from organisations that have been assessed against rigorous standards;

– access to knowledgeable, skilled and competent cyber threat intelligence analysts who have a detailed understanding of the financial services sector;

– realistic penetration tests that replicate sophisticated, current attacks based on current and targeted cyber threat intelligence;

– standard key performance indicators that can be used to assess the maturity of the organisation’s ability to detect and respond to cyber-attacks; and

– access to benchmark information that can be used to assess other parts of the financial services industry.

The combination of these will allow a firm to understand where they are vulnerable. They will then be better prepared to implement remediation plans. The inclusion of specific cyber threat intelligence will ensure that the tests replicate, as closely as possible, the evolving threat landscape and therefore will remain relevant.

CBEST differs from other security testing currently undertaken by the financial services sector because it uses real threat intelligence and focuses on the more sophisticated and persistent attacks on critical systems and essential services. The implementation of CBEST will help the boards of financial firms, infrastructure providers and regulators to improve their understanding of the types of cyber-attack that could undermine financial stability in the UK, the extent to which the UK financial sector is vulnerable to those attacks and how effective the detection and recovery processes are.

In his speech, Andrew Gracie said: “The idea of CBEST is to bring together the best available threat intelligence from government and elsewhere, tailored to the business model and operations of individual firms, to be delivered in live tests, within a controlled testing environment. The results should provide a direct readout on a firm’s capability to withstand cyber-attacks that on the basis of current intelligence have the most potential, combining probability and impact, to have an adverse impact on financial stability.”

The Bank of England has worked with the Council for Registered Ethical Security Testers (CREST), a not-for-profit organisation that represents the technical information security industry and Digital Shadows, a cyber-intelligence company, to develop new accreditation standards. This is the first time that commercial cyber intelligence providers will be subject to accreditation standards which are bound by enforceable codes of conduct and supported by a range of CBEST documents on security testing and cyber threat intelligence.

Strong manufacturing output bolstering UK economic outlook

Data released today by the Office for National Statistics (ONS) showed that UK production output was 3.0% higher in April compared to the same month in 2013. Results were especially strong in the manufacturing sector, where output was up 4.4% over the same period – the fastest year-on-year growth since February 2011.

Growth was broad based, with output in all sectors except for electricity, gas, steam & air conditioning, higher than they were a year ago. This is partly due to an unusually warm April, reducing demand for heating and energy within the sector.

Within manufacturing, the main components contributing to strong output growth were the manufacture of rubber, plastic and other non-metallic products, increasing year-on-year by 18.0% – the largest rise for over 40 years. Other substantial contributions came from the manufacture of transport equipment, food products, and beverages & tobacco.

Looking forward, leading indicators such as the Markit/CIPS Purchasing Managers’ Index (PMI) for manufacturing suggest that growth in the sector continues to be robust. Although the index score for April was slightly higher than the 57.0 for May, it is still comfortably above the 50 mark that denotes growth. In addition the ICAEW/Grant Thorton Business Confidence Monitor, shows confidence in the production industries for the year ahead is on a strong upward trend, suggesting that growth will continue.

These results are encouraging for the production industry, which only relatively recently (mid 2013) returned to positive year-on-year growth. Output in the sector remains 11.3% below the Q1 2008 pre-downturn peek, so there remains a way to go. However, with strong growth now emerging, the sector is expected to help boost UK Gross Domestic Product growth to 3.0% for 2014 as a whole.

Aldermore joins lead sponsors at NACFB Commercial Finance Expo

Aldermore has announced that they are one of the lead sponsors of the upcoming NACFB Commercial Finance Expo taking place on Wednesday 25th June at the NEC, Birmingham.

The Commercial Finance Expo is the only show in the UK dedicated to the finance community and the accompanying conference allows NACFB members to look at the key issues facing the broker market and to invite comment from industry experts from across all sectors of commercial finance. This year the event will include Small Business Workshops for the Birmingham area, focusing on members of the local business community to highlight the funding choices available from the NACFB members and patrons.

In addition, Gareth Claxton, head of commercial Lending, and Carl D’Ammassa, managing director for asset finance, will be panel participants in the seminar sessions during the day.

Aldermore has long supported the NACFB, and was the expo’s main sponsor in 2011. The bank has also received several awards at the NACFB’s annual gala, including ‘Specialist Lender of the Year’, ‘Most Supportive Lender’ and ‘Best Buy-to-Let Lender’.

Gareth commented: “Aldermore are delighted to be sponsoring the NACFB Commercial Finance Expo, highlighting our commitment to supporting the brokers whose focus is the SME market. The NACFB is incredibly important within the industry, especially at a time when the economy is really picking up. With over 85 lenders present at the event, the expo presents a fantastic opportunity for those in the market to meet and discuss the issues facing the industry at the moment.”

Early registration is highly recommended as booking go very busy very quickly in 2014.

Anyone wishing to attend should register as soon as possible at www.commercialfinanceexpo.co.uk

ONS – UK trade, April 2014

The deficit of trade in goods and services for April 2014 was £2.5bn, compared with £1.1bn in the previous month. The deficit on trade in goods was £9.6bn in April 2014; the trade position reflects exports minus imports.

Exports of goods decreased by 4.4% (an estimated £1.1bn) between March and April 2014 to £23.4bn. However HMRC have informed ONS that through routine quality assurance, omissions have been identified resulting in exports of oil being underestimated by about £700 million. Unfortunately this was identified too late to incorporate into this publication. This is entirely attributed to exports of oil to the EU.

Excluding this factor, exports still fell between March and April, attributed to falls in semi-manufactured goods with exports of chemical manufacturers and material manufacturers contributing a combined £0.3bn to the overall decrease.

Imports of goods for the same period increased by 0.8% to £33.0bn. The rise reflects increases in almost all key commodities, notably imports of food, beverages and tobacco which rose by £0.1bn between March and April. Imports of manufactured goods were generally quiet in April, rising marginally from March due to several offsetting movements at a lower commodity level. Imports of ships was the most significant increase at this level with a monthly movement of £0.2bn. This was attributed entirely to trade with countries outside the EU where the import level of ships reached a record high of £0.3bn in April 2014.

In April 2014, exports of goods to the European Union (EU) decreased by £0.5bn, but this all related to the underestimation of oil exports mentioned above. Imports from the EU increased by £0.4bn to £17.5bn, reflecting increases in imports of manufactured goods (specifically chemicals) and food beverages and tobacco.

In April 2014, exports of goods to countries outside of the EU decreased by £0.5bn to £11.7bn, due mainly to widespread falls in exports of manufactured goods. Imports from countries outside of the EU decreased by £0.2bn to £15.5bn, reflecting falls in imports of manufactured goods and fuels.

Trade statistics for any one month can be erratic. For that reason, it is recommended to compare the latest three months against the preceding three months and the same three months of the preceding year.

The deficit on trade in goods narrowed by £0.1bn to £26.7bn in the three months to April 2014, compared with the previous three months. Exports of goods decreased by £2.3bn to £71.3bn in the three months to April 2014, reflecting a £1.4bn fall in exports of manufactured goods; £0.7bn of this decrease is attributed to exports of transport machinery and equipment and a further £0.5bn to exports of material manufactures. Imports of goods decreased by £2.4bn to £98.0bn in the same period. Imports of manufactured goods account for roughly two fifths of the decrease, falling £1.0bn from the previous three months. A further fall of £0.9bn was attributed to imports of fuels (specifically oil).

This bulletin also reports on trade in services. However, the information on trade in services is mainly obtained from quarterly surveys, in some cases underpinned by larger annual surveys. That means that the data for the latest months are inevitably uncertain. For this reason comparisons of Q1 2014 with the previous quarter have been made rather than the three months to April 2014.

For Q1 2014, both exports and imports of services have been revised as the latest quarterly survey estimates have been included. Between Q4 2013 and Q1 2014 exports of services increased 1.7% to a record high of £52.1bn. Within exports, there were increases in travel services and other business services. Imports of services in Q1 2014 were £30.6bn, a record high, an increase of 1.5% from the previous quarter mainly attributed to increases in imports of other business services.