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Week in Review - 21st October, 2011

Felicity Burch October 21, 2011 10:22

 
Consumer prices CPI inflation was up again in September, to 5.2%, and has now been above target for 22 months. September’s high level of inflation was, as expected, driven up by recent increases in household electricity and gas prices which rose by 7.5% and 13.0% respectively. Upward pressure also came from clothing and footwear. The only downward pressure on the monthly change came from falling air transport costs as the summer peak season ended.
   
MPC minutes The minutes from the Monetary Policy Committee’s September meeting showed the nine members of the committee voted unanimously to maintain the bank rate at 0.5% and extend stock of asset purchases by £75bn to a total of £275bn.
   
↓ EEF Pay Settlements Pay settlements have been broadly stable since the beginning of the year. The three-month average pay settlement was 2.5% in September, a little down from a revised figure of 2.6% in August, and a little below the long-term average.
   
Retail sales In the year to September 2011, the volume of retail sales increased by 0.6%, particularly driven by increases in non-store (predominantly internet) sales.
   
↓Trends in lending The stock of lending to UK businesses contracted by £2.5bn in the three months to August.
   
↑ Public sector finances Excluding the temporary effects of financial interventions, public sector net borrowing was £14.1bn in September 2011, £1.3bn lower than in September 2010. Public sector net debt rose from £833bn to £966.8bn over the same period, and is now equivalent to nearly 63% of GDP.
   
The week ahead
 
No UK data releases
 

Week in Review - 29th July, 2011

Felicity Burch July 29, 2011 11:26

 
GDP Q2 ONS estimated that GDP grew by 0.2% in the second quarter of the year. Growth was weakened by the supply-chain impacts of the Japanese tsunami and the additional Bank Holiday. Manufacturing, in particular, was knocked back by the tsunami, and output contracted by 0.3% over the quarter. Services output was stronger, growing by 0.5% and construction output also grew by 0.5%. 
   
GfK Consumer Confidence GfK NOP's Consumer Confidence Index fell to -30 in July. Confidence fell across all sub-indices. Concerns about personal financial situation in the next twelve months worsened, but the biggest drop, of 9 points, was in people’s expectations of the performance of the economy over the next 12 months.  
   
↑ Lending to individuals Total lending to individuals rose £0.4bn in June, within the total, lending secured on dwellings fell by £0.1bn, and consumer credit rose by £0.4bn. 
   
   
The week ahead
 
Mon 1st: Manufacturing PMI;   
 
Thu 4th: MPC rate decision
 
Fri 5th: Producer Price Index
 

Business Growth Fund launch - now we need to see access to finance improve

Andrew Johnson May 19, 2011 09:39

Today in Birmingham the BBA Taskforce banks are launching the Business Growth Fund (BGF), providing equity investments for growing SMEs with turnovers of £10-£100 million, looking for £2-10 million.

For the avoidance of doubt this is the banks’ fund, which they committed to as part of their Taskforce commitments in October. The Merlin agreement in February bumped it up from £1.5 billion to £2.5 billion (viz Cable on the radio this morning not a representative of the banks) but there is no government money in here, not even the £50 million previously set aside for the idea that preceded the BGF, the Growth Capital Fund.

We’ve welcomed the intent to address the growth capital gap, identified most recently in the 2009 Rowlands Review, that is holding back some promising UK companies from growing.

Even though this is funded by the banks, it does go towards supporting an increase in sources of finance outside of traditional bank lending – especially important for fast growing companies where bank lending is not appropriate.

This is an area where we have previously called for progress. And we’re further encouraged by positive noises about the BGF’s board including people with real business (even manufacturing!) expertise, again something we’ve been looking for in the financial sector.

However, the launch of the fund again highlights the limited progress being made in increasing the provision of mezzanine debt finance that the Rowlands Review recommended as the best way to address the growth capital gap.

This is important because often growing SMEs have an aversion to giving up an equity stake in their business and the control that goes with that. The BGF will take a seat on the board in the companies it invests in with stakes ranging from 10-50%.

How much this impedes the progress of the Business Growth Fund i.e. by discouraging take up will need to be closely monitored.

With the launch of the BGF all 17 of the Taskforce banks’ commitments set out in October are underway. And of course we have the government’s ‘Project Merlin’ agreement with the banks to increase lending to UK businesses.

However, signs of an improving landscape, particularly for SMEs have been slow to emerge following the financial crisis.

So now we get to the point of all this – improving access to finance. We need to see it happen – and sooner rather than later. And we need to start hearing from the government what that improvement looks like and by when.

The Prime Minister said on Tuesday that Merlin was very much his. While I couldn’t follow his logic on gross v net lending targets, I do agree with him that, so far, results in lending trends have been disappointing. Cable said this morning there's PwC analysis out on Monday looking at performance so far, my hunch is that this too will disappoint.

However, the PM believes the performance of banks needs to judged over the full year of the agreement not off partial data. Fair enough.

But the clock is nevertheless ticking for the actions of both the banks and the government to deliver results. And the benchmark isn't some number on gross lending, which could turn out meaningless if net lending is withdrawn from the economy. The benchmark is meeting the government’s own ambition set out in the Plan for Growth to see ‘more finance for start ups and business expansion’ and inadequate access to finance no longer holding back growth.

With the actions announced so far we’re hopeful of seeing access to finance improve but progress is far from guaranteed.

We need to be thinking now about what more could be done if present measures prove insufficient. Growing companies looking for credit and the UK recovery more generally cannot afford to wait.

Week in Review - 4th March, 2011

Felicity Burch March 04, 2011 10:12

↑ GfK NOP Consumer Confidence GfK NOP’s Consumer Confidence Index remains low, though it improved slightly in February, rising by one point to -28. There were small increases in three of the five sub indices but public perception of the general economic situation over the last 12 months and over the next 12 months decreased by one point each.
   
↔ Manufacturing PMI The manufacturing PMI remained at 61.5 in February, equaling last month’s record high (which was revised down from 62.0). Inflationary pressures remained elevated with the rates of increase in output prices and input costs near to their respective record highs.
   
↑ Lending to individuals Total net lending to individuals rose £1.5 billion in January. Within the total, lending secured on dwellings rose £1.8 billion while consumer credit showed a net repayment of £0.3 billion.
   
The week ahead
 
Mon 7th: EEF’s Business Trends
Wed 9th: UK Trade
Thu 10th: Index of Production; MPC rate decision
Fri 11th: Producer Prices
 

Week in Review - 4th February, 2011

Felicity Burch February 04, 2011 09:37

↑ Manufacturing PMI The manufacturing PMI rose to 62.0 in January, a record high for the survey. Average input price pressures rose again from last month’s 19-year high, and output prices also climbed substantially.
   
↓ Lending to individuals Total lending to individuals fell £0.1 billion in December. Within the total, lending secured on dwellings fell £0.3 billion, compared with a £0.8 billion increase in November. Consumer credit rose by £0.2 billion in December, compared with a fall of £0.1 billion in November.
   
The week ahead
 
Wed 9th: UK Trade; 
 
Thu 10th: Index of Production; MPC rate decision 
 
Fri 11th: Producer Price Index 
 

Week in Review - 21st January, 2011

Felicity Burch January 21, 2011 11:14

↑ CPI CPI annual inflation moved up again, by 0.4 percentage points, to 3.7% in December. The most significant upward contributions to the change in the CPI between November and December were from: transport, which saw its largest monthly price increase (3.6%) on record; housing and household services; and food and non-alcoholic beverages. There was some downwards pressure from the price of clothing and footwear.In the year to December, RPI inflation was 4.8%, up from 4.7% in November.
   
↔ Labour Market Statistics The three-month ILO unemployment rate remains at 7.9%, though the number of unemployed people rose by 49,000 over the quarter to 2.5 million. Conversely, the claimant count measure of unemployment – which records the number of people claiming Job Seekers’ Allowance – fell by 4,100 to 1.46 million. The claimant count rate remains at 4.5%. There are 144,000 fewer claimants than at this point last year.
   
↑ EEF Pay Settlements The three-month average pay settlement was 2.2% in December, up a little from a revised figure of 2.1% in November, though this figure is based on only a small number of settlements. 20.3% of pay settlements were between 0.0% and 2.0% in the three months to November and the proportion of pay deals between 2.0% and 3.0% was 38.1%. The monthly average settlement was 2.2% in December compared with a revised figure of 1.5% in November.
   
↔ Retail Sales Year on year, there was no change in the volume of retail sales in December. However, between November and December total sales volume decreased by 0.8%. Both food and non-food sales fell. Non-store retailing (which includes internet sales) rose by 5.4% its largest rise since March 2009.
   
↓ Trends in lending The stock of lending to businesses contracted by around £5 billion in the three months to November. The annual rate of growth for total lending to consumers picked up in October and November to 0.6%, the highest rate seen since September 2009, though it remains low.
   
The week ahead 
Tue 25th: GDP (2010q4, preliminary);  
Wed 26th: Labour Market Statistics; Index of Services; Public Sector Finances  
Fri 28th: Retail Sales; Trends in lending 

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