BANKING REMINDER

Please note that as per an earlier email, we have changed our bank to Bank of Scotland. If you should require any reminder as to account details then please contact us on 0141 639 9076 or 07395834536.

ECONOMIC OUTLOOK

We live in interesting times. We thought that some information as regards the recent economic data may be of interest. Of course, this detail can change with pressure from the Government or Bank of England, and the top rate of tax has already moved. (Some Tax rates do vary in Scotland).

• The Government’s ‘Mini Budget’ on 23 September saw an array of tax-cutting measures. This included reversing April’s increase in employers’ and employees’ NI contributions, as well as reversing the proposed increase in corporation tax to 25% (which will remain at 19%). The 45% additional rate income tax band will be abolished from April 2023, and the proposed 1p-in-the-pound reduction in the basic rate of income will be brought forward 12 months (to April 2023). House buyers will also benefit from an immediate increase in the threshold for Stamp Duty Land Tax. 

• The Mini Budget represents a significant stimulus package and comes on top of the Energy Price Guarantee Scheme for households and the Energy Bill Relief Scheme for businesses, which will add a significantly greater amount to the UK’s national debt. Concerns over the burgeoning level of UK debt have precipitated turbulence in the foreign exchange markets, with the value of Sterling initially falling by more than 6% against the US Dollar.

• There remain many supply-side constraints to economic growth, including ongoing disruption to global supply chains, Brexit-related challenges for UK exporters, and an undersupply of labour. The Government’s mini-budget signalled an increasing focus on addressing supply-side issues, although there was little detail.

• A key concern is that fiscal and monetary policy appears to be pulling in opposite directions, with tax cuts aimed at stimulating demand and rising interest rates aimed at dampening it to reduce inflation. 

• UK GDP is estimated to have fallen by 0.1% in Q2, and it is likely that Q3 will also show a decline (the latest consensus forecasts expect -0.3%), in part due to September’s additional bank holiday. The UK is therefore likely already in a technical recession. High inflation, rapidly rising interest rates, a sharp decline in real household incomes, low consumer confidence and slowing global growth are likely to mean further falls in UK output, despite September’s fiscal stimulus and the cap on energy bills.

• There are reasons to be positive, however. Unemployment is historically low at just 3.6%, and although this figure will rise, it is not expected to reach the levels seen during the Global Financial Crisis. In addition, many households still have significant savings accrued during the pandemic. These factors, plus the Government’s Cost of Living Support package, will help to cushion the impact of rising prices on the consumer.

OUTPUT TRENDS

• July’s GDP growth of +0.2% follows a decline of 0.6% in June (which was impacted by the additional Platinum Jubilee Bank Holiday). In July, services sector output grew by 0.4% and was the main driver of GDP growth, while production fell by 0.3% and construction by -0.8%. Output in the energy sector has been falling as consumers and businesses cut back on their consumption patterns amid skyrocketing energy costs. 

• August’s S&P Global / CIPS manufacturing PMI for the UK fell again for the fourth consecutive month, however, this month saw a sharp decline to 47.3 (below the 50-mark indicating expansion). This marks the first contraction in this sector since May 2020 with output, new business and new export orders all falling, while jobs growth stalled. The rate of input inflation slowed to its weakest level since November 2020 but is still high in relative terms across all the main inputs of commodities, containers, energy, packaging, raw materials, etc. On the plus side, supply chain issues continue to ease. 

Inflationary and cost of living pressure has also impacted the UK Services sector PMI which moderated to 50.9 in August, down from 52.6 the month prior. Although this is still in grown territory, it is the weakest activity in the sector for 18 months as domestic and overseas demand declined, and new business orders rose at a much softer rate. There was a surge in output cost levelled at clients due to increasing input costs in the month although the labour market remained strong as firms continued to hire.

INFLATION 

• Inflation remains at a 40-year high, with CPI at 9.9% in August, down only marginally from 10.1% in July (the first fall in annual inflation since September last year). This month’s largest upward contributions came from electricity, gas and motor fuels, although motor fuels inflation is easing sharply, and this contributed to this month’s inflation decline compared with July. 

• The Bank of England now expects CPI inflation to peak at a little under 11% in October, compared with its previous expectation of 13.3%, due to the introduction of the Energy Price Guarantee. The September consensus forecasts compiled by HM Treasury suggest CPI falling to 4.5% by Q4 2023, still well above the Bank of England’s 2% target. 

There is clearly much uncertainty around the level at which inflation will peak and how long it will take to fall, as this is highly dependent on the path of global energy prices. Other uncertainties include the extent to which global supply chain pressures will ease, possible further significant movements in the value of Sterling (which affect the cost of imports), and the risk of a wage-price spiral developing.

INTEREST RATES

• The Bank of England Monetary Policy Committee (MPC) raised Bank Rate by 50 basis points to 2.25% in late September. Three members of the Committee voted in favour of a 75 basis points increase (which would have been in line with the US Federal Bank’s September rise). A further significant rise is inevitable – the next planned meeting is in early November, although the MPC could move earlier to provide emergency support to Sterling if required.

• Normally, the Bank would be cutting interest rates at the start of an economic downturn to boost demand. The reverse being true reflects the severity of the inflationary problem, and its causes (rising energy and commodity costs rather than an overheating economy). There is clearly a limit to the Bank’s ability to control inflation through monetary policy, as inflation is currently so heavily influenced by global energy and commodity prices. Changes in Bank Rate take time to have an impact and are aimed more at controlling inflation in the medium term.

BINS

At Kirkhill Office Park the bin area is for use of occupiers and refuse that is generated within this site. We have noted an increase in items such as filters and suitcases that obviously should not come from this site.

By way of reminder, the 2 NWH bins are for any general waste and this should where possible be in black bags.

The 3 red/orange bins are for all recycling material to include cardboard, shredding, plastic etc.

Please ensure that the appropriate materials are placed in the correct bins.

The bins are uplifted every 2 weeks the next being the 21st October.

LOOKING AHEAD

UK Winter 2022-2023 Weather Forecast

It is that time of the year when everyone is asking the question - what will the UK Winter of 2022-2023 bring?

At the moment the signals are pointing towards a La Niña based Autumn and winter. A La Niña Autumn and Winter would lead to an unsettled and cooler Autumn with areas of low pressure moving in off the Atlantic to affect the United Kingdom.

The winter period, or at least the start of winter 2022-2023 would more than likely bring much colder weather compared to El Niño years. Whilst winters generally get off to a colder start during a La Niña year, we would then normally go on to see a milder second half of winter or a mixed (seasonal reversal) which can be seen in the below graphics from the Metoffice.

It is also worth mentioning that La Niña has less of an impact on this side of the pond, more especially across Northern Europe so whilst the seasonal tendencies are possible, there are no guarantees of any type of specific or extreme patterns across the United Kingdom. Though it is worth mentioning that the winter of 2010 in which many parts of the United Kingdom experienced disruptive snowfall and record-breaking low temperatures was during a La Niña event.

At this range, based on current seasonal signals, I would expect a cold start to UK winter 2022 and a very unsettled Autumn 2022. The La Niña event should be in full swing by October. For now, enjoy any warm or high-pressure dominated weather. Our full Autumn and UK winter 2022-2023 forecast will be published on this page at the end of September 2022.

THE MEETING ROOM

NOW OPEN THE MEETING ROOM AT KIRKHILL  - THE PERFECT LOCATION FOR YOUR TEAM OR EVENT MEETING.

The Meeting Room @ Kirkhill provides space for up to 8 people and is fully fitted and accessible from the car park area on an easy and convenient basis. Within the office, it has toilet and kitchen facilities (tea and coffee are included in the booking fee) together with full AV connectivity. The Yealink soundbar and TV set up will allow for the meeting to be conducted via Zoom and Teams and of course, with WIFI can link to other presentation platforms.

The layout can be made flexible with a variety of configurations that will best suit your meeting type. Of course to allow for breakout sessions and a breath of air there is the outside deck area with seating. Parking is just off the main access road.

We will in due course be sending invitations for a series of open events which we hope you will have time to attend. The Meeting Room is available to book on a flexible basis and can be done online at:

https://www.kirkhillhouseofficepark.co.uk//meeting-room