It doesn't matter which way up you read your tablet this evening, the UK business news is heading in both directions. The bunting is out for the economy, with fist-pumping and cries of "Get in", greeting the news that we may have avoided recession last year. Starting with grim facts; in quarter-3 of 2022, the UK economy contracted by 0.3 per cent and even economists can agree that for an economy to be in recession it needs to see at least two consecutive quarters of economic contraction - or negative growth - in GDP.
Following the most niggardly of growth in November of last year (it was hard to get excited over a shock 0.1 per cent rise) all our economy needs to do is avoid a fall of more than 0.4 per cent month on month in December. Surely it can manage that? Don't worry though, economists and central bankers are reassuring us that if we escaped recession by the depth of a butterfly wing last year we can and will deliver one this. If 'failure' or 'success' can be expressed in such small numbers, surely it cannot really matter once perspective is added to the pot?
Despite Bank of England Governor Andrew Bailey hinting broadly that ever-climbing interest rates may have peaked, Catherine Mann, one of the Monetary Policy Comittee’s most consistently hawkish rate-setters, still thinks that an upward hike is more likely than a plateau or a fall. Definitely going down are the numbers for the UK's construction sector, as the S&P Global/CIPS construction purchasing managers’ index scored 48.4 in January 2023, slipping from 48.8 in December. Any score below 50 is considered a decline. The latest reading was marginally worse than the 48.5 reading predicted by analysts. Much of this was due to falling housebuying numbers, which can be attributed to the fall in housing volumes to “rising borrowing costs, unfavourable market conditions and greater caution among clients”.
Also down is sales of electric cars. Just 17,000 battery electric cars were registered in January, which was much less than the 16.6 per cent they accounted for during 2022 as whole, when 267,000 new such vehicles were sold. It is also down on statistics from November 2022, when electric car sales accounted for 20 per cent of all sales.
Andy Leeson, chair of the Institute of Turnaround, picked out manufacturers and retailers to be amongst those most likely to be struggling most in the present economic climate, and so will need the greatest support in the year ahead. Andy said that the automotive sector was a “case in point”, with issues relating to Brexit, electric vehicles and environmental, social and corporate governance all putting pressure on the industry.
Outside factories more than 17,000 retail businesses have already been identified as “distressed”, where payments increasingly are being delayed and liquidity is deteriorating. The Institute said that, amid growing inflationary pressures, rising energy prices and interest rates, labour shortages and supply chain issues, demand for turnaround advice would continue to grow, with the biggest rise in the first quarter of 2023. Paperchase recently grabbed the headlines, as Tesco nabbed its name and IP, and Andy said that ... “the expectation is that the bigger retailers are going to be a bit more resilient, but that problems will become evident in due course”.
Interest rates and inflation numbers will continue to dominate the headlines until at least mid-summer and the prediction is that that the figures will keep growing.