The economy in recent weeks has resembled the Scottish weather: not quite the summer we hoped for but definitely could be worse, and we hope for better to come (writes Fraser of Allander’s Institute’s EMMA CONGREVE).
Inflation easing
This week’s announcement on inflation coming in at 7.9% in the year to June 2023 was lower than markets were expecting.
According to the ONS, the fall was driven by lower motor fuel prices and an easing in the rate of food price growth. We’re sure readers of the FAI weekly update don’t need to be reminded of this, but just in case, remember that a drop in the inflation rate does not mean that average prices are falling.
However, as the Resolution Foundation’s Torsten Bell pointed out in a useful thread on Twitter, in June 2023 it looks like we (finally) had a situation where average wage growth was higher than inflation, meaning that real wages rose.
Of course, averages are just that, and will not apply to all, but it’s a chink of sunshine nonetheless. Many will hope that this easing of inflation will ease the pressure on the Bank of England’s Monetary Policy Committee.
The next rate decision is due on the 3rd of August.
Recent labour market news
On the 11th June, the latest labour market statistics were released covering the period March to May 2023.
The employment rate reduced slightly over this period, leading to an increase in both unemployment (people seeking work) and inactivity (people not working and not seeking work).
Inactivity statistics have been moving in opposite directions in Scotland compared to the rest of the UK over recent quarters, although as the chart shows, this follows a period of relative convergence of the UK and Scottish rates, and rates have tended to be higher in Scotland than the UK average over recent years.
Chart: Economic Inactivity Rates in Scotland and UK
“Risky” Finances
According to the OBR, in a report published on the 13th July, the pressure on UK public finances has risen considerably over the last year, due to a combination of inflation and interest rate rises, and accelerated changes in demographic change.
One key part of this is the fact that the UK has a relatively high proportion of inflation linked debt compared to other advanced economies. Their frankly terrifying forecasts see UK public debt rising to over 300% of GDP over the next 50 years, from around 100% now (indeed statistics out today show that the UK’s debt pile is now officially higher than GDP in June 2023).
Nothing is inevitable, and these forecasts are drawn up to provide context and evidence for government decision-making in the years ahead. Difficult decisions, as ever, loom.
That’s it for this week. If you haven’t seen it yet, I’d encourage you to watch our colleague Adam’s presentation as part of this year’s Pride in Economics Event. You can find it on our website.
Tata Group announces new multibillion-pound electric car battery factory to be built in the UK – one of the largest ever investments in the UK automotive sector.
Investment will create up to 4,000 new direct jobs, and thousands more in the wider supply chain – driving forward the Prime Minister’s priority to grow the economy.
New gigafactory set to provide almost half of the battery production needed by 2030 – turbocharging UK’s switch to zero emissions vehicles.
The UK has been chosen as the home of Tata Group’s first ‘gigafactory’ outside India, in a move set to create thousands of jobs and bring a huge boost to the UK’s automotive sector.
Tata Group confirmed the UK had secured one of the largest ever investments in the UK auto industry today (19 July). The gigafactory will secure UK-produced batteries for another Tata Sons investment, Jaguar Land Rover, as well as other manufacturers in the UK and Europe.
The new gigafactory, at 40GWh, will be one of the largest in Europe. It will create up to 4,000 highly skilled jobs, as well as thousands of further jobs in the wider supply chain for battery materials and critical raw minerals, helping grow the economy and take forward the UK’s commitment to net zero.
Prime Minister Rishi Sunak said:“Tata Group’s multi-billion-pound investment in a new battery factory in the UK is testament to the strength of our car manufacturing industry and its skilled workers.
“With the global transition to zero emission vehicles well underway, this will help grow our economy by driving forward our lead in battery technology whilst creating as many as 4,000 jobs, and thousands more in the supply chain.
“We can be incredibly proud that Britain has been chosen as home to Tata Group’s first gigafactory outside India, securing our place as one of the most attractive places to build electric vehicles.”
Mr N Chandrasekaran, Chairman, Tata Sons, said: “The Tata Group is deeply committed to a sustainable future across our business.
“Today, I am delighted to announce the Tata Group will be setting up one of Europe’s largest battery cell manufacturing facilities in the UK. Our multi-billion-pound investment will bring state-of-the-art technology to the country, helping to power the automotive sector’s transition to electric mobility, anchored by our own business, JLR (Jaguar LandRover).
“With this strategic investment, the Tata Group further strengthens its commitment to the UK, alongside our many companies operating here across technology, consumer, hospitality, steel, chemicals, and automotive.
“I also want to thank His Majesty’s Government, which has worked so closely with us to enable this investment.”
The investment of over £4 billion represents a historic moment for the UK’s growing electric vehicles industry.
The new gigafactory will supply JLR’s future battery electric models including the Range Rover, Defender, Discovery and Jaguar brands, with the potential to also supply other car manufacturers. Production at the new gigafactory is due to start in 2026.
This investment will be crucial to boosting the UK’s battery manufacturing capacity needed to support the electric vehicle industry in the long term. With an initial output of 40GWh it will also provide almost half of the battery production that the Faraday Institution estimates the UK will need by 2030.
Business and Trade Secretary Kemi Badenoch said: “Today’s multibillion-pound investment demonstrates that this Government has got the right plan when it comes to the automotive sector.
“We are backing the UK car industry to help grow our economy as we transition to electric vehicles, and this latest investment will secure thousands of highly-skilled jobs across the country.
“Tata’s decision is a major vote of confidence in UK automotive. The Government is committed to making the UK one of the best places in the world for automotive investment, as evidenced by the Automotive Transformation Fund, the British Industry Supercharger, and the strong programme of support for research and development.”
Chancellor of the Exchequer Jeremy Hunt said:“This is a huge vote of confidence in the UK and one that will drive growth in our economy, creating thousands of jobs and powering our transition to electric cars.
“Tata Group’s gigafactory builds on the strength of our manufacturing industry and shows we’re on the right track, backing the sectors that will underpin our future prosperity for decades to come.”
Energy Security Secretary Grant Shapps said: “Today’s announcement from Tata is excellent news. We have been working tirelessly with the company, and across government, to make the case for why the UK is the best place for them to invest.
“This new gigafactory puts us firmly in the fast lane to becoming the capital of Europe’s electric car market, and makes crystal clear how they see the UK as the place to be for their future growth.
“With thousands of jobs on site and in the supply chain, this new factory will be the cornerstone of our automotive industry, backing manufacturers to develop and expand, and customers to make the switch from petrol and diesel.”
Business and Trade Secretary Kemi Badenoch has formally signed the treaty to accede to CPTPP trade group in New Zealand this morning
Business and Trade Secretary Kemi Badenoch formally signed the treaty confirming the UK’s accession to CPTPP – the Indo-Pacific trade bloc now worth £12 trillion in GDP – in New Zealand today [Sunday 16th]
To celebrate this huge moment, the Government released new figures showing CPTPP-owned businesses employed one in 100 UK workers, with membership expected to turbocharge investment in the UK even further
British whisky and cars amongst 99% of current UK goods exports to CPTPP set to be eligible for zero tariffs as UK businesses given unparalleled access to market of over 500 million people
Business and Trade Secretary Kemi Badenoch has formally signed the treaty to accede to CPTPP trade group in New Zealand this morning [Sunday], kickstarting the UK’s membership of a modern and ambitious trade deal spanning 12 economies across Asia, the Pacific, and now Europe.
The Secretary of State is in Auckland to put pen to paper on this ‘mega deal’, alongside New Zealand Trade Minister Damien O’Connor, Canadian Trade Minister Mary Ng, Japanese Minister for Economic Revitalisation Goto Shigeyuki and Australian Deputy Trade Minister Tim Ayres.
The signature is the formal confirmation of agreement for the UK to join the group, following substantial conclusion of negotiations earlier this year. The Government will now seek to ratify the agreement, which will include parliamentary scrutiny, whilst other CPTPP countries complete their own legislative processes.
The signing comes as a new government report reveals one in every 100 UK workers was employed by a business headquartered in a CPTPP member nation in 2019, equating to over 400,000 jobs across the country.
Membership of the trade group is expected to spark further investment in the UK by CPTPP countries, already worth £182 billion in 2021, by guaranteeing protections for investors.
Ian Stuart, CEO at HSBC UK, said: “The UK’s formal accession to CPTPP marks a significant milestone for UK trade, enabling ambitious British businesses to connect with the world’s most exciting growth markets for start-ups, innovation and technology.
“At HSBC UK, we are incredibly excited about the opportunities this agreement presents; as the world’s leading global trade bank we will support UK businesses to achieve their full potential and open up a world of opportunity.”
Cath White, Head of International at Belvoir Farm said: “The UK’s accession to CPTPP will mean more than 99% of UK goods exported to CPTPP member countries will be eligible for zero tariffs.
“It will also ease administrative and commercial trade barriers to allow talented and passionate UK producers to tell their story on a worldwide scale.
“At Belvoir Farm, we export 20% of our turnover to markets across the globe, with one third of exports bound for Indo-Pacific markets, including Australia, New Zealand, Japan and Singapore. This is a fantastic opportunity to grow British brands, especially this year when the spotlight is on the UK.”
Ian Galbraith, Group Strategy Director at Mott MacDonald, said: “Mott MacDonald is strongly supportive of UK accession to CPTPP and proud to have been part of the technical board advising the British negotiating team.
“The Partnership’s ambitious services and procurement chapters pave the way for greater recognition of professional competence in engineering and architecture, and establish open, fair and transparent competition rules in government procurement, allowing world-leading firms like Mott MacDonald to win and service new contracts across the many countries covered by CPTPP.”
Speaking ahead of the signing, Kemi Badenoch said:“I’m delighted to be here in New Zealand to sign a deal that will be a big boost for British businesses and deliver billions of pounds in additional trade, as well as open up huge opportunities and unparalleled access to a market of over 500 million people.
“We are using our status as an independent trading nation to join an exciting, growing, forward-looking trade bloc, which will help grow the UK economy and build on the hundreds of thousands of jobs CPTPP-owned businesses already support up and down the country.”
The report found CPTPP investment accounted for:
Over £240 billion in turnover in London, £35 billion in the South East and £18 billion in the East of England
The creation of 26,000 jobs in 2021 and 2022
75% of all employment in CPTPP-owned businesses was outside of London
One in 50 jobs in the North East
One in every 25 jobs in the manufacturing sector
The report also found that CPTPP companies punch above their weight economically. While they account for 0.3% of all businesses in the UK, they generate 6.1% of the UK’s total turnover – 20 times higher than the proportion of businesses they represent.
The UK will be the first European member and first new member since CPTPP was created, which would have been impossible had we remained in the EU. With the UK as a member, CPTPP will have a combined GDP of £12 trillion and account for 15% of global GDP.
The UK Government will now take the steps needed to bring the agreement into force, expected to be next year.
Being part of CPTPP will mean that more than 99 per cent of current UK goods exports to CPTPP countries will be eligible for zero tariffs.
Dairy farmers, for example, will benefit from reduced tariffs on cheese and butter exports to Canada, Chile, Japan and Mexico. This builds on the £23.9 million worth of dairy products we exported to these countries in 2022.
The UK Government says the agreement is a gateway to the wider Indo-Pacific which is set to account for the majority of global growth and around half of the world’s middle-class consumers in the decades to come, bringing new opportunities for British businesses and supporting jobs.
Chancellor outlines reforms to boost pensions and increase investment in British businesses
the ‘Mansion House Reforms’ could unlock an additional £75 billion for high growth businesses, while reforms to defined contribution pension schemes will increase a typical earner’s pension pot by 12% over the course of a career
comprehensive reforms will increase pension pots by as much as £16,000
The reforms will also unlock up to £75 billion of additional investment from defined contribution and local government pensions, supporting the Prime Minister’s priority of growing the economy, and delivering tangible benefits to pensions savers.
The United Kingdom has the largest pension market in Europe, worth over £2.5 trillion. Over the past ten years Automatic Enrolment has helped an extra ten million people save for their futures, with £115 billion saved in 2021, but how this money is invested is limiting returns for savers. Comparable Australian schemes invest ten times more in private markets than UK schemes, reaping the rewards that UK savers are missing out on.
To level the playing field, the Chancellor and the Lord Mayor have supported an agreement between nine of the UK’s largest Defined Contribution pension providers, committing them to the objective of allocating 5% of assets in their default funds to unlisted equities by 2030. These providers represent over £400 billion in assets and the majority of the UK’s Defined Contribution workplace pensions market.
This could unlock up to £50 billion of investment in high growth companies by 2030 if all UK Defined Contribution pension schemes follow suit.
More effective investments by defined contribution pension schemes will also increase savers’ pension pots by up to 12%, or as much as £16,000 for an average earner.
Chancellor of the Exchequer Jeremy Hunt said:“British pensioners should benefit from British business success. By unlocking investment, we will boost retirement income by over £1,000 a year for typical earner over the course of their career.
“This also means more investment in our most promising companies, driving growth in the UK.”
Secretary of State for Work and Pensions Mel Stride said:“British workers should have the confidence that their pension savings are working as hard as they are.
“Our reforms will benefit savers and society – unlocking investment into pioneering UK businesses, growing the economy, and helping the record number of people in this country saving into a pension to achieve the retirement they want.”
The Chancellor’s Mansion House Reforms will also deliver better returns for savers through a new Value for Money Framework which will make clear that investment decisions made by pension firms should be based on overall long-term returns and not simply costs. Pension schemes which are not achieving the best possible outcome for their members will be wound up into larger, better performing schemes.
Analysis shows that over a five-year period there can be as much as 46% difference between the best and worst performing pension schemes. This means that a saver with a pot of £10,000 could have notionally lost £5,000 over a 5-year period from being in a lowest performing scheme.
The Mansion House Reforms will be guided by the Chancellor’s three golden rules: to secure the best possible outcome for pension savers; to always prioritise a strong and diversified gilt market as we seek to deliver an evolutionary, rather than revolutionary, change in our pensions market; and to strengthen the UK’s position as a leading financial centre to create wealth and fund public services.
To ensure that the money unlocked by these reforms is invested quickly and effectively, the Chancellor has asked the British Business Bank to explore the case for government to play a greater role in establishing investment vehicles, drawing upon the BBB’s skills and expertise.
This will complement the £250 million of support that government has made available through the Long-term Investment for Technology and Science (LIFTS) initiative to incentivise new industry-led investment vehicles.
The government will also encourage the establishment of new Collective Defined Contribution funds which can invest more effectively by pooling assets as well as launch a call for evidence to explore how we can support pension trustees to improve their skills, overcome cultural barriers and realise the best outcomes for their pension schemes and subsequently their members.
Defined Benefit pensions
For the Local Government Pension Schemes a consultation will be launched on setting an ambition to double existing investments in private equity to 10%, which could unlock £25 billion by 2030. The consultation proposes a deadline of March 2025 for all Local Government Pension Scheme funds to transfer their assets into LGPS pools and setting a direction that each pool should exceed £50 billion of assets.
To improve outcomes for savers in a highly fragmented market, with over 5,000 Defined Benefit Schemes, the government will set out its plans on introducing a permanent superfund regulatory regime to provide sponsoring employers and trustees with a new way of managing Defined Benefit liabilities.
A new call for evidence will also launch tomorrow on the possible role of the Pension Protection Fund and the part Defined Benefit schemes could play in productive investment whilst securing members’ interests and protecting the sound functioning and effectiveness of the gilt market.
Capital Markets
The UK has the largest stock market in Europe and one of the deepest in the world – the London Stock Exchange had the most Initial Public Offerings (IPOs) outside of the US in 2021.
A comprehensive set of reforms will help attract the fastest growing companies in the world to grow and list in the UK. Prospectuses will be simplified, another milestone of Lord Hill’s UK Listing Review, replacing the EU’s outdated regime.
Firm’s prospectuses for investors will be easier to produce, more accessible and understandable, saving companies time and money and attracting more firms to do business in the UK.
Protectionist rules inherited from our time in the EU will be abolished. The Share Trading Obligation and Double Volume Cap have held back UK businesses and will be removed so firms can access the best and most liquid markets anywhere in the world.
The government has also accepted all of Rachel Kent’s Research Review published today, paving the way for a new ‘Research Platform’ that will provide a one-stop-shop for firms looking for research experts. It also sets the path for potentially removing the unbundling rules – an inherited EU law that requires brokers to charge a separate fee for research.
The Chancellor will set out plans to establish an entirely new kind of stock market that allows private companies to access capital markets without floating on a stock exchange. This ‘Intermittent Trading Venue’ would be a world first and will help firms grow and boost the UK economy. It will be complemented by a move to make shares fully digital rather than written on paper, saving businesses time and money.
This builds on the Chancellor’s Edinburgh Reforms and Solvency II reforms which will unlock over £100 billion of productive investment from insurance firms across the UK over a decade.
Seizing the opportunities of the future
To ensure the continued success of the UK’s world-leading financial services sector, firms must be ready to innovate faster, with regulators willing to support them as they do.
Following the Financial Services and Markets Act 2023 passing into law, the government has announced that it is commencing repeal of almost 100 pieces of unnecessary retained EU law for financial services, further simplifying the UK’s regulatory rulebook.
The government launched an independent review into the future of payments – led by Joe Garner, former Chief Executive Officer of Nationwide Building Society – to help deliver the next generation of world class retail payments, including looking at mobile payments.
The government also welcomes a report suggesting ways to move to fully digital shares, scrapping outdated paper-based shares. This will make markets more efficient and modernize how people own shares.
Further information
The Mansion House Compact members are: Aviva; Scottish Widows; L&G; Aegon; Phoenix; Nest; Smart Pension; M&G; Mercer.
The package of reforms announced yesterday could help increase pension pots for an average earner who starts saving at 18 by 12% over their career – over £1,000 more a year in retirement – all whilst supporting UK economy, businesses, and employment.
Analysis shows a difference in returns between schemes over a 5-year period of up to 46% in some cases. This means that a saver with a pot of £10,000 could have notionally lost £5,000 over a 5-year period from being in a lowest performing scheme.
Reaction to the Chancellor’s Mansion House Reforms
Jamie Dimon, Chairman & CEO, JPMorgan Chase said:“Great financial centers stay competitive by responding to the market and evolving through the kinds of important iterations that the Chancellor has announced.
“It’s also good to see the U.K. preparing for the industries of tomorrow considering the great promise of life sciences and A.I. as cornerstones of the economy in the years to come.”
Sir Jon Symonds CBE, Chair, GSK said:“I welcome these important reforms which will further strengthen the UK capital markets and support economic growth.
“The changes will help increase investment returns for pension savers through improved access to all asset classes including in high growth sectors, and ensure the UK’s most innovative companies are better supported by UK capital to stay in this country as they scale to maturity.”
Brent Hoberman, Executive Chairman & Co-Founder, Founders Forum, Founders Factory said:“The planned pension reforms will enable for capital to be productively invested in funds and scaleup companies in the UK.
“This should be welcome news to the UK industries of the future, their ability to attract more capital will create more national champions and generate growth, jobs and increased tax revenue.
“The reforms will enable the UK to build on the positive momentum in these key parts of the economy drive further synergies between it’s world class financial institutions and entrepreneurial base.”
C. S. Venkatakrishnan, Group Chief Executive, Barclays said:“The UK has needed a bold, forward-looking policy agenda and industrial strategy to grow the economy.
“These Mansion House Reforms are an important step in the right direction in mobilising private capital to support growth and innovation.”
Irene Graham OBE, CEO, ScaleUp Institute said:“The package of measures announced by the Chancellor today are very much welcomed by the ScaleUp Institute.
“They contain significant and innovative solutions which will help to enable easier and simpler access to capital markets and patient growth capital. These new initiatives, coupled with the reforms already underway, will support and fuel the global ambitions of our scaleups, and high-potential scaling businesses, across all sectors and all areas of the UK.”
Miles Celic, Chief Executive Officer, TheCityUK, said: ““The competitiveness and attractiveness of any successful international financial centre must, by definition, always be a work in progress. The Chancellor is right to be ambitious in building on the UK’s successes and recognising that we can’t afford to be complacent.
“The Mansion House Reforms are ambitious, pragmatic and necessary. They will underpin the UK industry’s future success. Most importantly, their main beneficiaries will be the British people, who will gain from greater investments in growing businesses, revitalising communities and improving retirements.”
Chris Hulatt, Co-Founder, Octopus Group said: ““We welcome government’s efforts to make the UK a more attractive place to start a business, and support measures that provide additional opportunities for private companies to raise capital.
“Finding new ways for the most skilled and talented entrepreneurs to access capital as they build businesses is fundamental to helping the UK maintain its place as the best place to start, build and scale a business.”
Noel Quinn, Group Chief Executive, HSBC said:“I welcome the strong and comprehensive package of measures announced by the Chancellor in his Mansion House speech.
“Unlocking equity to support companies in innovative high-growth sectors such as technology and life sciences is vital to the future growth of the UK economy.”
Lord Mayor, Nicholas Lyons said: ““These reforms and the Mansion House Compact mark a historic turning point that will accomplish the dual aim of securing a brighter future for retirees and channelling billions into our economy.
“I’m proud to have convened key industry players to make this commitment to unlock £50bn in capital by the end of the decade which will improve returns for pension savers and support firms to grow, stay and list in the UK.”
Tim Orton, Chief Investment Officer, Aegon UK said: ““Aegon UK is proud to be a founder signatory of the Mansion House Compact which will help deliver better long-term outcomes for our customers.
“We are committed to ensuring our customers can access and share in the growth and success of innovative companies we invest in. We will use our scale and expertise to develop investment solutions seeking to improve the retirement outcomes of the millions of members of the defined contribution pension schemes we support. The Compact will also create opportunities that help deliver our climate targets as we progress towards net zero.”
Sir Nigel Wilson, Group CEO, Legal & General said:“As the UK’s largest manager of money for pension clients, L&G is pleased to support the ambition set by the Compact.
“Increasing investment in science, technology and infrastructure will support better returns for the tens of millions saving for their retirement, as well as stimulate much needed long-term growth for the UK economy.”
Mark Fawcett, CEO, Nest Invest said:““For many years now, illiquid assets have been integral to diversified DC pension schemes around the world.
” It’s been a key driver behind Nest setting up our own private market mandates to ensure our members aren’t missing out. Nest will continue to increase our investment in unlisted equities, helping our 12 million members benefit from the strong returns these types of deals can typically offer.”
Ruston Smith, Chair, Smart said: ““Smart Pension is committed to securing better outcomes for long-term savers. Giving UK savers access to higher net returns by investing in unlisted equities, including innovative, high-growth UK companies as part of a well diversified portfolio, will deliver these outcomes over time.
“We are pleased to be a signatory of the Mansion House Compact and, as a successful British fintech, we are proud to be supporting the country’s technology sector, helping home-grown start-ups and scale-ups to flourish and thrive.”
Scottish Widows, CEO, Chirantan Barua said: ““The industry needs to modernise the investment options available to customers.
“With the right consumer protections in place, the proposals announced today could make a huge difference to our customers and the wider UK economy. I’m proud that Scottish Widows is a founding signatory of the Mansion House Compact.”
Phil Parkinson, Investments and Retirement Leader, Mercer said:“Mercer supports proposals that lead to improved pension scheme member outcomes.
“As a global investment solutions provider, we see first-hand the value that illiquid asset allocations can bring to investors’ portfolios from a risk and a return perspective and are in favour of initiatives designed to unlock this asset class for DC members.”
Edward Braham, Chair, M&G said:“Patient capital put to work in companies or projects over multiple decades is essential to support economic growth and importantly, capture value for people’s pensions as they save for their retirement.
“M&G’s heritage is in investing in private markets, whether it is through infrastructure, real estate or innovative companies with purpose. We are democratising access to private markets through the Prudential With Profits Fund, and are supportive of DC pension reforms that encourage more investment of this kind that has potential to result in positive outcomes for savers.”
Mike Eakins, Chief Investment Officer, Phoenix Group said:““We are proud to sign the Compact, which is an important step to allow UK long-term savers to invest in a more diversified portfolio, giving them access to the potential returns of a broader range of assets, in line with their international counterparts.
“Currently, only 9% of UK pension funds are invested in alternative assets as compared to 23% in other major pensions markets. With the right regulatory environment, Phoenix Group could invest up to £40 billion in sustainable and/or productive assets to support economic growth, levelling up and the climate change agenda whilst also keeping policyholder protection at its core.”
Figures revealed by the Labour Party show that 51,7000 homes in Edinburgh will be affected by eye-watering mortgage rises, with those remortgaging next year paying £280 more a month.
Across Scotland, 546,600 households in Scotland will be paying an average of £190 more a month on their mortgages next year.
The news follows interest rates rising for the 13th time in June, increasing the painful squeeze on family finances.
Ahead of visiting Centrica Green Skills Centre in Glasgow, Labour’s Shadow Chancellor Rachel Reeves said the party would not stand by as Scots facing the failures of both the Tories and the SNP.
Commenting, Scottish Labour MSP for Lothian Sarah Boyack MSP said: “People in Edinburgh are feeling the crushing weight of the Tory mortgage bombshell and the SNP’s incompetence.
“On the one hand, the Tories have shown time and time again that they simply don’t care about people facing hard, impossible choices; they don’t care about the relentless toll the cost of living emergency has taken on so many lives.
“And on the other, we have an SNP Government that is just not up to the job – too distracted by the scandal in their own party ranks.
“Labour’s Mortgage Rescue Scheme will offer practical help to ease the financial burden and will provide support to those in need.
“Our plan will pave the way for a brighter, prosperous and fair future for Edinburgh and the whole of Scotland.”
Local authority
Number affected by 2026
Average Increase in monthly mortgage payments next year
Independent research has confirmed the huge contribution that Edinburgh’s Festivals make to the economic vitality of Edinburgh and Scotland.
The latest study – conducted across the festivals in 2022 and surveying 22,000 people – shows that the Edinburgh Festivals continue to be Scotland’s world-leading cultural brands.
These unrivalled cultural programmes deliver a major economic uplift to businesses, jobs and livelihoods in the city and further afield – helping to rebuild sectors devastated by the pandemic and an especially important boost during the cost-of-living crisis, with the Festivals themselves having a stronger focus on fair work and local suppliers.
Key findings from the study show that the Edinburgh Festivals in 2022 are:
Edinburgh Festivals are World leading cultural brands
FACT: 3.2 million attendances generated by around 700,000 attendees FACT: Remain on a par with FIFA World Cup [3.4m], despite reduced scale in 2022 Edinburgh Festivals are Increasing economic powerhouses FACT: Economic impact increased in Edinburgh from £280m [2015] to £407m [2022] FACT: Economic impact increased in Scotland from £313m [2015] to £367m [2022] Edinburgh Festivals are Important drivers in the national economy FACT: Proportion of non-Scottish staying visitors increased from 25% [2015] to 31% [2022] FACT: Spend by non-Scottish staying visitors increased from £95m [2015] to £137m [2022] FACT: Impact supported 5000 FTE jobs across Scotland Edinburgh Festivals provide Crucial support to city jobs and livelihoods FACT: Impact created 5850 FTE jobs in Edinburgh [5650 in 2015] FACT: 51% of spend on accommodation (c£85m), 25% on food & drink (c£42m) and a further 19% on shopping (c£31m) Edinburgh Festivals offer Incredible value for money FACT: Generate £33 in economic impact for every £1 invested from the public purse
For the first time this Impact Study also identifies what the figures look like when the economic actions of locals are included in the calculations – previous impact studies have focussed solely on the Festivals’ role in bringing new money into the economy.
This further analysis shows the importance, previously only anecdotal, of local and Scottish audience spending driven by the Festivals rather than by other activities:
Edinburgh Festivals are Loved by locals
FACT: Had 1.5m attendances by residents of Edinburgh/Scotland [c50% of total audience] FACT: Contribute £492m to Edinburgh and £620m to Scotland in gross impact FACT: Support 7,150 FTE jobs in Edinburgh and 8,500 FTE jobs in Scotland FACT: Overnight audience spend from across Scotland has doubled since last report
Introducing the Study, Dr Simon Gage, Chair of Festivals Edinburgh commented: “The positive impact our Festivals have on businesses, jobs and livelihoods is great news for the people of our city and country – and we need to ensure that this economic recovery is built on a solid foundation of good responsible growth, looking after our people, our place and our planet.
“In this instance our impact is primarily felt by the tourism and hospitality sectors, not by the festivals themselves and the people who make them happen – in fact, their unique cultural programmes are hanging each year by a precarious financial thread, damaged by Covid lockdowns and over 15 years of declining investment.
“We call on all funders and supporters to come together to consider their long-term role in helping the Edinburgh Festivals remain Scotland’s world leading cultural brands and a crucial economic powerhouse for people’s jobs and livelihoods.”
Commenting on the Study, Richard Naylor, Director of Research at BOP consulting said: “This Study confirms and further strengthens the key message from the earlier Impact Studies that the Festivals are a major contributor to both the local Edinburgh economy and the national Scottish economy.
“This economic impact spreads far beyond the immediate cultural economy, with the biggest beneficiary businesses being those in the tourism and hospitality sectors.
“That the Festivals have bounced back so strongly shows the importance of communal events in our post-pandemic world, with audiences and visitors increasingly seeking out unique cultural experiences such as the Edinburgh Festivals.”
Tomorrow (10 July) Jeremy Hunt will outline how he will unlock capital for high-growth businesses and boost outcomes for pension savers, guided by ‘three golden rules’.
Chancellor to use first Mansion House speech to set out how Britain’s financial services sector will support the Prime Minister’s priority to grow the economy.
Measures will mean that more investment is available for high-growth businesses, which are key to creating good jobs, opening up opportunity and contributing millions in tax receipts.
Chancellor Jeremy Hunt will deliver his first Mansion House address tomorrow (10 July) setting out how Britain’s financial services will support the drive for long-term sustainable growth across the country.
In front of an audience of CEOs and leaders from the sector in the City of London, the Chancellor will set out his “Mansion House Reforms” to drive the Prime Minister’s priority to grow the economy by making the UK the most innovative and competitive financial centre in the world.
The financial and related professional services industry employs over 2.5 million people – something Hunt will describe as starting from a “position of strength” – and generates more than £100 billion in tax revenue, paying for half the cost of running the NHS.
He will also hail the importance of the traditionally “nimble” and “agile” sector for Government’s vision of Britain as a science superpower and the world’s next Silicon Valley.
The Chancellor is expected to say: ““I want to lay out plans to enable our financial services sector to increase returns for pensioners, improve outcomes for investors and unlock capital for our growth businesses.”
The reforms will not only help create jobs and increase tax revenues – which ultimately helps to fund vital public services – but will also lead to better returns for pension savers in the long term.
The Mansion House Reforms will be guided by the Chancellor’s three golden rules. He is expected to say: ““Firstly everything we do we will seek to secure the best possible outcomes for pension savers, with any changes to investment structures putting their needs first and foremost.
“Secondly we will always prioritise a strong and diversified gilt market. It will be an evolutionary not revolutionary change to our pensions market. Those who invest in our gilts are helping to fund vital public services and any changes must recognise the vital role they play.
“The third golden rule is that the decisions we take must always strengthen and never compromise the UK’s competitive position as a leading financial centre able to fund, through the wealth it creates, our precious public services.”
Hunt is expected to announce a wide-ranging package of measures that build upon the Edinburgh Reforms announced in December last year and deliver upon the vision that the Prime Minister himself set out at Mansion House in 2021 – with a smarter rulebook tailored for Britain’s needs.
On the economic headwinds facing the UK economy, the Chancellor will say that there can be “no sustainable growth without first eliminating the inflation that deters investment and erodes consumer confidence” and promise that the government will continue to honour its “responsibilities to those struggling the most” in the face of inflation.
David Livingstone, Citi’s Chief Executive Officer (Europe, Middle East and Africa) said:“Citi strongly supports a UK strategy focussing on growth and improving competitiveness.
“A government plan to reform the pension system to emphasise net returns would be key to the collective prosperity of all the country’s pensioners, while also creating a higher growth, more productive, and innovative economy.
“Based on Citi’s experience working with investors and pension funds around the world, consolidating funds often increases efficiency and improves access to global, diversified investment opportunities, which would be immensely beneficial to the UK, home to the second-largest pool of long-term capital in the world.”
Hannah Gurga, Director General, ABI said:“We share the Government’s ambition to make pension money work as hard as possible to deliver better returns for savers and the UK economy.
“A long-term strategy with savers at its heart and working with the sector are key to delivering on this ambition. We and our members look forward to working closely with Government as it fleshes out its plans over the summer.”
Dr Dan Mahony, Government Life Sciences Investment Envoy and Chair of the UK BioIndustry Association (BIA), said:“The unlocking of pension fund assets for investment into the UK life sciences sector will enable everyone saving for their retirement to benefit financially from Britain’s world-leading strength in drug discovery and development, whilst supercharging business growth and accelerating medical progress.
“We have great science and great people, now they will be supported by greater capital from the UK, adding to what the sector is already attracting from overseas investors.
“More domestic investors championing our growing companies will help them to put down deeper roots here, producing more jobs and benefits for the UK economy.”
Chris Cummings, Chief Executive, the Investment Association said:“The Chancellor’s comments recognise that investment must be at the heart our economy – providing for the financial futures of UK households through pensions that deliver good returns, even in the most challenging economic times, and powering growth by investing in British businesses.
“The recognition of the central role of long term investment is the foundation of successful policy.
“With the right regulatory framework, pension schemes will be able to invest productively and sustainably, unlocking further investment for innovative growth companies, and improving returns for savers by broadening investment options. In tandem with reforms to the listings regime, this will help the UK to become a more globally attractive place for companies to list, invest and do business.
“Achieving this new economic dynamism will require the government to bring together regulators, policymakers, and businesses, to create a forward-looking and internationally competitive investment framework, based on a stable, long term policy approach.
“This will also improve the gilt market, ensuring UK government debt remains attractive to domestic and international investors.
“Delivering these outcomes will require us to strike the right balance between risk and reward and between protection and innovation. Investment managers stand ready to play our part.”
Chancellor Jeremy Hunt met the UK’s principal mortgage lenders and the Financial Conduct Authority (FCA) yesterday to agree support for people struggling with mortgage repayments.
The latest market indicators (FCA; UK Finance) show that mortgage arrears and defaults remain below pre-pandemic levels, which were themselves extremely low. The FCA reported 0.86% of total residential mortgage balances in arrears in the first quarter of 2023 which is significantly lower than the 3.32% rate in 2009.
The proportion of disposable income spent on mortgage payments is currently at 5.4%, compared to around 10% in the 1990s and prior to the financial crisis.
The average homeowner re-mortgaging over the last twelve months had around a 50% loan-to-value ratio. This indicates homeowners have considerable equity in their homes, which makes it easier to manage repayments.
Lenders have less than 10% ‘owner-occupier mortgages’ on their books with loan-to-value rates greater than 75%, compared to around 25% before the 2008 financial crisis. Taken together, this puts the market in a significantly stronger position than before.
The lenders – which cover over 75% of the market – agreed to a new mortgage charter providing support residential mortgage customers. These are:
Anyone worried about their mortgage repayments can call their lender for information and support, without any impact on their credit score and we would encourage you to contact your bank who are there to help.
Customers won’t be forced to have their homes repossessed within 12 months from their first missed payment.
Customers approaching the end of a fixed rate deal will be offered the chance to lock in a deal up to six months ahead. They will also be able to apply for a better deal right up until their new term starts, if one is available.
A new agreement between lenders, the FCA and the Government permitting customers to switch to an interest-only mortgage for six months, or extend their mortgage term to reduce their monthly payments and switch back to their original term within the first six months, if they choose to.
Both options can be taken without a new affordability check or affecting their credit score.
Support for customers who are up-to-date with payments to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.
Providing well-timed information to help customers plan ahead should their current rate be due to end.
Offer tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.
The Chancellor of the Exchequer, Jeremy Hunt, said: ““There are two groups of people that we are particularly worried about. The first are people who are at real risk of losing their homes because they fall behind in their mortgage payments. And the second are people who are having to change their mortgage because their fixed rate comes to an end, and they’re worried about the impact on their family finances of higher mortgage rates.
“So today I agreed with the banks and the principal mortgage lenders and the Financial Conduct Authority three very important things.
“The first is that absolutely anyone can talk to their bank or their mortgage lender and it will have no impact whatsoever on their credit score.
“The second is that if you are anxious about the impact on your family finances and you change your mortgage to interest only or you extend the term of your mortgage and you want to go back to your original mortgage deal, within six months, you can do so, no questions asked and no impact on your credit score. That gives people a powerful new tool for managing their monthly budgets – and it will begin taking effect within the next two weeks.
“And finally for people who are at risk of losing their home in that extreme situation, the banks and mortgage lenders have a number of things in place. The last thing that they want to do to repossess a home, but in that extreme situation they have agreed there will be a minimum 12 month period before there’s a repossession without consent.
“These measures should offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty.
“Tackling high inflation is the Prime Minister and my number one priority. We are absolutely committed to supporting the Bank of England to do what it takes. We know the pressure that families are feeling. That’s why we’ve introduced big support packages around £3,000 for the average household this year and last.
“But we will do what it takes, and we won’t flinch in our resolve because we know that getting rid of high inflation from our economy is the only way that we can ultimately relieve pressure on family finances and on businesses.”
Martin Lewis, founder of MoneySavingExpert.com said: “The unprecedented steep rise in mortgage rates is causing a nightmare for many with variable mortgages and those coming off fixes.
“Therefore, the most important thing we can focus on right now is appropriate, flexible forbearance measures. While the Bank of England’s aim is intended to squeeze people’s disposable incomes, no one wants people’s lives to be ruined by arrears and repossessions – and that is the urgent protection we need to focus on.
“I met the Chancellor on Wednesday and reiterated that the minimum we needed was to ensure that when people asked for help from lenders, they knew that if things changed, it wouldn’t be detrimental to their financial situation and their credit scores would be protected as much as possible.
“I’m pleased to see it looks like the Chancellor has listened and those measures are going to be put in practice by the banks. We need to make sure everybody knows their rights if they are in trouble with their mortgage, so they can feel comfortable speaking with their lender and understand the measures that they can request for help.”
Nikhil Rathi, chief executive of the Financial Conduct Authority, said: “Today’s productive meeting builds on the work we’ve done over the last year to ensure those who get into difficulty receive the tailored support they need.
“We’ll move quickly to make any changes needed to support today’s commitments.”
Ian Stuart. Chief Executive Officer, said HSBC UK said: “We’re firmly focused on supporting our customers in this challenging economic environment, so we welcome the meeting with the Chancellor today, and with the support of the regulators, the concerted efforts across our industry to help customers through these measures.
“It’s important that customers feel comfortable contacting us if they feel they are getting into financial difficulty because whilst every customer’s situation is different we have a range of options that we can use to help them find their way through. We stand ready and remain committed to our customers.”
David Duffy, Chief Executive Officer, Virgin Money said: “Today’s commitments are an important next step in ensuring that customers feel supported as they navigate rising rates and high inflation.
“At Virgin Money, we are committed to supporting customers in the current economic environment and will continue to work with Government, regulators and industry to help those facing financial difficulty.”
Dame Alison Rose, Group Chief Executive, NatWest said: “Our priority is to help the people, families and businesses we serve to navigate this ongoing economic uncertainty.
“Today’s announcements, following very productive discussions between mortgage lenders, government and regulators, will provide further flexibility and reassurance to customers who may be anxious about their household finances.
“We stand ready to support those worried about the future, and encourage anyone experiencing financial difficulty to get in touch.”
Commercial property investment by the City of Edinburgh Council has provided space for local businesses to thrive while raising over £15 million a year for vital public services, reveals a new report.
A revised version of the Council’s Commercial Property Strategy – which supports existing, new, and expanding enterprises across the Capital – has been approved by the Finance and Resources Committee.
It reveals that the Council is the biggest landlord of commercial property in all of Edinburgh, with a portfolio of 949 assets worth in the region of £245m. This has helped the Council generate income to reinvest towards frontline services and make profits from sales, which have helped with budget savings.
The strategy also supports a number of grassroots and community-based clubs and organisations with low-cost lease arrangements.
Under the refreshed plan, the Council will continue to maximise income growth from buildings in the year ahead while also prioritising support for start-ups and the Capital’s ambitious net zero by 2030 climate commitment.
A change to the strategy will also allow the opportunity for funds from property sales to be reinvested back into the portfolio, helping to streamline and make the most of the council’s assets.
This involves a vision for designing inhouse and building a new, sustainable, business park on Council-owned land at Peffermill – mirroring the successful business park launched in East Hermiston in early 2018. Five years on, the East Hermiston Park is providing 16 fully let units in a 1,600sqm modern industrial space yielding an annual income of £185k.
Councillor Mandy Watt, Finance and Resources Convener, said: “I’m pleased that the refreshed strategy has received Committee’s approval and that we’ll be able to improve on the £15m of income already raised from the council’s property portfolio.
“The opportunities available to support even more jobs at the new low carbon business park in Peffermill are exciting, and I’m looking forward to plans being brought forward later in the year.
“Over the last year, the council has used its properties to support the economic success of the city post-Covid and helped budding businesses to thrive, in ways that maximise income for delivering Council services. The results speak for themselves and we’ve seen first-hand the benefits business parks like the existing one at East Hermiston can bring.
“Against a backdrop of reduced government funding, we’ve had to think creatively to make the most of any income that we can raise for council services. This property strategy is a good example of that.”
Bank of Scotland’s Business Barometer for May 2023 shows:
Business confidence in Scotland fell nine points during May to 22%
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down two points at 30%
Overall UK business confidence remains strong at 28%, down five points on last month
Business confidence in Scotland fell nine points during May to 22%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down two points at 30%. When taken alongside their optimism in the economy, down 20 points to 14%, this gives a headline confidence reading of 22%.
Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (45%), investing in their team (35%) and entering new markets (29%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 29% of businesses in the region expect to increase staff levels over the next year, down three points on last month.
Overall UK business confidence dropped five points to 28% in May. Despite the dip, every UK nation and region report a positive confidence reading.
As the country celebrated the Coronation, London reported the highest levels of business confidence at 43% (down four points on last month), followed by the North East at 35% (down six points month-on-month). The West Midlands, South East and South West, also reported high readings in May, all at 30%.
Firms remain optimistic about their own trading prospects, with a net balance of 34% expecting business activity to increase over the next 12 months, down just five points on last month.
Chris Lawrie, area director for Scotland at Bank of Scotland Commercial Banking, said: “Despite a slight drop, business confidence figures remain positive and it’s great to see so many firms planning to invest in their teams.
“On the ground we’re hearing that more and more companies are setting their sights on new goals in the coming twelve months. Whether going after new markets, or making new hires to help during busier periods, it’s important that businesses ensure their working capital is in rude health.
“Having a keen eye on forecasting and finances can help firms to move swiftly when new opportunities arise. We’ll remain by the side of Scottish businesses to support them and help them to capitalise on growth opportunities this summer.”
Confidence among manufacturers increased to a one-year high of 40% (up from 29%), while retail registered a more modest two point rise to 26%, and construction remained robust at 34% despite its monthly nine point decline.
Services confidence, however, fell back to 26% from 36%, almost erasing last month’s rise. Overall, confidence across the broad sectors remains above levels at the start of the year.
Paul Gordon, Managing Director for Relationship Management, Lloyds Bank Business & Commercial Banking, said: “Although we’ve seen a slight slowdown in hiring activity this month, there is still an overall upward trend in hiring intentions this year, with improvements in labour availability as well.
“While businesses may be feeling less optimistic, it’s still encouraging to see confidence is still in line with the Barometer’s long-term average, consistent with positive growth.
“Wage pressures continue to be at higher levels than before the pandemic, which management teams will be closely monitoring. And with inflationary pressures persisting, businesses need to remain agile to the changing economic environment, while keeping a tight watch on costs and the structure of their finances.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “As the economic environment remains challenging, compounded by stubborn inflation and higher wage pressures, business confidence has dipped slightly this month as firms feel cautious about the wider economy and their own trading prospects.
“However, while firms’ trading prospects and economic optimism both eased back, they still remain in positive territory as the UK has avoided an outright contraction in GDP – indicating a certain amount of underlying resilience in the economy.”
