📋 House prices, regional investment and tech companies...
Research round-up + Podcast + Michelin stars
Hello everyone and welcome to the latest edition of Off to Lunch…
House prices fell by 3.1 per year-on-year in March according to new research by Nationwide. That is the biggest annual drop since July 2009 and the aftermath of the financial crisis. House prices have now fallen for seven months in a row, dropping 0.8 per cent in March compared to February.
This data from Nationwide is part of a collection of interesting research about the state of the UK that has come across my desk this week. I want to share some of that with you…
As I have touched on before, housing market data is a useful guide to the mood of consumers. Nationwide’s monthly research is usually one of the most up-to-date sources of information and includes a useful regional breakdown. This month’s regional breakdown shows a notable disparity between housing markets across the country, with house prices up year-on-year in the West Midlands, Northern Ireland, South West and East Midlands but down everywhere else. This graph is courtesy of Nationwide…
Below are two more Nationwide graphs which show how the mortgage market is putting pressure on house prices. The first graph shows how the number of mortgage approvals has dropped in recent months while the second shows the change in interest rates on an average five-year mortgage…
However, outside of the housing market there is some upbeat research around too. Lloyds Bank says that business confidence has risen to its highest level in ten months, with optimism about the outlook for the economy improving and wage demands from staff easing. More in a story by The Times here.
Meanwhile, research by law firm Brabners has found that Manchester ranks as the most attractive city for institutional investment in the UK, with London second and Cardiff third. Brabners, which is based in Liverpool, said it surveyed more than 400 institutional investors in the UK and US about where they want to invest over the next 12 months. It also found that half of these investors intend to increase their investment in northern England over the next 12 months, with the interest of US investors boosted by the pound’s weakness against the dollar. After Cardiff came Birmingham, Glasgow, Edinburgh, Bristol, Leeds and Liverpool.
Lastly, Evaluate|Locate, whose data on levelling-up I have referenced before, have looked at the number of active tech businesses operating in the UK. This number rose for a decade until the Covid-19 crisis, with the economic impact of the pandemic leading to the failure of a collection of businesses. However, that decline is now levelling off (it was 9.3 per cent in March compared to 10.2 per cent in January) and the number of active tech businesses is rising in parts of the country, such as Brighton, which appears to have benefited from Londoners moving to the south-coast city. Evaluate|Locate uses Companies House data to track this. This is what their data shows for the number of tech businesses actively trading from each of these cities…
Podcast…
The latest episode of Business Studies went live on Tuesday and features an interview with Rishi Khosla, the co-founder and chief executive of OakNorth Bank. You can find it on Substack here, Apple here and Spotify here. It is also available on all other podcast platforms.
The interview with Khosla had been scheduled for a while but took a fascinating turn because it happened in the immediate aftermath of the collapse of Silicon Valley Bank. The story of OakNorth’s attempts to buy Silicon Valley Bank UK during a frantic weekend of talks makes up a large part of the episode. OakNorth missed out on the deal, with HSBC securing it instead. However, Khosla says the HSBC takeover could be bad for UK innovation and start-ups. He says:
"We lost an opportunity to create a champion for the British innovation economy. Actually putting SVB UK into HSBC is probably going to reduce the amount of funding for the innovation economy that the country has."
Khosla’s point is that OakNorth is a specialist lender to small and medium-sized businesses and is more attuned than HSBC to the unique requirements that founders and start-ups have. However, OakNorth would have needed the Bank of England to provide a credit facility alongside the deal because of the risk that the loans SVB had issued could default. HSBC, which is obviously a far bigger bank, could shoulder these potential losses without that facility.
The Bank of England appears to have prioritised the deal that most obviously and quickly protected the UK’s financial stability and the deposits of SVB’s UK customers. Did it miss an opportunity by doing this deal? Does that matter? The Bank said the demise of SVB UK did not pose a systemic risk to the banking system. However, as subsequent events showed - ie UBS’s emergency takeover of Credit Suisse - the demise of SVB sparked a loss of confidence in other institutions. This was not a moment to take risks. That is certainly how customers of SVB UK felt on the Monday that the deal was announced. They had been worried they were going to lose their money.
Aside from the SVB story there is much to digest in the episode. Khosla talks about the challenges that OakNorth has faced since it became the most valuable fintech in Europe in 2019, when it secured a valuation of $2.8 billion thanks to investment from Softbank. He also discusses when and where it could float - Khosla has concerns about listing in London - and his links to the Conservative party, which have seen him described as a “Tory donor” or “former Tory donor” in previous coverage. The episode highlights some of the challenges that a promising tech company faces when it reaches a bigger scale…
The next episode of Business Studies will be with you on Tuesday
Other stories that matter…
The government-backed British Patient Capital has confirmed it is putting £30 million into Northern Gritstone, which invests in spin-outs from Leeds, Manchester and Sheffield universities (UKTN)
The new owner of Britishvolt has been in the north-east of England discussing its planned gigafactory in Blyth, Northumberland. “This will be a huge project for a long period of time,” David Collard said at an event hosted by the North East England Chamber of Commerce (Business Live)
The cost of the new South Wales Metro - which is electrifying lines into Cardiff and creating a new rapid transit system - has risen by more than a third from £734 million to £1 billion, with inflation and disruption from Covid-19 blamed. The network is due to open in 2025 (BBC)
Jennifer Williams, the Financial Times’s northern England correspondent, has written about the importance of local media in holding councils and mayors to account and stopping corruption (Financial Times)
Councils across the UK spent £23.4 million on consultants to try to win a chunk of the government’s Levelling Up Fund (Northern Agenda)
Lord Wolfson, the chief executive of Next, is the longest-serving chief executive in the FTSE 100. Since he took charge of Next in 2001 the company’s share price has risen more than 600 per cent. Next published its annual results this week and the Next boss took the opportunity to offer some deep insights into how he runs the business. Page 16 is particularly interesting. On this page Lord Wolfson outlines six key things that he expects from Next staff: take decisions and make things happen; change is everyone’s job; create value and make profit; keep it simple and speak in plain English; be open, honest and considerate in your dealings with others; be demanding but never nasty. The full report is here (Next)
Great piece from The Athletic on how Brighton & Hove Albion have outperformed bigger rivals in the Premier League this season and how new manager Roberto De Zerbi built on the success of Graham Potter. The piece is anchored around an interview with Adam Lallana, who has also played under Mauricio Pochettino, Jurgen Klopp and Gareth Southgate. “He’s just made football (make) so much more sense to me since he’s been here,” says Lallana. “He’s given substance to it: ‘This is why you are doing this, so you can have this‘.” (The Athletic)
An amusing but insightful profile of Nassim Nicholas Taleb by The Spectator. “What people don’t realise is I have my Twitter fights prepared at least a week in advance,” he says. “And I use that downtime, traffic jam in an Uber or something like that, to start executing.” Aside from Twitter spats the piece also looks at why Taleb has turned against cryptocurrency despite making a “not insubstantial” amount from bitcoin and why he is an antidote to the social media influencers offering get-rich-quick and self-help guides (The Spectator)
A long-read in the Financial Times about how AI is being used by sophisticated gamblers to bet on horse-racing and build businesses (Financial Times)
And finally…
Michelin has published its annual list of the restaurants in the UK and Ireland that have been awarded Michelin stars. The full-list, including the new entries, is here. It also has published a list of restaurants awarded a Bib Gourmand, which recognises venues offering great value-for-money. That is here.
There are now 11 restaurants in Cumbria with a Michelin star, the most for any county outside London. This includes three for Simon Rogan’s L'Enclume. The dining boom in the Lake District owes much to Rogan opening L'Enclume in Cartmel in 2002.
The news on Cumbria’s Michelin stars prompted a story from The Telegraph which included this eye-opening line:
“Forget Kendal mint cake and Cumberland sausages – the Lake District is Britain’s hottest fine-dining destination.”
I just want to confirm for anyone wondering, people in Cumbria don’t eat Kendal Mint Cake every day. The piece damns Cumbria with faint praise throughout - describing it as “overlooked” and “a place more known for cheery pub food and pretty tea-rooms”. However, it also includes interesting quotes from Rogan and details about Cumbria’s origins as a culinary destination. The article is here
For those who prefer trying street food to fine-dining (that includes me) then Salford is the place to visit. It has been named the best place for street food in the UK, ahead of London, according to a new survey. Manchester Evening News story here
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Best
Graham