Insolvencies, mortgages and shop prices
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
There is a glut of important economic data out today that I want to flag. This includes upbeat news on inflation and mortgages but also data from The Insolvency Service that highlights how challenging 2023 was for businesses.
Firstly, shop price inflation has slowed significantly sharply according to the latest report from the British Retail Consortium and NielsenIQ. Shop price inflation came in at 2.9 per cent in January, down from 4.3 per cent. This is the lowest reading for shop price inflation since May 2022 and the biggest monthly fall in inflation for three years.
Helen Dickinson, chief executive of the BRC, said:
“Non-food goods drove the fall, as many retailers offered heavily discounted goods in their January sales to entice consumer spending amidst weak demand. Good news for the morning brew as the price of tea and milk fell, while evening tipples remained more expensive on the back of increased alcohol duties.”
You can read more from the BRC here
Meanwhile, mortgage approvals in the UK have risen to the highest level in six months, suggesting activity is picking up in the housing market. There were 50,459 mortgages approved in December, up from 49,313 in November, the Bank of England said. The effective rate of interest on newly-drawn mortgages was 5.28 per cent on average, down 6 basis points month-on-month, which was the first drop for two years.
The chart below from the Bank shows mortgage approvals over the last 20 years…
And here are a couple of other interesting charts from the Bank. This is net consumer borrowing per month…
And this is lending to businesses…
You can find the full report from the Bank here
While this data suggests the economic outlook is improving, it is too late for businesses that did not survive 2023. There were more corporate insolvencies in England and Wales in 2023 than in any year since 1993, according to a new report by The Insolvency Service. There were 25,158 registered insolvencies in 2023. This includes liquidations, administrations, company voluntary arrangements and receiverships.
One in 186 active companies entered insolvent liquidation last year, The Insolvency Service said. This equates to a rate of 53.7 per 10,000. This is up from 49.6 per 10,000 in 2022, but well down on the 94.8 recorded during the financial crisis of 2008 and 2009.
The graph below shows insolvencies over the last 20 years…
The rise in insolvencies has been driven by the tough trading conditions in 2023 but also by the end of government support packages that helped businesses get through the Covid-19 crisis and a surge in energy bills.
The graph below shows the industries that suffered the most insolvencies…
You find The Insolvency Service’s full report on 2023 here
Podcast…
The new episode of our Business Leader podcast is out today and it looks at the story behind Sir Stelios Haji-Ioannou and easyJet.
The origins of easyJet can be traced back to 1994, 30 years ago, when Sir Stelios travelled to Boeing’s factory in the US. EasyJet’s maiden flight was on November 10 1995 and was a journey from Luton to Glasgow. Today it is the biggest airline in the UK by passenger numbers.
In this episode of Business Leader, Sir Stelios discusses how he built the airline, how it used distinctive marketing to fight fierce competition, how fly-on-the-wall documentary Airline became one of the most popular shows on television, and why he has launched a new award for young entrepreneurs.
You can listen to the episode on Substack here, Apple here or Spotify here
Other stories that matter…
1. HSBC has been fined £57.4 million for “serious failings” in protecting customer deposits. The fine is the second largest ever to be issued by the Prudential Regulation Authority, which is part of the Bank of England. The PRA said that between 2015 and 2022 HSBC had failed to to accurately identify accounts that were eligible for the Financial Services Compensation Scheme, which protects customer deposits of up to £85,000 if a bank collapses. Sam Woods, chief executive of the PRA, said: “The serious failings in this case go to the heart of the PRA’s safety and soundness objective.” Statement from the PRA here
2. Elon Musk says his tech start-up Neuralink has successfully implanted a wireless brain chip into a human. Neuralink is developing chips that could help humans to manage neurological conditions. BBC story here
3. The cost of building infrastructure in the UK is more expensive than other European countries, according to a new report by Boston Consulting Group. Financial Times story here
4. Walmart, the largest supermarket retailer in the world, is paying store managers up to $400,000-a-year (£315,000). The company treats the store managers like mid-level executives with the power to source products, manage local online orders and oversee hundreds of workers. Story by The Wall Street Journal here
5. A new industry is growing in finance that helps family businesses find new owners, according to a fascinating piece in The Economist. Search funds have emerged as an off-shoot of the private equity industry in the US and are now in Europe too. These funds look to buy family businesses where the owner or chief executive wants to retire. You can read that piece here
And finally…
A podcast recommendation for you today. I highly recommend The Rest Is History’s seven-part series on John F Kennedy and his assassination in 1963. The series explores Kennedy’s background, presidency and the theories behind his death. I learned a lot about JFK that I hadn’t known before. The episodes were released at the end of 2023, so I am slightly late to this, but you can find the first part via the link below…
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Best
Graham