Risks and reports
The business news that matters
A scheduling note: There will be no Off to Lunch tomorrow, back on Thursday
Hello and welcome to the latest edition of Off to Lunch…
The Bank of England has published its latest analysis about the risks to financial stability in the UK. This provides an insight into what the Bank thinks are the main challenges facing consumers, businesses and the banking system.
The quarterly update is produced by the Bank’s Financial Policy Committee, which is led by Andrew Bailey, the governor. The previous report was published in July.
The Bank said there were concerns about the impact of persistent inflation, higher interest rates, geopolitical tensions and the vulnerability of the Chinese property market, but also a “notable increase in the proportion of borrowers taking out mortgages with 35-year or above terms”. On household finance, the Bank added:
There is evidence that some households are increasing the use of consumer credit in response to cost of living pressures and higher debt servicing costs, which could lead to greater debt vulnerability for households in the near-term. A significant rise in unemployment would increase the likelihood of UK household debt vulnerabilities crystallising. UK unemployment remains low by historical standards at 4.3%, although employment indicators are generally softening with subdued economic activity.
The report said the UK corporate sector is “expected to to remain broadly resilient to higher interest rates and weak growth”, but added:
However, the full impact of higher financing costs has not yet passed through to all corporate borrowers, and will be felt unevenly, with some smaller or highly leveraged UK firms under pressure. Corporate insolvency rates have continued to rise, albeit from very low levels.
The Bank has published a summary of its findings below…
You can find the full report from the Bank here
The International Monetary Fund has also published its latest Global Financial Stability report. It has warned of a “heightened risk” to the financial system from the recent volatility in bond markets. The IMF has forecast that the UK economy will grow by 0.6 per cent next year, which would be the slowest among G7 countries and compares to 1.5 per cent for the US, but this is based on an assumption that interest rates will hit 6 per cent, which now looks less likely.
You can find a summary of the IMF’s report below….
Other stories that matter…
1. The amount of empty office space in London has hit the highest level for at least 20 years, according to research from property group CoStar. Big cities in the US such as New York and San Francisco have seen a similar trend as people continue to work from home following the Covid-19 crisis. Story by the Financial Times here
2. The increasing use of weight-loss drug Ozempic appears to be impacting sales of food in the US, particularly junk food. Bloomberg analysis here and a round-up of what companies have said about this by Quartz here.
3. Andy Haldane, the former chief economist of the Bank of England, has written a column about the dangers of short-term thinking in light of the changes to High Speed 2. “If it continues to underinvest in long-term transformational projects, few things could be dimmer than the UK’s own growth prospects,” he writes. Piece here
4. A new study by Harvard Business Review has warned about the danger of managers turning an everyday setback into a catastrophe, or “catastrophizing”, as the writer describes it. “Your choice to catastrophize isn’t random. It’s learned behaviour. Be curious about how and when you may have learned it,” the piece says. You can read the analysis here
5. Management teams should seek a balance between introverts and extroverts, and they also benefit from understanding where everyone sits in the range, according to an analysis in the latest edition of Moving Tribes, the newsletter by retail adviser (and Business Studies podcast guest) Ian Shepherd. Piece here
And finally…
I read two fascinating sports features over the weekend that I wanted to share with you. They include stories and lessons that are relevant way beyond the world of sport…
Firstly, Mike Atherton’s interview with Simon Kerrigan in The Times. Kerrigan, for those who don’t know, is a cricketer who played one match for England ten years ago. That match was a disaster. Kerrigan froze in the spotlight, effectively losing the ability to bowl the ball where he wanted and having a case as what is described as the “yips”. Kerrigan never played for England again and has now retired from cricket. He has now spoken for the first time about what happened and why. “It’s what you’ve played for and dreamed about and it quickly turned into something else,” he says. “I’ve done lots of work with coaches and psychologists since the event. Once it’s happened it’s always there, and it’s been about trying to accept that and to still be able to bowl with those feelings and worries.” You can read that piece here
Secondly, also in The Times, an interesting analysis of how the Ireland rugby team won 16 games in a row (now 17) and are one of the favourites to win the Rugby World Cup. The hiring of Gary Keegan as performance coach - effectively a psychologist - has been key. Paul O’Connell, the former captain and now assistant coach, says in the piece: “Being able to not rely massively on emotions is a big part of it. The lads love playing for each other, they love playing for Ireland, they love pulling on the jersey and what it means and all that. But that’s the icing on the cake now, rather than the whole cake.” The piece offers an insight into an organisation that is performing well but was previously renowned for underachieving. You can read that piece here
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Best
Graham