July 2014 The Cornish Account
-
Upload
francis-clark-llp -
Category
Economy & Finance
-
view
57 -
download
0
description
Transcript of July 2014 The Cornish Account
The Cornish AccountBack in the Black?
www.francisclark.co.uk
The Cornish AccountBack in the Black?
Welcome Introduction
The Cornish Account
Presentation at Francis Clark2 July 2014
Stephen Collins
AgentAgency for South West England
GDP and sectoral output
South West Agency
OUTPUT AND EMPLOYMENT
South West Agency
Contributions to the change inwhole-economy employment since 2008 Q2
Source: Labour Force Survey. South West Agency
Self-employment share
Source: Labour Force Survey South West Agency
Regional unemployment rates
Source: Labour Force Survey.South West Agency
Survey indicators of capacity utilisation
Sources: Bank of England, BCC, CBI, CBI/PwC, ONS and Bank calculations.South West Agency
Productivity growth
Sources: ONS and Bank calculations.South West Agency
DEMAND
South West Agency
Contributions to average quarterly GDP growth
South West Agency
Household saving ratio
South West Agency
Survey measures of household expectations
Source: Research carried out by GfK NOP on behalf of the European Commission. South West Agency
Business investment and surveys of investment intentions
Sources: Bank of England, BCC, CBI, CBI/PwC, ONS and Bank calculations.. South West Agency
Composition of the fiscal consolidation
Source: Institute for Fiscal Studies. South West Agency
The UK current account
South West Agency
UK goods and services exports
South West Agency
UK imports and import-weighted demand
Sources: ONS and Bank calculations. South West Agency
Sterling exchange rates
South West Agency
Advanced economies continued to recoverContributions to growth in real world GDP, actual and forecast
Sources: IMF World Economic Outlook (WEO) and Bank calculations. South West Agency
GDP projection based on market interest rate expectations and £375 billion purchased assets
South West Agency
INFLATION
South West Agency
Bank staff projection for near-term CPI inflation
South West Agency
Contributions to CPI inflation
South West Agency
Private sector nominal earnings and output per worker
Sources: ONS and Bank calculations. South West Agency
Estimate of consumer-facing companies’ margins relative to its average since 2000
Sources: ONS and Bank calculations South West Agency
Companies’ expected changes in own prices over the next year
Sources: CBI (all rights reserved) and ONS. South West Agency
CPI inflation projection based on market interest rate expectations and £375 billion purchased assets
CPI inflation projection in February based on market interest rate expectations and £375 billion purchased assets
South West Agency
CREDIT CONDITIONS
South West Agency
Loans to individuals
South West Agency
Projections and outturns for net lending to households and PNFCs
South West Agency
At short horizons, implied volatility was historically low across asset classes
Differences from averages since 2003, in standard deviations, of three-month option-implied volatilities
Sources: Barclays Live, Bloomberg, Chicago Mercantile Exchange, NYSE Liffe and Bank calculations.
South West Agency
House price inflation has risen in the United KingdomAnnual Halifax and Nationwide regional house price inflation
Sources: Halifax, Nationwide and Bank calculations. South West Agency
House price inflation has increased in all areas of the United Kingdom during the past year
Annual house price inflation
Sources: Halifax, Nationwide and Bank calculations. South West Agency
Mortgage rates remained at exceptionally low levelsAverage UK mortgage rates on new lending
Source: Bank of England.South West Agency
The share of new mortgages with LTI multiples above 4.5 has risen to a new peak
New mortgages advanced for house purchase by LTI
Sources: Council of Mortgage Lenders, FCA Product Sales Data (PSD) and Bank calculations.
South West Agency
Indicators of housing affordability
Sources: Bank of England, Halifax, Nationwide, ONS and Bank calculations. South West Agency
Headwinds
• Financial sector continues to heal
• Public and private balance sheets continue to be repaired
• Exporters face a 10% appreciation in the value of sterling over the past year
• Growth in the world economy, although improving, remains muted
• EA risks more balanced but downside risks o/a rapid growth in Chinese shadow banking
• Risk of reassessment of risks in financial markets – implied volatilities are low
South West Agency
POLICY
South West Agency
Decision-making bodies, since April 2013
South West Agency
Bank Rate and forward market interest rates
Sources: Bank of England and Bloomberg. South West Agency
Medium term monetary policy
• Meet inflation target, while using up spare capacity, particularly in the labour market
• Bank Rate increases are expected to be gradual and limited, so Bank Rate may need to stay low for some time
• Asset purchase sales (ie, reversal of QE) will be deferred till Bank Rate is at a level from which it could be cut materially
• Close coordination with the FPC
South West Agency
Slack in the economy
• Companies operating at about normal levels of capacity, but significant slack in the labour market
• Best collective judgement: =1-1.5% of GDP
• Visible in • unemployment rate above equilibrium• level of part-time working among people unable to find
full time work• “hidden slack” in high level of self-employment?
• Expectation: only absorbed by the end of the forecast period, assuming output growth moderates and productivity growth resumes
South West Agency
Policy measures announced by the Financial Policy Committee, 26 June 2014
• First, we are introducing a new affordability test: mortgage lenders should assess whether borrowers could still afford their mortgage if Bank Rate were to be 3 percentage points higher than at the origination of the loan.
• Second, we are introducing a cap: no more than 15% of any lender’s total number of new residential mortgages should be at or greater than 4.5 times the borrower’s income.
South West Agency
The Cornish AccountBack in the Black?
www.francisclark.co.uk
The Cornish AccountBack in the Black?
What we have seen
• Cornish economy perhaps slower to feel the cold in certain key areas
• Lack of large employers and higher than average self-employment
• But heavy reliance on Public sector for higher paid jobs
www.francisclark.co.uk
The Cornish AccountBack in the Black?
What we have seen
• Construction hit hard due to finance availability and market conditions
• Cornish house prices peaked at £208,000 April 2008 but fell to a low of £175,000 May 2009
• Business start-ups exceed failures 2004-2008, however 2008-2011 more failures than start-ups
www.francisclark.co.uk
The Cornish AccountBack in the Black?
What is the most significant factor restricting your business?
1) Economy/Market Demand (40%)
2) Recruitment/Skills (21%)
3) Availability of Finance (17%)
www.francisclark.co.uk
The Cornish AccountBack in the Black?
Recruitment/Skills
www.francisclark.co.uk
Video 1
www.francisclark.co.uk
Video 2
www.francisclark.co.uk
Video 3
www.francisclark.co.uk
Video 4
www.francisclark.co.uk
Our survey - Employment/Wages
Do you expect to increase you employee numbers in the next 12 months?
• 50% expect static numbers, encouragingly however, more expect growth (45%) than decline (only 5%)
• Investing/training for current staff
www.francisclark.co.uk
Our survey - Employment/Wages
What are your expectations for salary inflation in 2014? • Static - 36%• Up to 2% rise - 35%• 2-4% rise - 28%• Over 4% rise - 1%• Pay cuts - 0%
Cornwall continues to be well below National average, but who sets the wages?
Pensions/Auto-enrolment – All additional costs that need to be recovered
No indication of wages inflation in the near future to close the gap.
Impact on ability to get on the housing ladder?
www.francisclark.co.uk
The Cornish AccountBack in the Black?
Availability/Sources of Finance
www.francisclark.co.uk
Video 5
www.francisclark.co.uk
Video 6
www.francisclark.co.uk
Video 7
www.francisclark.co.uk
Our survey - Investment
Will you be looking to raise additional borrowing or funding in the next 12 months?• 52%Yes• 48% No
www.francisclark.co.uk
Our survey - Investment
Retained Profits
Bank loan/Overdraft
Grant /Public funding
Crowdfunding
Other
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Which source of borrowing do you expect to seek to provide additional funding?
www.francisclark.co.uk
Our survey - Investment
What will additional funding be for?
• 34% - Equipment (Tax driven?)
• 21% - Working capital
Less apparent appetite for
• 8% - R&D
• 3% - Business acquisition
www.francisclark.co.uk
Economic Threats
Interest Rates - The only way is up!
www.francisclark.co.uk
Video 8
www.francisclark.co.uk
Economic Threats
Impact on National/Cornish Economy
• Households
• Business
• Politics? General Election 2015
• Potential Opportunities – Will savings rates follow interest rates? Retired and shoulder months
www.francisclark.co.uk
Video 9
www.francisclark.co.uk
Economic Threats
• Interest Rates - A blunt tool?
• One size does not fit all!
www.francisclark.co.uk
Economic Threats
What do you think is the most serious economic issue for Cornwall?
Same old story, nothing new here!
www.francisclark.co.uk
Video 10
www.francisclark.co.uk
Economic Threats
1. Transportation links/costs • Road/Rail/Air• Local Public transport• Isles of Scilly
www.francisclark.co.uk
Video 11
www.francisclark.co.uk
Economic Threats
2. Housing (affordable) • Differential between house prices and wages• Impact of Second Homes?• Housing Boom?
www.francisclark.co.uk
Opportunities
Where is the greatest opportunity for Cornwall in the next 10 years?
www.francisclark.co.uk
Video 12
www.francisclark.co.uk
Opportunities
1) Energy and Renewables2) R&D sector3) IT & Related industries
4) Marine5) Agriculture6) Tourism
New/Sexy! Jobs?
Old/Established and forgotten at our peril
www.francisclark.co.uk
Video 13
www.francisclark.co.uk
Opportunities
Brand Cornwall - Quality
Third tranche of EU funding to 2020• Cornwall and Isles of Scilly LEP• Need to build on Objective One and Convergence funding• Where administered from?
www.francisclark.co.uk
The Cornish AccountBack in the Black?
Is your business Back in the Black?
Overall positive signs at individual business level
• 51% - Back in the black
• 25% - “never went into recession”
• 17% - Still in red but expectations of improvement
• 6% - Still in recession
www.francisclark.co.uk
The Cornish AccountBack in the Black?
Do you think Cornwall is Back in the Black? • Yes 33%• No 67%
Inconsistency with individual business responses?
Everyone above average?
Glass half empty?
www.francisclark.co.uk
The Cornish AccountBack in the Black?
Conclusion
www.francisclark.co.uk
The Cornish AccountBack in the Black?
With thanks to all who took part in the round table discussion and our survey.
Kim Conchie Cornwall Chamber of CommerceColin Stratton St Austell BreweryJeremy Miller Miller and Son SW LLPAndrew Brewer FG Brewer & Sons LimitedPhilip Strong Reflex Marine LimitedClare Mock Hardy Carpets LimitedDavid Brian County ConfectioneryChris Hugo Watergate Bay HotelTim Light Cornwall Ferries Limited
www.francisclark.co.uk
(c) copyright Francis Clark LLP, 2014
You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained prior written consent from Francis Clark LLP to do so and entered into a licence.
To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP.
These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free.
Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales.
These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request.
Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by Francis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited.
Disclaimer & copyright