UK job growth businesess Business confidence Interest rates UK economy UK businesses Bank of England
Marketing No Comments

UK economy suffers unprecedented slump amid coronavirus lockdown

The UK economy suffered an unprecedented blow in April as the coronavirus lockdown choked off demand, according to a closely watched gauge which slumped to its lowest level since records began.

The IHS Markit/Cips composite purchasing managers’ index (PMI) crashed to a reading of 12.9 in April. This was the worst score since the survey began more than 20 years ago.

April’s reading was even worse than analysts’ dire predictions and well below March’s record low of 36. A score of below 50 indicates contraction. The worst score seen during the financial crisis was 38.1.

The data was “eye-watering,” said Ruth Gregory, senior UK economist at Capital Economics. She said the lockdown “has pushed the economy into a recession of unprecedented speed and depth”.

The unprecedented collapse in the PMI highlights the devastation coronavirus is wreaking on the UK economy. It is one of the most up-to-date economic indicators.

Lockdown measures, which were last week extended until early May, have caused businesses to close and demand to evaporate as people stay at home and lose their jobs.

Chris Williamson, chief business economist at data firm IHS Markit, said the PMI reading was consistent with UK GDP falling at a rate of seven per cent per quarter.

Such an economic contraction has not been seen since World War II. Yet many groups, such as the UK’s budget watchdog, predict a steeper fall in GDP.

Coronavirus batters UK services sector

Britain’s enormous services sector bore the brunt of the pain. The coronavirus lockdown sent the sector to its worst month since records began in 1996.

“Business closures and social distancing measures have caused business activity to collapse at a rate vastly exceeding that seen even during the global financial crisis,” said Williamson.

More than 80 per cent of UK services providers reported lower business activity in April. Duncan Brock, group director at Cips, the Chartered Institute of Procurement & Supply, said this “compared with 38 per cent during the worst single month of the global financial crisis”.

Around half of all firms’ purchasing managers reported lower numbers of staff in April.

However, numerous respondents said this was due to their firm using the government’s job retention scheme that pays 80 per cent of a worker’s wages if they temporarily stop working, or “furloughed”.

The government has rolled out a number of very large support schemes for the UK economy that seek to limit the damage from coronavirus.

Dire figures will spark debate among policymakers

Yet April’s PMI data will raise questions about whether support is getting to businesses quickly enough. There have been a number of complaints about the coronavirus business interruption loan scheme (CBILS) for example.

Williamson said the dire performance of the UK economy in April will also spark debate about the length of the lockdown.

The cabinet is reportedly split about when to start lifting stay-at-home orders and letting people go back to work.

“Hawks” such as chancellor Rishi Sunak and cabinet secretary Michael Gove arguing that the economy needs to be returned to normal quickly.

On the other side are the “doves”. These include Prime Minister Boris Johnson and health secretary Matt Hancock, who fear the damage a second wave of infections could do.

By Harry Robertson

Source: City AM

UK housing market recovery housing crisis UK house prices
Marketing No Comments

UK house prices dip as coronavirus lockdown makes sales ‘almost impossible’

UK house prices dipped during the coronavirus lockdown as experts warned the housing market was barely functioning due to the restrictions.

The latest data from Rightmove showed that the average price of property coming to market dipped 0.2 per cent to £311,950. In April last year UK house prices increased 2.1 per cent.

However, Rightmove said recent statistics were not “meaningful” as there is not currently a “functioning market” due to the lockdown. New sales were “almost impossible”, the company said.

“You do not have a functioning market when buyers can’t buy and sellers can’t sell, and so the focus needs to be on what is required to help the market recover once the lockdown can safely be eased,” Rightmove said.

The research showed that existing sellers have largely remained on the market, with total available stock for sale down 2.6 per cent since lockdown was enforced on 23 March.

Miles Shipside, Rightmove director and housing market analyst, said: “Agents report that there is good co-operation, with both buyers and sellers keen to hold deals together.

“While some buyers may express concern over the possibility of short-term dips in house prices, many are taking the longer-term view and living up to their commitments to proceed.

“This is being helped by mortgage lenders extending the life of existing mortgage offers by three months, and new legal rules on flexible completion dates.”

Former RICS residential chairman Jeremy Leaf said the survey confirmed what firms are seeing “on the ground”:

“Our offices may be closed but the market is anything but quiet. Buyers and sellers are pausing, not cancelling sales, or listings, while continuing to access websites readying themselves for when lockdown restrictions are eased.

“But the market cannot re-start in isolation. We need surveyors to work with lenders, agents, and solicitors to ensure successful transitions as well as continuation of social distancing and safe visiting”.

There has been an abrupt turnaround from the best start to a year since 2016. Pre-lockdown sales agreed in the year to 23 March were up 11 per cent on the same period last year.

However, potential buyers and sellers are still planning for the future. Visits to Rightmove dropped 40 per cent when the lockdown was announced, however the platform’s sold prices section has recovered more quickly since the restrictions were implemented.

Property firm Knight Frank said that the market would require urgent government stimulus in order to get it functioning again.

According to new research from the firm, the lockdown will result in 526,000 fewer house sales in 2020, a reduction of 38 per cent on 2019.

It also expects lenders to approve 350,000 fewer mortgages as a result of coronavirus, including 150,000 to first time buyers.

In order to get the market moving quickly, Knight Frank said the government should introduce a holiday from Stamp Duty and extend the Help to Buy scheme to boost consumer confidence.

By Jessica Clark

Source: City AM

Marketing No Comments

Supporting brokers through the coronavirus lockdown

During the past few weeks we have seen significant efforts being made by lenders to support borrowers impacted by the coronavirus pandemic. In particular banks and building societies have responded by providing mortgage payment holidays to more than 1.2 million borrowers according to UK Finance. Exceptional times require decisive action.

But it’s not only borrowers who need lender support at this time of significant uncertainty. Brokers also face real challenges as the housing market suffers from the effect of the coronavirus lockdown.

The government has clamped down on people moving home. The number of new mortgage purchases has reduced dramatically, so brokers will clearly be worried about the decline in income from a lack of new business and the impact this will have on the future of their business.

In these unprecedented times, smaller lenders in particular have an important role to play in supporting brokers during this period of lockdown.

New business

Despite the decline in new mortgage purchases, several smaller lenders are still active in many niche areas where there remains a demand. Smaller lenders have a great reputation for providing niche products, which rely more heavily on sound advice from brokers.

At the Tipton we are still lending on our range of buy-to-let products (including ex-pat) for customers who want to purchase or remortgage properties. These buy-to-let products remain a useful source of new business opportunity for brokers as they continue to meet the needs of both first-time and experienced landlords.

Relationships

Relationships play a major role in any business transaction. They are especially important now when it comes to how lenders interact with brokers. Regular communication is critical at this time between brokers, BDMs and underwriters in order to find the right solution for the customer.

It must be a real challenge for brokers and their customers to navigate the current purchase market. A market which has almost ground to a halt as many lenders make significant criteria changes and withdraw products completely. However it is pleasing to see that many smaller lenders are still offering mortgage products of between 80% and 90% LTV.

Staying in touch

At this time of uncertainty it’s never more important to ensure BDMs stay close to their broker contacts. Brokers still need to remain up to date with a lender’s mortgage offering, to ensure the sourcing is made based on reliable information.

BDMs therefore play a key role in this process by ensuring they remain accessible to their broker contacts and provide them with product and criteria information. For example, like other lenders, the Tipton is now offering desktop valuations on all house purchases, remortgages and buy to let mortgages up to 70% LTV.

It’s also important for brokers to be able to access lenders BDM’s who can in turn access experienced underwriters during this time to help find a solution, particularly for specialist and niche cases. This open and proactive channel of communication between brokers, BDMs and underwriters will be crucial to providing brokers solutions for the specific needs of individual clients throughout the lockdown period.

There is no doubt that some brokers will be under pressure and many will be concerned about the future of the mortgage market. However the mortgage market will recover and brokers will look back favourably to those lenders who provided proactive support in their time of need.

By Cammy Amaira

Source: Mortgage Introducer

Pension funds UK economy UK GDP
Marketing No Comments

UK GDP could fall by 30 per cent in second quarter

Chancellor Rishi Sunak has reportedly told ministers to expect GDP to fall by as much as 30 per cent between April and June.

The government’s draconian social distancing measures will be reviewed next week, with an extension considered a formality.

The coronavirus lockdown has already begun to bite the UK economy, with activity in the manufacturing sector hit with its largely monthly decline in March for almost a decade.

Claims for Universal Credit also increased fivefold last month, according to the Department for Work and Pensions.

The Times reports today that the chancellor has told ministers that GDP could fall by “25 per cent to 30 per cent” in the second quarter.

Sunak has yet to give a public estimate of how much Treasury is expecting GDP to fall due to the Covid-19 outbreak, however some banks are predicting up to 25 per cent.

When asked about the predicted drop in GDP today, the Prime Minister’s official spokesman declined to comment.

Some members of cabinet are reportedly urging for the lockdown to be eased next month among fears of long-lasting damage to the economy.

One minister told The Times: “It’s important that we don’t end up doing more damage with the lockdown.

“We’re looking at another three weeks of lockdown and then we can start to ease it.”

The UK has recorded the fourth most coronavirus deaths in the world, after Italy, Spain and France.

Italian Prime Minister Giuseppe Conte announced last week that the country would stay in complete lockdown until May 3, meaning the measures will be in place for at least two months.

Spain has moved to ease some of its tougher restrictions, such as closing down construction sites, but remains in a lockdown similar to the UK.

By Stefan Boscia

Source: City AM

Self-employed mortgage house-buying UK Property Prices Expats Rightmove Stamp duty holiday
Marketing No Comments

Expats will be ready to buy once the lockdown is lifted

Expat mortgage broker Guy Stephenson of Offshoreonline is positive interest in UK property from overseas will start strong once the UK lockdown is lifted.

Stephenson said enquiries are now coming from Asia, adding that some parts of the world are less affected by the outbreak than the UK.

He said: “The vast majority of expat buyers of UK buy-to-let property come from parts of the world which have suffered far less from COVID-19, areas such as the Middle East, Singapore and even Hong Kong (pictured).

“Buoyed by the success of containing SARS in 2003, Asian governments have deployed tried and tested techniques which have helped them recover quickly. Already we are seeing enquiries coming from Singapore and Hong Kong again.”

He added that people with UK expat mortgage applications approved will be the first ‘away from the starting gun’ once the UK recovers.

The expat mortgage market was performing strongly before the lockdown, as uncertainty over Brexit had been lifted by Boris Johnson’s victory in the December General Election.

As a result, Offshoreonline saw more expat mortgage enquiries in January 2020 alone than in the whole of the last quarter of 2019.

BY RYAN BEMBRIDGE

Source: Property Wire

Marketing No Comments

UK economy grew just 0.1 per cent before coronavirus lockdown

The UK economy grew 0.1 per cent in the three months to February before the coronavirus lockdown hit businesses.

The Office for National Statistics (ONS) data showed the increase was entirely down to the services sector.

The tiny rise, which is measured on a three-month rolling basis, was a slight improvement on the three months to January, when there was no growth.

In February GDP contracted 0.1 per cent, a lacklustre start to the year after the optimism that followed Boris Johnson’s resounding victory at the polls in December.

Thee coronavirus outbreak was already beginning to impact certain sectors of the economy at this stage, the ONS data showed. Travel agencies and manufacturers of transport equipment were the earliest firms to suffer.

A steep drop in the manufacture of transport equipment due to a fall in exports to China as a result of coronavirus was behind the overall weak performance.

Energy production, mining and quarrying all fell.

Growth in the services sector, which increased 0.2 per cent, was enough to push GDP forwards despite contraction in both production and construction.

Production showed the highest fall, dropping 0.6 per cent, while construction slipped 0.2 per cent before the coronavirus lockdown.

The fall in production marked the 10th consecutive three-month decline for the sector.

‘Worse to come’ for UK economy

The impact of the coronavirus lockdown, which has hit almost all shops and businesses, is yet to be seen. But accountant EY said the UK could see contraction of as much as five per cent in March.

This would result in an economic contraction of 1.3 per cent for the first quarter. EY predicted that will grow to an enormous 13 per cent contraction in the second quarter.

The decline will be led by a 14 per cent fall in consumer spending, EY said. A lack of consumer confidence and the closure of pubs and restaurants will underpin this plunge.

For the year as a whole, EY is predicting a contraction of 6.8 per cent. However, that is presuming the coronavirus lockdown is relaxed in the second quarter.

UK can start recovery from coronavirus lockdown in June

Howard Archer, EY’s chief economic adviser, said: “There is no denying that there are substantial downside risks. [But] we believe the economy can start to recover in the third quarter and then see decent activity late on in 2020 and during 2021.

“This is on the assumption that coronavirus peaks during Q2 2020 and the government starts to relax some of the restrictions on people’s movements and on business activity late on in the quarter and further loosens them during Q3.

“However, the government warned at the end of March that normal life in the UK may not return for up to six months”.

By Edward Thicknesse

Source: City AM