UK house price growth slows, as households suffer longest income squeeze on record – business live | Business

After a busy morning here in London, here’s a summary of the key points.

UK households have suffered the longest squeeze on disposable incomes on record.

Real disposable household incomes (ie, accounting for inflation) fell by 0.2% in the first three months of this year, the fourth quarterly drop in a row — even before the impact of the Ukraine war.

Economists warned that incomes will continue to be squeezed, as food and energy prices soar, pushing inflation to 40-year highs.

Paul Dales of Capital Economics said households were less protected against the cost of living squeeze to come.

The final Q1 GDP data perhaps leave households looking a bit more vulnerable to the big fall in real incomes that’s going to hit in Q2 and Q3.

Although GDP and consumer spending won’t fall as far as real incomes, it’s pretty clear the economy is going to be very weak for a while and a recession is a real risk.

The latest GDP data also showed that

UK house price inflation has eased, with prices only rising by 0.3% this month. That pushed house prices to a new record of £271,613, but Nationwide said there were ‘tentative signs’ of a slowdown.

Nationwide’s chief economist, Robert Gardner, said:

“The market is expected to slow further as pressure on household finances intensifies in the coming quarters, with inflation expected to reach double digits towards the end of the year.

Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.

Guy Harrington, CEO of bridging financing form Glenhawk, say the outlook for 2023 looks “increasingly ominous.”:

“Another month of slowing growth is just a precursor to the sharp correction about to torpedo the UK housing market, caused by a perfect storm of record inflation, geo-political turmoil, rising rates and a once-in-a-generation cost of living crisis.

Elsewhere:

• Shevaun Haviland, director-general of the British Chambers of Commerce (BCC), has callled for action to save the economy as the cost of doing business crisis continues to worsen.
• Britain’s biggest recruitment and staffing companies have warned the government that plans to replace striking workers with agency staff would further inflame strikes.
• Britain has told airlines they must avoid a summer of flight chaos, as it published a 22-point plan outling its support for the industry.
• UK car production has risen for the first time in 11 months, after semiconductor shortages weighed on output over the last year
• Japan has seen its worst factory output slump in two years, as supply chain woes disrupt supply and China’s lockdown hit demand
• Inflation in France has hit a record high of 6.5%…
• … while prices in Sri Lanka have surged over 50% (!) in the last year, as its economic crisis intensified.
• Sweden’s central bank has announced its biggest interest rate rise in two decades, in an attempt to cool inflation.
• Shares in state-controlled Russian gas giant Gazprom have tubmled 27% after its shareholders blocked plans to pay a record dividend
• Italian coffee giant Lavazza has said it is in “constructive and open” talks with UK retailers after revealing that supply costs for its green beans have risen 80% in a year
• Nearly half of businesses in the hospitality and food sectors look set to hike prices in July due to higher energy costs and the ongoing cost-of-living crisis.
• The latest ONS data also showed that consumers cut back last week, with fewer transactions at most Pret A Manger locations, and a drop in restaurant visits
• Markets have tumbled across Europe, as investors fear the global economy is weakening

Here’s more reaction to the UK’s house price slowdown to 0.3% this month, or 10.7% over the last year:

Tom Bill, head of UK residential research at estate agents Knight Frank:

“The rate of inflation is fast catching up with UK house price growth, which stubbornly remains in double digits. How can house prices rise to such an extent during a cost-of-living squeeze?

The answer is that they are both increasing largely for the same reason – a supply chain disruption. Property listings are rising as more sellers sense the market is peaking, but it will take time to filter through to prices.

We expect UK prices to end the year at 8% before calming down further in 2023 as supply and demand rebalance and higher mortgage rates increasingly put the brakes on exceptionally high levels of demand.”

Simon Gerrard, managing sirector of London estate agent Martyn Gerrard:

“Whilst there is nothing new about the seasonal summer slowdown, this year the housing market must also contend with a cost of living crisis, soaring inflation and an upward creep in mortgage rates.

“However despite these obvious challenges, house prices will remain high as buyers fight tooth and nail to secure the best homes in a chronically under-supplied market. But on the ground it is the second steppers who are struggling most as they seek to move up the ladder amid near-unprecedented competition for property.

“Make no mistake, alarm bells should be ringing within government over this housing supply crisis. The only viable solution to make the market more accessible is an urgent relaxation of planning laws to help stimulate supply across the country.”

James Sproule, Chief Economist at Handelsbanken

Our expectation remains that house prices will be flat through the end of the year and see a small dip in early 2023. This is being driven by overall rental yields responding to the broader rises in Gilt yields, as well as the very depressed levels of consumer confidence putting people off moving home.

There remains a chance that any decline in overall house prices (we continue to expect particular narrow categories of housing to do better than the average) will be masked by inflation.

In other words, nominal house prices will languish, while real house prices fall. This could be critical in maintaining a wealth illusion in consumers’ eyes and such an illusion could be important to the eventual economic recovery.”

Britain has told airlines it was up to them to avoid a repeat of recent chaotic scenes at airports during the upcoming summer holiday season, as it published a 22-point plan outlint its support for the industry.

Transport Secretary Grant Shapps said there was ‘simply no excuse’ for widespread disruption (on the day when passengers at Heathrow were hit by disruption).

Holidaymakers deserve certainty ahead of their first summer getaways free of travel restrictions. While it’s never going to be possible to avoid every single delay or cancellation, we’ve been working closely with airports and airlines to make sure they are running realistic schedules.

The 22 measures we’ve published today set out what we’re doing to support the industry. It’s now on airports and airlines to commit to running the flights they’ve promised or cancel them with plenty of time to spare so we can avoid the kind of scenes we saw at Easter and half term.

With 100 days having passed since we set out that restrictions would be eased, there’s simply no excuse for widespread disruption.

The list of measures being taken including an “amnesty” on airport slots so airlines can hand them back without losing them for good, setting up an aviation recruitment campaign, and reminding airlines of their legal responsibilities.

But there’s no new measures today, and some aviation industry sources havse said only two — previously announced on slot allocation and speeding up recruitment — would helpo reduce queues this summer, our transport correspondent Gwyn Topham reports.

Shadow transport minister Mike Kane accused Shapps of being “missing in action” when it comes to aviation, telling the House of Commons:

“He needs to step up to the plate, he needs to go to the Prime Minister, he needs to knock on the door, and he needs to clean up the mess.”

Inflation in Sri Lanka has hit record levels, as citizens suffer from persistent shortage of essentials including food and fuel.

Cnsumer prices in the crisis-riven country continued their ascent in June, rising by 54.6% year-on-year.

That puts Sri Lanka’s inflation over the 50% level that most economists commonly use to define hyperinflation, says Bloomberg, which reports:

“We would have reached a hyperinflation-like impact already, although official numbers are only now catching up,” said Kavinda Perera, head of research at Asia Securities in Colombo.

“There is still room for prices to increase further, with electricity tariff hikes on the cards,” he said, noting that there’s no monetary policy solution to supply-driven problems like energy prices.

On Monday Sri Lanka was forced to halt to all fuel sales for two weeks except for essential services, as its economic meltdown left it increasingly short of foreign exchange reserves to pay for imports.

The IMF reported today that talks with Sri Lankan authorities had been constructive and productive this week, raising hopes that a credit facility could be agreed soon.

UK’s biggest recruiters warn ministers not to hire agency staff to replace strikers

Julia Kollewe

Britain’s biggest recruitment and staffing companies have written to the government to protest against plans to replace striking workers with agency staff, warning that this would further inflame strikes.

In a letter to Kwasi Kwarteng, the bosses of 13 companies including Hays, Adecco, Randstad and Manpower called on the business secretary to reconsider plans to repeal a decades-long ban on using agency workers to cover for picketing staff.

“We can only see these proposals inflaming strikes – not ending them,” the 13 groups warned in their letter, which was sent by Sarah Thewlis, chair of the Recruitment & Employment Confederation (REC).

Here’s the full story:

The Government is being urged to put in place support for businesses to help firms weather a “perfect storm” of spiralling costs and problems recruiting workers.

Shevaun Haviland, director-general of the British Chambers of Commerce (BCC), said action is needed to save the economy as the cost of doing business crisis continues to worsen.

She told the BCC’s annual conference in London that ministers must not to impose any more tax increases on businesses, and should provide more assistance in the autumn budget.

“Increasing costs of raw materials over last summer, supply chain and shipping issues, problems in recruiting people, and, by this March, spiralling energy prices. It really is the perfect storm for businesses, firmly putting the brakes on recovery.

“This has to change; we are on limited time. The Government has until the autumn Budget to reset, rethink and get their house in order.

“First, they need to put in place support for businesses now to weather this storm, and they need to work in partnership with us to develop a long-term economic strategy for growth.”