UK economy at turning point as output rises; ‘shocking’ rise in ultra-long mortgages – business live

Heathrow Airport has accused the government of curtailing the UK’s global connectivity through bad policies.

In its latest traffic update, Heathrow says the government is failing to support UK aviation and help it compete globally.

It says:

Initiatives like the introduction of unnecessary visas for transiting passengers, the absence of tax-free shopping and the recently proposed hike in business rates, underscore the need for Ministers to take a cross-Government approach to policymaking that supports UK aviation’s global competitiveness.

Last month, Heathrow urged ministers to scrap a new £10 charge for overseas travellers using UK airports to connect to other flights.

Despite these problems, Heathrow reports that it handled 6.7m passengers in April, bringing the total for the year so far up to 25.2 million. It says it “remains on-track” for a record-breaking number of passengers in 2024.

Friday 19 April was its busiest day since the pandemic, with 1,337 flights.

Heathrow CEO Thomas Woldbye says:

As we continue to grow, our focus is on making Heathrow fit for the future, delivering reliable journeys for all our customers today and getting ready for the challenges and opportunities of tomorrow.

But to unlock our full potential to help grow the country’s economy, we need the Government to implement policies that support UK aviation’s ability to compete globally, and thus make the UK more competitive overall.

Former UK chancellor Nadhim Zahawi has become the chair of one of Britain’s biggest online retailers, just days after announcing he will step down from parliament at the next election.

The Very Group, which operates digital retailers Very and Littlewoods and is owned by the Barclay family, has announced that they have appointed Zahawi as non-executive chair and board member.

Zahawi will replace current non-executive chair Aidan Barclay, who took on the job on a temporary basis back in February.

Zahawi, currently MP for Stratford-on-Avon, announced last week that he will stand down as an MP at the next election, declaring “My mistakes have been mine.”

Those mistakes include failing to declare that HMRC were investigating his tax affairs – a breach of the ministerial code, leading to his dismissal as chancellor. Yesterday, Zahawi admitted for the first time he paid nearly £5m to the tax authority to settle his tax affairs.

Zahawi, who also served as vaccine minister in the pandemic, also co-founded polling company YouGov.

Aidan Barclay says he’s an ideal candidate to lead the Very board, explaining:

“I am delighted to welcome Nadhim to the Board of The Very Group. With a proven track record in digital growth and innovation, and highly respected in the UK and global markets, he is ideally suited to lead our Board as the company enters its next stage of strategic development and growth.”

“The Great Resignation” that gripped the UK economy is over, according to the Chartered Institute of Personnel and Development (CIPD).

CIPD’s latest Labour Market Outlook report has found that 55% of employers are looking to maintain their current staff level – the highest level since winter 2016/17 – rather than taking on more workers to handle increased demand.

Instead, CIPD reports that the UK labour market is now less dynamic and competitive, leading more workers to stick with their currrent jobs rather than risk a move.

James Cockett, labour market economist for the CIPD, says

“When the economy reopened post-pandemic, turnover and vacancy levels rose in response to the hot recruitment market. Now, the so-called ‘Great Resignation’ is well and truly over and has been replaced by ‘The Big Stay’, with more people opting for job stability. Falling staff turnover and vacancies also mean the balance of power in the labour market is moving in the direction of employers and away from workers.

“Based on the trends in our report, there’s likely to be further falls in both turnover and vacancy levels in 2024. Employers will need to look forward and factor in this lower attrition when making decisions around staffing levels and the future of their workforce. We are now entering a more stable period, as recruitment trends bounce back to pre-pandemic levels.

The report also found that British employers expect to raise wages by 4% over the coming 12 months. That would still mean a rise in real wages, as inflation is expected to fall to around 2% this spring.

A former pensions minister has warned that young home buyers are being forced to gamble with their retirement prospects by taking on ultra-long mortgages.

Steve Webb is concerned that 42% of new mortgages agreed in the fourth quarter of 2023 – or 91,394 – had terms going beyond the state pension age. That’s up from 31% in the last quarter of 2021.

Many of those loans are being taken out by 30- to 39-year-olds, who would typically be expected to be taking out their first mortgage, or those in their 40s.

Demand for such long loans has increased following the rise in mortgage rates; taking out a longer loan lowers the monthly repayment cost (even though the total interest bill may end up higher).

Webb, a partner at the pension consultants LCP, obtained the data via a freedom of information request to the Bank of England.

He says the number of mortgages set to run past state pension age is “shocking,” and may make it harder for people in retirement.

Webb explains:

“The challenge of getting on the housing ladder is forcing large numbers of young homebuyers to gamble with their retirement prospects by taking on ultra-long mortgages.

“We already know that millions of people are not saving enough for their retirement and if some of that limited retirement saving has to be used to clear a mortgage balance at retirement they will be at even greater risk of poverty in old age. Serious questions need to be asked of mortgage lenders as to whether this lending is really in the borrower’s best interests.”

Here’s the full story:

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Having exited out of recession strongly last Friday, the UK economy appears to have turned the corner after a tough couple of years.

The latest Business Trends report, released by accounting and business advisory firm BDO this morning, shows that output rose last month to its highest level in almost two years.

BDO reports that UK business output and confidence rose in April, as the inflation pressures that have dogged firms for months ease.

This upturn has pushed up BDO’s output index by 2.09 points to 103.92 in April – the highest level since May 2022.

The UK’s services sector led the bounceback in April, says BDO, thanks to consumers having more money to spend at hospitality, retail and leisure companies as energy bills fall.

Hopes of a cut to UK interest rates by the autumn helped lift business confidence. Last week, Bank of England governor Andrew Bailey said it was “likely” that Bank Rate will be cut over the coming quarters, after the BoE left rates on hold again.

Worryingly, though, BDO’s employment index fell for the 10th month running, to its lowest level since February 2013, suggesting the UK jobs market is cooling.

Kaley Crossthwaite, partner at BDO, says:

“Cautious optimism is the order of the day for UK businesses hoping for an interest rate cut this summer.

“It’s heartening to see a turning point begin to materialise for the economy, with the services sector driving the bounce back so far from last year’s technical recession. But businesses across the board need more certainty from the government and we urge them to provide a clear, stable and long-term tax roadmap as soon as they’re able to, alongside much needed reforms to the apprenticeship levy.

Only once businesses have this will we start to see the more stable optimism, investment and hiring intentions needed for a robust recovery.”

The latest Regional PMI survey data from NatWest confirm that business activity continued to rise across almost all UK nations and regions last month.

London saw the fastest growth, followed by the West Midlands and Northern Ireland.

Yorkshire & Humber was the only area where activity fell.

Firms across the UK also reported a rise in cost inflation last month, driven by a rise in staff pay (partly due to the rise in the minimum wage at the start of April).

Sebastian Burnside, NatWest chief economist, explains:

“Most areas of the UK are enjoying a revival in business activity, with growth even accelerating in most cases in April.

“Yorkshire & Humber is the one area where we are yet to see the economy kick into gear, though the region’s firms are optimistic about their prospects for the coming year, as is the case across the UK.

The agenda

• 10am BST: China’s current account for Q1 2024

• 1pm BST: India’s inflation report for April

• 3pm BST: Eurozone finance ministers meet for Eurogroup meeting