Business confidence on the up as interest rate decision looms
Plus, the sectors most affected by UK talent shortage, leadership lessons from Amazon's CEO and commuting habits revealed
This article is an online version of our Off to Lunch newsletter. Sign up to receive it straight to your inbox here.
Tomorrow the Bank of England (BoE) will deliver its interest rate decision. There has been a groundswell of speculation that the central bank’s governor Andrew Bailey et the rest of the monetary committee will opt to make a reduction. It currently sits at a 16-year high of 5.25 per cent and could be the BoE’s first cut in more than four years.
Investors believe that a cut is looming, as traders in swap markets have lifted probability from 40 per cent earlier this month to 60 per cent today, according to the Financial Times. This comes as inflationary pressures are showing signs of decreasing across the globe.
The speculation comes amid reports that the government transferred £44.5bn to the BoE to cover losses it made in the past year. The central bank has faced significant losses over the past two years due to increasing interest rates from near-zero levels, which has devalued the gilts on its balance sheet.
These gilts are now being sold back to investors following the conclusion of its quantitative easing programme. Additionally, the higher borrowing costs have resulted in rising interest payments to commercial banks holding overnight reserves at the central bank. Last year, the BoE projected that the cumulative losses from its quantitative easing programme would reach £85bn over the next decade.
Despite being part of an indemnity agreement between the central bank over its bond-buying programme, the nearly £45bn payment is not ideal for the newly inaugurated Labour government. Days after revealing a £22bn “hole” left by the previous government, the chancellor Rachel Reeves said she may have no other choice but to raise taxes in the upcoming budget. Talking on the News Agents podcast, the chancellor warned there were “more difficult decisions to come”.
Confidence in business circles is on the up, however, according to Lloyds Bank’s latest barometer of business sentiment. The survey of 1,200 UK companies showed that overall business confidence jumped by nine points to 50 per cent in July. This equals the highest level in business confidence for eight years. Almost two-thirds (62 per cent) of businesses reported stronger activity, up from 53 per cent in June, while 6 per cent predicted weaker trading prospects, down from 9 per cent.
The survey did show regional disparities though. Nine of the UK’s 12 regions and nations reported stronger business confidence in July. There were strong monthly increases in the East Midlands and Wales, followed by the East of England and South East, where confidence in these areas is at post-pandemic highs. However, confidence fell in the South West, Yorkshire & the Humber and the North West.
Business Agenda
A summary of the most important business news
By Sarah Vizard
1. Almost nine in 10 (89 per cent) of people are now commuting to the office at least once a week, while 38 per cent are doing so daily, according to Virgin Media O2’s Movers Index. And while 83 per cent of businesses are enforcing mandatory in-office policies, 75 per cent believe in a hybrid future of work. You can read the full report, which also digs into retail and transport habits, here.
2. The UK is among the countries facing a talent shortage in industries including technology and banking, according to a report by the recruitment firm Hays. It says countries including New Zealand, Portugal, Canada and Switzerland could face challenges, while the US, China, India, Germany and Brazil have the best talent networks. You can read more here.
3. Procter & Gamble has posted a drop in sales in the three months to the end of June as demand dipped despite efforts by the company to raise prices more slowly amid the cost-of-living crisis. Sales volumes increased by 1 per cent amid a 1 per cent increase in prices. Net sales fell to $20.53bn. You can read more here.
4. Takeaway orders on Just Eat increased by 1 per cent to 60.3 million in the second quarter of 2024, bucking declines in almost all its other markets. The results come just a day after Just Eat said it would pull out of New Zealand, where it says it has too small an operation “to maintain a health business”. You can read more here.
5. The number of young people watching live TV in an average week has fallen significantly as they instead watch content on streaming platforms. Data from Ofcom found that less than half (48 per cent) of those aged 16 to 24 watch live TV weekly, down from 76 per cent in 2018. Among viewers aged 45 to 54, there has also been a fall, from 89 per cent last year to 84 per cent this year. You can read more here.
Business Question
Who am I?
- I was born on this day in 1958
- My company was sold to Yahoo! for $5.7bn in 1998
- I was credited by the Guinness Book of Records for the largest single e-commerce transaction
- I am a self-made billionaire
- I own a minority stake in an NBA basketball team
- I am a US-version what you in the UK would call a “Dragon”
The answer can be found at the bottom of the page.
Business Thinker
Deep dives on business and leadership
? Amazon has posted a series of videos from chief executive Andy Jassy in which he explains the leadership principles that the company expects its senior staff to follow. He talks about the importance of staff challenging each other if they think something is wrong. “At Amazon, you are not just empowered to speak up if you think we’re doing something wrong for customers of the business. You’re expected to do so, regardless of level,” he says. You can find the post here.
? Successful businesses create more successful businesses. Sifted has done a fascinating piece on how at least 10 former employees of GoCardless, the UK payments group, have gone on to build their own businesses. You can read that piece here.
? Steve Kerr has won four NBA championships as the coach of the Golden State Warriors and another five as a player, including three alongside Michael Jordan at the Chicago Bulls. He is coaching the US men’s basketball team at the Paris Olympics. You can watch a new three-minute clip of him offering a masterclass on building teams and leadership here. It is striking how much he has sought to learn from other leaders and coaches.
Business Quote
Inspiration from leaders
“Where there is no vision, there is no hope.”
– George Washington Carver
Business Leader
The best of our content
The art of turning absurd ideas into achievable goals
Mark Beaumont’s unique ability to turn ambitious dreams into reality has made him a world-renowned adventurer and record-breaking cyclist. From cycling across Scotland at 11 to circumnavigating the globe in 78 days, Beaumont’s feats highlight his resilience and determination.
His journey from a home-schooled childhood on a Scottish farm to a venture capital investor offers valuable insights into achieving seemingly impossible goals. Beaumont’s story reveals the power of a performance mindset, the importance of perseverance, and how embracing the reality of challenges can lead to extraordinary success.
You can read the article here.
Other popular pieces
? The art of business wargaming
? Under pressure? Learn to control your emotions, shift your mindset and self-talk
☝️ Take responsibility, even if it’s not your fault – it can change your life
And finally…
Despite the weather seemingly taking a turn for the normal for much of the country over the weekend, we’re all on the lookout for a good day out to make the most of the British summertime. The Times has profiled the Dales’ lesser-known Rosedale valley in the heart of the North Yorks Moors National Park and it looks amazing.
You can read more about it here.
The answer to today’s Business Question is Mark Cuban.
