NEWS VIBER

Key events

The ONS also reports that British consumer spending on credit and debit cards picked up in cash terms in early December, in line with usual seasonal trends.

UK credit and debit card purchases increasing by 13 percentage points, while overall retail footfall was 5% higher than the previous week.

The ONS says:

Revolut debit card transaction data showed increased spending in all reported sectors in the week to 4 December 2022, except “retail”, which saw a 1-percentage-point decrease. The “entertainment” sector saw the biggest increase of 13 percentage points but remained the only sector not to return to its pre-coronavirus baseline levels.

More than a quarter (29%) of UK businesses expect turnover to decrease in January 2023, the latest data from the Office for National Statistics shows.

The ONS also reports that online job advert levels were flat last week, leaving them 18% lower than the peak level in February 2022.

Of the 28 job categories, 16 showed a decrease in the number of adverts, while 10 increased and two remained unchanged. The largest decrease was in the “Charity and voluntary” category, which fell by 5% and was 21% below its level in the equivalent week of 2021.

Sacha Lord, night time economy adviser for Greater Manchester, warns that customers not showing up for bookings can end businesses:

The Christmas season is crucial for hospitality firms – money made during the party season keeps some pubs and restaurants afloat during the quiet times in January.

Emma McClarkin, chief executive of the British Beer and Pub Association, says it’s becoming “increasingly difficult” to see how many businesses would make it through the quieter winter months until spring.

She warned:

“People aren’t confident they’ll be able to travel next week and so it’s almost too late now to save the festive season from ruin for pubs.

Christmas party cancellations ‘near Omicron level amid UK strikes’

Pubs and restaurants have suffered a collapse in Christmas party bookings due to next week’s UK rail strikes, Bloomberg reports.

Industry chiefs suggest the plunge is as bad as last year when cases of the Omicron variant of Covid-19 were surging, which hit hospitality firms in the run up to last Christmas.

Kate Nicholls, chief executive officer of the trade body UKHospitality, said businesses were reporting cancellation rates of as much as 30%, which could blow a £1.5 billion ($1.8 billion) black hole in revenues.

The RMT union is holding strikes on 13-14 December [next Tuesday and Wednesday] and 16-17 December [Friday and Saturday], and from 6pm on Christmas Eve until 7am on 27 December. Network Rail has warned passengers ‘only travel if necessary’ on those dates.

“We’re getting into omicron territory,” Nicholls told Bloomberg, adding:.

“A lot of people are saying it’s too difficult to come in, and if you’re writing off next week, you might as well write off the week after. So it’s going to be an early Christmas shutdown.”

Here’s the full story.

The hospitality sector is already reeling from surging energy costs, staff shortages and falling bookings, leading UK restaurants to go bust at a faster rate than during the Covid crisis.

Updated at 09.26 GMT

Investment banking industry faces uncertainty ‘for some time’

UK boutique investment bank Numis has been hit by the slowdown in City, as rising interest rates hit the markets.

Numis has reported a 71.9% drop in pre-tax profits, to £20.9m from £74.2m, in the year to 30th September. Revenues were down by a third.

It told shareholders that the capital markets outlook “remains challenging”, with volumes of new deals “subdued” as the market digests the impact of sustained inflation and higher interest rates.

Numis warns that conditions may not pick up for a while:

Our experience suggests that market uncertainty and macro-economic conditions are likely to affect the investment banking industry for some time.

Packaging firm DS Smith has also revealed it loaned its pension scheme £100m to help it through the market chaos following the mini-budget, which rocked the pensions industry.

It told shareholders this morning that:

In response to the market turmoil following the UK “mini- budget” in September 2022, the Group made funding support of up to £100 million to the main UK defined benefit pension scheme.

This took the form initially of a cash advance in anticipation of potential margin calls and latterly a liquidity facility.

The cash advance was fully repaid within days of being made and as at 31 October 2022 the liquidity facility remained in place but was undrawn.

The surge in government borrowing costs (measured as the yield on UK gilts) forced some pension funds to sell some of their assets in a fire sale to meet margin calls, before the Bank of England stepped in:

BT’s £47bn pension scheme has warned it may need to call on the telecommunications group for more cash “support” as it tightens its use of leveraged investment strategies, the Financial Times reports here.

Shares in Frasers have dropped 3.9% in early trading, as investors digest its warning about the macroeconomic challenges it face.

Here’s Victoria Scholar, head of investment at interactive investor, on today’s results from Frasers.

“Frasers reported first half adjusted profit before tax of £267.1 million up from £192.4 million year-on-year. Revenue also increased to £2.63 billion up from £2.34 billion last year. Despite warning about the challenging macroeconomic environment, the retailer kept its full-year guidance unchanged.

Over the summer, the retailer reported record-breaking full-year results sending shares soaring thanks to the reopening of its stores post pandemic and the release of pent-up demand after covid.

Although Frasers Group’s shares had a difficult first half of the year amid the market volatility, since mid-October when investor risk appetite returned, shares have staged an impressive surge of around 50% off the intraday lows. The well-documented pressures on the consumer with the cost-of-living crisis squeezing household budgets appear to be dividing the retail sector into winners or losers with the owner of Sports Direct managing to land itself a position in the winning category thanks to its intelligent strategy to partner up with strong brands.”

Updated at 08.13 GMT

Retail analyst Nick Bubb says the most eye-catching news from Frasers today is its move to Coventry:

Well, it’s unclear what’s going to happen to the huge Sports Direct warehouse and office at Shirebrook in the North Midlands, but, as rumoured, Frasers has announced that it is to build a huge new distribution complex at Coventry, at an eye-catching cost of £600m…

Updated at 08.04 GMT

Frasers has also announced it plans to spend £600m on a new distribution centre and offices in Coventry, where it has also recently bought the Coventry Building Society Arena.

It tells shareholders:

Looking further forward to support our continued growth and ambition, we are intending on investing approx. £600m in a new distribution centre and offices in Coventry over the next ten years subject to planning, and we recently purchased the site for this exciting development for Frasers and the Coventry area.

As part of this strategy we have also purchased the CBS Arena in the city which strengthens our investment in the area and supports our future plans for the region.

Introduction: Frasers sticking with forecasts after profits jump

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

UK retail group Frasers and packaging company DS Smith are both warning today that the macro-economic outlook is ‘challenging’, as they update the City with their latest financial results.

Frasers, formerly Sports Direct, has reported a 53% jump in pre-tax profits in the 26 weeks to 23 October 2022, up to £284.6m from £186m.

Frasers has been pushing an “Elevation Strategy” under new CEO Michael Murray, the son-in-law of founder Mike Ashley.

A House of Fraser store in Manchester. Photograph: Phil Noble/Reuters

Chairman David Daly says today this strategy is working, telling shareholders that:

We have delivered a strong performance during the period, despite the challenging backdrop of heightened economic uncertainty in the UK, soaring energy costs, rapidly rising inflation, a widespread cost of living crisis and continued geopolitical instability.

Whilst post pandemic issues with the global supply chain remain, there are signs that these are beginning to ease.

Frasers, whose brands also include House of Fraser, Jack Wills and Evans Cycles, is sticking with its profit guidance, Daly adds:

Whilst the macroeconomic environment is clearly challenging and the backdrop for the coming year is hard to predict with any certainty, we have strong strategic and trading momentum behind us and we remain confident in our guidance for adjusted PBT [pre-tax profits] of between £450m to £500m for this financial year.

DS Smith, which makes corrugated packaging solutions (cardboard boxes) and runs recycling services, has also grown its earnings in the first half of the financial year.

DS Smith’s pre-tax profits jumped 80% in the six months to the end of October.

CEO Miles Roberts cautions that the macro-economic outlook for the rest of the financial year remains challenging. But, DS Smith have lifted its forecasts, predicting that its performance this year will be ahead of previous expectations.

Roberts says:

“The performance during this six month period has been strong, benefiting from our constant focus on our customers’ evolving needs during this time of significant economic volatility.

This has enabled us to achieve continued market share gains, an increase in profitability and improvements in our key financial performance ratios.

Also coming up today

The UK is failing to develop a skilled and globally desirable workforce, with domestic talent increasingly less attractive to overseas businesses, a new survey of international executives has found.

Economic problems followin Brexit, plus political upheaval, means the UK and its workforce is less appealing to global business, the poll of over 5,000 executives by the Institute for Management Development showed.

The UK has dropped 7 places, to 28th of 63 countries studied, on the IMD’s World Talent Ranking.

More here.

The agenda.

9.30am GMT: Weekly UK economic activity data

Noon GMT: ECB president Christine Lagarde speaks at the Sixth Annual Conference of the European Systemic Risk Board (ESRB) “Addressing Financial Stability Challenges”

1.30pm GMT: US weekly jobless claims