UK mortgage approvals lowest since 2009 excluding Covid, as consumer credit doubles – business live

Bank of England governor Andrew Bailey is speaking about the cost of living squeeze and the future path of interest rates at a conference in London.

The central bank has raised rates to 4% at its February meeting in an attempt to bring inflation down towards its 2% target, and further rate hikes are expected. Bailey said this will depend on the economic data:

If we do too little with interest rates now, we will only have to do more later on. The experience of the 1970s taught us that important lesson.

But equally – second – we have to monitor carefully how the tightening we have already done is working its way through the economy to the prices faced by consumers. Our outreach events make clear that we need to calibrate monetary policy with great care to return inflation to target sustainably.

That is the best contribution monetary policy can make to a fair society.

He went on to say:

At this stage, I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more. Some further increase in Bank Rate may turn out to be appropriate, but nothing is decided. The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions.

Viasat takeover of Inmarsat is cleared

Mark Sweney

The $7.3bn (£5.4bn) takeover of the British satellite company Inmarsat by its US rival Viasat has been cleared, after the UK regulator decided that rivals such as Elon Musk’s Starlink are providing increasing competition.

The Competition and Markets Authority (CMA) had raised significant competition concerns about the deal, saying in October that the merger could result in higher-priced and lower-quality wifi for UK aeroplane passengers. At the time the CMA, which subsequently launched an in-depth investigation into the deal, said that new players in the satellite communications market seeking to target the aviation sector such as Starlink, OneWeb and Telesat may not be able to effectively compete against a combined Inmarsat and Viasat.

“While Viasat and Inmarsat compete closely, the evidence suggests that the merged company will face significant competition in the coming years – from both emerging players like Starlink and from established firms like Intelsat and Panasonic,” said Richard Feasey, chair of the independent inquiry group carrying out the in-depth CMA investigation. “This competition has led us to provisionally conclude that airlines and their UK customers will not be adversely affected by the deal.”

The UK government has already cleared the deal, saying the takeover of Inmarsat did not pose a threat to national security. Inmarsat provides mobile satellite services that underpin email, internet and video conferencing, as well as in-flight wifi and communications services for ships. Its takeover is the California-based Viasat’s largest-ever acquisition.

The latest Bank of England figures show sharp declines in mortgage approvals and lending in January, as the housing market continues to slow.

There was also a hefty rise in consumer credit, as people borrowed more on credit cards, loans etc as they struggled with soaring food and energy bills.

• Net mortgage lending to individuals decreased from £3.1bn to £2.5bn in January.

• Net mortgage approvals for house purchases decreased to 39,600 in January from 40,500 in December, marked the fifth consecutive monthly decrease in mortgage approvals. If the onset of the Covid-19 pandemic and period immediately thereafter is excluded (when the housing market ground to a halt), this was the lowest approvals since January 2009 (32,400).

• The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 21 basis points, to 3.88% in January.

• Consumers borrowed an additional £1.6bn in consumer credit, compared with £800m borrowed in December. This was split between £1.1bn of borrowing on credit cards and £500m of borrowing through other forms of consumer credit.

Over here, the UK manufacturing sector showed a resilient performance in February.

Stabilising client demand and improved supply chains boosted production, while inflationary pressures also eased further, with costs rising at the slowest rate since July 2020.

The final reading for the S&P Global / CIPS UK manufacturing purchasing managers’ index (PMI) rose to 49.3 in February, up from 47.0 in January and the earlier flash estimate (49.2). Although the PMI remained below the neutral mark of 50.0 for the seventh successive month, this was the best reading during that period.

Manufacturing production rose for the first time in eight months, albeit only slightly. The increase was underpinned by signs of firming client demand, with consumer and investment goods the only industries to see new orders increase.

In China, solid PMI readings suggest that the Beijing government will set a high GDP growth target.

The official manufacturing and non-manufacturing PMI indices for February came in at 52.6 and 56.3, respectively. This compares with readings of 50.1 and 54.4 respectively in January. The CAIXIN manufacturing PMI rose to 51.6, from 49.2 in January. The numbers beat market expectations.

Iris Pang, chief economist for Greater China at ING, said:

Both manufacturing and non-manufacturing PMIs for February were very strong. Some sub-indices are the highest in several years. This supports our view that the Two Sessions government meeting will set a high GDP growth target.

We believe that the government will set a GDP growth target of 5.5% to 6% at the Two Sessions on 5 March. This set of PMI data gives the government a very good reason to set a high growth target. Even though the recovery is on track, this year will not be easy with the central government requiring local governments to grow their economies with high-quality growth prospects in mind.

Aston Martin losses double in 2022

Jasper Jolly

Aston Martin has revealed that its losses more than doubled during 2022 as the sportscar maker spent heavily on new models and struggled through supply chain problems hitting the global car industry.

The UK-listed carmaker reported a loss before tax of £495m in 2022, up from £214m the year before, even as sales rose 26% to £1.4bn. It made an operating loss of £118m after adjusting for some one-off costs, less than the £135m expected by analysts.

The company has struggled for years to turn itself around after an overambitious listing on the London Stock Exchange in late 2018. It was taken over in early 2020 by the fashion billionaire Lawrence Stroll, just as the coronavirus pandemic hit.

Since then, Stroll has as the executive chair sought to move Aston Martin’s brand upmarket – with higher prices – and cut its crippling debt pile, including a £650m fundraising in July that took money from Saudi Arabia’s public investment fund.

Aston Martin sold 6,400 cars during 2022 but it was hit by higher spending including reinvestments including marketing and expensive new product launches, as well as the impact of high inflation across its operations. At the same time it spent £287m mainly on developing new models.

Manufacturing production across the eurozone stabilised in February, ending an eight-month run of contracting output. Manufacturers in Italy, Greece and Spain lent the greatest support to factory output in February, while Germany and France trailed behind.

The final reading for the manufacturing PMI from S&P Global came in at 48.5, below the 50 mark that divides contraction from growth. However, the output sub-index improved and rose about that mark to a nine-month high, indicating expansion.

The survey said:

According to survey respondents, easing supplier bottlenecks and improved raw material availability reduced the strain on production schedules. Indeed, supplier delivery times shortened to the greatest extent since May 2009. Consequently, cost pressures faced by goods producers eased considerably once again, with the overall rate of input price inflation slowing to a marginal pace that was the weakest in almost two-and-a-half years.

Key findings:

Revolut, the UK’s most valuable fintech company, has made its first annual profit, long-delayed results show.

The London-based firm reported a net profit of £26.3m for 2021 compared with a loss of £223m in 2020. Revenues nearly tripled to £636m.

Revenues from its foreign exchange and wealth division, which includes crypto trading, jumped more than eightfold to almost £350m. Revolut stole a march on most of its rivals when it pushed into cryptocurrency trading in 2017.

The company has been praised as a high-growth success story by leading UK politicians including the chancellor, Jeremy Hunt, but it has also been criticised for the late filing of accounts, as well as EU regulatory breaches and fines, reports our City editor Anna Isaac.

Allegations of an aggressive work environment, which it has denied, have also come under scrutiny as the company pushes toward a valuable UK banking licence.

Revolut did not put a deadline on when it was set to receive a UK banking licence in the 2021 report, instead saying it was “in the advanced stages of its application” to British regulators. It added that revenues topped £850m ($1bn) in the year to December 2022.

Annual profits at the Co-operative Bank (which is no longer part of the wider Co-operative Group) have risen more than fourfold to over £130m, as the bank benefited from rising interest rates.

Pre-tax profits jumped from 31.1m in 2021 to £132.6m in 2022. Net interest income climbed by by 41% to £458m.

Interest rates on mortgages tend to rise faster than on savings products, but the Co-op boss, Nick Slape, said that the bank passes back about 60% of every rate rise to savers.

Speaking on BBC Radio 4’s Today programme, he talked about the rise in fraud.

The fraudsters are getting ever more sophisticated that’s the challenge we have in a digital environment. We put a lot of effort into protecting our customer base and we carry the pain in our P&L [profit & loss statement], we compensate our customers around the 90% mark for fraud.

When asked whether the Co-op, which is owned by private equity and hedge funds, would make another bid for rival TSB, Slape replied:

Nothing planned at all.

However, the Co-op is the frontrunner to buy Sainsbury’s Bank’s £650m loan portfolio, according to reports. When asked whether the Co-op wanted to acquire it, Slape said:

Possibly.

As reported earlier, the housebuilder Persimmon has also sounded the alarm on the housing market. Dean Finch, the chief executive, said:

The market remains uncertain. Our marketing campaign has helped improve the group’s sales rates in the new year from the lows at the end of 2022, but they still remain lower year on year. We have carefully managed our pricing, recognising the improved value and energy efficiency of our product in these difficult times and sales prices have proved resilient. We responded quickly to stimulate sales, enhance cost controls and preserve cash, promptly slowing new land investment in the fourth quarter of last year.

Nonetheless, the sales rates seen over the last five months mean completions will be down markedly this year and as a consequence, so will margin and profits. However, it is too early to provide firm guidance.

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

Annual house price growth has moved into negative territory for the first time since June 2020, Nationwide building society said this morning.

The average price of a home declined by 1.1% year-on-year to £257,406 in February, the weakest rate since November 2012. In January, the annual rate showed 1.1% growth.

Prices fell 0.5% compared with January, following a 0.6% drop the month before. It was the sixth monthly decline in a row, and left prices 3.7% below their peak in August.

Robert Gardner, Nationwide’s chief economist, said:

The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.

This likely reflects the lingering impact on confidence as well as the cumulative impact of the financial pressures that have been weighing on households for some time. Indeed, inflation has continued to outpace wage growth and mortgage rates remain significantly higher than the lows recorded in 2021. Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.

It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.

In another sign that the housing market has slowed sharply, Persimmon, one of the UK’s biggest housebuilders, warned of lower profits this year and slashed its dividend by 75%. It made an underlying pre-tax profit of £1.01bn last year, up 4%.

There’s a slew of other data out today, and Bank of England governor Andrew Bailey will be speaking at a cost of living conference organised by the Brunswick Group and hosted at Coin Street Social Enterprise in London later this morning.

The latest quarterly FTSE reshuffle is expected to lead to the greeting cards retailer Moonpig and the betting firm 888 being relegated from the FTSE-250 index to the FTSE small cap.

The Scottish sausage skin manufacturer Devro may briefly enter the FTSE 250 after “a banger of a performance for shares” which surged following a cash offer for the company, said Susannah Streeter, head of money and markets at Hargreaves Lansdown. The results of the reshuffle, based on yesterday’s closing prices, will be announced later today, probably this afternoon.

The Agenda

• 8.15am GMT – 8.55am GMT: Spain, Italy, France and Germany S&P Global manufacturing PMIs for February

• 8.55am GMT: Germany unemployment for February

• 9am GMT: Eurozone S&P Global manufacturing PMI final for February

• 9.30am GMT: UK Mortgage approvals and consumer credit for January

• 9.30am GMT: UK S&P Global manufacturing PMI final for February

• 10.10am GMT: Bank of England governor Andrew Bailey speech

• 11am GMT: Italy GDP growth for 2023 (previous: 6.6%)

• 1pm GMT: Germany inflation for February

• 3pm GMT: US ISM Manufacturing PMI for February (forecast: 48)