Monday 12/07/21

  1. In CONSUMER-RELATED NEWS, household savings rise under lockdown, pay rates rise, a deal could be on the cards for haulage, commuters want the commute but not the four-day week, Goldman considers upping wages for juniors and business confidence rises
  2. In PROPERTY-RELATED NEWS, landlords shift to student accommodation, drive-thru sites are in demand, house sales fall and Zoopla buys an online mortgage broker
  3. In MISCELLANEOUS NEWS, China imposes checks on overseas listings and an investment boom looms
  4. AND FINALLY, I bring you a cunning seagull attack…

1

CONSUMER-RELATED NEWS

So household savings rise, commuters get antsy and business confidence rises…

Households gain £7,800 after pandemic saving spree (Daily Telegraph, Louis Ashworth) cites findings from the Resolution Foundation think tank which show that total household savings are £200bn higher than they were pre-Covid and non-credit card household debts have fallen by about £10bn. Unfortunately, this was not evenly spread across the population as the richest 20% of households were four times more likely to have saved more under lockdown than the poorest. The middle-classes were among the biggest winners, mainly due to the fact that property accounts for the greatest share of total wealth in this category – and prices have been going up.

Still, Prices to rise as ‘war for workers’ puts up pay rates in food sector (The Guardian, Sarah Butler) shows that the current shortage of delivery drivers, abattoir staff and other supply chain workers is likely to feed through to end prices to the consumer as employers chase the same pool of candidates in a crowded market. The chief exec of the Food and Drink Federation, Ian Wright, said that the only way to address the shortages was to raise pay – but this would probably put food prices up by around 5% – and Tony Goodger of the Association of Independent Meat Suppliers added that difficulties in the meat processing industry (there is said to be a 20% shortfall of workers necessary to keep facilities at full capacity) have led to firms raising wages by at least 10%. Mind you, Ministers in secret visa talks to end haulage worker crisis (Daily Telegraph, Alan Tovey) shows that the government is making efforts to address the shortage of lorry drivers by considering a short-term visa scheme for foreign drivers. Department for Transport (DfT) officials are talking to consulting industry chiefs on how best to address the problem and avert empty shelves in the supermarket. * SO WHAT? * Thus far, the DfT announced that it was relaxing limits on how long HGV drivers can work, but bringing in foreign drivers (about 15,000 of whom are thought to have left the UK post-Brexit) could be an even bigger part of the solution – at least in the short term. I think that a solution has to be reached – and quickly – because inaction will lead to shortages in supermarkets, which could result in another bout of stockpiling that makes the situation even worse. It is also bound to dent consumer confidence as well.

Meanwhile, on the white collar side of things, Give us back the daily rail commute, say staff eager for freedom after year at home (Daily Telegraph, Oliver Gill) cites a study by PwC which shows that Britons are increasingly keen to get back to their pre-Covid commuting rhythm! Interestingly, 70% of respondents said they would revert to the same commutes as they did before versus 55% at the start of the crisis. * SO WHAT? * This will be particularly welcomed by the railway industry, which has been propped up by over £10bn of taxpayers’ money to limp through the pandemic. Predictions of passenger numbers being only 60% of what they were at best could prove to be overly-pessimistic if the findings of this research come good.

Sticking with the theme of a return to work, Staff do not want four-day week if it means wages cut (Daily Telegraph, Russell Lynch) cites research from the Social Market Foundation (SMF) which, rather unsurprisingly, shows the rather earth-shattering conclusion that we’d all like to work less for the same money but not for less money. No 💩, Sherlock! I could have told them that 😂! France has done a 35-hour working week, New Zealand is backing a four-day week and Nicola Sturgeon has earmarked £10m for Scottish firms giving it a go (but let’s face it, £10m is peanuts!). * SO WHAT? * I think that the pandemic has made everyone stop and think about how they worked before and how they would like to change it. We’ve all gone through the fantasy of increased productivity of working from home, but the fact of the matter is that we all need money to live and cutting paid hours just isn’t an option for most people. Maybe – just maybe – businesses that cater for office workers will see a stronger comeback than had previously been predicted. Covid-bruised survivors could yet be rewarded for staying the course…

Then in Goldman wrangles over whether to pay junior bankers higher salaries (Financial Times, Stephen Morris and Joshua Franklin) we see that senior execs at Goldman Sachs are wondering whether to boost the pay of junior investment bankers mid-year in order to match Wall Street rivals following complaints that younger staff were burning out. There has been a recent trend of US banks raising pay for first year investment banking analysts. Citigroup has raised them by about $25,000 to $100,000 a year, JP Morgan Chase and Barclays have raised their salaries to about the same level and Bank of America and Wells Fargo have also given their first year intakes a $10,000 raise. * SO WHAT? * Bankers get paid a mix of base and bonus – the former of which is largely fixed while the latter is highly variable. A rise mid-cycle is very rare, but Goldman’s rivals are all at it in a bid to attract the best talent. At the end of the day – and I’m saying this as a former investment banking headhunter – these bankers have horrendous working hours that you just wouldn’t believe. I’ve heard of some at American firms working from 8/8.30am to 4.30am for six days a week (and these are “normal” working hours) and the recent complaints in Goldman Sachs analysts highlight this. However, although working cultures at investment banks can be pretty aggressive, I don’t think that these hours are entirely their fault. At the end of the day, it is largely due to the client base. If they call Goldman on Friday saying they are in a deal and want the documents on their desk by Monday, it is very difficult to refuse. I know it’s not going to be a particularly popular opinion, but I just think some investment banking jobs are always going to be like that and as long as you are aware of that going in, then there’s no problem. Getting paid more than the Prime Minister for a relatively junior role (probably a few years in) is not going to come for free…

…and all this is happening against a backdrop of UK business confidence jumps ahead of 19 July lockdown lifting (The Guardian, Graeme Wearden), which cites the latest BDO survey that shows UK businesses were at their most optimistic level since 2005 last month! Manufacturing optimism rose particularly sharply! This is just the latest positive data point on the British economy as we chart a course out of lockdown.

2

PROPERTY-RELATED NEWS

We take a look at property trends and Zoopla’s latest news…

In Landlords swap offices for student housing as pandemic hastens change (Financial Times, George Hammond) we see that the world’s biggest commercial property landlord, Blackstone, is repositioning its $378bn real estate portfolio away from retail and offices and towards alternatives with better prospects. For instance, Blackstone sold BNY Mellon’s London office in St Paul’s for £465m and has approached student housing operator GCP Student Living. Warehouses, rental flats, student housing and life sciences campuses are all the hot areas now as they are driven by e-commerce, home shortages, rising student numbers across Europe and big investments in R&D respectively. Fun fact: ten years ago, offices and retail accounted for roughly 70% of total European property deal volume, but this has fallen to about 35%, according to Real Capital Analytics. * SO WHAT? * Times are a-changin’! It makes recent moves by Lloyds Bank and John Lewis look quite canny (although I still think this is a very weird move by the latter!).

Following on from that, Rush to acquire drive-thru sites after Covid lifts demand (Daily Telegraph, Russell Lynch) shows that interest in drive-thru sites has seen a notable uptick in interest from chains like McDonald’s, Greggs and Starbucks given the resilient trading and higher spend. This has been driving up prices of existing locations given

difficulties in getting planning permission for new sites. * SO WHAT? * It’s interesting to see this trend emerging, but I would have thought that the newly-acquired Leon would be able to do pretty well from this given that the owner, EG Group, is a forecourt business!

On the residential side of things, House sales plunge to 60pc below average after Sunak winds back stamp duty cut (Daily Telegraph, Russell Lynch) cites the latest figures from Knight Frank which show that house sales fell dramatically last month as the spectre of stamp duty holiday deadline looms. * SO WHAT? * This is just what happened the last time when the original stamp duty holiday deadline approached (back in March). I suspect that consumers will be waiting to see whether the end of furlough will bring the unemployment people have been predicting (in which case house prices might start to weaken) or whether these predictions prove to be overly-pessimistic (in which case house prices could start to go back up again).

Then in Zoopla snaps up online mortgage broker as competition heats up (Daily Telegraph, Lucy Burton) we see that the online estate agent’s price comparison website division (called RVU) has continued its shopping spree by buying online mortgage broker Mojo Mortgages just months after buying Admiral’s UK and European price comparison business. * SO WHAT? * This sounds like a decent enough purchase from a strategic point of view given that for this sort of business to work you really need scale. RVU already owns Money.co.uk, Uswitch and Confused.com. I would expect business to be brisk while buyers search out the best mortgage deals in a crowded market.

3

MISCELLANEOUS NEWS

China continues its crackdown and an investment boom is in the offing…

China to impose security checks on overseas listings (Financial Times, Tom Mitchell, Ryan McMorrow and Yuan Yang) continues on from recent moves by Chinese authorities to clamp down on its tech companies and their collective penchant for listing overseas. The Cyberspace Administration of China announced on Saturday that Chinese companies that have data of over 1m users will have to pass a security review before issuing shares on overseas stock exchanges. This came just one week after the State Council, China’s cabinet and the Chinese Communist party’s Central Committee launched a new regulatory regime to oversee overseas listings, particularly in the US. * SO WHAT? * This clampdown is really getting serious. If this doesn’t put Chinese tech companies off from listing overseas I don’t know what will! It really is quite incredible to see what has happened since Ant Group’s IPO got cancelled last year as there is a definite momentum building here. I wonder whether things like this will make China more insular or whether this is a necessary stage of evolution that Chinese companies have to go through

before they look outwards once more in the future. Until now, they have just been able to pretty much do what they like and grow like crazy by any means possible – but maybe now is the time to pause for breath, consolidate and then do things properly. I suspect the government and authorities also want to make sure that domestic “gold” does not slip through their fingers!

Then in Investment boom ‘on the horizon’ (The Times, Gurpreet Narwan) we see that a report from Deloitte shows that hiring and investment will hit their highest levels in almost seven years over the next few months. Interestingly, expansion via acquisition has been at its highest priority for the last 11 years according to this survey of 107 of the country’s biggest companies. * SO WHAT? * Rising input costs, employee shortages and supply chain bottlenecks are all combining to clip the wings of a break-neck recovery as the ever-present threat of inflation (which will ultimately lead to higher interest rates, which in turn leads to higher debt costs) hangs over them. It’ll be interesting to see how much current confidence levels are affected by furlough and the lifting of restrictions.

4

...AND FINALLY...

…in other news…

Seagulls seem to be rather confident as birds go, don’t you think? They also seize on an opportunity whenever they see one as per Man horrified after seagull rips food out of his mouth as he takes a bite (The Mirror, Emma Rosemurgey). Wow!

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