Monday 15/08/22

  1. In BUSINESS TRENDS NEWS, SMEs fear their prospects, the City of London loses restaurants and craft brewers worry about recession
  2. In EMPLOYMENT TRENDS, salaries rise but those at asset managers fall, the four-day week experiment looks like it’ll fall flat and PwC lowers its entry requirements
  3. In MISCELLANEOUS NEWS, US consumers still spend on fun, Zalando remains undeterred, Rightmove says house prices are falling and Saudi Aramco hits a new profit record
  4. AND FINALLY, I bring you a surfing labrador…

1

BUSINESS TRENDS NEWS

So there’s a lot of concern about the outlook…

📢 Just so you know, I’m going to be going on holiday (for the first time in ten years!) from the end of this week. I will be writing Watson’s Daily as normal until this Friday but will be having a social media (and podcast) “posting holiday” until returning on Tuesday 30th August. There will be a lot of work going on behind the scenes until then, though – so keep watching this space! That said, I did do a special podcast edition this weekend with Ralph on our thoughts for the final quarter of this year, so I would recommend you give this a try as we cover politics, economics and energy policy.

Small business owners worry whether they will make it through the winter (Financial Times, Oliver Barnes) just shows the concerns that small businesses are having at the moment, particularly as they face vastly inflated energy bills going as we head into winter. And this is before all the other pressures like rising wage bills, material costs and a supply chain crunch. Over the course of 2020, the UK saw almost 390,000 small businesses go under and it looks like we could be heading back there again. SMEs in hospitality, manufacturing, construction and retail have all seen input costs almost double over the same quarter last year. It’s not looking good. Unless the government steps in here, the situation could get very bad very quickly.

Hospitality seems to be facing some of the worst pressures as City of London has lost 14% of its restaurants since 2020 (Financial Times, Oliver Barnes) shows that there have been a huge number of restaurant closures in the Square Mile between March 2020 and June this year, according to AlixPartners and industry tracker CGA. A similar amount closed in Birmingham, followed by Glasgow. This reversed the pre-pandemic trend of more openings but shifts in working patterns have hit hard. For those of you who want to dine in central London at the moment, the day with the lowest footfall is Monday! * SO WHAT? * Given that more “white-collar” jobs can be done from home and the overall shift to WFH, this is hardly surprising – particularly in the Square Mile. The restaurant business has always been tricky, but it is sad that so many have suffered so much.

Brewers fear that a recession will burst the craft beer bubble (The Times, Constance Kampfer) reflects current fears among craft brewers that cash-strapped drinkers will switch from the more expensive craft beer option to cheaper alternatives. There was a craft beer brewer boom last year but there’s a danger that craft beer is perceived to be a luxury item, which could make it particularly vulnerable in a cost-of-living crisis. * SO WHAT? * I suspect that we will see two trends emerging: a lot of brewers going out of business as well as a wave of acquisitions by mega-brewers eager to broaden their offering (and at presumably fire-sale prices).

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

2

EMPLOYMENT TRENDS

Salaries generally rise, the four-day week doesn’t look like it’ll last and PwC lowers its entry requirements…

It was interesting to see Salaries rising as bosses struggle to find new staff (The Times, Constance Kampfner), which cites findings from the Chartered Institue of Personnel & Development’s Labour Market Outlook report which show that the labour market continues to be “incredibly tight”, leading to employers to increase wages and offer workers more flexibility. However, Asset managers curb pay amid rising cost pressures (Financial Times, Adrienne Klasa, Brooke Masters and Lydia Tomkiw) shows that fund managers are going the other way as clients continue to withdraw money against the backdrop of a falling stock market. Even the biggest one in the world, BlackRock, has seen an 11% fall in assets under management and is postponing hiring for more senior roles. We heard recently that one of the world’s biggest hedge funds, Man Group, has also been seeing asset withdrawals and when that happens, redundancies often follow.

In Four-day week may not leave drawing board (Daily Telegraph, Leonora Lynn and Lucy Burton) we see that the great four-day-week-for-five-days-wages experiment may fall flat as increasing numbers are doubting that it can be sustained beyond the trial period that is set to end in December. * SO WHAT? * The experiment has divided opinion as, on the one hand, many employees are happy with the arrangement. On the other hand,

many have found it difficult to co-ordinate who’s around and who isn’t. This is going to sound cynical but I suspect that a big fat recession looming large is going to give chief execs ample excuse to walk back ambitions here, and I really think that EVERYONE needs to work a four-day week for this to truly work.

Then in No 2:1? That’s no problem for PwC (The Times, Constance Kampfner) we see that PwC has decided to ditch its requirement for grads to get a 2:1 as a way to increase the “socio-economic diversity of the firm”. It says that it places greater store on its own aptitude and behavioural testing. It is not the only one to do this – rival EY dropped the 2:1 requirement in 2015, saying that it had no correlation to achievement in professional qualifications. * SO WHAT? * This is an interesting development. I always think that the first phase for recruitment for many firms is to cut the field down to a more manageable size. One of the easiest ways of doing this is by using grades as they are absolute. This is why some employers ask for A-level grades for graduate jobs (and I have heard that, interestingly enough, A-level grades are a more accurate predictor of how someone is likely to do in professional exams) as well as university grades. At the end of the day I’ve seen and worked with plenty of people who don’t have top grades and yet they are leaders in their field, but that has been more the exception rather than the rule because I guess that those with lower grades often don’t get a look in. You do wonder, though, why PwC even bothers with uni grads, though, if they believe in their own tests as a more meaningful way of judging potential…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

3

MISCELLANEOUS NEWS

US consumers just wanna have fun, Zalando hopes for a better future, Rightmove shows house prices getting weaker and Saudi Aramco hits new heights…

In a quick scoot around other interesting stories today, Consumers are still spending on fun (Wall Street Journal, Will Feuer and Kathryn Hardison) shows that Americans are continuing to spend on travel and entertainment over the summer, particularly on experiences that they perhaps missed under the pandemic. Hotel chains, theme parks and Las Vegas casinos are reporting strong activity, for instance. In Europe, though, Europe’s largest online fashion retailer bets sales slump is just a blip (Financial Times, Olaf Storbeck) shows that Zalando is hoping to avoid massive job cuts that online rivals such as Amazon, Klarna and Shopify are implementing despite revenues taking a drubbing in the first half of the year. It wants to keep employee numbers steady to the end of the year, but it has slowed down hiring. Although revenues have taken a hit, the company believes that it still has room to build market share while it continues to concentrate on profitability.

Meanwhile, Prices drop for first time this year, says Rightmove (The Guardian, Kalyeena Makortoff) shows that the rising trend may have reversed although some observers say that this was due to slower activity over the summer rather than tricky economic conditions. * SO WHAT? * TBH, there is usually a summer lull, so we’ll see the true picture once everyone gets back from holidays. Interestingly, asking prices are expected to fall this month as seller who need to move quickly tend to cut their asking prices so they can be in the new place by Christmas – as the average price to complete a sale now is four-and-a-half months. It is expected that the ongoing lack of supply of houses will continue to support the market.

Saudi Aramco posts record $48bn profit after oil surge (Daily Telegraph, Laura Onita) shows that red-hot demand for oil following Russia’s invasion of Ukraine has led to the state-controlled company’s biggest ever quarterly profit – and the biggest ever profit by any other publicly-listed company on the planet! It managed to make a profit of $48.4bn in the last quarter – an increase of 90% on the same period last year (although that is a bit of an extreme comparison given what we were experiencing last year). No wonder it didn’t care when Biden asked it to open the taps 🤣…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

4

...AND FINALLY...

…in other news…

This really is brilliant – and a great way to start the week: ‘Clever’ dog leaves people in stitches as it’s spotted surfing along a beach (The Mirror, Zahna Eklund). I mean, who wouldn’t love a surfing lab???

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Some of today’s market, commodity & currency moves (as at 0633hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
7,501 (+0.47%)33,761.05 (+1.27%)4,280.15 (+1.73%)13,047.19 (+2.09%)13,796 (+0.74%)6,554 (+0.14%)28,875 (+1.23%)3,276 (-0.02%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$91.274$96.971$1,792.641.211361.02460133.2351.1822924,803

(markets with an * are at yesterday’s close, ** are at today’s close)