Hold On!                                                                                          04 August 2023   

The 3,112 real estate and properties transactions totalled US$ 2.64 billion, during the week, ending 04 August 2023. The sum of transactions was 248 plots, sold for US$ 414 million, and 2,132 apartments and villas, selling for US$ 1.34 billion. The top three transactions were all for plots of land, one in Palm Jumeirah, sold for US$ 52 million, Hadaeq Sheikh Mohammed Bin Rashid for US$ 30 million and in Island 2, for US$ 19 million. Madinat Hind 4 recorded the most transactions, with 104 sales, worth US$ 42 million, followed by twenty-three sales in Al Hebiah Fifth for US$ 20 million, and eighteen sales in Wadi Al Safa 3, valued at US$ 45 million. The top three transfers for apartments and villas were all for apartments – the first in Al Barsha South Second, valued at US$ 22 million, one in Island 2 for US$ 20 million, and the other in Al Thanayah Fourth for US$ 19 million. The mortgaged properties for the week reached US$ 793 million, whilst seventy-nine properties were granted between first-degree relatives worth US$ 123 million.

CBRE’s latest report confirms what many already know – that Dubai’s property market posted a strong H1 performance, with average prices rising 16.9% in the year to June 2023, split between a 17.2% hike in apartment prices and 15.1% for villas. Average prices for apartment and villas stood at US$ 353 and US$ 416 respectively. Average apartment sales rates are still 13.1% below the highs of 2014, but average villa prices are 5.0% above, with a number of districts have long surpassed 2014 levels. In H1, a total of 16.5k units were completed and delivered – with new stock in Downtown Dubai, Dubai Creek Harbour, and Business Bay accounting for 44.6% of this total. By the end of this year, an additional 45.4k units are expected to be completed, although some of the stock may not be delivered, as planned. The number of H1 transactions stood at 57.7k, the “highest total on record over this period”, marking an increase of 43.2% annually. Having noted that the housing market had continued to show robust growth in H1, and that there is a similar outlook for H2, it did warn of “the key downside risks that we are monitoring include the impact of higher interest rates, the impact on consumers on the back of higher housing costs, namely in Dubai, and finally, the net impact of a weakening US dollar”. 

The consultancy also noted that, mainly due to tenants preferring to renew their existing contracts, June rents continued to moderate for the fifth consecutive month. It also commented that “moving forward, we expect that rental rates will continue to moderate. This is due to a reduction in asking rents in a number of key residential areas, particularly in the apartment segment of the market, where rents in several prime communities are now heading towards a single-digit growth.”

With more Dubai expat residents seeking to own, rather than rent, their own homes, and along with a marked influx of overseas investors, the local property market is set to continue its current impressive growth. In H1, it posted 76.1k real estate transactions, valued at US$ 77.1 billion, with the highest volumes being recorded in Al Barsha South Fourth, Dubai Marina and Business Bay. By value, the following locations made the top nine places in H1, (all in US$ million):

	Dubai Marina		6.80
	Wadi Al Safa 3		5.72
	Palm Jumeirah		5.29
	Jebel Ali Industrial First		3.82
	Business Bay		3.62
	Al Khairan First		2.95
	Hadaeq Moammed bin Rashid		2.80
	Jebel Ali First		2.63
	El Merkadh		2.56

Knight Frank report that H1 office space has seen an “unprecedented demand”, surging by 23%, to almost 54k sq mt. The sector that has benefited most from this Is property in the Grade A, including such locations as DIFC, Business Bay, the Trade Centre District and Dubai. The consultancy noted that “Dubai’s office market continues to experience a severe shortage of supply, with just three million sq ft [278,700 square metres] of space due to be completed between now and 2026, the vast majority of which is already spoken for. This is against a backdrop of 580k sq ft [54k sq mt] of requirements.” Under this scenario, rents will inevitably continue to head north. The best performing location is DIFC, driven by Brookfield Place, where rents remain well above the wider DIFC average of around US$ 763 per sq mt. Elsewhere, over the past twelve months, the biggest rise in rents have been seen in Business Bay, the Trade Centre District and Dubai Marina posting hikes of 69%, 54% and 54%, at US$ 516, US$ 566 and US$ 587 per sq mt respectively. The Trade Centre District, Jebel Ali Free Zone, Jumeirah Lakes Towers, Downtown Jebel Ali, Barsha Heights, Downtown Dubai and Dubai Marina all registered increases above 40 per cent to lead all areas monitored by Knight Frank.

The DIFC continued its recent trend of impressive growth, at 22.8%, equating to 661 entities, increasing the number of companies operating to 4,949; this influx saw the number of new employees at 3,057, (8.5%) bringing the total working population to 39,140. Dubai’s Prime Minister, and president of the DIFC, Sheikh Maktoum bin Mohammed, commented that “DIFC’s exceptional performance in the first half of the year once again demonstrates the strength of the ecosystem it offers for investment, innovation and enterprise to flourish.” The Centre leased more than 233k sq ft of owned and managed commercial space, with occupancy rates of 99%. Among the firms joining DIFC in 2023 were Asia Research and Capital Management Ltd, Edmond de Rothschild, EnTrust Global, Hudson Bay Capital, King Street Capital, Nomura Singapore, St James’s Place and Verition Fund Management. In line with DIFC’s Strategy 2030 to shape the future of finance and innovation, the centre recently announced the Dubai AI and Web3 Campus, aimed at creating the largest cluster of AI and tech companies in the region. It expects to attract more than US$ 300 million in funds, house more than 500 global AI and Web3 start-ups and create more than 3k jobs by 2028.

July S&P Global PMI shows that business activity, in the non-oil private sector, in the UAE continues to expand amid robust economic momentum, with companies reporting further uplifts in both employment and input buying; strong output growth was accompanied by another sharp uplift in sales in July. Businesses surveyed also reported an easing of cost pressures, as the rate of overall input price inflation softened to a three-month low, driven by lower commodity prices and freight costs. The overall sharp uplift in new orders provided companies with further impetus to expand their staffing levels, leading to a moderate rise in employment in the month. The index, at 56.0, was slightly down from June’s 56.9, and the thirty-second consecutive month of growth. The July findings signalled that the UAE non-oil sector will continue on its expansion path in to H2.

The Ministry of Economy confirmed that the country’s economy grew 3.8% in Q1, to US$ 113 billion, boosted by its strong non-oil sector; non-oil rose 4.5% to US$ 85.0 billion, as the government’s strategy of advancing and diversifying the non-oil economy starts to pay marked dividends. The Minister, Abdu al Touq, noted that “the key pillars of the national economy made significant contributions”. Other contributory factors include higher oil prices and government measures to mitigate the impact of the pandemic. Last year, UAE’s GDP grew by 7.9% to US$ 441.1 billion. The seasonally adjusted S&P Global PMI climbed to 56.9 in June, from 55.5 in May, with the health of the non-oil private sector improving in each of the past thirty-one survey periods, whilst business activity in the non-oil private sector strengthened in June as new order growth hit a four-year high. Sector-wise, transport and storage witnessed an 11% hike on the year, the biggest percentage rise in terms of growth, to contribute US$ 5.94 billion to the economy, followed by construction jumping 9.2% to US$ 8.9 billion. There were 7.8%, 7.7% and 5.4% rises posted for accommodation/food services, finance/insurance and wholesale/retail sector respectively.

After prices rose in July, the UAE Fuel Price Committee again increased all August retail petrol prices:

• Super 98: US$ 0.856 – up by 4.67% on the month and up 7.94% YTD from US$ 0.793  
• Special 95: US$ 0.823 – up by 4.50% on the month and up 13.83% YTD from US$ 0.727
• Diesel: US$ 0.804 – up 6.90% on the month and down 10.26% YTD from US$ 0.896
• E-plus 91: US$ 0.804 – up by 5.00.% on the month and up 13.88% YTD from US$ 0.706

Dubai Financial Services Authority has fined Mirabaud (Middle East) Limited (Mirabaud) bank US$ 3.0 million for having inadequate anti-money laundering systems and controls between June 2018 and October 2021. US$ 975k of the fine represents Mirabaud’s economic benefit from its contraventions in the form of fees and commission, and the fact that the bank agreed to settle the matter, reducing the fine from US$ 3.9 million. The DFSA did not make a finding that any of these transactions were in fact money laundering, but significant weaknesses in Mirabaud’s systems and controls presented key indicators of potential money laundering that should have been investigated.

The UAE will set up federal prosecution offices, dedicated to tackle money laundering and economic crimes, in a bid to develop the country’s judicial system, while continuing to boost financial stability. With the aim of improving the country’s professional and legal performance, the offices will investigate the whole range of AML, and other “white collar” crimes, including corporate crimes, bankruptcy, regulation of competition, financial markets and intellectual property/trademarks, or those that violate the UAE’s financial rights, such as customs evasion crimes.

Starting last Tuesday, 01 August, the Federal Tax Authority opened online requests, via its EmaraTax digital tax services for clarifications related to Corporate Tax registration platform. Access will be by filling and submitting a clarification request through the EmaraTax platform, along with the required supporting documents, and paying the designated service fees. Its main aim is to support and encourage taxpayers subject to Corporate Tax to voluntarily comply with the Federal Decree-Law No. 47 of 2022.

The tax authority also clarified that Cabinet Decision No. 7 of 2023 and determined the fees for providing a Private Clarification request related to one tax and a Private Clarification request related to multiple taxes. As per the Cabinet Decision, a Private Clarification is a clarification issued by the Authority in the form of a stamped and signed document concerning specific tax technical matters for a specific taxpayer, as submitted through the designated form on the FTA website, along with the required documents. Moreover, the Cabinet Decision allows the Authority to refund fees paid for Private Clarification requests in cases where the FTA does not issue the requested clarification. Furthermore, under Cabinet Decision No. (75) of 2023, penalties will be imposed on Taxable Persons, whether an individual or a legal entity, who do not comply with their obligations under the UAE Corporate Tax Law. Penalties will be applied in cases of failure to file and pay Corporate Tax due on time, including the failure of the Registrant to inform the Federal Tax Authority of any case that may require the amendment of the information pertaining to his Tax record kept by the Federal Tax Authority. Penalties also apply in cases of failing to properly keep records or submitting the required records and other information specified in the Tax Law.

A survey carried out by the Spices Board of India, announced ahead of the 14th World Spice Congress to be held in Mumbai from 15 September, ranked the UAE fourth in the world among the top twelve markets for Indian spices in the fiscal year ending 31 March 2023. India produces seventy-five spices out of the 109 varieties listed by the International Organisation for Standardisation. In the calendar months of April-May this year, export of Indian spices rose by 40% in volume compared to the corresponding months last year.

Four UAE companies make the top ten list in Forbes Middle East’s Top 100 Arab Family Businesses 2023, with the Al Futtaim Group being placed second behind Egypt’s Mansour Group, with a combined net worth of US$ 6.4 billion. Al Ghurair Investment, Majid Al Futtaim Holding and Al Ghurair Group made it in the top 10.  The annual list evaluates successful Arab businesses based on size, performance, business activity and legacy. UAE companies filled twenty-nine of the places, second only to Saudi Arabia’s thirty-three.

Commercial Bank International has announced its H1 2023 financial results, with increases across the board. Net profit was 43.6% higher at US$ 22 million, net operating income up 0.7% to US$ 74 million and loans/advances by 2.5% to US$ 3.35 billion.

Dubai Investments posted a 59.3% hike in H1 net profit, to US$ 158 million, with Q1 revenue up 64.7% at US$ 72 million. Total income for the Group increased by 31.0% to US$ 553 million, with total shareholder equity rising 0.04% to US$ 3.51 billion. Its chief executive, Khalid bin Kalban, noted that “the increase in net profit is mainly due to the strong performance of the real estate segment underpinned by substantial returns from the investment portfolio”.

Emirates Central Cooling Systems Corporation PJSC returned impressive annual returns for the year ended 30 June 2023, with increases seen in revenue and EBITDA, up by 9.1% to US$ 717 million, and 10.9% to US$ 349 million; H1 saw revenue 6.1% higher, at US$ 334 million, and EBITDA by 7.4%, with an absolute net profit basis of US$ 110 million.

Deyaar, taking advantage of the Dubai property market continuing to boom, posted a 90% jump in Q2 profit to US$ 17 million, as revenue increased by 53% to US$ 59 million. Over H1, total six-month profit came in 77% higher, on the year, at US$ 32 million, as revenue was up 70% to US$ 171 million. Saeed Al Qatami, chief executive of the Dubai property developer, noted, “the positive … financial results were achieved due to strong performance executed by all business segments of the company, especially the property development business, which was the dominant revenue contributor.” The company, majority owned by Dubai Islamic Bank, reported that its total assets had increased by 1.6% to US$ 1.69 billion, whilst its liabilities stood at US$ 436k.

Dubai Aerospace Enterprise posted a marginal US$ 1 million rise in H1 profit, before exceptional items, nudging to US$ 141 million; the company was forced to write off US$ 577 million for aircraft operating in the fleet of Russian airlines, over which the plane lessor had no control. H1 revenue was 15% higher, at US$ 670.1 million, because airlines were paying off Covid-era rent deferral agreements earlier than scheduled. The growth comes as the industry sees no signs of air travel demand abating on one hand and as plane makers struggle to deal with aircraft delivery delays and ease capacity constraints on the other. In Q2, DAE, one of the world’s biggest plane lessors, repurchased a further US$ 102 million of principal amount of its bonds, bringing the total to US$ 307 million, and in H1, it had US$ 368 million of remaining bond repurchase authorisation by 30 June 2023 Fitch Ratings revised DAE’s outlook to positive from stable during the quarter.

Driven by the robust growth in the emirate’s economy and high occupancy rates, (up 5% at 87%), Tecom Group, which manages over 10k companies, posted a 13% rise in H1 profits to US$ 132 million. It also confirmed a 6% rise in revenue to US$ 286 million, driven by continued growth in rental rates, sustained strong occupancy levels and high customer retention rates across its business districts. Earnings before interest, taxes, depreciation and amortisation were up 14%, year-on-year, to US$ 225 million, attributable to improved management of operating expenses and better operational efficiencies. The Group comprises ten business districts, (nine of which are located in free zones), including Dubai Internet City, Dubai Media City and the Dubai Design District.  The Board approved a US$ 109 million H1 interim cash dividend.

E& posted their H1 financials showing a 1.1% rise in revenue to US$ 7.25 billion, on the year, and a consolidated net profit of US$ 1.28 billion, with a consolidated EBITDA of US$ 1.63 billion, at a 48% margin. Its subscriber base in the UAE grew 5.1% to 13.9 million and to an aggregate 165 million, a 3.1% hike.  At the same time, it announced that it had signed a binding agreement with PPF Group to acquire a controlling stake (50% + 1 share economic stake) in PPF Telecom Group’s (PPF Telecom) assets in Bulgaria, Hungary, Serbia, and Slovakia.

The DFM opened on Monday, 31 July 2023, 558 points (16.1%) higher the previous seven weeks, gained 46 points (1.1%) to close the week on 4,083, by 04 August 2023. Emaar Properties, US$ 0.14 higher the previous three weeks, gained US$ 0.10 to close on US$ 1.93 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.72, US$ 4.52, US$ 1.56, and US$ 0.44 and closed on US$ 0.72, US$ 4.63, US$ 1.57 and US$ 0.45. On 04 August, trading was at 170 million shares, with a value of US$ 94 million, compared to 235 million shares, with a value of US$ 84 million, on 28 July 2023.

The bourse had opened the year on 3,438 and, having closed on 31 July at 4,059, was 621 points (18.1%) higher. Emaar started the year with a 01 January 2023 opening figure of US$ 1.60, to close the first seven months at US$ 1.84. Four other bellwether stocks, DEWA, Emirates NBD, DIB and DFM started the year on US$ 0.59, US$ 3.54, US$ 1.55 and US$ 0.41 and closed YTD at US$ 0.73, US$ 4.63, US$ 1.57 and US$ 0.45.   On 31 July, trading was at 212 million shares, with a value of US$ 138 million, compared to 66 million shares, with a value of US$ 18 million, on 31 December 2022.

By Friday, 04 August 2023, Brent, US$ 10.07 higher (13.5%) the previous four weeks, gained US$ 1.74 (2.1%) to close on US$ 86.24.  Gold, US$ 3 (0.1%) lower the previous week, gained US$ 19 (1.0%) to US$ 1,978 on 04 August 2023.  

Brent started the year on US$ 85.91 and shed US$ 3.74 (4.35%), to close 31 July on US$ 82.17. Meanwhile, the yellow metal opened 2023 trading at US$ 1,830 and gained US$ 113 (6.17%) to close YTD on US$ 1,943.

The world’s biggest plane maker posted a record Q2 net profit increase of 55.0% to US$ 1.18 billion on a 25.0% rise in revenue to US$ 17.7 billion, attributable to higher jet deliveries during the period, as demand surged because of growth and the need for airlines to replace ageing fleets.  Its adjusted EBIT figure rose 34% on an annual basis to US$ 2.02 billion. Airbus’s H1 net profit fell 20% year on year to US$ 1.9 billion, despite revenue being 11% higher at US$ 35.1 billion, as the Toulouse-based company delivered 316 commercial aircraft – twenty-five A220s, 256 A320-family jets, fourteen A330s and twenty-one A350 wide-bodies. Gross commercial aircraft orders totalled 1,080, up from 442 aircraft in the first half of 2022. The net orders of 1,044 aircraft, after cancellations, were up from the 259 net orders recorded in H1. The total order backlog amounted to a record 7,967 commercial aircraft at the end of June 2023. Airbus also confirmed that it was on track for its target to build seventy-five of its best-selling A320 jets a month by 2026.

Last week, Pratt & Whitney, ordered inspections on 1.2k engines of Airbus A320 Neo jets, after a problem with contaminated powdered metal, which will require accelerated removals and inspections within the next twelve months, including approximately two hundred accelerated removals by mid-September of this year.

PayPal posted a Q2 30% improvement in profit, to US$ 1.03 billion, compared to a US$ 341 million loss in the same period last year – and a 29.6% improvement on Q1’s profit of US$ 795 million. Q2 revenue was 7% higher, on the year, at US$ 7.3 billion, with operating income 48% to the good on US$ 1.1 billion. The company’s shares fell as much as 7.4% in extended hours trading. In Q2, total payment volumes jumped 11% annually to more than US$ 376.5 billion, with total active accounts of 431 million, compared to 429 million in Q2 last year. It expects that Q3 revenue to grow to US$ 7.4 billion. By 30 June, PayPal’s cash, cash equivalents and investments totalled US$ 14.4 billion, while its debt stood at US$ 10.5 billion. In June, PayPal and private equity firm KKR announced a multi-year relationship for European “buy now, pay later” receivables.

In a move to try and get the big tech companies, such as Apple, Dell and Samsung, to increase manufacturing in India, the government announced that it will impose a licensing requirement for imports of laptops, tablets and personal computers, with immediate effect.  To date, there is no restriction on companies importing laptops freely, but the new rule mandates a special licence for such products; if this occurs, there is going to be prolonged waiting times for the launch of each new product, which will have a negative impact on the sector. In Q2, there was a 6.25% hike, to US$ 19.7 billion, in the country’s electronics imports, (which include laptops, tablets and personal computers) – they account for about 1.5% of the country’s total imports. Many of these products are imported into the country, rather than being manufactured locally. Meanwhile, the government has extended the deadline for companies to apply for a US$ 2 billion incentive scheme to attract big-ticket investments in IT hardware manufacturing, which covers products like laptops, tablets, personal computers and servers; the Modi administration hopes to produce locally electronic goods, to the value of US$ 300 billion, by the end of 2026.

HSBC posted an 89% hike in Q2 profit before tax, at US$ 8.8 billion, boosted by a sharp increase in net interest income, as benchmark interest rates across the world continued to rise; revenue rose 38% to US$ 16.7 billion, with growth across all of the bank’s global businesses. Net interest income of US$ 9.3 billion was 38% higher on an annual basis and rose by US$ 300 million, compared with Q1; the bank raised its full 2023-year guidance for net interest income to above $35 billion. Impairment charges more than doubled to US$ 913 million, including a US$ 300 million charge in the commercial real estate sector in mainland China. Customer lending shed US$ 9 billion to $960 billion, which included a reduction of US$ 3 billion related to a “reclassification of our business in Oman  held for sale”. Customer accounts also fell by US$ 18 billion, compared with Q1, partly due to a slide in Europe, as “corporate customers used deposits to pay down their loans, and in HSBC UK, reflecting higher cost of living and competitive pressures”.

Wilko has filed a “notice of intention” to appoint administrators after failing to find enough emergency investment and is on the brink of collapse if no investment is forthcoming. The privately-owned company, which has over four hundred stores and 12k employees, has built its reputation on selling affordable everyday items. Chief executive, Mark Jackson, said the company was left with “no choice but to take this action”, but hopes to find a solution as quickly as possible to “preserve the business”, and that he would continue to talk with interested parties about options for the business. It added that it had received “significant interest” from investors, and some offers but none of them would have provided enough cash within the time needed. It was reported that Wilko, which has an annual turnover of about US$ 1.52 billion, had a “robust turnaround plan” in place. According to reports, the privately owned retailer, founded in 1930, has already borrowed US$ 51 million from Hilco, a specialist retail investor and the owner of Homebase, and has even been exploring the potential sale of a stake in the business.

The World Trade Statistical Review 2023 indicated that services trade jumped 15% last year – slightly more than goods trade – with total trade, for both goods and services, up 13% to US$ 31.0 trillion. Although its global exports dipped 1% to 14%, China remained the top merchandise exporter in 2022, well in front of the US and Germany, who accounted for 8% and 7% of global trade. Because of high energy prices limiting demand, the share of manufactured goods in world merchandise exports fell to 63% in 2022 (versus 68% in 2018). With shipping rates returning to pre-pandemic normality, trade in transport services continued to grow, albeit slowly, in 2022. Global exports of fuels and mining products increased on average by 19% per year between 2019 and 2022, reaching a value of US$ 5,158 billion in 2022. Their share in world exports increased by 4% during the four years, rising to 21% in 2022. Excluding “other manufactured goods”, chemicals (US$ 3,010 billion) and office/telecom equipment (US$ 2,512 billion) had the highest shares – 20% and 16% respectively – in world exports of manufactured goods in 2022. Automotive products (US$ 1,518 billion) represented 10% of the global total, with US overtaking Japan as the second-largest exporter of automotive products in 2022. Among the top ten exporters, China increased its exports the most, recording a 30% rise.

 In June 2023, both the euro area’s seasonally adjusted unemployment rate and that of the EU were both lower on the year by 0.3% to reach 6.4%, and by 0.2% to 6.1% respectively; both were stable compared to May returns. Eurostat estimates that 12.8 million in the EU, of whom 10.8 million in the euro area, and compared with June 2022, unemployment decreased by 387k in the EU and by 441k in the euro area. In June 2023, the unemployment rate for women and men was at 6.1% and 5.7% in the EU, and in the euro area, at 6.1% and 5.7%; all rates were stable compared to May 2023 returns.

Three years after China levied tariffs on Australian barley imports, involving billions of dollars of trade, bilateral relations have improved markedly, since Anthony Albanese became Prime Minister in May 2022. In 2020, his predecessor, Scott Morrison, called for an international investigation into the origins of Covid-19 – a move that upset the Chinese and saw relations sink to new depths. Canberra confirmed it will suspend its case at the World Trade Organisation over Beijing’s duties on barley and has also invited China’s new foreign minister to visit the country. Before the tariffs were imposed, it was estimated that barley exports to China averaged around US$ 790 million a year. In 2020, tariffs were also placed on a number of other Australian products including wine, lobster, beef and meat exports from certain abattoirs. Prior to the introduction of tariffs, China had been Australia’s biggest wine partner and the tariff had a major impact on the industry.

Citing that it had noted a “steady deterioration” in governance over the last twenty years, Fitch has downgraded the US government rating, a notch from AAA to AAA-, following concerns over the state of the country’s finances and its debt burden. US Treasury Secretary, Janet Yellen, called the downgrade “arbitrary”, and that it was based on “outdated data” from the period 2018 to 2020. The debt agency also pointed that “the rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance.” It also expects the US to slip into a mild recession later this year.

Despite surging interest rate hikes and higher borrowing costs, it appears that the US economy is performing better than expected by many analysts and that there is the distinct possibility that it will avoid a recession. In June, 187k jobs were added to the economy, with the jobless rate dipping 0.1% to 3.5%, although hiring was weaker on the month and had slowed over the past twelve months. With the average hourly pay in July 4.4% higher than a year ago, and unemployment rate remaining near historic lows there is an argument that the Fed should continue with its current high rates until there are other signs that the economy is indeed cooling; one positive indicator would be to see wage growth lower at say 3.0%. Since the Fed started raising interest rates, inflation has dropped sharply – down to 3.0% in June.

According to the Australian Tax Office, about 33% of large public companies paid no tax in fiscal 2021. Australia, one of the 130 OECD countries that pledged in 2021 to introduce a 15% global minimum tax, will bring in the tax, aimed at preventing multinationals based within its borders from evading tax. The new tax will include an additional levy charged to these companies, who have an annual global revenue of at least US$ 780 million. The aim of the exercise is to prevent multinational companies from evading domestic taxes, through offshore subsidiaries, and is expected to raise US$ 217 billion annually in revenue. In 2016, it was estimated that about 50% of US corporate profits were stashed in seven countries with low tax rates – Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland. By 2019, such a practice is estimated to have cost countries across the world US$ 1 trillion in lost tax revenue. In 2018, mining giant BHP settled with the ATO to pay US$ 352 million in taxes it skipped through its Singapore marketing hub. Last year, the ATO reached a settlement of almost US$ 650 million with mining giant Rio Tinto over its Singapore-based subsidiary. The following year, Google settled with the ATO to pay US$ 315 million in taxes for the same reasons.

In the UK, the Infrastructure and Projects Authority has given a “red” warning for the HS2 rail line’s first two phases – from London to Birmingham then onto Crewe. The warning has given the project, (which aims to create high-speed rail links between London and central and northern England) an “unachievable” rating. With its usual “ostrich in the sand” approach, the Sunak administration says it remains committed to delivering HS2. The rating also means there are “major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable”, and that “the project may need re-scoping and/or its overall viability reassessed.” The third phase – Crewe to Manchester – received an “amber” warning indicating that successful delivery of a project “appears feasible”, but “significant issues already exist”. The London to Birmingham leg of HS2 was due to open in 2026 but has been delayed to between 2029-2032. An eastern leg of the line running to Leeds has been scrapped, and instead a shorter high-speed line will link Birmingham and East Midlands Parkway.

Nationwide reported that July UK house prices dropped at their fastest annual pace for fourteen years – by 3.8% on the year; the average house price is now at US$ 333.4k. The building society also noted that mortgage interest rates remained high, making affordability a challenge for house-buyers, with it calculating that a first-time buyer, based on a 6.0% rate, on an average wage, who had saved a 20% deposit, would see mortgage payments account for 43% of their take-home pay; a year ago, this would have been 33%. Despite the fall in house prices, it also commented that higher mortgage rates meant housing affordability remained stretched.

Alcohol duties have been frozen since 2020, but this week, Chancellor Jeremy Hunt introduced a major shake-up of the way alcohol is taxed that has resulted in many alcoholic drinks costing more from last Tuesday, 01 August 2023. Duty has increased overall, with most wines and spirits seeing rises, but have fallen on lower-alcohol drinks and most sparkling wine, with taxes on draught pints remaining unchanged, as an additional measure designed to support pubs. The government is going ahead with a 10.1% rise in alcohol duties, but drinks with alcohol by volume below 3.5% will be taxed at a lower rate, but tax on drinks with ABV over 8.5% will be taxed at the same rate, whether it is wine, spirit or beer. Consequently, sparkling wine, which was previously taxed at a higher rate than still wine, will be US$ 0.24 cheaper, for a standard-strength bottle, whilst tax a typical bottle of still wine with ABV 12% will go up by US$ 0.56, but on wine with 15% ABV, tax will rise by US$ 1.24; spirits and fortified wines, such as sherry and port, will see steep rises. Tax on draught beer in pubs will be up to US$ 0.14 lower than tax on supermarket beer as a result of the changes.

Having announced a 25bp rate increase, to 5.25%, yesterday, 03 August, the BoE surprised the market by commenting that it expects interest rates to stay higher for longer, in an effort to battle soaring price rises; it was also downbeat on growth prospects. The current rates are at their highest in fifteen years, which send mortgage repayments even higher and more damaging on the average mortgage-holder. The July inflation rate of 7.9% is still almost quadrupled the BoE’s 2% target, with the Bank’s Governor, Andrew Bailey, noting that “we know that inflation hits the least well-off hardest and we need to make absolutely sure that it falls all the way back to the 2% target.” Rather worryingly, the Bank said the impact of its rate rises would begin to hit people and the economy harder next year, with growth continuing to be sluggish and smaller than it was before the pandemic for some time. Rising food prices have been one of the biggest drivers of inflation, but the Bank said there was evidence that the increases were slowing, “albeit only gradually”. The Governor also commented that interest rates will not fall until there is “solid evidence” that rapid price rises are slowing, and that once both prices and pay are stable, then rates would drop. For the time being Hold On!