Money (That’s What I Want). 18 October 2024
Damac has launched Sun City, an exclusive new master community in Dubailand, featuring elegant four- and five-bedroom townhouses, ranging from 2.3k sq ft to over 3.3k sq ft. Prices start at US$ 205k, with a simple payment plan available – 20% deposit, 55% during construction and 25% on handover. There are several variants on the floor plans, with all units featuring spacious living areas, modern kitchens, and some with walk-in wardrobes and balconies.
Nakheel, has awarded three major contracts, valued at US$ 1.36 billion – to Ginco General Contracting, Shapoorji Pallonji Mideast, and United Engineering Construction Company – for the construction of seven hundred and twenty-three ultra-luxury villas on the first six fronds, (K, L, M, N, O and P) of Palm Jebel Ali, with completion expected within two years. Of the total, there will be five hundred and thirty-three nine 5 B/R and 6 B/R Beach Collection villas and one hundred and eighty-four 7 B/R Coral Collection villas. Each of these villas will have exclusive beach access. Ginco will build one hundred and ninety-seven villas on Fronds O and P, Shapoorji Pallonji will construct two hundred and seventy-five villas on Fronds M and N, and UNEC will develop two hundred and fifty-one villas on Fronds K and L. On completion, Palm Jebel Ali will feature 13.4k km of beachfront and sixteen fronds.
For its first new development since 2015, Union Properties has unveiled Takaya, located in Dubai Motor City, with its luxury services and cutting-edge amenities. With building having already started in May, delivery date is expected in Q4 2027. There are four types of units
- Studio from US$ 205k 376 sq ft
- One bedroom from US$ 327k 850 sq ft
- Two bedrooms from US$ 436k 1,250 sq ft
- Three bedrooms from US$ 599k 1,679 sq ft
Arabian Construction Company has been given the construction contract for Select Group’s renowned ultra-luxury project, Six Senses Residences Dubai Marina – an ultra-luxurious one hundred and twenty-two storey development. Aiming to set a new standard for residential health and wellness, it encompasses 61k sq ft of state-of-the-art fitness centres, dedicated longevity facilities, and landscaped social areas, along with many other facilities. Six Senses Homes Dubai Marina offers two hundred and fifty-one residences, including duplex and triplex Sky Mansions, half-floor penthouses, and deluxe residences with two to four bedrooms.
Dubai’s latest development will raise eyebrows – not because of its height but its width. Although 380 mt high, The Muraba Veil will be just one apartment wide, or 22.5 mt, earning it the distinction of being one of the narrowest skyscrapers ever built. Located along Sheikh Zayed Road and the Dubai Canal, the seventy-three-storey tower, designed by the Pritzker Prize-winning Spanish studio RCR Arquitectes, will house one hundred and thirty-one apartments, each spanning the full width of the building. The development will also feature amenities such as a spa, a fine dining restaurant, an art gallery, a private cinema, and even a padel court. The exterior will be a stainless steel “veil” that envelops the building, giving it a sleek, contemporary look. This development is the fifth collaboration between Muraba and RCR Arquitectes that stretches over a decade.
AE7 has been appointed the consultant for One Development’s flagship US$ 545 million project to be located in Dubai’s City of Arabia. Not only will the renowned architectural and engineering firm oversee all facets of the development’s master planning, but they will also be in charge of the project management, architecture, interior design, landscape architecture, AI innovation integration, development management, mechanical and electrical engineering, and integrated sustainability practices for this soon-to-be-unveiled project.
This week witnessed the highest ever leasing deal for a Dubai property. It is reported that a villa in Jumeirah Bay Island has been let for an annual sum of US$ 4.2 million, (AED 15.5 million). The leased property is a private mansion set on the waterfront, offering views of the ocean and the Bvlgari Resort & Residences. Recent data, from Prime by Betterhomes, shows that transactions exceeding US$ 4.74 million surged by 65% in Q3, further solidifying Dubai as a top destination for luxury residences.
At the end of last week, there were reports that DP World would not be attending the UK’s investment summit, following Transport Secretary Louise Haigh criticising the port operator and urging consumers to boycott the company relating to its ownership of P&O Ferries; after it sacked nearly eight hundred seafarers in 2022 and replaced them with cheaper workers. There was concern that DP World would be pulling out of the two-day event and not investing an expected US$ 1.0 billion for further expansion of its London Gateway port. The change came about after there had been “warm engagement” between senior figures in the firm and the government, with the PM distancing himself from his Trade Minister’s remarks, commenting that her comments were “not the view of the government”.
At the RTA’s latest open auction, its one hundred and sixteenth edition, ninety premium plates came under the hammer, raising US$ 19 million; all numbers ranged from two to five digits and included the letters AA, L, N, P, Q, R, S, T, U, V, W, X, Y, and Z. The top four plates – AA17, Y1000, V96 and AA333 – came in at US$ 2.2 million, US$ 1.2 million, US$ 1.1million and US$ 820k.
On Monday, HH Sheikh Mohammed bin Rashid toured GITEX Global 2024, the world’s largest tech and startup event; its forty-fourth edition, which boasted 6.5k exhibitors from one hundred and eighty countries, featured the world’s largest technology enterprises alongside governments, investors, experts, startups, academia, and researchers. The Dubai Ruler commented “as the UAE embarks on a new phase of economic growth, driven by strategic investments in future industries, the nation is rapidly consolidating its position as a global hub for advanced technologies such as artificial intelligence. We have a clear vision to advance the UAE’s leadership in the global digital and technology landscape, making it the world’s most future-ready nation”. He also added “GITEX Global 2024 also further accelerates the growth and innovation momentum created by our recent strategic initiatives like the ‘Dubai Universal Blueprint for Artificial Intelligence’. As the world’s top-ranked destination for foreign direct investment in AI, Dubai is creating an environment that nurtures innovation and empowers companies to explore the vast potential of emerging technologies.”
On Sunday, Sheikh Mansoor bin Mohammed bin Rashid inaugurated Expand North Star 2024, the world’s largest event for startups and investors, that ran for four days at Dubai Harbour. He emphasised that Dubai continues to intensify its efforts to strengthen its position as a vital player in shaping the world’s future, driven by its visionary leadership and a development model marked by sustainable growth, continuous efforts to raise excellence, and an environment that fosters innovation and creativity. He added that “we remain committed to developing a digital business ecosystem and infrastructure that empowers companies to grow and thrive, strengthening Dubai’s position as the most attractive city for investment and entrepreneurship.” Fully integrated with GITEX Global, the world’s largest and best-rated tech and startup event, this event brought together the world’s most sought-after founders, investors, entrepreneurs, and business leaders to explore exciting growth opportunities emerging in Dubai and catalyse the future of the digital economy. This year’s Expand North Star not only welcomed a record number of attendees but welcomed 1.2k investors, from over one hundred countries, with assets under management exceeding US$ 1 trillion.
According to Ahmad Bin Byat. Vice Chairman of the Dubai Chamber of Digital Economy, “the growth rate of the number of digital companies in Dubai is about 30%, while the growth rate of new companies operating in various sectors ranges between 13% – 15%”. He noted that there are at least 120k digital companies in Dubai, with a significant increase in the number of existing companies working on digital transformation, attributable to three main drivers – attracting global companies, local startups, and the transformation of many existing traditional companies to digital.
The Federal Authority for Identity, Citizenship, Customs and Port Security Current is in the throes of introducing a quicker and seamless payment system using the palm of the hand. This ‘palm ID’ tech will replace the need of payments by the likes of credit cards and digital applications, which will soon be only found in the pages of history. This solution, part of the UAE Vision 2031 programme, is currently in the trial-and-development phase. With palm veins of each individual different, people will provide palm biometrics at the ICP platform, which will be linked to the personal profile of the individual. It will also make it easier for people to access services such as the Metro and other crowded places. The UAE will be the first country in the ME to introduce such technology.
In a recent study, carried out by Telegraph Travel, Emirates has been awarded the “World’s Best Airline” amongst ninety global carriers, in a recent comprehensive and methodological study. Thirty-plus criteria included punctuality, baggage allowance, route network, quality of home airport, age of fleet, value of rewards programme and tastiness of in-flight meals, while the results were calculated referencing data from more than eighteen independent and international awards, readers polls, ratings websites and expert reviews.
According to global rating agency S&P, the Dubai government has repaid about US$ 10.90 billion in debt and a further US$ 1.93 billion in bonds – making a total of US$ 12.83 billion, (AED 47.1 billion), over the past two years. Of that total, US$ 5.45 billion related to a partial repayment of a US$ 15.00 billion loan from Abu Dhabi and the Central Bank of the UAE. Over the period, the loan from the Dubai-based Emirates NBD bank has halved. The agency noted that “we expect Dubai’s gross general government debt will decline to about 34% of GDP (US$ 50 billion) by the end of 2024 from 70% of GDP in 2021.” Two factors have helped boost the emirate’s exchequer – the introduction of 9% corporate tax and estimated cash proceeds of about US$ 9.00 billion, (AED 33 billion). from partial sales (of up to 25%) of public entities such as DEWA, Salik, Empower, Parkin, Dubai Taxi Co and Tecom; four more “government” entities are still to be listed on the DFM which will help with liquidity. S&P estimates Dubai’s public debt at about 70% of GDP, including contingent liabilities of about 36% of GDP and general government debt of 34%. It also expects Dubai to get fiscal surpluses from 2024 to 2027, with no additional debt issuances for deficit financing over the next couple of years. These forecasts exclude the estimated US$ 35.0 billion Al Maktoum Airport expansion project and the US$ 8.2 billion Tasreef project (to build a rainwater drainage network which would be completed in phases by 2033).
A report by S&P Global Market Intelligence notes that the UAE has posted YTD the second-largest number of private equity deals in the ME, (a bloc of twelve countries), behind Israel. In Q3, it was estimated that the region attracted US$ 2.28 billion – 0.5% higher on the quarter and 91.6% up on Q1. However, the annual total is likely to fall well short of the $11.60 billion of capital attracted last year, not helped by the continuing regional military conflicts. The region’s largest deal in 2024 has been the acquisition of a 49% stake in ICD Brookfield Place, for US$ 735 million, by Lunate and Olayan Financing Co WLL; both companies each took a 24.5% share. The other two leading deals were the US$ 600 million agreement for 50% of the iron blending and distribution company, Vale Oman Distribution Centre LLC, by Apollo Global management and Silver Rock Group’s US$ 325 million investment in UAE-headquartered generative AI company Pathfinder Global FZCO.
Late last week the General Commercial Gaming Regulatory Authority granted its first-ever commercial land-based casino gaming licence to Wynn Resorts. The licence has been issued for Wynn Al Marjan Island Resort, currently under construction in Ras Al Khaimah. Another interesting development came with the news that, last month, MGM Resorts had submitted an application for a similar project to be located in Abu Dhabi. The Wynn Al Marjan Island Resort, set to open in 2027, is a multi-billion dollar project, featuring a gaming floor, over 1k hotel rooms, convention facilities, shopping outlets, and various dining options.
Emirates NBD posted a flat Q3 net profit of US$ 1.42 billion, unchanged from the corresponding 2023 period, and missing a mean analyst estimate of US$ 1.63 billion. Dubai’s biggest bank by assets, and majority owned by the Government of Dubai, had further mixed results, posting an 8.0% hike in net interest income but a 15.0% fall in non-funded income; earlier in the year, when talk was on the unwinding of the high interest rates, the bank had started focusing on expanding its non-income income. By the end of Q3, total assets had climbed 14.0%, to US$ 253.68 billion, gross loans by 6.0% to US$ 138.42 billion and deposits by 13.0% to US$ 170.03 billion. The bank’s ratio of non-performing loans improved by 0.7%, down to 3.9% on the year from last year’s 4.6%, boosted by “strong recoveries, writebacks, write-offs and repayments”. By today, its share value was at US$ 5.45 – US$ 0.75, (16.0%) higher YTD from its 2024 opening price of US$ 4.70.
Meanwhile, Emirates Islamic posted an impressive 52% record profit surge, to US$ 681 million, in the nine months to 30 September 2024 – and a net profit margin of 4.5% – with income 14.0% higher at US$ 1.12 billion; the main drivers behind the results were marked expansion in both funded and non-funded income, along with a 24.0% increase in customer financing. Q3 saw profit 92.0% higher at US$ 227.52 million, as total income grew 16.0% to US$ 381 million. Its total assets rose to US$ 29.16 billion, with further rises for both customer financing, up 24.0% to US$ 18.26 billion and customer deposits, 21.0% higher at US$ 20.16 billion.
The DFM opened the week, on Monday 14 October, thirty-three points (0.7%) higher the previous week, gained a further thirty points (0.7%), to close the trading week on 4,469 points by Friday 18 October 2024. Emaar Properties, US$ 0.07 higher the previous week, shed US$ 0.01, closing on US$ 2.29 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 5.40, US$ 1.66 and US$ 0.34 and closed on US$ 0.67, US$ 5.45, US$ 1.69 and US$ 0.34. On 18 October, trading was at eighty-five million shares, with a value of US$ 61 million, compared to eighty-nine million shares, with a value of US$ 60 million, on 11 October.
By Friday, 18 October 2024, Brent, US$ 7.23 higher (10.0%) the previous fortnight, shed US$ 5.66 (7.1%) to close on US$ 73.55. Gold, US$ 7 (0.2%) higher the previous week, gained US$ 63 (2.4%) to end the week’s trading at a record US$ 2,731 on 18 October 2024.
A study by Action Fraud indicates that Revolut – named in 9.8k fraud reports – was involved in more fraud complaints than any major UK bank last year; this was about 2k more than Barclays and Lloyds, and double the number received about Monzo. The bank responded that it “takes fraud and the industry-wide risk of customers being coerced by organised criminals incredibly seriously.”
It seems that a US industrial technology group is in line to acquire a division of UK’sDe La Rue, a London listed company – and a major player in the currency printing sector – currently responsible for supplying at least forty global central banks. Crane NXT is planning a US$ 390 million investment for De La Rue’s authentication arm, that will leave the company, founded in 1813, being just a pure-play currency printer. However, it will result in it being able to eliminate its debt and include an unspecified sum to be injected into the company’s pension scheme; in 2023, the firm was forced to seek breathing space from its pension trustees by deferring tens of millions of pounds of payments into its retirement fund. There are reports that it may well be interested in acquiring the whole De La Rue enterprise. On Monday, 14 October, shares in De La Rue closed at the equivalent US$ 1.22, giving a market cap of US$ 240 million – 50% higher over the past twelve months.
Following trading in Mothercare’s shares having been suspended since the beginning of the month, the retailer is closing in on a US$ 39 million deal with India’s Reliance deal in a bid to solve its financial woes; it is likely that the troubled retailer will receive US$ 20 million in cash to refinance the company’s debt. The joint venture would see Mothercare’s Indian operations in the hands of the conglomerate. At the turn of the century, the UK company was one of UK’s leading listed retailers by market cap but has since seen a relentless decline, with a current value of US$ 26 million. To make matters worse, it was continuing to pay an interest rate, on its loan facility, of over 19%, along with a pension deficit larger than its market capitalisation. Reliance, which owns Hamleys, recently struck a brand licensing deal with Superdry to acquire the British fashion brand’s intellectual property assets in India.
This year, over two hundred and sixty companies in India have raised more than US$ 9 billion through IPOs, higher than the US$ 7.42 billion raised in2023. The latest issue involves Hyundai Motor India, with its US$ 3.3 billion issue, fully subscribed, mainly driven by institutional investors. This deal is the South Korean company’s first such arrangement outside of its home base, and India’s biggest ever, and the world’s second-largest IPO this year. The issue prices India’s second carmaker at about twenty-six times earnings, close to twenty-nine times for market leader Maruti Suzuki.
Chief executive, Kelly Ortberg has advised that Boeing will cut 17k jobs – equivalent to 10% of their current workforce – which will include executives, managers and employees. He said the downsizing is necessary to “align with our financial reality”, after an ongoing strike by 33k workers, on America’s West Coast, halted production of its 737 MAX, 767 and 777 jets. He also confirmed that it will also delay the rollout of the new 777X plane to 2026 instead of 2025 and will stop building the cargo version of its 767 jet in 2027, after finishing current orders. It is estimated that it has lost US$ 25.0 billion over the past six years, with Q3 results showing that it had burned through US$ 1.3 billion in cash and lost US$ 9.97 per share.
Last week Boeing announced major redundancy plans – this week it seems to the turn of Airbus, as it plans to cut up to 2.5k jobs in its Defence & Space division – equating to 7% of that division’s payroll – after spiralling losses on satellite projects. It had been impacted by heavy charges in space systems, including OneSat, and delays and rising costs in defence. The announcement follows a longstanding efficiency review, code-named ATOM. It has also been drawing up a specific turnaround plan for its struggling Space Systems business.
A deal could be in the offing that would see three of the world’s biggest cigarette companies – Philip Morris, British American Tobacco and Japan Tobacco – paying US$ 23.6 billion to smokers and health departments in Canada under the terms of a settlement put forward by a court mediator. This comes after a 2015 Quebec court ruling that the companies were long aware of the links, between cigarettes and cancer, but failed to warn their customers, and ordered them to pay US$ 10.87 billion in damages; this decision saw the cigarette companies placing their Canadian units into bankruptcy, followed by nine years of negotiations. The proposal sends roughly US$ 4.71 billion directly to smokers and their heirs hit by illnesses, such as lung or throat cancer, with US$ 2.90 billion reserved for victims in Quebec who first brought the suit; this equates awards of up to US$ 72k per person. On top of that, government health departments would also receive about US$ 17.38 billion in funds over time.
In a bid to boost AI-assisted content moderation, TikTok has announced that it will cut hundreds of its 110k global jobs, without giving more specific details, but is expected a significant number of, but less than five hundred, positions being in Malaysia. The company, owned by ByteDance, noted “we expect to invest US$ 2.0 billion globally, in trust and safety, in 2024 alone and are continuing to improve the efficacy of our efforts, with 80% of violative content now removed by automated technologies”. The layoffs also come as tech giants face increased regulatory pressure in Malaysia, where a surge of malicious content on social media, including online fraud, sexual crimes against children and cyberbullying, was reported earlier this year.
Following a slump last year, global merchandise trade moved higher in H1, with an annual 2.3% increase, which should be continued well into H2. With consumption increasing, as banks start to cut interest rates, WTO economists now anticipate 2024 and 2025 increases, in the volume of world merchandise trade, of 2.7% in 2024 and 3.0%. It estimates that global GDP growth, at market exchange rates, will be flat at 2.7%, over the two years. The forecast comes with the caveat that there are possible downside risks, including regional conflicts, geopolitical tensions and policy uncertainty. It is expected that growth in ME exports will be the second largest, at 4.7%, behind Asia’s impressive 7.4%, but ahead of South America’s 4.6%, the CIS region’s 4.5%, Africa’s 2.5%, North America’s 2.1% and Europe’s minus 1.4%. However, the ME, (with a 9.0% growth) leads the world on the import side, followed by South America’s 5.6%, Asia’s 4.3%, North America’s 3.3%, the CIS region’s 1.1%, Africa’s 1.0% and Europe minus 2.3%.
Wine fraud has existed from time immemorial but of late it seems that stakes have been raised. In days gone by, it was left to dedicated experts, counterfeiting labels and wax seals, in order to pass basic wine off as something fancier. Now with best grand crus costing thousands – and the demand from newish markets, such as China, rising – the market is ripe for the experts, who understand wine, and can forge labelling, create old bottles and understand corks so that they can fool the professionals. The result is that this particular crime has become more technical and better organised, with much higher profits. Italy ticks all the boxes – including wine know-how, artisans, who know everything about labelling, corks and old bottles, as well as a criminal underworld willing to get involved in this profitable venture – making it the hub of wine fraud. These artisans are so good at what they do, that, in some cases, the vineyards themselves are often unable to spot a fake. International buyers, especially in China, are willing to spend US$ 26k or more on a top-quality bottle and have been scammed by the criminals filling the bottle with cheaper wine. French and Italian police say they have busted an international fraud ring, led by a Russian mastermind, that was passing poor quality bottles of wine off as vintages worth up to US$ 16k each. Europol noted that items recovered during seizures included a “large amount of wine bottles from different counterfeited Grand Cru domains, wine stickers and wax products, ingredients to refill wine, technical machines to recap bottles”, as well as electronic equipment and over US$ 108k in cash.
According to the IEA’s Renewables 2024 report, “MENA countries’ combined ambition is to reach 201 GW of renewable capacity by 2030”. While the main-case forecast falls 26% short of this ambition, not all countries will miss their announced ambitions. Saudi Arabia, Egypt, and Algeria are responsible for nearly 60% of the region’s total ambition, and although the outlook is more optimistic than last year in these markets, the IEA forecast indicated that installed capacity still falls short of their 2030 ambitions. Growth in the region could be 60% (152 GW) higher than in the main case – nearing the realisation of the 2030 ambition – if countries meet three key challenges – faster auction implementation, improving the regulatory and policy environment for distributed solar PV, (by implementing reforms to allow self-consumption and introduce remuneration for excess electricity generation), and more growth.
The IMF managing director, Kristalina Georgieva, noting that although inflation is indeed heading south, has cautioned that growth will not deliver the tax revenues required to service debt and fund investment in the energy transition, adding that “inflation rates may be falling but the higher price level that we feel in our wallets is here to stay.” She also warned that “medium-term growth is forecast to be lacklustre”, but that it was “not enough to eradicate world poverty. Nor to create the number of jobs we require. Nor to generate the tax revenues that governments need to service heavy debt loads while attending to vast investment needs, including the green transition.” She also took a side swipe to the US and China, warning that trade disputes risked further dampening growth, and that “major players, driven by national security concerns, are increasingly resorting to industrial policy and protectionism, creating one trade restriction after another.”
At this week’s Made in Russia Export Forum, Prime Minister Mikhail Mishustin noted that “China, India and Egypt are the key destinations, with Vietnam developing at a good pace”. He also commented that “the government proactively facilitates the expansion of communications between our businessmen and counterparties from friendly countries. Various types of lending are stipulated. Insurance of contracts is also in effect. Owing to these and other measures, deliveries to such countries increased by about a third in four years – up to 86% of total domestic exports, according to data for seven months of this year”. In the first eight months of 2024, he also confirmed that the country’s GDP had increased by 4.2%.
For the third time in 2024, the Egyptian government has raised fuel prices; this time, the diesel price has been raised 17.0% to US$ 0.2279 per litre, and petrol prices – by between 11% – 13% – with 80, 92 and 95 increasing to US$ 0.2321, US$ 0.2574 and US$ 0.2689 per litre. The increase in prices in part of an IMF bailout deal which plans to rid the country of fuel subsidies by 2025. Since January 2022, the Egyptian pound has lost around 50% of its value against the greenback, whilst almost 30% of Egyptians live in poverty.
With New Zealand now entering its third recession in just two years, it seems that an increasing number of Kiwis are moving across the Tasman for a better life. The country is going through a triple-dip recession, with three episodes of two negative quarters of GDP in a row. In comparison, Australia had its first recession, in thirty years, in the early 2020 days of Covid-19. Last year, there was a net migration 27k people from New Zealand to Australia, according to Stats NZ. In the decade to 2013, this annual figure averaged 30k, before slumping to 3k for the years to 2019..
After years of being the kingpin of the European economy, Germany is fast becoming the “the sick man of Europe”, following back-to-back recessions and further bad news on the horizon. Despite its government projecting a miserly 0.3% growth in 2024, it is increasingly likely that it will be in negative territory, at minus 0.2%, come 31 December. If this event were to occur, it will see the country suffering only its second two-year recession this century. More worryingly, it is possible that Germany will be the only G7 country in contraction. There are many factors in play that have resulted in the former European powerhouse sliding down the economic ladder – soaring energy prices, the end of reliance on cheap Russian energy, China’s changing role in the global economy the Ukraine war, other geopolitical tensions, (especially in the ME), a weak global economy, the aftermath of the pandemic, demographic change, digitisation and decarbonisation. Traditionally, 50% of Germany’s growth emanated from exports but pressure from the likes of China has begun to bite into their global market share of exports. On top of that, pollical instability has worsened since Angel Markel ceded power in December 2021, after eighteen years as Chancellor. Since then, infighting in the coalition government, a surge in support for the far right, a fast-approaching general election, a skills shortage, and long-term issues of excessive red tape and underinvestment in infrastructure have exacerbated the problems.
Despite these problems, the German economy still retains its position as a major driver for economic development throughout the EU. The IMF estimates that the economy, with a GDP of US$ 4.6 trillion, equates to the cumulative GDP of Poland, Sweden, Croatia, Austria, Norway, Romania, Czech Republic, Hungary, Finland, Slovakia and Bulgaria. Germany remains the “most distressed” European market and looks to be retaining this title for the near future and this in turn will have a negative impact on neighbouring nations’ economies.
The newly created National Wealth Fund, (which also absorbs the UK Infrastructure Bank), has struck a US$ 1.30 billion deal with Barclays and Lloyds Banking Group to retrofit thousands of homes to upgrade their energy-efficiency; an official announcement is expected in coming days. More clarity is needed on the scale of the loan guarantees. A separate deal with the Housing Finance Corporation, valued at about US$ 195 million, is also expected to be announced. It is reported that the Treasury intends to inject US$ 7.46 billion into the NWF, less than the US$ 9.50 billion that Labour pledged in its election manifesto.
With wage growth slowing – down 0.2% to 4.9% – in the quarter to 31 August, it seems inevitable that there will be a further BoE rate cut, possibly only 0.25%, to 5.0%, next month; the obvious driver being that although pay is still rising faster than inflation, it is heading south, along with slowing economic growth. Over the period, the unemployment rate slipped to 4.0%, whilst in the September quarter, the number of job vacancies decreased again, declining to 841k – but still above pre-pandemic levels. The Office for National Statistics said the rate of people considered “economically inactive” – defined as those aged between 16 to 64 years old not in work or looking for a job – edged lower to 21.8%. However, the estimated jobless rate among the 18 – 24 year age group, which has been on the move upwards, over the past two years, stood at 12.8% in the August quarter, higher than pre-pandemic levels.
Although he would have probably lost the election, Rishi Sunak must be wondering what would have happened if he had gone to the electorate in November. Since July, when the Tories were hammered in the polls, there has been a raft of positive economic news, the latest being that inflation, at 1.7%, has finally fallen from its 11% level in 2022 to below the Bank of England’s 2.0% target – its lowest rate in three-and-a-half years. It now boasts being the strongest G7 economy – after the US – with many other positive indicators as interest rates have started to decline. Meanwhile, the Chancellor continues with her budget plans which will include finding US$ 52 billion, (GBP 40 billion), to avoid real-terms cuts to government departments.
Even though many of the commitments were known in advance, the Starmer government claims that the two-day mega international investment summit raised US$ 81.9 billion, (GBP 63.0 billion) – short of its target of US$ 130 billion, (GBP 100 billion). There is no doubt that some companies are holding off until they digest the ramifications of the Reeves budget. Furthermore, if Elon Musk had been invited to the summit, his companies may have helped increase the “pot”. Some of the new investment pledges from firms on Monday include:
- Manchester Airports Group – US$ 1.43 billion into Stansted Airport to expand the airport’s terminal by a third, creating more than 5,000 jobs
- Eli Lilly – US$ 364 million from US pharmaceutical giant to tackle “significant health challenges”, such as obesity
- Macquarie – US$ 26.2 billion over the next five years for various infrastructure projects including an electric car charging network. (The Australian conglomerate has been blamed for saddling Thames Water with unsustainable debts when it was its biggest shareholder)
- DP World – US$ 1.3 billion to create four hundred new jobs and make London Gateway the UK’s largest container port within five years
Speaking at the summit, Kier Starmer told the attendees that he would scrap regulation that “holds back investment” and would ask regulators to prioritise economic growth. Commenting that greater security for workers would lead to better growth in the economy, he defended the government’s plans to overhaul and increase workers’ rights as “pro-growth”. The Employment Rights Bill includes proposals that would see people being able to get sick pay from the first day they are ill and claim unpaid parental leave as soon as they start a job. He also said he wanted to “rip out” bureaucracy obstructing investment in the UK, and that simplification would give the economy a welcome boost.
There was no surprise to hear that Rachel Reeves commenting that when “we do the budget that those with the broadest shoulders will be bearing the largest burden” – “you know, non-doms, private equity, the windfall tax on the big profits the energy companies are making and putting VAT and business rates on private schools.” Although critics have already pointed out that a crackdown on non-doms could lead to an exodus, she noted that “previously when taxes on non-doms have been changed you haven’t seen that flight”. Leading business groups have also raised concerns over the potential tax rises could have a negative impact on economic growth and badly damage the hospitality sector.
The money appears to be on that the upcoming budget will see an increase in the amount of money companies pay in National Insurance – with both the PM and Chancellor declining to rule this out, with the latter noting that Labour’s election pledge not to increase National Insurance on “working people” related to the employee element, as opposed to the sum paid by employers. Employers pay NI at a rate of 13.8% on all employees’ earnings above US$ 227 per week, but pension contributions made by employers are currently exempt from the levy. (In its election manifesto, it had also ruled out increasing VAT and income tax). However, there is some concern there is – and will be – labour shortages that will impact the economy and, that being the case, any NI increases for employers may well deter them recruiting; also, many are concerned that any tax hikes could damage economic growth and play havoc with the hospitality sector.
This week, the Chancellor reiterated that her budget would be “tough” but felt that it would have little impact on inward foreign business investment, noting that she would be giving firms long-term certainty about the levels of taxation they will face. The chancellor did hint that she might change the government’s borrowing rules to free up billions of pounds more in spending for big projects. She reconfirmed that there would be no raising taxes on “working people” – and corporation tax would be pegged at 25% at least for the next five years. Capital Gains Tax is a certainty to be touched, with the PM only suggesting that a rise as high as 39% were “wide of the mark”.
Currently when it comes to public spending, the amount of money that can be borrowed for investment is restrained by the amount of debt it has, along with a self-imposed rule that public debt must fall in five years’ time. However, it seems that the new Starmer administration is set to change this in order to borrow billions to fund new infrastructure projects. The Treasury Chief Secretary, Darren Jones, has indicated that independent checks on spending for major building work will be introduced to allow the government to borrow for investment “more efficiently”. “Guardrails” will be introduced for infrastructure spending which will form part of its aim to encourage the private sector to invest in UK projects, and that, “expert-led checks and balances” will determine the quality of government borrowing for investment. With a relaxation of the former rules, the Treasury noted that the “guardrails” on spending would allow the government to borrow for investment “more efficiently going forward”. A new National Infrastructure and Service Transformation Authority, that will oversee a ten-year strategy for a pipeline of major projects, aligned with a series of Spending Reviews, and long-term budgets for investment in, for example, buildings, roads and rail, whilst the National Audit Office and a new Office for Value for Money, will also offer ongoing appraisals of “mega projects”, such as major train lines. The hope is that future project investments will give genuine value for money, bring a return on investment, and deliver for communities. Jones’ comments come alongside the government’s introduction of a “taskforce” for infrastructure spending – a group of private sector bosses including from HSBC, Lloyds, and M&G – who will advise government on where to invest for infrastructure.
There are reports that several ministers – including Deputy Prime Minister Angela Rayner, Justice Secretary Shabana Mahmood, and Transport Secretary Louise Haigh – have gone against protocol by side tracking the Chancellor and going directly to the PM, appealing for a rethink of the spending review that have seen many departmental budgets slashed. There are fears that steep spending cuts, some as high as 20%, will be needed to meet a US$ 52.18 billion, (GBP 40 .0 billion) much vaunted funding gap. It is reported that the PM and his Chancellor have already agreed on the spending cuts, due to be announced at the 30 October budget, but negotiations are ongoing with individual departments about their specific allocations. Money (That’s What I Want).
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