- Outlook increasingly grim for UK consumer-focused stocks
- London equities remain steady
- Hospitality industry bears brunt
It is probably safe to say there are few sectors of the UK economy looking forward to Christmas. The housing market has slammed into reverse, freezing weather is making people choose between heating and other expenditure and industrial unrest threatens to hobble large swathes of the economy in the coming weeks.
A raft of data from the Office for National Statistics this morning added some colour to the picture with almost a third of businesses (29 per cent) expecting their turnover to decrease in January while UK consumers are upping their debit and credit card spending in the run up to Christmas across all sectors apart from retail - could this be the final splurge before the purse strings are tightened? And among the different areas of spending 'delayables', goods like furniture and clothing where the payment can be delayed, was the fastest growing element - we all know where that ends.
Against that depressing backdrop, equities are somehow holding their own - the FTSE100 and the domestically focused FTSE250 are flat in early trading this morning and have largely held on to recent gains. But chances of a ‘Santa rally’ into the final weeks of the year are in the balance.
Frasers shines amidst high street gloom
Amidst growing gloom on the high street, Frasers (FRAS) has bucked the trend today with a reiteration of confidence in meeting its forecast profits of £450m-£500m after posting a 53 per cent rise in half year profits to £284.6m with a further sign of confidence signalled via a commitment to invest around £600m in a new distribution centre in Coventry. The good news was tempered by an acknowledgement that the macroeconomic environment is ‘clearly challenging’ which weighed on shares today, down 8 per cent mid-morning.
Meanwhile, the hospitality industry this week warned that rail strikes which are likely to shut down the network for most of next week are hitting hopes of a festive lift. The head of UKHospitality, Kate Nicholls, this morning reported Christmas party cancellation rates of 30 per cent and likened it to ‘omicron levels’ of disruption - a nudge to the ghosts of Christmas past.
Financial services outlook deteriorates
The rainmakers in the City of London are not likely to be splurging out on champagne to ease the hit either. UK-focused investment bank Numis (NUM) this morning reported a ‘challenging’ outlook for capital markets with conditions for new issues likely to remain subdued - although we reported this week on an attempt to raise money in the specialist investment trust sector.
Sticking with financial services, Hargreaves Lansdown (HL.) has signalled its intention to push hard in enhancing its offering in the coming years through technology by appointing Dan Olley, who has been a non-executive director since 2019, as its new chief executive, replacing Chris Hill in 2023. Olley is currently chief executive of data science company Dunnhumby. Earlier this year Hargreaves signalled its intention to invest heavily in technology over the next five years.
