This week's briefing highlights, significant productivity gains in AI-exposed sectors, demands by small firms for tax cuts and cost reductions, Blackstone's major investment in the UK's rental housing market and more.
UK Economy UK
Unemployment Surges, But Vacancies Fall
- The UK's unemployment rate rose to 4.4% in the three months to April, marking the highest level in over two years, according to the Office for National Statistics (ONS).
- Despite expectations for stability, the jobless rate increased, with vacancies falling by 12,000 to 904,000, marking the 23rd consecutive decline.
- Throughout this period salary earnings growth has remained strong at 6%, outpacing inflation, which fell to 2.3%, the lowest since 2021.
- The ONS noted, “This month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong.”
- Jake Finney, an economist at PwC UK, highlighted the challenge for the Bank of England, stating, “A broad set of indicators suggests that the labour market is cooling but pay growth has not fallen to the extent they would like to see.”
- More timely data from HM Revenue & Customs showed a slight decline in payroll employment, further indicating a cooling job market.
UK Business
AI Implementation See’s Productivity boost
- UK Sectors heavily exposed to AI have experienced productivity growth nearly five times higher than less exposed sectors, according to a PwC report.
- In the UK, job postings requiring AI skills are growing 3.6 times faster than average, with employers offering a 14% wage premium for these roles, proving the major benefit companies are seeing from AI implementation.
- The legal and information technology sectors have seen the highest wage premiums, reflecting the high demand for AI skills in these industries.
- PwC’s 2024 global AI jobs barometer indicates that AI adoption has been driving significant job market changes for over a decade, with AI job postings increasing sevenfold since 2012.
- Barret Kupelian, chief economist at PwC UK, noted, “AI has the power to create new industries, transform the jobs market, and potentially push up productivity growth rates.”
Small Businesses Call for Tax Cuts and Employment Cost Reductions
- The Federation of Small Businesses (FSB) has urged political leaders to provide reassurances on tax and employment costs to win the support of small business owners.
- Research from FSB indicates that 90% of small business owners are concerned about potential tax increases, while 92% worry about rising employment costs under the next government.
- The FSB has launched a manifesto calling for a Small Business Act, aiming to protect small firms and foster their growth through new legislation.
- Key proposals include enshrining measures to combat late payment practices, improving access to finance, and setting a 33% SME statutory public procurement target.
- The manifesto also advocates for reforms to business rates, maintaining current tax reliefs for self-employed and small business directors, and reintroducing universal work experience in secondary schools.
- Tina McKenzie, FSB’s Policy Chair, emphasised, “Small businesses are the key to securing economic recovery, driving innovation, and creating jobs in all parts of the UK.”
UK Property
Blackstone's Major UK Investment
- Blackstone has agreed to purchase 1,750 homes from Vistry in a £580 million deal, reflecting growing opportunities in the UK’s underserved rental market.
- This deal, combined with a previous transaction, brings Blackstone’s total investment with Vistry to £1.4 billion, funding over 4,500 homes.
- The UK rental sector relies heavily on small private landlords, but institutional investors like Blackstone are increasingly entering the market, reflecting the clear opportunity in Britain's property market.
- James Seppala, head of European real estate at Blackstone, stated, “Institutional private capital can play an important role in providing high-quality housing stock across the UK, particularly in the private rented sector, which is significantly undersupplied today”.
- These properties will be managed by Leaf Living, a company established by Blackstone and Regis to manage single-family homes for rent in the UK.
- Vistry’s strategy to focus on partnerships for building affordable housing has helped it navigate the housing market downturn, with plans to increase new home completions by 10% this year.
Final Note
It is fair to say that the past week has proven a period of varied emphasis across the UK business and property landscapes in particular, from Blackstone’s UK property pursuit to the transformative impact of AI on productivity in the UK.
Small businesses have voiced their concerns ahead of political shifts, seeking assurances for a more favourable business environment.
Meanwhile, Blackstone's substantial investment in UK housing underscores the growing interest and potential in not only the rental market but the entire property market.
While not without room for improvement, these developments point the UK investment and economic landscape in a positive direction as we progress into the second half of 2024, with many opportunities for growth and innovation for business owners and investors alike.