UK house prices rise for first time in over a year after borrowing costs fall – business live | Business

Pearson, the London-listed digital learning group, has announced a further £200m share buyback and said it was well positioned to benefit from opportunities in artificial intelligence (AI) as it reported a 31% rise in full year adjusted operating profit of £573m in 2023, from £456m in 2022.

Pearson’s shares have jumped 4.4% to the top of the FTSE 100 leaderboard.

The company in recent years has transformed itself from a traditional textbook education group to focus more on digital and workplace training.

Omar Abbosh, a former Accenture executive and ex-president of industry solutions at Microsoft, who took over as chief executive of Pearson earlier this year from Andy Bird, said on a media call on Friday that Pearson had expanded generative AI study tools to help students and was well placed for future growth.

Abbosh said:

“The secret sauce for AI is data. In Pearson we have a vast array of data sets which will make us a winner in AI.”

…adding that the world was at an “inflexion point” with AI as more companies looked to train staff for jobs augmented by the new technology.

The company, which generates most of its earnings in the US, came under pressure last year from Cevian Capital, its largest shareholder, to move its listing from London to the US. The proposal comes at a time when London is fighting to keep listed companies after companies such as CRH, the building materials group, and Ferguson, the UK-based plumbing equipment supplier, decided to shift their primary listings from London to New York.

Abbosh was asked about the London listing and replied that his focus remained on shareholder value and organic growth. He said he would”listen very carefully to ideas” and “ would look at the pros and cons..” but had yet to begin his first investor roadshow.

Wincanton backs GXO’s £762m offer in takeover battle

Julia Kollewe

The takeover battle over UK haulage firm Wincanton has taken another twist this morning.

Wincanton’s board have thrown their support behind a £762m takeover offer from the American logistics company GXO and dropped their backing for a rival bid.

The Wincanton directors intend to recommend unanimously an offer of 605p for each Wincanton share made by GXO yesterday. They have withdrawn their backing for an “increased and final cash offer” from Marseille-based CEVA Logistics at 480p a share, announced earlier this week.

The GXO offer is pitched at a 29% premium to the all-time high share price of 470p reached during the period to 18 January, the last business day before Wincanton received a £567m bid from CEVA.

The Wincanton share price dipped 0.46% to 621.15p in early trading on Friday, but has risen sharply since 18 January, when it traded at 297p.

Although it billed its £600m offer as “final”, CEVA could come back with a higher offer. It has four business days from Thursday in which to table an improved bid…

In the City, shares in broadcaster ITV have surged 14% after it announced the sale of its stake in the BritBox streaming service.

BBC Studios, ITV’s joint partner in the venture, is buying the 50% stake for £255m.

ITV says it is focusing on its advertiser-funded streaming service, ITVX; it plans to return the cash from the sale of its Britbox stake to investors through a share buyback.

Carolyn McCall, ITV’s CEO says:

“The sale of 50% of BritBox International means ITV is focused on its core strategic goals of continuing to build on ITVX’s success and growing ITV Studios.

I would like to thank the BritBox International team for making the company such a success and particularly CEO Reemah Sakaan for her leadership, drive and vision.”

News of the sale has sent ITV’s shares surging to the top of the leaderboard on the FTSE 250 index of medium-sized stocks.

BritBox was launched by the BBC and ITV in 2019, as a rival to streaming services such as Netflix, Amazon Video, and Sky’s Now TV. It offers a range of classic UK shows, from Downton Abbey and Love Island to Grange Hill and Captain Pugwash.

February’s pick-up in house prices bolsters the view that the correction in property values seen in late 2022 and part of last year has ended, says Martin Beck, chief economic advisor to the EY ITEM Club forecasting group.

Beck explains:

An improving economic outlook has helped. Falling inflation and still-strong pay growth mean real wages are rising again, unemployment is very low, consumer sentiment has picked up and quoted mortgage rates are up to 150 basis points lower than the peaks of summer 2023.

“These factors contributed to mortgage approvals in January increasing to a 15-month high [the Bank of England reported yesterday], while surveys of buyer and seller activity have also picked up.

Very high inward migration, along with a continued under-supply of new houses, are also supporting property values.

A pick-up in borrowing costs could “restrain” the recovery in house prices, Nationwide adds.

Chief economist Robert Gardner says:

“Borrowing costs remain well below the highs recorded last summer but, if the recent upward trend is sustained, it threatens to restrain the pace of any housing market recovery.

“While the squeeze on household budgets is easing, with wage growth now outstripping inflation by a healthy margin, it will take time to make up for the ground lost over the past few years, especially given consumer confidence remains fragile.”

The money markets have dialled back their expectations of interest rate cuts this year, which is why borrowing costs have been inching higher.

At the end of 2023, the City expected as many as six interest rate cuts in 2024, bringing Bank of England base rate down to 3.75%, from 5.25%. Now, though, fewer than three quarter-point rate cuts are expected.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK house prices have continued to recover from their slide last year, with prices rising on an annual basis for the first time in over a year last month.

Lender Nationwide has reported that UK house prices were 1.2% higher than a year ago in February, having jumped by 0.7% during the month – the same monthly rise as in January.

This lifted the average price to £260,420, up from £257,656 in January, Nationwide reports.

Nationwides’s data is based on mortgages approved by the lender, and doesn’t capture cash buyers. It does suggest that the drop in mortgage rates following the surge last year is helping to bring buyers back to the market.

Robert Gardner, Nationwide’s chief economist, says:

“The decline in borrowing costs around the turn of the year appears to have prompted an uptick in the housing market.

Indeed, industry data sources point to a noticeable increase in mortgage applications at the start of the year, while surveyors also reported a rise in new buyer enquiries.

Gardner adds that “the near-term prospects remain highly uncertain”, partly due to ongoing uncertainty about the future path of interest rates.

He says:

After falling sharply in late December, swap rates, which underpin fixed rate mortgage pricing, have drifted back up.

Nationwide reports that house prices are now around 3% below the all-time highs recorded in the summer of 2022, once seasonal effects are taking into account.

February’s rise in prices follows a 0.7% rise during January, according to Nationwide’s data, which left prices 0.2% lower than a year ago.

Yesterday, Bank of England data showed that new mortgage approvals rose in January to their highest level since October 2022, although new lending was still subdued in historic terms:

Zoopla has reported this week that activity in the housing market has picked up; they forecast sales will rise 10% this year.

Also coming up today

We round off the week with a flurry of economic data, including the latest eurozone inflation reading and Brazil’s growth report. Factory surveys from across the world are expected to confirm another drop in activity in the eurozone and the UK.

China’s manufacturing downturn has continued, with activity shrinking for a fifth straight month in February.

This puts more pressure on Beijing to deploy new stimulus measures to support its economy.

Stock markets in Japan, Australia and India have all hit record highs today, as the equities rally continues.

The agenda

• 9am GMT: Eurozone manufacturing PMI for January

• 9.30am GMT: UK manufacturing PMI for January

• 10am GMT: Eurozone flash inflation reading for February

• 10am GMT: Eurozone unemployment report for January

• Noon GMT: Brazil’s GDP report for Q4 2023

• 2pm GMT: Bank of England’s chief economist Huw Pill: gives a speech at the Cardiff University Business School

• 3pm GMT: US manufacturing PMI for January

• 3pm GMT: University of Michigan’s index of US consumer confidence