Key events
UK housing affordability improves – but only because of London price dip
British housing became more affordable during 2023, according to new analysis by the Office for National Statistics – but only because some of the air came out of inflated London prices.
In 2023, full-time employees in England could expect to spend about 8.3 times their annual earnings buying a home, compared with 8.5 times in 2022. The equivalent figure in Wales is 6.1 times their annual earnings.
There might be an improvement in those figures, but that will be cold comfort to many who in previous generations would have been likely home owners. Mortgage lenders tend to cap home loans at less than five times annual earnings, meaning potential first-time buyers have to either save for years, or else rely on inherited wealth.
Only 7% of local authorities – 23 of them – had homes bought for less than five times workers’ earnings which count as affordable. This is more than in 2022 and similar to numbers before the pandemic.
But the improvement in the overall affordability picture was driven by London: local authorities in or bordering the capital filled the top 10 biggest improvements in affordability, but “they remain some of the least affordable areas”, the ONS said.
Take, for example, Kensington and Chelsea. It is the country’s least affordable local authority, according to the ONS. An average worker will have to work 34 years to afford a house. That is down by five years from 2022, but hardly a cause for celebration.
Burnley is the most affordable place in the UK, with prices in the Lancashire town only 3.73 times average earnings, the ONS said – although that is in part a sign of the struggling economy.
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Legoland and Madame Tussauds may introduce surge pricing this summer, meaning customers will pay more for that and other well-known attractions at peak times.
Surge pricing is an obvious response to standard economic theories: when demand is higher, prices are higher. It is also hated by almost everyone.
Everyone except company executives, that is. Scott O’Neil, the chief executive of Merlin Entertainments, which owns the attractions, said changing prices to reflect higher demand was “very intuitive”, in an interview in the Financial Times. He said:
If [an attraction] is in the UK, it’s August peak holiday season, sunny and a Saturday, you would expect to pay more than if it was a rainy Tuesday in March.
Airlines have pushed up prices when demand peaks for decades, but the promise of newly “dynamic” prices can still cause uproar, such as when fast food chain Wendy’s last month said it would introduce the practice for burgers. The chain insisted that its plans were “misconstrued”, and that its new digital menu boards would only be used to offer discounts or change the menu at different times of day.
Merlin was previously a member of the UK’s FTSE 100 index before it was taken private in 2019 – just before the coronavirus pandemic caused a huge depression for theme parks.
The FT reported that Merlin made record revenues of £2.1bn in 2023, but that visitor numbers are still below pre-pandemic levels. Its other attractions include Sea Life, the London Dungeons, the London Eye, Alton Towers and Sydney Zoo.
Kingfisher’s share price has taken a further step down since the early trades: it is now the biggest faller on the FTSE 100. It is down 2.1%.
Insurer Direct Line is another notable mover: its shares, listed on the FTSE 250 index of mid-sized companies, are down 12% after Belgian company Ageas on Friday said it would not make any offer after its initial approaches were rejected.
Nissan plans to cut costs of producing electric cars
Nissan has said it will try to cut the cost of producing electric cars by as much as 30% as the Japanese carmaker seeks to compete with Chinese rivals and sell 1m more cars a year.
The Leaf electric car was a global pioneer, but since then Nissan has failed to keep up with rivals such as America’s Tesla or China’s BYD. It is BYD and its Chinese rivals in particular that are keeping up executives in traditional carmaking economies like Germany and Japan, with a wave of cheap models that are rapidly gaining market share.
Nissan is hoping to push sales up by 1m cars per year, while also trying to make them more profitable, it said on Monday.
Makoto Uchida, Nissan’s chief executive, said the company would release 30 new models by the end of its 2026 financial year – although only 16 will be “electrified”, which includes hybrids as well as pure battery electric models.
The cost of producing battery cars has been a problem for traditional carmakers, who want to keep selling their most profitable petrol and diesel vehicles. However, Nissan said it expected “cost parity” by 2030, meaning battery and petrol cars will cost the same to make.
It is a fairly quiet open on European stock markets on Monday morning.
On the FTSE 100 Kingfisher is one of the bigger fallers, but even so it is only down by 0.6%.
Here are the opening snaps via Reuters:
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EUROPE’S STOXX 600 FLAT
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BRITAIN’S FTSE 100 FLAT
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FRANCE’S CAC 40 FLAT, SPAIN’S IBEX DIPS 0.2%
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EURO STOXX INDEX AND EURO ZONE BLUE CHIPS FLAT
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GERMANY’S DAX UP 0.1%
B&Q owner Kingfisher warns of weak 2024
Good morning, and welcome to our live coverage of business, economics and financial markets.
The owner of B&Q has said it expects lower profits than expected by analysts, as it waits for a housing market turnaround to spur a pickup in DIY demand.
Kingfisher, which also owns Screwfix and France’s Castorama, said on Monday that sales dropped by 1.8% for the year to the end of January, with particular weakness during the November-to-January period, when sales dropped by 4.3%.
DIY went through a big boom during the coronavirus pandemic lockdowns – remember when DIY stores were one of the few retailers allowed to open in the UK because of their role in essential maintence. Huge sales from locked down customers prompted excited talk of a “new generation of DIYers”, but that does not appear to have materialised financially: Kingfisher shares are only marginally above where they were when the pandemic started.
Thierry Garnier, the company’s chief executive, said that in France “the market has been impacted by low consumer confidence”, and the company has been forced to cut costs, including a new plan to cut floorspace in Castorama stores.
But the big problem is housing markets in its main countries: the biggest spur to DIY is buying a new house. Garnier said:
Looking forward, we remain confident in the attractive growth prospects of the home improvement industry and our ability to grow ahead of our markets. In the short term, while repairs, maintenance and renovation activity on existing homes continue to support resilient demand, we are cautious on the overall market outlook for 2024 due to the lag between housing demand and home improvement demand.
Oil prices gain as investor look at supply risks
Oil prices have risen by 0.6% on Monday, pushing back towards the four-month high hit last week amid concerns over supply.
Brent crude oil futures – the global benchmark – rose by 0.5% following the weekend market pause to peak above $86 per barrel, while the North American benchmark, West Texas Intermediate, rose 0.5% above $81.
Russia’s full-scale invasion of Ukraine in 2022 prompted one of the biggest global energy market shocks in decades, and Israel’s bombardment of Gaza in the months since Hamas’s attack on 7 October has translated into months of concerns that fighting could spill over into the rest of the Middle East and affect oil producers.
Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, said (via Reuters):
Escalating geopolitical tension, coupled with a rise in attacks on energy facilities in Russia and Ukraine, alongside receding ceasefire hopes in the Middle East, raised concern over global oil supply.
The agenda
9:30am GMT: UK consumer card spending analysis
11am GMT: UK Confederation of British Industry retail survey (March; previous: -7 points)
