Inflation, rising cost of energy, political uncertainty and the lingering after-effects of Brexit. 2022 presents itself with challenges, but also with multiple opportunities to capitalise on. According to the Ipsos Mori’s annual ‘Captains of Industry’ survey, four in five British bosses believe both the economy and their own businesses will improve in the next 12 months[i].
Chart of the month: Used cars price indices (January of each year = 100)
Source: Office for National Statistics – Consumer price inflation, Blend Network
Politics & Economics
The FT’s annual survey of almost 100 economists revealed that most expect UK living standards to deteriorate this year as inflation outpaces wages, while higher energy costs and rising National Insurance contributions hit those on lower incomes hardest[ii]. Meanwhile, cost of living rose by 5.1% in the 12 months to November, a 10-year high[iii].
Elsewhere, the FT’s annual survey also revealed that the UK will likely trail other developed countries in its economic recovery from the pandemic, predicting that it will be held back by political uncertainty and the lingering after-effects of Brexit[iv].
Business
The worsening outlook for the pandemic once again put pressure on small businesses. The Federation of Small Businesses recently warned that more than 440,000 small firms may be forced out of business by the late payment crisis. 30% of small businesses surveyed said they had seen late payment of invoices increase over the last three months and 8% warned the problem was threatening the viability of their business[v].
Staff shortages continued to ripple out from haulage, farming and hospitality sectors to almost all parts of the economy, putting severe pressure on medium-sized UK business. The shortage has worsened due to workers being forced to self-isolate[vi].
Real Estate
According to the Nationwide House Price Index, last year UK house prices grew at their fastest pace in seventeen years. Three out of four quarters of 2021 saw average house price growth above 10% year-on-year (the last time this occurred was in 2004)[vii].
Wales ended the year as the strongest region, with prices up by 15.8% year-on-year, followed by Northern Ireland where prices rose by 12.1%. In England, the Southwest was the strongest performing region, with annual price growth of 11.5%[viii].
Equity Markets
Last year turned out to be pretty good for UK investors. In 2021, the FTSE 100 index rose by 14.3%, its best annual performance since 2016. In the US, the S&P 500 soared by 26.9% to record its third consecutive year of double-digit returns[ix]. Some FTSE 100 shares did really well, while others did terribly. Here are the index’s biggest winners and losers last year. Of 101 stocks in the FTSE 100 in 2021 (one company is dual-listed), 74 saw gains, ranging from 70.3% (the largest increase) to 0.3% (the lowest increase). Across all 74 winners, the average increase was 23%. On the other hand, the shares of 27 companies saw decreases, ranging from 27.2% (the largest decrease) to 0.1% (the smallest decrease). Across all 27 losers, the average decrease was 11.4%[x].
FX & Commodities
Commodity markets continued to soar last year as reopening economies and the transition to green energy drove a rise in raw material demand. The S&P GSCI index of 24 major raw materials, a key benchmark, increased by 30% last year[xi].
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[i] Source: https://on.ft.com/32NZkIo
[ii] Source: Office for National Statistics, available at https://bit.ly/3F0BBBU
[iii] Source: https://on.ft.com/3FZhQMi
[iv] Source: https://bit.ly/3HBrEg6
[v] Source: https://on.ft.com/3FWYQ1d
[vi] Source: Nationwide House Price Index, available at https://bit.ly/3sWxC6Z
[vii] Source: Nationwide House Price Index, available at https://bit.ly/3sWxC6Z
[viii] Source: https://bit.ly/3FXkNNz
[ix] Source: https://bit.ly/31sqUKN
[x] Source: https://bit.ly/3zu1c5h
[xi] Source: https://bit.ly/3HC42I1
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