Bulking Up

Many of you will no doubt be making car journeys over the summer. If travelling with children, you may like to know there is now another game to play to keep them occupied – spot the longer lorries!

The government has approved the use of longer lorries on British roads, which it believes will make businesses more efficient and cut lorry emissions. The Department of Transport (DfT) said that from 31^st May any business in England, Scotland and Wales will be permitted to use a longer lorry. These can be up to 18.55m long which is about 2.05 m longer than the standard HGV. This follows extensive trials since 2011 with some 3,000 of the longer lorries already on the country’s roads.

The DfT said the longer HGVs will help businesses be more productive. For example, bakery chain Greggs, which has used the longer vehicles since 2013, says it can carry 15% more goods than in a standard trailer. The DfT estimate that there could be a £1.4bn economic benefit, reduce the number of journeys by 8% equivalent to taking one standard-size trailer off the road for every twelve trips, saving 70,000 tonnes of carbon dioxide over 11 years.

However, although longer, the new lorries will have the same 44-tonne weight limit. The Road Haulage Association has urged the government to increase this to 48-tonnes. This will be increasingly important with the roll-out of zero-emission lorries to compensate for the increased weight of the batteries. Although, road safety groups are warning of an increased risk posed to pedestrians and cyclists. Adding that the vehicles’ ‘swing and blind spots’ could also result in damage to roadside infrastructure.

When I started my career many years ago as an investment analyst, one of the earliest lessons I learned was ‘spot the lorry.’ Put very simply, for some UK businesses, the more lorries of a particular brand or company you spotted on the roads, the better. As this implies more deliveries and hence more orders. Even today, I still play spot the lorry!

What have we been watching?

The US debt ceiling continued to overshadow markets ahead of the 1^st June deadline. The last time the US came close to default was in 2011 where a resolution was only agreed two days before the deadline. The events leading up to this were not without consequences, notably the credit rating downgrade of US government debt by S&P to AA+ for the first time in history. However, President Joe Biden has expressed confidence there will be no default and House Speaker Kevin McCarthy said reaching a deal was possible, but the latest talks were put on pause. Meanwhile, Chinese economic data continued to fall short of expectations. Copper which is seen as a barometer of global economic activity hit a five-month low.

The G7 meeting in Japan saw the US confirm it will support providing advanced warplanes including F-16s to Ukraine and will back efforts to train Ukrainian pilots.

Brussels has proposed a deal with the UK to boost co-operation on the regulation of financial services, in a further sign of improved relations after the settlement of the dispute over post-Brexit trading arrangements for Northern Ireland. Meanwhile, German car manufacturers are lobbying the European Commission to delay post-Brexit rules regarding electric vehicles shipped between the UK and EU with a potential 10% tariff if 45% of the parts are not made in the UK or EU. Stellantis, owner of Vauxhall, Citroen, Peugeot and Fiat has also warned about the threat to UK jobs in the car industry from the rules of origin.

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In the UK, Andrew Bailey, Chair of the Bank of England has acknowledged for the first time that it is dealing with a wage-price spiral as he pledged to lift interest rates as far ‘as necessary.’ He did note one piece of good news in the economy was that wage growth has fallen slightly and ‘near-term indicators suggest pay growth could ease further later this year.’ However, reflecting the wider global uncertainty, the yield on UK gilts moved back above 4%.

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In Europe, Christine Lagarde, president of the European Central Bank re-iterated that the central bank is still in hiking mode saying ‘the ECB isn’t pausing based on the information I have today.’

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In the US, besides the debt ceiling uncertainty, Treasury Secretary Janet Yellen told banking executives that further mergers may be needed in the US banking sector suggesting we are not out of the woods yet as regards the regional banking crisis.

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Japanese economic growth in the first quarter of 2023 was strong with an annualised increase of 1.6% which helped propel Japanese equities to a new high.

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Chinese industrial production grew by 5.6% in April but this was half the rate expected. Fixed asset investment was also lower than forecast. Retail sales jumped by 18.4% but this was also not as strong as expected and disappointing given the exit from lockdown.

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Brent oil was range bound at $75 following weak Chinese economic data given the country is expected to be main driver of oil demand this year.

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Finally, following last week’s Alpha Bites ‘AI-Rise of the Machines’. BT has announced it is planning to shed 55,00 jobs by the end of the decade with around 10,000 to be re-placed by artificial intelligence (AI). BT’s CEO Philip Jansen expects the business to be a ‘huge beneficiary’ of the technology. This followed separate news that accounting solutions provider Sage had launched several AI products which it believes will enable its customers to become more effective and more productive. ESG remains an important part of business strategies but is rapidly being overtaken by AI as the ‘hot topic.’

Read Last Week’s Alpha Bites – AI – Rise of the Machines

 

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Alpha Portfolio Management is a trading name of R C Brown Investment Management PLC which is authorised and regulated by the Financial Conduct Authority.