Return to Kernow

Cornwall - one of the most desirable parts of the country, but also one of the poorest areas. Victim of a UK skills shortage and shortage of workers

Simon Reeve’s recent ‘Return to Cornwall’ on BBC2, provided an eye-opening look at why the county is one of the most desirable parts of the country and an iconic holiday destination, but also one of the poorest areas in England. In 2022, the average net household income was just £21,000 a year. This is well below the national average and one in five people in Cornwall live in poverty.

The programme sadly highlights how young locals are being priced out of the housing market by property owners from elsewhere in the country and that this trend had been exacerbated in the rental sector by the growth of Airbnb and holiday lets. Last week, the government announced homeowners will potentially need to get planning permission before converting properties into short-term holiday lets, in tourist hotspots. In Cornwall, short-term listings are estimated to have increased six-fold in five years, according to government research. The new measures are focused on short-term lets and not hotels or B&Bs.

Since the Covid pandemic, businesses across the UK have been struggling to fill vacancies due to a lack of skilled workers. Last year, an ONS survey revealed that the number of businesses experiencing a shortage of workers reached an all-time high.

‘Return to Cornwall’ reaffirmed this. Firstly, a major supplier of brassicas (broccoli, Brussels sprouts, cabbages and cauliflower), to most of the UK’s leading supermarkets had recruited workers from as far away as Tajikistan to ensure the crop was harvested. Secondly, Falmouth based luxury superyacht builder and re-fitter Pendennis highlighted the lack of apprentices with more youngsters having chosen to go to university over the last 20 years.

While only covering the county of Cornwall, Simon Reeve did provide an interesting insight into many problems for locals and businesses across the UK. While Brexit has clearly created its own set of challenges, surely the UK would be better off in encouraging more youngsters to consider an apprenticeship? The government has said it is making £2.7billion available by 2025 to support businesses to create more apprenticeship opportunities. Should the government be doing more? Last week it was announced that the number of new apprenticeships in some UK regions was down by half despite efforts to promote them.

What have we been watching?

Markets are still pondering central bank interest rate policy, set against the dual challenges of the banking crisis and falling but ‘sticky’ inflation. Bank of England governor Andrew Bailey said the world is not on the cusp of another banking crisis of the scale of the 2008 crash although he did raise the prospect of increased UK bank deposit protection, suggesting the current guarantee scheme does not function as intended, particularly for smaller lenders.

The IMF said that higher interest rates are likely to be ‘temporary’ once high inflation is brought under control. However, the expectation of a return to ultra- low interest rates would appear to suggest adverse economic conditions. Indeed, the IMF has slightly trimmed its global economic growth outlook for 2023 and 2024 to 2.8% and 3% respectively. The US economy is forecast to grow by 1.6% in 2023 but is expected to slow to 1.1% in 2024. These forecasts assume that the financial instability from the banking crisis is broadly contained by the ‘forceful actions’ of regulators in the US and Europe. Meanwhile, the US Federal Reserve has forecast the risk of a mild US recession later this year leading to the Dollar to weaken with Sterling at one point breaking above $1.25.

 

In the UK, economic activity stagnated in February with GDP flat on the month. With the combined forces of industrial action and aggressive monetary tightening as well as stretched household budgets, it is little wonder that the UK economy is struggling to find any real momentum. However, on a more positive note, property surveyors are less pessimistic about the state of the housing market, as fewer report prices falling and the majority expects sales to rise over the next six months. The Royal Institute of Chartered Surveyors suggest the outlook is improving on perceptions that interest rates have peaked.

 

Europe will see a ‘sharp slowdown’ in economic growth this year, but most countries will avoid a recession according to the IMF. However, Germany is expected to enter a mild recession.

 

Federal Reserve (Fed) officials are leaning towards another interest rate hike emphasising the need for flexibility and optionality even though Fed staff are forecasting a mild US recession later this year. US inflation data for March was broadly in line with expectations with CPI of 5%, down from 6% in February, although core inflation is proving stickier at 5.6%. Meanwhile, producer price inflation dropped to 2.7% in March from 4.9% in February. US interest rate futures are currently indicating the chance of one more 0.25% rate hike in May.

Read our latest Chinese investment insights from Alpha PM

 

While China is starting to see come recovery from lockdown, consumer spending remains a concern and there are reports that Chinese state governments are planning a 17% increase in infrastructure projects, energy generation and industrial park investment this year to stimulate economic growth. Meanwhile, China’s exports increased in March for the first time in six months, up by almost 15% albeit against a comparative period when many factories were forced to shut down.

Read our latest investment insights from Alpha PM

 

Brent oil continued to rally following the recent OPEC+ production cut and moved up to $86.

Finally, ‘Don’t panic Captain Mainwaring.’  At 3pm on Sunday 23rd April, there will be a national test of the UK’s Emergency Alerts service by the government. As used in other countries, Emergency Alerts aim to keep us safe if there is an immediate risk to life by sending an alert direct to our mobile phones. Given our more extreme weather and flooding risk as well as heightened tensions with Russia and memories of the Salisbury poisonings, probably a very sensible plan but what do they know that we do not? Should we be alarmed?

 

Read Last Week’s Alpha Bites – Stormy Waters

 

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