In this week’s Commercial Awareness update, we discuss the housing market in the UK, mixed fortunes for Ocado and Tesco, Dyson’s new HQ, the biggest taxpayers in the UK and why people love the cinema.
The housing market
Activity in the housing market dropped to its lowest level for years, after consumer confidence appears to be dented on both sides of the Atlantic. In London, data from LonRes shows that properties changing hands in the prime areas of the capital dropped by 14% in 2018 compared to the previous year. This makes it the lowest level of activity since the financial crash over a decade ago. The decline in activity is focused on London, however it has started to affect the commuter belt and the rest of the UK too. Uncertainty over Brexit is a key reason for this downturn - people are waiting to see what happens before making big purchases. Subsequently, an owner is likely to have to lower the asking price to sell a house in London today. They are unlikely to do this especially if it was worth more when they bought it. Therefore, you have a perfect storm of a lack of new houses coming on the market and not enough buyers. If this continues and spreads across the UK, estate agents and property businesses may start to struggle.
The housing market in America is having similar troubles. December saw a five year low in house sales and also the smallest increase in house prices since February 2012. Many look towards the five week shutdown (see last update) for a lack of consumer confidence, leading to potential buyers holding off purchases.
Companies to watch
The UK’s largest supermarket has announced that up to 9,000 staff will have their jobs affected as part of a wide cost-cutting plan. The retailer will close fresh food counters in 90 of its stores, however will remain operating their existing fish, deli and meat counters in 700 other stores. Tesco employs more than 300,000 UK in more than 3,400 stores, but is hoping that they will be able to transfer around half of the affected staff into other customer service roles. The costs are part of a plan to save £1.5bn to compete with emerging competition from other supermarkets, including discount retailers Aldi and Lidl. Since Dave Lewis, the current CEO, took over in 2014, more than 10,000 jobs have been cut, including last year when 1,700 employees were affected in middle management.
In other retail news, the grocery delivery company, Ocado saw its shares rise as much as 6.7% after a report suggested that they may agree to a food delivery service with Marks and Spencer. Ocado has been Waitrose’s key supplier for 20 years, however the current deal between the two companies is due to end in September 2020. This deal could mean Ocado dropping Waitrose. Marks and Spencer's lack of delivery service has been a competitive weakness, so this potential deal could be strategically very powerful in the industry. After this news, Marks and Spencer shares rose 2% to 295p, while Ocado’s shares finally steadied 3% higher at 975p.
The UK household appliance maker has said it will be moving its HQ to Singapore. This seems like a huge decision, but in practical terms, may not mean much will change at the moment. According to Jim Rowan, Dyson’s chief executive, there will be no impact on the 4,000 workers currently in Britain. Furthermore, he emphasised that Dyson would still be investing money in British industries and that there will be an injection of £200m in new buildings and testing facilities in Hullavington, £44m in a new office space and £31m for new undergraduates.
Rowan said that there will be little impact on its tax affairs too - in 2017 Dyson paid £95 million in taxes. However, two senior executives will be transferred to the Singapore office and Sir James Dyson will split his time equally between the UK and Singapore. The decision does have implications - Dyson is showing that its centre now lies in Asia where it sees the most opportunities for growth.
The Japanese car maker, Nissan has stated it is ‘cooperating’ with US regulators, after it was revealed that the Securities and Exchange Commission (SEC) had launched an investigation. The news comes as Carlos Ghosn, the firm’s former chairman, faced an internal investigation which found he had received “improper payments” totalling $8.9m from a joint venture between Nissan and Mitsubishi. Ghosn was arrested in November last year and is facing charges of financial misconduct. The former CEO created the world’s largest car-making alliance as he brought car-makers Nissan, Renault and Mitsubishi together to produce more than 10 million vehicles a year. A SEC probe could prove rather costly for Nissan, as if the agency declares that a company has broken US security rules, it has the power to impose financial penalties. Nissan shares in Tokyo fell 0.8% as a result of the news.
Britain’s biggest taxpayers revealed
For the first time ever, a list has been compiled of Britain’s biggest taxpayers. The Sunday Times, who also creates the Rich List, published estimates of how much tax the richest people pay based on publicly available information. It’s believed that the top 1% of earners pay 28% of the overall income tax collected by government, with the top 10 biggest payers contributing a combined £1 billion. According to the list, majority owner of JD Sports, Stephen Rubin tops the list with a £181.6 million tax bill, with the likes of James Dyson, the Beckhams and Sports Direct owner Mike Ashley all in the top 50.
With the Panama Papers scandal and other high profile scandals, the amount of tax the wealthy pay has been heavily scrutinised in recent years. The list shows how much many do contribute, but a number of publications have been quick to point out who didn’t make the list. The UK’s wealthiest sportsman and F1 world Champion, Lewis Hamilton, wasn’t featured due to his residency in Monaco, which enjoys low taxation.
The cinema's back
In 2018 British cinema enjoyed its best year since 1970, as box offices across the country saw huge numbers flock to see the latest releases. People went to the cinema 177 million times, with hits like The Greatest Showman, Mamma Mia! Here We Go Again and Black Panther all drawing in big crowds. As Netflix and other streaming services grow, many have worried it would lead to the decline of cinemas. However, this hasn’t been the case. Cinemas are increasingly doing more to offer better experience for the customer, whether it’s IMAX or local cinemas offering luxury viewings.
This week's Commercial Awareness update is proudly sponsored by Deutsche Bank. At Deutsche Bank, your ideas have impact. As Germany’s leading bank, with a strong position in Europe and a significant presence in the Americas and Asia Pacific, they’re proud to drive change and innovation in the industry. That’s why they're looking for creative, curious and strategic thinkers who are ready to make a difference from day one. View their roles.