There was a drop in inward investment into the UK by foreign firms last year with new investment down 12% and expansion of existing investment down 22%. Despite this, the UK remained the number one destination in Europe in 2018, ahead of Germany and France, securing its third-highest number of projects in 20 years. Projects in Germany also fell by 13% largely due to a slump in business services investment, but in France they increased by 1%, moving it into second place in Europe above Germany, suggesting some of President Macron’s reforms are working.
Of the 1730 projects which took place in a single location, 627 or 36% were in London. If the South East is included, then nearly half (48%) of projects were south of the Watford Gap. Across the home nations, 1518 projects were in England, with Scotland, Wales and Northern Ireland winning 126, 51 and 35 each. Outside London and the South East, the West Midlands performed best, securing 155 projects, with the North East the worst performing English region with 59 projects. In terms of sectors, software and computer services were top with 366 projects, with extraction industries and renewable energy joint bottom with 41 projects. The Americans were the biggest inward investors with 440 projects followed by the Germans on 109 and the Indians on 106.
The taxpayer funded British Business Bank has loaned £500m to start ups since opening its programme in 2012. With UK banks still shell shocked after the financial crisis, the Bank was tasked with supporting business investment directly with its own funds and also giving confidence to other lenders via lending guarantees. Data from Start Up Loans, which is part of the bank, showed London has gained a disproportionate share of the funds, with 14,000 of nearly 70,000 start-up firms loaned £118m. The North West region fared best outside of London, receiving 7,841 loans worth £60m followed by the South East with 5,680 loans worth £48m. In the devolved nations, £29m was lent in Scotland, £26m in Wales and £7m in Northern Ireland. Of the English regions, at £25.9m, the smallest amount loaned was in the East Midlands. For more established businesses in the East Midlands, the £250m Midlands Engine Investment Fund – which is also operated by the British Business Bank – can provide debt or equity finance. The Fund is drawn from UK taxpayers, EU finds and the European Investment Bank and has so far deployed £50m in the region.
On the economy, figures from the ONS confirmed UK annual growth at 1.8% in the first quarter of the year with the economy growing by 0.5% from the previous quarter. Later in the month though, the April figures showed a fall in car production and an easing of stockpiling by manufacturers caused the economy shrink, contracting 0.4% from the month before, which resulted in growth for the three months to April at 0.3%. Factory shutdowns designed to cope with disruption from a March Brexit was the main reason, for example BMW’s Mini factory in Oxford brought forward its summer shutdown to April. The economy had grown impressively in the run-up to the proposed March date for the UK leaving the European Union, as manufacturers stockpiled parts, raw materials and goods but after the Brexit deadline was extended to October the reverse happened.
Wages grew by 3.4% in the three months to April with the biggest increases in the construction and financial services industries. After taking inflation into account, wage growth was 1.4%. The unemployment rate remained at 3.8%, the lowest since October to December 1974. The employment rate for women was 72%, the highest on record, largely because of changes to the state pension age which has meant fewer women retiring between the ages of 60 and 65.
The government borrowed £5.1bn in May, £1bn more than the previous May. Total borrowing in the first two months of the financial year was £11.9bn, 18% more than last year. The ONS expects the government to borrow £24bn this financial year – £500m more than it had previously estimated.
Inflation was 2.0% in May, down from 2.1% in April. Falling fares for transport services, and falling car prices offset rising prices of furniture, furnishings and toys.
Eurozone GDP rose 0.4% in the first quarter or 0.5% when all 28 EU countries are included according to Eurostat. This compared to the previous quarter when GDP climbed by 0.2% in the eurozone and 0.3% across the wider EU area. Croatia recorded the highest growth, with GDP climbing 1.8% compared to the previous quarter which meant 3.9% annually. German and French annual growth is 0.7% and 1.2%.
The eurozone unemployment rate was 7.6% in April 2019, down from 7.7% in March 2019 and from 8.4% in April 2018. This is the lowest rate recorded in the euro area since August 2008. The wider EU unemployment rate was 6.4% in April 2019, stable compared with March 2019 and down from 7.0% in April 2018.
Further afield, the unemployment rate in the US increased from 3.6% to 3.7% and inflation dropped by 0.2% to 1.6%. The US economy grew annually by 3.2%.