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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Many UK exporters say Brexit trade deal hurts business; price rises loom; US jobless claims rise – as it happened

United Kingdom United States European Union Russia Walmart Brexit (Geopolitical Entity) Europe Joe Biden Office for National Statistics Nestlé
Peoples walk along London Bridge against the West-London skyline this week.
Peoples walk along London Bridge against the West-London skyline this week. Photograph: Christopher Walls/SOPA Images/REX/Shutterstock

Closing post

Time to wrap up... here are today’s main stories.

UK firms have warned that the Brexit free trade deal is pushing up costs, increasing paperwork and delays, and putting the UK at a competitive disadvantage.

The British Chambers of Commerce, who conducted the survey, urged ministers to tackle the problems, with supplementary deals to smooth trade across the channel.

Consumes have been warned to expect higher prices after Nestlé and Reckitt both warned they would pass on higher costs to consumers.

European sales have hit a record January low, as semiconductor shortages hampered production.

European stock markets have fallen, on fresh concerns that a Russian invasion of Ukraine could be imminent. The FTSE 100 fell by 0.9%, while Wall Street is down around 1%.

US jobless claims have risen, while housing starts dropped in January as bad weather hampered construction workers.

Here are today’s other main stories:

Goodnight. GW

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdow, sums up the day:

‘’Financial markets took a turn for the worse after warnings from the US administration that there is evidence on the ground that Russia is moving towards an imminent invasion of Ukraine. Reports of firing in a border region and accusations that Moscow is orchestrating a false flag operation, an intent to pin the blame for starting conflict on Ukrainian forces, has ratcheted up tensions and led to more investors seeking less risky positions.

The price of gold, seen as a safe haven in times of crisis has risen by another 1.37% to $1896 an ounce, an 8 month high. Equity markets dropped with US indices falling on the open and the FTSE 100 lost more ground with once again travel stocks bearing the worst of the losses. Data out from Eurocontrol and the ONS earlier had showed the sector flying into brighter skies with UK daily flights up 17% compared to the previous week, with the lift off helped by half term holiday bookings. It’s feared that recovery for airlines could be derailed if a conflict breaks out on the doorstep of Europe.

This concern has seen British Airways (IAG) fall by around 4%, Wizz Air by more than 7% and Rolls Royce, so highly reliant on the commercial air travel, dropped 3%. Cruise company Carnival also saw a 2.5% fall in its share price as worries mount about travellers’ sentiment.

Evraz, the Russia focused mining and steel production company was the biggest faller on the FTSE 100 amid heightened worries about the effect sanctions will have on the business. For now the increased tensions haven’t pushed up the oil price, instead Brent crude dropped around 2.2% to $92.6 dollars a barrel. The price is proving much more sensitive to the better prospects for Iranian output, with negotiators of the Iran nuclear deal saying an agreement is closer than ever. An accord would provide supply side relief but fresh falls in the oil price are still likely to be limited by the ever more tense situation surrounding Ukraine.‘’

All Europe’s markets finished in the red, with Germany’s DAX down 0.75%, France’s CAC off 0.45%, and Italy’s FTSE Mib 1.1% lower.

FTSE 100 closes lower as Ukraine fears rise

Britain’s FTSE 100 index has closed 66 points lower at 7537, down almost 0.9% today.

Russian steelmaker Evraz finished as the top faller, down 7.5%, with investors concerned by Joe Biden’s warning that a Russian invasion of Ukraine is imminent.

Airline group IAG fell 4%, and Rolls-Royce lost 3%, on concerns that travel could be hit by geopolitical tensions.

Oil giant Shell also pulled the index down; it dropped 2.7%, following the 2% drop in crude prices today. Financial stocks were weaker too, with Abrdn (-4.1%) and Prudential (-2.7%) in the fallers.

On the smaller FTSE 250 index, Eastern Europe-focused airline Wizz Air fell 7.4%.

Updated

Nestlé and Reckitt’s comments today are a sign that consumers will face further price rises this year, says Spencer Brown, senior vice president at procurement and supply chain consultancy Proxima:

“In recent weeks we’ve seen major businesses, from Tesco to Unilever, warn about the impact inflation will have on prices for consumers. Now Nestle and Reckitt are giving similar warnings. In many cases price increases have already been implicated and this is a trend that will only continue.

Costs in the supply chain have been rising significantly and we expect this to continue. This means that there are limited options for companies – prices have to rise, products have to be reconfigured or costs have to be absorbed.

It is clear that the latter option is not palatable for businesses or their shareholders, so we expect price rises and ‘shrinkflation’, where products become smaller for the same price, will become the norm over the coming months.”

US retail giant Walmart has overcome supply chain problems to beat profit and sales expectations on Thursday and set a strong full-year earnings forecast.

The US’s largest retailer grew revenues by 0.5% in the last quarter, with net sales in the US 5.7% higher than a year ago.

Walmart says it “navigated higher supply chain costs and pandemic-related challenges well”.

It expects to grow net sales and operating profits by 3% this year, despite ongoing supply-chain issues and rampant inflation.

The company may benefit from the inflationary squeeze, as its huge size allows it to offer better deals... or to absorb price pressures to win customers.

Walmart chief financial officer Brett Biggs told a conference call with analysts that the company expects U.S. consumers to remain in a “generally favorable economic position throughout the year”, Bloomberg reports.

Journalist Charles Fishman has more details, and makes some very interesting points about Walmart’s success:

Gas prices are rising too, with the next-day contract for UK wholesale gas up 6.3% at 175p per therm (back towards Monday’s two-week high).

Stocks are also lower in Europe.

The UK’s FTSE 100 is now down 87 points, or 1.15%, back towards the lows seen on Monday, with travel companies, oil firms and miners all weaker.

Germany’s DAX is down 0.75%, while Italy’s FTSE Mib is off 1%.

Updated

Wall Street opens lower as Ukraine tensions remain high

The floor of the New York Stock Exchange.
The floor of the New York Stock Exchange. Photograph: Spencer Platt/Getty Images

In New York, stocks have opened lower as the Ukraine crisis continues to worry investors.

The main indices are in the red, shortly after president Joe Biden told reporters that a Russian invasion could happen in the next “several days”. Biden described the chance of conflict in the region as “very high.”

The Dow Jones industrial average of 30 large US companies has dropped by 315 points, or 0.9% to 34,619 points.

The broader S&P 500 is also down 0.9%, with the Nasdaq Composite off 1%.

Biden’s comments came after Nato secretary-general Jens Stoltenberg said the alliance is concerned that Russia is “trying to stage a pretext for an armed attack against Ukraine”.

In another step, Russia has expelled the deputy US ambassador to Moscow, Bartle Gorman.

Associated Press has more details:

Speaking at the White House, Biden said the United States saw no signs of a claimed Russian withdrawal of forces along its border with Ukraine. He said the U.S. has “reason to believe” that Russia is “engaged in a false flag operation to have an excuse to go in.”

He told reporters in Washington: “Every indication we have is they’re prepared to go into Ukraine, attack Ukraine.”

Rowan Williams calls for UK wealth tax to tackle ‘spiralling inequality’

Rowan Williams, the former archbishop of Canterbury, has called on the UK government to impose a wealth tax on the super-rich to help tackle “spiralling inequality”, which he said was “deeply damaging to our collective morale and trust”.

Williams, who was the most senior bishop in the Church of England from 2002 to 2012, on Thursday joined a growing group of moral leaders demanding a one-off tax on the richest 1% of the population to help close the “staggering” gap between the richest and poorest in society.

“Spiraling inequality is a major issue in our society, and all the evidence suggests this is deeply damaging to our collective morale and trust,” Williams said.

“A wealth tax of the kind we are backing recognises that vastly disproportionate rewards for a very small number of citizens will not make for a cohesive and just national community.”

Williams told the super-rich they should not view paying back to wider society as a tax burden but as “an opportunity to build a stable, sustainable economy that works for everyone”.

Here’s the full story:

British Gas has set up a scheme to protect the hundreds of millions of pounds it receives in advance payments from customers towards their future energy bills, after the “national scandal” that left households on the hook to pay £500m after a string of energy firms spent consumers’ deposits before going bust.

The Centrica-owned energy firm has pledged to ringfence the £294m it holds in credit balances through direct debits from its 7 million customers in a bank account separate from funds it uses to run the day-to-day business.

“I think that in any other walk of life using over £500m of customers’ money to prop up a business that subsequently failed would be considered a national scandal,” said Chris O’Shea, the chief executive of Centrica.

“I’m amazed it is not treated as such in the energy business.”

New house-building projects fell by 4.1% across America last month, as builders continue to face supply chain disuption, rising materials prices...and bad weather.

Housing starts in January fell to an annual rate of 1,638,000, from a December estimate of 1,708,000.

That could be a sign that rising borrowing costs are weighing on the sector. If so, that would be a blow to efforts to increase housing supply, and address the shortage that pushed prices to record levels.

But it’s also due to the freezing weather which hit the US last month, with Winter Storm Izzy bringing heavy snow and damaging ice to the southeastern US, disrupting power supplies and forcing flights to be cancelled.

House completions were down 5.2% in January -- which may also show that work was held up in the freezing weather.

The number of building permits (giving permission to start construction) rose 0.7% during the month.

Updated

US jobless claims rise

Just in. The number of Americans filing new claims for unemployment benefit rose last week.

There were 248,000 initial claims in the week to Saturday February 12, an increase of 23,000 on the previous seven days.

That’s more than economists had expected, but still close to pre-pandemic levels.

Jobless claims hit their lowest since 1969 late last year, falling below 200,000 as firms held onto workers in a tight labour market.

Back in April 2020, they hit a record at above 6m, as firms shed staff early in the pandemic.

Updated

U.S. investigates 416,000 Tesla vehicles over 'phantom braking' reports

A Tesla dealership in Littleton, Colorado.
A Tesla dealership in Littleton, Colorado. Photograph: David Zalubowski/AP

US car safety regulators have opened an investigation to assess potential safety issues in certain Tesla vehicles after users reported “phantom braking.”

The National Highway Traffic Safety Administration has started a formal investigation into 416,000 Tesla vehicles over reports of unexpected brake activation tied to its driver assistance system Autopilot.

The preliminary evaluation covers 2021-2022 Tesla Model 3 and Model Y vehicles in the United States after the agency received 354 complaints about the issue over the past nine months.

NHTSA said:

“Complainants report that the rapid deceleration can occur without warning, at random, and often repeatedly in a single drive cycle.”

Earlier this month Tesla updated its “Full Self-Driving” software, to fix a situation where cars would roll through stop signs without coming to a full stop.

A currency exchange office in the Beyoglu district in Istanbul, Turkey.
A currency exchange office in the Beyoglu district in Istanbul, Turkey. Photograph: Berkcan Zengin/GocherImagery/REX/Shutterstock

Turkey’s central bank has left interest rates on hold, despite inflation having surged to nearly 50% in January.

The Central Bank of the Republic of Turkey voted to leave its benchmark rate at 14% today.

During 2021 it cut borrowing costs several times, lowering rates from 19%, under pressure from President Recep Tayyip Erdoğan to ease monetary policy.

Those cuts sent the lira slumping to record lows, driving up import costs and creating an economic crisis.

The CBRT said that the pandemic, and rising ‘geopolitical risks’ were creating uncertainty and threatening the global recovery.

The variants and increasing geopolitical risks keep the downside risks to global economic activity alive and increases the uncertainty.

Recovery in global demand, high course of commodity prices, supply constraints in some sectors, particulary in energy, and high transportation costs have led to producer and consumer price increases internationally

Erdoğan seems to have relaxed his pressure for rate cuts. Earlier today he said debate on the issue had largely dropped off the agenda, and that the government’s goal was to lower inflation to single digits.

Consumer goods company Reckitt, which makes household brands including Dettol, Nurofen and Strepsils, is also planning to pass rising costs onto consumers.

Reckitt said it had faced on average 11% cost increases during 2021, and predicted these would climb even higher this year- echoing the message from Nestlé this morning.

The Berkshire-based firm, formerly known as Reckitt Benckiser, said it was absorbing some of its increased costs, but was increasing prices of some of its products.

“We are passing some pricing on to consumers, but we minimise that through programmes that we have internally such as productivity programmes,” Jeff Carr, chief financial officer at Reckitt, told reporters.

“Prices have gone up but we’re absorbing a significant part of that inflation, and we’re not passing it on to consumers. We want to get good offers to our consumers, we want to be competitive.”

Reckitt said it was seeing “across the board” increases in the price of raw materials, especially those related to crude oil such as plastics, as well as tinplate – used for making tin cans – and dairy products.

The company has also been facing continued supply chain disruption, and higher transport costs.

Carr said:

“Logistics has been a key challenge, not just for us, but for everyone, and that’s been strong double digits, an over 20% increase in in logistical costs, ocean freight being one of the key drivers of that,”

Gold Bullion from the American Precious Metals Exchange.
Gold Bullion from the American Precious Metals Exchange. Photograph: Mike Segar/Reuters

Back in the markets, gold hit its highest level in eight months this morning as rising inflation and the Ukraine crisis boosted demand.

Bullion rose as high as $1,892 per ounce, for the first time since June 2021. It’s now gained around 5% since the start of February.

Fawad Razaqzada, market analyst at ThinkMarkets, says three factors have pushed up gold: heightened geopolitical risks and stock market volatility; falling real yields, and soaring inflation.

Indeed, the number one source of support for gold is rising price levels around the world as investors seek to protect their purchasing powers from being eroded by depreciating fiat currencies. Inflation has reached multi-decade highs around the world, and a record high in Eurozone.

Although soaring inflation has raised concerns about policy tightening from the Fed and other major central banks, this has been offset by the fact real yields haven fallen sharply, boosting the appeal of non-interest-bearing assets like gold. The real yield on the 10-year note is around -5.5%, which has been derived from 2% nominal yield minus 7.5% CPI inflation. This means that real yields will not move into the positive territory with a bit of policy tightening, without a sharp fall in nominal inflation rate.

The gold price over the last year
The gold price over the last year Photograph: Think Markets

Gold dropped on Tuesday when Russia claimed it was withdrawing some troops, but has now jumped to its highest since last June.

That drop suggested gold had been at least partially supported by haven flows. This view has been re-enforced amid fresh concerns about the situation there. Ukraine has said that some Russian-backed forces fired shells at a village in Luhansk region.

EU’s Von der Leyen has added that: “We hear claims from Russia about pulling back troops from Ukraine’s border but we have not seen any sign of de-escalation on the ground,” and that it has been adding even more soldiers to the military build-up.

Victoria Scholar, head of investment at interactive investor, also attributes gold’s rise to the Ukraine crisis:

EU car sales hit record January low

Europe’s car industry continues to be badly hurt by chip shortages.

New car registrations in the European Union fell by 6% year-on-year in January to 682,596 units. That’s even worse than the previous worst January, a year earlier.

Industry body ACEA reported that ongoing semiconductor shortages are still damaging car sales across the region, with factories forced to cut production.

ACEA says:

Various markets in Central Europe posted gains last month, with Slovakia (+72.6%) and Romania (+55.5%) seeing the strongest growth, although Polish sales contracted by 10.2% in January.

In Western Europe, on the other hand, almost all countries posted negative results. Looking at the four major car markets, double-digit losses were seen in Italy (-19.7%) and France (-18.6%), while only Germany posted solid growth (+8.5%) and Spain saw a modest gain (+1.0%).

European car sales

In the UK, total new car sales rose by 27.5% year on year in January, although that increase was compared with January 2021 when the UK was in a strict lockdown and car showrooms were closed.

Consumer demand for travel insurance is returning to near pre-pandemic levels, according to the price-comparison site Moneysupermarket, but high energy prices mean it does not expect any profit from tariff switching this year.

The financial services platform, which helps consumers compare deals, said revenue from its travel insurance comparisons had bounced back in the last three months of 2021.

Revenues at its Travelsupermarket division reached 35% of 2019 levels in January, as further easing of coronavirus restrictions was announced.

However, it said high wholesale energy prices meant there had been no switchable tariffs available to consumers since October.

As a result, the London-listed company said it would not make any profit this year from customers using their platform to compare deals from energy providers, although it predicted the tariff-switching market would return in the medium term.

UK consumers continued to return to the shops last week - but visits are still below pre-pandemic levels.

The ONS reports that overall retail footfall in the UK increased by 2% from the previous week, but remained at 86% of the level seen in the equivalent week of 2019.

It’s the fifth consecutive week of increasing retail footfall, driven by weekly rises in high street footfall as Covid-19 cases dropped from their record highs.

More households feel cost of living squeeze

More than three quarters of adults felt their cost of living rise this month, as prices in the shops increase.

Around 76% of adults said their cost of living had increased over the last month, according to the latest Office for National Statistics’s Opinions and Lifestyle Survey.

That’s a notable increase on the 69% recorded in the last two weeks of January, showing inflationary pressure are rising.

The most frequently reported reasons continued to be:

  • rising food shop prices (90%)
  • rising energy bills (77%)
  • increases to the price of fuel (69%)

Consultants at Kantar warned this month that the average annual grocery bill is on track to rise by £180 this year, with grocery prices having increased 3.8% per year in January.

And the chairman of Tesco, Britain’s biggest supermarket chain, has forecast that “the worst is yet to come” on food price inflation, which could soon hit 5%.

Many of the cheaper grocery items have seen the steepest increases, which is hurting the poorest families.

My colleague Zoe Wood reported yesterday that the Canterbury and District food bank has seen a surge in demand from struggling households, and falling donations as supporters are also squeezed - just as food prices jump.

Motorists have also been paying more at the pumps, with petrol and diesel prices hitting records this month.

Updated

Airbus has announced its highest-ever profits and a return to paying a dividend to shareholders, in a sign of the aerospace industry’s burgeoning recovery from the Covid pandemic.

The European plane-maker reported a record net income for 2021 of €4.2bn (£3.5bn), in stark contrast to a steep €1.1bn loss in 2020, when the pandemic first hit. The company, which is headquartered in Toulouse, France, made revenues of €52bn, up from €50bn in 2020.

The Nestle research center at Vers-chez-les-Blanc in Lausanne
The Nestle research center at Vers-chez-les-Blanc in Lausanne Photograph: Denis Balibouse/Reuters

Food group Nestlé is planning to keep raising its prices this year, to shore up its profit margins in the face of rising costs.

The Swiss food and drinks giant beat expectations this morning by reporting organic growth of 7.5% for last year, the highest in over a decade. But, 2% of that growth came from price increases, with Nestlé lifting prices by 3.1% in the fourth quarter.

The maker of Nespresso coffee pods, Kitkats chocolate bars and Purina petfood says it intends to defend its margins against rising costs.

CEO Mark Schneider told reporters that the cost pressures will probably be higher this year than last:

“It is a safe assumption that our input cost increases for 2022 will be higher than 2021, that is something that we have to reflect in our pricing.

“There is almost no place in the company that is exempt of inflation now....Some of these things you can hedge against, some not.”

Nestlé expects its underlying trading operating profit margins will be between 17.0% and 17.5% this year, compared with 17.4% in 2021, and 17.7% in 2020.

Reuters: Nestle expects steady margins after beating 2021 expectations

Sovereign dollar bonds issued by Ukraine and Russia have dropped this morning, after reports of clashes in Ukraine’s eastern region.

Reuters has the details:

Ukraine’s growth-linked 2040 bonds dropped more than 4 cents in the dollar to trade at 68.425 cents, having suffered their biggest daily tumble in more than three weeks, Tradeweb data showed.

Longer-dated Russian bonds slipped more than 2 cents in the dollar to trade at 105.5 cents.

The selloff came as Russian-backed separatists in eastern Ukraine, and Ukraine’s military, blamed each other for the shelling reported this morning.

The Russian rouble has also weakened, dropping around 1.5% to reverse Tuesday’s recovery.

In the City, the FTSE 100 index is down around 0.66% as the Ukraine crisis weighs on markets.

The blue-chip index has lost 50 points to 7553, with Russia’s steelmaker Evraz leading the fallers (-6%).

Travel companies are also lower, with British Airways parent company IAG down 2.2%, and Rolls-Royce (which makes and services jet engines) off 2.5%.

A Standard Chartered branch in Hong Kong.
A Standard Chartered branch in Hong Kong. Photograph: Budrul Chukrut/SOPA Images/REX/Shutterstock

Bankers at Standard Chartered have shared a $1.37bn bonus pot for 2021, up 38%, even as it said it was trying to cut fixed costs.

It’s a sign of how banks were returning to bumper payouts after weathering the Covid-19 pandemic in better shape than expected, as most workers face a painful squeeze on their finances.

London-headquartered Standard Chartered said the payout increase reflected a normalisation of bonuses after a lean 2020, but it also reflected a hot hiring market as lenders worldwide paid up to retain key staff.

The bigger bonus pool came as Standard Chartered set out plans to cut annual expenses by $1.5bn, as part of a broader goal to achieve double-digit returns by 2024, which it outlined on Thursday as it reported annual results.

This bonus season is expected to be the most lucrative since the 2008 global financial crisis, as banks benefit from the economic recovery and a boom in takeover deals.

Migrant worker shortage ‘unlikely’ to boost wages and productivity: Resolution

Immigration changes due to Brexit will not deliver the ‘high wage‘ economy that Boris Johnson has promised, a new report from the Resolution Foundation shows.

Resolution has analysed UK migration trends, and concluded that the economic impact of ending freedom of movement has been exaggerated by both its supporters and opponents.

The new regime is driving changes in the UK labour market, particularly in lower-paying industries which rely on migrant labour and typically see high staff turnover, such as farming or food production

Overall, total migration was responsible for 77% of labour market growth between 1994 and 2019. EU workers made up 34% of total growth, and were increasingly likely to have worked in lower-paid roles by the time Brexit happened.

But Resolution report’s found that while the Government’s policy is likely to reduce migration into the UK, it is unlikely to significantly boost productivity or deliver a big hit to the public finances.

In the short term, the new migration regime will cause some sectors, like food manufacturing, transport and storage and hospitality (which have high turnover and are reliant on EU-born workers in occupations that wouldn’t be eligible the new skilled visa) to experience an acute labour supply pinch.

But, the reporst says we shouldn’t expect a reduction in migrant workers to automatically drive up wages for UK-born workers in these same sectors. Firms may look to use labour-saving technology instead -- leading to fewer jobs.

If they can’t, they must choose between raising wages and raising prices (hitting incomes elsewhere in the economy), leading to production falling over the medium-to-long term.

If low-productivity, migrant-reliant sectors like farming and food manufacturing shrink, then average productivity could rise. Even so, the Prime Minister’s claims that controlled migration is the key to a new high wage economic strategy “are overdone”, Resolution says.

Kathleen Henehan, Senior Research and Policy Analyst at the Resolution Foundation, explains:

“Despite claims from both sides of the debate, the UK’s new migration regime will do little to change the UK’s economic trajectory, or its central low investment, low productivity challenges.

“Over the past two decades, immigration has had a profound effect on the size and composition of the UK’s labour force, with migrants driving over three-quarters of the growth in the workforce.

“And sectors which are particularly reliant on migrant workers – such as food manufacturing, warehousing and accommodation – are more exposed to the regime changes, which will limit firms’ abilities to hire low-paid non-UK workers in these industries and to respond quickly to changes in demand.

“But evidence does not suggest that the coming change in the level and nature of migration will transform our economy, or our public finances.”

“Ultimately, a migration strategy is not a substitute for an economic strategy.”

Late last year, the government extended the UK seasonal agricultural workers’ visa scheme for another three years , meaning fruit and vegetable growers will be able to recruit overseas workers to help bring in harvests, following warnings that crops would rot in the fields otherwise.

One-in-five workers in food manufacturing in 2017-19 were from the EU and would be ineligible for a SWV, meaning the sector is likely to need to change significantly or shrink in the years ahead, Resolution’s report found.

The food and accommodation sectors who rely on EU-workers in SWV-ineligible roles for 10% of their workforce have seen vacancies double as the economy reopened.

Data this week has shown that inflation has outpaced wage growth, with the consumer prices index expected to rise above 7% by April.

A Scottish truck parked in the port of Boulogne-sur-Mer, northern France, after delivering seafood in November.
A Scottish truck parked in the port of Boulogne-sur-Mer, northern France, after delivering seafood in November. Photograph: Michel Spingler/AP

Brexit trade frictions have also been cited as a factor pushing down business confidence in Scotland.

Scottish businesses are less optimistic than elsewhere in the UK, according to the ICAEW (Institute of Chartered Accountants in England and Wales) Business Confidence Monitor, released this morning.

This may be because domestic sales and export performance have been more subdued than the UK average over the last year.

UK and Scottish business confidence
UK and Scottish business confidence Photograph: ICEAW

Over the last year, Scottish domestic sales increased by 4.6%, compared to 5.3% for the UK, ICEAW reports. Export growth was weaker too, with sales rising by just 1.5% over the same period, below the UK average (2.2%).

ICEAW says:

Trading frictions due to Brexit may be a factor impeding growth here.

Scottish exports of fresh fish and seafood were quickly disrupted when the Brexit trade deal came in last year, with delays due to new paperwork such as health certificates and customs documentation.

Businesses do expect exports to rise this year, by 3.7% - but again, that lags behind their UK counterparts.

The survey also found that Scottish firms are facing recruitment challenges and rising costs,

For the first time since the BCM survey began, the availability of non-management skills and staff turnover were the most prominent growing challenges for companies.

The Herald newspaper has more details:

The Herald: Brexit ‘friction’ cited as Scottish business confidence plunges to lowest level in UK

How to make Brexit trade run better

The British Chambers of Commerce have identified five issues holding back the flow of goods and services into the EU - and proposed five solutions to address some of these complexity, bottlenecks and pressures on firms.

  1. ISSUE: Export health certificates cost too much and take up too much time for smaller food exporters.
    SOLUTION: We need a supplementary deal on this which either eliminates or reduces the complexity of exporting food for these firms.

  2. ISSUE: Some companies are being asked to register in multiple EU states for VAT in order to sell online to customers there.
    SOLUTION: We need a supplementary deal, like Norway’s with the EU. This exempts the smallest firms from the requirement to have a fiscal representative and incur these duplicate costs.

  3. ISSUE: As things stand CE marked industrial and electrical products will not be permitted for sale on the market in Great Britain from January 2023. The same is true for components and spares.
    SOLUTION: We need action from the Government to help businesses with these timelines. Many firms are far from convinced about a ban on CE marked goods in Great Britain.

  4. ISSUE: UK firms facing limitations on business travel and work activities in the EU.
    SOLUTION: Government needs to make side deals with the EU and member states to boost access in this area as a priority for 2022.

  5. ISSUE: Companies starting to be pursued in respect of import customs declarations deferred from last year.
    SOLUTION: We need a pragmatic approach to enforcement to ensure companies recovering from the pandemic do not face heavy-handed demands too quickly on import payments, or paperwork.

Dr Philippa Whitford MP, the SNP’s Europe spokesperson, said:

“This latest survey highlights once again that the Tory government’s extreme Brexit deal has been nothing short of an unmitigated disaster.

“Brexit has prevented growth in the economy, cost billions of pounds, led to drastic fall in exports, and is now adding to the cost of living crisis.

“At a time when Tory cuts, regressive tax hikes, rising inflation and soaring energy bills are hammering families and businesses - Brexit is further piling on the pressure and hardship.

“The SNP will continue to press the UK government for action to mitigate Brexit and the Tory cost of living crisis but it’s beyond any doubt that independence is the only way to keep Scotland safe and regain the benefits of EU membership.”

The BCC’s survey results are “extremely worrying”, says Nick Thomas-Symonds, shadow international trade secretary:

The Government have been asleep at the wheel and have shown a complete lack of support to help businesses who are seeking help.

“Labour have been clear that it wants to make Brexit work. The Government should be negotiating a veterinary agreement and working pragmatically with the EU to ensure goods flow easily, including, making sure that there are not delays at our ports and that ministers are giving the tools needed to industry so that trade flows easily.

“Business prosperity, job security and livelihoods depend on reliable supply chains. Ministers need to urgently listen to business and give them the support they need.”

Introduction: Many UK exporters say government’s Brexit trade deal is bad for business

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

UK businesses are calling on the government for more help exporting to Europe, after new research found that many firms believed the EU trade deal was not helping them grow or increase sales.

The British Chambers of Commerce (BCC) has surveyed 1,000 businesses, and found that a majority said it has created problems such as pushing up costs, increasing paperwork and delays, and putting the UK at a competitive disadvantage.

Just 8% of firms agreed that the Trade and Co-operation Agreement (TCA) was ‘enabling their business to grow or increase sales’, while 54% disagreed.

For UK exporters 12% (or just one in eight) agreed that the TCA was helping them, while 71% disagreed.

The BCC received 59 comments on the merits of the TCA, which was agreed on Christmas Eve 2020, including:

  • It had allowed some companies to continue to trade without significant change
  • It had encouraged firms to look at other global markets
  • It had provided stability to allow firms to plan.

But this was outnumbered by 320 comments criticising the deal, such as:

  • It had led to rising costs for companies and their clients
  • Smaller businesses did not have the time and money to deal with the bureaucracy it had introduced
  • It had put off EU customers from considering UK goods and services – due to the perceived costs and complexities.

William Bain, head of trade policy at the BCC, said smaller firms are particularly suffering from the change to trading relationships between the UK and the EU.

“This is the latest BCC research to clearly show there are issues with the EU trade deal that need to be improved.

“Nearly all of the businesses in this research have fewer than 250 employees and these smaller firms are feeling most of the pain of the new burdens in the TCA.

“Many of these companies have neither the time, staff or money to deal with the additional paperwork and rising costs involved with EU trade, nor can they afford to set up a new base in Europe or pay for intermediaries to represent them.”

The BCC has made a number of suggestions, including moves to reduce the complexity of exporting food, and tackling limitations on business travel and work activities in the EU.

Last week, MPs on parliament’s spending watchdog warned that Brexit red tape has damaged Britain’s trade with the EU. They fear the situation could worsen unless the government works with Brussels to reduce hold-ups at UK ports,

A Government spokesperson, though, says businesses are getting support to help with Brexit changes:

“The Trade and Co-operation Agreement is the world’s biggest zero-tariff, zero-quota free trade deal. It allows businesses in Britain to trade freely with Europe while also being able to seize new trading opportunities with countries around the world.

“We’ve always been clear that being outside the single market and the customs union would mean changes and that businesses would need to adapt to new processes. That is why we are ensuring that businesses get the support they need, including through the free-to-use Export Support Service.

“Goods exports to EU nations were 4% higher last year compared with 2020. However, given the Covid-19 pandemic, global recession and supply chain disruption, it is still too early to draw any firm conclusions on the long-term impacts of our new trading relationship with the EU.”

But there is evidence that UK trade has weakened over the last few years. UK exports of goods to the EU were down £20bn last year compared with the last period of stable trade with Europe, according to official figures marking the first full year since Brexit.

Elsewhere today, companies such as Nestlé , Reckitt Benckiser and Standard Chartered are reporting results.

European markest are set to open a little lower, with the Ukraine crisis firmly in focus.

The US has said that Russia has deployed another 7,000 troops to the border, while Ukraine has denied claims by Russian-backed separatists that it has conducted mortar attacks on their terrirory.

The agenda

  • 7am GMT: European new car registrations for January
  • 9.3am GMT: ONS weekly survey of economic activity and social change
  • 1.30pm GMT: US monthly building permits for January
  • 1.30pm GMT: US weekly jobless figures

Updated

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