Next Give Investors The January Blues

Wednesday, 4 January: The first of the UK’s major clothing retailers announced their most recent trading statement, albeit an update for the trading days in the run up Christmas. Next have reported a fall in sales of 0.4% in the 54 day trading period, ending Christmas Eve. The group warned of tougher times to come and subsequently cut expectations for the 2017/18 year, as both inflation squeezes consumer spending and the devaluation of the pound pushes up prices (by no more than 5% they claim). Next began the day falling in to double digit declines, rooting itself to the bottom of the FTSE 100, remaining there over the course of the day to close -14.36%. Despite not announcing any results themselves, Marks & Spencer were dragged down by Next, and ended the day lower by 6.12%.

Following on from yesterday’s manufacturing PMIs, it was the turn of construction data in the UK. Activity in the sector rose from 52.8 in November to 54.2 in December, the strongest reading since March 2016. As with the manufacturing data, cost pressures are evident as the rise in costs for imported raw materials in December was the biggest since April 2011.

Data from the Bank of England shows that British consumer borrowing increased by the biggest amount in more than 11 years in November. UK consumer credit grew by £1.9bn, driven more so by non-credit card debt, i.e. bank overdrafts, car loans and store credit. Spending has increased post-Brexit but 2017 will be a different year as sterling’s decline following the UK’s decision to leave the EU looks set to push prices up for consumers. In the same data release, 67,505 mortgage loan applications were approved in November, the highest since March 2016.

If getting back in to the swing of things following the Christmas period wasn’t hard enough, take a moment to reflect: today is “Fat Cat Wednesday”, according to High Pay Centre. By midday today, the UK’s top bosses will have earned more than the average worker earns over the course of the year. Before many workers will have taken their lunch break, those sitting at the top of the corporate ladder will have earned more than the average UK salary of £28,200. However, High Pay Centre use a calculation based on the assumption that executives work 12 hours a day, work most weekends and take less than 10 days holiday a year (the average worker works 8.4 hours a day and receives 28 days paid annual leave a year).