BUSINESS LIVE: Wages up 7.8%; Rolls-Royce slashes headcount; SJP charging model shake-up

Bellway’s profits have plunged 18 per cent this financial year as high mortgage rates hit demand, and the builder has warned it will build far fewer homes in the next 12 months.

The British property market has been battling a slowdown for most of this year, as high mortgage rates reduce demand and weigh on construction activity at a time when consumers have adjusted their spending in response to a prolonged cost of living restriction.

Weekly bookings in the first nine weeks of the new fiscal year were 133 units, a drop of more than 30 percent year-on-year, the company said.

The Newcastle-based company said it aimed to build around 7,500 homes in fiscal 2024, compared to 10,945 units built the previous year.

“Since the start of the new financial year, customer demand continues to be affected by mortgage affordability constraints, with bookings below comparative rates from the previous year,” Bellway said in a statement.

Britons were today offered much-needed relief as official figures showed wages are finally growing faster than inflation for the first time in almost two years, suggesting the cost of living crisis may be starting to ease. .

Average regular income rose 7.8 per cent in the three months to August and rose 0.7 per cent after taking into account Consumer Price Index inflation, according to the Office for National Statistics.

This is the first time wages have exceeded price increases since October 2021, during the Covid-19 pandemic.

Richard Carter, head of fixed interest research at Quilter Cheviot:

‘Despite the current pause in rate rises, businesses will continue to find things very difficult. As a result of higher interest rates, this may lead to stagnant wage growth, as companies will not have surplus funds to sanction significant wage increases.

‘Furthermore, with continued financial uncertainty, employees may be cautious about negotiating pay rises for fear of becoming too expensive to move forward.

‘Likewise, companies could choose to stay efficient and not hire too many staff, as future economic uncertainty still prevails and reduces the number of positions available.

‘Therefore, despite the positive momentum in wages over the past year, a slowdown appears likely in the near future.

‘All eyes will be on next week’s data and not only will the unemployment rate be closely watched, but the percentage of economically inactive people is also expected to have seen a further reduction.

‘If this is the case it would be a real positive for the government as it continues to try to help encourage people to return to work. However, in light of the cost of living crisis, this may end up happening naturally in the coming months as belts tighten.’

Emma Mogford, manager of the Premier Miton Monthly Income fund:

‘With payroll numbers falling and wage inflation below expectations, this gives the Bank of England more reason to pause its interest rate rises.

“If we are at peak levels, then a more stable outlook for interest rates could help the economy and the stock market.”

St. James’s Place has confirmed planned changes to its fee structure aimed at reducing overall overhead charges for existing clients’ investments across all core products.

Britain’s biggest wealth manager has been under pressure from regulators to review the way it charges clients to comply with new UK consumer rights rules, which have weighed on the FTSE 100 company’s shares. .

Last week, it had said it was working with regulators and evaluating options in response to rules set by the country’s financial watchdog, which seeks to draw a line under fraudulent retail sales scandals dating back to the 1980s. , from gift mortgages to pensions. and payment protection insurance.

The fee changes, which will come into effect during the second half of 2025, will see an initial charge and ongoing charges applicable from the beginning, and no early withdrawal charge for the vast majority of new investment and pension bonds, St James’s Place said in a statement.

Rolls-Royce will cut up to 2,500 jobs as part of its new chief executive’s plan to build a more efficient business in a broader recovery strategy.

Rolls-Royce, whose engines and systems are used in the Airbus A350 and Boeing 787, as well as in ships, submarines and in power generation, has undergone multiple restructurings over the past decade, including one in 2020 aimed at surviving the pandemic that resulted in 9,000 job cuts.

Tufan Erginbilgic, CEO, said:

‘We are building a Rolls-Royce ready for the future. That means a more streamlined and efficient organization that delivers for our customers, partners and shareholders.

‘Our business is full of committed and talented people and I believe these changes will allow them to develop greater capability in areas that are key to our long-term success.

“This is another step in our multi-year transformation journey to build a high-performance, competitive, resilient and growing Rolls-Royce.”

UK workers’ wages before bonuses were 7.8 per cent higher year-on-year in the three months to the end of August, in line with expectations, as wage growth finally begins to slow from historical highs of the previous quarter.