BUSINESS LIVE: UK wage development at 6%; Anglo American eyes asset gross sales

The American owner of Boots is stepping up efforts to find a buyer for the British pharmacy chain.

Walgreens Boots Alliance is working with consultants to set up talks with companies who may make a bid for the retailer, Bloomberg reported.

It is thought the Americans want £7billion for the High Street stalwart.

One of the world’s biggest banks yesterday said that now is the time to buy British stocks – even as the FTSE 100’s blistering rally came to an end.

In a major vote of confidence in the UK, UBS advised clients to purchase shares in London-listed companies.

‘The UK is shaking off its ‘sick man of Europe’ label and is now a buy,’ the bank said.

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

‘The unemployment level in the UK has risen once again, according to the Office for National Statistics, reaching 4.3% in the three months to March 2024 up from 4.2% in the three months to February.

‘Wage growth, an indicator the Bank of England has been keeping a particularly watchful eye on, is reported to have increased slightly. Annual growth in total earnings including bonuses increased slightly to 5.7%, up from 5.6% previously, while annual growth in average regular earnings remained stagnant at 6%.

‘Though small, this uptick in wages will be of concern to the Bank of England, particularly when coupled with new data from the Resolution Foundation released just yesterday which revealed that real wages – measured in terms of the goods workers can buy with regular wages – rose by 2% in the year to February 2024.

‘Though this is good news for households as cost of living pressures should now be easing somewhat, the Bank will likely fear that it risks being inflationary if businesses attempt to restore profits by raising prices.

‘Labour market inactivity, another area that has been watched keenly by the Bank of late, also climbed. In the three months to March 2024, the UK economic inactivity rate for those aged 16 to 64 years reached 22.1% – this is above estimates of a year ago, and an increase on the last quarter.

“’espite questions around the accuracy of the ONS data, which the Bank of England highlighted as a challenge for its decision-making, the labour market data remains a pivotal factor in monetary policy.

‘As the Bank contemplates its first interest rate cut, the precision of these figures is crucial. Any data inaccuracies could significantly impact the economy, necessitating a cautious approach by the Bank. Though we have seen a slight uptick in wage growth, the possibility of rate cuts later in the summer still looms, adding to the Bank’s deliberations.’

Thomas Pugh, economist at RSM UK:

‘A sharp fall in employment and a rise in the unemployment rate suggests that the labour market is easing rapidly.

‘Admittedly, at 6% pay growth excluding bonuses were stable at a high rate, which is concerning. However, much of this was probably due to firms getting ahead of the minimum wage rise in April. Indeed, Sainsburys and Lidl both significantly increased pay that month.

‘The rising unemployment rate should translate into slower pay growth in the second half of the year. Taking everything together, we think the Monetary Policy Committee (MPC) should still be confident enough to start cutting rates in June, but this is far from guaranteed.

‘Regular wage growth was slightly stronger than expected (6.0% actual vs 5.9% expected) and will give the hawks on the committee who argue that pay growth is still too strong for rate cuts some ammunition. But the large increase in the minimum wage is clouding the picture already.

‘What’s more, the rise in the unemployment rate to 4.3% chimes with all the unofficial data that the labour market is easing. That should eventually feed through into slower pay growth once the one-off impact of the minimum wage hike wears off.

‘The MPC will likely want to see the impact of April’s 9.8% increase in the minimum wage before it commits to rate cuts. But it will have this data by the June meeting, and it is likely to conclude that the one-off increase in the minimum wage has not altered the underlying trajectory of pay growth.

‘Just as importantly for households, real wages grew by 2.0%. That, combined with potential tax cuts and rising consumer confidence could give a boost to consumer spending in the second half of this year, helping a consumer spending driven recovery.’

Currys has raised its annual profit forecast by around 10 per cent after sales returned to growth in both its UK and Ireland unit and in the Nordic region.

The electricals retailer, which rejected a takeover offer earlier this year, now expects to post a pre-tax profit of £115million to £120million for the year to the end of April, up from previous guidance of £105million.

The group’s upgrade follows its rejection of a takeover bid from US investor Elliott Advisors in February, which it said undervalued its growth potential.

In March, China-based online retailer JD.com, which had also said it was interested in Currys, decided not to make an offer for the UK-based group.

Currys said demand for fridges, washing machines, and computers pushed underlying sales up 2 per cent in the first four months of the year, an improvement on the Christmas period when sales had fallen compared to the previous year.

‘Sales are now growing again, margins are benefiting from higher customer adoption of solutions and services, and cost discipline is good,’ Chief executive Alex Baldock said.

Anglo American has laid out a strategy update that includes exploring options for its steelmaking coal, nickel and platinum businesses, in an effort to fend off a takeover bid from the world’s largest miner BHP Group.

The announcement comes a day after the London-listed miner rejected a raised offer from BHP, saying it continued to significantly undervalue the company and was ‘highly unattractive’ for its shareholders.

Anglo told investors this morning it was going to divest its steelmaking coal assets, demerge its troubled platinum unit in South Africa, explore options for its nickel mines, and divest or demerge diamonds business De Beers.

‘We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction,’ Anglo CEO Duncan Wanblad said.

British wages excluding bonuses grew by slightly more than expected at 6 per cent year-on-year in the three months to the end of March, giving the Bank of England pause for thought as it weighs the timing of its first interest rate cut.

Economists had forecast wage growth of 5.9 per cent for the period.