Interest rate cut hopes boost UK builders’ optimism; NatWest share sale could come in June – business live | Business

Julia Kollewe

A record number of rental and affordable homes were built last year, but overall new home completions fell 12%, according to new figures.

Some 45,649 new homes were completed in the rental and affordable sector, up 10% on 2022 and the highest figure ever recorded by the National House Building Council, the UK’s largest provider of new home warranties and insurance.

Overall, 133,213 new homes were completed in 2023, down 12% on 2022, with private sector completions falling 20% to 87,564.

The outlook doesn’t look too rosy. Last year, there was a 44% drop in new home registrations – the process by which a developer registers their intent to build a new home – to 105,449. Across the UK, all regions saw a fall in registrations, with the biggest declines in the North West (-61%), West Midlands (-59%) and East (-52%).

Steve Wood, CEO at NHBC, said:

“Whilst there were considerable supply and demand pressures on the new homes market in 2023, it is very encouraging to see record numbers of new home completions in the affordable sector. Several major house builders have partnered with housing associations and Build to Rent providers, re-focusing parts of their output to help address the demand for affordable homes.

“The backdrop of high interest rates, significant inflationary pressures and challenges with planning consents has supressed private sale output in 2023. That said, there are some signs of demand returning to the market and we would expect an improved position in 2024 as consumer confidence begins to recover and mortgage rates start to fall.”

Looking to the year ahead, Wood added:

“With a general election looming, we may also see new home-buyer incentives that influence build volumes. In the mid to long-term, the industry would welcome measures that restore consumer confidence and encourage market growth.”

The UK taxpayer appears to have lost hundreds of millions of pounds through its shareholding in satellite firm OneWeb.

The Treasury committee has questioned UK Government Investments this morning about the government’s decision in June 2020 to spend £400m buying the then-bankrupt satellite company.

OneWeb was subsequently merged with France’s Eutelsat in 2022, giving the government a 11% stake in the Paris-listed communications firm.

Charles Donald, chief executive of UKGI (which handles the government’s stakes in various companies) told MPs that the 11% stake in Eutelsat is not, currently, worth the £400m investment in OneWeb.

He indicated it could be in the “tens of millions”, but didn’t have an exact figure.

When pressed on the value of the UK’s stake in Eutelsat, Donald indicated “it could be in excess of £200m”.

He also pointed out that Eutselsat withgrew its guidance for this year’s profitability and revenues last week, which knocked its share price.

But Donald insisted the shareholding in Eutelsat has a different longterm prospect than the original shareholding in OneWeb.

Harriett Baldwin MP, chair of the committee, was unimpressed, asking:

“So effectively the UK taxpayer has paid £400m for some intellectual property that now resides within a French company. And we’ve lost money on the transaction?”

Eutelsat currently has a market capitalisation of €1.75bn, meaning the UK’s 10.89% stake would be worth €190m, or £162m.

Last week, it revealed that OneWeb’s activities are “running behind schedule relative to the original roadmap”, although also “progressing well”.

OneWeb is building a “constellation” of hundreds of satellites in low-earth orbits designed to provide internet coverage everywhere on the plane.

Donald told MPs that UKGI assessed the £400m investment in OneWeb, and was “not in a position to confirm” it was good value for money. The government issued a “ministerial direction” to override concerns from civil servants.

The sale of shares in NatWest to the general public could happen as soon as June this year, UK Government Investments has confirmed.

Holger Vieten, who is leading the sale for the Treasury-owned company, told a group of MPs that there are some potential windows in which the share offering could take place.

“The very earliest could be around summertime, but we don’t have a exact date”, Vieten indicated. “Potentially it could happen in June”.

The retail offer which was announced by Chancellor Jeremy Hunt during his autumn statement last year, when he told MPs that the retail sale would take place within 12 months, “subject to market conditions and achieving value for money.”

Vieten also told MPs that UK Government Investments has engaged several advisors to help with its work, including legal firm Freshfields. Barclays has been hired as “retail coordinator” for the float, while Goldman Sachs is its overall privatisation strategy advisor.

The government currently owns 35% of NatWest, dating back to the rescue takeover of Royal Bank of Scotland after the 2008 financial crisis.

Optimism in the UK construction sector has hit a two-year high, despite subdued order books and another fall in housebuilding.

The latest poll of purchasing managers at building firms has found a sharp upturn in business activity expectations, due to hopes of interest rate cuts.

Just over half of those surveyed forecast a rise in business activity during the year ahead, while only 12% predict a decline – the highest level of business optimism since January 2022.

Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey said:

“UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon. The prospect of looser financial conditions and an improving economic backdrop meant that business activity expectations strengthened to the highest for two years in January.

Moreover, there were again signs that customer demand is close to turning a corner as total new orders fell to the smallest extent for six months.

However, the survey also showed that construction activity fell in January, for the 5th month in a row.

The increase in business confidence lifted the UK construction PMI up to 48.8 in January, from 46.8 in December, but still below the 50-point mark separating expansion from contraction.

House-building remained by far the weakest-performing category, while civil engineering and commercial construction work also fell.

Last week, the Bank of England pushed back against pressure to cut interest rates soon, saying it wants to see more evidence that inflation is falling sustainably to its 2% target.

The money markets predict interest rates will have fallen below 4.5% by the end of this year, down from 5.25% at present, with the first cut priced in by June.

In the financial markets, shares in China have jumped as hopes build that Beijing will take more forceful action to stem the recent stock rout.

The CSI 300 index of leading Chinese stocks has jumped by 3.5%, while Hong Kong’s Hang Seng is up 4%.

The rally came after Bloomberg reported that regulators plan to brief President Xi Jinping on market conditions and the latest policy initiatives as soon as today.

Kathleen Brooks, research director at XTB, says:

There has been a boost to market sentiment on Tuesday after a strong bounce back for Chinese shares. The Shenzhen Index rose by more than 6% on Tuesday and the Hang Seng was higher by 4% after the Chinese government put more pressure on institutions to actively buy Chinese stocks.

How long this will last, we shall have to see, as it may not be a long-term solution to China’s share price decline, but for now this is helping to boost market sentiment and US futures are also pointing to a higher open in the US later today.

Stocks in Europe are also higher, with the FTSE 100 index up 55 points or 0.75% at 7,668 points.

German industrial orders have unexpectedly jumped, bringing some relief to Europe’s largest economy.

Factory orders jumped by 8.9% in December, Germany’s federal statistics office reports, beating expectations that orders would remain flat.

There were a very high volume of large-scale orders in a range of branches, including an “exceptionally large number of aircraft” being ordered.

There were also more large-scale orders for fabricated metal products and electrical equipment, which made up for a drop in orders for new cars, machinery and equipment, and chemicals.