Lowest Spend On M&A Since 1987

British companies spent £0.2bn on 10 acquisitions abroad in the first quarter of 2010 according to the ONS, £1bn less than the last quarter of 2009. It is the lowest value since records began in 1987. Expenditure on UK companies by UK companies was £1bn, £1.4bn less than Q4 2009. There were a total of 52 acquisitions. Foreign companies spent £14.3bn on 41 acquisitions in the UK during the quarter.

The 10 overseas acquisitions by British companies are included as they have values over £1m. The ONS used to use a threshold of £0.1m until recently and therefore there will be a discontinuity in the statistics. The 4 disposals of companies abroad by UK companies totalled £2.3bn and included the disposal of Rio Tinto Plc of Alcan Packaging Businesses for -£1.2bn and Rio Tinto Plc of Alcan Packaging Food American Division for -£0.8bn. Xstrata Plc disposed of El Morro SCM for -£3bn. The largest transaction in the UK by foreign companies was the acquisition of Cadbury Plc by Kraft Foods Inc of the US. One significant transaction in the UK by a British company was the acquisition of Standard Life Bank Plc by Barclays Plc for £0.2bn.

Good Weather Good For Sales

Retail sales rose 1.4% on a like-for-like basis and 3.2% in total in June according to the British Retail Consortium-Nielsen Retail Sales Monitor. The good weather is said to be a contributory factor in the increase in sales, particularly food sales and outdoor goods. This time last year it was wet and cold. The uncertainty about jobs may be putting shoppers off spending on bigger items which has seen sales fall off slightly. The weather has not put people off the Internet and other non-food non-store sales which were up 16.8% on last year. The gap between like-for-like and total sales performance is narrowing reflecting the reduction in new store openings in the current environment.

Fresh Foods Help Keep Price Inflation Down

The British Retail Consortium (BRC) Shop Price Index (SPI) produced in collaboration with Nielsen reported annual inflation of 0.7% in June. It is down from 1.3% in May. The slowdown has continued since March. Food was the main driver with annual inflation of 5.6% from 6.4% in May. Fresh foods and particularly dairy products and some meats were largely responsible. Consumers will be seeing savings on their supermarket bills. Non-foods were up from 1.3% to 1.9%.

The month-on-month basis reported a prices increase of 0.2% in June compared with 0.5% in May. The increase in unemployment is affecting consumer confidence. Discounts and promotions are being offered at the expense of margins. Shopping conditions such as good weather help shoppers take advantage of promotional offers. The BRC maintain that the SPI is a more reliable indicator of shop price inflation than the RPI produced by the ONS.

Modest Rise In National Minimum Wage Welcomed

The small increase of 1.2% in the national minimum wage was welcomed by the trades unions. It was a relief more than anything else as there had been pressure from parts of business to freeze it. The Low Pay Commission announced the NMW will increase by 7 pence to £5.80 per hour from October 2009. The increase for younger people aged 18-21 will be 6 pence to £4.83 and for 16-17 year olds the minimum will rise 4 pence to £3.57. It was also welcomed by the British Retail Consortium and the CBI who said the moderate increase was right to protect jobs in these difficult times. The BRC had suggested to the Low Pay Commission that any increase should not be above 1.5%. They also suggested it might increase job opportunities.

Shop Price Index Down

The British Retail Consortium's Shop Price Index year-on-year index fell from 2.0% in March to 1.4% in April. It is the first time it has fallen since December 2008 when there was a cut in VAT. The month-to-month index fell by 0.5%. Non-food goods are cheaper than a month ago because of discounting. Food is also cheaper this month signalling a possible end to the worst of food price inflation. Retailers’ attempts to keep shopping bills down are being prevented by rising farm gate prices for meat and vegetables.