WeekWatch

After what seems an endless period of negative news about the UK and its companies, has the story changed?

Last week saw welcome headlines for the Labour government. First came the news of a trade deal with India, followed shortly after by an announcement of a deal with the US. The latter has seen tariffs introduced in March removed completely on UK exports of steel and aluminium. They have also been reduced on UK car exports (up to a limit of 100,000 vehicles) from 27.5% to 10% with immediate effect. The government said the deal would save up to 150,000 jobs. It also claims the trade deal with India will boost the UK economy by around £5 billion by 2040.

Meanwhile the Bank of England announced a reduction of 0.25% to the Base Rate – good news for borrowers. It is hoped the move could increase consumer confidence and restore momentum to the UK economy.

UK equities rose towards the end of the week following the news. This positive sentiment shows investors may be hoping the US-UK trade deal is the first step in a move towards more concessions and lighter tariffs.

So, is the UK back on the hotlist? At the beginning of May, the FTSE 100 had its longest ‘winning’ streak in five years, with 15 consecutive days of gains. And there are more signs investors are feeling more bullish about the UK.

UK equities generally have been considered undervalued for some years now, especially in comparison to US equities, in particular technology stocks such as the Magnificent 7 (which include behemoths including Nvidia, Amazon and Apple).

However, the US tech sector has underperformed in the first quarter of this year, in no small part due to the tariff-induced volatility.

Joe Wiggins, SJP’s Investment Research Director, says: “UK equities have been trading at historically depressed relative valuations but there is now some indication of rising corporate activity.

“Although it has been difficult investing in UK equity markets in recent times – particularly relative to the US – low valuations are often a strong indicator of higher returns in the future.”

More cause for optimism?

Other potential reasons for optimism include the government-backed plans to ensure pension funds invest more in the UK. In 2023 then-Chancellor Jeremy Hunt announced an agreement with 11 pension providers to commit to investing at least 5% of their assets in unlisted UK equities by 2030. However, a ‘landmark’ agreement that would have seen this increase to 10% and which was expected to be announced last week was postponed. It may still be announced in the coming weeks, but it is not definite.

While SJP’s Head of Economic Research Hetal Mehta welcomes the more positive news, she cautions against expecting any economic miracles or for interest rates to continue falling notably.

“While a base rate cut is welcome, the Bank of England (BoE) continues to be hesitant about accelerating the pace of easing, given its persistent concerns about inflation. Growth and inflation forecasts were both revised down by the BoE, and wage growth is expected to moderate, so quarterly cuts are most likely.

“While the UK-US trade deal is a start – and good news for car and steel sectors – there are still quite limited details, with the overall 10% baseline tariff in place leaving tariffs higher than before the US’ so-called “Liberation Day”. Negotiations are set to continue but scope and timing is not clear, and the overall impact is limited so far.”

US in tariff step down

The news today of progress between China and the US on tariffs has been widely welcomed. The US has agreed to temporarily reduce tariffs on Chinese imports to around 30% (from 145%) for 90 days. Meanwhile China will cut tariffs on US goods from 125% to 10%. The two countries will now hold further talks on their ongoing trading relationship.

US equities are still expensive compared to other developed equity markets. However, a substantial proportion of the US earnings growth is due to the Magnificent 7.

Asia looks brighter

Asian stock markets lifted today following the progress in the China-US trade talks.

It followed the decision of China’s central bank to cut interest rates from 1.5% to 1.4% last week. The move was aimed at stimulating lending and investment and limiting the impact of the ongoing US tariff war.  The Shanghai Composite Index closed the week 1.92% higher in local currency.

Meanwhile Japan’s Nikkei 225 closed the week 1.83% higher in local currency after its finance minister backtracked from comments that the country’s $1 trillion-plus of US Treasuries could be used as a bargaining chip in trade talks with the US.

Europe reaps benefit

European stock markets also picked up after the announcement that tariffs between the US and China would be temporarily slashed. The Stoxx Europe 600 was up 1% on Monday morning, while the main stock market indexes in both France and Germany also rose on Monday of this week.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

One of the big challenges for small business owners, particularly in the start-up phase, is taking time off. Summer is coming, and it’s important to make time for your own break – and to create the conditions for everyone to enjoy some time off and return refreshed.

Chloe Carey, HR Consultant at business advisory firm Elephants Child, shares 10 tips to keep your business running smoothly this summer.

1. Encourage holiday bookings. You need to keep your business running – but you also want your workforce to be rested, happy and productive. Now’s the time to remind them to plan their leave instead of cramming it in at the end of the year.

2. Be clear on absence policies. If hot weather or major sporting events lead to unauthorised absences in your business, make sure your policies are clearly communicated.

3. Respond to holiday clashes fairly. When several people want to take time off at once, it’s important to have a consistent and fair process in place.

4. Review the summer dress code. Consider relaxing the dress code in warmer months to keep everyone comfortable.

5. Host a summer team event. Organise something fun to build engagement and bring your team together. Don’t forget to share photos and a write-up on social media to promote your business.

6. Offer flexible summer working. Think about adjusting schedules, such as early starts and finishes, or building up extra hours to allow for shorter Fridays.

7. Discourage working during annual leave. Remind colleagues (and yourself) to leave a clear handover and switch off properly before heading off.

8. Switch off digital notifications. Encourage people to disconnect from work emails and messaging apps during their time off – and lead by example.

9. Set a professional out-of-office. Agree a standard format that suits your tone of voice.

10. Take your own break. You’ll be no use to your loved ones or your team if you’re stressed and burnt out. Make sure you take a well-deserved rest.

As you prepare for the summer – and as your business grows – setting up the right policies and processes will pay off in the long run. Build good delegation habits and get comfortable stepping away from time to time. Longer term, if you plan to exit your business, a company that runs smoothly without you will be far more attractive to potential buyers.

By fostering an environment of trust and flexibility, you’ll create a culture that values both hard work and the importance of rest.

Don’t leave it to chance.

Are you ready to take the first step towards a more balanced work life? Get in touch to discover how we can help empower your business, navigate this summer and promote a healthier work environment.

We work in conjunction with an extensive network of external growth advisers and SME specialists, such as Elephants Child, who have been carefully selected by St. James’s Place. The services provided by these specialists are separate and distinct to the services carried out by St. James’s Place and include advice on how to grow your business and prepare your business for sale. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.