UK labor costs grow by more than 2% again

Flower pickers harvest daffodils on a farm near Holbeach in eastern England, on February 25, 2019. (AFP)
Updated 05 July 2019

UK labor costs grow by more than 2% again

  • British employers have been on a hiring spree recently, pushing up pay for workers at the quickest pace in a decade
  • Many economists have linked the jobs boom to uncertainty about Brexit

LONDON: Growth in British unit labor costs, an early signal of inflation pressures ahead, slowed to 2.1 percent in the first three months of 2019 but it was the sixth quarter in a row when costs grew by more than 2 percent in annual terms.
British employers have been on a hiring spree recently, pushing up pay for workers at the quickest pace in a decade, one of the few bright spots for the economy ahead of its departure from the European Union.
Many economists have linked the jobs boom to uncertainty about Brexit which has made employers favor hiring workers — who can be laid off quickly — over longer-term commitments to investing in equipment.
The Office for National Statistics said the 2.1 percent increase in labor costs in the January-March period was weaker than a rise of 3.1 percent in the fourth quarter of last year.
The ONS also confirmed preliminary data showing a weak picture for productivity in early 2019.
Britain’s poor productivity record poses a risk to the country’s long-term growth prospects.
Output per hour fell by an annual 0.2 percent in the January-March period for its third straight fall, the longest such run since 2013 when Britain was struggling to emerge from the hangover of the global financial crisis.
“Our latest figures represent a continuation of the UK’s productivity puzzle,” said Katherine Kent, head of productivity at the ONS. “This sustained stagnation in productivity in the last decade is at odds with what we’ve seen after previous economic downturns.”


Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

Updated 20 min 15 sec ago

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

The issuance was to be unrated, and two sources with knowledge of the matter said that Cathay was willing to pay 200 basis points over the US Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.

FASTFACT

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Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal.