Business News (May 2018)

Club 18-30 to disappear?

Travel giant Thomas Cook are said to be considering the future of the Club 18-30 holidays brand that they took over in 1998. The Club 18-30s holiday was first introduced during the 1960s, a brand which became notorious with its somewhat cheeky marketing and risqué advertisements. The package holidays targeted younger singles and couples that wanted to travel without their families. Although originally marketed at the 18-30 age group, the actual ages that are targeted range from 17 up to 35.

Thomas Cook believe that the Club 18-30 holidays are no longer appealing to millennials, and are looking to concentrate on their new Cook’s Club brand that was launched in April. The holidays will be aimed squarely at the so-called Instagram generation, accommodating 300-400 guests per holiday with feature including DJs at the poolside and a larger focus on food.

Club 18-30’s first holiday destination was the Spanish Costa Brava at the Lloret de Mar resort. In 1973, the brand was bought out by the management which led to the first changes of ownership. Over the last quarter of a century, the controversial holiday image was kept at the forefront of the public consciousness, with advertising jingles relating to the sun and the sea that was on offer, not just the potential for sexual shenanigans.

In 2002, ITV filmed a television series called Club Reps, an insight to the life of the holiday representatives employed by the brand. Thomas Cook benefitted from the boost to the company’s bookings, but after a 2005, another documentary by Channel 5 entitled ‘The Curse of Club 18-30’ left Thomas Cook unamused, leading them to make a number of complaints to the communications regular OFCOM.

It is interesting to note that the original 18-30 holiday makers would now be septegenarians, and sensibilities have changed the holidays market. Local authorities abroad have made changes to legislation, leading to crack downs on organised pub crawls throughout popular holiday resorts. Wild parties don’t seem to be what the Snowdrop generation of today are looking for. Thomas Cook are aiming to target this generation with more upmarket resorts and are offering sophisticated all-inclusive properties.

Supermarket merger creates consternation

Following the announcement of the merger between Sainsbury’s and ASDA, it has been reported that both supermarket chains may have to sell at least 73 of their branches to seal the deal. According to information received it will be the south east and north west of England where store closures will be most likely.

If the merger is completed, the new supermarket group will become the largest across the United Kingdom by shares. However, the £15 billion proposal will be facing scrutiny by the regulators, the Competition and Markets Authority (CMA).

The CMA will undertake investigations prior to approval of the merger – it is their job to ensure that large companies do not become too dominant across the markets thus affecting consumer choice and ultimately their pockets. Both the CMA have advised that if the proposed move takes place, both supermarket chains will have a requirement to reduce their number of stores.

Mergers of this size are not straightforward and are often controversial. The CMA have said that the they are witnessing the largest retail deal of this kind in over a decade, and steps need to be taken to ensure diversity across the board.
It is believed that at least 6% of the stores across the UK could be at risk of closure, excluding smaller convenience stores. The focus on the merger will be the overlap of businesses in the local areas. The CMA will be investigating locations of competitors that fall within a 10 – 15 minute driving radius of the existing stores that could be merged.

Questions have also been asked about the impact that Aldi and Lidl may have within these areas. Sainsbury’s bosses feel confident, due to Aldi and Lidl’s remit of not stocking as many brand items as ASDA, and Sainsburys and do not believe that the reduced supermarket chain will make an impact on the merge. Although overlaps have been mentioned, Sainsbury’s also feel that critics have incorrect information about the stores across the UK with Sainsbury’s monopolising the south-east of England whilst the number of ASDA stores in the north-west are significantly higher.

Even so, ASDA and Sainsburys will be encouraged by the recent Booker and Tesco takeover, approved by the CMA. Mike Coupe, Chief Executive of Sainsbury insists that store closures will not take place following the merger, and should any stores be “off-loaded”, then they would be sold as going concerns.
The merger is still in its early stages, and any decisions and investigations that the CMA make will not be made soon. It is predicted that another year is yet to pass before any conclusions will be made, leaving thousands of employees with uncertainty regarding the future of their employment.

Websites for hot property are now hot property

Private US equity firm Silver Lake has agreed a price of £2.2 billion to buy out ZPG who own property website Zoopla and comparison site Uswitch. The sale also sees the equity firm take ownership of websites PrimeLocation and SmartNewHomes.

It has been reported that ZPG investors will receive a price of 490p per share, approximately a third more than closing figures on Thursday this week. Managing Director of Silver Lake, Simon Patterson believes that ZPG is a company that continues to grow, having established itself within the market of classified properties, home and financial services due to their innovative marketing and product availability.

The founder of ZPG and its Chief Executive, Alex Chesterman recognises Silver Lake to be a “global leader” in technology investments, and believes that ZPG will reap the benefits from their knowledge and expertise which will see an increase in the growth across the globe.

The recent deal was agreed and confirmed by the Daily Mail and General Trust (DMGT) who hold a stake of approximately 30% in ZPG. Their financial stake has been in place since 2012 following their acquisition of the Digital Property Group, a online property business merged with Zoopla; it was within only three years that it agreed a takeover price for the website Uswitch. Trading figures showed ZPG shares rose by 30%, with rival Rightmove’s shares also up by 5% at the time of the announcement.

Beast from the East slows interest rate growth

According to an announcement by the Bank of England, the UK economy has hit what has been described as a “temporary soft patch”, following its decision to hold interest rates at 0.5%. Growth forecasts for the year have been cut to 1.4% from the 1.8% forecast that was made in February this year, blaming the cut on the effect on the economy on the bad weather that hit the UK in March.

Mark Carney, the governor of the Bank of England, announced that a rise in rates is likely later this year. Economists were expecting a rise in rates, but it wasn’t until economy growth figures were revealed of just 0.1% in the first three months of this year, that the overall forecast was adjusted. The so-called ‘Beast from the East’ that hit parts of the UK in March is being held responsible for major disruption to the construction industry, retail and transport sectors. Indications throughout the financial markets are showing a rise in increase rates towards the end of 2018, with another rise predicted in both 2019 and 2020.

UK households are affected by the banks official rates, and a rise in the interest rate will mean that approximately 4 million households will see an increase in their mortgage payments on variable or tracker mortgage plans, while 45 million savers across the UK will benefit.

A team of experts form the Monetary Policy Committee (MPC), including Carney came to these conclusions. It was during the last meeting that the majority of its members made the vote to keep interest rates on hold, whilst two other members Ian McCafferty and Michael Saunders recommended an increase.

Chief Economist, Brian Coulton from Fitch Ratings strongly believes that the 2018 rate increase has not been cancelled, it has merely been delayed. According to former MPC member Andrew Sentence the Bank of England has understood the slow down in the economy. He believes that continuing low interest rates and the direction they are heading were “undermining the pound and hurting consumers by causing inflation”.

Minutes taken from the meeting also reveal that the MPC want to make temporary postponements and watch the performance of economy during the next few months. Whilst a recovery is expected following the fragile start of the year, a persistent slowdown has not been ruled out.

Although the Bank of England are optimistic with their recent figures, the Office for National Statistics (ONS) give a more pessimistic picture, with recent data showing that overall, the production industries output rose just 0.1% from February to March this year. The ONS described the economy as “sluggish” throughout the first quarter, and that the bad weather that hit the UK has in fact had very little impact, signifying that the UK economy is struggling elsewhere.

Carney believes that the UK will see interest rates rise during the next 12 months, but that the overall increase will be gradual. Carney also suggested that the UK economy could be affected by xenophobic trade policies or Brexit, and stressed that should this be the case and the economy slows, its policies will be adjusted.

Interest rates are based on the inflation rates that have been expected by the Bank of England. In March this year, the annual inflation rate was running at 2.5%, 0.5% above the bank’s target figure. Published within the Bank of England’s Quarterly Inflation Report, the bank is blaming price rises on imported goods, causing the pound to weaken, creating “above-target inflation prices”. It anticipates that by 2021, that figure will fall back to 2%, and that the rate of unemployment will drop by 2020 to 4%, making this the bank’s lowest forecast since the financial crisis of 2008.

Student loans interest rates under scrutiny

The method that interest is measured to determine interest rates on student loans have been described as ‘absurd’ according to a reported by MPs. Currently the government use the Retail Prices Index (RPI) to calculate the figures, however, the Treasury Select Committee have deemed the RPI as “flawed”, and recommends that the practice should be “abandoned”.

Using the RPI system means that will see student loan’s interest rates at up to 6.3% by this autumn. However, the Department of Education firmly believe and have defended the use of RPI, and the criticism raised from MPs, while they acknowledged the few flaws in the system, confirmed that reviews were to be made regarding tuition fees and loans but no outcome could be ‘pre-judged’. A review is due in 2019, but until then, students will see their tuition fee loan interest rates set using the RPI system.

Centrica hit hard by’competitive intensity’

Over 110,000 energy supply accounts have been closed during the first four months of the year by the owners of British Gas, Centrica, estimating a loss of over 70,000 gas and electricity customers across the UK. During 2017, Centrica saw a loss of nearly 1.3 million accounts, blaming “high levels of competitive intensity”, but has tried to reassure markets that the losses have slowed significantly. It is currently estimated that Centrica have nearly 13 million accounts nationwide where they provide either gas, electricity or both.

During March 2018, when the Beast from the East hit parts of the UK, British Gas’s callouts surged to exceptionally high levels, mainly due to boiler breakdowns throughout the cold spell. Centrica also saw an increased demand in energy supplies during the same period, and confirmed that callout numbers for engineers neared 145,000.

During April, price rises were announced by British Gas, with a 5.5% rise in both electricity and gas supplies, and its remaining customers will feel now be feeling the effect of this on their monthly bills. The price rises were blamed on the rising cost of wholesale energy prices, the introduction of smart meters, as well as the overhead costs involved in order to meet environmental emission targets.

It wasn’t just British Gas that announced price hikes. Other energy providers including Npower, EDF and Scottish Power also released increased price tariffs. Because of this, there have been a record number of customers wanting to switch suppliers, especially during the first three months this year, when it was estimated that the 1.3 million energy customers switched to cheaper suppliers. According to Energy UK this is a record number.

With the increase in competition, Centrica announced 4,000 job cuts in February. They also were quick to blame the introduction of energy price caps across the industry. It is estimated that 12 million households nationwide are paying hundreds of extra pounds each year due to their bills based upon uncapped default tariffs, compared to cheaper deals that are currently available on the market. Under new regulations, the government want to cap tariffs that are causing some households hardship. The legislation is currently working its way through Parliament.

Like and follow us on Facebook      

Follow us on Twitter

Business News (April 2018)

Subscribe to the Starjammer Bulletin

More about The Starjammer Bulletin

The Starjammer Bulletin is the official newsletter for The Starjammer Group, its customers, clients, affiliates and subscribers. With over ten years under our belt, we are proud of our commitment to our clients, and of our assurance that we provide them with the best level of service and help that they have come to know and respect us for. The Starjammer Group is proud of its track record to date, and strives to improve its products, services and standing on all fronts. Our mantra has always been '21st century thinking'. Why? Simple: we love doing what we do, enjoy our work, and work on the principle that our customers, clients and associates should share in the fun. Business shouldn't be a chore: we spend on average 8 hours per working day in the office, or factory, behind a desk, stall or wheel. We employ people who are not only competent and good at their job, but people who have that something; that little spark that grabs our attention. It can't be defined, and it's not always obvious. Nethertheless, we have been lucky to attract and keep the right people. Something we are proud of.