UK business sector growth number doubles in 2023, but trading still ‘fragile’, says Bank of Scotland — we explore

Despite a ‘fragile’ trading environment, the Bank of Scotland tracker reports sector growth.

January 20, 2023
UK business sector growth number doubles in 2023, but trading still ‘fragile’, says Bank of Scotland — we explore
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Matt Crabtree

Written By

Matt Crabtree


The number of expanding industries tracked by the Bank of Scotland has doubled, but the report warns that commerce “remains fragile. February 1st will see a major wave of strikes across multiple industries. But is everything up in arms? 

  • Although the commercial climate “remains unstable”, Bank of Scotland said today that the number of industry sectors reporting production increase more than quadrupled last month.
  • Cost of living still pressuring the market — Tesco bank raises wages for 90% of workforce.
  • Growing list of strikes taking place in the UK on February 1.

Seven of the fourteen sectors tracked by Lloyds/Bank of Scotland UK Sector Tracker reported an increase in production, up from just three in November and the greatest number since June of last year.

Despite the uptick, business output in the UK as a whole remained in the red in December, with an index score of 49. If the gauge goes over 50, growth is occurring, whereas a reading below 50 suggests a contraction.

The software services sector (56.8 vs 47.5) and the UK automotive sector (53.1 versus 38) had the greatest increases in business.

The World Cup helped boost production in the hospitality and leisure industry, which includes bars, hotels, and restaurants (50.2 vs 44.6 in the previous month). The bank did warn that growth in this and other industries were typically moderate.

There were “good indicators of businesses' inflationary pressures reducing” in December's statistics, the study said, which might lead to a reduction in the rate at which prices are passed on to consumers. 

Since July, the number of industries reporting decreased input cost inflation month over month has increased to 11. The chemical industry had the highest drop in price inflation, however, the production of autos and auto components, as well as that of food and beverages, also saw considerable decreases.

According to the index, the combined cost constraints of energy, materials, and logistics have eased to their lowest levels in 11, 20, and 25 months, respectively. However, pay pressures remained around record high levels as competition for labour remained intense.

Increase in growth output possibly the result of restriction-free incentives

Whilst the economy has been holding up more than expected in recent times, Jeavon Lolay, head of economics insight at Lloyds Bank, noted that temporary boosts like the World Cup first restriction-free Christmas in three years are beginning to show their effects. 

The stresses from increasing prices and higher interest rates will affect both families and businesses disproportionately in 2023, making it probable that the varied performances across UK industries will continue to be a recurring trend.

Lolay says that still, more evidence of a broad weakening of inflationary pressures is encouraging, since this mostly reflects the continued regularisation of distribution network conditions for numerous industries. 

It will be interesting to see how soon this trickles down into firm production pricing and ultimately into consumer price increases. Their findings also highlight the robustness of pay demands, which, if maintained, would keep underlying pricing pressures high.

Despite December statistics suggesting a modest improvement in activity in certain sectors, this month's overall data demonstrates that the present trade climate remains unstable, according to Scott Barton, managing director of Lloyds Bank‘s Corporate and Institutional Banking. 

To be successful when 2023 begins and businesses launch, it will be crucial to remember the basics. Companies may build a solid basis for facing future issues by consistently and thoroughly predicting, analysing performance information, and controlling supply chains and inventories.

Nearly 1,300 private sector enterprises in the United Kingdom were surveyed as part of S&P Global's manufacturing and services PMI survey panels, and their replies were used to create the indices included in the tracker.

Cost of living still pressuring the market — Tesco bank raises wages for 90% of workforce

In order to assist their employees in coping with the growing cost of living, Tesco Bank, which in 2021 closed all of its current accounts because they were being underused, has granted each of its more than 3,400 employees a wage raise of £1,250.

The bank claims that as of this month, more than 90% of its full-time equivalent personnel, including those most likely to be affected by the present financial issues, are eligible for the hike.

Salary increases were implemented in addition to the bank's annual pay review, which is scheduled for May 2023 as per usual, after negotiations between Tesco Bank and trade unions USDAW and Unite.

Tesco Bank has listened to its employees and learned how the growing cost of living is hurting them, according to Tesco Bank CEO Gerry Mallon. Because of this, they are decided to give most of their staff a permanent raise in their starting salaries. 

The wage raise is intended to give long-term assistance to employees, especially those in the contact centre who have shown exceptional dedication to assisting consumers in the present economic context.

The bank joins a growing list of companies that help their workers with living expenses. In January, Hachette gave its publishing and distribution staff in the United Kingdom and Ireland a non-consolidated cost-of-living increase of £1,000. 

Employees who are already receiving the £1,000 in cost-of-living allowances that their company has already provided over the last five months will not be eligible for the payment.

In the meanwhile, this month NatWest gave all of its junior and junior management staff members (about 59,000 people worldwide and 39,000 people in the UK) a one-time cash reward of £1,000 to show their appreciation.

What industries are recession-proof?

In 2023, what sectors do analysts anticipate will see the most growth? Each of these sectors may see growth in 2023. Popular candidates include: additive manufacturing (3D printing), virtual reality, ethanol fuel production, electric vehicles, the internet of things, bioengineering, digital twins, and wearables. 

Primary Consumables

Regardless of the state of the economy, regular purchases of some types of home goods are inevitable. Items such as shampoo, toothpaste, dish detergent, soap, laundry detergent, toilet paper, and paper towels. Products in this category are all examples of consumer staples due to their consistent demand.

Company names like Procter & Gamble (PG), and Unilever (UN) are household names in the industry (UN). Many common household objects have these businesses as their manufacturer listed on the back. Each of them controls dozens of well-known brands that are ubiquitous.

Department Stores and Supermarkets

Grocery shops and multinational retail conglomerates are popular destinations for the acquisition of everyday necessities. In the United States, three of the major supermarket chains are the Kroger Company (KR) and Costco Wholesale (COST).

All of these retail behemoths rake in hundreds of billions of dollars annually.

Although recessions may be disastrous for any number of businesses, the grocery and consumer products sectors tend to do quite well.

Alcoholic Drinks

High-margin items like wine, beer, and distilled spirits are always in demand. Many of the major brands in the planet have been bought by a few of corporations in recent years. Heineken N.V. (HEINY), and Diageo plc are the three major firms in this industry (DEO).

Corona, Stella Artois, Budweiser, Leffe, Beck's, and Hoegaarden are just a few of the brands that are owned by Anheuser-Busch InBev.

In addition to its eponymous brand, Heineken N.V. also owns the breweries responsible for Sol, Amstel, and Tiger. Diageo, headquartered in the United Kingdom, owns many well-known spirits labels. These businesses may assume you as a client if you maintain a well-stocked home bar.

When circumstances are tight, people tend to consume less of what they normally would, and this might negatively affect certain producers. Standard-priced beverage sales took the biggest hit in 2008 and 2009 as customers feeling the effects of the recession opted for cheaper beverages.

Makeup and Cosmetics 

The lipstick effect is the tendency for consumers to keep spending on cosmetics and beauty items even when times are tough. The “lipstick effect” postulates that when times are tough, people forego more substantial luxury like vacations in favour of more affordable ones like new lipstick.

Coty Inc. (COTY), a significant licenced brand maker, is among the top ten cosmetics firms with Estée Lauder (EL) and L'Oréal (LRLCY).

They both have luxury brands that perform well when the economy is doing well, and they also both have non-cyclical product lines that do well when the economy is doing poorly. Both Procter & Gamble and Unilever, as was previously indicated, are also quite influential in the cosmetics market.

Death and Burial Services

There are only two things in life that can be counted on with absolute certainty: death and taxes. Although stock in the IRS is off-limits, investors might put their money into businesses that benefit from the inevitable. Three corporations that profit off people's deaths are Service Corp. (SCI), Carriage Services (CSV), and Matthews International. 

Since they specialise in providing products and services associated with funerals, such businesses are relatively immune to economic downturns because of the high demand for their products and services.

It’s possible to invest in many of these companies using one of the popular stock trading apps.

List of strikes taking place in the UK on February 1

In the run-up to the February 1st action, the leading committee has already conducted many sessions to consider strike responses. We have seen that we have been able to greatly mitigate against some of the issues that would have otherwise been faced by some of these strikes, the Prime Minister's spokesperson stated.

The following businesses and services will be affected by a strike on February 1.

University Employees 

As part of actions by the University and College Union, more than 70,000 employees at 150 institutions will strike in the UK on 1st February 2023, walking out (UCU). The other 17 strikes scheduled for February and March will be announced next week, making this the first of 18.

Jo Grady, general secretary of the University and College Union, issued a call for universities to “get serious and quickly” in order to avert additional strike action.


Teachers in England and Wales will strike in the UK on 1st February 2023. They are already on a strike organised by the National Education Union (NEU). In a wage dispute, the NEU wants to undertake seven days of walkouts in February and March.

National Association of Head Teachers (NAHT) general secretary Paul Whiteman warned that schools in England and Wales may be forced to close if “staffing numbers are dangerously low” amid planned teacher strikes.

The Department for Education (DfE) has updated its guidelines to suggest that agency workers and volunteers may be used to cover classes on strike days, with schools expected to remain open wherever possible. However, remote learning is also an option, and the most vulnerable students are to be given priority.

“Frankly, the advice issued to headteachers by the DfE yesterday is at best foolish”, Mr. Whiteman told PA. Instead of the nationwide walkouts that the NEU had planned, it relies on smaller-scale disruptions.

Public Servants

Also on February 1, members of the Public & Commercial Services Union (PCS) will strike in the UK on 1st February 2023. Somewhere in the neighbourhood of 100,000 union members from 123 different companies are expected to take part in the strike.

Institutions including government offices, DMVs, museums, seaports, and airports will be influenced.

Rail Industry

Members of two rail unions, the newest to join this series of strikes, will be absent from work on both February 1 and 3. Members of the Rail, Maritime, & Transport Union (RMT) and the American Federation of Railway Employees (Afte) will strike in the UK on 1st February 2023.

  • The New West Coast and East Midlands Railway
  • The Trans-Pennine Railway
  • Gatwick Express from Northern & Southern Terminals on Chiltern Railways
  • Greater Anglia, a Subsidiary of the Great Western Railway
  • N.E. of London Northern and Southern Railways, London's Metropolitan and Greater Northern, the Southeastern
  • Southern
  • Rail Service in the Southwestern United States (including Island Line)
  • Thameslink
  • The West Coast Main Line

Passengers have been urged not to take any non-essential trips by rail during prior strikes. They are also advised to double-check their trip information online before to departure.


The vocal market disagrees with the Bank of Scotland tracker, with UK employees on strike adding to the picture. Who is on strike in the UK today? Seemingly everybody.

Wednesday, February 1st, sees a new wave of industrial action as wage issues in a variety of sectors continue to rage.

Some of the thousands of train employees who have been on strike throughout the summer are planning to walk out again in the coming month. At the same time, Train Minister Huw Merriman has confessed that the government has lost more cash as a result of rail protests than what it would have spent to resolve the issues months earlier.

Furthermore, disruptions will also affect schools, colleges, and Whitehall on the same day, making it what seems to be the worst day of the government's miserable winter. Expect “severe inconvenience” that day, the public has been told.

Even though it's just January, healthcare professionals like medics and nurses, as well as transportation employees like those who operate on trains, have already gone on strike.

Thursday also saw a decline in the value of UK bank stocks as investors fretted about the impact of rising recession and bad debt worries and a relatively weak batch of US bank results this week.

Banks across the board in the FTSE 100 had a bad day on Thursday. Barclays down 2.8%, HSBC by 0.6%, and Standard Chartered by 0.8%. Lloyds and Natwest, both focused on the domestic market, finished the day down 1% and 2%, respectively.

All of the major banks have had a successful start to 2023, gaining ground in the hopeful climate. Compared to where they were at the beginning of the year, shares of Barclays, HSBC, NatWest, and Standard Chartered are all up more than 10%.

Nonetheless, it would seem that investors are becoming wary.

According to Susannah Streeter of Hargreaves Lansdown, caution has returned to the banking sector, with Barclays leading the industry down as anxieties rise about loans going bad and a worldwide recession.

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