The travel boom has far-reaching benefits, and the propensity for holidaymakers to spend freely on holidays and their holiday experience has helped increase WH Smith sales.

WH Smith’s UK travel unit sales rose 9% in the 13 weeks to 1 June as the business transitions to being a ‘one-stop-shop’ for travel essentials for which it can charge a premium.

Anyone who has reluctantly bought a bottle of water from WH Smith at an airport will have a good idea of the company’s strategy. WH Smith has successfully placed stores in locations where potential customers have little option but to pay the higher price they demand. In addition to airports, WH Smith has targeted rail terminals, where sales rose 8%, and hospitals. Hospital sales surged 14%.

North American sales grew 3% while Rest of the World jumped 15%.

In the UK High Street division, which includes online sales, total revenue was down 4% for the 13 weeks ending June 1, 2024. However, the store network performed well, with LFL revenue flat compared to the same period last year.

Five new Toys “R” Us shop-in-shops have been successfully opened within existing stores and plans are in place to open an additional 25 shop-in-shops by the end of the financial year.

“What’s really interesting is how WH Smith is helping to revive the Toys R Us brand. It is slowly converting parts of its UK stores to house sections dedicated to toys under this retro name and it looks like the strategy is paying off,” said AJ Bell investment director Russ Mould.

The company has maintained guidance for the year and says it is well positioned for the peak summer trading period.

WH Smith shares were 3% higher at the time of writing on Wednesday.

When the British ISA was announced by Jeremy Hunt at the recent budget it was met with mixed reviews.

Some liked the idea of encouraging more investment in UK stocks, while others lambasted the proposal as illogical and unlikely to succeed.

The move was part of the government’s efforts to rejuvenate the UK’s financial markets, alongside other initiatives such as the sale of NatWest shares. The NatWest share sale has been canned ahead of the general election and now the future of the British ISA hangs in balance.

Many within the industry think the British ISA is a nonstarter. Here are Eight reasons why AJ Bell’s director of public policy, Tom Selby, thinks it’s a bad idea, in his own words: 

1. Additional complexity risks deterring potential new ISA investors

“The extra complexity created by any British ISA will inevitably cause confusion, particularly among potential new investors. AJ Bell research shows the complexity of the current landscape – where there are already six versions of ISAs – acts as a barrier to investing and risks undermining the successful ISA brand.

“Despite 71% of UK adults saying they are familiar with ISAs, fewer than a third (29%) know the current adult ISA allowance is £20,000. This falls further for women to 26% and further still for young adults aged 18-34 (19%). 

“Furthermore, half (49%) of UK adults think the different versions of ISAs make them too complicated. Although Cash ISAs had some recognition, fewer than half of UK adults could recognise the other types.  

“Financial advisers have similar concerns. AJ Bell research shows the vast majority of financial advisers support ISA simplification. Two-thirds (65%) believed unnecessary complexity had crept into the ISA market, and 8 in 10 (77%) thought this was down to ‘too many variants and names’ for ISA products.” 

2. The impact on UK capital markets will be extremely limited

“While the aims of the British ISA – namely boosting UK capital markets and ultimately economic growth – are laudable, the policy simply will not achieve its stated purpose. The main ISA product already enables people to invest in UK companies in a tax efficient manner. Therefore, the only people who would have any need for a British ISA are those that regularly utilise all of their annual ISA allowance. Even if every person who subscribes £20,000 to a Stocks and Shares ISA were to open a British ISA and invest the full £5,000 allowance, it would generate a maximum of £4 billion a year for UK equities. In the context of a £2 trillion+ UK stock market, this is a drop in the ocean in relative terms.”

3. Behavioural shifts will further dampen any boost to UK Plc

“In reality, the impact will likely be much smaller. Not all investors who subscribe £20,000 a year to their ISA will use the product, and many investors who do will adjust their asset allocation in the rest of their portfolio to maintain the same overall UK exposure.”

4. The consumer harm risk

“The negative impact of extra complexity isn’t the only material consumer risk posed by the British ISA. Independent research commissioned by AJ Bell* shows that, when presented with the choice of a British ISA and a Stocks and Shares ISA for their first subscription of the tax year, more people chose the British ISA (35%) than the Stocks and Shares ISA (26%). Given investors could access a much wider range of investments in a Stocks and Shares ISA – allowing greater global diversification – choosing a British ISA for your first subscription would almost certainly be unwise. Under Consumer Duty, providers would therefore inevitably be required to deliver warnings to customers to mitigate the risk of foreseeable harm.”

*Based on a nationally representative survey of 2,000 UK adults carried out online on behalf of AJ Bell by Opinium between 7 and 10 May 2024.

5. How exactly would ‘UK’ be defined in a British ISA?

“To create a British ISA, government will have to decide what qualifies as a ‘UK’ investment. This should be relatively simple for direct equities on listed stock exchanges but becomes much more difficult for collective investment vehicles like funds and investment trusts. In the original consultation document, the government suggested the ‘Personal Equity Plan’ regime from the 1990s could be used, with only funds which invest at least 75% in UK holdings qualifying.

“If this model were adopted, there would need to be a mechanism in place to monitor allocations to UK companies/funds. Where an investment in a British ISA becomes non-qualifying, HMRC would need to decide on the approach taken in relation to that investment. If this monitoring process is overly onerous, product providers may simply decide any British ISA is not worth the hassle.

“Government will also need to make a decision in relation to the policy intent. If the aim of the British ISA is primarily to boost UK stock markets, such as the London Stock Exchange, then it may want to allow listed instruments, including Exchange Traded Funds (ETFs) and investment trusts, to qualify for British ISAs. However, many of these vehicles – and indeed many major listed businesses – have a limited stake in the UK. 

“The Scottish Mortgage Investment Trust, the largest investment trust on the market and a FTSE 100 member, holds just 3.2% in UK listed shares. Equally, Antofagasta, a London listed copper mining company, conducts most of its business in Chile. It is hard to make the case for including either of these companies in the British ISA while excluding the other.

“However, if investment trusts and UK equities on qualifying indices are deemed to qualify for a British ISA, one could make the argument that it would be unfair not to include similar investment funds that are not listed on an exchange. Given the challenges in identifying qualifying investments for a British ISA, it would be significantly simpler to increase the overall ISA allowance to £25,000, which would likely achieve very similar outcomes.” 

6. Should investors be allowed to transfer out of a British ISA?

“In an ideal world, if a British ISA is to be introduced, it would be slotted seamlessly into the existing ISA framework, with similar rules on subscriptions and transferability. However, the additional £5,000 overall annual subscription limit granted through the British ISA means allowing transfers out would leave the system open to being gamed.

“Savers could, for example, simply max out their British ISA subscription and then transfer their funds to a Stocks and Shares ISA, thus benefitting from a £25,000 overall subscription limit (rather than the usual £20,000 for a Stocks and Shares ISA), without ever having to expose a certain amount of their funds to UK investments.

“It is therefore hard to conceive of a situation where transfers out of a British ISA are allowed.”

7. Should investors be allowed to transfer into a British ISA?

“This creates a further challenge in relation to transfers into a British ISA. If transfers were allowed into British ISAs from other types of ISA but savers were barred from transferring out of the UK ISA world, there is potential for consumer detriment. For example, if an investor chose to transfer their entire Stocks and Shares ISA portfolio to a British ISA, they would effectively be locked into the British ISA. As consolidation is often a key reason for transferring existing ISAs, this is not an unrealistic scenario.

“Given exactly the same investments in a British ISA would already have been available to the investor in their Stocks and Shares ISA – not to mention a range of non-UK investments which could help them diversify their portfolio – this is unlikely to be a ‘good outcome’ and could potentially be viewed as ‘foreseeable harm’. Allowing transfers to British ISAs from other types of ISA would therefore risk undermining the FCA’s Consumer Duty.”

8. The cash conundrum

“Given the aim of the British ISA is to funnel investors towards UK-listed companies and funds, the government is understandably keen to discourage people using the vehicle to hold cash. Proposals put forward in the consultation include banning the payment of interest on cash or taxing cash interest payments.

“Having different rules regarding the payment of interest on cash for British ISA investors versus other ISA investors risks creating unnecessary complexity and undermining the core principles of the FCA’s Consumer Duty regulations. Regulated firms are also already required to give warnings to customers who hold large amounts of cash over a certain period of time.”

The FTSE 100 was firmly in the red on Tuesday as growth concerns started to creep in after several weaker uS data points.

Apart from earnings and geopolitics, the main drivers for equity markets tend to be economic growth and monetary policy. Over the past year, the focus has almost exclusively been on interest rates, and markets have given the growth outlook little consideration.

Indeed, US growth has been reasonably strong, so there has been little for investors to be concerned about while they wait for the Federal Reserve to cut rates. This may be about to change.

A string of US economic data points has reminded us that economic growth dictates company earnings, and if growth rates slow, the outlook for earnings may be impacted.

The risk of such a scenario hit equities and oil prices on Tuesday, and the FTSE 100 was trading down 0.3% at the time of writing.

“The FTSE 100 started Tuesday in negative territory amid signs of US economic weakness and mixed trading in Asia,” said AJ Bell investment director Russ Mould.

“Also not helping matters was a fall in oil prices, as OPEC’s surprise decision to start rolling back some of its production cuts before the end of the year hit the market. Index heavyweights BP and Shell, as well as other resources names, were on the back foot.

“News of slowing activity in US factories is a double-edged sword as it could provide the Federal Reserve with more room for manoeuvre on interest rates. Job openings data later today could reveal if a softening economy is being reflected in looser labour market conditions. Friday’s non-farm payrolls release is also in focus as investors await the latest decision from the Federal Reserve next week.”

The fixation on interest rates will likely continue in the short term, but investors will become increasingly concerned about growth if we receive further weak data later this week.

As Mould alluded to, commodity companies were among the worst hit on Tuesday with miners Anglo America, Antofagasta, Rio Tinto and Glencore down between 1.7% and 3.6%. A soggy Asian session weighed on Standard Chartered which fell 4%.

Ocado was the biggest faller, down 6.4%, as the high-beta stock accentuated the wider market move.

Defensive utilities companies and consumer staple stocks were the best performers as the risk-off move drove allocations to ‘safer’ stocks.

Hargreaves Lansdown has released investor buying activity for May, revealing its ISA account holders have waded into equities in a big way.

During May, HL ISA investors picked out broad equity indices for their portfolios, particularly those with a focus on US stocks providing exposure to the AI story and wider technology sector.

Top Funds bought in ISAs, May 2024 (net buys, HL clients)

“It’s a firmly ‘risk on’ mood for HL clients. Interest rates cuts have been kicked into the long summer grass, and the April market slump is in the rearview mirror, meaning ISA investors are filling their baskets with equity funds,” said Emma Wall, head of investment analysis and research, Hargreaves Lansdown

“Five of the top 10 most bought funds in ISA wrappers last month were global equity funds, with the remainder made up of US equity and tech trackers, an L&G European index fund and ISA stalwart Jupiter India, which has been a mainstay in the top 10 lists for the past six months.”

“This market optimism amongst HL clients is not surprising; the spectre of recession has passed and equity markets on both sides of the Atlantic rallied through the first half of May. The S&P 500 shrugged off April losses to hit yet another all-time high, while the FTSE 100 similarly recorded a new peak mid-month.”

While its great US and UK equities have hit record highs in recent months, the data from Hargreaves Lansdown’s client’s buying activity during the period should be treated with caution. Retail investors are notoriously bad at timing the market and are often guilty of chasing returns in fear of missing out.

It should be no surprise that HL’s retail client base bought up equity-based funds given the biases associated with individual investor activity. However, retail investors rushing into stocks at elevated levels has historically proved to be a sell signal for equities.

As the warning goes, when your taxi driver starts talking about stocks, it’s probably time to sell. This usually happens near a peak in stocks.

That’s not to say we’re anywhere near euphoria in stocks, but as Emma Wall points out, the rush into stocks by HL’s investors may mean many over look the opportunity to diversify portfolios into other asset classes that may offer better value than equities.

“While stickier-than-hoped inflation and higher-than-anticipated jobs data has meant interest rate cuts are no longer expected this month, it is better to be early when it comes to investing and now could be a great time to buy bonds,” Emma Wall said.

“Most portfolios would benefit from the diversification a fixed income fund brings to an equity portfolio, and over the long-term, bonds offer both income and growth opportunities.”

UK gilt and US treasury yields are trading near multi year highs and the potential capital gains on offer – should interest rates fall – are compelling.

Checkit, the augmented workflow and smart sensor automation firm, has made a formal £12 million all-share offer to acquire rival Crimson Tide. T

he unsolicited approach offers Crimson Tide shareholders 7 new Checkit shares for every Crimson Tide share they hold.

The 182p per share offer price represents a 12% premium to Crimson Tide’s closing share price on 3rd June and may be difficult for Crimson Tide’s shareholders to stomach, given Crimson Tide traded significantly higher than the offer price for long periods during 2023.

If successful, existing Crimson Tide investors would own around 30% of the enlarged Checkit group.

Checkit believes combining the two companies creates a compelling scaled player in workflow software with significant revenue and cost synergy potential. A larger entity could attract broader investment and higher valuation multiples than the current standalone businesses.

The product fit between Checkit’s workflow automation and Crimson Tide’s mobility solutions is complementary. An integrated offering spanning sensors, software and services would benefit both customer bases.

Crimson Tide’s logistics, healthcare and retail verticals are highly relevant for Checkit. Leveraging its expertise in areas like IoT sensors could provide Crimson Tide a edge as it aims to expand its mobility roadmap.

Substantial cross-selling opportunities have been identified, particularly into Checkit’s established US market footprint. The combined entity would pursue an aggressive expansion strategy across multiple sectors worldwide.

Checkit stated the all-share bid is “undoubtedly in the best interest” of both companies’ investors. However, the Crimson Tide board has yet to formally respond to the unsolicited approach.

Ceres Power, a leading clean energy technology firm, has been awarded a major new contract from Shell for the second phase of their collaboration on solid oxide electrolysis cell (SOEC) technology.

The contract tasks Ceres with designing a 10 megawatt (MW) pressurised SOEC module to produce green hydrogen at high efficiency.

The 10MW module represents a tenfold scale-up from the existing 1MW SOEC demonstration system deployed by the partners at Shell’s R&D facility in Bangalore, India. Data and learnings from this operational demo unit are informing the design of the radically larger 10MW system.

A key advantage of SOEC is its potential for high efficiency. The technology can achieve around 35% more hydrogen output per unit of electricity when integrated to capture waste heat from industrial processes.

The 10MW module design will target energy consumption below 36 kilowatt-hours per kilogram of hydrogen produced – meeting the 2030 technical targets set by the European Union.

“Our strategic collaboration with Shell continues to provide valuable insights, ensuring Ceres’ SOEC technology is well positioned to meet our partners’ needs for the green hydrogen and synthetic fuels markets. Building on Ceres’ class-leading technology, our commitment to continuous innovation keeps Ceres’ commercial offering at the forefront of the industry in terms of simplicity, efficiency, and performance,” said Phil Caldwell, Chief Executive of Ceres.

Ceres Power implements an asset-light green hydrogen licensing model to partnerships with the world’s largest companies including Bosch, Doosan, Shell and Weichai.