With the hot weather have come some green shoots

Growth forecasts are being upgraded at the same time that emerging market economic growth expectations are being cut, says Kate Rogers

Kate Rogers
Kate Rogers

Is this the summer that we can celebrate all things British? We have a British Wimbledon champion, successful rugby and cricket teams, a royal baby boy and even the weather has been glorious. Rule Britannia.

But we Brits always find something to whinge about. After years of rainy summers, a recent YouGov poll found that 68 per cent of us think the July weather is too hot. So how does the heatwave affect UK business? Winners include Pimms, with Waitrose reporting a 90 per cent increase in sales. John Lewis stores have seen increases of 672 per cent in sales of parasols and of 100 per cent in sales of sun cream. And Amazon.co.uk has reported an increase of more than 38,000 per cent in sales of desk fans.

On the negative side, workforce productivity falls during heatwaves as we all swelter at our desks - or so it seems. Research from Cornell University in the US suggests that, in fact, we're more accurate when we're hot. Researchers set up camp at an insurance office in Florida, sampled the air temperature every 15 minutes and noted the amount of time workers spent fixing typing errors. At 25C the workers made 44 per cent fewer mistakes than when the temperature was five degrees cooler - and employee output was 150 per cent higher at 25C.

The UK government recommends that we keep our offices at 23C. From experience, most offices are either much hotter (ancient buildings) or colder (over-zealous air conditioning) than this official optimum.

Amazingly, the British economy is also providing us with some cheer. For the first time in a long time, growth forecasts are being upgraded at the same time that emerging market economic growth expectations are being cut. GDP figures are expected to show a healthy increase when they are released. This should allow more talk of recovery and, though the world economy remains weak, on our island all four headline sectors of the economy - services, industry, construction and agriculture - are expected to have expanded in the April to June quarter, for the first time since 2010. This 'cheer' has been reflected in equity markets. The FTSE All Share is up 14 per cent in the year to date, compared with a fall of 9 per cent in emerging market equities.

Mark Carney, the new governor of the Bank of England, was selected to bring about a new level of monetary activism. He has already got the monetary policy committee to vote unanimously to retain the quantitative easing programme at £375bn.

While the economy is heading in the right direction, the rise in yields in recent weeks is likely to lead to a rise in mortgage rates soon, and this could persuade the MPC to stimulate further. At Schroders, we are positive about UK equities because of this more accommodative stance. Medium-sized firms stand out - we see healthy corporate balance sheets and signs of revival in corporate activity as likely to encourage the continued outperformance of middle-sized companies.

So embrace the Great British Summer, enjoy the weather, dine out on our sporting success and invest in our companies. It will be autumn soon.

Kate Rogers is client director at Schroders

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