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Rolls-Royce shares dip to lowest level for more than decade

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rolls royce shares dip to lowest level for more than decade

Rolls-Royce shares dipped to their lowest level for more than a decade as analysts warned it could need to raise at least £6billion in order to survive the coronavirus crisis. 

The engineering group is thought to be looking to secure around £1.5billion in emergency funding by selling new shares. 

And it is also understood to be trying to sell its Spanish division, ITP Aero, for an estimated £1billion. 

31521654 8589073 image m 14 1596485751827

31521654 8589073 image m 14 1596485751827

But Rolls could need as much as £6billion just to keep going during the aviation industry downturn caused by the pandemic, JP Morgan analysts have warned. 

Rolls fell another 0.5 per cent, or 1.2p, to 230.4p yesterday – the lowest level since 2009 in the depths of the last recession. 

The stock has fallen 66 per cent so far this year and Rolls is worth £4.5billion having been valued at almost £23billion six years ago. 

  • Virgin Galactic has announced it is working with Rolls-Royce to develop an aircraft that can travel three times the speed of sound.

The mass grounding of flights for several months hit the company hard and has knocked two-thirds off its market value since the start of the year. Rolls makes plane engines – but it earns money from maintaining them and its profits depend on the number of hours they fly. Airlines expect it could take until 2024 before demand for flights recovers to the same levels as last year, so Rolls is facing a difficult few years ahead. 

It is planning to axe 9,000 staff from its 52,000-strong workforce. 

But the company is thought to be looking to raise through the share and ITP Aero sales ‘are not adequate to put Rolls on a sound financial footing’, JPMorgan brokers cautioned in a note to investors. 

The analysts added they believe ITP may only be worth £750m in the current market. 

A spokesman said: ‘We are in the early stages of reviewing a range of potential options to strengthen our balance sheet and position ourselves for the recovery following Covid-19.’ 

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Mortgage holidays are ending soon but banks will still offer support to the most vulnerable

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mortgage holidays are ending soon but banks will still offer support to the most vulnerable

Mortgage lenders will continue to offer mortgage payment holidays to some financially vulnerable customers after the government scheme ends, the City watchdog has confirmed.

While the scheme officially ends at the end of next month, the Financial Conduct Authority said that banks and building societies can continue to offer payment holidays for borrowers who need short-term support.

From November banks won’t be under any obligation to do this however, and the FCA has now confirmed that taking a payment holiday will affect a borrower’s credit report once the scheme ends. 

This means that taking a mortgage holiday could affect the borrower’s ability to secure any further finance in the future. 

Customers yet to apply for a mortgage payment holiday have until 31 October to do so

Customers yet to apply for a mortgage payment holiday have until 31 October to do so

Customers yet to apply for a mortgage payment holiday have until 31 October to do so

The FCA said it will be ‘monitoring firms to ensure borrowers are treated fairly’ once the scheme ends in October.

Christopher Woolard, interim chief executive at the FCA, said: ‘Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. 

‘Consumers in these situations will benefit from firms providing them with tailored support.

‘However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.’

Eric Leenders, managing director of personal finance at banking trade body UK Finance, said: ‘It is essential that customers go online or contact their lender to consider the best solution for them.

‘Firms will be communicating with customers whose mortgage payment deferral is coming to an end to discuss the options available. Those who can afford to resume payments should do so, as it will always be in their best interests in the long run.’

Mortgage payment holidays will cost you more

Banks will rake in hundreds of millions of pounds in extra interest off the back of the payment holidays already granted, especially from those borrowers who opted for a six month rather than a three month holiday. 

For example, if you took a three-month payment holiday for a mortgage that started in January this year of £100,000 with 20 years remaining at the average two-year fixed rate of 2.24 per cent, then after your mortgage holiday your monthly payments will go up from £505 to £515, and you’ll pay an additional £955 in interest over the lifetime of the mortgage.  

However, taking a six-month holiday on the same terms would see the total interest over the life of the mortgage rise to £1,945.  

The financial watchdog has encouraged firms to continue offering support to borrowers

The financial watchdog has encouraged firms to continue offering support to borrowers

The financial watchdog has encouraged firms to continue offering support to borrowers

This is more than double the three month holiday, because the interest on the loan compounds while you’re not paying it. 

If you want to do the sums for yourself, broker Habito has a mortgage holiday calculator which you can find here.  

Taking a mortgage holiday could also severely hamper your ability to refinance in future.   

While doing so before 31 October shouldn’t affect your credit score, industry insiders claim that some lenders are already starting to automatically decline applications for those who have taken a payment holiday. 

Zane Groves of financial adviser firm Light Blue said: ‘If you don’t need a mortgage break, don’t take one. It may be used against you in a future mortgage application, although this is yet to be proven on a large scale.’

How does a mortgage holiday work?  

At the moment, lenders are offering borrowers three ways to defer their mortgage payments. 

Some borrowers will be able to extend their loan, effectively adding the extra three months onto the end of their term.

Others are being offered the opportunity to increase the mortgage size but keep the same term length.

This means that the mortgage will be paid off over the same period, but the borrower will be paying slightly more each month once payments start again.

Remember though, with both these options you will be paying interest on the sum accrued, meaning you’ll pay more interest overall.

Another option that some lenders are offering is a shorter term repayment plan, giving the borrower the opportunity to pay the debt back sooner over a period of, for example, six months.

Not all lenders will be offering all borrowers all of these options. Speak to your lender to find out which one you might be able to take.

Normally a payment holiday is granted on a case-by-case basis with financial hardship and general situational factors taken into account. From November, lenders will likely go back to using this approach. 

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China has stronghold on the lithium-ion battery supply chain as EV demand soars

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China has a stronghold on the lithium-ion battery supply chain, according to a new market report. 

Along with 72GWh of electricity storage demand, China also retains an estimated 80 per cent of the world’s raw material refining, 77 per cent of cell capacity and 60 per cent of component manufacturing.

The study claimed the US and Europe are both well positioned to close the gap in the next five years, but warned that Britain could slip behind by 2025.

Countries are desperate to increase their position in the sector – sales of electric vehicles have begun to surge and are likely to rocket in the coming years as governments introduce bans on the availability of petrol and diesel cars from 2030. 

Stronghold: An employee works at a production line of lithium ion batteries inside a factory in Dongguan, Guangdong province. China has been ranked the top global market for electric-car batteries by a new industry study

Stronghold: An employee works at a production line of lithium ion batteries inside a factory in Dongguan, Guangdong province. China has been ranked the top global market for electric-car batteries by a new industry study

China’s dominance of the lithium-ion battery market is a clear indicator for why Tesla set up shop with a 210-acre Gigafactory in Shanghai where it’s been producing Model 3s since last year and will also build Model Ys for the fastest-developing economy.

Analyst BloombergNEF has ranked it as the driving force in the sector, having overtaken former leaders Japan and South Korea – however, they remain in the top three ranking highest for battery and component manufacturing but lag behind China when it comes to the availability of raw materials, refining and mining.  

James Frith, BNEF’s head of energy storage, said: ‘China’s dominance of the industry is to be expected given its huge investments and the policies the country has implemented over the past decade. 

‘Chinese manufacturers, like CATL, have come from nothing to being world-leading in less than 10 years.’

But Frith said China’s stronghold could be challenged in the coming years from western markets. 

‘The next decade will be particularly interesting as Europe and the US try to create their own battery champions to challenge Asian incumbents who are already building capacity in both places,’ he added. 

‘While Europe is launching initiatives to capture more of the raw material value chain, the US is slower to react on this.’

Note: “Environ.” is environmental. “RII” is regulations, infrastructure and innovation. Red represents countries in the Asia-Pacific region, teal countries in Europe and Africa, and blue countries in the Americas. The symbol represents if country has moved up or down the rankings in comparison to its 2020 score, green represents up and red represents down. The number shows the number of places the country has moved

Note: “Environ.” is environmental. “RII” is regulations, infrastructure and innovation. Red represents countries in the Asia-Pacific region, teal countries in Europe and Africa, and blue countries in the Americas. The symbol represents if country has moved up or down the rankings in comparison to its 2020 score, green represents up and red represents down. The number shows the number of places the country has moved

Countries are desperate to increase their position in the sector with sales of electric vehicles already starting to boom and will sky rocket in the coming years as governments introduce bans on the availability of petrol and diesel cars from a decade's time

Countries are desperate to increase their position in the sector with sales of electric vehicles already starting to boom and will sky rocket in the coming years as governments introduce bans on the availability of petrol and diesel cars from a decade’s time

BNEF’s ranking provides a snapshot of a country’s position in the lithium-ion battery supply chain in 2020 and where it will place in 2025, based on its current development trajectory.

While the US today languishes in sixth place, the upcoming presidential election could change things. 

If America were to increase its investment in raw materials and promote electric vehicle adoption, it could overtake both Japan and China to be number one in 2025. 

In contrast, the UK – currently one place behind the US – could see its position in the rankings fall if it becomes unable to access the large demand in continental Europe, which, at 152GWh, will be around five times the size of its domestic market. 

Europe is improving its position on the supply chain, with a boom in cell plants across the continent. Tesla is currently building its Gigafactory 4 vehicle plant in Berlin

Europe is improving its position on the supply chain, with a boom in cell plants across the continent. Tesla is currently building its Gigafactory 4 vehicle plant in Berlin

A street sign reading 'Tesla Street 1' stands in front of the construction site of the electric car Tesla Gigafactory in Gruenheide

A street sign reading ‘Tesla Street 1’ stands in front of the construction site of the electric car Tesla Gigafactory in Gruenheide

According to the Global EV Outlook 2020, the sales of electric cars reached 2.1 million globally in 2019, surpassing 2018s record to boost the stock to 7.2 million electric vehicles

 According to the Global EV Outlook 2020, the sales of electric cars reached 2.1 million globally in 2019, surpassing 2018s record to boost the stock to 7.2 million electric vehicles

As electric car demand grows in the next decade, there is an increasing need for cell manufacturing facilities close to automotive production. 

This has led to a boom in European cell plants, and the rest of the supply chain is also slowly making its way to Europe as nations look set to ban the sale of passenger cars with internal combustion petrol and diesel engines from as early as 2025 in Norway.

Polestar: ‘We want to be the most transparent electric car maker’ 

Polestar – the electric-car sister brand to Volvo, itself owned by Chinese firm Geely –  will publish full details of the climate impact of its electric vehicles as part of efforts to become the ‘most transparent’ EV maker in the automotive industry’.

It criticised the wider industry for a ‘disturbing lack of transparency’, stating that it is ‘impossible for a consumer to compare the climate impact of different cars’. 

As a result, the Swedish company will, with immediate effect, reveal a headline number that shows the climate impact of its EVs as they leave the production line. 

It will also show the total climate impact of the car over its life cycle.  

‘Car manufacturers have not been clear in the past with consumers on the environmental impact of their products,’ said Thomas Ingenlath, Polestar CEO. 

‘That’s not good enough. We need to be honest, even if it makes for uncomfortable reading.’ 

Using its own analysis, Polestar found its new £50,000 ‘2’ leaves the factory with a 26-tonne carbon footprint. 

Compared to a Volvo XC40 with a petrol engine, Polestar 2 has a larger footprint in the manufacturing phase, mainly due to the energy-intensive battery production process.

But once the EV reaches the customer, if charged with green energy, further CO2 emissions are ‘negligible’.  And after 31,000 miles (50,000km) of driving, the fossil fuel car surpasses the EV in total CO2 emissions.

Pressure is mounting on UK Government decision makers to bring forward the current ban from 2040 to an earlier deadline of 2030, which would be in-line with countries including Denmark, Ireland, the Netherlands and Sweden.

This includes Tesla’s Gigafactory 4 that’s being built in Berlin, Germany, which the US maker says will be ‘the most advanced high-volume electric vehicle production plant in the world’.

In the UK, start-up Britishvolt is due to open the country’s first gigafactory rival in South Wales , which will be penned by legendary vehicle design house, Pininfarina, and open in 2023. 

Sophie Lu, head of metals and mining at BloombergNEF, said that while nations with a monopoly of critical metals are in a good position, it is equally fundamental for other countries to leverage the availability of clear and cheap electricity and develop large-scale manufacturing sites with a ‘technically skilled labour force’.

According to the Global EV Outlook 2020, the sales of electric cars reached 2.1 million globally in 2019, surpassing 2018s record to boost the stock to 7.2 million electric vehicles. 

China remained the world’s largest EV market, with 2.3million electric vehicles in active use, accounting for nearly half (45 per cent) of the global stock of zero-emission cars. 

Europe and the US are relatively far behind with 1.2 and 1.1million EVs respectively in 2019 – but the latter is performing far better in relative terms,

 While only 5.2 per cent of China’s vehicles are electric, over half (56 per cent) of cars in Norway were powered by electricity last year.

EVs also make up 26 per cent and 15 per cent of all motors in Iceland and Netherlands respectively in 2019, though in the UK represented less than 2 per cent of new registrations. 

However, by the end of August 2020, one in 20 new models bought in the UK were battery electric cars, according to the latest sales figures published by the Society of Motor Manufacturers and Traders.

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Smart speaker ownership rises – are they useful?

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‘Okay Google. Play, Aerosmith.’

‘Sure, here’s The Smiths on Spotify.’

Since the start of the year, our home has contained two Google Nest Mini devices. They came free with two Fitbits I bought and my wife was adamant that we wouldn’t use them in the home.

But, we have. We have one upstairs and one downstairs. Their function? To play the radio through Global Player or music through our Spotify account – usually with about 95 per cent accuracy of what I’m asking (it’s okay, I like both Aerosmith and The Smiths).

Easy peasy: The Google Nest Mini is basic, easy to set-up and essentially an inexpensive way to decide whether a smart speaker is for you

Easy peasy: The Google Nest Mini is basic, easy to set-up and essentially an inexpensive way to decide whether a smart speaker is for you

We never ask it the weather. What’s the point? I can look outside. 

We never ask it for the football scores. Well, I don’t want to know how my own beleaguered Southend United are doing anyway. 

And I don’t ask it any general knowledge.

Nope, it is a glorified music player, activated by voice. Nothing more, nothing less. 

We have a smart thermostat – which, by the way, is fantastic, way more beneficial than a smart meter – but we never ask the Nest Mini to turn the temperature up or hot water on.

Interest in smart devices, including smart speakers, has exploded in the last year – thanks, probably, in part to things like Google dishing the RRP £49 devices out for free with other buys.

Why would it do this? Well, the cynic in me would say because the search engine giant will expect at least £49 worth of data on you as time goes on. 

I’m not alone, with a recent survey suggesting people fear for their privacy with the devices. But is that really case?

Consumer Trends takes a look at smart speakers, how they have now become a common feature in many people’s homes and where we’re heading next.

Aerosmith or The Smiths: I just bark an artist, radio station or song request, and the Google Nest does the rest

Aerosmith or The Smiths: I just bark an artist, radio station or song request, and the Google Nest does the rest

Streaming music boom

Over the years, the music industry is one that has had to adapt vastly to technology. I’m in my early 30s, but I still remember recording parts of the Top 40 off the radio onto tape cassette for my Walkman.

I can also remember being at school and my friend bringing in a Apple iPod, with the first touch wheel and the ability to hold thousands of songs, and being completely blown away.

My dad played records on vinyl, I grew up largely with CDs, played both on stereo and CD Walkman, and thumbed through albums in HMV and a wonderful shop called Golden Discs just off Southend High Street.

I can remember another friend investing heavily in minidiscs – they’re the future, he said. They weren’t.

We had Napster and the internet, ripping music off via old school connections, before Spotify came in to do it in a legal way, along with Apple iTunes and Amazon Music, to really dominate it all.

I have been a Spotify user since it launched just after I finished university. In one way it has been brilliant, in others, it hasn’t.

For instance, if you told me when I was clumsily pressing record and stop on the Top 40 in my younger years that I could have any song I want to listen to while anywhere on the go through a device in my pocket at my fingertips for less than the price of an album per month, I would never have believed you.

It’s a treasure trove of modern music that I can listen to instantly and also discover old artists that I never got round to buying CDs of.

But sometimes the choice is overwhelming and I’m not sure new albums will ever be listened to, from start to finish, in the same way ever again. It’s all about curating playlists, chopping the filler out, and skipping songs on shuffle.

By 2024, market data firm Futuresource predicts the number of music subscriptions worldwide will top 600million – this will account for 90 per cent of all spend on recorded music. Staggering.

Smart speaker ownership booms

Streaming services have gone hand-in-hand in recent years with smart speakers. 

Amazon and its Echo device has Amazon Music, Apple its HomePod and Apple Music and Google Nest Mini has Google Music – unless you default to something else, like me and Spotify.

Consumer Trends

This is Money assistant editor and consumer journalist, Lee Boyce, writes his Consumer Trends column every Saturday.

It ranges from food and drink and retail, to financial services and travel. 

Have an idea or suggestion? Get in touch:

lee.boyce@thisismoney.co.uk 

Apple does have music heritage of sorts, but Amazon and Google don’t. They are a global retailer and a search engine.

According to an annual smart home study by market research firm GfK, 29 per cent of people in Britain now own a smart speaker, making it the second most popular ‘smart’ device after the smart TV (which half of people have).

The growth has been substantial. Last year, ownership was 22 per cent, in 2018 14 per cent and just three years ago, 7 per cent.

Further data from Forrester Research, another market research company, the number of households with smart speakers in the European Union, including Britain, almost doubled last year from 10million in 2018 to 19.6million.

It forecasts this to nearly triple in five years to reach 57.5million by 2024. It says that Amazon and Google have dominated the market, and account for nearly nine in 10 sales globally, excluding China.

This will be largely devices made by the companies above, but their are higher end, more expensive examples – with some homeowners even choosing to have these types of devices built into their property.  

Privacy concerns

The GfK study shows an increase in the level of concern about privacy in relation to smart home technology.

This now stands at 53 per cent of those for smart devices in general, up from 49 per cent last year – but increases to 58 per cent for smart entertainment devices.

A large part of this will be people worrying about two things: how their data is being used when they ask the assistant a question and whether private conversations are being recorded in the home.

On the first part, I don’t have much of a problem with this. I only use my speaker for music and I use search engines on my laptop and smartphone without much thought these days. I treat the device the same.

On the second part, I am more concerned. For that reason, I simply switch the microphone off from the bottom when it’s not being used and unplug the machine in the evening. It only takes 5 to 10 seconds to reboot once plugged in. From smart to sleep. I have the power. 

Trevor Godman at GfK says: ‘The onus is on the industry to win consumers’ trust in these areas, and also address ease of use and interoperability of connected home devices – the ability of some of those devices to monitor or control others. Addressing these areas will drive wider uptake.’

The past year has seen a number of debates about whether smart speakers are capturing household conversations and how tech providers use ‘manual’ quality checking to improve voice recognition – these are arguments likely to go on for the foreseeable, and for many, they simply won’t want the tech. 

Other smart devices on the march?

Despite a boom in smart speaker ownership, the picture isn’t as rosy with other devices, such as home security and energy management, with these areas remaining flat or even dropping slightly.

These are smart lights, thermostats and doorbell cameras. I’m not surprised on the first one, a light switch is pretty simple already without the need for going smart.

On thermostats, as mentioned, we have one and I think it’s excellent. It is much easier to control the temperature with it and I can do with the app on my smartphone.

And on smart doorbells, which I have no interest in, I would expect that sales of these have been huge, given that a walk around my area now sees at least one home in five with a Ring doorbell.

Trevor says ‘People’s stated interest in buying connected devices for security and energy management is actually strong.

‘The problem is that 58 per cent of people hesitate about the higher cost of smart devices over conventional devices – they need to be convinced of the value that ‘smart’ benefits bring.’

This could be why Google keeps dishing out these devices for nothing – including with Spotify recently, in which the streaming service was swamped with requests, and a This is Money story we wrote covering it went viral, with tens of thousands of people arriving, via the search engine, to read it.

The GfK report concludes that cost, privacy, and awareness are the key concerns brands should focus on alleviating.

Could I live without my Google Nest Mini? Certainly. Would I pay for one? Probably not. But since working from home, listening to music and radio in the background more, it’s certainly handy to bark orders from the other side of the room and fills a lonely void without colleagues. 

The sound quality is distinctly average but perfectly fine.

It just depends if I’m in the mood for Walk This Way or Heaven Knows I’m Miserable Now, and whether Google can understand my Essex twang.

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