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The economy grew 0.4% in August, but remains 0.8% below its pre-coronavirus peak of February 2020

   NEWS / 13 Oct 2021

Published: 13 October 2021
Location: London, UK

By Suzanne Evans, Director, Political Insight


The economy grew 0.4% in August, but remains 0.8% below its pre-coronavirus peak of February 2020. The GDP increase was driven primarily by growth in the accommodation and food, arts entertainment and recreation, and information and communication sectors, the Office for National Statisticssaid. Sports clubs, amusement parks and festivals made as especially high contribution to growth, and there was significantly higher demand for hotels and campsites. Overall, services grew 0.3% (0.6% below February 2020); manufacturing grew 0.5% (2.4% below February 2020); and construction shrank 0.2% (1.5% below February 2020). Imports fell £1.3bn in August, driven by a £1.2bn fall in imports from non-EU countries. Exports also fell £1.3bn due to a £0.6bn fall in exports to the EU and a £0.7bn fall to non-EU countries.
 
Chancellor Rishi Sunak is in Washington today to chair the final in-person meeting of G7 finance ministers under the UK’s presidency. Sunak will also attend a meeting of G20 finance ministers. The resilience of global supply chains, net zero, and the importance of continued vaccine rollouts across the globe are likely to be focal points of the discussions.  "From global tax reform to global supply chains, we must work together to seek international solutions for the benefit of our citizens at home,” he said in a statement released by the Treasury.
 
The US House of Representatives yesterday gave final approval to legislation temporarily raising the government's borrowing limit to $28.9 trillion, pushing off the deadline for debt default only until December. The House is only narrowly controlled by Democrats, who managed to maintain party discipline to pass the hard-fought, $480 billion debt limit increase by 219-206. The vote was along party lines, with a ‘yes’ vote from every Democrat and a ‘no’ from every Republican. President Joe Biden is expected to sign the measure into law by October 18, when the US Treasury Department has estimated it will no longer be able to pay the nation's debts without congressional action.
 
The European Union raised €12bn in its first ever green bond yesterday. The 15-year green bond, which matures on 4 February 2037, received more than €135bn of demand, Reuters said. This was the highest level of demand for a green bond on record in the government debt market, beating the £10bn the UK raised with a £100bn order book in September.
 
Both the BBC and the FT claim Prime minister Boris Johnson is set to offer struggling businesses in gas-intensive industries a support package, amid soaring energy prices. The media outlets say the Department for Business is expecting new measures, with the Treasury looking at proposals. On Monday, Business secretary Kwasi Kwarteng asked the Treasury to support firms in such industries as production at such industries, such as the steel and concrete sectors, threatens to grind to a standstill. The proposals are thought to include rolling out a package of loans totalling hundreds of millions of pounds. Sky News says former Governor of the Bank of England, Mark Carney, has thrown his weight behind the idea
 
Yahoo Finance UK reports that Britain’s financial firms are asking Chancellor Rishi Sunak to abolish the bank corporation tax surcharge and bring the effective tax rate that banks pay in the UK closer to that paid by competitors in the US, Germany and the Netherlands. TheCityUK, an industry-led body representing UK-based financial and related professional services, wants Sunak to use the 2021 Budget and Spending Review to make the UK more competitive and help return the country to being the world’s leading international financial centre over the next five years. The measure imposes a surcharge of 8% on the profits of banking companies, which Sunak pledged to review in his March 2021 Budget.
 
A review of the London stock market’s listing and capital raising rules have been kicked off by the Treasury, with veteran Freshfields partner Mark Austinat the helm. The aim is to give already-listed companies more options when raising capital, so the review will examine whether rule changes and better use of technology could make capital raising more efficient for such companies. The review launch is the latest step in the government’s response to Lord Hill’s UK Listings Review, which was set up to make the UK an even more attractive destination for IPOs and optimise the capital raising process for large and small companies.
 
Spending on UK credit cards increased to an average of £711 in August 2021, a rise of £23 on a month earlier, and the highest level since global analytics software provider FICO began compiling such data eight years ago.
 
Pubs, clubs, bars and restaurants are closing at the rate of 16 a day, according to a comprehensive review of licensed premises by industry consultants CGA and business advisory firm AlixPartners. There are now 9,900 fewer licensed premises across Britain than there were when coronavirus restrictions began in March 2020. These figures include a rush of closures taking place since the summer reopening of the economy. 980 closed their doors between July and September alone, primarily because of "operational challenges" including labour shortages, disruption to supply and rising costs. Small, independent businesses bore the brunt of these problems: chains proved more resilient. The report said nightclubs had suffered particularly badly with almost 100 lost since July to leave only 1,000 still operating in September. Legislation in Wales and Scotland forcing people to prove their vaccination status will place further pressure on the night-time economy, the report said, as will pressures on consumer spending power which is likely to be squeezed by rising prices, particularly on food and energy bills. This report follows claims by Industry body UKHospitality, that 660,000 jobs have been lost in the sector.
 
Clive Chesser, chief executive of Punch Pubs has told Sky News that Covid-19 is not in the "rear view mirror" for Britain's hospitality sector. It still has symptoms that are "very real", he said in an interview at Sky's Big Ideas Live event. Chesser said the "celebratory" tone of the prime minister's speech to the Conservative Party conference last week did not match the reality facing hospitality businesses, which he said was seeing an uneven recovery across the country, with staycation hotspots such as the southwest of England bouncing back strongly over the summer but others seeing a slower upturn. He also spoke of "frustration" about not being able to meet demand at times because many pubs are struggling to find staff.
 
British lender Natwest said this morning that it plans to increase lending linked to sustainable and climate-related finance to £100 billion by 2025.
 
Barclays bank has officially opened a major new financial hub in Glasgow for 5,000 staff. The 500,000 sq ft campus-style site is expected to be fully occupied by 2023. It includes indoor and outdoor spaces for community events; a curated space for social enterprises and local entrepreneurs to showcase and sell their products to the public; wellbeing facilities; community exhibition spaces; and a street food market.
 
Passenger transport operator Stagecoach Group said in a trading update yesterday that passenger demand for its regional bus operations has recovered in recent weeks, alongside the return of schools and universities. The London-listed company said that journey numbers were over 70% of the equivalent 2019 pre-pandemic levels by the end of September, as it was operating vehicle mileage at around 94% of 2019 levels.
 
GlaxoSmithKline shares topped the FTSE 100 index yesterday following a report that the pharmaceuticals giant's consumer unit was drawing interest from private equity firms in what could lead to the biggest buyout of all time. According to Bloomberg, Glaxo's advisers are informally fielding interest in the operations alongside preparations for a listing. It was understood that Advent International, Blackstone, Carlyle Group, CVC Capital Partners, KKR and Permira are among potential suitors evaluating the business.
 
British rocket manufacturer Skyrora has agreed a multi-launch deal with the SaxaVord spaceport on Unst, the most northerly of the Shetland Islands, as it moves closer to launching its XL rocket. If successful, this could be the first rocket to go to space from the UK.
 
449,000 people bought Christmas puddings in September, according to figures from market researcher Kantar. Sales of the festive staple were up 76% compared to the same month last year. Toy sales were also up 5% and sales in gift-wrapping products increased by 10%. Sales of frozen stuffing were also 37% higher, frozen poultry and game 35% higher, and seasonal greeting card sales increased by 25% on last year.
 
Executives from BP Plc and Royal Dutch Shell Plc will face the US Congress to rebuff allegations that oil giants misled the public about the role of fossil fuels in causing global warming. The hearing planned for later this month by the House Oversight and Government Reform Committee follows an investigation by the panel into what it termed a “long-running, industry wide campaign” of climate disinformation.
 
Bitcoin’s recent rally has taken its dollar value to around $57,000 (£41,899), a fresh five-month high representing total gains of 23% so far in October. Significantly, this latest rally has taken the overall crypto market cap above $2.3tn, overtaking the value of tech giants like Amazon, Google's parent company Alphabet and Microsoft. Only Apple is still worth more than the cryptocurrency market, at $2.36tn.


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