The Office for National Statistics (ONS) has upwardly revised GDP data

By Suzanne Evans, Director, Political Insight

The Office for National Statistics (ONS) has upwardly revised GDP data this morning, moving it from -0.1% to +0.2% in the second quarter of the year. However, the overall size of the economy is still smaller than previously estimated, the ONS says, and is 0.2% below its pre-covid pandemic level. The UK current account deficit fell to £33.8bn (5.5 % of GDP) in the same period.

Prime Minister Liz Truss again refused to back down on her economic policies during a local media round yesterday, saying that her government's plans were the right ones for the country and would not change course. Truss blamed the upheaval on the Russian invasion of Ukraine, which has caused inflation to spike around the world. "We had to take urgent action to get our economy growing, get Britain moving, and also deal with inflation, and of course, that means taking controversial and difficult decisions," she told BBC radio. "But I'm prepared to do that as prime minister because what's important to me is that we get our economy moving." She dismissed her final Conservative Party leadership contender Rishi Sunak's warnings that her plans posed a threat to Britain's economic standing in the world as "negative, declinist language". In the coming weeks, she said, she would spell out further reforms of everything from childcare costs to immigration, planning and financial regulation, as well as a fresh budget statement on 23rd November with new forecasts and details of the cost of the borrowing and measures to cut debt.

Meanwhile Chancellor Kwasi Kwarteng said the government's mini budget was essential in helping reset the debate around growth. It was “absolutely essential in resetting the debate around growth and focusing us on delivering much better growth outcomes," he told reporters while on a visit to a local business in northern England, when asked if it had been an economic disaster.

Both Truss and Kwarteng will meet Richard Hughes, Chair of the Office for Budget Responsibility (OBR) today, to discuss the budget forecast process and economic and fiscal developments since March. Kwarteng has asked the OBR to produce a first draft of its next economic forecasts on 7th October, the aforementioned fuller fiscal statement on 23rd November.

“The spread between bid and ask prices on British bonds, reflecting the ease of trading in such debt, was only slightly tighter on Thursday than at its peak before the Bank of England intervened to calm markets, data from ING Bank citing Tradeweb showed. This suggests conditions in Britain's government bond market remain tough after the rout triggered by last Friday's mini-budget and its unfunded tax cuts,” Reuters reports.  

The pound rallied to reverse losses yesterday, climbing to stand 1.3% higher on the day at $1.1026 in the afternoon session. It rose against most major currencies, with the euro last down 1.01% at 88.48 pence. The pound crashed to a record low against the dollar of $1.0327 on Monday after new finance minister Kwasi Kwarteng unveiled plans to cut taxes and raise borrowing. Sterling's rise took its three-day rally to more than 3%, although it is still down by more than 18% this year.

European stock markets continued their downwards dip yesterday as David Malpass, president of the World Bank, warned it could take years for global energy production to recover from the supply crisis triggered by Russia’s invasion of Ukraine, and that the energy crisis would prolong the risk of a period of low growth and high inflation, or stagflation. In London, the FTSE 100 fell 2% by the end of the session, with losses across the board, while the CAC tumbled 1.5% in Paris and the Frankfurt DAX was 1.7% lower.

The Financial Times said yesterday that The Financial Conduct Authority(FCA) has contacted high street lenders following the withdrawal of more than 1,600 mortgage products, apparently to ask banks what options borrowers would have when their fixed-rate terms end. However, the FCA declined to comment on the story.  

The Financial Conduct Authority has, however, written to insurance industry chief executives to warn that is in households may cut back on insurance cover in the face of surging food, energy and mortgage costs. The letter says they must ensure customers are protected "from unnecessary products or add-ons and unfair penalties" during the crisis, and warned it would "quickly intervene" if poor practise was discovered. Sheldon Mills, FCA executive director, consumers and competition, said: "Customers who are struggling with their finances should contact their providers as soon as possible. We encourage customers to continue to shop around to find the best deal. Firms should not unfairly penalise them for any payment difficulties but instead work with them to find solutions."

Left-wing think-tank The Resolution Foundation is claiming that the scale of tax cuts and a weak economic outlook will mean that the government is likely to need to announce fiscal tightening of between £37bn to £47bn in order for debt to begin falling in 2026-27. “This level of fiscal tightening would require announcing spending cuts that are broadly the same or bigger than George Osborne set out in his 2010 Emergency Budget,” it said, adding that to avoid even deeper spending cuts, prime minister Liz Truss will need to abandon her pledge to increase defence spending to 3% of GDP by 2030, as this would cost a further £12bn a year in 2026-27.

The Labour party has surged to a 33-point lead over the Conservatives, according to a YouGov poll released yesterday, after days of chaos in financial markets triggered by the government's mini-budget. The lead was a record high share for Labour in any YouGov poll as well as the highest figure the party has ever recorded in any published survey since the late 1990s, YouGov said.

British job vacancies have dropped to the lowest level since the pandemic last week according to data from the Recruitment & Employment Confederation (REC). There were 143,000 new job postings in the week of Sept. 19-25, the least in 2022 so far, bringing the total number of active job alerts to 1.45 million.

Business confidence remained steady in September after falling for the previous three months, new data from the Lloyds Bank business barometer has shown. Confidence came in at 16% during the month - still down at its joint lowest level since March 2021 – against a long term average of 28%. Lloyds said: “Since companies were surveyed before the UK government’s Fiscal Statement on 23rd September the effect of the announcement on business confidence will be seen in next month’s data.” 55% of respondents expected to raise their prices in the coming year. 9% of businesses are looking to increase salaries by 5% in the next 12 months. Almost a third (29%) anticipate a 3% wage growth in the next year. Staffing expectations for the year ahead were stable, with a one-point rise to 39% for companies anticipating an expansion of their workforce. However, this was countered by 23% — up one point — expecting to reduce their headcount as they tackle rising costs such as energy, and a weaker pound. The data also revealed that economic optimism fell two points to a 19-month low of 5% during September. Businesses’ trading prospects remained broadly unchanged at 26%, with a one-point rise in businesses expressing prospects of stronger activity, which was offset by the same one-point rise in companies reporting a weaker outlook.

The London Metal Exchange (LME) is considering a consultation on whether Russian metals such as aluminium, nickel and copper should continue to be traded and stored in its system, it said yesterday. The LME issued a statement after three sources familiar with the matter told Reuters the exchange was planning to discuss banning new deliveries of Russian metal so its warehouses cannot be used to offload hard-to-sell stock. Although Western countries have sanctioned Russian banks and wealthy individuals connected to President Vladimir Putin since Russia’s invasion of Ukraine, there are currently no restrictions on buying Russian metal.

Nearly 600 Liverpool dock workers are to strike for a further seven days next month in a dispute over pay. The Unite union said the walkout at one of Britain's largest ports would run from 11th – 17th October, and that control room operators had voted to join port operatives and engineers who began two weeks of strike action on 19th September.

Sportswear retailer JD Sports has struck a "connected partnership" with footwear giant Nike that will give the group's customers "unprecedented access" to select member-only shoes and apparel, the former said this morning.

Capricorn Energy said yesterday that it was ditching a planned merger with Tullow Oil to instead team up with Israel's NewMed Energy. Capricorn said in June that it had agreed to be bought by its fellow FTSE 250 member Tullow in all-share deal. Under the terms of the new deal agreed with NewMed, shareholders will own 10.3% of the enlarged group and receive a special dividend of $620m, equivalent to £1.72 a share.

Pub group Shepherd Neame has bounded back from lockdown restrictions and swung to a full-year profit. In the year to 25th June, the company made a statutory pre-tax profit of £7.4m from a loss of £16.4m the year before, while earnings before interest, taxes, depreciation and amortisation grew to £23.4m from £7.7m. Revenue jumped 74% to £151.5m, although Shepherd Neame noted that the prior year was significantly impacted by the Covid-19 pandemic. Total retail like-for-like sales were down 8% versus 2019 but 130% higher compared to 2021, with footfall outside London near normal and strong in the company's coastal estate. CEO Jonathan Neame said: "Shepherd Neame has rebounded well from the challenges of the last two years - a testament to the strength of the business model and depth of talent across the business”.

InterContinental Hotels said yesterday that no guest data was accessed in the cyberattack it suffered earlier this month, and that its booking websites, mobile apps, and most of the other booking channels and revenue-generating systems have now been reactivated.

HSBC is reviewing whether to keep its global headquarters in London's Canary Wharf, ahead of its lease expiry in early 2027, a staff memo seen by Reuters yesterday showed. HSBC has long grappled with the optimal location for its business, the news agency says, with some stakeholders urging it to shift its HQ to Asia, where it makes the majority of its profits. However, the memo said the bank would keep its global HQ in London, and the review would include the option of staying and renovating the tower it has occupied since 2002. It has been home to up to around 8,000 HSBC employees; however the bank has made a commitment to axe around 40% of its office space.

British manufacturer Surface Transforms, a supplier of carbon ceramic brake discs to a raft of high performance sports car manufacturers, including Koenigsegg, Ferrari and Aston Martin, is set to invest almost £20m expanding its existing Knowsley site and opening a new factory to meet increasing global demand.

M&G is to make Andrea Rossi its next CEO and an executive director. He will take up his new position on 10th October, succeeding John Foley who, in April, announced his intention to retire after seven years in the role at the FTSE 100 savings and investment company. M&G said Rossi had a 22-year track record in the global insurance and asset management sectors, mainly through his time at AXA Group, where he was CEO for six years.

German carmaker Volkswagen’s (VW) listing of its Porsche subsidiary has been successful, being priced at the top end of the advised range in a choppy market. The luxury car maker closed its books on Wednesday just above its final price of €82.50 (£73.77) per share, giving Porsche a market cap of around €78bn (£69bn). By selling a 25% stake parent VW will raise €19.5 billion (£17.25bn), partly to help its transition to electric vehicles. The listing is Germany’s biggest initial public offering (IPO) in over a quarter of a century, and the second largest in the country’s history after Deutsche Telekom in 1996

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