Published: 13 April 2023
By Suzanne Evans, Director, Political Insight
The UK economy flatlined in February, falling short of expectations of a 0.1% rise mostly because of strikes by public sector workers, the Office for National Statistics (ONS) said this morning. The teachers’ strikes made the largest contribution to negative growth in the services industry, with education falling 1.7%. Other strikes within the civil service hit public administration, and rail workers also did their bit to help bring the economy to a grinding halt. Overall, services sector output fell by 0.1%, while production fell 0.2%. Construction grew 2.4%. Meanwhile, growth of 0.4% in January has been revised up from growth of 0.3% in figures published previously, a bounce that means the UK is less likely to see a recession (defined as two consecutive quarters of negative growth) in the first quarter of the year, as predicted last month by the Bank of England. GDP will now need to sink below 0.6% in March for that prediction to come true.
Despite February’s flat performance, Chancellor Jeremy Hunt says Britain’s economic outlook is "brighter than expected". “GDP grew in the three months to February, and we are set to avoid recession thanks to the steps we have taken through a massive package of cost-of-living support for families and radical reforms to boost the jobs market and business investment,” he said in a statement. Yesterday, speaking to Bloomberg in Washington DC while at a meeting of G7 finance ministers, Hunt also dismissed gloomy predictions for the UK economy made by the International Monetary Fund (IMF). “We will do better than that, our forecasts are significantly better than the IMF”. “It’s not just me. The German finance minister says he’s much more optimistic about Germany’s prospects,” he added. “We are very confident about the UK medium and longer term prospects, but we don’t pretend we’re not going through a difficult period. Like everyone we’re dealing with very high inflation which we have to bring down.”
Labour Shadow Chancellor Rachel Reeves, meanwhile, has said the latest ONS data shows the UK was "lagging behind on the global stage with growth on the floor".
The ONS also reported this morning that the total underlying trade in goods and services deficit widened by £2.3bn to £23.5bn in the three months to February, as exports fell more than imports.
The number of job seekers has increased for the first time since February 2021 as improving pay offers encourage people to return to work. The Recruitment and Employment Confederation/KPMG’s monthly permanent placements index came in at 49.3 last month, the slowest fall since last September but still below the 50.0 no change level.
The Government is taking aim at holiday lets again. Having previously announced plans to introduce legislation forcing homeowners who rent out their properties to register on a new database, Levelling Up Secretary Michael Gove has now announced they will have to obtain planning permission to turn their properties into short-term lets. He says the plans will crack down on nuisance holiday rentals and prevent local people being pushed out of “cherished” towns and villages by individuals buying second homes with the primary intention of using them for short-term lets. The changes would see a new planning use class created for lets not used as a sole or main home.
Accounting giant KPMG has been fined £875,000 by the Financial Reporting Council (FRC) for its 2016 audit of lighting manufacturer Luceco. Former KPMG employee Stuart Smith admitted eight breaches of "relevant requirements" during the audit and was fined £50,000, discounted to £35,000 for admitting his breaches of the rules. KPMG's original fine was £1.25m. "The breaches included failures in the design and performance of audit procedures, failures to adequately review and critically assess the audit evidence obtained, failure to document the audit work and failures by the respondents to apply professional scepticism," the FRC said. It added that the breaches were made more serious by the fact that KPMG and Smith were aware of inventory cost errors in the previous year.
City law firm Ince Group has collapsed into administration after months of financial turbulence and missing deadlines to publish last year’s financial results. Ince, which has a history dating back 150 years, announced its failure on the London Stock Exchange yesterday. A major creditor recently pulled support for the firm, the Daily Mail says. Ince hit the headlines last year after some of its senior lawyers allegedly mistreated a 22-year-old waitress at a restaurant in Cardiff. Shares in Ince, once the largest listed law firm in London after a float in 2017, were suspended on 3rd January.
Shares in banknote printer and passport maker De La Rue plunged 19% yesterday, as the firm issued a profit warning saying full-year earnings for 2023 are now expected to fall short of market estimates. The British firm, headquartered in Basingstoke, has been suffering from weak demand for banknotes in an increasingly cashless society, and it has suffered since losing its British passport contract. It also blames increased costs and supply chain woes for the fact business is languishing at a 20-year low. Yesterday’s dip in shares brings their one-year loss to around 63% and its 5-year share price decline to almost 92%.
The Everyman cinema chain has announced a return to 'business as usual,' posting a £402,000 operating profit and revealing that 3.4m people attended a screening at one of its cinemas last year, compared to 2 million in 2021, when its sites were shut for almost five months for covid lockdowns. Everyman Media Group's turnover climbed by 61% to £78.8m as consumers also spent slightly more on average for tickets and refreshments.
Tesco has reported a 6.9% fall in operating profit, having been hit hard by consumers tightening their belt during the cost of living crisis, it said this morning. Britain’s biggest supermarket said its profit was £2.6bn for the year to the end of February, despite sales being 5.3% up at £57bn. Fuel sales rose especially high, by 23%, as motorists were hit by the rising cost of petrol and diesel.
JP Morgan has asked its senior bankers in all of its offices around the world to work from the office five days a week in a sign of executives’ growing frustration with homeworking. In a memo to staff seen by City A.M., JP Morgan’s operating committee said that its leaders play “a critical role in reinforcing our culture and running our businesses” and that “they have to be visible on the floor, they must meet with clients, they need to teach and advise, and they should always be accessible for immediate feedback and impromptu meetings. We need them to lead by example, which is why we’re asking all Managing Directors to be in the office five days a week”. The note was sent to staff last Friday.
In a symbolic rebuke, Switzerland's parliament yesterday rejected its government's 109bn Swiss franc (£97.47bn) in state aid for Credit Suisse's merger with UBS. Although Switzerland’s upper house had approved the rescue package, parliament's lower, larger chamber, pushed back, turning it down by 103 votes to 71 for the second time. The aid, signed off using Swiss emergency law, left almost 250 politicians without a say and many of them angry. "The use of emergency law has reached a level in the last three years that is beginning to annoy me," Hansjoerg Knecht, a member of Parliament's upper house, told Reuters. "This decision has no impact on the takeover of Credit Suisse decided on March 19," the Swiss Finance Ministry said after the vote, adding: "The funds have already been fully committed".
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