Published: 14 June 2023
By Suzanne Evans, Director, Political Insight
The Office for National Statistics says this morning that the economy returned to growth again, with GDP growing 0.2% in April. This follows a contraction of 0.3% in March, mostly as a consequence of public sector strike action in healthcare and transport. Services were up 0.3% in April, while production fell 0.3% and construction fell 0.6%. Bars and pubs had a strong month; car sales rebounded; and education partially recovered from the effect of the previous month’s strikes, the ONS said, adding that the data also revealed falls in healthcare, which was affected by the junior doctors strikes; falls in computer manufacturing and the often-erratic pharmaceuticals industry. House builders and estate agents also had a poor month. Monthly UK GDP is now estimated to be 0.3% above its pre-coronavirus levels, as set in February 2020, the ONS added. The total underlying trade in goods and services deficit narrowed £12.6bn to £12.3bn in the three months to April, with imports falling by more than exports, the ONS also said today.
Jeremy Hunt, Chancellor of the Exchequer responded to the ONS data saying: “We are growing the economy, with the IMF saying that from 2025 we will grow faster than Germany, France and Italy. But high growth needs low inflation, so we must stick relentlessly to our plan to halve the rate this year to protect family budgets.” He said the Government would be "unstinting in our support" for the Bank of England (BoE) "to do what it takes" to slow inflation, saying Britain has "no alternative" but to hike interest rates to tackle rising prices. Asked if he was following former Chancellor John Major's 1989 dictum that "if it isn't hurting, it isn't working", Hunt said: "In the end there is no alternative to bringing down inflation, if we want to see consumers spending, if we want to see businesses investing, if we want to see long-term growth and prosperity...we have to do everything we can as a Government, as a country, to support the Bank of England in their mission to squeeze inflation out of the system."
Yesterday, Bank of England Governor Andrew Bailey told the House of Lords economic affairs committee that inflation was “taking a lot longer” than he hoped to come down. “We still think the rate of inflation is going to come down, but it’s taking a lot longer than we expected,” he said. In response to yesterday’s news of significant wages increases - basic wages in the three months to April were 7.2% higher than a year earlier - he noted the “very tight labour market in this country,” saying: “We've had a fall in the supply of labour, which is showing signs of recovering, but very slowly, frankly". On food prices he said: "We've been told for some time, you know, they've reached their peak, they're going to come down, the rate of inflation is going to come down. And then the contacts come back and say 'Sorry, we got that one wrong.'"
The Bank of England has already raised interest rates 12 times in a row, to 4.5%, in an attempt to tackle inflation, and is widely expected to lift interest rates again when its Monetary Policy Committee meets next week. “But stronger than expected wage growth in the three months to April has raised the prospect that rates could rise close to 6% by the end of the year,” the BBC’s economic experts Michael Race and Faisal Islam write this morning.
Meanwhile, inflation in the US has fallen to 4% over the year to May, down from 4.9% in April, and its lowest level in two years, meaning it stands at less than half the April UK rate of inflation of 8.7%. Britain’s rate is currently the highest in the G7. The Office for National Statistics will publish the May estimates of UK inflation next week.
Labour's Shadow Chancellor Rachel Reeves said the figures represented "another day in the dismal low growth record book of this Conservative government". "The facts remain that families are feeling worse off, facing a soaring Tory mortgage penalty and we're lagging behind on the global stage," she said.
Grant Shapps, Secretary of State for the Department for Energy Security and Net Zero, has claimed that collecting solar power in space and beaming it wirelessly to Earth could generate round-the-clock electricity in all weathers; tackle climate change; and generate 10 gigawatts of power by 2050, enough to power three-quarters of Britain’s homes. Speaking at London Tech Week, Shapps also said the technology could potentially create 143,000 jobs. He promised £4.3m for research projects. “With the climate clock ticking, innovation has never been so important,” he said. “Half of the emissions reductions required to reach net zero by 2050 will have to come from technologies which are not yet totally commercially available.” Scientists at the California Institute of Technology announced earlier this month that they had managed to beam “detectable power” to Earth through microwaves.
The Competition and Markets Authority (CMA) has reprimanded Asda and J Sainsbury over "unlawful, anti-competitive" land agreements. The CMA said both supermarket giants had repeatedly breached the Groceries Market Investigation (Controlled Land) Order 2010, which was introduced to prevent supermarkets stopping rivals from opening competing stores nearby via so-called ‘land-banking’ activity or by or placing restrictions on landlords. The CMA said Asda had breached the order 14 times and Sainsbury's had breached it 18 times between 2011 and 2019. In open letters to the two, Andy Land, the CMA's senior director for remedies, business and financial analysis, acknowledged they had cooperated in assessing their compliance with the order, while highlighting "significant shortcomings" in compliance for companies of their "size, resources and standing, particularly given that the order has been in force since 2010". The letter said Sainsbury's was expected to "move swiftly to rectify all outstanding matters", while Asda was expected to take "all steps necessary" to ensure future compliance. David Stewart, executive director of markets and mergers at the CMA, said: "Restrictions of this nature are against the law, cause real harm to shoppers and will not be tolerated. This is particularly important at a time when many families are struggling to pay their weekly grocery bills." A Sainsbury's spokesperson told the BBC that the "minor, unintentional technical breaches" had not reduced competition, while a spokesperson for Asda said: "All [breaches] relate to legacy transactions that occurred between 2011 and 2019, when Asda was under different ownership, and involve technical errors in documentation that have all been resolved."
Power supplier E.On Next has been ordered to by Ofgem to pay £5m in compensation to more than 500,000 customers for “unacceptable” call services, the Press Association reports. Customers had to wait on hold for 18 minutes on average, and half of all calls failed to contact the supplier, according to Ofgem. £4m will be paid to customers potentially affected, equating to £8 each, and £1m will be paid into Ofgem’s voluntary redress fund, which supports vulnerable energy consumers and innovation and carbon emission reducing investments.
An Anglian Water advertisement promoting how the company builds wetlands to protect the environment has been banned by the Advertising Standards Authority (ASA) because they omitted significant information about Anglian Water’s history of releasing sewage into the environment. The ASA received nine complaints the ads were misleading, a claim Anglian denied, saying it had “an overwhelmingly positive impact on the environment”. It said it did not “actively dump sewage into rivers and seas”, but discharged “highly diluted sewage” into the environment when exceptional storms occurred which could overwhelm the network, to avoid homes flooding. It said this had a “negligible environmental impact on the receiving watercourse and was permitted by the Environmental Agency”. While recognising this, the ASA went ahead with the ban on the basis that in 2021, the most recent year for which data was available, Anglian had an overall Environmental Performance Assessment (EPA) rating of two stars out of a possible four, which meant that the “company requires improvement”.
The City of London has got a vote of confidence from Spanish investment bank Alantra, which has shifted its investment banking headquarters to a new office overlooking St Paul’s, City A.M. reports.
Britain's vegan market appears to be faltering due to a 'slowdown in demand' for meat-free products amid concerns over 'ultra-processed' food and the cost of living, the Daily Mail reports, saying that Meatless Farm has become the latest victim: the Leeds-based company made its 50-strong workforce redundant last Friday when it collapsed into administration. Other brands to have faltered in Britain in recent months include Yorkshire-based sausage maker Heck which has dropped most of its vegan products, and Swedish oat milk firm Oatly which has withdrawn its dairy free ice cream offering in the UK, the newspaper says.
Heathrow Airport is calling on the Government to reinstate VAT-free shopping, saying Europe’s busiest airport is “losing out to neighbours” because Ministers currently refuse to budge on the so-called tourist tax. Although spending by American tourists in the UK has returned to pre-pandemic levels, their shopping has doubled in Spain and France and is now at a respective 201% and 226% of 2019 levels, according to data from tourism shopping tax refund company Global Blue. Shoppers from across the Atlantic are also spending nearly twice as much in Italy as they did before lockdown, reaching 190% of 2019 levels, the report said. Heathrow is among more than 200 businesses to have backed the Daily Mail’s Scrap the Tourist Tax campaign.
British oil giant Shell is set to hike its dividend by 15% effective from the second quarter of this financial year. The group will also initiate share buybacks of 'at least' $5bn (£4bn) in the second half.
IKEA has trained 8,500 call centre workers to become interior design advisers since 2021, Reuters reports, saying the Swedish furniture giant is doing so not just because it has expanded into offering home improvement services, but because run-of-the-mill customer queries have been handed to an artificial intelligence bot called Billie - a name inspired by IKEA's Billy bookcase range. The bot has handled 47% of customers' queries to call centres over the past two years, IKEA said. In the UK, customers can now pay £25 for a 45-60 minute interior design advice video call and suggested product list, and can pay £125 for three workspace design consultations, a floorplan and 3D visuals. IKEA owner Ingka Group told the news agency that sales by phone or video of products and services through its remote interior design channel accounted for €1.3bn (£1.11bn) of revenue in Ingka's 2022 financial year, 3.3% of the total. It aims to grow that share to 10% by 2028 as part of a push to appeal to future Gen Z customers.
Capita has been awarded a contract by the City of London Police to deliver an end-to-end customer management process and victim engagement services for the force's new fraud reporting service, which receives more than 350,000 calls and 2.3m unique website visits each year. The contract will run from 2024 and is worth approximately £50m over five years, with the option to extend by a further two years.
Sky News claims high street clothing retailer Next is looking to sell Reiss, the fashion chain it controls, in a deal that could value Reiss at more than £500m. The newscaster claims investment bank Raymond James has been appointed to oversee the sale process and that the auction has already reached a second round, with multiple potential buyers showing interest.
Entain has raised around £600m in a discounted share placing to help fund acquisition of Polish sports betting operator STS Holdings. The FSE 100 Ladbrokes is buying STS for around £750m. Entain placed a total of just under 48.3m shares at a price of 1,230p, a 6.9% discount to yesterday’s closing share price.
Snowfox Group, the business behind restaurant chain Yo! Sushi has been bought by Zensho Holdings, one of Japan’s largest food companies in a deal worth £495million.
Odey Asset Management has blocked withdrawals from two funds - the Brook Developed Markets Fund and the LF Brook Afternoon Fund - and shut down another, The Swan Fund. The hedge fund faces turmoil following allegations of sexual misconduct against its founder Crispin Odey, whom partners ousted over the weekend. Banks JP Morgan, Morgan Stanley, Goldman Sachs and Exane have all cut ties with the firm.
Three former employees of Swiss private bank Julius Baer yesterday won their appeal against a proposed lifetime ban on working in finance that was requested by The Financial Conduct Authority (FCA). In November, the FCA fined the bank's London-based subsidiary for facilitating finder's fees between Julius Baer and an employee at bankrupt Russian oil group Yukos Group more than a decade ago. Although Judges sitting on London's Upper tribunal agreed the three had "demonstrated varying degrees of a lack of competence and capability," they also castigated the FCA for failings and concluded it would be "irrational" to impose a full or partial ban on the grounds that the three acted without integrity. "There are only so many times that the Authority (FCA) can apologise for its failings, insist that lessons have been learned and then expect that those affected should simply move on," Judge Timothy Harrington said in the unanimous judgment.
US regulators have been granted legal permission to temporarily block Microsoft's $69bn (£56bn) takeover of Activision Blizzard. The US Federal Trade Commission (FTC) says the deal could "substantially lessen competition" in the sector. A two-day hearing will now take place from 22nd June in San Francisco. The deal to buy Activision Blizzard - the company behind Call of Duty and Candy Crush – has already been blocked by the CMA here in the UK, but the EU has approved it. In order for the deal to go through, Microsoft and Activision need approval from regulators in the UK, the EU and the US, and they have said they will appeal the UK decision.
India threatened to shut down Twitter in the country unless it complied with orders to restrict accounts critical of the handling of farmer protests, co-founder Jack Dorsey said, an accusation Prime Minister Narendra Modi's government called an "outright lie". Dorsey, who quit as Twitter CEO in 2021, said on Monday in an interview with YouTube news show Breaking Points that India had also threatened the company with raids on employees if it did not comply with government requests to take down certain posts. Rajeev Chandrasekhar, Modi’s Deputy Minister for Information Technology, called Dorsey’s accusations an "outright lie". "No one went to jail nor was Twitter 'shut down'. Dorsey's Twitter regime had a problem accepting the sovereignty of Indian law," he said in a post on Twitter.
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