Published: 13 September 2023
By Suzanne Evans, Director, Political Insight
Figures released earlier by the Office for National Statistics (ONS) showed the economy contracted more than expected in July, mostly because of strike action within the NHS and poor weather. GDP shrank by 0.5%, having grown 0.5% in June. Analysts had expected only a 0.2% decline. Services output was the main contributor to the fall, dipping 0.5% overall, following 0.2% growth in June and, within the sector, activity in the human health and social work sector fell most, by 2.1%. Meanwhile, production output was down 0.7% in July following 1.8% growth the month before. Manufacturing contracted by 0.8%, while construction dipped by 0.5%, partly wiping out a 1.6% expansion in June.
ONS director of economic statistics Darren Morgan said: "In July, industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather. Manufacturing also fell back following its rebound from the effect of May's extra Bank Holiday”. However, a busy schedule of sporting events and increased theme park visits provided a slight boost. He added.
These latest statistics have inevitably raised the spectre of recession. Paul Dales, chief UK economist at Capital Economics, said: "The 0.5% m/m fall in real GDP in July...could possibly mean that the mild recession we have been expecting has begun. Even so, with wage growth still uncomfortably strong, we suspect the Bank of England will still raise interest rates one final time next week, from 5.25% to 5.50%." Yael Selfin, chief economist at KPMG UK agreed, saying that with the “lagged impact of higher interest rates, the UK economy could struggle to keep its head above water in the remainder of the year.”
In response to the GDP data, shadow chancellor, Rachel Reeves said the figures were “dismal” and showed “the British economy remains hostage to the Conservatives’ low growth trap that is leaving working people worse off”. Chancellor Jeremy Hunt said: “Only by halving inflation can we deliver the sustainable growth and pay rises that the country needs,” adding: “There are many reasons to be confident about the future. We were among the fastest in the G7 to recover from the pandemic and the IMF have said we will grow faster than Germany, France, and Italy in the long term.”
Meanwhile, as strikes within the NHS help hammer the economy, it has been revealed more people are choosing private healthcare than ever before. Around 227,000 admissions were paid for using private medical insurance (PMI) in the first quarter of this year, according to the Private Healthcare Information Network, breaking the previous record of 219,000 set in the last quarter of 2022. The expansion came mainly from insured plans, around 80% of which are paid for by companies on behalf on employees. Insured treatments climbed to 156,000 in the quarter, up from 149,000 at the end of last year. In August, 7.6m people were on NHS waiting lists, the highest number since records began in 2007. At least 885,000 hospital appointments have been postponed because of strike action by staff since December last year. A further 100,000 plus mental health appointments have also been delayed. Charles Cotton, senior policy adviser for performance and reward at the CIPD, said: “It’s not too surprising that many people are turning to private medicine, given the challenges currently facing the NHS in both England and Scotland. Because of this, organisations are reporting increased interest from potential or existing staff about the wellbeing benefits on offer, such as digital GP services, group medical insurance, physiotherapy, occupational sick pay, or health cash plans. Offering such benefits at this time will help employers stand out in the labour market”.
BP CEO Bernard Looney has resigned with immediate effect after less than four years in the job, having failed to fully disclose past relationships with colleagues. In May 2022, BP received allegations from an anonymous source relating to Looney's conduct, following which he “disclosed a small number of historical relationships with colleagues prior to becoming CEO," BP said. "No breach of the company's code of conduct was found,” the statement added, but in light of “further allegations of a similar nature” received recently, “the company immediately began investigating with the support of external legal counsel. That process is ongoing”. Looney is said to have conceded he was not "fully transparent" in his previous disclosures and “accepts he was obligated to make more complete disclosure". No decisions have yet been made regarding any remuneration payments to be made to Looney. CFO Murray Auchincloss will act as CEO on an interim basis.
Poundland is to buy 71 Wilko stores. The company, part of South African retail conglomerate Steinhoff International, reportedly said it would “prioritise” hiring staff previously employed by Wilko. Poundland already has over 800 stores worldwide, and is planning to convert Wilko stores to its brand by the early autumn. It is believed the stores it is buying are in areas where Poundland currently has few stores. FTSE 100 discount retailer B&M European Value Retail had agreed to acquire just over 50 Wilko outlets, in an estimated £13m deal £13m.
Primark’s owner has added its voice to concerns over rising levels of retail crime, saying its store staff are battling more cases of shoplifting and assaults than ever before. George Weston, CEO of Associated British Foods (ABF) said the retailer is rolling out more CCTV and – like Tesco - offering workers body cameras to deter criminals. Primark is also increasing the number of security guards in stores. Weston also said that while there was positive work between retailers and police forces beginning to take place, magistrates and judges need to take retail crime more seriously. “There have been too many examples of theft not being taken as seriously as I think they should be. Those who are responsible for law and order need to help us get on top of this,” he said.
According to a report in The Telegraph, the Government is planning to ban disposable vapes. Ministers are said to be preparing to unveil a Department of Health consultation on the matter as soon as next week, warning vapes are a threat to public health because of growing concerns the brightly coloured and heavily flavoured devices are enticing those under 18. However, industry groups are fighting back, calling it a backwards step in Britain’s health goals. Simon Clark, director of smokers lobbying group Forest, said any ban will be a “significant own goal”. “Vaping has been a huge success story, with millions of smokers choosing to switch to a product that is far less risky to their health. Part of that success is due to disposable vapes which are convenient and easy to use,” he said. “The answer to the problem of children vaping is not to ban a product many adults use to help them quit smoking, but to crack down on retailers who are breaking the law and selling e-cigarettes to anyone under 18”. A spokesperson from British tobacco company Imperial Brands, which also sells vaping products, agreed, saying: “Rather than prohibition, we believe that government, industry, and enforcement authorities must work together to create a regulatory framework which supports the role vapes can play in helping adult smokers quit and, at the same time, prevents the appeal and access of products to youth. An integrated, multi-pronged approach is needed to drive out irresponsible actors and improve trust in this important product category.”
Barclays is cutting more than 450 jobs, according to the Unite trade union which says the decision is "unnecessary and unjustified". National officer Dominic Hook said: "How can a profitable finance organisation such as Barclays slash over 450 staff amid a cost-of-living crisis? This isn't an organisation struggling to survive, this bank is making billions of pounds of profits. If these plans for compulsory redundancy are implemented then hundreds of families will lose their livelihoods… staff losing their jobs are not highly paid rich City bankers but those earning modest salaries within Barclays.” Unite is urging Barclays to reconsider, and ensure no compulsory redundancies. A spokeswoman for Barclays said: “We continue to review and adapt our operations based on the ways customers are choosing to interact with us. These changes will enable greater collaboration across our teams, allowing us to continue to improve service for customers and clients. We are committed to supporting colleagues through this change, working closely with Unite.”
Sir Paul Marshall, the hedge fund tycoon and investor in GB News, has hired investment bank Moelis to advise him on a bid for the Daily and Sunday Telegraph ahead of a looming auction of the titles that could fetch in the region of £600m, City Editor Mark Kleinman reports exclusively for Sky News.
Thames Water has admitted this morning that thousands of West London homes have been left without water, or with low water pressure. A power issue at its Ashford and Hampton water treatment centres have caused the problem, Thames said, and it is “working hard to fix the issue and to get things back to normal.”
Package holiday operator On the Beach has reported a 26% rise in total transaction value (TTV), which represents gains in holiday bookings pre-cancellation, to deliver a £1.1bn, a record year of bookings. Demand has risen 11% year-on-year, it said, while the typically quieter winter months have seen a jump of 26%.
Redrow has become the latest housebuilder to suffer as a result of higher interest rates, posting a 4% slide in underlying profit before tax to £395m in its full year results. The FTSE 250 listed construction firm said that the number of homes it built during the full year fell from 5,436 down from 5,715, and blamed rapidly rising mortgage rates for the hit to the market.
The Ministry of Defence (MoD) has bought £130m of bullets and artillery shells from BAE Systems to replenish stocks depleted from supporting Ukraine’s war effort. The deal follows a similar munitions order worth £280m in July. Up to 200 jobs are set to be created at BAE plants in Tyne & Wear and South Wales as a result of the MoD contracts.
FTSE 100 insurer Aviva has agreed to sell its 25.9% stake in Singapore Life Holdings (SLH), together with two debt instruments, to Sumitomo Life for £800m in cash. Sumitomo Life will pay £500m for Aviva's equity stake and £300m for the two debt instruments. Sumitomo Life is currently a 23.2% shareholder in SLH and sees Singapore as a key market within its overall Southeast Asia strategy, Aviva said in a statement.
FTSE 250 British oil and gas producer Ithaca Energy is to buy the remaining 30% stake in the West Shetland Cambo field from Shell UK, thereby taking full control of Cambo, the second largest undeveloped oil and gas discovery in the UK North Sea. No price was disclosed, but the company said terms were payable on first oil, or receipt of payment to any subsequent sale of the stake by Ithaca.
Smurfit Kappa shares have fallen by more than 10% since the FTSE 100 firm said it had agreed to merge with US rival WestRock in a deal that will create a $20bn packaging giant under the name Smurfit WestRock. Under the terms of the transaction, shareholders of WestRock will receive one new Smurfit WestRock share and $5 in cash. “The Boards of Smurfit Kappa and WestRock see compelling strategic, commercial and financial rationale for combining (their) highly complementary paper-based packaging companies to create a global leader in sustainable packaging. The combination will enhance Smurfit Kappa and WestRock's existing offerings by creating the global "Go-To" packaging partner of choice,” a statement said.
London-listed oil and gas group Tullow Oil is also watching its shares plummet almost 9% this morning after revealing profits more than halved in the first six months of 2023 on the back of a significant drop in crude prices. Tullow also disappointed the market with lower-than-expected output guidance for the full year.
Investment manager St James's Place has confirmed rumours it is replacing its long-running CEO Andrew Croft with former Prudential boss Mark FitzPatrick. Croft, who has been with the company since 1993 and CEO since 2018. will stay on the board until the end of the year and then remain with the company into 2024 "to assist the business as required," the firm said.
And finally… Apple is to stop using leather across all of its accessories in an effort to “protect the planet” and meet its net zero targets by 2030. Leather in its new watch straps and phone cases will be replaced with a material called “FineWoven”, which is made using 68% recycled textiles and other artificial fibres, and which COO Jeff Williams said had a “significantly lower carbon footprint than leather;” a “suede-like” feel; and a “sophisticated look”. Lisa Jackson, Apple vice president for environment, said the company’s aim was to “make products customers love and protect the planet at the same time”. “Leather is a popular material for accessories, but it has a significant carbon footprint, especially at Apple’s scale. To reduce our impact, we will no longer use leather in any new Apple product, including watchbands,” she added.
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