UK development revised all the way down to zero; corporations warn financial system is heading for ‘worst of all worlds’ – enterprise reside | Enterprise

Key occasions

Biden launches new US commerce probe into legacy Chinese language chips

Over within the US, the Biden administration has introduced new commerce investigation into Chinese language-made “legacy” semiconductors.

The transfer that might result in larger US tariffs on chips from China utilized in items from autos to washing machines to telecoms gear.

The US Commerce Consultant’s workplace says there’s proof that China is searching for to dominate home and world markets within the semiconductor business, and undertakes intensive anticompetitive and non-market means, together with setting and pursuing market share targets, to realize indigenization and self-sufficiency.

Ambassador Katherine Tai says:

“This investigation underscores the Biden-Harris Administration’s dedication to standing up for American staff and companies, growing the resilience of important provide chains, and supporting the unparalleled funding being made on this business.”

The “Part 301” probe will probably be handed over to Trump’s administration, when it succeeds the Biden White Home in 4 weeks.

Extra particulars right here.

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Honda, Nissan and Mitsubishi verify merger talks

Honda, Nissan and Mitsubishi have confirmed they’re in talks over a potential three-way merger because the Japanese firms battle with falling gross sales and competitors from Chinese language manufacturers.

The businesses confirmed on Monday that Honda and Nissan had agreed to “begin consideration in the direction of a enterprise integration via the institution of a joint holding firm”, and that Mitsubishi would additionally determine on becoming a member of by the tip of January.

The merger would mix Japan’s second- and third-largest carmakers, and add the smaller Mitsubishi, in a defensive effort to affix forces because the automotive business goes via its largest ever interval of upheaval. It might create the world’s third-largest carmaker by way of annual gross sales, behind solely Japanese rival Toyota and Germany’s Volkswagen.

Extra right here:

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The UK financial system’s failure to develop within the third quarter is the newest blow to a authorities already going through criticism from companies, as Sam Miley, managing economist and forecasting lead a the CEBR thinktank explains:

“Downward revisions point out that the UK financial system was stagnant in Q3. This adopted an preliminary estimate of a 0.1% quarterly enlargement.

This knowledge revision provides additional proof to the view that the UK financial system is struggling for momentum and can come as a blow to the brand new Authorities, having made development a coverage precedence. Cebr expects the UK financial system to develop by simply 0.9% this 12 months, with a modest enchancment to 1.3% projected for 2025.”

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The information that the UK financial system flatlined within the third quarter of this 12 months has dampened the temper within the Metropolis this morning.

The FTSE 100 share index is up simply 5 factors in morning buying and selling at 8089 factors, a achieve of 0.07%, having hit a one-month low on Friday.

Susannah Streeter, head of cash and markets at Hargreaves Lansdown, says:

‘’The FTSE 100 has continued on its shedding streak, with a Santa rally proving elusive, whereas European indices are additionally in much less cheery shade crimson.

There’s not a lot merriment round for the UK’s financial prospects as the newest evaluation from the ONS paints an image of stagnation. As an alternative of meagre development of 0.1% the financial system stood nonetheless between July and September, and that was earlier than the Price range forged one other chill, and brought about output to shrink in October.

The lengthy interval of hypothesis previous to Rachael Reeves bulletins is unlikely to have helped, given the hearsay mill was working on overdrive. With development flagging even earlier than the hike in Nationwide Insurance coverage contributions comes into impact, it’s more likely to make some firms that bit extra hesitant about climbing wages or occurring recruitment sprees.

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It’s “very seemingly” the UK financial system has contracted within the present quarter, warns Professor Costas Milas, of the College of Liverpool’s Administration Faculty.

He tells us:

Revised GDP knowledge level to a potential contraction in 2024 This fall because the financial system’s development has been revised all the way down to 0.4% (from 0.5%) in 2024Q2 and likewise flatlined in 2024Q3 (from 0.1% beforehand).

This very lack of momentum over successive quarters means that the 0% development predicted final week by the BoE’s policymakers is our “greatest case state of affairs”. Discover that the MPC will determine, once more, on rates of interest in early February 2025, that’s, earlier than having the total image for the financial system’s efficiency in 2024Q4.

It is sensible to chop rates of interest at that time slightly than being overtaken totally by hostile financial occasions.

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UK was slowest G7 financial system in Q3

Earlier than the election, Labour mentioned needed the UK to have the best sustained development within the G7.

However… this mission has obtained off to a nasty begin. This morning’s GDP downgrade means the UK was the joint-slowest member of the G7 within the third quarter of the 12 months, with no development in July-September.

Right here’s the newest development estimates from different main superior economies, for comparability.

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As we speak’s GDP downgrade exhibits the UK financial system has misplaced traction,, the economics crew at Investec say.

In a analysis observe festively titled “The grinch steals Q3 GDP development”, Investec say this might result in extra fast cuts to UK rates of interest in 2025.

They clarify:

The primary level is the additional indication of a lack of traction within the financial system, after a buoyant first half of 2024.

This follows current information that GDP shrank in each September and October and can most likely depart the UK solely simply escaping a technical recession in Q3 and This fall. The higher information is that it’s going to make the [Bank of England’s] MPC extra inclined to convey rates of interest down early subsequent 12 months, particularly because it was dismissive of final week’s robust earnings knowledge for October.

Whereas rate of interest markets are at present pricing in between two and three 25bp cuts within the coverage charge over subsequent 12 months, we stand by our view of 4, which might take the extent of the Financial institution charge down to three.75%.

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Labour have “killed, plucked and cooked the UK financial goose”

Andrew Griffith, shadow secretary of state for Enterprise and Commerce, has accused the federal government of “trash speaking” the financial system, making a recession “a definite risk.”

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Aviva to purchase Direct Line in £3.7bn deal

A £3.7bn takeover within the UK insurance coverage sector has been agreed, placing jobs in danger.

Aviva has reached settlement with Direct Line to take over its smaller rival in a money and share deal.

It values every Direct Line share at 275 pence, which Aviva says is a 73.3% premium to their worth in late November earlier than the primary provide was made, and rejected.

As we speak, Dame Amanda Blanc, group chief govt officer of Aviva, says:

“This deal is good news for the shoppers and shareholders of Aviva and Direct Line. It builds on our observe report of delivering 4 years of robust monetary efficiency and, according to our technique, it accelerates our development in capital gentle enterprise.

Aviva and Direct Line share a deep dedication to excellence in taking care of prospects, and this can stay a high precedence following the Acquisition. The monetary power and scale of the Mixed Group means prospects will profit from aggressive pricing, an enhanced claims expertise and even higher service.

The acquisition of Direct Line by Aviva will convey collectively various the UK’s main manufacturers in a extra environment friendly enterprise, which could be very properly positioned to generate robust returns for all shareholders.”

However it will not be good news for all Aviva and Direct Line employees. Aviva says it expects to chop between 5% and seven% of jobs on the mixed firm, “in an effort to obtain the anticipated advantages of the acquisition”.

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The largest draw back danger to UK financial development is the hazard that the federal government have layered too many burdens on UK employers, too shortly, says Simon French, chief economist at funding financial institution Panmure Liberum.

French additionally means that the gloomy warnings from Labour after it gained July’s election have backfired.

Posting on X, he says:

The conclusion needs to be that the govt. messaging over the summer time was completely self defeating to the mission of financial development, and people phrases got here with a value in a method they didn’t in opposition. Very, very laborious to recapture the goodwill they’d with enterprise in early July.

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UK financial system, the small print

Digging into right now’s GDP report, we will see that the companies sector stagnated in July-September.

The business-facing companies sector flatlined, whereas consumer-facing companies elevated by 0.1%

The biggest optimistic contributor to development was “wholesale and retail commerce; restore of motor automobiles and bikes subsector”, whereas the most important destructive contributor to development was “monetary and insurance coverage actions”.

The manufacturing sector shrank by 0.4%, led by a 2.0% decline in electrical energy, fuel, steam and air con provide, whereas the manufacturing sector contracted by 0.1%.

Development output is estimated to have grown by 0.7%; new work elevated by 1.6%, whereas restore and upkeep decreased by 0.5%.

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Reeves: Fixing the financial system is a big problem

Chancellor Rachel Reeves has warned that the goverment faces a “large” problem to repair the UK financial system.

Reacting to this morning’s information that the financial system didn’t develop in July-September, Reeves says:

“The problem we face to repair our financial system and correctly fund our public funds after 15 years of neglect is large.

“However that is solely fuelling our hearth to ship for working individuals.

“The Price range and our plan for change will ship sustainable long-term development, placing more cash in individuals’s pockets via elevated funding and relentless reform.”

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Capital Economics: financial system has floor to a halt

The downward revision to UK Q3 GDP from +0.1% q/q to 0.0% seems to be primarily attributable to exterior influences slightly than the home financial system, reviews Paul Dales of Capital Economics, who says:

This leaves loads of scope for a full of life debate with the household over the festive interval about whether or not or not the financial system is heading for a recession.

Capital Economics additionally estimates that the UK financial system additionally stagnated within the fourth quarter of this 12 months.

Dales provides:

General, these knowledge recommend that after a bumper first half of the 12 months, the financial system floor to a halt within the second half of the 12 months attributable to a mix of the lingering drag from larger rates of interest, weaker abroad demand and a few considerations over the insurance policies within the Price range.

Our hunch is that 2025 will probably be a greater 12 months for the financial system than 2024. However newer knowledge recommend the financial system doesn’t have a lot momentum because the 12 months involves an in depth.

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As we speak’s up to date UK GDP knowledge exhibits that the restoration from the recession within the second half of 2023 was weaker than first thought:

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Family incomes stagnated within the third quarter of this 12 months, right now’s GDP quarterly nationwide accounts report exhibits:

The ONS says:

Early estimates of actual households’ disposable earnings per head present no development in Quarter 3 2024, following development of 1.4% within the earlier quarter.

The family saving ratio is estimated at 10.1% within the newest quarter, down from 10.3% in Quarter 2 2024.

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Recession warning: What the papers say

The Conservatives’ warning that Britain could possibly be going through a ‘recession made in Downing Road’ subsequent 12 months makes the entrance web page of two right-leaning newspapers.

The Day by day Mail says the CBI’s survey of 899 corporations painted a downbeat image of the nation’s financial future…

Whereas The Instances leads on an admission from Lucy Powell, the chief of the Commons, that the state of Britain’s stalling financial system is “disappointing”.

Powell mentioned she understood the general public’s frustration with Labour’s tenure thus far, arguing:

“We knew [governing] was going to be troublesome.”

“I believe the voters and the general public knew it was going to be troublesome too, that’s why they voted for change as a result of we knew the nation was in such a nasty state of affairs.

“I can perceive individuals’s frustration. It’s a frustration that I share, as a result of we need to make issues higher, sooner for individuals.”

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UK financial system heading for ‘worst of all worlds’, CBI warns

This morning’s downgrade to UK development in July-September comes as enterprise teams warn that exercise is about to fall at the beginning of the brand new 12 months.

The Confederation of British Trade is warning this morning that the UK financial system is “headed for the worst of all worlds”, with exercise over the subsequent quarter set for a “steep” decline.

And chancellor Rachel Reeves’s price range is being blamed for driving development expectations all the way down to the weakest stage in over two years.

The CBI’s newest development indicator survey has discovered that non-public sector corporations count on to chop down on hiring, scale back output and lift costs within the first three months of 2025.

Alpesh Paleja, the group’s interim deputy chief economist, says:

“There’s little festive cheer in our newest surveys, which recommend that the financial system is headed for the worst of all worlds – corporations count on to scale back each output and hiring, and value development expectations are getting firmer.

Companies proceed to quote the affect of measures introduced within the Price range – significantly the rise in employer NICs – exacerbating an already tepid demand setting.

Tory enterprise spokesman Andrew Griffith has claimed that if the UK falls into recesion, will probably be one “made in Downing Road”.

Responding to the CBI’s survey, Griffith says:

“Since taking workplace, the chancellor has made this nation a hostile local weather for aspiration, for funding and for development.”

The Conservative MP added: “Rachel Reeves’s tax-raising spree and trash-talking her financial inheritance are actually killing companies and jobs.

“If there’s a recession – and based mostly on these CBI expectations that appears more and more seemingly – will probably be one made in Downing Road. Labour must urgently change course earlier than the harm they’re doing turns into even better.”

The Treasury has defended October’s price range, saying the federal government is delivering the soundness that companies want.

A Treasury spokesperson says:

“Greater than half of employers will both see a lower or no change of their Nationwide Insurance coverage payments.

“We have now capped company tax on the lowest charge within the G7, offered 40% enterprise charges aid subsequent 12 months for 250,000 properties the place there have been no plans to take action, launched a 10-year infrastructure technique and are creating pension mega funds to spice up funding in British companies, infrastructure and clear power. That is alongside establishing a Nationwide Wealth Fund to catalyse over £70bn in funding to drive development in our to spice up funding in British companies.”

However…there’s additionally rising gloom within the purchasing sector, with the British Retail Consortium predicting {that a} January spending squeeze is on the horizon.

In keeping with the BRC’s newest Client Sentiment Monitor, client expectations for the state of the financial system over the subsequent three months have fallen:

Helen Dickinson, chief govt of the British Retail Consortium, says:

“Public confidence within the state of the financial system took a nosedive…

This created a widening hole between expectations of the financial system and of individuals’s personal funds, which remained unchanged. Perceptions have been closely skewed by age, with 18 to 35 12 months olds significantly extra upbeat than older generations on each questions.

The general public’s spending intentions – each in retail and past – dropped 6pts, with expectations of spending in practically each retail class falling. If these expectations are realised, retailers may discover themselves going through a New Yr spending squeeze simply as they unveil their January gross sales.

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Up to date at 02.12 EST

Introduction: UK GDP revised all the way down to 0%

Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world financial system.

Britain’s financial system stagnated within the first three months of the brand new Labour authorities, and was additionally weaker than anticipated within the last quarter of the Conservatives’ tenure, new knowledge this morning exhibits.

The Workplace for Nationwide Statistics has simply revised down its estimate of GDP development within the third-quarter of this 12 months, to 0%, down from 0.1% beforehand anticipated. That exhibits the UK financial system flatlined in July-September.

The most recent GDP quarterly nationwide accounts report, simply launched, additionally exhibits that actual GDP per head fell by 0.2% in Quarter 3 2024, and is 0.2% decrease in contrast with the identical quarter a 12 months in the past.

On an output foundation, the oNS says there was no development within the companies sector within the newest quarter, while a 0.7% improve in building was offset by a 0.4% fall in manufacturing.

ONS director of financial statistics Liz McKeown explains:

“The financial system was weaker within the 2nd and third quarters of this 12 months than our preliminary estimates advised with bars and eating places, authorized corporations and promoting, specifically, performing much less properly.

“The family saving ratio fell somewhat within the newest interval, although stays comparatively excessive by historic requirements. In the meantime actual family disposable earnings per head confirmed no development.”

The ONS has additionally revised down its estimate for development in April-June to 0.4%, down from 0.5% development estimated earlier.

We’ll be monitoring extra response to the state of the financial system via the day, because the Metropolis winds down for Christmas:

The agenda

7am GMT: UK GDP quarterly nationwide accounts, UK: July to September 2024

1.30pm GMT: Chicago Fed Nationwide Exercise Index

3pm GMT: CB report on US client confidence

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Up to date at 02.15 EST