BUSINESS LIVE: UK GDP shrinks 0.3%; Entain boss exits; Workspace embraces solar power

Money Mail has received a deluge of letters from BT customers complaining of chaos and confusion around a advance to switch Britain’s 29 million homes over to new digital landlines.

One customer lost the phone number she had used for 50 years after her old copper-wire landline was switched off and a new internet telephone was installed at her home.

Mike Riddell, head of macro unconstrained at Allianz Global Investors:

‘It’s no longer about how much higher rates will go; we’re almost certainly at the peak. It’s now about how fast and how soon rates will go back down again. As ever, the BoE will be keen to keep all options open, but markets are increasingly disbelieving that the BoE will consider hiking again.

‘Markets are fully pricing in a quarter point cut next June and expect UK rates to be down to 4.5% by this time next year.

‘While markets are now pricing in a number of cuts through 2024 and 2025, it is still striking that the market’s central case is for the BoE to never cut interest rates below 3.75% ever again. This might make sense if inflation is expected to stay well above target, but that’s not the case – markets assume inflation is likely to be back below 3% this time next year.

‘The implied trough in UK interest rates of 3.75% in 2025 therefore indicates that the UK and global economy will avoid any meaningful recession. But most of the super aggressive hikes of the last year haven’t even been felt yet, due to the lags between interest rate changes and their impact on the economy.

‘The spare capacity that is still set to be created as the previous hikes bite, leads us to infer that the hit to UK growth is likely to be far greater than most expect. A sharp downturn in growth also likely means that inflation pressure ought to quickly subside through next year.’

Hopes for an interest rate cut in the first half of next year have been reinforced after official figures yesterday showed that pay growth has slowed sharply.

Average weekly earnings rose by 7.3 per cent in the three months to October compared with the same period last year, according to the Office for National Statistics.

Flexible work space firm Workspace Group has signed a 10-year deal to buy electricity from renewable energy supplier Statkraf.

Workspace said the agreement would see Statkraf supply approximately two thirds of its expected electricity demand from February 2024.

FTSE 250-listed Workspace said it will take all the electricity generated by a newly constructed solar plant in Devon.

Boots could float on the London stock market next year under plans being examined by its American owner.

Walgreens Boots Alliance has resumed talks to sell the High Street chemist after efforts collapsed last year.

The FTSE 100 is up marginally as the pound easees after data showed that the UK economy contracted in October, while markets await the Federal Reserve’s rate decision later today.

Sterling is down 0.3 per cnet after official data showed Britain’s economy shrank in October, testing the Bank of England’s settle to stick to its tough line against signalling cuts to interest rates from their 15-year high.

Keeping a lid on gains, heavyweight energy stocks have dipped 0.7 per cent amid declining crude oil prices.

Later in the day, the Fed will announce its decision on monetary policy, with the consensus tilted towards the central bank holding rates steady.

Entain shares are up 6 per cent after the gambling giant said CEO Jette Nygaard-Andersen will step down from the group with immediate effect.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

’The UK economy has accelerated more sharply into reverse, as the pain of interest rates takes an even bigger toll on companies and consumers. An Autumn of adversity has emerged and there is little prospect of a fast turnaround.

‘Output shrank in every sector in October, particularly manufacturing where it fell by 1.1%. Although the mighty Services sector was expected to stay on more of an even keel, it also shrank by 0.2% and construction too suffered a 0.5% contraction.

‘Across the three months, output was flat, with the contraction cancelling out the better-than-expected performance in September. The UK is still mired deep in stagnation territory and a fast rebound looks unlikely, particularly given that interest rates are set to be kept on hold tomorrow, prolonging the pain for borrowers.

‘However, it does enhance the likelihood that the Bank of England might cut rates earlier than forecast, although it’s still not likely until the second half of next year, given that wage increases, although slowing, are still strong.’

Poundland’s owner insisted it was ‘cautiously optimistic’ about the year ahead after annual profits crashed by more than a third.

Pepco Group, which owns the Pepco and Dealz brands in Europe as well as Poundland in the UK, revealed profits fell 35.8 per cent to £126million for the 12 months to the end of September.

John Lewis customers who have had their credit limit slashed in recent months have had their full limit reinstated after Money Mail raised the alarm last week.

In a major u-turn, John Lewis agreed to reverse the dramatic cuts it had made to the credit limits of loyal customers.

Dr Roger Barker, director of policy at the establish of Directors:

‘There is very little of comfort in the latest GDP figures. The emerging picture is one of a sinking economy. The possibility that we will advance into recession next year has increased.

‘October was an exceptionally wet and windy month. So, declining output in sectors admire construction, retail and hospitality was not entirely unexpected.

‘However, declines in service sectors such as computer programming, consultancy and the media may be suggestive of more persistent economic weakness.

‘Although the labour market remains tight, the emerging economic picture points to a need for the Bank of England to start cutting interest rates sooner rather than later. We hope that it does not delay its policy response too long as it did at the beginning of the current cycle.’

Chemring reported booming demand yesterday, as it cashed in on global instability.

The defence group, which makes materials and components for missile systems, explosives and propellants, said orders hit £756million in the year to the end of October.

This was up 40 per cent on the previous year. And the order book is at its highest level in over a decade at £922million, the company said.

Lindsay James, investment strategist at Quilter Investors:

‘UK GDP fell 0.3% month-over-month in October, down from 0.2% in September and missing estimates, piling the pressure on the Bank of England ahead of Thursday’s interest rate decision.

‘While no rate cuts are expected tomorrow, or for some time, it will be crucial to see how the BoE is monitoring economic growth going forward and what that might mean for the path of interest rates. Calls for rate cuts are likely to grow stronger should this sort of economic data persist.

‘Services in the UK has always been the strongest part of the economy, but this month it has driven the fall in GDP as a result of information and communication services struggling. If the UK is to avoid recession it is the services sector that is likely to hinder it, so seeing such a sharp fall on the month will be bring about for concern.

‘With GDP growth over the last rolling three month period also flat, economic conditions in the UK are clearly tough as we work through the winter months.

‘The BoE will be hoping it can muddle through so its higher for longer narrative can persist, but how long this can continue remains to be seen.

‘This may be a fairly backward looking data set, given it is for October, but it will remain a crucial one to watch as we enter 2024. The Bank of England has done a good job not tipping the UK into recession to date, but interest rates are biting now and encourage contraction cannot be ruled out. It could be a while before things get better again.’

Flexible office space provider Workspace Group has reached an agreement with Europe’s largest generator of renewable energy to supply around two thirds of the firm’s expected electricity demand for the next 10 years.

Statkraft will furnish Workspace with all the electricity generated by a newly constructed solar plant in Devon, contributing to the UK’s clean energy capacity.

This agreement marks the first clean energy deal made by a London office provider to date, sourcing electricity directly from a renewable energy generator, the group said.

Sonal Jain, head of sustainability at Workspace, said:

‘Today we have taken a significant step on our path to net zero carbon by decarbonising around two thirds of our portfolio’s electricity use.

‘The recent agreement at COP28 for countries to triple their renewable energy capacity by 2030 is supported by decisions admire ours, which enable new capacity on the grid, rather than simply procuring from the existing supply.

‘This is by far the most responsible way we can acquire a substantial share of clean green electricity.’

Neil Birrell, Chief Investment Officer at Premier Miton Investors, commented:

‘The UK economy shrank by 0.3% in October, more than estimated, but given recent data, that should not be too much of a surprise.

‘It’s clear that economic growth has been stalling, as should be expected given policy measures, which is where all eyes will be focused now.

‘This data is historic but it’s all about what happens next, and we will hear the thoughts of major central banks in the next two days.

‘The Bank of England will be pleased that their actions have worked, but worried that they have gone too far. We will find out tomorrow.’

Bond yields fell yesterday as fresh signs of easing inflation pressure threw the spotlight onto central banks ahead of key interest rate decisions.

UK figures showed a slowdown in wage growth while in America inflation dipped to 3.1 per cent.

The data comes ahead of the US Federal Reserve’s rate decision tonight.

The chief executive of Ladbrokes owner Entain will step down from the gambling giant with immediate effect.

Jette Nygaard-Andersen will be replaced by Stella David, currently a non-executive director, on an interim basis.

David will remain in the role until a permanent replacement is found.

Nygaard-Andersen said: ‘The past three years have been rewarding and challenging in equal measure.

‘The resolution of the HMRC investigation into the legacy business, which was sold by a former management team in 2017, offers a clean inflection point for me and for Entain.

‘The Group is now safe, stable and sustainable and I believe that this is the right time to advance on to other business and career opportunities.’

The British economy shrank by 0.3 per cent in October, missing economist forecasts of flat growth for the month, fresh data from the Office for National Statistics shows.