Article 3SG2T UK facing weakest growth since 2009; Audi CEO arrested over dieselgate scandal - as it happened

UK facing weakest growth since 2009; Audi CEO arrested over dieselgate scandal - as it happened

by
Graeme Wearden (until 1.50) and Nick Fletcher
from Economics | The Guardian on (#3SG2T)

Britain's bosses warn that Britain's economy is weakening, as German prosecutors arrest boss of VW's Audi division

Earlier:

5.33pm BST

Investors have been rattled by the escalation of the trade dispute between the US and China, pushing stock markets lower once more. On top of that come concerns about the political situation in Germany, with the issue of immigration putting pressure on the country's coalition government. But signs of optimism over the issue has seen markets come off their worst levels. The final scores showed:

4.17pm BST

Joshua Mahony, market analyst at IG, said:

Global markets have started the week on a weak footing, as trade fears continue to play the primary role in determining market sentiment. With both the US and China set to impose a raft of tariffs on 6 July, there is likely to be an increasingly unstable and anxious market environment as we progress towards that deadline....

However, equally as important is the huge uncertainty we are seeing build in Germany, with Angela Merkel clashing with the leader of their coalition partner (CSU) over her stance on immigration. It is no doubt that immigration remains Merkel's Achilles heel, and with the chancellor desperate to maintain a coalition to maintain her dominance over German politics, markets are understandably jittery at the thought of any political upheaval in the biggest economy in Europe.

3.36pm BST

Markets are still in the red, amid US-China trade fears and worries about the political situation in Germany. Connor Campbell, financial analyst at Spreadex, said:

Things got pretty ugly after the US open, the Dow Jones following in the footsteps of its Eurozone peers by posting some heavy losses.

The Dow plunged 240 points as the session got underway, a sharp decline that took it back below 24850 and to its worst price in 12 days. The index is struggling under the weight of the escalating US-China trade war, with Trump's decision to push forward with tariffs on Beijing last Friday causing another nasty flare-up of international posturing.

3.25pm BST

The pound has come under pressure amid the latest Brexit developments - peers are currently debating the EU withdrawal bill which can be followed in our politics live blog - and ahead of the latest Bank of England meeting on Thursday.

With the Bank widely expected to leave interest rates on hold, the pound has slipped 0.32% against the dollar to $1.3240 having earlier fallen as low as $1.3227. Dan Smith, investment analyst at Thomas Miller Investment, said:

The Bank of England (BoE) holds a monetary policy meeting this Thursday (21 June) and is widely expected to make no change to interest rates. Incoming data continues to show that the UK economy is not firing on all cylinders. Consumer spending, employment and business confidence surveys have been fairly solid and supportive of growth, whilst industrial production and manufacturing have been exceptionally weak.

The minutes of the meeting will be closely scrutinised to see whether policy members sit on the optimistic or pessimistic side of the fence in regards to recent data, with the tone of the minutes likely to set expectations over the possibility of an interest rate rise in August.

2.39pm BST

The increased trade tensions between the US and China continue to unnerve investors, with Wall Street falling sharply at the open.

The Dow Jones Industrial Average is down 238 points or 0.95% while the S&P 500 and the Nasdaq Composite both opened almost 0.7% lower.

2.05pm BST

Elsewhere the oil price is heading higher ahead of a key meeting of Opec later this week.

Brent crude is currently up 1% at $74.18 a barrel, recovering some of its recent losses. Saudi Arabia and Russia had been widely expected to agree to increase production, boosting supplies and lowering prices. But talk that this may not happen after all - or perhaps not by as much as previously expected - has halted the slide in crude.

1.59pm BST

The arrest of Audi's chief executive does not mean the truth about Dieselgate is any closer, says consumer rights law firm Your Lawyers, which is leading the steering committe for a group litigation order against Volkswagen. The firm's director Aman Johal said:

Audi CEO Rupert Stadler's arrest and investigation over fraud and false advertising indicates that we may still be no closer to the full extent of the truth behind the Volkswagen Group's Dieselgate scandal.

Stadler is one of 20 suspects being investigated at Audi for false claims about its diesel vehicles. Perhaps the widening probes will lead to greater clarity on how the automotive giant was able to cheat customers around the world, and which individuals within the VW Group are personally responsible.

1.38pm BST

1.20pm BST

German newspaper Frankfurter Allgemeine Zeitung reports that Audi's board will soon appoint an interim chief executive, following Rupert Stadler's arrest this morning.

The appointment will be made at a supervisory board meeting convened at short notice on Monday.

11.52am BST

The Volkswagen emissions scandal centred on the use of "defeat devices," which allowed VW cars to recognise when they were being tested in the lab and enter a low-emissions mode.

Otherwise, they would generate more pollution than permitted under EU and US rules, but also provide higher performance.

Volkswagen has pleaded guilty to criminal charges in the United States and nine managers, including former CEO Martin Winterkorn, were charged there. Two are serving prison terms; Winterkorn and the others remained in Germany and are unlikely to be extradited.

11.28am BST

German news agency DPA is reporting that German prosecutors arrested Rupert Stadler on fears that he might undermine the ongoing investigation into the VW diesel emissions scandal.

The investigation is focused on claims that Audi sold at least 210,000 diesel-engine cars fitted with cheat software in the United States and Europe over several years.

11.12am BST

Shares in Volkswagen have fallen 2% in Frankfurt, following Stadler's arrest (Audi is one of VW's biggest divisions)

11.06am BST

More details of Audi CEO Rupert Stadler's arrest are coming in.

He was detained at his home in Ingolstadt, the Bavarian city, in the early hours of this morning, prosecutors say.

"As part of an investigation into diesel affairs and Audi engines, the Munich prosecutor's office executed an arrest warrant against Mr Professor Rupert Stadler on June 18, 2018,"

10.40am BST

Newsflash: Over in Germany, the boss of automaker Audi has been arrested by police investigating the emissions scandal.

"We confirm that Mr Stadler was arrested this morning. The hearing to determine whether he will be remanded is ongoing."

Related: The Volkswagen emissions scandal explained

10.20am BST

David Madden, CMC Markets analyst, says investors are "caught in the middle" between the US and China.

Stock markets are broadly lower today as traders are increasingly worried about the prospect of a trade war. Tensions between the US and China are escalating, and we are not any closer to an agreement being reached.

We are expecting the Dow Jones to open down 115 points at 24,975 and we are calling the S&P 500 down 9 points at 2,770.

10.05am BST

Back in the UK, the takeover battle for Virgin Money is over -- putting hundreds of jobs at risk.

Clydesdale and Yorkshire Bank Group (CYBG) and Virgin Money have agreed to create the UK's sixth-largest bank, with 6 million personal and small business customers and total lending of 70bn.

The banks expect to make 120m of annual savings by by 2021 by reducing overlap between their operations. This will result in a 16% reduction in the combined group's 9,500-strong workforce that CYBG hopes to achieve by attrition - that is, when people leave they will not be replaced. It declined to say how many of the combined group's 250 branches will be closed.

Related: Virgin Money takeover by CBYG to result in 1,500 job losses

9.39am BST

European stock markets have started the week on the back foot, as fears of a global trade war intensify.

The Stoxx 600 index, which tracks Europe's largest companies, has dropped by 0.5% after America and China imposed tit-for-tat tariffs on Friday.

"It reinforces the difference in images of the two countries: one challenges the foundation of global trade through sudden attacks; and one that is prepared to defend itself in a trade war that it cannot avoid."

Related: 'The fool builds walls': China takes aim at Trump trade war threats

The negotiating style of President Trump had allowed investors to assume that his threats were hyperbole and part of his unique diplomatic style, and that he would step away from the brink rather than risk undermining the positive impact his previous policies have had on the stock market.

However, the US decision to press forward and take on China makes the risks far more pronounced and the real danger is that the Chinese retaliation may start a chain reaction that is difficult to stop - especially as Trump likes to have the last word.

9.14am BST

In another sign of economic weakness, London house prices have fallen for the 10th month in a row.

Rightmove reports that asking prices in the capital are down 0.9% compared with May, and are 1.0% lower than a year ago. That's the 10th monthly fall in a row, as the once-hot London property market continues to cool.

"The reduction in property choice for buyers in the north compared to a year ago is a result of property for sale being snapped up, meaning it's more of a sellers' market there.

In marked contrast the jump in buyer choice in southern regions shows there are signs of a sellers' market in some areas."

8.55am BST

Here are all the key points from the British Chamber of Commerce's new economic forecasts:

8.34am BST

The BCC's gloomy forecasts could actually be too optimistic, if the Brexit process ends messily or if Donald Trump manages to create a full-blown trade war.

Suren Thiru, head of economics at the British Chambers of Commerce, explains that the UK is vulnerable to external shocks:

"While Brexit uncertainty and the weakness in sterling have weighed on overall UK growth, it is the failure to deal with the longstanding structural issues from weak productivity to the deep imbalances in the UK economy that continue to undermine the UK's growth potential.

"The risks to the outlook are on the downside. A messy departure from the EU would likely slow UK GDP growth further over the medium term. The prospect of an escalating trade war is now a key downside risk to our forecast as it could mean much weaker export and business investment growth than implied by the current forecast.

8.15am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain is facing its weakest growth since the financial crisis, as uncertainty over Brexit and fears of a global trade war hit confidence.

"A decade on from the start of the financial crisis, the UK now faces another extended period of weak growth amidst a backdrop of both domestic and global uncertainty.

"Our forecast should serve as a wake-up call to government - as it demonstrates that 'business as usual' is not an option when it comes to the economy.

Businesses across the country want to see far more urgency around fixing the fundamentals here at home and a concerted effort to lower the high costs of doing business.

Related: China retaliates against Trump's $50bn in tariffs, escalating possibility of trade war

Related: Angela Merkel stands firm as Germany's refugee row intensifies

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