UK business investment slows, but retail sales bounce back - business live

Graeme Wearden

from on 2017-11-23 16:51 (#38S5W)

Updated growth figures show British businesses reined in their spending over the summer - bad news for the productivity crisis

Earlier:

Latest: Eurozone companies enjoy best month in six years
Living standards squeeze to continue
Politics Live: Hammond defends the budget

4.51pm GMT

Time for a quick recap.

A new report on Britain's economy has shown that firms reined in their investment over the summer. UK business investment growth more than halved in Q3 2017, to 0.2%, suggesting bosses were reluctant to invest for the future.

4.50pm GMT

A quiet day in the European markets has ended, with the FTSE 100 closing almost flat. France and Italy managed a small rally though.

European stock markets mixed on the day https://t.co/fbG7E3FWBk Closing changes for the main bourses
- UK FTSE -0.1%
- French CAC +0.5%
- German DAX -0.1%
- Spain IBEX +0.1%
- Italy MIB +0.4%
We might be at the end of the retracement cycle in French stock markets.

4.34pm GMT

Financial firms and organisations with a large gender pay gap may have to explain it to MPs.

Nicky Morgan MP, chair of the Treasury Committee, says there is no room for complacency, following the publication of the Bank of England's data today.

"The Bank's measures to address its pay gap seem to be on the right track, but we cannot be complacent. Any gap is still too great.

"As part of our Women in Finance inquiry, we will keep a close eye on organisations as they report their gender pay gap before the April 2018 deadline.

"We may call for organisations to give evidence to the Committee to hear about best practice. Financial firms should be prepared to explain any gender pay gap that they may have."

2.56pm GMT

Discouraging news from the UK labour market:

Huge fall in number of people taking up apprenticeship. 48,000 Q4 2017 compared to 117,000 Q4 2016. Paid for by bigger firms but smaller firms balking at 10% contribution to training cost and giving apprentices 1 day a week offsite. Problem for future productivity.

2.46pm GMT

There's no Wall Street open today; The US stock market is closed for the Thanksgiving celebrations, so traders will soon be tucking into the turkey with their nearest and dearest.

That means tomorrow is Black Friday - America's traditional pilgrimage to the nearest mall to worship consumerism.

Among them are some John Lewis stores that are slightly extending their opening hours, a "few" Argos outlets opening early and 187 Tesco Extra stores that are closing at 1am and reopening at 5am on Black Friday, while a further 62 will open at 6am after preparing for the event.

Workers at Amazon's main Italian site to hold first strike on Black Friday https://t.co/7satc9zjBQ pic.twitter.com/CM887yvfLj

2.22pm GMT

Mihir Kapadia, CEO of Sun Global Investments, is struck by the contrast between Britain's latest growth figures and this month's eurozone PMIs:

Britain's has achieved a 0.4% growth rate in the last quarter, a respectable enough figure. However, UK business investment only rose by 0.2% in the last quarter, down from 0.5% in April-June which suggests that the growth rate is set to slow.

Meanwhile over in Europe, the recovery of growth continues as France outpaced Germany, and the Eurozone posted its strongest growth in over six years. We expect the German economy to ride though the coalition crisis which is expected to lead to fresh elections."

1.36pm GMT

The day after the UK budget is traditionally a time for the Institute of Fiscal Studies to explain what's really going on.

And today, the IFS has torpedoed the suggestion that Britain's era of austerity is over. There are plenty more cuts coming our way.

IFS #Budget2017 analysis. This is not the end of "austerity". There are still nearly 12 billion of welfare cuts to work through the system, while day-to-day public service spending is still due to be 3.6% lower in 2022-23 than it is today. https://t.co/ifNr9iQbv8 pic.twitter.com/05eWvZ9LFG

Forecasts for UK economy worse than for any other G7 nation. pic.twitter.com/FTFvnMmXdf

Bravo @PJTheEconomist on correcting misapprehension bubbling around since yday. First time buyers WON'T be worse off as result of stamp duty changes. They will be better off. Even if prices rise & they spend even more in total, they'll OWN THAT HOME rather than giving govt money

1.07pm GMT

Here are some charts from the Bank of England's gender pay report.

They showing how female staff at the bank receive smaller bonuses on average, as well as less basic pay.

The Bank of England's median gender pay gap of 24.2% looks pretty big, I thought to myself. Then I looked up the ONS data for the financial sector as a whole: 35.6%! pic.twitter.com/vFlGznYIe8

12.41pm GMT

Newsflash: The Bank of England has just released its gender pay gap.

It shows that male staff at the UK central bank were paid 18.6% more than female colleagues this year (that's the mean gender pay gap for base pay).

The Bank of England has today published its gender pay gap report 2017. https://t.co/C344WS2as0

12.14pm GMT

Rating agency Moody's has now weighed in, saying that Britain's growth has 'stabilised' in the last quarter.

In a new report, Moody's says the Brexit vote has had a "moderate negative impact" so far. They also predict that labour market growth will remain muted, and that inflation will peak in the next few months.

11.10am GMT

Breaking: UK retail sales have bounced back this month after a shock slowdown in October.

Employment declined in the year to November for the fourth consecutive quarter. #CBI_DTS https://t.co/wGqhkuKCAX pic.twitter.com/vkrd5mGaCW

Retailers expect their business situation to deteriorate over the next quarter, albeit only slightly. #CBI_DTS https://t.co/wGqhkuKCAX pic.twitter.com/c9IQIy3hvX

"It's great to see retail sales rebound this month after a big dip, but let's be clear: our high streets are not out of the woods.

Ahead of the crucial run up to Christmas, the weaker pound has pushed up prices and retailers are nervous about business conditions and are trimming their workforces.

10.17am GMT

Jacob Deppe, head of trading at online trading platform, Infinox, can't find much cheer in today's UK growth update.

Today's second estimate of GDP confirms what we already know. Growth this year has slowed considerably as a result of the uncertainty caused by Brexit and is set to be 1.5% at best....

Anaemic growth looks here to stay for years to come at a time when the other major economies of the world are enjoying a boom.

10.12am GMT

Jeremy Cook, Chief Economist at WorldFirst, reckons British businesses are suffering from Brexit uncertainty, and the government's failure to plan for the future better.

Cook says:

"The UK economy owes everything to the overstretched consumer. GDP grew by 0.4% in Q3, with all of that growth coming from consumer spending. Business investment has slowed and trade subtracted 0.5% from overall growth.

"This does not surprise us at WorldFirst given our latest Global Trade Barometer showed that as many as 1.1m fewer small businesses are trading internationally compared to this time last year. These businesses represent the back bone of the British economy and are being held back by uncertainty over future trade relations, poor productivity and an incoherent industrial strategy from Westminster."

10.07am GMT

Kallum Pickering of Berenberg bank says household spending is being supported by debt, helping to prop growth up.

Here's his take on the GDP figures:

Despite the Brexit driven temporary real wage squeeze caused by rising import prices, households are still coping well. Private consumption growth accelerated to 0.6% quarter-on-quarter from 0.2%. Sterling has fallen by c12% on a trade-weighted basis since the Brexit vote in June 2016.

Households are smoothing their real consumption by borrowing a little more and saving a little less for a while until real wages begin to rise again - probably early next year.

10.00am GMT

Today's growth figures confirm that Britain is lagging behind its major European rivals.

Germany, for example, grew twice as fast in the last three months - expanding by a healthy 0.8%.

The economy keeps chugging along, but comfortably at the slowest rate in the G7, and Britain is in danger of being left behind.

"After a number of growth forecast downgrades in Chancellor Philip Hammond's Budget speech, we may need to face up to the fact that the situation isn't going to get better any time soon.

UK growth in Q3 led by consumer spending, held down by poor trade performance (despite weaker ) according to @ons detail. Doesn't bode well

9.41am GMT

Disappointingly, UK business investment only rose by 0.2% in the last quarter, down from 0.5% in April-June.

That's the weakest quarterly growth since the end of 2016. It suggests that firms are reluctant to spend on new machinery and equipment in the current uncertain economic climate.

The rate of growth in household final consumption expenditure strengthened to 0.6% between Quarter 2 and Quarter 3 2017, with car purchases recovering somewhat from a low Quarter 2.

The UK film industry is playing a stormer! "Motion pictures made the largest contribution at industry level to the month-on-month increase, contributing 0.06 percentage points." #services #GDP

9.36am GMT

Britain's industrial base was stronger than expected in the last three months, but builders had a bad quarter.

The Office for National Statistics has revised up its estimate for industrial production growth, from 1% to 1.1%, in July-September.

9.31am GMT

Newsflash: Britain's growth rate in the last quarter has been confirmed at 0.4%, in line with the first estimate of GDP.

UK GDP Q3 (QoQ)
Actual: 0.4% Survey: 0.4% Prior: 0.4% #gbp

UK GDP Q3 (YoY)
Actual: 1.5% Survey: 1.5% Prior: 1.5% #gbp

9.21am GMT

The strength of growth in the eurozone is a stark contrast with Britain's weakening economy.

Julien Lafargue, global investment strategist at JP Morgan, says Europe's economy looks strong - meaning he favours owning share in European companies rather than UK ones.

The economic momentum remains very supportive in the Eurozone.

With the rate of backlog accumulation rising despite companies hiring at the fastest pace in years, we expect to see further investments to boost production capacity. This in turn should support growth in the region and extend the cycle. Within the EU, this trend is in stark contrast with the picture depicted yesterday by the UK's Chancellor and the Office for Budget responsibility which lowered UK's GDP growth forecasts for every year until 2021.

9.12am GMT

Boom! Eurozone companies are enjoying their strongest month since April 2011.

The latest survey from data firm Markit shows that Europe's recovery strengthened, with companies reporting a surge in output and hiring.

#euro area flash #PMI at 6-year high of 57.5 in Nov (56.0 in Oct). Jobs growth best since October 2000. Price pressures highest since mid-2011. PMI suggests Q4 GDP growth could be as strong as 0.8%. https://t.co/OoOSzGbjdZ pic.twitter.com/yFrNtpNlDQ

Growth kicked higher in November to put the region on course for its best quarter since the start of 2011. The PMI is so far running at a level signalling a 0.8% increase in GDP in the final quarter of 2017, which would round-off the best year for a decade.

Jobs are being created at the fastest rate since the dot-com boom, yet despite this increase in operating capacity firms are struggling to meet demand. Backlogs of uncompleted work are growing at the fastest rate for over a decade, often resulting in a sellers' market as customers struggle to source goods and services. Prices are consequently rising at an increased rate.

8.59am GMT

Newsflash: The UK is on course for the longest fall in living standards since records began in the 1950s.

That's according to the Resolution Foundation, whose analysts must have worked late into the night crunching yesterday's Budget, and the verdict of the Office for Budget Responsibility.

The headline finding is that household income is projected to fall for 19 quarters in a row, eclipsing the 17 quarters of decline following the recession (1/7) pic.twitter.com/MIYkWgmaBm

The productivity downgrade also means that economic growth could be slower and so the economy could be smaller than previously expected (5/7). pic.twitter.com/udBkOeouUO

8.46am GMT

Philip Hammond is touring the nation's TV and radio stations this morning, defending the budget.

On Radio 4, the chancellor was grilled about productivity;

8.43am GMT

Centrica's slide has helped to pull the London stock market into the red.

The FTSE 100 is down 36 points, or 0.5%, in early trading.

8.29am GMT

Over in the City, shares in energy supplier Centrica have plunged by 15%.

British Gas's parent company has revealed it lost 823,000 customer in the four months between June and October.

We are also reflecting the expected impact of warmer than normal weather across October and November.

8.20am GMT

Yesterday's productivity downgrades are a 'Suez moment' for the UK economy, says our economics editor Larry Elliott.

He writes:

It is now more than 10 years since the start of the financial crisis and the OBR's gloomy outlook marks the moment when Britain has to stop kidding itself. Growth is not going to return to its pre-crash levels. The 21% gap between output per hour now and where it would have been had it remained on its pre-2007 path is never going to be closed.

Britain is substantially and permanently poorer.

8.05am GMT

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

Today's second estimate of UK Q3 GDP isn't expected to result in a revision to the first estimate of 0.4% q/q expansion. Since that preliminary estimate, the incoming information has revealed industrial production to have been stronger than initially thought and construction to be even weaker.

The expenditure breakdown becomes available on this occasion. The contribution of consumer spending has been weakening in 2017 and, having seen some of the early indicators of retail activity for October coming in on the soft side, we would caution against reading too much into any potential improvement in Q3 as far as consumption is concerned.

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