Marketing Newscast

In a renewed loss of momentum in the economy, GDP grew by just 0.1% in the third quarter of the year, according to the latest data released by the Office for National Statistics (ONS) this morning. The service sector grew 0.1%; construction grew 0.8%; but production fell by 0.2%. This near-stagnation stands in marked contrast to the first half of the year, when the UK economy was the fastest growing the G7 and was said to be “going gangbusters” by ONS economist Grant Fitzner, it is now the second worst performer. The data, the first set of GDP figures released since the Budget, was described as “subdued” by the ONS, and appears to justify the arguments of many business leaders and trade bodies who say Chancellor Rachel Reeves’ polices will stifle, rather than contribute to growth. The stats in all likelihood also reflect considerable apprehension ahead of the Budget, which Chancellor Rachel Reeves said repeatedly would involve '“difficult decisions”. She said this morning: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.” Labour MP Liam Byrne, who is also chair of the House of Commons’ Business and Trade Committee,told the BBC Radio 4 Today programme that the data results from “really long-term problems in the British economy”. “We need to raise the investment rate in the British economy, we have not been investing enough in infrastructure and skills and innovation for a long period of time. “I’m afraid that catches up with you, especially if you’re now in this new world where so much of our trade is wrapped in red tape,” he said. “We’re in quite a difficult position at the moment and we’re going to need some pretty bold and pretty quick measures from our Government.” Prime Minister Sir Keir Starmer pledged last year that a Labour government will make Britain the fastest growing economy in the G7. The ONS also revealed this morning that the total underlying trade deficit widened by £1.5bn to £11.4bn in Q3 2024 because of a larger fall in exports than imports.

Last night in her first Mansion House speech, Chancellor Rachel Reeves warned that financial regulation had “gone too far” and pledged to rip up red tape.  Regulatory measures brought in since the financial crisis in 2008 have looked to “eliminate risk” but had “unintended consequences” in hampering growth that “we must now look to address,” she said, adding: “We cannot take the UK’s status as a global financial centre for granted. In a highly competitive world we need to earn that status and we need to work to keep it.”  She then laid out a package of reforms aimed at driving competition across financial services and ‘unlocking’ a wave of capital from the UK’s pension systems. As reported here yesterday, she went on to unveil a proposed overhaul of the sector create so-called “megafunds,” ostensibly to raise around £80bn to invest in businesses and infrastructure. This includes consolidation of many local government pension schemes. She also confirmed her intention to introduce legislation next year to launch a so-called Piscesstock exchange system allowing private companies to trade their shares; new “growth-focused remits” for financial service regulators; and the publication next year of the first ever Financial Services Growth and Competitiveness Strategy.

The Governor of the Bank of England, meanwhile, used his speech at the Mansion House to take a pop at President Elect Donald Trump and Brexit. “I will own up to being an old fashioned free trader at heart. It’s a British characteristic, I like to think. My point is this: amidst the important need to be alert to threats to economic security, let’s please remember the importance of openness,” Andrew Bailey said, in a reference to Trump’s description on the campaign trail as a “tariff man” who threatened levies of 10% on all goods imports from US trading partners, and up to 60% and 100% for China and Mexico. Bailey also called for a “reset” with the European Union, and urged the Chancellor to “welcome opportunities to rebuild” post-Brexit relations as he blamed the EU referendum vote for some of the UK’s economic woes, although he said too that the decision of the British people must be respected. Bailey also appeared to hint at support for immigration, saying the UK's ageing population means there are fewer workers, which "makes the productivity and investment issue all the more important". "I will also say this: when we think about broad policy on labour supply, the economic arguments must feature in the debate," he added. Bailey also said he thought the UK economy is bigger than we think because it is not being measured properly. A new measure to be used by the ONS, which will include the value of data, will probably be "worth a per cent or two on GDP," he said.

The Government is banning new coal mines, now the last UK coal power station has been shut down. Ratcliffe-on-Soar closed on 30^th September after five decades of service that powered more than 2m homes and produced enough electricity to make more than 1bn cups of tea per day. The decision to bring forward a decision to restrict new licences ends an era of coal-fired power generation that at its peak supported more than one million jobs. Energy Minister Michael Shanks said: “By consigning coal power to the past, we can pave the way for a clean, secure energy system that will protect bill payers and create a new generation of skilled workers.” The former Government gave permission to build the UK’s first new coal mine in 30 years, in Cumbria, to produce coking coal for steelmaking in the UK and Europe, but that became the subject of a legal challenge from climate activists; they brought a Judicial Review that the new Labour Government said it would not contest, and so the decision was quashed by the High Court.

A study from the Institute for Fiscal Studies (IFS) suggests Scotland’s tax raid on top earners may have lost Holyrood money, because they either left the country or found ways to reduce their earnings, such as reducing their working hours. Former SNP leader Nicola Sturgeoncapitalised on greater powers on income tax that were given to Holyrood by the Westminster government in 2017-18, increasing tax on income over £43,430 from 40% to 41%, and increasing it from 45% to 46% on earnings over £150,000. This change, which meant someone earning £125,000 pays £5,221 more if they live in Scotland than England, prompted the exit of a net 60 people earning more than £500,000, according to the HMRC, and cost Scotland £38m in lost revenue. David Phillips, an economist at the IFS, said: “Increases in the top rate of tax are unlikely to raise much – with evidence from the first of Scotland’s reforms in 2018–19 suggesting they may even reduce revenue.” “The evidence currently available suggests that if the aim is to raise revenue, the Scottish Government should at least pause any plans for further increases in Scotland’s tax rates on higher incomes.”

The British cinema industry is warning that higher taxes on employees’ wages announced in the Budget will be the “final straw” for some venues. “We already know that many are considering reducing operating hours or pulling back on recruitment plans, but it is inevitable that it may lead to the closure of some sites,” UK Cinema Association CEO Phil Clapp, said. Simon Burke, co-founder of Revolting Spaces – a collection of LGBTQ+ hospitality venues in London which owns independent cinema The Ardzner – said he believes the additional tax bill is a “political choice” on the part of the Government that will compound previous issues with energy bills and rental costs for the sector.  “Independent theatres and cinemas are going to take a hit as a result of the incoming tax environment,” he said. Reeves increased the amount employers have to pay in Employer National Insurance contributions (NICs) by 1.2%, and lowered the wage threshold employers must start paying the tax from £9,100 to £5,000, meaning retail and hospitality sectors, which rely on part-time lower-earning workers, are disproportionately affected. Britain has lost 54 cinemas over the past four years, according to the UK Cinema Association, while a survey by the Independent Cinema Office last year found 45% of independent cinemas were operating at a loss.

Young’s CEO Simon Dodd is also critical of Reeves’ £25bn tax raid on businesses, and suggests it could mean last orders for bartenders. The pub group chief said he planned to increase the use of app and tablet-based ordering to save money after large increases in employers’ NICs and the National Living Wage in her Budget, which will add £11m to its annual costs. He stressed, however, that he was not looking at job cuts but wanted to drive “efficiencies” through technology. The British Institute of Innkeeping (BII), however, says three quarters of its members do plan to cut staff hours. Young’s employs around 6,500 people and owns more than 280 pubs.

Typhoo Tea is reportedly close to falling into administration after years of setbacks including a costly break-in at its Wirral factory. The Telegraph reports it has filed notice to appoint administrators, using the process to explore rescue options. CEO Dave McNulty told the newspaper: “This action has been taken to enable us to pursue a sale of the business. A further statement will be issued in due course with further information.” Typhoo, one of Britain’s oldest brands, was founded in 1903 by Birmingham grocer John Sumner.

Fintech Truelayer, which once held ‘unicorn’ status, laid off roughly a quarter of its workforce in a single day as part of an effort to slash costs and become profitable, City AM reveals. The London-based firm axed 71 roles at the end of September, just a week before announcing a $50m funding round that lowered its valuation, according to two people familiar with the matter. City AM’s sources said employees were summoned to a meeting with roughly two hours warning, where they were informed of the job cuts, and that staff affected left the company the same day. A ‘unicorn’ is a privately held startup company with a valuation of $1bn or more.

Zzoomm and FreedomFibre are said by Sky News to be in discussions about a merger. The two are among Britain's largest independent fibre broadband networks and together, could be valued at around £500m, Sky says.