UK business growth slows as budget uncertainty hits investment plans; German recession ‘baked in’ – as it happened

Time for a recap:

Uncertainty before Labour’s first budget next month is weighing on the UK economy, according to two separate business surveys.

The data company S&P Global said UK private sector activity growth slowed for the second consecutive month in September, affecting companies in the services and manufacturing industries.

Some companies reported that clients were taking a “wait-and-see approach” to decision-making before the autumn budget, which is hitting investment plans, even as the chancellor, Rachel Reeves, wants to encourage business investment to boost economic growth.

The figures suggest Labour’s emphasis on its poor inheritance from the previous Conservative administration and the need for a tough budget on 30 October were weighing on the immediate outlook for many businesses.

The S&P survey found the budget was “by far the most cited concern among UK private sector firms”. Export orders remained “relatively subdued” and total overseas sales rose only “marginally” in September.

The survey said:

“Some service providers noted higher demand from US clients, but manufacturers frequently suggested that weak EU sales had weighed on export orders.”

A separate survey of manufacturers by the Confederation of British Industry (CBI) found that export order books in the three months to September were at their weakest since December 2020 – during the first year of the Covid-19 pandemic, and just before the UK signed the Brexit trade agreement.

More here:

In other news…

The economic picture in Germany is weakening too, with the economy being dragged into a contraction by its shrinking manufacturing sector.

Billionaire Rupert Murdoch’s REA Group has added another £200m to a sweetened offer for Rightmove, valuing the UK’s biggest online property portal at more than £6bn.

REA lifted its offer after its first two approaches were rejected by Rightmove earlier this month.

JCB has reported an increase in profits last year as strong US sales made up for its exports to Russia ending and faltering demand in the UK and Germany.

Britain’s biggest building society, Nationwide, is to let first-time buyers borrow up to six times their earnings in what has been labelled a “gamechanging” move that ramps up the mortgage price war.

The price of petrol and diesel in the UK is falling at the fastest pace this year, with households paying about £4 less to fill up a family car than they did a month ago.

Fifty pubs a month closed for good across England and Wales in the first half of this year, with experts warning that tax rises in 2025 could make it even harder for some businesses to keep their doors open.

Research has shown that house prices were not hit by the construction of a 137-mile electricity superhighway in Scotland.

US business activity growth remained robust in September, the latest flash survey of purchasing managers shows, but election anxiety led to a drop in hiring.

Dat provider S&P Global has just reported that the US services sector drove a “sustained robust economic upturn in September,” more than making up for a decline in manufacturing.

The flash US PMI Composite Output Index has slipped to 54.4, down from August’s 54.6, but still a level that shows robust growth.

However, business optimism waned as bosses watched to see whether Donald Trump or Kamala Harris would win the race to the White House in November.

The survey says:

A moderation of order book growth and a deterioration in business expectations for the year ahead to a near two-year low meanwhile reflected heightened uncertainty ahead of the Presidential Election. Companies consequently held back on hiring and allowed employment to fall for a second successive month.

The prices charged by US companies rose at the fastest rate for six months, pushed higher by input cost growth accelerating to a one-year high, the survey added.

Tensions are rising in Europe’s banking sector today, after Italy’s Unicredit took steps to more than double its stake in Germany’s Commerzbank to over 20%.

UniCredit defied Germany’s defence of Commerzbank by using derivative contracts on Monday to raise its potential stake in the German bank close to 21%, while waiting for regulatory approval to lift its stake above 9.9%.

Earlier this month Unicredit surprised Commerzbank by revealing it had a 9% stake – half of which was acquired from the German government.

This has sparked speculation that Europe could see a cross-border banking merger.

Today, the Italian bank explained:

“UniCredit believes that there is substantial value that can be unlocked within Commerzbank, either stand-alone or within UniCredit, for the benefit of Germany and the bank’s wider stakeholders. However, as was the case for UniCredit, such potential requires action for it to be crystalized.”

Unicredit’s move has ruffled feathers in Germany. Today, Commerzbank board member Stefan Wittmann condemned the stake-building as a “completely inappropriate aggressive act”.

But in Rome, Italian foreign minister Antonio Tajani declared today “it was more than legitimate” for an Italian company to try to buy part of a German competitor.

Tajani said:

“This is the internal market, being pro-European only in words leaves something to be desired, UniCredit is a big Italian bank and it is doing well to act within the internal market.”

One hundred and 50 UK MPs have written to supermarket chain Asda, urging it to end pay discrimination across its business.

The MPs say it is unfair that mainly female shop workers’ roles are paid up to £3.74 per hour less than predominantly male warehouse workers.

This issue is currently being examained by a employment tribunal, which began earlier this month. Asda is fighting the case, arguing that retail and distribution are two different industry sectors that have their own distinct skill sets and pay structures.”

The letter says:

We, the undersigned MPs, call on you to take action against pay discrimination in ASDA stores.

GMB union have told us that they have estimated women workers on the shop floor earn up to £3.74 per hour less than their male counterparts in warehouses. ASDA’s retail workers are currently owed over £2 billion in back pay.

Over 60,000 current and former ASDA retail workers have lodged claims and with the equal value hearing underway, now is the time for ASDA to begin seriously considering how to address the issue of pay discrimination.

We believe it is simply unfair for people to be paid differently for doing work of the same value.

Everyone deserves equal pay for equal work.

As MPs with ASDA stores and workers in our constituencies, we urge you to urgently commence settlement negotiations with the GMB union.

Signaturies to the letter include senior Labour MPs such as Diane Abbott, Stella Creasy and Rebecca Long Bailey.

It comes as Asda struggles with a falling market share, and rising debts, with veteran retailer Sir Stuart Rose stepping up to run the business.

In June, more than 3,500 workers and former employees of Next have won a similar six-year equal pay claim.

An employment tribunal ruled that Next failed to demonstrate that paying sales consultants (mostly women) – lower hourly pay rates than warehouse operatives (who tend to be men) was not sex discrimination.

Post Office chief executive Nick Read wanted the two post office operators appointed to the company’s board removed, and blocked them from meetings on issues including pay and bonuses, the inquiry into the Horizon IT scandal has heard.

Saf Ismail was appointed to the Post Office board as a non-executive director in June 2021, along with fellow subpostmaster Elliott Jacobs, in a move to repair relations and improve oversight as part of an attempt to overhaul the organisation and “right the wrongs of the past”.

Ismail gave scathing testimony to the inquiry saying that while the other non-executive directors on the board welcomed the new appointments, Post Office executive members did not.

“The wider executive made it difficult [and there were] situations we didn’t feel welcomed by the wider executive,” he said, adding:

“I was told by an individual on the wider executive that ‘we don’t want to particularly deal with you and Mr Jacobs as we feel uncomfortable with what has bee happening’”.

Ismail said that Jane Davies, the former Post Office HR director that accused Read of bullying and an “obsession” with remuneration, told him that he [Read] wanted them off the board.

He said:

“She categorically told said to me how the chief executive was not happy with postmasters being on the board.

We were too awkward, too challenging, and he wanted that to be reversed. There were times when I spoke to the previous [Post Office] chair [Henry Staunton] and Jane Davies and they particularly mentioned how the wider executive ensured myself and Mr Jacobs were blocked out of meetings that involved talking about bonuses and salaries. We were actively excluded from their meetings.”

An investigation by an independent barrister cleared Read on all counts of misconduct relating to Davies’s accusations against him.

Ismail said that despite the promises to overhaul the culture and processes at the Post Office it remains too bureaucratic, and is focused on protecting its own employees instead of exiting those involved in the wrongful prosecution of subpostmasters from the organisation.

“I heard Paula Vennells say [to the inquiry] that she started to try cultural change in 2012,” he said. “I don’t feel we’ve even got off the ground.”

He said that until recently the two subpostmaster board members were not provided documents relating to various committee meetings, and recounted an example of the hiring for a role internally where the Post Office executive ignored the recommendation of a candidate by the board, instead appointing their own choice.

Ismail criticised two initiatives launched to root out staff involved in the Horizon IT scandal, Project Phoenix and Past Roles, saying that decision-making was “inquiry-led” with the semblance of action only being taken after events at the Post Office inquiry put a spotlight on individuals.

Ismail said that while subpostmasters were immediately suspended and then pursued legally, Post Office staff involved remain employed, and are often redeployed with a new job title, instead.

He said there are 23 employees on a “red” list, deemed high-risk given their involvement in the scandal in one way or other, none of whom who have even been suspended.

“To be clear from my observations at the time there was no particular appetite to deal with this issue,” he said, adding:

“Decisions were ‘inquiry-led’. The default position in the Post Office at this moment in time is protect. Unfortunately this business redeploys, recycles. I don’t feel it is appropriate for individuals in the red category to be in the business. I feel it is an insult. This is not a witch hunt, this is parity.”

Nationwide offers to lend first-time buyers six times their salary

Rupert Jones

Britain’s biggest building society is to let first-time buyers borrow up to six times their earnings in what has been labelled a “game-changing” move that ramps up the mortgage price war.

Weeks after it was announced that the Halifax and Lloyds would allow new buyers to take out loans worth up to 5.5 times their household annual income, Nationwide said it would now go up to six times income – a first for a major high street lender.

Nationwide is also cutting its mortgage rates and increasing its maximum loan sizes, so that someone taking out a home loan for more than 90% of the property’s value will now be able to borrow up to £750,000 – up from the existing £500,000, and higher than the £570,000 limit at many rivals.

The moves come amid an ongoing mortgage price war that has seen lenders jostle to cut their rates in the wake of the Bank of England’s 1 August interest rate cut and the expectation of more reductions to come.

Newsflash: Swedish electric car battery maker Northvolt plans to lay off 1,600 employees in Sweden, including 1,000 positions at its factory in Skelleftea in the north of the country.

Northvolt, which had been Europe’s great hope for a electric battery manufacturer, says it is “adjusting its near-term ambitions” and focusing on deeloping its lithium-ion battery gigafactory at Ett, near the Arctic Circle.

This, Northvolt says, will allow it to prioritize commitments to its current automotive customers.

Northvolt is cutting 1,000 positions at Skellefteå, 400 at Västerås, and 200 in Stockholm.

Peter Carlsson, CEO and co-founder of Northvolt, says:

“While overall momentum for electrification remains strong, we need to make sure that we take the right actions at the right time in response to headwinds in the automotive market, and wider industrial climate.

We now need to focus all energy and investments into our core business. Success in the ramp-up of production at Northvolt Ett is critical for delivering to our customers and enabling sustainable business operations. Recent production records at Northvolt Ett show that we are on the right path, but the decisions we’re taking today, however tough, are required for Northvolt’s future.”

BAME Post Office subpostmasters more likely to be threatened with suspension

Mark Sweney

Post office owner-operators from a minority ethnic background are more likely to have been threatened with suspension than those from a white background, the inquiry into the Horizon IT scandal has heard.

An anonymous survey published on the first day of the final phase of the long-running inquiry also received reports from eight subpostmasters who said that they had been suspended or threatened with suspension in the last three years after issues with discrepancies with the IT system had emerged.

The survey, conducted by research firm YouGov, found that 8% of a total of more than 1,000 respondents said that they had been threatened with suspension by the Post Office in the past.

However, it found that 12% of subpostmasters threatened with suspension were from an ethnic minority background, and 17% of those with an Asian/Asian British background.

A further 4% said that they had been suspended and subsequently re-instated.

“Subpostmasters surveyed from ethnic minority back grounds were more likely than white subpostmasters to have been suspended and re-instated – 6% versus 2%,” said the YouGov report.

“As were those who have been serving subpostmasters for 21 years or more.”

Gavin Ellison, the head of public sector and not-for-profit at YouGov, told the hearing that the findings were statistically significant.

Last year, documents released to campaigners revealed that lawyers investigating post office operators in the Horizon computer scandal used a racist term to categorise Black workers.

Investigators were asked to group suspects based on racial features, a freedom of information request found.

The document, which was published between 2008 and 2011, included the term “negroid types”, along with “Chinese/Japanese types” and “dark skinned European types”.

Ellison was asked whether there was a link between suspensions and subpostmasters finding discrepancies in their accounts using the Horizon IT system. However, while he said that while there was “no causation between those two factors” the survey did find respondents who said that this was the case.

YouGov published an addendum document relating to the issue which contained some anonymous written statements about the issue in the past three years.

One respondent said:

“There were shortfalls when we first took over the post office.

We had complained but we were told that the computer doesn’t make mistakes.

An audit [was] done a few months later and we were accused of theft and threatened to be suspended if we didn’t pay back the money. We [were] already told their system had flaws.. but they still accused us. Degrading us. Calling us thieves. Majority post office auditors made postmasters feel like thieves.”

YouGov qualified the experiences of these subpostmasters, pointing out that 69% of the overall respondents to its survey had reported having experienced discrepancies with the Horizon IT system since January 2020.

“A total of eight SPMs surveyed reported being suspended or threatened with suspension in the past 3 years and all stated that they experienced an unexplained discrepancy since 2020,” the research company said in the three-page document. “We can only identify correlation not causation.”

The YouGov report showed that the 89% of the discrepancies reported by respondents was less than £1,000, although 1% reported a discrepancy of £30,000 or more.

Newsflash: UK factories have been hit by a slump in export orders this month.

The CBI reports that export order books are now their weakest since December 2020 – during the first year of the Covid-19 pandemic, and just before the UK signed the Brexit trade agreement.

Its latest industrial trands report has found that total and export order books at manufacturers deteriorated in September.

A net balance of 44% of manufacturers reported that their export order books were below “normal” this month. That’s a considerable deterioration compared to August, where the reading was -22%.

Worryingly, output volumes fell sharply in the three months to September – and manufacturers expect output to decline again in the three months to December. This is the first time since November 2023 that expectations have been negative.

Ben Jones, CBI lead economist, said:

“This was a uniformly disappointing set of results for the manufacturing sector, with output falling over the past quarter, order books deteriorating and manufacturers expecting activity to soften further in the remaining months of the year.”

“The survey highlights that the recovery of the UK economy seen over the first half of 2024 remains fragile, with uneven progress seen across different sectors, and businesses increasingly cautious ahead of the Budget at the end of next month.”

“In the meantime, firms will be looking to the Chancellor to reaffirm the government’s mission of long-term economic growth, providing them with the confidence and opportunities to invest and grow.”