25 July 2014
What kind of economic recovery has the UK been enjoying, and can it last?
The UK economy grew 0.8% in the second quarter and has now recovered the ground lost since the downturn began in 2008, according to official figures.
BSkyB wants to take over Rupert Murdoch's pay TV companies in Germany and Italy in a move that would create a company with 20 million European viewers.
Fast-food chain McDonald's suspends sale of chicken nuggets in Hong Kong over the out of date meat scandal at a Chinese supplier.
Amazon reports a loss of $126m in the second quarter and warns of slowing sales.
The International Monetary Fund (IMF) has lowered its forecast for global economic growth this year, from 3.7% to 3.4% but the UK's forecast is raised.
US President Barack Obama urges lawmakers to end a tax loophole that allows US companies to avoid paying US corporate taxes.
25 July 2014
BSkyB move to create a pan-European giant could be part of a bigger project
More on the Lloyds Bank libor settlement. Both Reuters and the Financial Times have a figure agreed between the bank and US and UK regulators for its involvement in the 2012 rate rigging scandal. Reuters estimates the settlement at between £200m and £300m. The FT is more definite with £300m. Either way, it puts Lloyds middle-of-the-pack in terms of financial settlements. Barclays - the first to be fined - was hit with a then-record £290m settlement, but RBS bust the record the following year paying out £390m.
Let's take a pinch of salt with these figures. First of all, this is the preliminary estimate, so it's an educated guess based on about 40% of the economic activity that will go into later estimates. But also, in two months the ONS will revise these figures for a once-in-15-years change to the methodology. It will change the treatment in the GDP figures of things like spending on research and development by companies and the government buying weapons.
And now some political reaction from Shadow Chancellor Ed Balls. He says: "At long last our economy is back to the size it was before the global banking crisis - three years after the US reached the same point." He also says GDP per head - that's the economy shared as individual pots by all of us - is not set to recover for three more years and most people are still seeing their living standards squeezed. So it's not the time to sit back, relax and assume the economy is fixed, he says.
Some political reaction to today's GDP figures. Chancellor George Osborne said a major milestone has been reached in the UK's long term economic recovery. "But there is still a long way to go, "he adds. "The 'great recession' was one of the deepest of any major economy and cost Britain six years." He warns against repeating "the mistakes of the past".
Marian Bell on the Today programme earlier this morning said she believes it is time to raise interest rates, particularly in light of today's GDP figures. "The key point is that the MPC needs to get on with it now, " she says. It's not the size of the increase that matters. An early, small rise, would send the right kind of signal, she adds. Ms Bell even suggests the MPC could "move in decimal points or even an eighth of a percent."
Let's take a quick look at the FTSE. It rose into positive territory, as you might expect, following the GDP announcement. It's currently hovering 0.07% higher at 6826.38. That's as much to do with the fact the news was expected as it is anything else. So a positive reaction from investors but not an overly exuberant one. RBS is still leading the way, up 13.5% to 372.70p, after its surprisingly positive half-year profits announcement earlier today.
It's also worth pointing out that the UK was the fastest-growing economy of the G7 in the first quarter (3% year-on-year), as the table above shows. And just look at the US (1.5% year-on-year). When was the last time the UK economy grew at twice the pace of the US economy? Answers on a postcard (or email as its the 21st century) please.
Breaking down the GDP figures for the three months to the end of June:
BSkyB has also announced it will pay around £4.9bn in cash to Rupert Murdoch's 21st Century Fox to buy out Sky Italia and Sky Deutschland. Under the deal BSkyB will pay £2.45bn for 100% of Sky Italia, part of which will be by handing over a share of National Geographic, and £2.9bn for Fox's 57% stake in Sky Deutschland to create a combined group with nearly 20 million customers.
It looks like things are not all rosy in the garden. The UK's dominant services sector has expanded past its previous 2008 peak - that's the green line. It's dragged GDP above the previous peak as a result (don't forget services account for almost 80% of GDP). But everything else - construction, industrial production and manufacturing - remains well below the 2008 peak.
More from the Office of National Statistics (ONS). Economic output was estimated to be 0.2% above the peak recorded in the first quarter of 2008. From peak to trough, which was in 2009, the economy shrank by 7.2%, the ONS adds. We'll bring you reaction as it comes in.
GDP was in-line with the 0.8% estimate for the three months to the end of June. As an aside, here is a feature worth a read, asking whether we should be interested in gross domestic product at all. Bobby Kennedy said GDP "does not allow for the health of our children... or the joy of their play."
It's official. UK economic output was 0.8% in the second quarter of this year. That means the economy has now passed its previous 2008 peak.
More from Ms Bell on the economy: She says it is typical that output recovers after about four years (following a recession) but this time its taken six "so its been quite a struggle." After Thursday's upgrade to its economic growth forecast for the UK, she adds, the IMF is looking for even stronger growth next year.
Financial Times owner Pearson Group has reported a pre-tax loss of £36m for the six months to the end of June. That compares with a loss of £16m a year earlier.
Argentina failed to reach a deal for its debts late on Thursday, with hedge funds demanding full payment on its defaulted bonds, veering closer to what the IMF warned could be a painful new default. There's less than a week to go to either pay up or risk being declared in default. Argentine officials met with the US court-appointed mediator trying to break the impasse, but refused to meet the hedge funds' representatives directly.
tweets: RBS Ross McEwan says UK recovery "broader than a consumer recovery". Gross lending to businesses up.
More market musings on RBS. Chirantan Barua, an analyst at Sanford C. Bernstein, says the reduction in money set aside for bad loans was "extremely strong" compared with City expectations. Sales and capital were better than he expected too, he said. He reckons the shares may be worth 440p apiece.
tweets: RBS CEO Ross McEwan says there has been a cooling in the mortgage and housing market over the last two months. "That is not a bad thing."
European markets are lower today with investors focused on earnings news and economic data release. The biggest rise on the FTSE 100 is perhaps unsurprisingly RBS - up 10.07% or 33.10p so far to 361.9p after it took everyone by surprise by announcing first-half pre-tax profits of £2.65bn a week early.
Vivek Raja, an analyst at Oriel Securities, is one of the first out of the traps with some insight into what the RBS results mean. "The preannouncement reflects better than expected operating performance on credit performance, in the Bad Bank (RBS Capital Resolution) and on capital ratios," he says. So that means 1) loans are performing better, 2) the worst loans are performing better, and 3) the bank has more capital as a percentage of loans.
Vodafone's first quarter trading shows the mobile operator getting no relief from its European market. Group service revenue - that's customers buying handsets and using the Vodafone network to you and me - was £6.4bn in the three months to 30 June, down 7.9% on the same period last year. Competition and regulation "continue to create a challenging operating environment," it says.
Lloyds Banking Group has responded to recent stories regarding settlements "with a number of government agencies" regarding rates setting - Libor. It's in "late-stage" discussions, it says.
"Asset quality continued to improve in the UK and Ireland," says what was once the world's largest bank. In English, more of their loans are more likely to be repaid in full and on time. The bank has set aside £22.4bn against bad loans, down from £25.2bn in December. Ulster bank posted a modest profit of £55m - that's from a £381m loss a year ago.
BSkyB has reported a slight slip in annual pre-tax profit to £1,1bn compared with £1,2bn a year earlier. Tax for the year was £249m compared with £295m in 2013, an effective tax rate of 21% as a result of the reduction in the rate of UK corporation tax.
Pre-tax profit was £2.65bn, up from £1.37bn as impairments dropped like a stone -- down to £269m from £2.15bn. Those reductions in bad loan costs far outweighed a rise in restructuring costs and a drop in sales. £150m was added to provisions for Payment Protection Insurance (PPI) and £100m to interest rate swap provisions.
A turn up for the books. Royal Bank of Scotland Group has put out its first-half results early. They were due 1 August, according to the bank. Operating profit rose to £2.6bn from £708m in 2013.
UK construction firm Balfour Beatty is in talks with rival Carillion about a potential £3.05bn merger, it has emerged. The two companies confirmed what they described as "preliminary discussions." In a joint statement they said they believed a "merger of the two groups has the potential to create a market leading services, investments, and construction business of considerable depth and scale."
Look out for Hussein Lalani, co-founder and commercial director of the 99p stores, on 5 live. He says before the recession suppliers would just give them their leftovers. Now many brands are making products just for the discount market.
Marian Bell, economist and former member of the Bank of England's Monetary Policy Committee has been talking to the Today programme about the UK's economic recovery. She says it is "people are expecting a 0.9% rise in output and that would be sufficient to surpass the 2008 level." But it has taken more time to achieve that economic recovery than in the past. In fact, she says, it has been "the longest that output has been below its previously level for more than 100 years."
Elaine Coverley, head of equity research at Brewin Dolphin is on Wake up to Money. "We need other markets to keep that going," she says of growing UK gross domestic product. Markets like the US aren't doing so well. The IMF slashed its US economic growth estimate on Wednesday to 1.7% for 2014.
"The consumer is doing a lot of the heavy lifting," in the economy, says economist Alan Clarke of Scotiabank on 5 live. How, when wages are stagnant? The housing market, of course. As the value of homes rises, people are prepared to save less and spend more without earning more. House prices won't go up at the current rate forever, though, he says.
CBI director-general, John Cridland is still on 5 live. The recovery is currently investment-led rather than export-led. Sterling's strength isn't helping but isn't wholly choking things off either, he says.
Director-General of the Confederation of British Industry John Cridland expects growth of 0.8% in the second quarter, he tells 5 live. "We are getting some balance in the recovery, like a boxer in the boxing ring finding his feet," he says. Companies are investing, finally, he says, and that's crucial. This is what will add to wages.
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Good morning. So, let's catch up from last night: Amazon had a tough second quarter, as did General Motors. And the International Monetary Fund downgraded its global economic growth forecast. Here at home it's as good as confirmed that the UK is richer than it has ever been (you literally have never had it so good, you lucky, lucky people). Do you feel richer than you did last year? How about last week? Or yesterday even? We'll find out at 09:30 with second quarter GDP, so stay with us.
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