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The Guardian - UK
The Guardian - UK
Graeme Wearden

WTO slashes world trade forecast as manufacturing slowdown bites – as it happened

The Qianwan Container Terminal III of Qingdao Port, in Shandong province, China.
The Qianwan Container Terminal III of Qingdao Port, in Shandong province, China. Photograph: Costfoto/NurPhoto/Shutterstock

Closing post

Time to wrap up……

The World Trade Organization has halved its forecast for exports growth around the world this year, blaming a slowdown in manufacturing and rising geopolitical tensions.

The WTO also flagged that trade through European ports has slowed this year, and that trade in intermediate goods (used to make final products for sale) has weakened – as supply chains fragment.

UK construction firms have suffered their steepest decline in output since May 2020, with housebuilding work slumping last month.

Several experts warned that the cancellation of the northern leg of HS2 to Manchester will further hurt construction firms.

The UK’s competition watchdog has launched an investigation into cloud computing, after Ofcom concluded that Amazon and Microsoft’s dominance was a concern.

In the economic world, fewer Americans filed new jobless claims than expected last week, which could encourage the US Federal Reserve to raise interest rates in November.

But bond markets have been calmer today, after yesterday’s selloff sent government borrowing costs to multi-year highs.

While shares in Metro Bank have tumbled by a quarter, as it seeks to raise funds – perhaps up to £600m – to shore up its balance sheet.

Here are today’s main stories:

Firms will hesitate to invest in UK after Sunak’s climate U-turns, says Mark Carney

Rishi Sunak watering down the UK’s climate commitments has damaged Britain’s position on the world stage for business investment, according to the former Bank of England governor Mark Carney.

In highly critical comments, Carney indicated that global companies would now think twice about locating their activities in the UK after Sunak pushed back key net zero deadlines and sanctioned new oil and gas drilling.

Speaking to Nick Macpherson, a former permanent secretary to the Treasury, at an online event, Carney said major businesses he had spoken to prioritised countries with clear environmental commitments before making investment decisions.

He said:

“In my conversations with companies around the world, their first conversation about location is: ‘Am I getting clean power?’ It doesn’t make sense to relocate without green power. You start throwing that into doubt, [and] it becomes a lot more complicated discussion.”

Citing several countries that have highlighted the availability of clean power to international businesses, the former Bank governor added: “The UK was in that camp, now it’s blurred around it.”

Another Metro Bank development tonight:

After a choppy day, share in Metro Bank have closed down 25.7% tonight at 37.5p.

That’s its biggest one-day fall since 2019, as investors digest the news it is it considering raising funds or selling off assets in a bid to shore up cash.

British Airways has reached a deal in principle for pay increases for its pilots for the next few years.

The airline announced “an agreement in principle” for the pay award from 2023-27.

A spokesperson said:

“The British Airline Pilots’ Association (Balpa) will now ballot its members on the agreement in principle.

“The pay offer builds on a number of pay and reward changes made in 2022 to support colleagues throughout the business at a time of ongoing cost-of-living pressures.”

As explained earlier (see 12.56pm), the deal could avoid a repeat of the strikes which gripped BA in 2019.

Unite union warns of winter of industrial action by council workers

Back in the UK, unions are warning that local government workers could hold “a winter of action” over low pay.

Officials from the Unite union are meeting in Wales today and tomorrow to discuss industrial action, after 23 councils across the UK either announced strike dates or are preparing to do so.

There is already strike action at both Wrexham and Cardiff councils, for example, which is due to continue until the end of November.

Unite says it is determined to tackle poverty pay rates, with members having rejected wage offers that didn’t keep pace with inflation.

Unite general secretary Sharon Graham said:

“The council leaders are wrongly claiming they can’t negotiate locally. It’s complete nonsense and the local government employers know it. Unite has already successfully negotiated pay rises for workers in Tower Hamlets and Newham in London. It’s time for other councils to listen and learn.”

German export fall raises recession risks

A drop in exports in Germany have highlighted that trade in Europe’s largest member is weakening.

German exports fell by 1.2% in August, new figures from statistics body Destatis shows, while imports fell by 0.4%.

The drop in trade increases that risk that Germany’s economy fell back into recession in the third quarter of this year, fears ING.

Carsten Brzeski, ING’s global head of macro, warns that German exports remain “stuck in the twilight zone between recession and stagnation”.

He adds:

Since the start of 2022, net exports have been a drag on the economy in four out of six quarters.

Supply chain frictions, a more fragmented global economy and China increasingly being able to produce goods it previously bought from Germany, are all factors weighing on the German export sector.

The cooling of global demand is currently worsening the structural problems and the weakening of the euro since the summer is still too small to have any significant impact on exports. As a result, trade is no longer the strong resilient growth driver of the German economy that it used to be, but rather a drag.

The WTO’s latest trade report also shows that trade in European ports had declined this year, but picked up at China’s ports, following the ending of pandemic restrictions at the end of 2022.

The WTO monitors container traffic through 92 ports around the globle, which account for 64% of world merchandise trade, making it a reasonable proxy for global container throughput.

The WTO explains the data may indicate that Europe’s economic stagnation is a bigger threat to trade growth than China’s slowdown.

In general, throughput tracks merchandise trade volume quite closely. This is shown in Chart 12 together with traffic through Chinese and European ports. While throughput has stagnated at the global level, traffic in Chinese ports has continued to grow while shipment through European ports had declined.

This suggests that stagnation in Europe may pose a greater risk to the trade outlook than China’s economic slowdown. The index does not show US ports separately, but data from the port of Los Angeles are suggestive.

Throughput there fell 48% between July 2022 and February 2023, then rose 71% through June. This suggests that US trade with Asia is picking up again after slumping in the second half of last year.

A chart showing global container traffic
A chart showing global container traffic Photograph: WTO


The WTO is concerned that the share of global trade made up by “intermediate goods” – which are used to make final products for sale – has fallen in the last year.

In the fourth quarter of 2022 the ratio fell firmly below 50% and has remained there through the first half of 2023.

The shift is not dramatic, the WTO points out, as the intermediate goods share averaged 51.0% over the previous three years.

But it may be a sign that trade is reorienting along regional and political lines, following rising tensions due to the Ukraine war, and between the US and China.

The WTO says:

Whether the decline is due to geopolitical tensions or the recent global economic slowdown is unclear.

Whatever the reason, the data suggest that goods continue to be produced through complex supply chains, but that the extent of these chains may have reached their high-water mark.


The WTO’s latest forecasts predict that North America will register the strongest export growth of any region in 2023, at 3.6%.

That is followed by the CIS region (the Commonwealth of Independent States created after the collapse of the USSR), where exports are forecast to increase by 3.0%.

Most other regions would only see modest export growth, except for Africa, where exports are expected to contract by 1.5%.


WTO warns global economic fragmentation threatening trade

World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala.
World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala. Photograph: Michele Tantussi/Reuters

The downgrading of world trade growth prospects this year is worrying, says WTO Director-General Ngozi Okonjo-Iweala:

She is concerned that WTO economists see some signs that geopolitical tensions are leading to trade fragmentation linked to geopolitical tensions.

Okonjo-Iweala says:

“The projected slowdown in trade for 2023 is cause for concern, because of the adverse implications for the living standards of people around the world.

Global economic fragmentation would only make these challenges worse, which is why WTO members must seize the opportunity to strengthen the global trading framework by avoiding protectionism and fostering a more resilient and inclusive global economy.

The global economy, and in particular poor countries, will struggle to recover without a stable, open, predictable, rules-based and fair multilateral trading system.”


So far this year, merchandise trade volumes were down 0.5% year-on-year in the first half of 2023.

However, the World Trade Organisation expects a “modest pickup” in the second half of the year, as this chart shows:

WTO global trade forecasts
WTO global trade forecasts Photograph: WTO

But, the WTO warns there are risks to its forecast, including:

….a sharper than expected slowdown in China and a resurgence of inflation in advanced economies, which would require keeping interest rates higher for a longer period.

On the other hand, growth could also exceed expectations if inflation comes down quickly, allowing an early exit from contractionary monetary policies

WTO cuts world trade forecast as manufacturing slowdown bites

Newsflash: the World Trade Organization has slashed its estimate for exports growth around the world this year, due to a slowdown in global manufacturing.

The WTO now expects world trade volumes to grow by just 0.8% this year, down from a forecast of 1.7% in April. Growth is expected to pick up to 3.3% in 2024.

The WTO says a slump in goods trade that began in the fourth quarter of 2022 is continuing, as hopes of a pick-up in demand have been dashed. So, trade is expected to grow more slowly than GDP this year but faster next year.

The WTO’s latest trade forecasts

In its latest report on global trade, the WTO says:

World trade and output slowed abruptly in the fourth quarter of 2022 as the effects of tighter monetary policy were felt in the United States, the European Union and elsewhere, but falling energy prices and the end of Chinese pandemic restrictions raised hopes of a quick rebound.

So far, these hopes have not materialized, as strained property markets have prevented a stronger recovery from taking root in China, and as inflation has remained sticky in the United States and the EU. Together with the after-effects of the war in Ukraine and the COVID-19 pandemic, these developments have cast a shadow over the outlook for trade in 2023 and 2024.

Back in the UK, Metro Bank has denied that its CEO and chairman were hauled in City regulators today for an urgent meeting (see earlier post).

Instead, chairman Robert Sharpe has attended a “long-standing” meeting with the UK’s Prudential Regulatory Authority this morning, which had aready been in the diary.

CEO Dan Frumkin was not there, they say, despite reports earlier that he was going to be, Reuters adds.

The relatively small increase in US jobless claims last week (see previous post) could embolden the US Federal Reserve to raise interest rates again at its next meeting, in early November.

Tom Hopkins, portfolio manager at BRI Wealth Management, explains:

“Initial Jobless Claims in the United States increased to 207,000 in the week ending September 30th, an increase of 2000 from the previous week and marginally below consensus expectations of 210,000.

“The data continues to add to evidence that the US labour market remains at historically tight levels. This will also add resilience to the Federal Reserve’s aggressive tightening cycle and supports the narrative of ‘higher for longer’ interest rates. Unless we see a material weakening in the US labour market and economy, it could add potential for another rate hike in November.”

US jobless claims rise less than expected

Newsflash: the number of Americans filing new claims for unemployment support has risen, but remains low in historic terms.

A total of 207,000 initial claims were filed in the week to Friday 30 September, an increase of 2,000 from the previous week.

That’s lower than expected – economists had forecast there would be 210,000 new initial claims last week.

Markets are bracing for the latest US jobless claims data, at the half hour mark…


Over in the US, employers slowed the pace of their job cuts in September.

The latest Challenger employment report shows that US-based employers announced 47,457 cuts in September, down 37% from the 75,151 cuts announced in August.

However, that’s 58% higher than in September 2022.

Challenger say that so far this year, companies have planned 604,514 cuts, almost three times as many as the 209,495 cuts announced by this stage in 2022.

Technology is leading in job cut announcements this year with 151,989, up 716% from the 18,620 cuts announced in the same period last year.

British Airways is on the brink of a long-term pay deal with its pilots, Sky News are reporting.

The deal would remove the renewed threat of strike action until at least 2027.

Here’s the details:

Sky News has learnt that BA, a subsidiary of the FTSE 100 company International Airlines Group, was applying the finishing touches to an agreement with BALPA, the airline pilots’ union, on Thursday morning.

The three-and-a-half year deal, which has been the subject of months of negotiation, expected to secure the agreement of BALPA, which would then ballot its members on the proposed deal.

One source said they expected the deal to be communicated to BA pilots later on Thursday.

BA pilots held their first ever strike in 2019, in a row over pay, leading to hundreds of flight cancellations and disruption for thousands of passengers.

The oil price is continuing to fall today, after its biggest one-day drop in over a year yesterday.

Brent crude has lost 1.5% to $84.50 per barrel, the lowest level since the end of August.

Oil has weakened amid concerns that the sharp increases in borrowing costs caused by higher interest rates could dent economic growth.


Shortages of homes to buy are pushing up rental prices, as people struggle to find tenancies.

Private home rents in Great Britain have increased to their highest point on record, new figures from Rightmove show.

The average rent for new properties being put on the market now stands at a record £1,278 per calendar month outside London in the July to September period.

My colleague Miles Brignall adds:

The property website found an even bleaker picture for prospective tenants in the capital, where the average advertised rent also hit a new high in the past quarter – £2,627 a month – a 12.1% increase on the same time last year.

It said an overall shortage of available rental properties was driving up prices. The average rental property across Great Britain is now receiving 25 inquiries from prospective tenants to letting agents, three times more than agents were receiving in pre-pandemic 2019.


A sense of calm has returned to the financial markets today.

After a relaxed morning’s trading, the FTSE 100 index of blue-chip shares is up 40 points or 0.55% at 7452 points.

Leading the risers are tobacco firm Imperial Brands (up 3.8% - recovering yesterday’s losses after Rishi Sunak announced a plan to curb smoking), then Tesco (+3.3% after raising its profit forecast on Wednesday).

UK bond prices are slightly higher this morning, nudging bond yields (which measure the rate of return on the debt) down a little.

Metro Bank’s share price fall today, to below 40p, is a reminder of how badly the stock has performed in recent years.

Metro floated on the London Stock Exchange in 2016 at £20 per share, when it was one of several challenger banks taking on the major lender. That was cut from an earlier target of £24 per share.

The stock gained ground over the first couple of years, hitting £40 in early 2018. But they then turned south, and tumbled in early 2019 when Metro revealed a major blunder in how it classifies its loan book.

In May 2019, its shares hit a record low below £5 amid online rumours about its financial health which it strongly denied.

Victoria Scholar, head of investment at interactive investor, says:

Metro Bank is reportedly looking at ways to raise up to £600 million in debt and equity financing including more than £100 million from selling shares after a steep slide in its share price.

The stock is sharply extending losses today down around 25%, bringing its six-month loss to over 60% as investors flee the company. The UK challenger bank which was launched in 2010 is reported to have recently hired Morgan Stanley to help with advice and the potential capital raise. Last month Metro failed to secure regulatory approval to lower certain capital requirements in its mortgage business.

There have long been concerns about Metro’s finances – back in 2019 queues formed at some of its branches, sparked by negative comments about its financial position on social media. It also admitted in the same year it faced a major error around how it classified its loan book, sending its shares crashing down by nearly 40% in a single session. Just yesterday, ratings agency Fitch placed Metro Bank on ‘rating watch negative’ reflecting its view that short-term risks to its ‘business model stabilisation, capital buffers and funding have increased’.

BoE's Broadbent says it is an "open question" whether interest rates will rise further

The key question facing construction companies, mortgage holders and potential house buyers is whether UK interest rate have peaked, or will push higher.

Last month, the Bank of England left base rate at 5.25%, due to the slowdown in inflation.

And deputy governor Ben Broadbent has said today that it is an “open question” whether rates increase again at future BoE meetings, or not.

Speaking at a panel discussion hosted by the European Central Bank this morning, Broadbent says:

“I think over time, the normalisation of the terms of trade and the gradual effect, a continuing effect - even if interest rates won’t rise any further and that’s an open question ... on our forecasts, it will be enough at least to assure that in two years we expect inflation to come down to the target.”

(thanks to Reuters for the quote).

FT: Metro Bank bosses summoned by UK financial watchdogs

Metro Bank’s chair and chief executive have been summoned to urgent talks with the UK’s top financial regulators today, the Financial Times has reported.

They say:

Metro’s chief executive Daniel Frumkin and chair Robert Sharpe have both been asked to meet officials from the Bank of England’s Prudential Regulation Authority and Financial Conduct Authority later on Thursday, according to two people familiar with the situation.

The move comes after the bank’s share price plunged by up to 29% this morning, following the reports that it is seeking a capital injection.

As we flagged earlier (9.07am), Metro told shareholders this morning that it continues to meet its minimum regulatory capital requirements, and is considering a range of options to “enhance its capital resources”.


Key event

Today’s slump in construction output comes as housebuilders claim that England is now “the most difficult place to find a home in the developed world”.

The warning comes in a new snapshot of the housing crisis that also found a greater proportion of people in England live in substandard properties than the European Union average.

My colleague Rob Booth reports::

The Home Builders Federation (HBF), an industry group representing companies that build for private sale, found that England has the lowest percentage of vacant homes per capita in the Organisation for Economic Co-operation and Development (OECD), a group of 38 nations, including most of the EU the US, Japan and Australia.

It drew the comparisons before next week’s Labour party conference, as housebuilders again called for planning restrictions to be eased to accelerate construction.

About a quarter of private renters in the UK are also “overburdened” by housing costs – spending more than 40% of income, compared with just 9% in France and 5% in Germany, according to OECD data.

The fall in September’s construction PMI is the latest evidence that the UK economy was weak in the last quarter, says the EY ITEM Club.

They say:

  • The construction Purchasing Managers’ Index (PMI) joined its services and manufacturing peers by falling into contractionary territory in September.

    A PMI of 45.0 was below the 50 ‘no-change’ mark for the first time in three months and adds to signs that the economy experienced a weak Q3.

  • The PMIs haven’t been a great guide to the official output measures in recent months, and the EY ITEM Club thinks the economy isn’t quite as soft as the survey measures suggest. But construction is particularly exposed to the adverse effects of higher interest rates on the property market.

    Its performance therefore may well undershoot what is likely to be a period of near-stagnation for the economy as a whole.

RSM: Construction sector outlook hit by HS2 leg cancellation

“Disruption to government infrastructure projects”, which hit civil engineering activity, and the “continued slowdown in the housing market” both hurt construction output last month, says accountancy firm RSM.

Kelly Boorman, partner and national head of construction at RSM UK, warns the scrapping of HS2 to Manchester will change sentiment in the industry.

This month’s fall in the headline PMI to 45 is the steepest drop in three years and does not come as a surprise, with the data finally catching up with sentiment on the ground. This follows prolonged slowdown in the residential market, the post-Covid lag after working through major backlogs of work, and this week’s government announcement that HS2 is being axed.

‘Long-term industry outlook is severely dampened due to the axing of HS2, with questions raised by the industry as to the timeline in re-allocating the £36bn to other infrastructure projects and the pace in which the projects can be procured and mobilised.

With government announcements that HS2 sites will create opportunity to build more regional and local affordable housing, this will help stimulate local communities and address housing targets. Many housebuilders however had planned for HS2 and acquired land and planning in line with this project and will need to re-visit to align with new local transport, connectivity and community project plans.

This exacerbates existing market fragility as interest rates and inflation continue to dry up housebuilders’ pipeline of activity.’

Many construction firms will be concerned by the axing of the northern leg of HS2 announced yesterday, reports Max Jones, director in Lloyds Bank’s infrastructure and construction team.

Jones says:

“Yesterday’s announcement regarding the future of HS2, the biggest infrastructure project in the UK, will be of concern to many contractors that have developed long-term plans based on the opportunities this would bring. Having said that, contractors are agile and will pivot to identify new opportunities from the £36bn which the government has identified for new transport projects in the North and Midlands.

“The construction sector lags the wider economy, so it faces a more challenging period as spending decisions from a few months ago filter through to pipelines. There is also some attention on whether there will be some consolidation within the sector, as well a focus on decisions on recruitment and retention, as businesses adjust to the current economic environment and plan for 2024 and beyond.”

The HS2 decision is still being digested in Westminster too, where there is criticism that Rishi Sunak recorded a video announcing yesterday’s decision several days ago, yet Downing Street and ministers repeatedly insisted no decision had been taken….

Andrew Sparrow’s Politics Live blog has all the details:

The construction sector now faces a “particularly tough” time until next spring, warns Joe Sullivan, partner at accountancy firm MHA.

Sullivan says we are seeing a “sustained slowdown” in UK construction, which will certainly not be helped by scrapping the western leg of HS2.

Commenting on the fall in the UK construction PMI in September, Sullivan says:

“September’s hold in the base rate didn’t weaken confidence further but it didn’t help either. Current interest rates push more homeowners onto expensive mortgages as their existing deals finish, weakening an already tepid housing market.

“We’re seeing a sustained deferral of work across the wider sector. Developers continue to mothball sites or slowdown their build rates, even in prime locations. Business owners in the supply chain must choose between keeping their skill base intact through taking on work at tighter margins, or layoffs, presenting problems when the upturn occurs.

“The period between now and the Spring will be particularly tough on activity. Insolvencies will rise and Michael J Lonsdale going into administration this week shows even the biggest businesses will be affected.

“Compounding the wider economic conditions is the scrapping of the western leg of HS2. At worst this move will take billions out of the sector. It also drives home that government must do better to provide visibility and certainty over the future so business owners can at least plan (for the worst) with confidence.”

The slump in house-building in September follows the steady rise in UK interest rates since December 2021, which has dampened demand from potential buyers.

Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply (CIPS), says:

“The impact of high mortgage rates and low house buying demand continues to flow through the supply chain and negatively hit the UK construction industry. It has been a tough year for residential construction and the sharp decline in September shows the pressure on the sector is still a long way from easing, despite the pause on the raising of interest rates.

After some positive signs over the summer months, September saw a bump back down to earth for commercial construction as concerns over the future of the economy hampered demand and delayed new projects.

There is some comfort in the fact that the days of disrupted supply chains and soaring inflation are behind us for the time being, with delivery times continuing to fall and input prices remaining stable. The lack of activity has given space for suppliers to catch up with demand and create slack in the supply chain, which the construction sector will be hoping to take advantage of once demand returns.”

Housebuilding slump triggers biggest drop in UK construction output since 2020

Newsflash: UK construction firms have suffered their steepest decline in output since May 2020.

Activity across the building sector shrank in September, the latest survey of purchasing managers at construction firms has found.

The decline was led by a “steep and accelerated fall in house building”, according to S&P Global who compile the report. Aside from the pandemic, the latest fall in housing activity was the steepest since April 2009 (when the global financial crisis pushed the UK into recession).

Shrinking order books contributed to another slowdown in employment growth and lower business activity expectations for the year ahead, the report shows.

It pulled the S&P Global / CIPS UK construction PMI index down to 45.0 in September, down sharply from 50.8 in August.

Any reading below 50 shows a contraction, and this is the fastest downturn since the first pandemic lockdowns hit the building sector.

Civil engineering activity also fell last month – a trend that could continue now that the northern leg of HS2 has been scrapped.

A chart showing UK construction PMI

Tim Moore, economics director at S&P Global Market Intelligence, says:

“Output levels declined across the UK construction sector for the first time in three months during September and the latest downturn marked the worst overall performance since the early stages of the pandemic.

A rapid decline in house building activity acted as a major drag on workloads, with construction companies widely commenting on cutbacks to new residential development projects in the wake of sluggish demand and rising borrowing costs. Concerns about the domestic economic outlook also dampened client spending during September, which contributed to the fastest reduction in commercial building since January 2021.

The survey’s forward-looking measures once again remained relatively downbeat as order books decreased at an accelerated pace and business activity expectations eased to the lowest so far this year. Moreover, fewer project starts meant that sub-contractor availability increased to the greatest extent since the summer of 2009.

Lower demand across the supply chain contributed to a robust improvement in delivery times for construction productions and materials, alongside a stabilisation in purchasing costs during September.”


UK car sales jump 21% in September

UK car sales have risen for the 14th month running, but the share taken by electric vehicles has fallen.

A total of 272,610 new cars were registered in September, industry body the SMMT reports, which is 21% more than a year ago.

There was a large increase in company car purchases, with registrations by large fleets up 40.8% to 143,256. The SMMT says this is due to “market rebalancing” after last year’s supply problems.

The SMMT also flags that battery electric vehicle sales rose by 18.9%, with 45,323 drivers choosing BEVs over fossil-fuel powered cars.

But as this growth was less than the overall recorded by the market, BEV market share slipped back slightly to 16.6% from 16.9% a year ago.

Mike Hawes, SMMT chief executive, says the government must offer more incentives to encourage motorists to switch to electric cars.

Amazon: We disagree with Ofcom's findings

Amazon says it disagrees with Ofcom, but has pledged to work constructively with the CMA over its probe into the cloud market.

An Amazon Web Services (AWS) spokesperson said in a statement:

“We disagree with Ofcom’s findings and believe they are based on a fundamental misconception of how the IT sector functions.”

The boss of a UK cloud computing company has welcomed Ofcom’s decision to refer the industry to the competition authorities.

Mark Boost, the CEO of Civo said:

“I applaud this bold action from Ofcom. A referral to the Competition and Markets Authority (CMA) is an unprecedented opportunity to make the cloud market a truly competitive space. This means empowering any company to develop and grow cutting-edge cloud services, and ensuring customers can readily move around to find the best solution to match their needs.”

“The CMA’s broad enforcement powers opens the door to wide-ranging remedies. Action will need to be a balancing act. It will be particularly important to tackle egress fees, either through significant price controls or the most ambitious choice: abolishing them entirely. The price point charged on egress by hyperscalers is out of control, and creates huge practical and financial obstacles for customers to move to another cloud provider. Urgent changes are also needed to how hyperscalers structure their services to enable customers to reap the benefits of simultaneously accessing multiple different providers, as well as a review of the fairness of incentives for loyal customers.”

“This is only the beginning of an 18 month journey before we know the decision made by the CMA. In the meantime, this investigation can also be a spur for immediate action from industry. Emerging cloud providers are rapidly stepping up to offer an alternative way forward to the hyperscalers. This vision is founded on putting the needs of the user back at the heart of cloud computing: transparent, predictable pricing; a streamlined experience; and super-fast, reliable services across the board.”

Metro: We're evaluating a range of options

A Metro Bank in London.
A Metro Bank in London. Photograph: Hannah McKay/Reuters

Metro Bank has just issued a statement to the City, in which it “notes the recent press speculation regarding a potential capital raise”.

[As flagged earlier, there are reports that Metro is in talks about an urgent capital raise of £600m in equity and debt]

Metro says it “continues to consider how best to enhance its capital resources”, with particular regard to £350m of senior bonds that are due to be refinanced in October 2025.

It explains:

The Company is evaluating the merits of a range of options, including a combination of equity issuance, debt issuance and /or refinancing and asset sales. No decision has been made on whether to proceed with any of these options.

Metro also says that it continues to meet its minimum regulatory capital requirements, and is “well positioned for future growth.

Shares in Metro are currently down 25%, having dropped 29% at the start of trading.

Here’s George Dibb, head of the Centre for Economic Justice at the IPPR thinktank, on the competition probe into UK cloud computing:

The bond markets appear to be rather calmer today than this time yesterday.

The yield, or interest rate, on UK 30-year government bonds has crept a little bit higher this morning. It is currently 5.033%, having ended Wednesday at 5.023%.

That small rise indicates that bond prices have slipped a little. But it still leaves yields below the 25-year high of above 5.1% hit yesterday morning.

Metro Bank shares fall 29% after reports it is seeking fresh capital

Ouch. In the City, shares in lender Metro Bank have tumbled by over a quarter at the start of trading.

Metro’s shares have fallen to around 36p, from 50p yesterday, following reports that it is considering raising hundreds of millions of pounds from investors.

Metro, whose market value had already halved during September, recently failed to persuade regualtors to allow it to lower the capital requirements attached to its mortgage business.

The FT has reported that Metro is in talks about raising £250m in equity funding and £350m in debt.

Last night, before today’s share price plunge, the bank was valued at around £86m.

You can read Ofcom’s report into cloud computing here.

It includes this handy chart showing the structure of the cloud computing sector:

A chart showing the cloud services value chain

As you can see, Amazon’s AWS, Microsoft’s Azure and Google Cloud are present at all levels of the cloud stack, and provide a wide range of cloud services across multiple product categories.

Full story: UK cloud computing market faces inquiry amid Microsoft and Amazon concerns

The UK’s communications regulator has referred the cloud computing market to the competition watchdog for a formal investigation after a study raised concerns about industry leaders Amazon and Microsoft.

Ofcom has asked the Competition and Markets Authority to launch an inquiry, saying it is “particularly concerned about the position of the market leaders Amazon and Microsoft”.

More here:

The CMA has various powers if it finds that competition is being threatened – it can force firms to change behaviour, such as the way they selll products.

It can also impose structural remedies – compelling companies to sell parts of their business to improve competition [as we saw when it forced Facebook to sell gif creation website Giphy].

CMA: We're launching a market investigation into cloud computing

That was quick. Britain’s competition regulator has announced that it is indeed launching a market investigation into the supply of public cloud infrastructure services in the UK, following Ofcom’s referral.

The Competition and Markets Authority (CMA) says it has appointed independent panel members to an inquiry group, who will act as the decision makers on this investigation.

They will publish “an issues statement” soon, which will lay out the proposed focus of the CMA’s investigation, for consultation.

The CEO of the CMA, Sarah Cardell (who has already tangled with Microsoft over its takeover of Activision Blizzard) says:

We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny. This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.

Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.

The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds.

Why Ofcom is concerned about cloud computing

It’s around a year since Ofcom announced it would examine the world’s biggest tech companies’ dominance in areas such as cloud computing, messaging and smart devices.

And today Fergal Farragher, the Ofcom director responsible for that market study, says it’s not clear that there is effective competition in the cloud computing world.

Farragher says:

“The cloud is the foundation of our digital economy and has transformed the way companies run and grow their businesses. From TV production and telecoms networks to AI innovations – all of these things rely on remote computer power that goes unseen.

Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well. So, we’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”

Introduction: Ofcom refers UK cloud market to CMA for investigation

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

British media regulator Ofcom has called for an antitrust investigation into Amazon and Microsoft’s dominance of the UK’s cloud computing market.

Following a probe into UK cloud services, Ofcom has decided to refer the public cloud infrastructure services market to the Competition and Markets Authority for further investigation, it announced this morning.

Ofcom is concerned that it is hard for UK businesses to switch and use multiple cloud suppliers.

And it points the fingers at two of the largest tech giants, saying: “We are particularly concerned about the position of the market leaders Amazon and Microsoft.”

Amazon Web Services (AWS) and Microsoft had a combined market share of 70-80% in 2022, Ofcom says, followed by Google with a share of 5-10%. The vast majority of cloud customers use the services of these ‘hyperscalers’ in some form, Ofcom says.

A chart showing the UK cloud computing markets

Ofcom says there are three areas of concern:

  • Egress fees. These are the charges that customers pay to transfer their data out of a cloud and the hyperscalers set them at significantly higher rates than other providers. The cost of egress fees can discourage customers from using services from more than one cloud provider or to switch to an alternative provider.

  • Technical barriers to interoperability and portability. These can result in customers needing to put additional effort into reconfiguring their data and applications so they can work on different clouds. This makes it more difficult to combine different services across cloud providers or to change provider.

  • Committed spend discounts. These can benefit customers by reducing their costs, but the way these discounts are structured can incentivise customers to use a single hyperscaler for all or most of their cloud needs, even when better quality alternatives are available.

As a result, Ofcom have now asked the CMA to carry out an independent investigation to decide whether there is an adverse effect on competition, and if so, whether it should take action or recommend others to take action.

Also coming up today

Some calm has returned to the financial markets after yesterday’s nervy bond sell-off.

Asia-Pacific shares are higher today, recovering from Wednesday’s losses, as concerns over high interest rates ease.

As we blogged yesterday, UK long-term borrowing costs hit their highest level in 25 years on Wednesday morning, while US Treasury yields hit a 16-year high. But the rout abated after a surprisingly small rise in US private sector payrolls was announced.

By the end of the day there was relief across financial markets, but for how long?

Jim Reid of Deutsche Bank says:

After a fraught start we saw bonds and equities rally back following a tough few days.

However, the recovery accelerated with bad employment data, so the answer to how to get out of the recent rout was clearly the return of bad news is good news.

The agenda

  • 7am BST: German trade balance

  • 9am BST: UK car sales for September

  • 9.30am BST: UK construction PMI survey for September

  • 1.30pm BST: US weekly jobless claims data

  • 1.30pm BST: US trade data for August


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