Get all your news in one place.
100's of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.15pm) and Nick Fletcher

Chancellor Hammond claims UK economic fundamentals are strong despite Brexit fears –as it happened

Philip Hammond hails news that Britain’s economy grew in the last quarter, but some economists fear a Brexit recession looming
Philip Hammond hails news that Britain’s economy grew in the last quarter, but some economists fear a Brexit recession looming Photograph: Mark Thomas/REX/Shutterstock

European shares end higher

The promise of extra financial stimulus from the Japanese government set a positive tone at the start of the day, and that mostly continued into the close. Better than expected UK economic growth in the second quarter also helped lift the FTSE 100 and FTSE 250 - the latter briefly regaining the level it was at before the Brexit vote. But European markets slipped back from their highs as Wall Street went into reverse after an early rise, with sentiment undermined by a sharper than expected rise in crude oil stocks. The final scores showed:

  • The FTSE 100 finished 26.40 points or 0.39% higher at 6750.43, its best level since 5 August 2015
  • Germany’s Dax rose 0.7% to 10,319.55
  • France’s Cac climbed 1.19% to 4446.96
  • Italy’s FTSE MIB was 0.99% better at 16,863.01
  • Spain’s Ibex ended up 1.18% at 8661.4
  • In Greece, the Athens market added 0.56% to 569.16

On Wall Street, the Dow Jones Industrial Average is currently down 31 points or 0.17% ahead of the US Federal Reserve interest rate decision.

On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

Here’s Reuters on the rise in US crude oil stocks:

Oil prices tumbled more than 2 percent on Wednesday, hitting a two-month low, after the U.S. government reported a surprise build in crude and gasoline inventories during the peak summer driving season.

The U.S. Energy Information Administration said domestic crude stockpiles rose 1.7 million barrels, against analysts’ forecasts for a drawdown of 2.3 million barrels.

“A drop in refinery runs at the peak of summer driving season indicate refiners are dialing back amid faltering profit margins,” said Matt Smith, analyst at New York-based oil cargoes tracker Clipperdata.

Refinery crude runs fell 277,000 barrels per day last week as utilization rates fell 0.8 percentage point to 92.4 percent of capacity, EIA data showed.

Surprise rise in US crude oil stocks

Oil prices are under pressure again after new figures showing a surprise increase in US crude stocks.

The Energy Information Administration said crude oil stocks rose by 1.67m barrels last week to 521.1m, rather than the 2m fall which had been expected.

Updated

Wall Street opens higher

US markets are off to a positive start, lifted by better than expected results from Apple and ahead of the Federal Reserve meeting.

The Dow Jones Industrial Average is currently up 56 points or 0.3%, while the S&P 500 is up 0.16% and Nasdaq is 0.63% better.

Dow Jones movers
Dow Jones movers Photograph: Reuters

Earlier in the US came some evidence of economic weakness, ahead of the Federal Reserve interest rate decision.

Orders for durable goods - long lasting items ranging from toasters to aircraft - fell 4% month on month in June, the biggest drop since August 2014. May’s initial reading of a 2.3% drop was revised downwards to a 2.8% fall.

Rob Carnell, chief international economist at ING Bank, said:

The volatile durable goods orders data fell again in June by 4.0% month on month, following a 2.8% decline in May. This matters because goods orders are one of the ways we can track business investment over the quarter. With the quarter now complete, the picture for business investment in the second quarter of 2016, following 2 previous quarters of decline, remains poor.

More accurate yardsticks for business investment than the headline orders series, are the trend series for core orders and shipments. Core (ex defence and aircraft) orders accelerated their decline on a 3-month annualised basis in June. But the equivalent figure for shipments fell at a slower pace, though remained negative.

We think this suggests a flat business investment figure in the second quarter of 2016 - or something close to flat - and this would be a slight improvement on the fourth quarter of 2015 and the first quarter of 2016.

We had not expected much more than this, but nonetheless, our 2.8% quarter on quarter forecast for second quarter GDP growth might now be a couple of tenths too high, assuming we have all our other subcomponents correct.

This would still leave second quarter 2016 GDP at about 2.5% - a marked improvement on 1.1% in the first quarter, and will help hawkish Fed members argue that the Fed should not hold its fire for too much longer before hiking rates again. The domestic economy does seem to have recovered some of its momentum since late 2015 / early 2016, and international political developments and market uncertainty are now the main deterrents to further fed tightening.

FTSE 250 regains all post-Brexit vote losses

The FTSE 100 is not the only index to be boosted by the news of better than expected UK GDP figures and, perhaps more pertinently, an interest rate cut from the Bank of England next week to try and stall a post-Brexit downturn.

The leading index is now at its highest level for more than a year - the best since 20 July 2015.

Meanwhile the FTSE 250, which is more focused on the UK domestic economy than the 100 index, has regained all the losses it suffered since the Brexit result.

The mid-cap index is up 1.6% at 17,354, compared to the 17,333 level it reached on the day of the referendum.

Lunchtime summary: Growth beats forecasts, but....

A quick recap.

Fears that Britain’s economy stalled in the run-up to the EU referendum have eased a little, after growth in the second quarter of 2016 beat forecasts.

UK GDO rose by 0.6% in April-June, the ONS reported, thanks to the biggest jump in industrial output since 1999.

That beats forecasts of 0.4% growth, and means Britain’s economy is 7.7% larger than before the 2008 crash.

Details:

  • Services: grew by 0.5%
  • Industrial production: grew by 2.1%
  • Manufacturing: grew by 1.8%
  • Construction: shrank by 0.4%
Where the growth came from:
Where the growth came from: Photograph: ONS

Chancellor Philip Hammond has declared that the figures show Britain’s economic fundamentals are robust, as it enters a world of Brexit uncertainty. He can also point to plans to invest more than £300m in London City Airport.

But many economists have warned that the economy is probably now shrinking. It could even fall into recession, if Britain gets a serious bout of Brexit blues.

There’s also concern that most of the growth occurred in April, before dropping off in May. The report has little detail on how the economy fared in the immediate run-up to the June 23 referendum either.

Worryingly, UK retail sales have tumbled at the fastest rate since January 2012 this month.

And Ireland’s central bank has cut its growth forecasts for 2016 and 2017, due to the impact caused by the EU referendum vote.

But City traders are in upbeat move, sending the FTSE up by 49 points to 6773 -- a new 11-month high. They’re expecting a fresh bout of stimulus from the Bank of Japan soon, followed by a UK interest rate cut next week.

Fast food chain McDonalds has just announced plans to hire thousands more workers in the UK; suggesting it is also confident about future prospects.

Updated

Our economics editor, Larry Elliott, reckons that Philip Hammond knows full well that Britain’s economy is entering turbulent times:

He writes:

The Brexit result was unexpected and has, judging by the surveys since, affected the outlook for both the services and manufacturing sectors. Construction was the one sector that was already struggling in the buildup to the vote and is likely to face an even tougher winter than the rest of the economy.

Growth is going to slow down markedly from now on. The length and depth of that slowdown will depend on how quickly businesses regain their equilibrium. The Bank of England knows that, which is why a big package of measures designed to boost confidence will be announced next week.

More here:

Here’s more City reaction to the growth figures.

Retail sales take a tumble

Bad news: UK retail sales have fallen at the fastest pace in over four years in July this month.

The latest survey, from the CBI, bolsters concerns that the economy is weakening fast - unravelling the solid growth in the last quarter.

Some 24% of retailers said that sales volumes were up in July compared with a year earlier, while 38% said they were down, giving a rounded balance of -14%. That’s the weakest reading since January 2012.

The CBI says:

Within retail, sales by grocers, and furniture and carpets stores were the main drivers of the drop in overall volumes. But some sectors bucked the trend, with non-specialised department stores and retailers of footwear and leather goods reporting higher volumes.

Sam Tombs of Pantheon Economics says it’s worrying news:

Ireland slashes growth forecasts after Brexit vote

flag of IrelandBB4MJ1 flag of Ireland

Ireland’s Central Bank has downgraded its forecasts for GDP growth for 2016 and 2017 citing the adverse affect of Brexit on the economy.

Britain is Ireland’s biggest export partner while Ireland is Britain’s fifth biggest trading partner with €1.5bn in transactions a week.

The Central Bank said it believed the Irish economy, which is one of the fastest growing in Europe, would continue to grow but that Brexit was negative for the economy.

  • It cut its projections for growth in 2016 by 0.2% to 4.9% GDP growth.
  • It also slashed 0.6% off its 2017 growth forecasts, down to 3.6%.

It said it expected a prolonged period of uncertainty while the UK was negotiating its Brexit package which would damage investor confidence.

In a statement Ireland’s Central Bank chief economist, Gabriel Fagan, said while the economy’s reliance on the British export market had weakened over recent decades.

However...

“Some sectors, including agri-food, clothing, footwear and tourism continue to have a relatively high dependency on exports to the UK and, consequently, could be affected disproportionately”.

Tourism is expected to take a particular hit because of the weakened pound.

Among Ireland’s top 10 exports to Britain are food and drink and packaged medicines while the UK’s exports to Britain including gas, cars and pharmaceuticals.

Edgar Morganrath, associate research professor at Dublin’s Economic and Social Research Institute has said that custom paperwork could add three to four per cent on costs for exporters to the UK, in line with additional costs of exporting to non-EU territories including US and Canada.

Here’s the full report

Updated

Britain’s growth since the crisis is less impressive once you adjust for the increase in population:

On a per-capita basis, the economy is only 1.3% bigger than in 2008, not the 7.7% headline increase report today.

Matthew Whittaker of the Resolution Foundation shows how this is much worse than in previous recessions:

Updated

Andy Bruce of Reuters has highlighted how April provided the bulk of the growth in the last quarter:

If you’re just tuning in, here’s our news story on today’s growth figures:

Andrew Sentance.

Andrew Sentance, senior economic adviser at PwC, fears that Britain’s economy is entering a period of weak growth, despite the forecast-beating performance in the last quarter:

“The pick up in growth in the UK in the second quarter is consistent with other data - for employment, retail sales and yesterday’s CBI survey of manufacturers.

“However, we also know that the EU Referendum result has sent a shockwave through the business world and we should expect much slower growth this quarter - the main scenario in our latest PwC Economic Outlook suggests growth slowing to around 1.6% this year. 2017 is likely to see even more sluggish growth - our central view is for GDP to increase by just 0.6% next year.

Once upon a time, Britain’s chancellor would have celebrated today’s growth figures by donning a florescent jacket and building a wall.

But Philip Hammond doesn’t shares George Osborne’s love of hard hats; so he’s decamped to London City Airport this morning.

Phillip Hammond visiting London City Airport (right) with Minister for Aviation Lord Ahmad (left) and Declan Collier CEO of London City Airport (middle)
Phillip Hammond visiting London City Airport (right) with Minister for Aviation Lord Ahmad (left) and Declan Collier CEO of London City Airport (middle) Photograph: Stefan Rousseau/PA

He’s there to announce a £344m expansion programme for the airport, meaning more space for planes and an enlarged terminal to house extra passengers.

Today’s report shows that “dire predictions” that the economy would grind to a halt before the EU referendum were false, says Peter Rosenstreich of Swissquote Bank.

In actuality, growth accelerated as business raced ahead of the uncertain vote (lead by industrial output). This unexpected read indicates that the UK economy was in stronger position ahead of the vote then originally forecasted.

But Rosenstreich also fears Britain could now fall into recession:

However, this preliminary estimate does not capture the post referendum fallout, which is likely to drive Q3 lower, possibly into recession. We remain bearish on the British pound as the UK economy will clearly go through a period of economic adjustment and likely BoE interest rate cuts.”

Updated

One decent quarter doesn’t mean Britain’s industrial sector has roared back, points out Ben Chu of the Independent:

The chancellor has been tweeting:

Martin Beck, senior economic advisor to the EY ITEM Club, also fears that the UK will contract following the Brexit vote, but might avoid a full-blown recession.

He points out that today’s strong growth reading is “almost entirely due to the exceptional April performance” [see earlier graph] That means the economy was probably weakening in June.

“GDP growth in Q2 looks likely to represent one last hurrah for the economy before it enters a softer and more turbulent period. The lack of momentum as the economy entered Q3 means that the chances of a negative reading for the current quarter are relatively high.

However, our view remains that the extent to which the economy will slow in the second half of the year has been overplayed and that the UK may avoid a technical recession.”

Ben Brettell, senior economist at financial services firm Hargreaves Lansdown, is encouraged by the 2.1% surge in UK industrial output:

The UK economy shook off pre-referendum nerves to grow by a better-than-expected 0.6% in the second quarter, with a notably strong performance from the manufacturing sector.

It’s always difficult to tell where you’re going by looking in the rear-view mirror, and as such today’s GDP figures can’t be taken as evidence of the current climate. However, what they do show is an absence of pre-Brexit concerns, meaning that if the forecast downturn does materialise, at least we start from a position of relative strength.

However... Danielle Haralambous of the Economist Intelligence Unit reckons it won’t last.....

Economist: UK likely to shrink this quarter

Jeremy Cook, chief economist at the international payments company, World First, fears that Britain’s economy will shrink in the current quarter, despite a better performance than expected in the last three months.

He says:

Preliminary GDP figures are always heavily caveated; less than 50% of the survey data is in and will likely over-represent the beginning of the quarter compared to the end.....

“Unfortunately we believe the overall UK economic picture is one of recession at the moment and while it is still too early to forecast we are looking for Q3 GDP to fall by anywhere 0.1-0.4%. Today’s data will limit calls that the UK was slowing into the vote however.”

Updated

A word of caution....

Today’s GDP report is mainly based on data from April and May, as it’s too early to have a full picture of the economy in June.

So if Britain did suffer a dose of Brexit angst last month, it won’t appear in today’s data - we’ll have to wait for the second estimate of GDP in August.

Simon French, chief economist of Panmure Gordon, flags up that April was a particularly strong month:

ONS: Little sign of Brexit fears

Britain’s carmakers and pharmaceutical firms helped to drive the economy forwards, according to Joe Grice, the Office for National Statistics’ top economist.

The ONS also found little sign that the EU referendum on June 23rd had hurt the economy during the last quarter.

Despite the surge in industrial output last quarter, the sector is *still* smaller than before the financial crisis back in 2008.

Only the services sector (which makes up 70% of the economy) is larger:

UK economy by sector
UK economy by sector since the financial crisis Photograph: ONS

Updated

Britain’s economy is now 7.7% higher than the pre-economic downturn peak, in the first quarter of 2008.

The 0.6% growth recorded in Q2 means the UK has been growing for the last 14 quarters:

UK GDP
UK growth over the last decade Photograph: ONS

Chancellor Philip Hammond.

Britain’s new Chancellor of the Exchequer, Philip Hammond, has welcomed the news that the UK growth rate has jumped to 0.6%.

He says:

“Today’s GDP figures show that the fundamentals of the British economy are strong. In the second quarter of this year our economy grew by 0.6 per cent – faster than was expected. Indeed we saw the strongest quarterly rise in production for nearly twenty years, so it is clear we enter our negotiations to leave the EU from a position of economic strength.

“Those negotiations will signal the beginning of a period of adjustment, but I am confident we have the tools to manage the challenges ahead, and along with the Bank of England, this government will take whatever action is necessary to support our economy and maintain business and consumer confidence.

UK industrial output leaps, but services slow

Britain’s manufacturing sector has a very good quarter, according to today’s GDP report.

UK industrial output jumped by 2.1% during the April-June period, the strongest quarterly growth since the third quarter of 1999.

However, the service sector slowed to 0.5% growth, down from 0.6% in Q1.

And construction output shrank by 0.4%.

On an annual basis, the UK economy grew by 2.2% over the last 12 months - up from 2.0% three months ago.

UK GROWTH FIGURES RELEASED

Here we go: The UK economy expanded by 0.6% in the last three months, up from 0.4% in the January-March quarter.

That’s faster than expected. It suggests that the UK economy was in fairly robust shape before June’s EU referendum.

Lots more detail and reaction to follow!

Tension is mounting in the City, as traders wait for the UK GDP data to drop in 10 minutes.

The pound is weakening a little, down 0.1% against the US dollar at $1.3111.

Ana Thaker, market economist at PhillipCapital, explains why investors are anxious:

A positive figure will add to optimism that the UK economy was robust going into the vote and therefore may weather the repercussions better than previously forecasted.

However, poor figures will be a blow to already fragile and worried markets, with expectations that the Brexit decision will only exacerbate problems in an already weak economy and could see weakness in Sterling as markets contemplate the prospect of an easing package from the Bank of England.

London’s stock market has hit a new 11-month high this morning.

The FTSE 100 has risen by 20 points to 6744, a level last seen in August 2015.

Shares are rallying worldwide, after Japan’s prime ministers promised a stimulus package, worth around £200bn:

Updated

UK companies upbeat about Brexit impact

A brickie shoulders a hod of bricks on a building site.

Encouragingly, several UK companies have told shareholders this morning that they’re not suffering any serious harm from the Brexit vote.

Yet, anyway.

Here’s Housebuilder Taylor Wimpey:

One month on from the EU Referendum, current trading remains in line with normal seasonal patterns. Customer interest continues to be high, with a good level of visitors both to our developments and to our website.

Challenger bank Metro says:

“Metro Bank is in a strong position to deal with any post European Referendum uncertainty. Since the Referendum vote we have seen no change in customer behaviour or impact on business flows.”

Fund manager Jupiter is also upbeat:

Jupiter has continued to deliver strong investment outperformance after all fees in the first half of the year. Net flows were positive despite the market backdrop and we made further targeted investments to support our strategy of diversification by product, client type and geography which continues to deliver on behalf of our clients and shareholders.

Since the end of June, we have continued to see net flows into our products.

It’s early days, of course - Britain hasn’t even triggered Article 50 to begin the formal exit from the EU.

Updated

Today’s second-quarter growth figures could be a “last hurrah” before the Brexit vote plunges the UK into recession early next year.

That’s according to Bloomberg’s Jill Ward, who flags up that economists expect GDP to shrink slightly over the next six months:.

So, even if the growth rate does rise to 0.5%, we should still brace for trouble ahead:

UK growth figures
UK growth figures Photograph: Bloomberg

Samuel Tombs, an economist at Pantheon Macroeconomics, told them:

“The economy had done quite well in the run-up to the referendum, but that can turn pretty quickly.

“We’ve already seen consumer confidence fall very sharply and all of the survey data has just collapsed over the last month.”

More here:

British Economy’s Last Hurrah Awaited Before Brexit Growth Shock

And here’s what a ‘last hurrah’ looks like in practice #ouch

Updated

Critics often argue that GDP is a poor measure of the health of an economy.

For example, it doesn’t distinguish between valuable and harmful economic output, nor does it include voluntary work or unpaid activity. It also doesn’t measure economic inequality, or living standards.

And we have a perfect example of that today; a survey showing that UK real wages (earnings adjusted for inflation) have shrunk by 10% since the 2007 financial crisis.

That dire performance is only matched by Greece, and shows why many people have felt isolated from the recovery since the crisis.

Frances O’Grady of the TUC (which prepared the report) says it shows the economy is still too fragile:

“Wages fell off the cliff after the financial crisis, and have barely begun to recover,.

People cannot afford another hit to their pay packets. Working people must not foot the bill for a Brexit downturn in the way they did for the bankers’ crash.”

Government cheers Glaxo's £275m investment push

A GlaxoSmithKline (GSK) flag near Irvine in Scotland.

Phamaceuticals firm GlaxoSmithKline has given the British economy a boost, by announcing a £275m investment programme to expand its UK manufacturing sites.

GSK swept aside worries about the Brexit vote, declaring that it was driven to invest the money by the UK’s “skilled workforce and competitive tax system”.

The money will be spent across three GSK sites: Barnard Castle in County Durham, Montrose in Angus, and Ware in Hertfordshire.

Understandably, the UK government has hailed the news - as a sign that Britain is still open for business despite voting to leave the EU.

Business and Energy Secretary, Greg Clark argues:

“An investment of this scale is a clear vote of confidence in Britain and underlines our position as a global business leader.

GSK’s recognition of our skilled workforce, world leading scientific capabilities and competitive tax environment is further proof that there really is no place better in Europe to grow a business.”

The Agenda: UK growth figures due today

Good morning.

Britain’s economy is centre-stage today, as we await the official UK GDP figures for the second quarter of this year.

That report, due at 9.30am sharp, will show how well the British economy performed in the second quarter of this year.

The City consensus is that the economy grew by 0.4% between April and June, matching the fairly modest growth recorded in January to March.

But some fear that the growth rate may have slowed, perhaps to 0.3%.

Today’s report is particularly important as it covered the period running up to the June 23 referendum on Britain’s membership of the EU. It should show whether the UK economy was in decent shape as the nation headed to the polling booths, or already weakening.

The very first ballot box arriving at the count in the EU referendum at Manchester Central convention centre at 22:08, from the Moss Side ward, on 23 June.
The very first ballot box arriving at the count in the EU referendum at Manchester Central convention centre at 22:08, from the Moss Side ward, on 23 June. Photograph: LNP/REX/Shutterstock

Laith Khalaf, senior analyst at Hargreaves Lansdown, explains why the GDP report matters:

“It will tell us if the referendum gave the UK economy the jitters in the lead up to the vote.

“There are several indicators which have pointed to a slowdown in economic activity as the referendum approached.”

The report will also show how Britain’s manufacturing, services, construction and agriculture all performed during the quarter.

As this chart shows, Services has provided the bulk of the growth since the financial crisis - making it more dominant than ever.

UK economy by sector
UK economy by sector Photograph: ONS

It’s also a busy morning for UK financial results, with housebuilder Taylor Wimpey, broadcaster ITV, challenger banks Shawbrook and Metro Bank all reporting to the City. They’ll doubtless be talking Brexit today.

Updated

Sign up to read this article
Read news from 100's of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Keith Urban Allegedly Claims Nicole Kidman 'Villain Narrative' Is 'Very Unfair,' Vows Revenge
Keith Urban is reportedly furious over a perceived 'villain narrative' around his split from Nicole Kidman, after she omitted him from a recent interview and left him feeling erased.
International Business Times UK
International Business Times UK
Former WWE Superstar Braun Strowman Takes Down 7,300 Calories A Day, But It's His Grocery Bill That Has Me Sweating
And it's not just the meat sweats...
Cinemablend
Cinemablend
Black Comedian Faces Backlash After Donning “White Face” To Mock Erika Kirk
The skit features Druski with his face painted white, wearing a blonde wig, heavy makeup, and bright blue contact lenses.
Bored Panda
Bored Panda
Brooks Nader Was Asked About All Those Haters Who Don't Want Her In The New Baywatch
She's responding to the backlash.
Cinemablend
Cinemablend
‘She heard a demon’: Atlanta realtor rushes out of property after client hears something terrifying
TikTok can't decide whether to believe the terrifying story or not.
We Got This Covered
We Got This Covered
Two salon owners wanted to go zero-waste. Could they do it and keep their business afloat?
Scisters Salon & Apothecary in the San Diego area is committed to sustainable beauty and going low-waste
The Guardian - US
The Guardian - US
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play