BUSINESS LIVE: GDP grows 0.4%; Ofwat outlines spending package; Heathrow passenger fees cap

Luke Bartholomew, deputy chief economist at Abrdn:

‘While it is important to stress that the monthly GDP series is very volatile, the strength of today’s report is consistent with the broader evidence of the UK continuing its solid recovery from a long period of stagnation.

‘With the Bank of England’s chief economist Huw Pill sounding somewhat cautious about the outlook for inflation, the fact that the economy now looks set to grow faster than the Bank’s forecasts may also make investors slightly more nervous about the prospect for an August rate cut. However, as long as the inflation data cooperate, we continue to expect the first cut next month.’

The UK Civil Aviation Authority has reduced the cap on passenger fees charged by Heathrow airport after push back fromt the Competition and Markets Authority.

The regulator had originally decided on an estimated cap at £25.24 per passenger in 2025 and £25.28 per passenger in 2026.

These figures will now fall by around 6 per cent or £1.52 in 2025 and £1.57 in 2026, with the price per passenger being capped at an estimated £23.73 in 2025 and £23.71 in 2026.

The CAA said the change reflects ‘a smaller reduction in charges for the over recovery of revenue by Heathrow in 2020 and 2021’.

It also reflects the ‘​elimination of the premium that had been allowed on indexed linked debt in calculating Heathrow’s cost of capital’, and ensures that ‘Heathrow’s charges reflect the costs of pension deficit repair payments and business rates’.

Household water bills in England and Wales are set to rise by an average £19 a year over the next five years – a third less than the increase requested by companies, under draft proposals announced by Ofwat.

The regulator said water firms proposed increases averaging £144 over five years.

For example, Thames Water’s proposed increase of £191 by 2030 has been reduced to £99, while Severn Trent’s proposed rise of £144 has been cut to £93.

Ofwat chief executive David Black said: ‘Customers want to see radical change in the way water companies care for the environment. Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.

‘These proposals aim to deliver a 44% reduction in spills from storm overflows compared to levels in 2021. We expect all companies to embrace innovation and go further and faster to reduce spills wherever possible.’

The UK economy expanded by 0.4 per cent in May, beating forecasts of 0.2 per cent thanks to a jump in housing construction activity, fresh data from the Office for National Statistics shows.