BUSINESS LIVE: GDP shrinks 0.3% in Q4; Close Brothers scraps divi; Jet2 ups profit expectations

Published on: February 15, 2024

By Live Commentary

Updated: 07:58 GMT, 15 February 2024

The FTSE 100 will open at 8am. Among the companies with reports and trading updates today are Close Brothers, Jet2, GSK, MJ Gleeson, Lloyds and Home REIT. Read the Thursday 15 February Business Live blog below.

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Better news on inflation means now is the time to cut rates, says MAGGIE PAGANO

GDP slips amid ‘persistently high inflation, structural weaknesses in the labour market and low productivity growth’

Marcus Brookes, chief investment officer at Quilter Investors:

‘UK GDP contracting in both December and the fourth quarter of 2023 is mainly due to persistently high inflation, structural weaknesses in the labour market and low productivity growth, but also adverse weather conditions.

‘These factors affected the performance of the services and construction sectors, which are the main drivers of the UK economy. Retail sales also declined sharply in December, in the face of ongoing high inflation and interest rates as well as changing buying patterns.

‘Some of these challenges are temporary and have already started to ease. The inflation rate held steady at 4% yesterday when many were predicting an increase. Over the coming months, we expect inflation to fall, potentially easing the pressure on UK households, and supporting the recovery of the consumer-driven economy.

‘The key indicator to watch is inflation in the services sector, which accounts for the bulk of the UK’s economic activity and employment and reflects the strength of wage growth and consumer demand, which are crucial for the UK’s recovery. As inflation steadies and then reduces, the Bank of England is more likely to cut interest rates to stimulate economic activity and investment.

‘The UK economy faces challenges and uncertainties, but it also has many strengths and opportunities. It has a dynamic economy with a skilled and flexible workforce, and the UK is expected to overcome many of the current difficulties and emerge stronger and more resilient in the future.’

UK slips into ‘very mild economic contraction’

Jeremy Batstone-Carr, European strategist at Raymond James Investment Services:

‘Today’s GDP figures confirm that the UK slipped into very mild economic contraction towards the end of 2023, with subdued economic activity dragging into the festive season.

‘The data is evident of deflated activity across all key sectors of the economy, from manufacturing to service and retail, as well as construction activity, which was negatively impacted by inclement weather.”

‘Nonetheless, while there is an impression of economic stagnation, brighter times surely lie ahead. As winter rolls away, the lagged impact of high inflation and interest rates will work its way through the economy and inflationary pressures will settle, allowing the Bank of England to lower the base rate come summertime.’

GDP shrinks 0.3% in Q4

The British economy shrank by 0.3 per cent in the final three month of 2023, a bigger drop than expected, leaving the country in a technical recession, fresh data from the Office for National Statistics shows.