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| UK service sector growth hits four-month low as political uncertainty bites - business live | UK service sector growth hits four-month low as political uncertainty bites - business live |
| (35 minutes later) | |
| 12.58pm BST | |
| 12:58 | |
| Just in: UK payments firm Worldpay has agreed to be taken over by US rival Vantiv, in a £9.1bn deal. | |
| Yesterday, FTSE 100-listed Worldpay revealed that it had received two separate bids, one from Vantiv and one from JP Morgan. | |
| The Vantiv deal (terms here) values Worldpay at £3.85 per share (including a 5p dividend), which is a 19% premium on their value on Monday. | |
| However... Worldpay’s shares are trading around 406p right now, indicating that the City believe there could be a bidding war. | |
| 12.38pm BST | |
| 12:38 | |
| Scotland dodges recession as growth outstrips rest of UK | |
| Severin Carrell | |
| The Scottish economy has avoided a recession after the latest GDP figures showed growth of 0.8% in the last quarter to March 2017. | |
| Alarm about its prospects had deepened after the economy shrank by 0.2% in the previous quarter, leaving Scotland’s economy trailing that of the UK as a whole. But the economy has bounced back in January-March. | |
| Nicola Sturgeon, the first minister, tweeted that the country’s economy outperformed the UK’s 0.2% for the last quarter. | |
| Scottish economy grew by 0.8% in first quarter of 2017 - compared to UK growth in same quarter of 0.2%. https://t.co/0srD0HzHmE | |
| With Scotland’s construction sector still contracting, a 4% growth in manufacturing and 3.1% growth in production help lift the overall figures, with chemicals including refined petroleum, and metals, driving those up. | |
| Sturgeon said that the Scottish government’s intervention to help save the Dalzell steel plant had helped boost GDP. | |
| Part of Q1 GDP growth in Scotland down to resumption of steel production at Dalzell - saved with the help of @scotgov intervention. | |
| However, on an annualised basis Scotland’s growth stood at 0.7%, still lagging substantially behind the UK’s. | |
| Economists at the Fraser of Allander Institute said last week this sluggish growth was due to wider problems with Scotland’s economy, and not just the effects of the slump in oil prices. | |
| John McLaren, an economist with Scottish Trends, said the latest figures showed Scottish growth had reached 1.2% over the past two years against 3.5% for the UK as a whole. | |
| Grahame Smith, general secretary of the Scottish TUC, said more urgent and substantial action was need to boost the economy, including scrapping the public sector pay cap. | |
| Smith argues: | |
| “Growth rates in Scotland have been low for several years and what growth there has been has in part resulted from hard pressed workers building up more debt and exhausting their savings. This is clearly unsustainable. | |
| “If steps are not taken to boost investment and demand and to prevent irresponsible private lending from destabilising the economy, another crash and recession is just round the corner.” | |
| 12.11pm BST | 12.11pm BST |
| 12:11 | 12:11 |
| Sam Hill, Royal Bank of Canada’s senior UK Economist, agrees that business confidence has been dented by the maelstrom in UK politics. | Sam Hill, Royal Bank of Canada’s senior UK Economist, agrees that business confidence has been dented by the maelstrom in UK politics. |
| On this week’s PMI reports, he says: | On this week’s PMI reports, he says: |
| The mid-month surveys will have been conducted in a period of political uncertainty, following the hung parliament general election result and the start of formal Brexit negotiations. | The mid-month surveys will have been conducted in a period of political uncertainty, following the hung parliament general election result and the start of formal Brexit negotiations. |
| This may have contributed to an easing in the business expectations components of the surveys. For example, there was a 4.4-point drop in that part of the service PMI, leaving it 1.3 standard deviations below the long-run average. | This may have contributed to an easing in the business expectations components of the surveys. For example, there was a 4.4-point drop in that part of the service PMI, leaving it 1.3 standard deviations below the long-run average. |
| RBC predicts that the UK economy grew by 0.4% in the April-June quarter. | RBC predicts that the UK economy grew by 0.4% in the April-June quarter. |
| That would be an improvement on the first quarter, when growth slowed to 0.2%, but still below trend. | That would be an improvement on the first quarter, when growth slowed to 0.2%, but still below trend. |
| 11.50am BST | 11.50am BST |
| 11:50 | 11:50 |
| Here’s some food for thought, from Scott Corfe, chief economist at the Social Market Foundation: | Here’s some food for thought, from Scott Corfe, chief economist at the Social Market Foundation: |
| The UK’s productivity problem: if we were at trend a full-time (Mon-Fri) worker could take Friday pm off and still produce 8% more each week pic.twitter.com/1OOKazO7YV | The UK’s productivity problem: if we were at trend a full-time (Mon-Fri) worker could take Friday pm off and still produce 8% more each week pic.twitter.com/1OOKazO7YV |
| 11.25am BST | 11.25am BST |
| 11:25 | 11:25 |
| The slowdown in UK service sector growth in June was “disappointing, but hardly surprising”, says Howard Archer, chief economist at the EY Item Club. | The slowdown in UK service sector growth in June was “disappointing, but hardly surprising”, says Howard Archer, chief economist at the EY Item Club. |
| “Following on from weaker manufacturing and construction surveys, the softer services PMI points to an already fragile economy struggling in June as heightened uncertainties about the UK outlook fuel business and consumer caution.” | “Following on from weaker manufacturing and construction surveys, the softer services PMI points to an already fragile economy struggling in June as heightened uncertainties about the UK outlook fuel business and consumer caution.” |
| Archer singles out the fall in new business growth, to a nine-month low, as a particular concern: | Archer singles out the fall in new business growth, to a nine-month low, as a particular concern: |
| Uncertainty appears to have caused some companies to limit or delay spending. Meanwhile, consumer-facing services companies continue to be hampered by squeezed purchasing power. | Uncertainty appears to have caused some companies to limit or delay spending. Meanwhile, consumer-facing services companies continue to be hampered by squeezed purchasing power. |
| 10.56am BST | 10.56am BST |
| 10:56 | 10:56 |
| The fall in UK productivity last quarter should send alarm bells ringing in Westminster, says Ian Brinkley, acting chief economist at the CIPD: | The fall in UK productivity last quarter should send alarm bells ringing in Westminster, says Ian Brinkley, acting chief economist at the CIPD: |
| “Today’s figures should act as a very sharp reminder to Government that Brexit is not the only challenge facing the UK. Unless more is done to tackle the nation’s low productivity, people’s wages and living standards will continue to fall and the UK will be ill-equipped to compete once we do leave the EU. | “Today’s figures should act as a very sharp reminder to Government that Brexit is not the only challenge facing the UK. Unless more is done to tackle the nation’s low productivity, people’s wages and living standards will continue to fall and the UK will be ill-equipped to compete once we do leave the EU. |
| “Government must urgently review its productivity plan and ensure that its industrial strategy includes a much stronger focus on boosting investment in skills and efforts to boost managerial quality in partnership with employers, professional bodies and unions at a national, sector and local level.” | “Government must urgently review its productivity plan and ensure that its industrial strategy includes a much stronger focus on boosting investment in skills and efforts to boost managerial quality in partnership with employers, professional bodies and unions at a national, sector and local level.” |
| Steve Hill, external engagement director at The Open University, argues that better staff training is the key: | Steve Hill, external engagement director at The Open University, argues that better staff training is the key: |
| “As the UK’s productivity continues to fall,it’s crucial that organisations invest in talent. | “As the UK’s productivity continues to fall,it’s crucial that organisations invest in talent. |
| The current skills gap is holding back business growth. Employers are struggling to recruit workers with the right skills and are paying inflated salaries and enhanced recruitment costs as a result. | The current skills gap is holding back business growth. Employers are struggling to recruit workers with the right skills and are paying inflated salaries and enhanced recruitment costs as a result. |
| “The Apprenticeship Levy presents an opportunity for organisations to build better skills from within, developing a more efficient, engaged and productive workforce. Faced with a shrinking talent pool, organisations need agile and adaptable workers who can embrace change and meet new challenges.” | “The Apprenticeship Levy presents an opportunity for organisations to build better skills from within, developing a more efficient, engaged and productive workforce. Faced with a shrinking talent pool, organisations need agile and adaptable workers who can embrace change and meet new challenges.” |
| Ian Jones of the Press Association shows how productivity has been stagnant for a decade: | Ian Jones of the Press Association shows how productivity has been stagnant for a decade: |
| UK productivity is (once again) back below the level it was pre-crash. We're heading for an entire decade of stalled growth. pic.twitter.com/uqqRHBPCre | UK productivity is (once again) back below the level it was pre-crash. We're heading for an entire decade of stalled growth. pic.twitter.com/uqqRHBPCre |
| This is from BBC personal finance correspondent Simon Gompertz: | This is from BBC personal finance correspondent Simon Gompertz: |
| To people who are asked to work ever harder for low wages, being told that the UK has a productivity problem feels like a slap in the face | To people who are asked to work ever harder for low wages, being told that the UK has a productivity problem feels like a slap in the face |
| 10.33am BST | 10.33am BST |
| 10:33 | 10:33 |
| UK productivity falls | UK productivity falls |
| I hate to bring even more bad news... but Britain’s productivity has fallen. | I hate to bring even more bad news... but Britain’s productivity has fallen. |
| UK labour productivity, as measured by output per hour, declined by 0.5% in the first three months of this year, according to new figures from the Office for National Statistics. | UK labour productivity, as measured by output per hour, declined by 0.5% in the first three months of this year, according to new figures from the Office for National Statistics. |
| It’s the first fall since the end of 2015, and it highlights the underlying problems in the UK economy. | It’s the first fall since the end of 2015, and it highlights the underlying problems in the UK economy. |
| Productivity in the services sector shrank by 0.6%, wiping out the benefits of a 0.2% rise in manufacturing productivity. | Productivity in the services sector shrank by 0.6%, wiping out the benefits of a 0.2% rise in manufacturing productivity. |
| As this chart shows, productivity has been persistently, and disappointing, weak since the financial crisis: | As this chart shows, productivity has been persistently, and disappointing, weak since the financial crisis: |
| Britain’s productivity is much weaker than the US, France or Germany, as our workers have to put in more hours to achieve the same economic output. | Britain’s productivity is much weaker than the US, France or Germany, as our workers have to put in more hours to achieve the same economic output. |
| It’s called the “productivity puzzle”, because economist can’t agree what’s caused it. | It’s called the “productivity puzzle”, because economist can’t agree what’s caused it. |
| One factor is that more people are being employed in low-paid, insecure jobs, where they produce relatively little economic output. Another theory is that companies have resisted buying expensive machinery that would boost productivity, preferring to employ more people instead. | One factor is that more people are being employed in low-paid, insecure jobs, where they produce relatively little economic output. Another theory is that companies have resisted buying expensive machinery that would boost productivity, preferring to employ more people instead. |
| Whatever the reason, it suggests that something rather nasty happened to the UK economy a decade ago when the financial crisis struck./ | Whatever the reason, it suggests that something rather nasty happened to the UK economy a decade ago when the financial crisis struck./ |
| UK productivity edges back down below Q4 2007 peak in Q1 2017. Full lost decade almost here... pic.twitter.com/RbR9kLTW8f | UK productivity edges back down below Q4 2007 peak in Q1 2017. Full lost decade almost here... pic.twitter.com/RbR9kLTW8f |
| 10.21am BST | 10.21am BST |
| 10:21 | 10:21 |
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| 10.21am BST | 10.21am BST |
| 10:21 | 10:21 |
| Duncan Brock of the Chartered Institute of Procurement & Supply blames political uncertainty for the drop in UK service sector growth last month. | Duncan Brock of the Chartered Institute of Procurement & Supply blames political uncertainty for the drop in UK service sector growth last month. |
| “A creeping doubt appears to be the cause of this month’s below par performance as the UK’s departure from the EU and the unpredictable political climate continues to impact on consumers and businesses alike. | “A creeping doubt appears to be the cause of this month’s below par performance as the UK’s departure from the EU and the unpredictable political climate continues to impact on consumers and businesses alike. |
| “Strong growth in new orders and overall activity was destabilised by a reduction in business optimism, which fell to one of the lowest levels since 2011. | “Strong growth in new orders and overall activity was destabilised by a reduction in business optimism, which fell to one of the lowest levels since 2011. |
| 10.19am BST | 10.19am BST |
| 10:19 | 10:19 |
| Despite the slowdown, service sector companies kept hiring staff last month. | Despite the slowdown, service sector companies kept hiring staff last month. |
| However... some reported that it was difficult to find workers with the skills they need. | However... some reported that it was difficult to find workers with the skills they need. |
| 10.18am BST | 10.18am BST |
| 10:18 | 10:18 |
| In another blow, UK service sector companies were hit by a steep increase in their costs in June. | In another blow, UK service sector companies were hit by a steep increase in their costs in June. |
| Markit explains: | Markit explains: |
| Greater operating costs were linked to a combination of rising staff salaries and increased raw material prices (particularly food and imported items). | Greater operating costs were linked to a combination of rising staff salaries and increased raw material prices (particularly food and imported items). |
| Survey respondents noted that intense competition for new work continued to place pressure on pricing power. Reflecting this, the latest rise in average prices charged by service providers was the slowest since July 2016. | Survey respondents noted that intense competition for new work continued to place pressure on pricing power. Reflecting this, the latest rise in average prices charged by service providers was the slowest since July 2016. |
| 10.05am BST | 10.05am BST |
| 10:05 | 10:05 |
| Service sector slowdown: Snap reaction | Service sector slowdown: Snap reaction |
| Ed Conway of Sky News says this morning’s data paints a worrying picture of the UK economy: | Ed Conway of Sky News says this morning’s data paints a worrying picture of the UK economy: |
| Poor economic tidings today: car sales dropping, services sector weakening, productivity falling. Paints picture of a stuttering economy | Poor economic tidings today: car sales dropping, services sector weakening, productivity falling. Paints picture of a stuttering economy |
| Duncan Weldon of Resolution Group points out that Britain’s economy is lagging, just as the eurozone posts its best quarter in six years: | Duncan Weldon of Resolution Group points out that Britain’s economy is lagging, just as the eurozone posts its best quarter in six years: |
| Shorter PMIs: UK economic momentum is slowing, Eurozone accelerating. | Shorter PMIs: UK economic momentum is slowing, Eurozone accelerating. |
| Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking, says the “uncertain political backdrop” is hurting UK firms: | Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking, says the “uncertain political backdrop” is hurting UK firms: |
| Many businesses may have delayed investment decisions in the face of an ambiguous political landscape. | Many businesses may have delayed investment decisions in the face of an ambiguous political landscape. |
| “The continued rise in inflation and the general uncertainty is denting consumer confidence which may impact on demand. The question remains as to how much businesses will be looking to invest during the rest of the year to help stimulate demand. | “The continued rise in inflation and the general uncertainty is denting consumer confidence which may impact on demand. The question remains as to how much businesses will be looking to invest during the rest of the year to help stimulate demand. |