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Pound slides as UK economy shrinks in November – business live Pound slides as UK economy shrinks in November – business live
(about 1 hour later)
Rolling coverage of the latest economic and financial news, as UK slowdown persists and airline Flybe seeks helpRolling coverage of the latest economic and financial news, as UK slowdown persists and airline Flybe seeks help
Environmentalists in Exeter don’t share concerns over Flybe’s future.
Instead, the local Green Party point out that airlines are a major contributor to the climate emergency, and that flying between regional airports is unsustainable both financially, and for environmental reasons.
A very fair point. But without serious investment in other transport networks, flying will still appeal.
For example, today’s flight from Exeter to Belfast was scheduled to take 80 minutes. Driving would take over 10 hours, while train takes around 15 hours.
Speculation continues to swirl over Flybe’s future, with the airline still looking for government support to prop up its finances.
Flybe continues to operate services as usual -- with flights still taking off on time despite the risk of blustery conditions in parts of the UK today.
But there is still concern that the regional airline may not get the support it needs.
Aviation consultant John Strickland fears that Westminster politicians may not bail out the Exeter-based firm.
He told the Press Association:
In other news, Britain posted a record trade surplus in November -- although the underlying picture isn’t quite as impressive.In other news, Britain posted a record trade surplus in November -- although the underlying picture isn’t quite as impressive.
The ONS reports that the UK racked up a monthly surplus of £4.0 billion, mainly driven by a £3.0 billion increase in exports of unspecified goods.The ONS reports that the UK racked up a monthly surplus of £4.0 billion, mainly driven by a £3.0 billion increase in exports of unspecified goods.
Unspecified goods includes ‘non-monetary gold’ (where swings in London’s bullion market can distort the trade figures).Unspecified goods includes ‘non-monetary gold’ (where swings in London’s bullion market can distort the trade figures).
But strip out unspecified goods, and November 2019 still saw a monthly trade surplus of £0.7 billion. That’s largely due to a £1.6bn drop in machinery imports, and a £1.3bn drop in transport equipment, during the month.But strip out unspecified goods, and November 2019 still saw a monthly trade surplus of £0.7 billion. That’s largely due to a £1.6bn drop in machinery imports, and a £1.3bn drop in transport equipment, during the month.
This may partly be due to companies stockpiling goods in October in case of a disorderly Brexit.This may partly be due to companies stockpiling goods in October in case of a disorderly Brexit.
The ONS also reports that Britain racked up a larger trade deficit with the EU, underlying the importance of a post-Brexit trade deal. It says:The ONS also reports that Britain racked up a larger trade deficit with the EU, underlying the importance of a post-Brexit trade deal. It says:
The UK’s trade in goods deficit widened £0.7 billion to £29.9 billion in the three months to November 2019, as imports grew faster than exports, while the trade in services surplus widened £1.7 billion to £28.8 billion.The UK’s trade in goods deficit widened £0.7 billion to £29.9 billion in the three months to November 2019, as imports grew faster than exports, while the trade in services surplus widened £1.7 billion to £28.8 billion.
The trade in goods deficit with EU countries widened £1.8 billion to £23.9 billion in the three months to November 2019, while with non-EU countries it narrowed £0.6 billion to £3.8 billion.The trade in goods deficit with EU countries widened £1.8 billion to £23.9 billion in the three months to November 2019, while with non-EU countries it narrowed £0.6 billion to £3.8 billion.
Today’s weak growth report piles pressure on the Bank of England to consider cutting interest rate soon, says my colleague Richard Partington:Today’s weak growth report piles pressure on the Bank of England to consider cutting interest rate soon, says my colleague Richard Partington:
There are some signs that the UK economy may be picking up speed.There are some signs that the UK economy may be picking up speed.
Savills, the estate agents, told the City this morning that business has picked up since the December general election.Savills, the estate agents, told the City this morning that business has picked up since the December general election.
Saville now expects profits to hit the upper end of its guidance, thanks to a pick-up in property transactions.Saville now expects profits to hit the upper end of its guidance, thanks to a pick-up in property transactions.
But it also warned shareholders that uncertainty over Britain’s future relationship with the EU could weigh on the economy in 2020:But it also warned shareholders that uncertainty over Britain’s future relationship with the EU could weigh on the economy in 2020:
Today’s growth report contains several charts showing how the UK economy fared in November, and over the last quarter.Today’s growth report contains several charts showing how the UK economy fared in November, and over the last quarter.
This one shows how the economy barely grew in September-November, with annual growth sliding to its weakest since 2012.This one shows how the economy barely grew in September-November, with annual growth sliding to its weakest since 2012.
This table highlights how services and manufacturing both contracted in November alone:This table highlights how services and manufacturing both contracted in November alone:
These charts show how services sector growth weakened steadily in recent months.....These charts show how services sector growth weakened steadily in recent months.....
...while industrial production has contracted for months....while industrial production has contracted for months.
The Chancellor of the Exchequer, Sajid Javid, is promising measures to spur the economy in his budget, in two months time.The Chancellor of the Exchequer, Sajid Javid, is promising measures to spur the economy in his budget, in two months time.
He also appears to blame Brexit deadlock for the growth slowdown, saying:He also appears to blame Brexit deadlock for the growth slowdown, saying:
TUC General Secretary Frances O’Grady has called on the government to take steps to boost growth:TUC General Secretary Frances O’Grady has called on the government to take steps to boost growth:
John Hawksworth, chief economist at PwC, says the UK economy is stuck “in the doldrums”, having only grown by 0.1% in the last quarter.John Hawksworth, chief economist at PwC, says the UK economy is stuck “in the doldrums”, having only grown by 0.1% in the last quarter.
John McDonnell MP, Labour’s Shadow Chancellor, says Britain’s weak growth is due to the UK government’s failure to invest in public services.John McDonnell MP, Labour’s Shadow Chancellor, says Britain’s weak growth is due to the UK government’s failure to invest in public services.
The pound has sunk to its lowest level since 27 December, and has fallen for eight of the first nine trading days this year.The pound has sunk to its lowest level since 27 December, and has fallen for eight of the first nine trading days this year.
The City now reckons there’s an even chance of UK interest rates being cut in a fortnight’s time.
Peter Dixon, economist at Commerzbank, says:
There’s a serious danger that the UK economy will have shrunk in the final quarter of 2019, given November’s grim performance.
That would put Britain half-way into recession again.
Howard Archer of IT Item Club says:
However, it’s also possible that activity and business confidence will be boosted this year, following December’s decisive election result.
Matthew Cady, investment strategist at Brooks Macdonald, says there’s a significant chance that the Bank of England cut interest rates at its next meeting on 30 January.
Last week, governor Mark Carney suggested the Bank could move ‘promptly’ if the UK economy was weakening.
Yesterday, policymaker Gertjan Vlieghe said he’d vote for a cut if the economy doesn’t bounce back following December’s election. Vlieghe’s comments were already pushing the pound down this morning, before the GDP figures landed.
Garry Young, Director of Macroeconomic Modelling and Forecasting at the NIESR thinktank, says UK growth has “petered out”.
Car production and pharmaceuticals helped to drag UK manufacturing down in the last quarter, flags up economist Rupert Seggins.
The BBC’s Dharshini David points out that UK industry is pulling growth back
Over the last three months, the UK service sector grew by just 0.1% while construction expanded by 1.1%.
But Britain’s production sector, including manufacturing, shrank by 0.6% over the last quarter -- with Brexit uncertainty hitting orders and forcing some carmakers to schedule temporary shutdowns in case of a disorderly exit from the EU.
The Office for National Statistics’ head of GDP, Rob Kent-Smith, says UK growth has hit its lowest level in seven years, on an annual basis.
Today’s GDP report shows that the UK economy has slowed for two months running.
As you can see, it shrank in April-June, then bounced back with 0.4% growth in July-September, avoiding a recession.
But growth slowed to 0.2% in August-October, and then just 0.1% in September-November (as we’ve just learned).
The pound has fallen sharply this morning, falling below $1.30 for the first time in 2020.
Sterling fell as low as $1.2968, down nearly a cent today, as November’s weak GDP figures spook the City.
Traders reckon there’s a rising chance that UK interest rates are cut soon, perhaps at the Bank of England’s meeting at the end of January.
Brexit uncertainty, and the threat of crashing out of the EU without a deal in October, hurt the economy in November.
The ONS says:
These industries were also the main drags on growth in April 2019, just after the UK’s original planned date to exit the European Union, as this chart shows:
NEWSFLASH: Britain’s economy contracted in November, amid uncertainty over the general election.
UK GDP shrank by 0.3% during the month, a sharply contraction than economists expected, with manufacturers and services companies both struggling.
The service sector shrank by 0.3% during the month, according to the Office for National Statistics, while manufacturing output fell by an alarming 1.7%.
But... the economy actually grew by 0.1% in the September-November quarter, which is better than expected.
More to follow....