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GDP flatlines

Strikes were partly to blame for the UK economy showing no growth in February, as GDP figures came in below expectations of 0.1% growth.

The ONS noted that poor performance in services and production offset growth in construction which grew by 2.4% in February, bouncing back after a 1.7% decline in January. Early survey data suggests that this was driven by the civil engineering sector rather than housebuilding.

The latest monthly statistic followed 0.4% growth in January, which was revised up from 0.3%.

Across the three months to February, the UK economy managed to grow by 0.1%.

Chancellor Jeremy Hunt said: “The economic outlook is looking brighter than expected – GDP grew in the three months to February and we are set to avoid recession thanks to the steps we have taken through a massive package of cost of living support for families and radical reforms to boost the jobs market and business investment.”

Rob Clarry, investment strategist at wealth manager Evelyn Partners, adds: “While the UK economy has surprised on the upside at the start of this year, the latest data may give the Bank of England pause for thought on raising interest rates again at their next meeting on 11 May.”

David Bharier, head of research at the BCC, said:  ”Although today’s GDP figures indicate the UK economy continues to technically avoid a recession, it’s now clear we are stuck in a prolonged period of almost no growth. 

“After a sharp drop in business confidence last year, our latest research shows that optimism among SMEs is now on the way up. But this is yet to translate into an improvement to business conditions in general.  

“The BCC expects GDP to contract overall by 0.3% in 2023, a view echoed by the IMF forecast in their World Economic Outlook published earlier this week.”

Alpesh Paleja, CBI lead economist, said: “February’s GDP data was disappointing, but not wholly surprising given continued headwinds to growth, particularly from high inflation.  

“Even if the UK avoids a recession this year, the pressures on household incomes will continue to sap the economy of any real momentum in the near-term. Whilst lower energy bills and falling inflation should set the stage for an uplift in the second half of the year, risks to the outlook remain to the downside.” 

London close

Glencore’s $23 billion takeover offer for Canadian group Teck was criticised by a high-profile shareholder.

Teck called Glencore’s attempt to merge the two companies and spin off their combined coal assets “opportunistic and unrealistic”.

Bluebell Capital Partners, an investor in both Teck and Glencore, said in a letter to both companies, said: “It is admittedly difficult to propose a deal that satisfies both the shareholders of the target company and those of the buyer and it is equally difficult to propose a deal that will displease them all: Glencore’s board of directors seems to have succeeded in this remarkable task.”

In a flurry of private equity-backed takeover approaches, Dechra Pharmaceuticals said after the market closed that it was in talks over a possible £4.6 billion cash bid from EQT, a Swedish private equity firm, in a deal backed by the Abu Dhabi Investment Authority.

Network International confirmed earlier that it had received a “preliminary and conditional” proposal from CVC Capital Partners and Francisco Partners, the private equity firms. Shares in the emerging markets-focused payments company closed up 56½p (23%) at 300p, valuing the company at £1.6 billion.

Housebuilders were given a lift after a survey by the Royal Institution of Chartered Surveyors showed that price falls may be easing and the outlook brightening. Barratt put on 11p (2.4%), to close at 478.25p, while Taylor Wimpey rose up 2.5p (2%)at 120½p.

Tesco closed 1.60p (0.60%) higher at 269.6p despite pre-tax profit halving from £2 billion to £1bn as cost of living pressures took their toll. Operating profit came in 6.9% lower at £2.6bn for the year to 25 February. Sales were 5.3% higher at £57.6bn.

Chief executive Ken Murphy said: “It’s been an incredibly tough year for many of our customers, and we have been determined to do everything we can to help.”

There is a proposed final dividend of 7.05p to take full year dividend to 10.9p in line with last year’s full year dividend.

Edinburgh-based Tesco Bank reported a fall on profit before tax to £139.6m (2022 : £188.5m).

Underlying profit before tax, which excludes items which are not reflective of ongoing trading performance, fell to £148.6m (202 2 : £186.4m ).

After a subdued start the FTSE 100 closed 18.54 points higher at 7,843.38.

Global markets

The US yearly inflation rate slipped to 5% in March, from 6% in February, according to the Bureau of Labor Statistics, easing pressure on the Fed to raise interest rates.

Minutes of the Federal Open Market Committee’s March meeting revealed that several members considered holding interest rates steady “to assess the financial and economic effects of recent banking-sector developments and of the cumulative tightening of monetary policy.”

But after judging that its actions, along with other government agencies, had helped calm conditions in the banking sector the committee decided action on inflation had to take priority and pressed ahead with the 25 basis point increase.

However, the US economy is likely to enter recession this year, the minutes showed.

Wall Street ended lower, with the Dow Jones Industrial Average down 0.1%, the S&P 500 0.4% lower and the Nasdaq Composite off by 0.9%.