BUSINESS LIVE: GDP growth stalls; Rightmove rejects £5.6bn REA bid; Boohoo write down on US shake-up

Heathrow has seen a record number of eight million people use its airport in August in a busy summer for holidaymakers – thanks to Taylor Swift.

The airport said it set a new monthly record for passenger numbers and also saw its busiest day last month, with 269,000 passengers on August 18.

Cooling wage growth looks likely to pave the way for two more interest rate cuts this year.

Average weekly earnings in the three months to July were 5.1 per cent higher than a year earlier, according to the Office for National Statistics (ONS).

The oil price crashed below $70 a barrel for the first time since before the invasion of Ukraine amid fears over the outlook for the global economy.

Brent crude – the main London benchmark – fell 3.5 per cent to as low as $69.32 a barrel.

That was the lowest level since December 2021, before Russia’s invasion in February 2022 sent energy prices soaring.

Dunelm enjoyed higher and sales this year, but has cautioned it was yet to see a ‘meaningful’ recovery in consumer spending.

The retailer reported a 6.6 per cent rise in pre-tax profits to £205.4 million for the year to 29 June after sales rose 4.1 per cent, with a marked pick-up in sales growth to 5 per cent in the final three months.

But Dunelm said it was continuing to see a ‘challenging consumer environment’ and warned ‘the timing of a sector recovery remains uncertain’.

Nick Wilkinson, chief executive of Dunelm, said: ‘Whilst we are gradually seeing improvements to economic indicators, we are yet to see a meaningful change in consumer spending habits in our markets.

‘Against this backdrop, and compared to a strong first quarter last year, we have made a solid start to full-year 2024-25.’

Rentokil Initial shares have plunged more than 15 per cent at the open after the pest company said it would cut jobs and warned of further weakness in its largest market North America.

The company, which generated approximately 60 per cent of its revenue from North America last year, did not specify how many jobs would be impacted by its cost-cutting plan.

However, it stated that the measures were intended to address cost overruns as it moved past the peak season.

North America sales in July and August came in lower than anticipated and the company is now expecting organic revenue growth from the business of about 1 per cent in the second half.

Rentokil and rival Rollins account for roughly half of the US pest control market.

Rob Morgan, chief investment analyst at Charles Stanley:

The stagnant growth picture certainly won’t prompt any significant inflationary concerns among the MPC decision makers at the Bank of England.

‘It’s also not so obviously weak to infer that rates are too restrictive, but it does tilt the odds in favour of a further cut in September a little.

Robust wage rises and sticky services prices are the main factors that have prevented the Bank from acting earlier and faster to cut rates. And with CPI inflation falling back to around the 2% target, a further reduction from the current 5% surely lies in wait later this year.

The September meeting is still probably a little early for the balance of MPC members to vote to cut again, but for November another 0.25% looks firmly on the table. A few more months of data and, perhaps crucially, a Budget from the Chancellor of the Exchequer that lays out tougher fiscal policy, will be important fodder for the decision-making process.

Particularly tight fiscal policy might encourage the Bank to reduce rates at faster clip, but overall a shallow trajectory of cuts towards the 4% level over the course of the next year still looks like the most likely scenario. Inflationary pressures are easing but they are not vanquished altogether.

London-listed stocks have inched higher at the open, supported by precious and base metal miners, as investors maintain a cautious stance ahead of a crucial US inflation print later in the day.

Industrial and precious metal miners are up 1.8 and 1.4 per cent, respectively, the biggest gainers in the index, as a softer dollar and rate-cut optimism lifts copper and gold prices.

Heavyweight energy shares have gained 1.2 per cent after oil prices climbed, as concerns about Hurricane Francine disrupting output in the United States, the world’s biggest producer, outweighed worries about weak global demand.

Rentokil Initial has slumped 17.8 per cent after the pest control company announced jobs cuts to address cost overruns.

Rightmove is down 2 per cent after the real estate portal rejected a £5.6billion cash-and-stock takeover proposal from Australia’s REA Group.

WH Smith has jumped 12 per cent after the company reported a higher annual revenue and announced a buyback plan worth £50million.

Boohoo is set to take a write down as it prepares to give up on supplying its customers in the United States from a US centre and instead fulfil orders direct from the UK.

Boohoo said on Wednesday it would cease operations at its US distribution centre in Pennsylvania by 11 November, just over a year after it started operations.

The group had previously described the site as a ‘gamechanger’ as it would slash delivery times to American shoppers.

However, it will now fulfil all US orders from its distribution centre in Sheffield.

It said the move would enable it to broaden its product offering for U.S. customers.

It will, however, result in a write-down on its balance sheet against the investments and costs associated with the US operation as well as certain one-off exceptional cash costs.

Boohoo shares are down roughly 2.5 per cent at the open.

Sam North, market analyst at eToro:

‘This latest GDP report out of the UK offers a mixed bag for analysts and investors alike. While it highlights economic stagnation for the second consecutive month, the data also shows growth over the three-month period leading to July. It’s not a strong report, but I don’t believe it’s cause for panic just yet.

‘Exiting a recession is rarely a smooth process, and fluctuations in month-to-month data are not uncommon when looking at GDP figures. However, it’s crucial to keep in mind that the overall trend since Q3 2023 has been upward, which is a positive sign despite short-term volatility.

‘As for the Bank of England, the decision on whether to cut interest rates further this month remains up in the air. If the Bank continues with rate cuts over the coming months, it may help stimulate economic activity, potentially making future GDP reports look far more encouraging.’

A former high-flying Glencore executive appeared in court yesterday accused of bribery.

Billionaire Alex Beard, 57, who was head of oil at the Swiss commodities giant for more than a decade, will plead not guilty, his lawyer told London’s Westminster Magistrates Court.

Brussels scored a double victory over US tech giants yesterday as it won major court battles against Apple and Google.

In a boost for EU competition chief Margrethe Vestager, the European Court of Justice (ECJ) ruled against the Silicon Valley titans in two long-running legal disputes.

Apple was first told to cough up £11billion over unpaid taxes in Ireland.

Isaac Stell, investment manager at Wealth Club:

‘The month-on-month GDP figures missed all estimates producing a fairly dismal set of numbers with the services sector managing to mitigate the declines seen in the construction and manufacturing sectors.

‘A reversal in the fortunes for the manufacturing and construction sectors is a blow to the new Labour Government that has growth as a central pillar of its agenda.

‘The usual bright spot was the bounce back in growth for the services sector with the Health sector one of the leading contributors, springing back to life following strike action in June.

‘A notable slowdown in advertising and architects may be indicative of a wider slowdown. With the canaries beginning to look a bit peaky, the Chancellor may need to tread more carefully in October.’

Rightmove has rejected a takeover proposal from Rupert Murdoch-backed REA Group in Australia, claiming it ‘fundamentally undervalued’ the firm.

REA, which is majority-owned by Rupert Murdoch’s News Corp, confirmed it put forward an approach for a cash-and-shares deal which it said would be worth around 705p a share, valuing the entire group at about £5.6 billion.

But Rightmove said that based on REA’s closing share price on 10 September, the proposal would value each Rightmove share at 698p.

Rightmove said: ‘The board carefully considered the proposal, together with its financial advisers, and concluded that it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects.

‘Accordingly, the board unanimously rejected the proposal on September 10 2024.

‘Rightmove shareholders should take no action in respect of the proposal.’

Lindsay James, investment strategist at Quilter Investors:

‘The UK economy was expected to continue to show modest momentum, but signs suggest that the growth from the first half of the year is now stuttering. July’s estimate has shown the UK economy had no growth, with growth for the previous three months coming in slightly below expectations at 0.5%.

‘Given the mood music emanating from the government and the economic inheritance it has received from the Conservatives, the government needs to be careful not to overcorrect with its narrative around tax rises and the potential this has to put off investment.

‘This month may just be a blip however, given recent positive noises that have been sounded about the state of the wider economy, especially as rate cuts will continue to be delivered over the coming year.

‘Expectations for the UK economy have gradually shifted higher, with the IMF now forecasting UK GDP growth of 0.7% in 2024, up from 0.5% previously, whilst another measurement of economist forecasts has seen it rise from a low of 0.3% in March to 1% currently. The government will hope today’s figure does not dampen those forecasts.

‘This improving economic outlook has been somewhat overshadowed by the weak state of the public finances resulting in the Labour Party receiving a muted welcome from investors keen for economic and political stability in a world where this is currently in shortage – although today’s announcement of investment by Amazon’s cloud business will be welcomed.’

The UK economy unexpectedly stalled in July after failing to show growth on the previous month, fresh data from the Office of National Statistics shows.

Economists had forecast the economy to expand by 0.2 per cent for the month.