BUSINESS: GDP grows by 0.1%; Taylor Wimpey signals higher costs; CAB Payments is cutting back on staff

Lindsay James, investment strategist at Quilter Investors:

‘Although the risk of recession remains modest for now, Britain is not yet out of the woods and the economy has leveled off in the three months to November.

“This weak growth can be partly attributed to the impact of the government budget, which caused consumers to pause their spending. As we move forward this year, we could see an even bigger impact.

‘Businesses will soon feel the consequences of higher national insurance contributions, the costs of which are likely to be passed on to employees. Wage growth is expected to take a hit, and spending could be further depressed as a result.

“Additionally, Trump’s inauguration is approaching and the real effects of his policies will be felt later this year. Hopefully Britain will be relatively shielded from the impact of its expected tariffs compared to some of its peers, but there is still a large degree of uncertainty on the horizon.

‘Overall, markets have been skeptical about the prospect of further rate cuts in Britain early this year, with less than two quarter-point cuts priced in for the year as a whole. The Bank of England stood alone in December in its decision to maintain interest rates, while the ECB and the Federal Reserve continued with cuts. However, if the economy fails to regain at least some momentum and Britain enters a recession, the country could be forced to change course.

“It appears the Chancellor has a big task ahead of her as she relies on growth to drive the economy.”

A US activist trying to take over seven London-listed investment funds is “betting on complacency” from thousands of retail shareholders to secure victory, a fund manager said.

Saba Capital wants to replace the board of the trusts with its own nominees.

The hedge fund, run by Wall Street financier Boaz Weinstein, has convened meetings at seven companies – Herald Investment Trust, Baillie Gifford US Growth, Edinburgh Worldwide, European Smaller Companies, Keystone Positive Change, CQS Natural Resources and Henderson Opportunities – to ask shareholders to vote on its plans.

Thomas Pugh, British economist at RSM UK:

‘The economy grew again in November, but barely, with growth of only 0.1% m/m. This makes it very likely that the economy will not have grown at all in the second half of the year. That will only increase the pressure on Chancellor Reeves.

‘However, the combination of weaker-than-expected inflation and economic growth means that a rate cut in February is now certain.

‘If there is anything positive to take from today’s data, it is that the sectors that rely on consumer spending have done quite well.

‘But that was about the sum of the good news. Admittedly, we can also attribute some of the weakness to temporary factors. People and companies continuing their work to stay ahead of the budget caused a major decline in accounting and consulting activities of 2.6%.

‘But industrial production fell 0.3% m/m, the third consecutive decline, taking it to its lowest level since mid-2022, and there was little sign of growth elsewhere in the economy.

‘Overall, the economy stagnated in the second half of last year. There are still good reasons to expect growth to pick up this year.

“The increase in government spending and investment announced in the budget should take effect and the first signs of a rebound in consumer spending should continue. But the lack of momentum entering the year increases the risk that 2025 will not meet expectations.”

A top Bank of England official said last night that interest rates may have to be cut as many as six times this year to stave off fears of a recession if Labor’s job tax rises.

Alan Taylor, member of the Bank’s rate-setting Monetary Policy Committee, said that “with the economy weakening, it is time to bring rates back to normal to support a soft landing.”

Inflation concerns eased on both sides of the Atlantic yesterday, boosting markets and giving beleaguered Chancellor Rachel Reeves a reprieve.

London-listed money transfer group CAB Payments plans to cut 20 percent of its workforce as it looks to cut costs and invest in artificial intelligence and automation.

The group cited weak trading and higher national insurance contributions by employers after the Autumn Budget.

“We can do more with less,” CEO Neeraj Kapur said in a statement Thursday.

The company said its performance since October has been hit by a stronger dollar and political uncertainty that has affected demand for cross-border payments.

Taylor Wimpey has identified increased cost pressures as the UK housing sector faces affordability and wider economic concerns.

British housebuilders, who have suffered subdued demand over the past year, may face the pressure of a slower-than-expected tapering of interest rate cuts.

“While market conditions are uncertain and we continue to monitor the impact of mortgage costs on affordability, we enter 2025 with a strong order book and a strong land position,” CEO Jennie Daly said in a statement.

The UK economy returned to growth in November, but output was weaker than expected, new data from the Office for National Statistics showed.

GDP rose 0.1 percent in November, missing forecasts of 0.2 percent but still marking an improvement after two consecutive months of contraction.

The figures, after weaker-than-expected inflation data on Wednesday, could strengthen the case for the Bank of England to resume interest rate cuts.