BUSINESS LIVE: UK economy shrinks; Royal Mail fined for poor delivery; Boohoo eyes Fraser’s deal

The European Central Bank (ECB) has cut interest rates for the fourth time this year, as the continent’s floundering economy faces political conflict and possible US tariffs.

The reduction of a quarter of a percentage point from 3.25 percent to 3 percent brings interest rates to the lowest level since May 2023.

Thomas Pugh, British economist, RSM UK:

‘With the economy now contracting for the second month in a row and inflation rising again towards 3%, there is a risk that Britain is slipping back into stagflation territory.

‘However, it is likely that at least some of the weakness in October was driven by a wait-and-see attitude from consumers and businesses ahead of the budget, and we still expect the economy to accelerate again in 2025.

‘Overall, growth now looks likely to disappoint in the fourth quarter and likely to be significantly below the Bank of England’s expectation of 0.3% growth. But we don’t think the economy is weak enough to prompt the MPC to make a successive rate cut next week.

“And we still expect the economy to accelerate in 2025 as a sugar rush of government spending begins to materialize.”

Boohoo is prepared to offer Frasers Group one board seat if the retail giant agrees to nominate a ‘suitable candidate’; except for current nominees Mike Ashley and Mike Lennon.

The latest development in the open feud between the two retailers comes after Frasers said on Thursday that the two nominees for Boohoo’s board would sign all protocols to address any governance issues if elected.

Tim Morris, chairman of the Boohoo group, said: ‘The board has consistently said that, due to clear points of conflict and because of their historical links with Frasers, Mike Ashley and Mike Lennon are not, under any circumstances, suitable candidates to join the board , whatever obligations they have. offered.

‘Despite this, Frasers continues to refuse to agree to some of the key protections that the Board would require if a suitable representative were appointed.

“These are important issues that need to be addressed for the protection of all shareholders, and it is not for Frasers to choose which commitments it will make.”

Royal Mail has been fined £10.5 million for failing to meet its mail delivery targets in the 2023-2024 financial year.

The fine, imposed by Ofcom, is the second in two years, after watchdog Royal Mail also imposed a £5.6 billion fine in November 2023.

Royal Mail said just under three-quarters of first-class mail was delivered on time during the period, well below the 93 percent target.

And 92.7 percent of second-class mail was delivered on time, below the target of 98.5 percent, the report said.

Ian Strawhorne, director of enforcement at Ofcom, said: ‘With millions of letters arriving late, far too many people don’t get what they pay for when they buy a stamp.

‘Royal Mail’s poor service is now undermining public confidence in one of Britain’s oldest institutions.

“This is the second time since the pandemic that we have fined the company.

‘Royal Mail has an improvement plan in place and we are seeing some signs of progress, but it needs to go further and faster to deliver the service people expect.’

Shares in recruitment company SThree tumbled yesterday after it warned that political and economic unrest in Europe is hurting profits.

The FTSE 250 company, which specializes in jobs for science, technology, engineering and maths experts, now expects profits of around £25m for the 12 months to the end of November 2025.

That’s less than half the £66m analysts expect.

Shares fell 36 percent early and ended the day down 26.6 percent, or 96 cents, at 265 cents.

James Smith, Developed Markets Economist, UK, at ING:

‘After starting the year with an eye-popping – and even eyebrow-raising – quarterly growth rate of 0.7% for the first quarter, momentum has slowed significantly in the second half of the year. October’s monthly GDP saw activity decline for the second month in a row, albeit only by a marginal 0.1%. Overall, GDP in the fourth quarter is likely to remain flat, we think.

‘In reality, the story is more nuanced than that. Much of that early 2024 strength was concentrated in sectors that are less tangible and typically not consumer-facing. Services sectors with a clear consumer focus and more intrinsically linked to underlying economic fundamentals performed stronger over the summer, when the broader economy appeared to be slowing – although we did see a significant decline in activity in these areas in October.

‘Our conclusion from this is that the economy has likely slowed, but neither the initial boost nor the more recent sluggishness is likely to have been as extreme as this year’s monthly GDP data indicates.

‘We still think the UK economy is poised to outperform most of Western Europe next year, based on our expectations Annual GDP forecasts for 2025. That may say more about the health of other parts of the continent, but also largely reflects the recent fiscal stimulus measures.”

Hetal Mehta, head of economic research at St. James’s Place:

‘The current GDP data will be disappointing for the government, especially as the decline follows a contraction in September. However, the monthly figures are noisy and some slowdown from the strong growth earlier this year was to be expected.

‘With credit conditions easing, interest rates falling and higher government spending on the horizon, the UK economy should see modest growth next year.

“The positive signals from the housing market are a good cross-check for the economy and show some resilience.”

The British economy shrank unexpectedly by 0.1 percent in October, adding to signs of a sharper slowdown than forecast – and increasing likelihood that the Bank of England will step up the pace of interest rate cuts.

Sterling has pulled back from recent strength as traders react to the data, which came in well below expectations of 0.1 percent growth for the month.