Decision time: Chancellor Jeremy Hunt
The latest output data for the UK economy is almost certainly wrong if recent history is any guide.
Trust in figures is at a low ebb in the wake of the Office for National Statistics under-reporting of output by 2 per cent (around £50billion) in the aftermath of the pandemic, and failure to collect labour and wages statistics which can be relied upon by the Bank of England.
One doesn’t have to be a Pollyanna to recognise that official forecasters at the Bank, Office for Budget Responsibility (OBR) and the International Monetary Fund have been consistently too pessimistic about the UK.
After a rapid tightening of monetary policy, lifting interest rates to 5.25 per cent, it would be amazing if the economy were not slowing. Surging borrowing costs have pushed up insolvencies and slowed the housing market.
But as the latest output data shows, Britain’s lighter-on-its-feet economy, with a dynamic services sector, is much more able to navigate current global uncertainty than manufacturing and export based nations such as Germany.
UK consumers continue to spend as optimistic sales and earnings forecasts from the retail sector show, with M&S, Next, Primark and Sainsbury’s all going great guns.
The housing market is not collapsing under the weight of mortgage costs with both the Nationwide and Halifax reporting an uptick in prices. The trade impact of Brexit has been negligible and nowhere near the 4 per cent loss forecast by the OBR.
Business investment is on a roll helped by very favourable tax reliefs for spend on IT, plant and equipment.
The country should not allow itself to buy into the Labour and LibDem narrative that the Tories crashed the economy.
All that does is create a negative feedback loop which undermines consumer and business confidence.
The reality is that the economy flatlined in the third quarter but did better than most forecasters projected. UK resumed growth in September, rising by 0.2 per cent, fuelled by a resilient service sector which accounts for almost 80 per cent of British output. This in spite of rampant inflation (now about to come down with a jolt) and more realistic interest rates. The Chancellor should get behind such momentum as there is, by bringing forward focused tax cuts for Britain’s strivers and entrepreneurs.
With the Government looking over its shoulder, the NatWest board had little choice but to claw back share and pay awards for its former chief executive Dame Alison Rose.
Her disclosures about the banking arrangements of Nigel Farage may not have infringed data rules, as the Information Commissioner acknowledged this week, but were unwise.
The Government as a 38 per cent shareholder was right to insist on her resignation because of the reputational damage done not just to NatWest and Coutts but to all UK banking. Rose’s misstep hit the share price, undermining already thin confidence in bank and customer relationships. It is an expensive error for Rose, costing her potential pay outs of £7.6m.
She will not leave NatWest a pauper, collecting some £2.4m for her work in 2023, plus another £800,000. Doubtless she can look forward to a handsome pension if predecessor Fred ‘the Shred’ Goodwin’s £500,000 a year provides guidance.
Diageo chief executive Debra Crew is not having the best of starts to her job. Elevated to the top early, as a result of the death of predecessor Ivan Menezes, the Johnnie Walker-whisky-to-Don-Julio-tequila group has suffered a commercial setback.
Traditionally, the spirits have been a great hedge against uncertainty. And Diageo, with its terrific collection of luxury brands, has prospered through recessions and a pandemic delivering strong dividends and buybacks as well as investing in new products.
The disclosure of trouble in Latin America, where 11 per cent of group sales are achieved, came like a bolt from then blue and sent the share price skidding by as much as 16 per cent: the biggest one day drop since 1987.
No one could ever be surprised by random downturns in Latin America which finds democracy and living within its means tricky. Something operational must have gone badly wrong.
Fortunately for Crew, her native North America is performing strongly and Europe is holding up well in the midst of economic doldrums and geopolitical strife.
Investors may fear that a rare crack could lead to shattered bottles.