Good morning. Today we're talking about BP under pressure, mixed UK economic news and the latest AI summit.

Big Stories

BP under pressure

Activist investor Elliott Management has bought a 5% stake in BP as the oil firm faces mounting pressures to change. Once a global energy giant rivalling Shell, BP is facing a critical juncture. Years of underperformance has resulted in a mere 1% share price increase over the past five years compared to Shell's 37% and Chevron's 41%. Elliott is pushing for a drastic shift in strategy, urging BP to cut costs, reduce investments in renewable energy and prioritise shareholder returns. This move comes as the company grapples with declining profitability and increasing investor scrutiny. BP's ambitious transition towards renewable energy, a departure from the industry norm, has come under fire from Elliott and other investors who believe it has hindered the company's financial performance. BP's CEO, Murray Auchincloss, is now under immense pressure to deliver a credible turnaround strategy at the next shareholder meeting later this month.

UK mixed economic surprise

The UK economy narrowly avoided recession in the fourth quarter of 2024, with GDP registering a modest 0.1% growth. This slight expansion, driven primarily by a stronger-than-expected December, offered some respite from the economic gloom that had previously gripped the nation. It follows zero growth in the previous three months, which had led to fears that the UK was on the brink of recession. However, the positive news was tempered by the stark reality that real GDP per capita, a measure of the average person's living standards, actually declined. This data presents a mixed picture for Chancellor Rachel Reeves, who faces the challenge of balancing economic growth with fiscal responsibility. While the immediate threat of recession may have receded, concerns remain regarding the long-term economic outlook and the potential impact of recent budget measures on businesses and jobs.

AI divergence

Last week the third annual AI Action Summit in Paris convened world leaders to address the impact of artificial intelligence. Discussions at the summit highlighted the differing views over how to manage AI. Firstly, the recent success of DeepSeek, a Chinese AI company, has underscored the rapid pace of AI development and the potential for significant advancements, particularly given its reported low development costs. This has prompted a reassessment of investment strategies and the competitive landscape for AI development among global players. The summit explored the delicate balance between fostering innovation and mitigating the potential risks associated with advanced AI systems. The US, represented by Vice President JD Vance, is advocating for a less restrictive regulatory environment to encourage rapid AI development. However, this approach diverges from the more cautious stance adopted by the EU, which has led the way in AI regulation. The summit ended with Vance criticising European regulation and warning against cooperation with China, while leaders from US and UK snubbed a diplomatic declaration on “inclusive and sustainable” AI.

Elsewhere...

Rising bills: Thames Water has launched an appeal to allow it to increase bills by more than the regulator wants to permit.

Property ladder: The number of first-time buyers rose by almost a fifth last year, according to data from Halifax.

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$97.4 billion

The size of Elon Musk’s offer to buy OpenAI, a bid that the board unanimously rejected.

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