Good morning. Today we're talking about the Vodafone and Three merger, UK’s low growth and steady US interest rates.

Big Stories

Mobile mega merger

Yesterday Vodafone and rival Three agreed to merge and create the UK’s largest mobile operator with 27m customers overtaking BT and Virgin Media O2. Three is currently owned by Hong Kong business group CK Hutchinson while Vodafone is publicly listed and in the FTSE100. The groups have promised they will invest £11bn to create a standalone 5G network. The deal will face scrutiny from the competition regulator to address concerns that it could make consumers worse off through less choice and higher prices. A report from the industry regulator Ofcom found that in recent years Vodafone and Three had delivered returns on investments below the financing cost, effectively losing shareholder money. The merger could therefore give the new company greater scale to save costs, invest more and drive shareholder returns. Many analysts think that this could be enough of a rationale for the competition watchdog to approve the deal.

UK back in growth

The UK economy grew 0.2% in April following a 0.3% contraction in the previous month. The modest growth was driven by the services industry especially strong trade in bars and pubs while manufacturing and construction both shrank. The news, along with the recent data on the resilient jobs market, means inflation is taking longer than expected to fall. Consequently, more rate increases are likely, reigniting the risk of a recession later this year. Meanwhile the rising rate environment is causing more disruption to homeowners with HSBC, Santander and Coventry Building Society becoming the latest lenders to pull mortgage deals from the market.

US holds steady

The Federal Reserve confirmed that for the first time in 15 months it will not raise interest rates. The decision came the day after it was revealed that US inflation had eased to 4% in May, down from 4.9% in April and the lowest rate in more than two years. The US central bank has raised rates 10 times since March 2022 as it battles to bring inflation under control. However despite inflation getting closer to the 2% target, financial markets still expect rate hikes to resume in July after comments from Fed leaders that they wanted more time to evaluate the impact of past increases on the economy as well as of recent banking failures on credit conditions.

Elsewhere...

Back on strike: Workers at Amazon’s Coventry have voted to continue their campaign of industrial action for another six months in a dispute over pay.

Star power: The start of Beyonce’s world tour in Sweden last month sparked such a frenzy of demand for hotels and restaurant meals that it has shown up in the country's inflation statistics.

Cancelled plans: Soda ash firm WE Soda has ditched its plans to float on the London Stock Exchange citing “extreme investor caution”, just one week after first announcing the move.

Disney delays: Disney is delaying many of its upcoming Marvel, Star Wars, and Avatar movies in part because of production delays caused by the writers’ strike.

New news: More young people are accessing news on TikTok, with users of some social media increasingly paying more attention to influencers than journalists, a report has found.

Loop Likes

• The world’s largest landowners 

• The smart way to coast at work

• Bill Gates’ top books, TV shows and music for summer 2023

  Number Of The Day

14

The age of SpaceX’s newest hire, Kairan Quazi. The child prodigy graduated from university this month and will join Elon Musk’s space exploration firm as a software engineer.

Not a subscriber? Sign up for free

Want to reach an audience of UK business leaders, young professionals and 1,000+ other smart, ambitious people? Reply to this email and we'll be in touch.