28th October 2022
Bite-sized business news from the UK and beyond
Mixed fortunes for UK big business
Meta shares slump as growth falters
BUSINESSMixed fortunes for UK big business
What happened?Yesterday three of the biggest companies in the FTSE 100 reported third quarter results with varied fortunes.Shell raised its dividend after it posted an eye-watering $9.5bn profit compared to $4.2bn during the same period last year. It’s the second-highest profit on record as the company and its peers in the oil and gas sector continue to benefit from the soaring energy prices this year.In May the UK government introduced a 25% windfall tax on British profits generated by the industry with an estimated £5bn expected to be raised. However Shell operates in 70 countries and its UK arm made no profits during the quarter, in part, because of heavy spending on drilling more oil in the North Sea and tax reliefs from investments.The news will add pressure on the new prime minister to extend the windfall tax as a way to fill a £35bn hole in the country’s finances.Unilever, the maker of dozens of consumer goods including Marmite, Dove soap and PG Tips, reported a 1.6% drop in sales volumes as squeezed households tightened their belts amid the cost of living crisis. It also announced it had increased prices by 12.5% - the highest ever quarterly increase – as it passed on cost inflation to consumers.The company said shoppers were switching from branded to supermarket own brands as cash-strapped households cut back on essential spending. Lloyds Banking Group reported a 26% drop in profits after it increased the reserves for loan losses in anticipation of a weaker economy. The UK’s biggest mortgage lender also predicted that house prices will fall 8% next year as rising interest rates could reduce property affordability and cool demand. Why it matters: Given their scale these reports are bellwether for the state of the UK economy. The country may have a new leader but the dark clouds on the horizon for British people and companies continue to grow.
Other stories to keep you in the loop
US economy bounces back to growth despite surging inflation
Morrisons to hire 3,500 extra Christmas staff
Investors dump Amazon as economy concerns grow
EU interest rates at decade high, fuelling European recession fears
Credit Suisse cuts 9,000 jobs to stem losses
TECHMeta shares slump as growth falters
What happened?This week Meta posted disappointing quarterly numbers with revenue falling for the second straight quarter and outlook for the rest of the year getting gloomier. The owner of Facebook, Instagram and WhatsApp has seen its share price drop by two-thirds this year with a 20% drop this week alone.What went wrong? Younger people are fleeing Facebook, and investors aren’t confident CEO Mark Zuckerberg can reinvent the company as a metaverse platform. “Meta has drifted into the land of excess—too many people, too many ideas, too little urgency,” a prominent shareholder wrote this week in a scathing letter. Meta’s metaverse unit, Reality Labs, has lost $9.4bn so far this year.Meta is not the only Big Tech name strugglingGoogle parent Alphabet posted its slowest revenue growth since 2013 (outside of one early pandemic quarter), and YouTube advertising sales fell. It’s “a tough time in the ad market,” CEO Sundar Pichai acknowledged.Big picture: Tech giants scored record profits during the pandemic, when interest rates were near zero and everyone was stuck inside with only the internet to entertain themselves. But growth is harder to come by during an economic downturn so tech companies will be expected to cut costs and increase efficiencies.
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