4th October 2021
Good morning After four months of offers and counteroffers US private equity firm CD&R is set to become the new owner of Morrisons after the supermarket’s board backed its £7.1bn takeover bid. It came down to pennies, literally. On Saturday CD&R’s 287p a share bid narrowly beat the 286p offered by rival investment group Fortress Investment Group.
- Data update – UK economy doing better than first thought
- Worst year ever - Wetherspoons slumps to record loss
UK economy doing better than first thought
What’s going on?
The UK economy grew by more than previously estimated between April and June. GDP rose 5.5% versus the first reading of 4.8%.
Why is this important?
Since the first release of second quarter GDP data, the Office of National Statistics (ONS) has had time to adjust to get a more complete picture of the economy. It’s taken more data into account from the health sector, as well as an update of its sources and methodology for calculating output.
All this means that after shrinking 1.3% in the first three months of the year then growing 5.5% in the second quarter, the UK economy is just 3.3% smaller than it was before the pandemic.
That puts the UK in line with other major economies like Germany and France who are 3.3% and 3.2% smaller, respectively, than their 2019 levels.
Before the update the British economy had been the worst-performing economy among the top seven developed countries. It’s now tied with Germany and above Italy.
The ONS’s data update suggests that the economy is closer to its pre-pandemic level than we had previously thought. This could have implications for when the Bank of England raises interest rates. The Bank expects inflation to reach 4% this year – double the target – and have dropped hints that it could raise rates in the next couple of months to curb rising prices.
But with the endless supply chain problems impacting the economy, raising rates too soon could but a dampener on economic growth.
Wetherspoons slumps to record loss
Wetherspoons has suffered its worst year in its history, posting a £155m loss in the 12 months to July.
The pub chain also saw sales fall to £773m, from £1.3bn the year before. Its results reflect the devastation the hospitality sector has experienced due to lockdown measures put in place during the pandemic.
This is the third ever loss Wetherspoons has seen in 37 years of trading, the other two came in 1984 and 2020.
Despite this, founder and chairman Tim Martin said he was "cautiously optimistic" about the company’s future but only if there were no further lockdowns or restrictions, which he called "a threat to civil society and democracy".
Even without more Covid measures pubs and restaurants are facing a tough winter. The VAT rate they pay goes up to 12.5% this month, following a cut to 5% last year to help the hospitality trade.
Supply chain problems caused by a shortage of lorry drivers could also cause more issues for the sector.
For the time being Wetherspoons has said sales improved in August and September. In past nine weeks, they were just 9% below 2019 levels.
Stat of the day
The stamp duty holiday saved home-movers £6.1bn in the 14-month window which ended last week
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