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The economy grew by 0.8% in May but remains 3.1% below its pre-pandemic peak, according to the Office for National Statistics.

The figure was just over half of the 1.5% growth predicted by economists and it was also lower than the 2% growth seen in April, when restrictions eased for non-essential retailers, hairdressers, pubs and restaurants.

Also included in the figures:

• The services sector grew by 0.9% in May, with a 37.1% growth in accommodation and food services as restaurants and pubs were allowed to serve customers indoors again

• Manufacturing of transport equipment fell by 16.5% – the largest fall since April last year – mainly because the global shortage of microchips hit car production

• Production sectors output grew 0.8% – bad weather boosted output in electricity and gas – and construction contracted by 0.8% but remains 0.3% above its pre-pandemic level (February 2020)

The Confederation of British Industry’s chief economist Rain Newton-Smith said the easing of coronavirus restrictions had brought a “welcome rise in activity” in May.

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She added: “But while more businesses were able to reopen their doors, times remain tough for our hardest hit sectors, particularly aviation and international tourism with some missing out on valuable summer trade to recoup their losses.

“With further pent-up demand providing an engine for growth, all signs point to a promising economic outlook for the UK over the course of the year. It’s now critical business and government work together to rebuild customer and employee confidence in living with the virus, while also maintaining progress in tackling the pandemic itself.”

Chancellor Rishi Sunak said: “It’s great to see people back out and about thanks to the success of the vaccine rollout, and to see that reflected in today’s figures for economic growth.

“Our unprecedented package of support – including business loans, the furlough scheme and a reduced rate of VAT for the hospitality and tourism sectors – has protected millions of jobs and helped businesses survive the pandemic.”

But Bridget Phillipson, Labour’s shadow chief secretary to the Treasury, said: “After causing the UK to experience the worst economic crisis in the G7, the Conservatives should be getting the economy powering on all cylinders. Instead, this morning’s growth data shows how fragile the UK’s economic recovery is.

“Instead of the Conservatives’ failure to secure the recovery, Labour’s plan to buy, make and sell more in Britain would mean seizing new opportunities to shape a new future for Britain.”

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Nationwide kicks off search for successor to chairman

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Nationwide kicks off search for successor to chairman

Nationwide, Britain’s biggest building society, is kicking off a search for its next chairman, months after it completed the biggest takeover deal in its 142-year history.

Sky News has learnt that Nationwide is working with headhunters to identify a successor to Kevin Parry, who has chaired the mutual since 2022.

Mr Parry has been on the building society’s board since 2016, meaning he is ‘timed out’ under the corporate governance guidelines applied to listed companies.

Although owned by its 16m members rather than listed on the public markets, Nationwide adheres to comparable governance principles.

One of Britain’s biggest high street financial services groups, it employs more than 18,000 people and has more than 600 branches across the UK.

In September, it completed the £2.3bn acquisition of Virgin Money, the London-listed banking group.

Last year, it sparked fury among its high street banking rivals by running a provocative television advertising campaign which mocked them for their approach to serving customers.

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One of the ads was banned for wrongly implying that – unlike its peers – Nationwide was not closing any of its branches.

Mr Parry, who is also a former chair of the mutual Royal London, is not expected to leave imminently, although it is possible that a succession plan could be confirmed at or before Nationwide’s next annual meeting in July.

It was unclear whether any of the mutual’s existing non-executive directors might be in the frame to succeed him.

Nationwide declined to comment on Monday.

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WH Smith buyer ‘faces 12-month ban’ on mass shop closures

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WH Smith buyer 'faces 12-month ban' on mass shop closures

The new owner of WH Smith’s high street chain has effectively been barred from launching a wave of mass store closures for at least 12 months amid plans for rapid restructurings at two other retailers it owns.

Sky News has learnt that WH Smith would have the right to cancel a year-long transitional services agreement (TSA) put in place with Modella Capital – which struck a deal to acquire the business in March – if it launched a company voluntary arrangement (CVA) before the first anniversary of the transaction’s completion.

The clause in the TSA, which enables Modella Capital to continue using WH Smith’s systems after it takes ownership, is significant, according to retail insiders.

WH Smith agreed to sell its 480 high street shops to Modella in a £76m deal, ending 233 years of high street history.

Modella plans to rebrand the chain under the name TG Jones after it takes control.

In recent weeks, Sky News has revealed plans drawn up by Modella to launch CVAs at both Hobbycraft and The Original Factory Shop, which it has owned for nine and three months respectively.

Both of those restructuring processes have put significant numbers of stores at risk, and industry executives say that, over time, a sizeable part of the WH Smith high street estate could also be at risk.

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A spokesman for Modella said: “We have a number of exciting plans for the future of TGJones.

“A CVA is not on the agenda, as it is a solvent business.”

WH Smith, which will become a pure-play travel retailer once the Modella deal completes, declined to comment further ahead of the completion of the sale.

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Hovis and Kingsmill-owners in talks about historic bread merger

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Hovis and Kingsmill-owners in talks about historic bread merger

The owners of Hovis and Kingsmill, two of Britain’s leading bread producers, are in talks about a historic merger amid a decades-long decline in the sale of supermarket loaves.

Sky News has learnt that Associated British Foods (ABF), the London-listed company which owns Kingsmill’s immediate parent, Allied Bakeries, and Hovis, which is owned by investment firm Endless, have been involved in prolonged discussions about a combination of the two businesses.

City sources said this weekend that the talks were ongoing, but that there was no certainty that a deal would be finalised.

Bankers are said to be working with both sides on the talks about a transaction.

A deal could be structured as an acquisition of Hovis by ABF, according to analysts, although details about the mechanics of a merger or the valuations attached to the two businesses were unclear this weekend.

ABF is also said to be exploring other options for the future of Allied Bakeries which do not include a deal with Hovis.

If completed, a merger would unite two of Britain’s best-known ambient food brands, with Allied Bakeries having been founded in 1935 by Willard Garfield Weston, part of the family which continues to control ABF.

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Hovis traces its history back even further, having been created in 1890 when Herbert Grime scooped a £25 prize for coming up with the name Hovis, which was derived from the Latin ‘Hominis Vis’ – meaning strength of man.

Persistent inflation, competition from speciality bread producers and shifting consumer habits towards lower-carb diets have combined to impair the bread industry’s financial health in recent decades.

The impact of the war in Ukraine on wheat and flour prices has been among the factors increasing inflationary pressures on bread producers, according to the most recent set of accounts for Hovis filed at Companies House last year.

The overall UK bakery market is said to be worth about £5bn in annual sales, with the equivalent of 11m loaves being sold each day.

The principal obstacle facing a merger of Allied Bakeries, which also owns the Sunblest and Allinson’s bread brands, and Hovis would reside in its consequences for competition in the UK market.

Warburtons, the family-owned business which is the largest bakery group in Britain, is estimated to have a 34% share of the branded wrapped sliced bread sector in the UK, with Hovis on 24% and Allied on 17%, according to industry insiders.

A merger of Hovis and Kingsmill would give the combined group a larger share of that segment of the market, although one source said Warburtons’ overall turnover would remain larger because of the breadth of its product range.

Nevertheless, reducing the number of major supermarket bread suppliers from three to two would be a test of the Competition and Markets Authority’s approach to such industry-reshaping mergers at a time when the watchdog is under intense government scrutiny.

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In January, the government removed the CMA chairman, Marcus Bokkerink, as part of a push to reorient Britain’s economic regulators around growth-focused objectives.

An industry insider suggested that a joint venture involving the distribution networks of Hovis and Kingsmill was a possible, although less likely, alternative to a full-blown merger of the companies.

They added that a combined group could benefit from up to £50m of cost savings from such a tie-up.

In its interim results announcement this week, ABF said the performance of Allied Bakeries had continued to struggle.

“Allied Bakeries continues to face a very challenging market,” it said.

“We are evaluating strategic options for Allied Bakeries against this backdrop and we expect to provide an update in [the second half of] 2025.”

In a separate presentation to analysts, ABF described the losses at Allied as unsustainable.

The company does not disclose details of Allied Bakeries’ financial performance.

Allied also owns Speedibake, an own-label bread manufacturer.

Hovis has been owned by Endless, a prominent investor in British businesses, since 2020, having previously been owned by Mr Kipling-maker Premier Foods and the Gores family.

At the time of the most recent takeover, High Wycombe-based Hovis employed about 2,700 people and operated eight bakery sites and its own flour mill.

Hovis’s current chief executive, Jon Jenkins, is a former boss of Allied Milling and Baking.

This weekend, ABF and Endless both declined to comment.

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