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Britain’s economic recovery is expected to slow over coming months thanks to staff shortages and supply chain disruption, according to a new forecast from a leading business group.

Official figures show UK GDP grew by 4.8% in the second quarter but the British Chambers of Commerce (BCC) predicts this will slow to 2.8% in the third quarter and 1.6% in the last three months of 2021.

The BCC also warned of the “real danger” that the £12bn National Insurance hike announced this week could further stifle Britain’s bounce back.

BoE governor - Andrew Bailey
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Bank of England governor Andrew Bailey said he feared worker shortages could persist

The warning about the impact of labour shortages comes a day after Bank of England governor Andrew Bailey said he feared the problem could persist.

HGV drivers and meat processing workers are among the areas where shortages have been identified.

Supply issues have affected a number of well-known businesses including Ikea, McDonald’s, Greggs and Wetherspoons.

The BCC’s forecast comes on the same day as a new report from the Recruitment and Employment Confederation (REC) showed recruiters and employers faced an unprecedented decline in the availability of candidates for roles.

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According to the BCC’s new forecast, Britain will still post annual growth of 7.1% for 2021 as a whole, which would be the strongest on records going back to 1949.

However the slowdown in the pace of the recovery – after last year’s pandemic-driven recession – means it is now not expected to reach pre-COVID levels until the first quarter of next year.

Suren Thiru, head of economics at the British Chambers of Commerce, said the economy remained “on course for a historic revival” this year thanks to the release of pent-up consumer demand as well as higher government spending.

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‘Perfect storm’ for retailers as Brexit and pandemic hit, says babywear boss

“However, our latest outlook also points to a loss of momentum  in the coming months as staff shortages, supply chain disruption and rising cost pressures limit output from many sectors,” he added.

“A prolonged period of acute supply and staff shortages could derail the recovery by forcing firms into a more permanent reduction in their operating capacity, eroding their ability to fulfil orders and meet customer demand.”

Hannah Essex, the BCC’s co-executive director, said: ”There is a real danger the National Insurance increase announced this week could stifle the recovery.”

The forecast came as the monthly UK report on jobs from the REC and KPMG showed a further rapid increase in hiring in August, spurred by improved confidence in the economic outlook.

At the same time a lack of availability of workers spurred sharp increases in starting salaries.

Neil Carberry, Chief Executive of the REC, said: “The number of staff available to start jobs fell at another new record rate, deepening the current labour shortage.

“Recruiters are working around the clock, placing more people into work than ever as these figures show.

“Switching the entire economy on over the summer has created a unique demand spike, and a short-term crisis.

“But it would be a mistake for businesses to think of this as only a short-term issue.

“A number of factors mean that the UK labour market will remain tight for several years to come.”

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Barclays fined £40m over ‘reckless’ financial crisis capital raising

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Barclays fined £40m over 'reckless' financial crisis capital raising

Barclays has been fined £40m over capital raising that averted its need for taxpayer aid during the 2008 financial crisis.

The Financial Conduct Authority (FCA) found that the bank should have disclosed more details to the stock market about the £11.8bn in funding, from Qatari and other sovereign investors, that it had previously described as “reckless” and lacking integrity.

The penalty followed a protracted investigation that began in 2013 but was held up by criminal proceedings brought by the Serious Fraud Office that led to the acquittal of all defendants charged, including Barclays.

A decision by the bank not to refer the FCA’s enforcement case to an Upper Tribunal meant that the watchdog’s planned fine could be imposed.

Its regulatory action concerned Barclays’ navigation of the events of 2008 when the-then Labour government took huge stakes in major lenders, including Lloyds and RBS – now NatWest – to prevent a collapse of the banking system.

The FCA said of its action: “The events in 2008 were of national importance as banks sought emergency recapitalisation.

“The FCA has a primary objective to ensure market integrity. Banks should treat their obligations to the market and shareholders seriously.”

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Barclays was yet to comment.

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‘When you hit profits, you hit growth’: Businesses criticise biggest budget tax increase in decades

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'When you hit profits, you hit growth': Businesses criticise biggest budget tax increase in decades

Tax rises announced during the recent budget will hit businesses rather than encourage growth, the head of one of the UK’s most prominent business groups will warn on Monday.

The Confederation of British Industry (CBI) has joined a choir of voices opposing Chancellor Rachel Reeves’s fiscal measures, which the Labour Party claims are needed to plug a £22bn “black hole” left by 14 years of Tory government.

Labour put growth at the heart of their campaigning during the last general election, but business believe the £40bn tax rises announced last month – the largest such increase at a budget since John Major’s government in 1993 – will stifle investment.

Rain Newton-Smith, who heads the CBI, is expected to say at the group’s annual conference in London that “too many businesses are having to compromise on their plans for growth”.

She will say: “Across the board, in so many sectors, margins are being squeezed and profits are being hit by a tough trading environment that just got tougher.

“And here’s the rub, profits aren’t just extra money for companies to stuff in a pillowcase. Profits are investment.”

Ms Newton-Smith will add: “When you hit profits, you hit competitiveness, you hit investment, you hit growth.”

The Office for Budget Responsibility (OBR), which monitors the government’s spending plans and performance, has previously said most of the burden from the tax increase will be passed on to workers through lower wages, and consumers through higher prices.

Last week, dozens of retail bosses signed a letter to the chancellor warning of dire consequences for the economy and jobs if she pushes ahead with budget plans.

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Up to 79 signatories joined British Retail Consortium’s (BRC’s) scathing response to the fiscal announcement, which claimed Labour’s tax rises would increase their costs by £7bn next year alone.

It warned that higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases next year, would be passed on to shoppers and hit employment and investment.

The letter, backed by the UK boss of the country’s largest retailer Tesco, said: “The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

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From October: ‘Raising taxes was not an easy decision’

‘Businesses will now have to make a choice’

A few days after the budget, Chancellor Reeves admitted she was “wrong” to say higher taxes were not needed during the election campaign – as she warned businesses may have to make less money or pay staff less to cover a tax increase.

But she claimed the previous government had “hid” the “huge black hole” in finances and she only discovered the extent of it once her party was voted in.

She told Sky News’ Sunday Morning With Trevor Phillips: “Yes, businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth.”

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ITV back in spotlight as suitors screen potential bids

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ITV back in spotlight as suitors screen potential bids

Potential suitors have again begun circling ITV, Britain’s biggest terrestrial commercial broadcaster, after a prolonged period of share price weakness and renewed questions about its long-term strategic destiny.

Sky News has learnt that a number of possible bidders for parts or all of the company, whose biggest shows include Love Island, have in recent weeks held early-stage discussions about teaming up to pursue a potential transaction.

TV industry sources said this weekend that CVC Capital Partners and a major European broadcaster – thought to be France’s Groupe TF1 – were among those which had been starting to study the merits of a potential offer.

The sources added that RedBird Capital-owned All3Media and Mediawan, which is backed by the private equity giant KKR, were also on the list of potential suitors for the ITV Studios production arm.

One cautioned this weekend that none of the work on potential bids was at a sufficiently advanced stage to require disclosure under the UK’s stock market disclosure rules, and suggested that ITV’s board – chaired by Andrew Cosslett – had not received any recent unsolicited approaches.

That meant that the prospects of any formal approach materialising was highly uncertain.

The person added, however, that Dame Carolyn McCall, ITV’s long-serving chief executive, had been discussing with the company’s financial advisers the merits of a demerger or other form of separation of its two main business units.

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Its main banking advisers are Goldman Sachs, Morgan Stanley and Robey Warshaw.

ITV’s shares are languishing at just 65.5p, giving the whole company a market capitalisation of £2.51bn.

The stock rose more than 5% on Friday amid vague market chatter about a possible takeover bid.

Bankers and analysts believe that ITV Studios, which made Disney+’s hit show, Rivals, would be worth more than the entire company’s market capitalisation in a break-up of ITV.

People close to the situation said that under one possible plan being studied, CVC could be interested in acquiring ITV Studios, with a European broadcast partner taking over its broadcasting arm, including the ITVX streaming platform.

“At the right price, it would make sense if CVC wanted the undervalued production business, with TF1 wanting an English language streaming service in ITVX, along with the cashflows of the declining channels,” one broadcasting industry veteran said this weekend.

“They would only get the assets, though, in a deal worth double the current share price.”

Takeover speculation about ITV, which competes with Sky News’ parent company, has been a recurring theme since the company was created from the merger of Carlton and Granada more than 20 years ago.

ITV said this month that it would seek additional cost savings of £20m this year as it continued to deal with the fallout from last year’s strikes by Hollywood writers and actors.

It added that revenues at the Studios arm would decline over the current financial year, with advertising revenues sharply lower in the fourth quarter than in the same period a year earlier because of the tough comparison with 2023’s Rugby World Cup.

Allies of Dame Carolyn, who has run ITV since 2018, argue that she has transformed ITV, diversifying further into production and overhauling its digital capabilities.

The majority of ITV’s revenue now comes from profitable and growing areas, including ITVX and the Studios arm, they said.

By 2026, those areas are expected to account for more than two-thirds of the group’s sales.

This year, its production arm was responsible for the most-viewed drama of the year on any channel or platform, Mr Bates versus The Post Office.

In its third-quarter update earlier this month, Dame Carolyn said the company’s “good strategic progress has continued in the first nine months of 2024 driven by strong execution and industry-leading creativity”.

“ITV Studios is performing well despite the expected impact of both the writer’s strike and a softer market from free-to-air broadcasters.”

She said the unit would achieve record profits this year.

ITV and CVC declined to comment, while TF1, RedBird and Mediawan did not respond to requests for comment.

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