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UK economic growth picked up in August as bars, restaurants and festivals benefited from a first full month without COVID restrictions in England, official figures show.

Gross domestic product (GDP) increased by 0.4% month-on-month, according to the Office for National Statistics (ONS) – slightly below experts’ average forecast of 0.5% growth.

However the report also pointed to a setback for the previous month, with July GDP, initially estimated to have shown a small 0.1% increase, now believed to have seen a 0.1% decline.

People sit at an outdoor restaurant on the South Bank in London
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Restaurants and hotels boosted growth

That was after revisions to data from sectors including car manufacturing – an industry which has been badly hit by the global shortage of semiconductor chips.

Overall it meant that GDP in August was 0.8% below the pre-pandemic levels of February 2020, the ONS said.

Darren Morgan, ONS director of economic statistics, said: “The economy picked up in August as bars, restaurants and festivals benefited from the first full month without COVID-19 restrictions in England.

“This was offset by falls in health activity with fewer people visiting GPs and less testing and tracing.

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“However, later and slightly weaker data from a number of industries now mean we estimate the economy fell a little overall in July.”

Chancellor Rishi Sunak responded by pointing to recent data showing growth in payroll jobs numbers and forecasts that UK growth will outpace other G7 countries.

File photo dated 30/08/21 of people enjoying the Bank Holiday weather on Bournemouth beach.
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The bounce-back has been partly attributed to staycations this summer

The ONS figures showed a mixed picture for different parts of the economy in August.

Within the services sector – which makes up four-fifths of output – it was hotels and restaurants together with arts, entertainment and recreation that led the way though retailers saw a decline.

There was also a pick-up for crude oil and natural gas after a recent closure of oil field production sites for planned maintenance. But the construction sector shrank.

Kitty Ussher, chief economist at the Institute of Directors, said: “August was a strong month for the UK economy, with the easing of restrictions and staycation boom causing a welcome growth in the service sector when compared with the previous month.

“Retail sales, however, were more muted but this could have been due to a higher proportion of disposable income being spent instead on going out over the summer.

“While the construction sector appears to have been affected by supply shortages, elsewhere in the economy there are signs that previous bottlenecks are able to self-correct to a certain extent.”

Paul Dales, chief UK economist at Capital Economics, said that for the third quarter from July-September, growth may have fallen short of the Bank of England’s forecast – suggesting this could dampen prospects for an interest rate hike.

Britain’s economy shrank by 9.7% last year as the coronavirus pandemic crushed economic activity – its biggest annual decline in 99 years.

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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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