UK recession ‘in the balance’ – but inflation latest is ‘good news’, says Bank governor
A UK recession is “in the balance” but there are signs growth is starting to pick up, the governor of the Bank of England has said.
Andrew Bailey made the comments as he hailed Wednesday’s inflation data – which revealed it remained at 4% in January – as “quite encouraging” amid the Bank’s ongoing attempts to bring the rate down to its target of 2%.
“That’s good news, as far as I can tell,” he told the House of Lords economic affairs committee on Wednesday afternoon.
However, the governor added the figure did not fundamentally alter the Bank’s outlook on potentially cutting interest rates in the months ahead.
“I think it leaves us broadly where we thought we were going to be. But that’s obviously encouraging relative to where we could have been,” Mr Bailey said.
The UK’s central bank had forecast inflation would rise slightly to 4.1%, while economists polled by Reuters expected it to creep up to 4.2%.
The rate of inflation has been on a downward trend in recent months – except for a surprise rise in December.
The Bank has held interest rates at 5.25% four times in a row and Mr Bailey previously told Sky News that he expects its next move to be a cut. However, the Bank has yet to decide when this will be.
Economy is flatlining – tackling unproductivity is our way out
The UK economy shrunk by 0.1% between July and September last year and it is expected to have shrunk by around the same amount between October and December last year.
If this is the case, then the UK will have met the criteria of a recession, which is two consecutive quarters of negative growth.
There are various reasons for this. The economy has struggled to gain any momentum since the pandemic after persistent inflation eroded the value of earnings and squeezed spending.
Looking more closely at the end of last year, we also had storms that kept shoppers at home and strike action that reduced the number of days worked.
The important thing to note is that there is a lot of disagreement among economists about whether this way of measuring a recession really tells us very much.
We could be entering a recession in name but it won’t necessarily change anything in terms of people’s lived experience as we continue to face a crisis in living costs.
Unemployment is close to a historic low at 3.8%, which is less than half the level we had during the recession that followed the 2008 financial crisis
So, rather than a huge contraction, the best way to think about this is that the economy is flatlining and it needs a boost.
As to where this boost comes from, we have had meagre growth in productivity since the financial crisis, and making improvements here is the real source of long term improvements in living standards.
It comes ahead of new growth figures on Thursday morning – which could show that the UK has tipped into a recession, which is defined as two consecutive quarters of negative growth.
The Office for National Statistics (ONS) previously estimated that gross domestic product (GDP) contracted by 0.1% in the three months from July to September.
Economists polled by Reuters believe Thursday’s figures will show it again shrank by 0.1% in the fourth quarter.
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Mr Bailey told the committee it was “in the balance” whether the UK would enter a “technical recession” on Thursday.
“Last year, overall GDP was basically flat… It wouldn’t take much to tip it either way, frankly,” he added.
However, the governor expressed some optimism for the year ahead.
“Going forward, and I think this is in some ways more significant, we are now seeing some signs of the beginning of a pick-up in some of the surveys, for instance… we’ve got a modest pick-up this year which continues thereafter,” he told the committee.
Henry Birch, the former boss of Rank Group, is among the candidates vying to run Entain, the FTSE-100 owner of Ladbrokes.
Sky News has learnt that Mr Birch is one of a small number of candidates being considered by Entain to replace Jette Nygaard-Andersen as its permanent chief executive.
The recruitment process comes at a challenging time for Entain, which has been beset by boardroom upheaval and regulatory difficulties in various international markets.
Its stock has halved in the last year, leaving it with a market capitalisation of just under £5bn.
This weekend, sources close to the company confirmed that Mr Birch was a serious contender for the post, although they said others were also in contention.
An appointment could still be weeks or even a small number of months away, they added.
Henry Birch, former CEO of Very Group
Mr Birch stepped down as chief executive of Very Group, the online retailer owned by the Barclay family, in 2022.
He is an experienced gambling industry executive, having spent four years as chief executive of William Hill Online prior to joining the London-listed multichannel gaming operator Rank Group.
He has also held roles at Leisure & Gaming plc and BettingCorp.
Under Mr Birch, Very Group broke the £2bn annual sales mark for the first time.
Investors in Entain have been pressing its board to recruit a new chief executive with substantial gambling experience as it grapples with a plunging share price and numerous regulatory and strategic challenges.
Last week, Sky News revealed that former bosses of bookies Coral and Skybet had rejected overtures to become its new boss.
Pic: Reuters
Industry sources said that Dan Taylor, chief executive of Flutter Entertainment’s international operations, had also been approached, although it was unclear whether he was interested.
Entain has been under siege from activist investors for months.
In January, it announced that Ricky Sandler, who runs Entain shareholder Eminence Capital, would join its board as a non-executive director.
Last month, it said that Barry Gibson, its chairman, would retire later this year and be replaced by interim chair, and former acting CEO, Stella David.
Entain has hired bankers to sell PartyPoker and other non-core operations, which the Financial Times reported could include Netherlands-based BetCity, which Entain bought for £398mn last year.
As well as Ladbrokes, Entain owns Coral and a stake in BetMGM, a major US betting player.
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MGM Resorts, the US casino operator behind the Bellagio in Las Vegas, attempted to buy Entain in 2021 but was rebuffed at a much higher valuation than the UK company’s shares trade at now.
MGM has since ruled out a further bid, although analysts expect it to return at some stage.
The company has faced a deluge of regulatory problems, triggering sharp criticism of its governance and business practices.
Last December, it was ordered to pay £615m for failing to prevent bribery at its former Turkish subsidiary under a deferred prosecution agreement.
Shares in Entain closed at 778.8p on Friday, giving the company a market capitalisation of £4.98bn.
Entain declined to comment, while Mr Birch could not be reached for comment.
A privately owned used-car platform is circling Cazoo Group, its stricken US-listed rival which is on the brink of administration.
Sky News has learnt that Motors.co.uk is a leading contender to acquire Cazoo’s marketplace operation, which would include its brand and intellectual property assets.
The process to auction the used-car platform’s constituent parts comes after it spent tens of millions of pounds on sponsorship deals in football, snooker and darts in a rapid attempt to gain market share.
Earlier this week, Cazoo filed a notice of intention to appoint Teneo as administrator, just three years after it floated in New York with a valuation of $8bn.
The filing was intended to provide protection from creditors while Teneo finalises asset sales.
Since an announcement last month about a restructuring of the group, advisers have offloaded a string of assets and unwound Cazoo’s previous operating model to transform it into a marketplace.
Among those have been the disposal of Cazoo’s vehicle fleet, which sources said had been achieved at higher-than-anticipated values, reflecting a current shortage of used cars in the market.
Teneo is also said to have struck a deal with Constellation Automotive, the owner of Cazoo’s rival, Cinch, involving a handful of sites and dozens of jobs.
Meanwhile, several parties are understood to have expressed an interest in Cazoo’s wholesale operation and other vehicle collection sites.
One industry source said the pivot to a platform model had seen its inventory rise to more than 15,000 cars, with Cazoo now the online vehicle marketplace where consumers can buy and sell cars under a single brand.
If, as expected, the group does fall into administration, it would underline the rapid implosion of a company which once ranked among Britain’s hottest technology start-ups.
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Founded by Alex Chesterman, the founder of Zoopla, it raised hundreds of millions of pounds in funding, and rapidly attracted a ‘unicorn’ – or $1bn – valuation.
Mr Chesterman left the business several months ago in the wake of a balance sheet restructuring which saw hundreds of millions of dollars of debt converted to equity.
One insider said the formal triggering of insolvency proceedings was likely to attract wider attention in Cazoo’s assets, including its brand.
It was unclear on Friday how much Motors.co.uk or other suitors for the marketplace were likely to bid for it.
Cazoo founder Alex Chesterman left the business several months ago
A spokesperson for Cazoo said: “Our new marketplace model, where consumers can both buy and sell cars, is revenue generating and performing ahead of expectations with interest from almost 100 car dealers including many household names wishing to trade on the Cazoo platform.
“Cazoo has successfully restructured and significantly reduced the cash burn of the group, resulting in a cash position in excess of £95m at 30th April 2024 compared to £113m at 31st December 2023, and the platform now has approximately 17,000 cars which is more than double the volume we previously supported and demonstrates the scalability of our technology and the strength of the team.
“We are making efforts to secure the next phase of our business and are grateful to our employees for their hard work and commitment.”
Motors.co.uk did not respond to enquiries, while a spokesperson for Cazoo declined to comment on talks about asset sales.
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