Official figures have raised fears of a deepening public sector drag on the the UK’s economic recovery from recession.
Data from the Office for National Statistics (ONS) showed that productivity in the public sector, dominated by education and healthcare, deteriorated between the third and fourth quarters of 2023.
It measured a 1.0% decline over the period, leaving the figure 2.3% lower than a year ago and even further away from recovering pre-pandemic levels.
Public sector productivity measures the volume of services delivered against the volume of inputs – like salaries and government funding – that are needed to maintain those services.
While the sector has witnessed hits from the impacts of strikes since the end of the COVID crisis, the NHS has struggled to deal with a worsening backlog in many key waiting lists.
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Rows over funding have been exacerbated by record levels of long-term sickness.
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UK’s economy has ‘turned corner’
The official jobless rate stands at just over 4% – around 1.4 million people.
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However, the numbers judged to be economically inactive due to poor health are nearing double that sum.
The Office for Budget Responsibility has estimated that the issue has added around £16bn to annual government borrowing bills.
Pressures have been reflected in ONS data, with output in both the health and education sectors falling during the fourth quarter of the year – contributing to the country’s recession.
That was despite rising inputs over the period.
Back in March, chancellor Jeremy Hunt used his budget to announce a Public Sector Productivity Plan – with an emphasis on improving technology in the National Health Service (NHS).
Figures next week are widely expected to confirm the end of the recession, with overall output returning to growth during the first quarter of the year.
Recent private sector surveys have painted a rosy picture for the dominant services sector, which accounts for almost 80% of overall output, despite continued pressure on budgets from the impact of higher inflation and interest rates to help cure the price problem.
The chief executive of Boots, Britain’s biggest high street pharmacy chain, is quitting after its owner’s plans for a £5bn sale or stock market listing stalled.
Sky News has learnt that Sebastian James, who has run Boots since 2018, will leave the company in November.
City sources said this weekend that he had accepted a new role in the healthcare industry.
His exit comes soon after it emerged that New York-listed Walgreens Boots Alliance (WBA), the British retailer’s owner, had decided for the second time in two years against pursuing a sale or stock market flotation of the chain.
An announcement about Mr James’s departure is expected in the coming days.
WBA is not yet thought to have lined up a successor.
Mr James, who previously ran the electricals retailer Dixons (now named Currys), recently endorsed Sir Keir Starmer – a notable move because of his long friendship with Lord Cameron, the foreign secretary.
His departure from Boots will come during the Nottingham-based company’s 175th year.
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Boots employs about 52,000 people and trades from roughly 1,900 stores.
Image: Boots has around 1,900 stores. Pic: iStock
Its recent trading performance has been strong, with WBA this week saying that like-for-like sales at Boots during the quarter to the end of May rose by 6% and 5.8% across its retail and pharmacy operations respectively.
An insider said Mr James had overseen a successful turnaround, with market share having grown for 13 successive quarters.
It has been a rare bright spot for WBA, which has had a torrid time and has seen its shares slump.
A WBA spokesperson said this week: “As Walgreens Boots Alliance continues a strategic review of the Company’s assets, we took a critical look at Boots.
“While we believe there is significant interest in this business at the right time, Boots’ growth, strategic strength and cashflow remain key contributors to Walgreens Boots Alliance.
“We are committed to continuing to invest in Boots UK and to find innovative ways for this business to fulfill its potential.”
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During a previous auction in 2022, only one bidder – a consortium of Apollo Global Management and Reliance Industries – tabling a formal offer worth about £5.5bn.
However, growing concerns about the global economy had triggered severe doubts among large banks which help finance leveraged buyouts, with Boots among the biggest such deals in Europe.
Among the other challenges facing prospective acquirers at the time was finding an adequate solution for Boots’ £8bn pension scheme – one of the largest private retirement funds in the UK.
This issue has now been resolved through an insurance deal struck with Legal & General.
Like many retailers, Boots had a turbulent pandemic, announcing 4,000 job cuts in 2020 as a consequence of a restructuring of its Nottingham head office and store management teams.
Shortly before the COVID pandemic, Boots earmarked about 200 of its UK stores for closure, a reflection of changing shopping habits.
Boots’ heritage dates back to John Boot opening a herbal remedies store in Nottingham in 1849.
It opened its 1000th UK store in 1933.
In 2006, Boots merged with Alliance Unichem, a drug wholesaler, with the buyout firm KKR acquiring the combined group in an £11bn deal the following year.
In 2012, Walgreens acquired a 45% stake in Alliance Boots, completing its buyout of the business two years later.
Boots declined to comment on Mr James’s exit on Saturday.
Britain’s fourth-biggest household energy supplier is lining up bankers to explore options including bringing in a new investor or a sale, 15 years after it launched in a bid to challenge the industry’s oligopoly.
Sky News has learnt that OVO Group, which was founded by Stephen Fitzpatrick, is close to hiring Rothschild to assist with a strategic review of the business.
City sources said this weekend that a range of possibilities would be considered during the process, which is expected to take several months.
These are likely to include a refinancing – with talks already underway about OVO’s existing borrowings – as well as issuing new shares to prospective investors, or a partial or full sale by some of the company’s shareholders.
An outright sale of the business is considered by insiders to be unlikely at this point, but is expected to be explored as part of the strategic review.
OVO, which has about four million customers, sits behind Centrica, the owner of British Gas, Octopus Energy and E.ON Next in the rankings of Britain’s leading gas and electricity suppliers, according to market share data provided by Ofgem, the industry regulator.
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Under Mr Fitzpatrick, who launched OVO in 2009, the company positioned itself as a challenger brand offering superior service to the industry’s established players.
OVO’s transformational moment came in 2020, when it bought the retail supply arm of SSE, transforming it overnight into one of Britain’s leading energy companies.
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Its growth has not been without difficulties, with insiders referring to a challenged relationship with Ofgem and a torrent of customer complaints about overcharging.
Image: Stephen Fitzpatrick launched OVO in 2009. Pic: OVO
In recent months, OVO’s shareholders have reshaped its leadership team, bringing in the former J Sainsbury chief executive Justin King as its chairman.
In May, Mr King recruited David Buttress, the former Just Eat boss who was briefly Boris Johnson’s cost-of-living tsar, as the energy group’s new chief executive.
Mr Buttress replaced Raman Bhatia, who left to join Starling Bank.
He is expected to focus on sharpening the company’s customer service performance as well as exploring ways to further diversify its products and services.
Key to OVO’s valuation will be the growth of its technology platform, Kaluza, which was set up to license its software to other energy suppliers, and provides customers with smart electric vehicle charging and heat pumps.
OVO recently announced that AGL Energy, one of Australia’s biggest energy suppliers, had bought a 20% stake in Kaluza at a $500m valuation.
Kaluza is understood to be exploring further expansion opportunities in Europe, Japan and the US.
OVO has also entered the electric vehicle car charging sector under the brand Charge Anywhere, adding 34,000 public charging points across the UK.
In 2022, OVO Group made an unadjusted loss of £1.3bn, which it blamed on a decline in the value of energy it had bought in advance to meet future supply commitments.
It said this had “no cash impact” in a corporate filing, and that this value would rise as customers used the energy it had bought.
Last summer, the company announced a £200m secondary share sale which saw existing investors Mayfair Equity Partners and Morgan Stanley Investment Management increasing their stakes in the company.
Other investors include Mitsubishi Corporation, the Japanese conglomerate.
Mayfair is thought to hold a stake of over 30%, while Mitsubishi owns approximately 20%.
Mr Fitzpatrick also remains a significant shareholder.
This weekend, it was unclear which of OVO’s investors might seek a disposal of their interests, although insiders acknowledged that a sizeable proportion of the company’s shares could end up changing hands.
Like its rivals, OVO has been contending with the impact of the industry price cap after a period of enormous price spikes which sent customers’ bills soaring.
Last month, Ofgem said the cap would fall in the quarter from July to September by the annualised equivalent of £122, to £1568.
Other big players in the sector include EDF and Scottish Power, which is owned by Spain’s Iberdrola.
In recent months, Octopus Energy, run by Greg Jackson, has crystallised a valuation of over £7bn by selling stakes to a number of new investors.
Centrica has a market valuation on the London Stock Exchange of £7.3bn.
OVO, whose valuation in any major transaction was unclear this weekend, declined to comment.
Nationwide, HSBC, Barclays and Virgin Money customers have been affected by problems with banking services, leaving some unable to send and receive money.
The issues could affect those on what is commonly pay day for many across the country, with some reporting they have not received their salary.
HSBC UK said there had been a “separate payments issue affecting multiple banks”, and Nationwide blamed a “third-party payments issue”.
Barclays also alerted customers, while Virgin Money said access to its app has been fully restored after issues in the morning – but there is a backlog of payments to process.
The Financial Conduct Authority said it was monitoring the situation and It is understood the Bank of England is engaging with the banks affected.
“We’re really sorry that some customers are having issues accessing personal online and mobile banking,” HSBC UK said on its website.
“Our IT teams are working hard to get these services back to normal. You can still authorise online card purchases via SMS.”
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Virgin Money said on X “like other banks” it is “working hard to process the backlog of payments delayed as quickly as possible”.
The bank had earlier alerted customers to delays to payments in and out of accounts and asked users not to try to make payments again if they had received an error message.
Barclays, responding to a user on X who said they have not been paid, said it was “aware of this issue” and is doing “everything… to get this resolved as quickly as possible”.
A Barclays customer said they have “thousands of pounds worth of payments due in” but “no one can pay me”.
“Absolutely marvellous at the end of the month and all my bills are due,” they added.
Last month, NatWest experienced a four-hour outage affecting its mobile and online banking services.