22nd Dec 2020 08:19
(Alliance News) - The UK economy is estimated to have grown a record 16% in the third quarter of 2020 from the second quarter, the Office for National Statistics said on Tuesday, and the figures offered some positive signals for 2021 despite the lockdowns that have followed.
"This is the largest quarterly expansion in the UK economy since Office for National Statistics quarterly records began in 1955. This reflects the effects of the easing of lockdown restrictions in the third quarter as well as some recovery of activity from the steep contraction in April," the ONS said.
The third-quarter reading has been revised from sequential growth of 15.5% reported initially. While a record figure, UK gross domestic product is still 8.6% below where it was at the end of 2019, revised from an initial estimate of 9.7% - and follows a 19% slump in the second quarter of the year and 3.0% fall in the first quarter.
Compared with the third quarter a year ago, the UK economy fell by a revised 8.6% in the three months to September.
Services output increased by a revised 15% in the third quarter from the second, though the sector was still 8.9% smaller than it was at the end of 2019. There was a recovery in retail trade in the third quarter, the ONS said, while the Eat Out to Help Out scheme boosted demand for restaurants and bars.
While the fourth quarter has seen lockdowns and other restrictions reimposed on the UK economy, Capital Economics said there is reason for optimism.
"While a double-dip recession is a clear possibility if the Tier 4 COVID-19 restrictions are extended into 2021, Q3's high saving rate provides optimism that as long as vaccines are effective and widespread, GDP will stage a strong rebound in the second half of next year," said Senior UK Economist Ruth Gregory.
While the risks to Capital Economics' forecast for first quarter GDP growth are now to the downside, "at least the drop in the saving rate from 27.4% in Q2 to 16.9% in Q3 left it far above its long-run average of 8.0%," Gregory said. "That implies there is plenty of scope for household spending, and GDP, to rebound strongly once the restrictions are lifted."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.2% at 6,401.89
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Hang Seng: down 0.7% at 26,119.25
Nikkei 225: closed down 1.0% at 26,436.39
DJIA: closed up 37.40 points, 0.1%, at 30,216.45
S&P 500: closed down 0.4% at 3,694.92
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GBP: up at USD1.3432 (USD1.3321)
EUR: firm at USD1.2225 (USD1.2217)
Gold: down at USD1,867.60 per ounce (USD1,875.05)
Oil (Brent): down at USD50.08 a barrel (USD50.32)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1100 GMT Ireland wholesale price index
1000 CET EU eurozone economic outlook
0830 EST US 3rd estimate gross domestic product
0855 EST US Johnson Redbook retail sales index
1000 EST US existing home sales
1000 EST US consumer confidence index
1630 EST US API weekly statistical bulletin
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UK government borrowing surged to a record GBP31.6 billion in November as efforts ramped up to support the economy through the second wave of the pandemic, official figures have shown. The Office for National Statistics said last month's borrowing – excluding state-owned banks – soared by GBP26 billion year on year and marked the highest seen in November and the third highest in any month since records began in 1993. The latest estimate saw public sector net debt reach a new all-time high of GBP2.1 trillion at the end of last month. It means the UK's overall debt is now around 99.5% of GDP, a level not seen since 1962. Borrowing has hit GBP240.9 billion for the first eight months of the financial year – GBP188.6 billion more year on year and breaking yet more records. Recent official forecasts from the Office for Budget Responsibility predict borrowing could reach GBP393.5 billion by the end of the financial year in March, which would be the highest seen since the Second World War.
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Talks with France on reopening full trade and transport across the Channel are ongoing as the UK government's chief scientific adviser said more restrictions may be needed at home because cases of a mutant strain of Covid were now appearing "everywhere". Patrick Vallance gave the grim warning after more than 40 countries banned UK flights because of fears regarding the spread of the coronavirus variant. The chief scientific adviser's remarks followed London and parts of southern and eastern England being rushed into the new Tier 4 lockdown regime at the weekend after existing Tier 3 measures proved inadequate to control the spread of the more infectious variant. Vallance indicated a lockdown may be needed in wider areas of England, particularly as Christmas mixing may result in an increased spread of cases. Scotland and Northern Ireland have already announced new lockdowns from Boxing Day while Wales' tough restrictions will only be eased for Christmas Day before being reimposed.
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BROKER RATING CHANGES
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JPMORGAN RAISES SSE PLC PRICE TARGET TO 1,550 (1,250) PENCE - 'NEUTRAL'
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JEFFERIES RAISES SPECTRIS PRICE TARGET TO 3,200 (3,090) PENCE - 'BUY'
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JEFFERIES RAISES CRH PRICE TARGET TO 40.10 (38.70) EUR - 'BUY'
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COMPANIES - FTSE 100
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BHP Group said Senior Independent Director Susan Kilsby will step down from the board due to her new role of board chair of Fortune Brands Home & Security. She will be replaced as senior independent director by Gary Goldberg, effective immediately. Goldberg has been a non-executive director of BHP since February. The Melbourne, Australia-based miner said Kilsby intends to retire as a BHP director during 2021, no later than the 2021 annual general meeting.
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COMPANIES - FTSE 250
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Grafton Group said it has agreed to buy Proline Architectural Hardware, a leading of architectural ironmongery products for doors from a single location in Dublin. Proline reported revenue of EUR10.8 million in 2019. No financial details of the deal were disclosed. "Proline will bring specialist expertise to Grafton in the architectural ironmongery distribution segment in Ireland. It will also enable us to offer a broader range of products and services and to extend our customer base in this segment of the market," said Chief Executive Gavin Slark.
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Weir said its Oil & Gas division sale to Caterpillar is now expected to close in the first quarter of 2021. The mining technology business said completion by the end of this year was dependent on the receipt of all regulatory clearances, and a "small number" remain outstanding, with the timing of some standard processes being delayed by Covid-19.
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easyJet has agreed with Airbus to defer aircraft from the 2022 to 2024 financial years. A total of 22 aircraft will be moved from the 2022 to 2024 financial years to 2027 to 2028. The budget airline said it will take no deliveries in the 2021 financial year, 8 in the 2022 year, 7 in 2023 and 18 in 2024. easyJet's financial year ends in September. "This latest amendment to our longstanding agreement with Airbus reflects easyJet's significant fleet flexibility as well as the benefit of highly attractive aircraft pricing. In this period of uncertainty, this flexibility is even more valuable, as it will enable us to quickly flex our fleet size in response to customer demand," said easyJet Chief Executive Johan Lundgren.
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Royal Mail has suspended deliveries to mainland Europe amid transport restrictions due to the mutant coronavirus strain. The company said it was also experiencing delays to Canada and Turkey, both of which were listed as part of its "on suspension" list. Deliveries to the Republic of Ireland are unaffected. In a statement on its website, Royal Mail said: "We are working to keep as many international mail services running as possible given the current restrictions around air, road, ferry and train movements from the UK. Royal Mail has temporarily suspended all mail services to Europe, with the exception of the Republic of Ireland. We are keeping the situation under close and constant review."
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COMPANIES - MAIN MARKET AND AIM
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Applegreen said it has agreed to be taken over by BidCo, a newly-formed company owned by B&J Holdings and Blackstone Infrastructure Partners, in a EUR718.1 million deal. Applegreen operates a number of petrol stations in Ireland, the UK and the US. B&J Holdings is a 41% shareholder in Applegreen and represents the holdings of Applegreen's founders, Robert Etchingham and Joseph Barrett. Applegreen shareholders will receive EUR5.75 in cash under the deal - the same price touted earlier in December - being a 48% premium to the stock's closing price of EUR3.88 on December 9, the last business day before the publication of the possible offer announcement. The stock closed at 500 pence in London on Monday. "The business has significant scope to further expand its footprint, which we believe will be best achieved in the private arena where the group can benefit from the experience and capital of Blackstone as its partner, whilst maintaining the management and wider team which have driven the business forward to date," said Applegreen Chair Daniel Kitchen. He continued: "The independent board is unanimously recommending the offer from BidCo, as it represents a compelling opportunity for independent shareholders to realise their investment in cash in the near term, and is at a significant premium to the prevailing share price."
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COMPANIES - GLOBAL
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Australia & New Zealand Banking Group said Chief Financial Officer Michelle Jablko will leave following her decision to take up a senior role at another organisation outside of financial services. The Melbourne, Australia-headquartered banking and financial services company said it will conduct an internal and external search for a replacement, with Jablko to transition her duties over the coming months to Shane Buggle, general manager of Internal Audit, who will be appointed acting CFO. Buggle has spent more than 20 years at ANZ Bank in senior finance roles and was deputy CFO from 2012 until 2018. Jablko had joined ANZ Bank in 2016.
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Tuesday's Shareholder Meetings
Exillon Energy PLC - AGM
Mosman Oil & Gas Ltd - AGM
Revolution Bars Group PLC - AGM
Jupiter US Smaller Companies PLC - AGM
Seneca Global Income & Growth Trust PLC - GM re renewal of authority to buyback shares
Capital Ltd - GM re Centamin contract and share placing
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By Tom Waite; [email protected]
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