LIVEBUSINESS LIVE: GDP grows 0.7% in first quarter; Keywords set for takeover; Nightcap to delist

Fashion giant H&M’s sales have been washed away by the wet weather.

In an update branded a ‘catastrophe’ by analysts, the company said sales in June were set to be 6 per cent lower than the same month last year.

It said ‘unstable weather’ in many of its largest markets deterred shoppers from the High Street.

Thomas Pugh, economist at RSM UK: 

‘It turns out that the rebound in Q1 was even stronger than expected with GDP rising by 0.7% q/q rather than the 0.6% initially expected. All the data suggests that the economy is set to continue to rise in Q2. We then expect growth to accelerate in the second half of this year and into 2025 as sharply lower inflation, tax cuts and falling interest rates give households an income boost.

‘The big unknown is how much of this rise in incomes households will actually spend. Indeed, despite real households’ disposable income growing by 0.7% in Q4 and consumer confidence increasing, the household saving ratio rose to 11.1% in the latest quarter, up from 10.2% in Q4, suggesting that households were still rebuilding saving buffers at the end of last year.

‘Since the start of 2022 households have saved an average of 8.7% of their incomes, that is significantly higher than the 5.5% they saved from 2016 to 2020. To put this in pound terms, if households had saved the same proportion of their incomes as before the pandemic, they would have spent an extra £100bn in the last two years.

‘The good news is that consumer confidence has been improving gradually over the last year and UK consumers’ confidence in their personal finances has reached the highest since 2021 as the impact of rising real wages filters through into people’s pockets. We expect this to continue over the next year. That suggests household savings patterns will start to return to more normal levels in the first half of the year.

‘On that basis, we think the improvement in households’ real incomes that is set to intensify later this year will translate into an increase in spending that will drive the emerging economic recovery and finally drag the UK out of stagnation.’

The new boss of BP has watered down the oil giant’s green energy plans following investor pressure.

In major strategy shift, Murray Auchincloss has put new offshore wind projects on ice as it focuses on oil and gas.

It is a stark change from the policies of disgraced ex-chief executive Bernard Looney, who had pushed for a rapid move away from fossil fuels.

Hospitality group Nightcap is set to become a private company, with the firm preparing to delist from London’s AIM market.

The owner and operator of 46 premium bars said it had evaluated ‘the value that the current market capitalisation ascribes to the Company, the liquidity of the Ordinary Shares, the ability to raise further equity through public markets at an acceptable price and the cost of maintaining a public quotation’.

Nightcap said it had ultimately concluded that delisting was in the best interest of shareholders, 76.9 per cent of whom have already backed the decision.

Gareth Edwards, chair of Nightcap, said:

‘We have not taken this decision lightly, however, following an extensive review and deliberation to ascertain the most effective way to maximise Shareholder value in the longer term and increase the potential for the long-term success of the Company, the Board has unanimously concluded that it is in the best interests of the Company and our Shareholders to cancel our AIM admission and re-register as a private limited company.

‘The Board believes that Nightcap’s current public market valuation does not reflect the underlying potential of our business or our achievements to date and that this is unlikely to change in the short-to-medium term. Since our last institutional fundraise in May 2021, we have demonstrated several times that we can access funding from non-institutional sources at a premium to our share price at the time.’

Nearly £5billion was wiped off the value of GSK after a top US health agency limited the scope of its blockbuster respiratory vaccine.

In a further setback for the UK pharmaceutical giant, the US public health agency, the CDC, said that respiratory syncytial virus (RSV) jabs should not be given to under-60s.

The ruling came just weeks after GSK was given the green light by the US Food and Drug Administration (FDA) to expand the use of its Arexvy vaccine from those aged over 60 to those aged between 50 and 59.

Keywords Studios is on course for a £1.96billion from European private equity group EQT, the Dublin-based video game services firm said on Friday.

The updated 2,450p-per-share offer follows a revised possible cash offer of 2,430p bid received on 26 June, and the board would recommend the proposal to its shareholders if a firm offer is made by EQT, Keywords said in a statement.

Lindsay James, investment strategist at Quilter Investors:

‘The Bank of England expects a more modest growth rate of 0.2% in the second quarter, which although forecast before the announcement of the election and indeed the publication of the better than expected Q1 figures, may end up being close to the truth as recent surveys have indicated a pause in spending decisions within the crucial services sector during the election period.

‘The second half of 2024 seems likely to be slow to change gear, despite the energy of a probable new government, with any noticeable changes not likely to be felt until 2025.

‘However attention is already shifting, at the margins at least, to UK equity markets which not only trade at near record discounts to US equities but have also prompted bid speculation in companies ranging from Anglo American to Royal Mail and John Wood Group, to name just a few. Whilst the many obstacles that have held back our home market remain, valuations have seemingly become too tempting for international investors to ignore.

‘With the wet spring that has firmly held back the retail sector finally giving way to warmer weather and interest rates likely to be heading down by year end, it could well be that better growth lies ahead. However until the next Budget makes both taxation and spending plans clear, businesses are unlikely to invest at scale, delaying any meaningful acceleration in GDP growth yet further.’

The British economy grew by more than initially thought in the first three months of the year, the Office for National Statistics said on Friday as it upgraded previous estimates of 0.6 per cent quarter-on-quarter growth to 0.7 per cent.