UK business growth slows as budget uncertainty hits investment plans; German recession ‘baked in’ – business live

Post Office chief executive Nick Read wanted the two post office operators appointed to the company’s board removed, and blocked them from meetings on issues including pay and bonuses, the inquiry into the Horizon IT scandal has heard.

Saf Ismail was appointed to the Post Office board as a non-executive director in June 2021, along with fellow subpostmaster Elliott Jacobs, in a move to repair relations and improve oversight as part of an attempt to overhaul the organisation and “right the wrongs of the past”.

Ismail gave scathing testimony to the inquiry saying that while the other non-executive directors on the board welcomed the new appointments, Post Office executive members did not.

“The wider executive made it difficult [and there were] situations we didn’t feel welcomed by the wider executive,” he said, adding:

“I was told by an individual on the wider executive that ‘we don’t want to particularly deal with you and Mr Jacobs as we feel uncomfortable with what has bee happening’”.

Ismail said that Jane Davies, the former Post Office HR director that accused Read of bullying and an “obsession” with remuneration, told him that he [Read] wanted them off the board.

He said:

“She categorically told said to me how the chief executive was not happy with postmasters being on the board.

We were too awkward, too challenging, and he wanted that to be reversed. There were times when I spoke to the previous [Post Office] chair [Henry Staunton] and Jane Davies and they particularly mentioned how the wider executive ensured myself and Mr Jacobs were blocked out of meetings that involved talking about bonuses and salaries. We were actively excluded from their meetings.”

An investigation by an independent barrister cleared Read on all counts of misconduct relating to Davies’s accusations against him.

Ismail said that despite the promises to overhaul the culture and processes at the Post Office it remains too bureaucratic, and is focused on protecting its own employees instead of exiting those involved in the wrongful prosecution of subpostmasters from the organisation.

“I heard Paula Vennells say [to the inquiry] that she started to try cultural change in 2012,” he said. “I don’t feel we’ve even got off the ground.”

He said that until recently the two subpostmaster board members were not provided documents relating to various committee meetings, and recounted an example of the hiring for a role internally where the Post Office executive ignored the recommendation of a candidate by the board, instead appointing their own choice.

Ismail criticised two initiatives launched to root out staff involved in the Horizon IT scandal, Project Phoenix and Past Roles, saying that decision-making was “inquiry-led” with the semblance of action only being taken after events at the Post Office inquiry put a spotlight on individuals.

Ismail said that while subpostmasters were immediately suspended and then pursued legally, Post Office staff involved remain employed, and are often redeployed with a new job title, instead.

He said there are 23 employees on a “red” list, deemed high-risk given their involvement in the scandal in one way or other, none of whom who have even been suspended.

“To be clear from my observations at the time there was no particular appetite to deal with this issue,” he said, adding:

“Decisions were ‘inquiry-led’. The default position in the Post Office at this moment in time is protect. Unfortunately this business redeploys, recycles. I don’t feel it is appropriate for individuals in the red category to be in the business. I feel it is an insult. This is not a witch hunt, this is parity.”

Nationwide offers to lend first-time buyers six times their salary

Rupert Jones

Britain’s biggest building society is to let first-time buyers borrow up to six times their earnings in what has been labelled a “game-changing” move that ramps up the mortgage price war.

Weeks after it was announced that the Halifax and Lloyds would allow new buyers to take out loans worth up to 5.5 times their household annual income, Nationwide said it would now go up to six times income – a first for a major high street lender.

Nationwide is also cutting its mortgage rates and increasing its maximum loan sizes, so that someone taking out a home loan for more than 90% of the property’s value will now be able to borrow up to £750,000 – up from the existing £500,000, and higher than the £570,000 limit at many rivals.

The moves come amid an ongoing mortgage price war that has seen lenders jostle to cut their rates in the wake of the Bank of England’s 1 August interest rate cut and the expectation of more reductions to come.

Newsflash: Swedish electric car battery maker Northvolt plans to lay off 1,600 employees in Sweden, including 1,000 positions at its factory in Skelleftea in the north of the country.

Northvolt, which had been Europe’s great hope for a electric battery manufacturer, says it is “adjusting its near-term ambitions” and focusing on deeloping its lithium-ion battery gigafactory at Ett, near the Arctic Circle.

This, Northvolt says, will allow it to prioritize commitments to its current automotive customers.

Northvolt is cutting 1,000 positions at Skellefteå, 400 at Västerås, and 200 in Stockholm.

Peter Carlsson, CEO and co-founder of Northvolt, says:

“While overall momentum for electrification remains strong, we need to make sure that we take the right actions at the right time in response to headwinds in the automotive market, and wider industrial climate.

We now need to focus all energy and investments into our core business. Success in the ramp-up of production at Northvolt Ett is critical for delivering to our customers and enabling sustainable business operations. Recent production records at Northvolt Ett show that we are on the right path, but the decisions we’re taking today, however tough, are required for Northvolt’s future.”

BAME Post Office subpostmasters more likely to be threatened with suspension

Mark Sweney

Post office owner-operators from a minority ethnic background are more likely to have been threatened with suspension than those from a white background, the inquiry into the Horizon IT scandal has heard.

An anonymous survey published on the first day of the final phase of the long-running inquiry also received reports from eight subpostmasters who said that they had been suspended or threatened with suspension in the last three years after issues with discrepancies with the IT system had emerged.

The survey, conducted by research firm YouGov, found that 8% of a total of more than 1,000 respondents said that they had been threatened with suspension by the Post Office in the past.

However, it found that 12% of subpostmasters threatened with suspension were from an ethnic minority background, and 17% of those with an Asian/Asian British background.

A further 4% said that they had been suspended and subsequently re-instated.

“Subpostmasters surveyed from ethnic minority back grounds were more likely than white subpostmasters to have been suspended and re-instated – 6% versus 2%,” said the YouGov report.

“As were those who have been serving subpostmasters for 21 years or more.”

Gavin Ellison, the head of public sector and not-for-profit at YouGov, told the hearing that the findings were statistically significant.

Last year, documents released to campaigners revealed that lawyers investigating post office operators in the Horizon computer scandal used a racist term to categorise Black workers.

Investigators were asked to group suspects based on racial features, a freedom of information request found.

The document, which was published between 2008 and 2011, included the term “negroid types”, along with “Chinese/Japanese types” and “dark skinned European types”.

Ellison was asked whether there was a link between suspensions and subpostmasters finding discrepancies in their accounts using the Horizon IT system. However, while he said that while there was “no causation between those two factors” the survey did find respondents who said that this was the case.

YouGov published an addendum document relating to the issue which contained some anonymous written statements about the issue in the past three years.

One respondent said:

“There were shortfalls when we first took over the post office.

We had complained but we were told that the computer doesn’t make mistakes.

An audit [was] done a few months later and we were accused of theft and threatened to be suspended if we didn’t pay back the money. We [were] already told their system had flaws.. but they still accused us. Degrading us. Calling us thieves. Majority post office auditors made postmasters feel like thieves.”

YouGov qualified the experiences of these subpostmasters, pointing out that 69% of the overall respondents to its survey had reported having experienced discrepancies with the Horizon IT system since January 2020.

“A total of eight SPMs surveyed reported being suspended or threatened with suspension in the past 3 years and all stated that they experienced an unexplained discrepancy since 2020,” the research company said in the three-page document. “We can only identify correlation not causation.”

The YouGov report showed that the 89% of the discrepancies reported by respondents was less than £1,000, although 1% reported a discrepancy of £30,000 or more.

Newsflash: UK factories have been hit by a slump in export orders this month.

The CBI reports that export order books are now their weakest since December 2020 – during the first year of the Covid-19 pandemic, and just before the UK signed the Brexit trade agreement.

Its latest industrial trands report has found that total and export order books at manufacturers deteriorated in September.

A net balance of 44% of manufacturers reported that their export order books were below “normal” this month. That’s a considerable deterioration compared to August, where the reading was -22%.

Worryingly, output volumes fell sharply in the three months to September – and manufacturers expect output to decline again in the three months to December. This is the first time since November 2023 that expectations have been negative.

Ben Jones, CBI lead economist, said:

“This was a uniformly disappointing set of results for the manufacturing sector, with output falling over the past quarter, order books deteriorating and manufacturers expecting activity to soften further in the remaining months of the year.”

“The survey highlights that the recovery of the UK economy seen over the first half of 2024 remains fragile, with uneven progress seen across different sectors, and businesses increasingly cautious ahead of the Budget at the end of next month.”

“In the meantime, firms will be looking to the Chancellor to reaffirm the government’s mission of long-term economic growth, providing them with the confidence and opportunities to invest and grow.”

The news that Rachel Reeves is ordering investigations into more than £600m worth of Covid contracts awarded under the Conservatives has been welcomed by anti-corruption campaigners.

The Guardian reported this morning that the chancellor will announce today that she will refer more than half of contracts for material such as masks to the incoming Covid corruption commissioner.

Daniel Bruce, chief executive of Transparency International UK says this is an “important first step” towards accountability over governent spending during the pandemic.

Bruce hopes that some of the money spent on pandemic equipment can be recovered, saying:

“We have repeatedly warned of the scale of corruption risk in the former government’s approach to procurement during the pandemic and have identified over £15 billion of high-risk contracts in need of investigation.

Today’s announcement is an important first step towards full accountability for the serious procurement failings we saw during the pandemic and we urge the Chancellor to launch similar investigations into the 135 contracts we’ve identified.

Such investigations offer an important chance for the new government to recoup some of the millions of pounds of public money wasted on these contracts and implement lessons learned to ensure this never happens again.

The pound has hit a two-year high against the euro, after this morning’s PMI surveys showed the UK economy outperforming the eurozone this month.

Sterling has gained half a eurocent to €1.1967 this morning, its highest level since early August 2022.

Uncertainty ahead of next month’s budget is weighing on the UK economy, the latest survey of purchasing managers across British companies shows.

Data firm S&P Global reports that UK private sector activity growth has slowed this month, across both services firms and manufacturers.

Some companies reported that clients are taking a “wait-and-see approach” to decision-making ahead of the Autumn Budget, which is hitting investment.

Fiscal policy uncertainty ahead of the budget, due on 30 October, was “by far the most cited concern among UK private sector firms”, the PMI survey shows.

Private sector employment growth slowed for the second month running to its weakest since June.

But encouragingly, firms slowed their price rises this month – with the average prices charged by private sector firms rising at the slowest rate since February 2021.

Overall, the Flash UK PMI Composite Output Index dipped to 52.9, down from August’s 53.8. That’s a two-month low, but still in growth territory, and much cheerier than in Germany or the wider eurozone this month (see earlier posts).

Chris Williamson, chief business economist at S&P Global Market Intelligence says:

“The September PMI data bring encouraging news, with robust economic growth being accompanied by a cooling of inflationary pressures. The data therefore hint at a ‘soft landing’ for the UK economy, whereby the fight against inflation is showing increasing signs of being won without higher interest rates having caused a downturn.

Williamson adds, though, that concerns about the budget are “jangling nerves somewhat”, explaining:

Investment plans in particular are reported to have been put on ice pending clarity on the new government’s policies, especially towards taxation. Hiring likewise has been stifled by business uncertainty about the near-term economic outlook ahead of the ‘budget’.

Chancellor Rachel Reeves has pledged this morning that there will not “be a return to austerity”.

Speaking to BBC Radio 4’s Today programme this morning, Reeves said:

“There won’t be a return to austerity, there will be real terms increases to government spending in this Parliament.

“What I’m saying is there will not be real terms cuts to government spending, but the detailed department by department spending will be negotiated.”

The downturn in Germany has pulled the wider eurozone economy into a contraction this month.

Business activity across the euroarea has decreased so far in September, according to the HCOB Flash Eurozone PMI index. It has dropped to 48.9 this month, an eight month low, and below the 50-point mark showing stagnation.

As well as Germany’s slump, the eurozone was also pulled down by a contraction in France’s private sector, as an Olympics-related boost to business activity in August faded.

Business confidence continued to wane, as firms reported a drop in new orders.

The recovery in the UK housing market, and the prospect of more cuts to UK interest rates, makes Rightmove an attractive target for Australia’s REA Group, says Susannah Streeter, head of money and markets at Hargreaves Lansdown:

Streeter explains:

Rightmove shares had been affected by the property market downturn amid a ratcheting up in interest rates. But now, with more cuts eyed on the horizon and a recovery in prices underway, there are now many more eyes on screen.

REA Group is clearly highly tempted by the sturdy fundamentals of the model, which offers an envious operating margin position of around 70%. DIY alternatives may be growing, but they are only a small slice of the market, and many estate agents can’t afford not to advertise on Rightmove. That’s demonstrated by their willingness to pay bigger sums to attract potential buyers.

Although total membership has reduced by 1% in the last full year, average revenue per advertiser was up 9% to £1,431.

Newsflash: the German economy is sinking deeper into contraction, dragged down by its manufacturing sector.

Thw latest HCOB ‘flash’ PMI survey compiled by S&P Global, just released, shows that business activity across Germany is falling at the quickest rate for seven months in September.

German businesses reported increased caution among customers, deterring them from making investments; concerns towards the health of the economy were reported to be a factor.

Total inflows of new business fell at the quickest rate for nearly a year in September, and firms cut jobs for the fourth month running.

This pulled Germany’s flash composite PMI output index down for the fourth month in a row, to 47.2, down from August’s 48.4. That’s the lowest reading since February – anything below 50 shows a contraction.

Manufacturing shrank at the fastest pace in a year, while the modest growth in the services sector was the weakest in six months.

Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, fears that a technical recession (two quarters of negative growth in a row) in Germany is now “baked in”.

De la Rubia says:

“The downturn in the manufacturing sector has deepened again, evaporating any hope for an early recovery. Output plunged at the fastest rate in a year, with new orders collapsing. In a sign of resignation, companies have shed staff at a rate not seen since the COVID-19 pandemic in 2020. This comes as several major automotive suppliers have announced significant job reductions. These troubling figures are likely to intensify the ongoing debate in Germany about the risk of deindustrialization and what the government should do about it.

Optimism is something of the past. Manufacturers are downright depressed about their future activity, with expectations for the coming year plummeting. In a striking shift, moderate optimism in August has quickly turned into the steepest pessimism in a year by September. This rapid downturn in sentiment is most likely linked to the wave of negative headlines surrounding Volkswagen, which has cast a shadow over the broader industry.

Hamburg Commercial Bank predicts Germany’s economy will shrink by 0.2% in the July-September quarter. That would put the country into recession, as GDP fell by 0.1% in April-June.