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- UK to avoid recession says CBI and KPMG
UK to swerve recession but problems remain
The UK will escape a recession but economic problems will remain, according to two surveys today.
A new report by the accountancy firm KPMG has found that the economy has enjoyed a better start to the year than it had thought, and is now expected to grow by 0.3% this year, compared with its previous prediction of an uplift of just 0.1%.
“We’ve seen a slightly stronger momentum for the UK economy,” said Yael Selfin, chief economist at KPMG UK.
“The UK economy has so far avoided a technical recession. But risks are still elevated. A stickier inflation will see monetary policy tightening even further, increasing the risk of unwelcome side effects, among other potential headwinds.”
While numbers crunchers at the CBI reckon the economy will expand 0.4% this year and 1.8% next year, compared with its previous forecast for a 0.4% contraction followed by growth of 1.6% in 2024.
Falling energy prices, the reopening of China's economy from COVID-19 restrictions and easing supply chain disruptions were the main reasons for the upgrade, the CBI said.
"While encouraging, there's no getting away from the fact that this year will be another tough one for both businesses and households," CBI lead economist Alpesh Paleja said, noting that the Bank of England looks likely to raise interest rates to a peak of 5% by August from 4.5% now.
"It's also concerning that the UK is underperforming on many of the areas crucial to our long-term prosperity, such as business investment and trade intensity," he said.
FTSE 100 holds modest gains
The FTSE 100 remains in the green, although a touch below earlier highs, now up 18 points at 7.580.
Victoria Scholar interactive investor said: “Markets are in an upbeat mood in anticipation that the Federal Reserve will hold off from another hike this week.”
Croda PLC (LON:CRDA) rallied 2% after falling sharply on Friday after a profits warning. Jefferies reiterated a buy rating but cut its price target to 7,000p.
The broker said management at the chemicals company said the new guidance represents a “floor.”
“While we would tend to agree we expect most will wait for further evidence at H1 results,” Jefferies said.
Shares in Darktrace (LON:DARK) rose 1.9% after it launched new artificial intelligence risk and compliance models to address the threat of intellectual property loss and data leakage.
The Cambridge, England-based artificial intelligence cybersecurity developer said these models for Darktrace Detect and Respond will make it easier for its 8,400 customers to respond to activity and protect their IP.
Great Portland Estates (LON:GPEG) fell 2.8% as Goldman Sachs (NYSE:GS) downgraded to sell from neutral with a reduced price target of 440p, down from 470p.
Glencore makes move for Teck Resources’ coal business
Glencore PLC (LON:GLEN) has made an alternative pitch to win over Teck Resources, offering to buy its steelmaking coal business.
The FTSE 100-listed miner, which has already expressed in buying the whole of Teck, said under the new plan it would buy Teck’s steelmaking coal business and then demerge the business unit together with its own energy coal assets 1-2 years after the deal closed.
Glencore said it was committed that any deal would “benefit Canada.”
Glencore said that it remained “willing to pursue” its offer to buy the whole of Teck after first making an unsolicited US$23bn offer for the Canadian group in April.
Its attempts have been rebuffed so far. Teck (TSX:TECKa) instead has wanted to pursue its own separation plans, though last month it pulled a shareholder vote on them, after receiving investor feedback.
Glencore's coal exposure has been seen as a problem for some Teck investors. In April, Glencore then added a cash portion to its takeover bid, in an effort to get a deal over the line while at the same time aiming to ease investor concerns about coal.