The FTSE 100 will open at 8am. Among the companies with reports and trading updates today are Redrow, Aviva, Old Mutual, Hornby, 888 Holdings and CAB Payments. Read the Wednesday 13 September Business Live blog below.

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‘UK stands at economic crossroad’ ahead of General Election

Marcus Brookes, chief investment officer at Quilter Investors:

‘As the UK stands at this economic crossroad, two things are clear. Firstly, today’s data will be critical in challenging the country’s economic perceptions and will play a big role in the Bank of England’s future decisions.

‘Secondly, with the election campaigning period looming, the state of the economy will undeniably take centre stage.

‘The UK’s unique set of economic circumstances, coupled with global pressures, means that it remains on a precarious edge, with some even sounding the alarm bells for a potential recession in 2024.’

Britain’s economy contracted by 0.5% in July after summer washout, ONS says – sparking fears of a ‘light recession’ this year

The UK economy shrank by 0.5% in July after a summer washout and weeks of strike action, sparking fears of a ‘light recession’ later this year.

Data from the Office for National Statistics (ONS) today showed that gross domestic product (GDP) contracted at a sharper rate than the 0.2% decline economists had forecast.

It came after a 0.5% monthly increase in June.

GDP shrinks 0.5% in July: ‘Slowdown could be indicating that recession is around the corner’

Neil Birrell, Premier Miton chief investment officer and manager of Premier Miton Diversified Growth Fund:

‘The UK economy shrank much more than expected in July, with the services sector notably weak, which may be seen as good news by some, particularly the Bank of England ahead of their meeting to discuss interest rates, although the speed of the slowdown could be indicating that recession is around the corner.

‘Either way, it does suggest that higher interest rates and sticky inflation are having a more significant effect on the economy. All eyes will be on the Bank for the announcement of the rate decision.’

UK economy shrinks 0.5% in July

The UK economy contracted by a larger-than-expected 0.5 per cent in July as strikes in hospitals and schools weighed on output, fresh data from the Office for National Statistics shows.

Every child could receive a pot of £1,000 at birth to be channelled into long-term investments in UK growth under proposals to revive a ‘stagnant’ economy.

The idea of a ‘New Generation Trust’ is raised as part of a package of reforms that could add £225billion to the economy, according to a report by the City of London Corporation. 

It revives memories of the child trust fund scheme launched by Gordon Brown two decades ago, later scrapped by George Osborne.

The report suggests: ‘The investments would be inaccessible until adulthood, when they would be automatically invested in an individual savings account (ISA) or DC [defined contribution] pension.

‘In so doing, the Government would be providing a source of long-term capital to UK businesses. It could also help to build an investment culture in the UK.’

The idea of a ‘New Generation Trust’ is raised as part of a package of reforms that could add £225bn to the economy, according to a report by the City of London Corporation

The report does not identify how this would be paid for.

It is among a number of ideas to boost growth. They include setting up a financial and professional services council, co-chaired by the Chancellor, and encouraging business to go digital.

Chris Hayward, policy chairman at the corporation, said: ‘Every element is about driving growth and creating jobs. 

A trust could be an investment in our nation’s future.’ The report is targeted at politicians preparing for the general election.

Hayward added: ‘Whoever’s in power, we think the one common agenda item will be: once you get inflation down, once you get interest rates coming down, what do you do to drive economic growth? This country’s growth has been stagnant for many years.’

Lufthansa’s cabin crew welcomed a new team member earlier this month – but he wasn’t a standard new hire.

The German airline’s Chief Executive Officer (CEO), Jens Ritter, worked as cabin crew in both business class and economy class on daytime and overnight flights heading between Riyadh, Bahrain and Frankfurt. 

Ritter, who has been running the airline since April 2022, opened up about the ‘challenging’ experience on LinkedIn, sharing pictures of himself in traditional crew uniform.

One image shows him serving a passenger a beverage, while in another, he’s pushing the flight attendants’ drinks trolley.

He said that his time as crew was ‘about putting yourself in someone else’s shoes’ and described it as an ‘enriching and a powerful experience’. 

Lufthansa’s CEO Jens Ritter worked as cabin crew in both business class and economy class earlier this month 

‘I was astonished how much I learned in these few hours,’ he said, adding that the decisions he makes in the Lufthansa offices going forward will be ‘different’ now that he’s seen what the crew do during their time on board. 

‘Sometimes, you need to change perspectives in order to gain new insights,’ he said.

He continued: ‘I was amazed by how much there is to organise, especially, if something doesn’t go as planned – for example, the meals offered on the menu cards were not exactly the meals loaded on board.’ Ritter noted that they have since fixed this issue internally. 

The experience of working on an overnight flight was particularly challenging for the airline boss. Ritter, who started out his aviation career as an Airbus A320 pilot in 2000, says he’d previously ‘thought he knew about the challenges a flight during the night entails’ thanks to his background as a pilot, but admits he had a lot to learn. 

Praising the overnight crew, he explains: ‘To be present and attentive and charming – when the biological clock just tells you to sleep – was something entirely different.’

Ritter, who has been running the airline since April 2022, opened up about the ‘challenging’ experience on LinkedIn

Ritter, pictured above with the Lufthansa team, says the decisions he makes in the Lufthansa offices going forward will be ‘different’ now that he’s seen what the crew do on board

Ritter can be seen serving a beverage to a passenger during the flight 

The father-of-three says that he ‘enjoyed every moment’ spent looking after the passengers, adding: ‘It was so interesting to address the guests’ wishes individually, to deal with the different energy everyone has.’

He added that the crew ‘was terrific and welcomed [him] into their team right away’. 

Ritter’s experience echoes the popular American reality TV series ‘Undercover Boss’, which sees senior company executives anonymously working within a department of their firm to investigate its inner workings.

His LinkedIn post has garnered more than 5,000 likes, with LinkedIn user Christopher Babayode wondering what the airline executive would ‘like to see improved’ to enable his crews to better excel at their roles. 

Ritter replied: ‘On the one hand it is all about stability and reliability. Because I think our crews already do a great job. 

‘However, the aviation industry suffers from lack of staff, broken supply chains, lack of aircraft and many other problems. If we fix this – their job would be a lot easier.’

He added: ‘On the other hand I think that everyone likes working if they feel being seen and appreciated and psychologically safe. This is something else I am trying hard to improve!’ 

Mortgage holders face more pain as stronger-than-expected UK economic growth increased the chances of more interest rate rises.

The economy bounced back in June, growing 0.5 per cent after a 0.1 per cent decline in May when output was depressed by the extra bank holiday for the coronation, according to the Office for National Statistics (ONS).

The ONS pointed to warm evenings, cold pints and stadiums packed with screaming music fans at Beyonce and Harry Styles concerts as the drivers behind the growth. A surprise boost in manufacturing also helped.

‘The actions we’re taking to fight inflation are starting to take effect, which means we’re laying the strong foundations needed to grow the economy,’ said Chancellor Jeremy Hunt.

UK inflation data for July, is due next Wednesday, and is expected to show that the pace of price rises cooled to 6.5 per cent last month from 7.9 per cent in June.

But the rise in growth showed consumers were holding up better than expected, despite interest rates hitting their highest levels in 15 years as the Bank of England struggles to bring down soaring inflation, which remains well above its target of 2 per cent.

It means the central bank has more ‘wiggle room’ to consider further rate rises to cool the economy and rein in consumer spending to bring down prices.

Neil Birrell, chief investment officer at asset management company Premier Miton, said: ‘The GDP data gives the Bank of England a headache. They may well have been thinking about pausing interest rate increases soon, but this data will make that more difficult.’

Worries about more rate rises hit trading in the Square Mile, with the FTSE 100 dropping 1.2 per cent, or 94.44 points, to 7524.16.

The Bank of England is still predicted to hike rates at its next meeting as gross domestic product (GDP) rose by 0.2 per cent in the second quarter of this year, up from 0.1 per cent in the first three months of 2023 and slightly ahead of previous forecasts.

UK growth was ahead of other developed nations such as Italy and Germany, which declined 0.3 per cent and saw flat growth for the second quarter respectively, but lagged behind the US and France, which grew by 0.6 per cent and 0.5 per cent.

Data shows 70 per cent of traders expect the Bank to raise rates by 0.25 percentage points next month to 5.5 per cent, with most predicting rates will hit at least 5.75 per cent by the end of the year, levels not seen since 2007.

Following the better-than-expected GDP data, the cost of UK government debt also climbed with yields on two-year gilts, which are sensitive to interest rates, rising around 0.07 per cent to 4.96 per cent. The pound, meanwhile, climbed 0.5 per cent to $1.273 against the dollar. But some economists warned the effects of previous rate hikes had yet to be fully felt by the economy and despite defying expectations, the UK could still slip into recession.

Ruth Gregory, deputy chief UK economist at research business Capital Economics, said: ‘A recession has so far been avoided. But with much of the drag from higher interest rates still to come, we are sticking to our forecast that the UK is heading for a mild recession later this year.’

Others said the 0.5 per cent bounce to GDP in June was likely to be short-lived. Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: ‘The UK is entering a more challenging period where, with stubbornly high inflation, soaring interest rates and unseasonably wet weather, GDP is likely to weaken considerably in the third quarter, despite a boost from lower energy bills.’

Thiru added that while interest rates would likely rise again next month, further increases risked ‘destabilising an already brittle economy by further suffocating consumer spending and businesses investment’.

Another cloud hanging over the figures was the fact that the UK remained the only country in the G7 group of advanced economies which has yet to see its GDP return to pre-pandemic levels.

The UK economy grew by 0.2 per cent in the second quarter of the year as it showed a surprisingly good performance in June, official data revealed today.

Data from the Office for National Statistics showed that gross domestic product (GDP) rose by 0.5 per cent in June, helped by the manufacturing sector and the hot weather sparking an increase in eating out

Economists had expected GDP to grow by 0.2 per cent in June and 0.0 per cent in the quarter as a whole. It grew by 0.1 per cent in the first quarter of the year.

The news is a welcome boost for the government, which has made fighting inflation its top priority, even if high interest rates sparked a drop in growth.

Chancellor Jeremy Hunt said: ‘The actions we’re taking to fight inflation are starting to take effect, which means we’re laying the strong foundations needed to grow the economy.

‘The Bank of England are now forecasting that we will avoid recession, and if we stick to our plan to help people into work and boost business investment, the IMF have said over the longer-term we will grow faster than Germany, France and Italy.’

The UK economy grew by 0.2% between April and June, according to data from the ONS

However, quarterly GDP is still 0.2 per cent below where it was in the final three months of 2019, before the Covid-19 pandemic hit and forced the country into lockdown. 

ONS director of economic statistics Darren Morgan said: ‘The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June. Manufacturing saw a particularly strong month with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.

‘Services also had a strong month with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action.

‘Construction also grew strongly, as did pubs and restaurants, with both aided by the hot weather.’

Businesses told the ONS that their output had increased in June in order to make up for the extra bank holiday in May.

The statisticians found that the human health and social work sector had weighed on GDP in June, shrinking by 0.8 per cent. There were four days of strikes by junior doctors during the month although nurses had not been on strike.

The new data puts the UK on a better course to avoid falling into a recession, which is defined as two quarters in a row where GDP shrinks.

However, forecasts from the Bank of England see growth remaining sluggish for years to come.

Shadow Chancellor Rachel Reeves said: ‘Growth in the economy is still on the floor.

‘Thirteen years of economic mismanagement under the Conservatives has left Britain worse off and trapped in a low growth, high tax cycle.’

While the Bank of England battles rising costs, Turkey is being ravaged by inflation.

Inflation almost touched 50 per cent in July as an overheating economy put consumers under strain, according to the Turkish Statistical Institute.

Consumer prices rose 47.8 per cent last month, a substantial increase from 38.2 per cent in June.

Currently the height of the Turkish summer – hotels and restaurants posted the biggest rises in July, with an 82.6 per cent increase. Food costs jumped by 61 per cent.

Turkey is still in the middle of a cost of living crisis, even as the new economic team that President Recep Tayyip Erdogan appointed in June continues to unwind unconventional policies that were in place for years.

Squeezed: Turkish consumer prices rose 47.8% last month, a substantial increase from 38.2% recorded in June. Pictured: A street seller in Istanbul

Under new finance minister Mehmet Simsek, Turkey has abandoned its costly defence of the lira and allowed it to plummet by a quarter against the euro since the end of May.

Simsek has boosted taxes on a broad range of goods and services, including a 200 per cent increase in petrol taxes, to cool demand and refill government coffers.

Central bank chief Hafize Erkan forecast last week that inflation would reach 58 per cent this year, falling to 33 per cent by the end of 2024 and 15 per cent the following year.

But many economists worry that Erdogan, an opponent of high borrowing costs, will not allow the central bank to raise rates to a sufficient level to cool inflation down.