UK continues move out of recession as output grows

The UK economy appears to have turned the corner after a tough couple of years according to the latest Business Trends report from accounting and business advisory firm BDO UK, which shows that output rose last month to its highest level in almost two years.

BDO reports that UK business output and confidence rose in April, as the inflation pressures that have dogged firms for months eased. The upturn pushed up BDO’s output index by 2.09 points to 103.92 in April – the highest level since May 2022.

The BDO report tallies with forecasts that the UK economy is poised for accelerated growth this year. Analysts are revising gross domestic product (GDP) forecasts upwards following last Friday’s robust first-quarter performance data that saw GDP expand by 0.6%, marking the fastest growth in nearly three years.

Deutsche Bank raised its annual growth projection to 0.8% from 0.5%, while Pantheon Macroeconomics and Capital Economics also adjusted their forecasts upwards to 0.8% from 0.6%. Tomasz Wieladek of T Rowe Price is even more optimistic, suggesting the potential for growth between 0.8% and 1% this year, surpassing expectations set by international organisations like the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), and the Bank of England.

The Office for National Statistics (ONS) reported upward revisions to legacy GDP data, indicating sustained expansion in output per capita, a positive sign for economic recovery. Sanjay Raja of Deutsche Bank described the rebound as “resounding,” highlighting the economy’s resilience in overcoming a technical recession in the second half of 2023.

The UK’s services sector led the bounceback in April, says BDO, thanks to consumers having more money to spend at hospitality, retail and leisure companies as energy bills fall.

Hopes of a cut to UK interest rates by the autumn helped lift business confidence. Last week, Bank of England governor Andrew Bailey said it was “likely” that bank rate will be cut over the coming quarters, after the BoE left rates on hold again.

The one negative was BDO’s employment index, which fell for the 10th month running to its lowest level since February 2013, suggesting the UK jobs market is cooling.

Kaley Crossthwaite, partner at BDO, commented: “Cautious optimism is the order of the day for UK businesses hoping for an interest rate cut this summer.

“It’s heartening to see a turning point begin to materialise for the economy, with the services sector driving the bounce back so far from last year’s technical recession. But businesses across the board need more certainty from the government and we urge them to provide a clear, stable and long-term tax roadmap as soon as they’re able to, alongside much needed reforms to the apprenticeship levy.

“Only once businesses have this will we start to see the more stable optimism, investment and hiring intentions needed for a robust recovery.”

Separately, he latest Regional Purchasing Managers’ Index (PMI) survey data from NatWest confirm that business activity continued to rise across almost all UK nations and regions last month.

London saw the fastest growth, followed by the West Midlands and Northern Ireland. Yorkshire and Humber was the only area where activity fell.

Firms across the UK also reported a rise in cost inflation last month, driven by a rise in staff pay, partly due to the rise in the UK minimum wage at the start of April.

 

China launches debt sale in bid to boost economy

China will start selling the first batch of its yuan (CNY)1 trillion (US$138 billion) of ultra-long special sovereign bonds on Friday as it seeks to raise funds to support the world’s second-biggest economy.

The central government will begin to issue some 30-year bonds on 17 May, according to a notice by the Ministry of Finance. Bonds with 20-year and 50-year tenors will be offered from 24 May and 14 June, respectively. The final batch consisting of 30-year notes will go on sale in November.

Bloomberg reported that the issuance will include CNY300 billion of 20-year bonds, CNY600 billion of 30-year notes and CNY100 billion in the 50-year tenor, according to insiders who rrequete anonymity.

China announced plans for the bond sale during the National People’s Congress in March as policymakers pledged to ramp up fiscal support for the economy. The move raised expectations that the central government is stepping up its fiscal spending amid mounting debt pressure on many local authorities.

It is only the fourth such sale in the past 26 years, with the most recent one in 2020 when authorities issued CNY1 trillion worth of those bonds to pay for pandemic response measures.

The planned sale comes as data showed a broad credit measure in April shrinking for the first time as government bond sales slowed. New bond issuance by Chinese authorities and policy banks fell in the first quarter to half of the level last year as regions with high debt risks were restricted from borrowing, and funds raised from last year’s sales were still being deployed.

Bond sales have been accelerating in recent weeks. Provincial governments sold the highest amount of new notes last week since February, responding to a call by top leaders to speed up local bond issuance. The 24-man Politburo also vowed in April to start the sale of special sovereign debt “at an early date.”

 

BBVA’s bid for Sabadell turns hostile

Spanish bank Banco Bilbao Vizcaya Argentaria (BBVA) surprised markets last week as it announced a rare hostile takeover bid for domestic rival Banco Sabadell, with one investment firm describing the situation as “very strange.”

The move comes shortly after a separate €12 billion (US$12.87 billion) takeover offer from BBVA to Sabadell’s board was rejected earlier in the week.

The board said that BBVA’s initial bid “significantly undervalues” the bank’s growth prospects, adding that its standalone strategy will create superior value. It reiterated this position on Thursday as BBVA took its all-share offer directly to the bank’s shareholders.

BBVA said its takeover offer has the same financial terms as the merger offered to Sabadell’s board. It described the proposal — which would create Spain’s second-largest financial institution if successful — as “extraordinarily attractive.”

“We are presenting to Banco Sabadell’s shareholders an extraordinarily attractive offer to create a bank with greater scale in one of our most important markets,” BBVA Chair Carlos Torres Vila said in a statement.

“Together we will have a greater positive impact in the geographies where we operate, with an additional €5 billion loan capacity per year in Spain.”

Hostile takeover bids are not common in the European banking sector and BBVA’s decision to proceed in this way has taken many by surprise.

Carlo Messina, CEO of Italy’s biggest bank Intesa Sanpaolo, told broadcaster CNBC that there were significant challenges to domestic consolidation within the region’s banking sector.

He said it was difficult to complete a “friendly transaction” in the current market environment, whereas proceeding with a hostile takeover bid was also “not so easy to do.”

David Benamou, chief investment officer at Axiom said a burgeoning trend of consolidation among European banks was a logical one, particularly because many regional lenders are “very small” compared to their US peers.

 

UAE and Indonesia to promote local currencies for bilateral transactions

The Central Bank of the Unite Arab Emirates (CBUAE) and Bank Indonesia have signed a Memorandum of Understanding (MoU) to support the steady growth of trade relations between the two countries through the establishment of a framework that promotes the use of local currencies for bilateral transactions.

Khaled Mohamed Balama, Governor of CBUAE, and Perry Warjiyo, Governor of Bank Indonesia, signed the agreement.

From 2017 to 2023, non-oil trade doubled to more than United Arab Emirates dirham (AED) 16 billion (US$4.36 billion) between the UAE and Indonesia, setting the scene for continuous growth and collaboration in trade.

“The partnership between CBUAE and Bank Indonesia defines a framework comprising various elements and measures to facilitate the settlement of cross-border trade transactions in the two national currencies,” stated a release. “Moreover, it outlines the types of eligible transactions and allows for developing the conditions to support hedging and liquidity management activities in the UAE dirham and the Indonesian rupiah. This strengthens bilateral financial cooperation and will help businesses reduce transaction processing costs.

“Under the agreement, CBUAE and Bank Indonesia will work closely to promote the use of their national currencies, supporting the gradual implementation of the framework. This collaborative effort not only aims to facilitate trade but also seeks to develop financial markets to foster economic growth and enhance financial stability in both countries.

Governor Balama emphasised that the MoU with Bank Indonesia lays a strong foundation for future partnerships between the UAE and Indonesia, fostering greater opportunities in the banking and financial sector while bolstering trade and investment growth.

 

Vodafone and Sumitomo partner with Sensos to combat supply chain fraud

Pairpoint, the Economy of Things (EoT) global platform owned by Vodafone and Sumitomo Corporation, and Sensos, a supply chain solution company founded by Sony Semiconductors, announced a strategic collaboration to combat supply chain fraud which continues to rise worldwide.

A release stated that ”the partnership brings together Sensos’ supply chain management solution with Pairpoint’s EoT platform to allow logistics companies to track their goods securely at every stage of the supply chain. Using Sensos’ cellular tracking labels and AI-powered control tower to detect supply chain anomalies alongside Pairpoint’s digital identity, trust, and transactional platform, all goods’ movements – from port departures to final deliveries – can be securely and immutably recorded. Goods are then authorised to make automated payments using blockchain technology and smart contract capabilities.

“Pairpoint’s secure technology overlays Sensos’ highly reliable, real-time supply chain management solution through the Pairpoint-enabled Integrated Subscriber Identity Module (iSIM) and device agent software embedded into a smart label. Every logistic transaction is then verifiable, transparent, and resistant to tampering, effectively combatting fraud, and enhancing trust across the supply chain ecosystem.

“Jorge Bento, CEO of Pairpoint, said: “We are excited to work with Sensos to bring the Economy of Things capabilities to the wider supply chain sector. There are billions of parcels and pallets operating across supply chains, and this partnership has huge potential to make them intelligent and equipped for e-commerce through globally connected cellular labels and the Pairpoint platform.”

 

Nestlé to invest US$196 million to expand Nescafé production in Brazil

Swiss food and beverage group Nestlé is set to invest Real (BRL) 1billion (US$196.5 million) in Brazil over the next two years to expand production capacity and out-of-home sales of its Nescafé brand, according to Reuters.

Nestlé executives quoted by the news agency said out-of-home coffee consumption in the South American country is rising and there are increased opportunities to attract younger consumers who are typically willing to spend more on premium coffee beverages.

Consumption growth among those aged under 24 is 10 times higher than other age groups, according to Nestlé, driven by increased interest in iced and flavoured coffee.

“We are at a time of expanding consumption of premium coffee, and that is making coffee consumption more sophisticated in Brazil,” said Valeria Pardal, Business Executive Officer for Coffee Beverages, Nestlé.

Investment will focus on growing business-to-business (B2B) sales, with Nestlé expecting to double its out-of-home coffee machine footprint to 44,000 by 2028. 

The news comes six months after Nestlé announced it would invest BRL6 billion in Brazil – its third largest market in the world – by 2025 to scale its existing business segments, invest in new technologies and expand its manufacturing units.  

Nestlé has been operating in Brazil for over 100 years and is currently the largest buyer of certified Brazilian coffee.

Coffee demand is growing elsewhere in the world. Last year, China overtook the United States as the country with the most branded coffee shops in the world, according to a report by the World Coffee Portal. The number of outlets in China grew 58% in 2023 to almost 50,000, compared with about 40,000 in the US.

Access Bank Group and Mastercard partner on cross-border payments in Africa

Access Bank Group, Nigeria’s multinational bank, has partnered with Mastercard to facilitate cross-border payments for African businesses and consumers.

This collaboration “utilises the robust network and treasury capabilities of Mastercard, alongside Access Bank’s innovative Access Africa platform.

“The partnership aims to expand opportunities for cross-border payments to and from Africa, improving financial inclusion and connecting the continent more closely with the global economy. This initiative will reduce transaction costs and increase the availability of secure and transparent payment channels across Africa.

“Mastercard brings to the partnership its extensive global network and financial technology solutions, which include the Mastercard Move system, enhancing the treasury operations across borders. Access Bank contributes its deep market understanding and the innovative Access Africa platform, designed to offer instant and seamless financial transactions.

Fable Fintech, an Express Partner of the Mastercard Move Partner Program, played a crucial role as the technical implementation partner. Their involvement ensured a seamless integration across multiple countries, enhancing the service reliability and reach.

Mark Elliott, Division President for Africa at Mastercard, said, “Empowering Access Bank customers with innovative solutions that prioritize choice, security, and flexibility is an achievement that fills us with great pride. This collaboration signifies our commitment to transforming payment experiences as it not only brings cutting-edge payment solutions to the bank’s diverse clientele, but also extends the reach of Mastercard’s financial and digital ecosystem, ensuring millions from underserved communities can actively participate in the evolving financial and digital economy.”

 

European firms’ appetite wanes for expansion in China

China is actively seeking foreign investment to boost its slowing growth, but that very sluggishness is weighing on company plans to grow their businesses in the world’s second largest economy, an annual survey of more than 500 European companies indicates.

The slowing economy is now the dominant concern of respondents to the newly-released European Chamber of Commerce in China survey. China still ranks high as a place to invest, but the share of companies considering an expansion of their operations in the country this year fell to 42%, the lowest ever recorded.

“The business outlook is the most pessimistic yet, with companies’ expectations for growth and profitability taking a hit, and concerns about competition intensifying,” the Chamber said in its business confidence survey.

The economic worries are layered on top of long-running complaints about regulations and practices that companies say favour their Chinese competitors or are unclear, creating uncertainty for businesses and their employees. Others including the American Chamber in China have expressed similar concerns.

Those older issues are now compounded by the weaker economy, eroding business confidence, said Jens Eskelund, the president of the European Chamber.

“Companies are beginning to realize that some of these pressures that we have seen in the local market, whether it’s competition, whether it’s low demand, that they are taking on perhaps a more permanent nature,” he said. “And that is something that is beginning to impact investment decisions and the way they go about thinking about development of the local market.”

Massive investment in industries such as solar power panels and electric cars has created intense price competition, squeezing profits. More than a third of the survey respondents said they have observed overcapacity in their industry. For 15% of the companies, their China operations finished 2023 in the red. Foreign companies need growth in domestic demand, not manufacturing capacity, Eskelund said.

 

AI enlisted to counter hacking threats to business

UK multinational telecoms group BT (formerly British Telecom) is increasingly using artificial intelligence (AI) to help it detect and neutralise threats from hackers targeting business customers amid repeated attacks on companies, reports The Guardian.

The paper says the group is aiming to build up its business protecting customers from online criminals and has patented technology that uses AI to analyse attack data to allow companies to protect their tech infrastructure.

British businesses are routinely facing hacking attempts, and some recent high-profile victims have included including the outsourcer Capita, Royal Mail and British Airways.

BT has 725 AI-related patents and patent applications in Europe, the US and China.

Bas Burger, the chief executive of BT Business, the division of BT dealing with business customers, said: “We have all this data around when criminals try to attack, such as time of day, what type of attack, and we have suppliers to help us with the information … all data we enrich and then we have a piece of AI running across it.”

He said the technology, called Eagle-i, which was launched in 2021, could suggest what kind of policies needed to be implemented in a firewall to make sure they were protected against a specific type of attack in the future.

BT is also using AI to help detect and establish the cause of faults across its network. This is helping to improve fix times by finding faults that might have taken much longer to identify in the past.

Burger said the pace of technological change had prompted concerns among some companies about whether they were choosing the right technology as well as anxiety about the potential disruption that implementing new technology would cause to their business.

BT recently conducted a study of 2,000 business leaders and found that 86% of company directors and executives report technology as a source of stress as they seek to modernise their businesses. The study showed that 88% of businesses were investing in new technology this year in an attempt to improve productivity and gain a competitive advantage, and overall tech investment was up 31% year on year.

 

OCBC bids S$1.4 billion to gain full ownership of Great Eastern

Singapore’s OCBC Bank has made a S$1.4 billion (US$1.03 billion) offer to purchase the remaining 11.56% stake in insurer Great Eastern Holdings Limited it doesn’t yet have, aiming to take full ownership of the company.

Having been the primary shareholder for two decades, this bid is part of OCBC's broader plan to integrate its banking, wealth management, and insurance services more closely and boost its footprint in the Asian wealth management market.

The proposed buyout price of S$25.60 per share represents a significant 42.4% premium over the recent closing prices of Great Eastern's shares, reports Fintech News Singapore. This move could potentially result in Great Eastern being delisted from the Singapore Exchange Securities Trading (SGX-ST).

Helen Wong, Group CEO of OCBC, highlighted that this offer aligns with the bank's long-term strategy to solidify its wealth management operations by enhancing its personnel, practices, processes, and investments, particularly in Great Eastern.

This strategy, established in 2022, is designed to capitalisse on regional opportunities in trade, investment, and wealth, reinforcing OCBC's existing major hubs in Singapore, Hong Kong, and Dubai, and bolstered by its digital services.

The acquisition is expected to be financially beneficial, as Great Eastern has contributed approximately S$700 million to OCBC's annual net profits on average over the last ten years, accounting for about 15% of the bank’s yearly earnings.

Wong also mentioned that this isn't OCBC's first attempt to increase its holdings in Great Eastern, with previous efforts made in 2004 and 2006. The current acquisition is seen as a step towards enhancing operational integration within the company.