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UK Economy Rebounds

Data published on Friday (13th January) revealed that the UK economy unexpectedly grew in November. Overall, the economy expanded by 0.1% due to a rise in demand for services in the tech sector (telecoms and computer programming) and the increased footfall for hospitality from the World Cup. This is despite economists predicting a 0.2% contraction. The month of October also delivered growth (0.5%) which means that the UK economy may have avoided a technical recession (two consecutive contractions) despite Q3 showing an economic contraction.

Additionally, there are expectations that energy bills will actually fall further than previously anticipated in 2023. At present, energy bills are forecast to rise from £2,500 (for a typical household) to £3,000 per year from April. However, Investec believe that bills may actually fall to £2,478 by July and Cornwall Insight (an energy consultancy) estimate that bills will be around £2,800. The Times and Deutsche Bank report that if bills do fall below £3,000 that it could save the government around £10bn due to the reduced subsidising cost.

Newspapers & Politics

The UK’s front page news cycle over the last seven days has covered a wide range of topics with no single business or political story dominating the headlines. Details about relations within the royal family have captured the largest portion of headlines but ongoing strikes in key sectors, such as the national healthcare system, continue to draw widespread attention. Additionally, newspapers such as The Times have warned that the UK is facing a shortage of doctors. Some of the newspaper front pages over the last week were:

  • The Sunday Telegraph: Starmer- I will slash ‘nonsense’ bureaucracy in the NHS
  • The Times: We need to train more doctors, says NHS chief
  • Financial Times Weekend: Signs of growth lighten gloom and make rate rise more likely
  • The Daily Telegraph: Net zero plan to ban gas boilers in a decade
  • The Times: 1,000 excess deaths each week as the NHS buckles
  • Financial Times: Goldman Sachs launches into biggest cost-cutting drive since financial crisis
  • The Daily Telegraph: UK willing to send tanks to Ukraine as British aid workers go missing
  • Financial Times: Breakthrough in talks with Brussels over Northern Ireland trade impasse

Sir Keir Starmer (Leader of Labour) has offered political support to PM Sunak to use the 25th anniversary of the Good Friday Agreement to resolve the Northern Ireland protocol dispute. Sir Keir stated that “if there is a deal to do in the coming weeks, whatever political cover you need, whatever mechanism in Westminster you require, if it delivers for our national interest and the people of Northern Ireland we will support you”. Elsewhere in the UK, two sites (Cromarty Firth and Forth) have been chosen to host Scotland’s first greenports with the support of the UK and Scottish governments. These areas will benefit from favourable tax incentives and lower tariffs in the zones.

EY’s $2.5bn Expansion

One of the UK’s most recognisable brands, EY, has set aside $2.5bn for an acquisition spree for it’s consulting business ahead of the division splitting off and a New York IPO at the end of 2023. The aim is to increase market share from competing Big Four rivals and the consulting business plans a rename to distinguish itself from the auditing business. A focus of these funds would be towards acquiring firms that offer advice on corporate strategy, technology or ESG issues, and niche law firms from outside the US. A further $400m has been allocated to developing a new brand for this business with the company’s leadership now working to convince its 13,000 partners worldwide that splitting the business will lead to faster growth for both auditing and consulting.

One key motivation for the split is due to regulations restricting firms from receiving consultancy advice from their auditors. As such, EY’s global managing partner for client services said that for “every potential acquisition, on average 25% of the revenue we have to say goodbye to on day two because we audit it”. After a merger, this would no longer be a conflict for the business. Globally, around 7,000 partners will be part of the publicly listed consulting company and 6,000 will remain with the audit-dominated partnership which combined currently generates $45bn of revenue globally.

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