BUSINESS LIVE: UK GDP up 0.3%; Burberry cuts profit target; Vistry cheers easing of mortgage rates

Burberry has issued a profit warning for the second time in three months, with the luxury firm blaming a further slowdown in demand in the run up to Christmas.

Burberry shares were down 7 per cent in morning trading, extending losses over the last year to 44 per cent.

A company planning to restore and open secret Second World War tunnels in central London is set to become the City’s first IPO of the year.

London Tunnels confirmed its intention to float on Friday, with plans to raise £30million at a valuation of £123million.

It has already raised £10million from private investors.

Thomas Pugh, economist at RSM UK:

‘The 0.3% m/m rebound in GDP in November puts the economy on course to have stagnated in Q4 rather than contracted again. That would mean a recession has been avoided by the narrowest of margins possible. While the first half of this year is likely to remain tough, there are reasons to be more optimistic about the second.

‘Of course, we’re not out of the woods yet. One off factors like fewer strikes and a rebound after storm Babet helped to boost GDP in November and even a small contraction in December would be enough to tip the economy into recession. However, our base case is that the economy avoids a recession this year by the skin of its teeth. Indeed, the RSM UK Middle Market Business Index is still pointing to growth in Q4.

‘The rebound in GDP means that the MPC will probably wait until the middle of this year before it starts to cut interest rates. The first cut is likely to come in May or June. If the economy does fall into recession, then it would give the MPC the cover it needs to cut interest rates earlier.

‘Growth in November was concentrated in the services industry, which grew by 0.4% following a rebound in the IT sector. We already knew that retail sales had a strong month in November and that boosted GDP by 0.05%. Output in consumer-facing services grew by 0.6%, suggesting that consumers still seem to be prioritising spending on experiences. The manufacturing sector grew by 0.4% due to strong growth in the pharmaceutical sector, but wet weather held back construction, which dropped by another 0.2%.

‘Looking ahead, the first half of this year is likely to be characterised by continued stagnation as high interest rates continue to depress growth. But things may be looking up towards the end of the year as inflation falls close to its 2% target, interest rates start to be cut and tax cuts boost consumers spending power.’

Burberry has warned on its full year profit outlook for the second time in three months, blaming a further slowing in global demand.

The latest warning is a major blow to CEO Jonathan Akeroyd’s turnaround plan as he tries to move upmarket under the creative guidance of designer Daniel Lee, who launched his first collection last September.

Having experienced a deceleration in trading in its key December trading period, Burberry now expects full-year adjusted operating profit in a range between £410million and £460million.

In November, it had said adjusted operating profit would be towards the lower end of analysts’ forecasts at the time of £552million to £668million.

CEO Jonathan Akeroyd said: ‘We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry which started appearing in our stores in early Autumn.

‘We are still in the early stages of executing on this, which has become more challenging against the backdrop of slowing luxury demand. We experienced a further deceleration in our key December trading period and we now expect our full year results to be below our previous guidance.

‘We remain confident in our strategy to realise Burberry’s potential and we are committed to achieving our £4 billion revenue ambition.’

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:

‘The UK’s economy squeezed out a small drop of economic juice in November, with month-on-month GDP rising to 0.3%, from minus 0.3% in October.

This could be a sign that people were getting ready for Christmas early, and all eyes will now be on how December itself shaped up, once consumers had potentially emptied their wallets on Black Friday deals.

‘A sluggish metabolism has become the new norm for the UK as higher interest rates and deep-rooted productivity problems continue to bite.

‘The lack of meaningful movement, in theory, adds weight to hopes that the Bank of England will be comfortable holding interest rates where they are, but there are unfortunately some more hoops to jump through before that becomes a certainty.

‘Inflation’s moving in the right direction but still isn’t where it needs to be, and that’s a major blocker to looser monetary policy being allowed through.’

Tech giant Microsoft leapfrogged Apple to become the world’s largest listed company – worth close to £2.3trillion.

As the two battle it out in the race to develop Artificial Intelligence (AI), Microsoft rose around 1 per cent in early trading in New York.

With Apple dipping, it overtook the iPhone maker to become the most valuable company in the world by market capitalisation.

Affordable homes builder Vistry Group has said the easing of mortgage rates in recent weeks is encouraging and will help stimulate demand in 2024.

Vistry, one of the largest housebuilders in the UK in terms of number of homes built, said forward sales – a key industry measure which gauges near-term demand – was up 12.4 per cent on the prior year at £4.5billion.

Boss Greg Fitzgerald: ‘The Group had a strong run into the year end and I’m pleased to report that adjusted profit before tax for FY23 is anticipated to be ahead of guidance. Our FY23 performance has demonstrated the resilience of Vistry’s unique Partnerships model.

‘Looking ahead, working with our highly valued partners we are committed to increasing the delivery of much needed homes across the country, and in the fourth quarter have continued to secure exciting new developments that reflect our high return, asset-light partnerships model.

‘Our forward sales of £4.5 billion is up 12.4% on prior year and positions us well to deliver a step-up in total completions in FY24 and make progress towards our medium-term targets and the return of £1bn of capital to shareholders.’

Hopes were raised that Britain can escape a full-blown recession today as the economy grew by more than expected in November.

GDP rose by 0.3 per cent in November, better than the 0.2 per cent analysts had pencilled in and largely offsetting a 0.3 per cent fall in October.

It makes the prospect of a second consecutive quarter of contraction, the official definition of a recession, less likely.

Burberry has issued a profit warning for the second time in three months, with the luxury firm blaming a further slowdown in demand in the run up to Christmas.

Burberry shares were down 7 per cent in morning trading, extending losses over the last year to 44 per cent.

A company planning to restore and open secret Second World War tunnels in central London is set to become the City’s first IPO of the year.

London Tunnels confirmed its intention to float on Friday, with plans to raise £30million at a valuation of £123million.

It has already raised £10million from private investors.

Thomas Pugh, economist at RSM UK:

‘The 0.3% m/m rebound in GDP in November puts the economy on course to have stagnated in Q4 rather than contracted again. That would mean a recession has been avoided by the narrowest of margins possible. While the first half of this year is likely to remain tough, there are reasons to be more optimistic about the second.

‘Of course, we’re not out of the woods yet. One off factors like fewer strikes and a rebound after storm Babet helped to boost GDP in November and even a small contraction in December would be enough to tip the economy into recession. However, our base case is that the economy avoids a recession this year by the skin of its teeth. Indeed, the RSM UK Middle Market Business Index is still pointing to growth in Q4.

‘The rebound in GDP means that the MPC will probably wait until the middle of this year before it starts to cut interest rates. The first cut is likely to come in May or June. If the economy does fall into recession, then it would give the MPC the cover it needs to cut interest rates earlier.

‘Growth in November was concentrated in the services industry, which grew by 0.4% following a rebound in the IT sector. We already knew that retail sales had a strong month in November and that boosted GDP by 0.05%. Output in consumer-facing services grew by 0.6%, suggesting that consumers still seem to be prioritising spending on experiences. The manufacturing sector grew by 0.4% due to strong growth in the pharmaceutical sector, but wet weather held back construction, which dropped by another 0.2%.

‘Looking ahead, the first half of this year is likely to be characterised by continued stagnation as high interest rates continue to depress growth. But things may be looking up towards the end of the year as inflation falls close to its 2% target, interest rates start to be cut and tax cuts boost consumers spending power.’

Burberry has warned on its full year profit outlook for the second time in three months, blaming a further slowing in global demand.

The latest warning is a major blow to CEO Jonathan Akeroyd’s turnaround plan as he tries to move upmarket under the creative guidance of designer Daniel Lee, who launched his first collection last September.

Having experienced a deceleration in trading in its key December trading period, Burberry now expects full-year adjusted operating profit in a range between £410million and £460million.

In November, it had said adjusted operating profit would be towards the lower end of analysts’ forecasts at the time of £552million to £668million.

CEO Jonathan Akeroyd said: ‘We are continuing to deliver the transition to our new modern British luxury creative expression for Burberry which started appearing in our stores in early Autumn.

‘We are still in the early stages of executing on this, which has become more challenging against the backdrop of slowing luxury demand. We experienced a further deceleration in our key December trading period and we now expect our full year results to be below our previous guidance.

‘We remain confident in our strategy to realise Burberry’s potential and we are committed to achieving our £4 billion revenue ambition.’

Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:

‘The UK’s economy squeezed out a small drop of economic juice in November, with month-on-month GDP rising to 0.3%, from minus 0.3% in October.

This could be a sign that people were getting ready for Christmas early, and all eyes will now be on how December itself shaped up, once consumers had potentially emptied their wallets on Black Friday deals.

‘A sluggish metabolism has become the new norm for the UK as higher interest rates and deep-rooted productivity problems continue to bite.

‘The lack of meaningful movement, in theory, adds weight to hopes that the Bank of England will be comfortable holding interest rates where they are, but there are unfortunately some more hoops to jump through before that becomes a certainty.

‘Inflation’s moving in the right direction but still isn’t where it needs to be, and that’s a major blocker to looser monetary policy being allowed through.’

Tech giant Microsoft leapfrogged Apple to become the world’s largest listed company – worth close to £2.3trillion.

As the two battle it out in the race to develop Artificial Intelligence (AI), Microsoft rose around 1 per cent in early trading in New York.

With Apple dipping, it overtook the iPhone maker to become the most valuable company in the world by market capitalisation.

Affordable homes builder Vistry Group has said the easing of mortgage rates in recent weeks is encouraging and will help stimulate demand in 2024.

Vistry, one of the largest housebuilders in the UK in terms of number of homes built, said forward sales – a key industry measure which gauges near-term demand – was up 12.4 per cent on the prior year at £4.5billion.

Boss Greg Fitzgerald: ‘The Group had a strong run into the year end and I’m pleased to report that adjusted profit before tax for FY23 is anticipated to be ahead of guidance. Our FY23 performance has demonstrated the resilience of Vistry’s unique Partnerships model.

‘Looking ahead, working with our highly valued partners we are committed to increasing the delivery of much needed homes across the country, and in the fourth quarter have continued to secure exciting new developments that reflect our high return, asset-light partnerships model.

‘Our forward sales of £4.5 billion is up 12.4% on prior year and positions us well to deliver a step-up in total completions in FY24 and make progress towards our medium-term targets and the return of £1bn of capital to shareholders.’

Hopes were raised that Britain can escape a full-blown recession today as the economy grew by more than expected in November.

GDP rose by 0.3 per cent in November, better than the 0.2 per cent analysts had pencilled in and largely offsetting a 0.3 per cent fall in October.

It makes the prospect of a second consecutive quarter of contraction, the official definition of a recession, less likely.