Time for a recap:

Uncertainty before Labour’s first budget next month is weighing on the UK economy, according to two separate business surveys.

The data company S&P Global said UK private sector activity growth slowed for the second consecutive month in September, affecting companies in the services and manufacturing industries.

Some companies reported that clients were taking a “wait-and-see approach” to decision-making before the autumn budget, which is hitting investment plans, even as the chancellor, Rachel Reeves, wants to encourage business investment to boost economic growth.

The figures suggest Labour’s emphasis on its poor inheritance from the previous Conservative administration and the need for a tough budget on 30 October were weighing on the immediate outlook for many businesses.

The S&P survey found the budget was “by far the most cited concern among UK private sector firms”. Export orders remained “relatively subdued” and total overseas sales rose only “marginally” in September.

The survey said:

“Some service providers noted higher demand from US clients, but manufacturers frequently suggested that weak EU sales had weighed on export orders.”

A separate survey of manufacturers by the Confederation of British Industry (CBI) found that export order books in the three months to September were at their weakest since December 2020 – during the first year of the Covid-19 pandemic, and just before the UK signed the Brexit trade agreement.

More here:

In other news…

The economic picture in Germany is weakening too, with the economy being dragged into a contraction by its shrinking manufacturing sector.

Billionaire Rupert Murdoch’s REA Group has added another £200m to a sweetened offer for Rightmove, valuing the UK’s biggest online property portal at more than £6bn.

REA lifted its offer after its first two approaches were rejected by Rightmove earlier this month.

JCB has reported an increase in profits last year as strong US sales made up for its exports to Russia ending and faltering demand in the UK and Germany.

Britain’s biggest building society, Nationwide, is to let first-time buyers borrow up to six times their earnings in what has been labelled a “gamechanging” move that ramps up the mortgage price war.

The price of petrol and diesel in the UK is falling at the fastest pace this year, with households paying about £4 less to fill up a family car than they did a month ago.

Fifty pubs a month closed for good across England and Wales in the first half of this year, with experts warning that tax rises in 2025 could make it even harder for some businesses to keep their doors open.

Research has shown that house prices were not hit by the construction of a 137-mile electricity superhighway in Scotland.

US business activity growth remained robust in September, the latest flash survey of purchasing managers shows, but election anxiety led to a drop in hiring.

Dat provider S&P Global has just reported that the US services sector drove a “sustained robust economic upturn in September,” more than making up for a decline in manufacturing.

The flash US PMI Composite Output Index has slipped to 54.4, down from August’s 54.6, but still a level that shows robust growth.

However, business optimism waned as bosses watched to see whether Donald Trump or Kamala Harris would win the race to the White House in November.

The survey says:

A moderation of order book growth and a deterioration in business expectations for the year ahead to a near two-year low meanwhile reflected heightened uncertainty ahead of the Presidential Election. Companies consequently held back on hiring and allowed employment to fall for a second successive month.

The prices charged by US companies rose at the fastest rate for six months, pushed higher by input cost growth accelerating to a one-year high, the survey added.

Tensions are rising in Europe’s banking sector today, after Italy’s Unicredit took steps to more than double its stake in Germany’s Commerzbank to over 20%.

UniCredit defied Germany’s defence of Commerzbank by using derivative contracts on Monday to raise its potential stake in the German bank close to 21%, while waiting for regulatory approval to lift its stake above 9.9%.

Earlier this month Unicredit surprised Commerzbank by revealing it had a 9% stake – half of which was acquired from the German government.

This has sparked speculation that Europe could see a cross-border banking merger.

Today, the Italian bank explained:

“UniCredit believes that there is substantial value that can be unlocked within Commerzbank, either stand-alone or within UniCredit, for the benefit of Germany and the bank’s wider stakeholders. However, as was the case for UniCredit, such potential requires action for it to be crystalized.”

Unicredit’s move has ruffled feathers in Germany. Today, Commerzbank board member Stefan Wittmann condemned the stake-building as a “completely inappropriate aggressive act”.

But in Rome, Italian foreign minister Antonio Tajani declared today “it was more than legitimate” for an Italian company to try to buy part of a German competitor.

Tajani said:

“This is the internal market, being pro-European only in words leaves something to be desired, UniCredit is a big Italian bank and it is doing well to act within the internal market.”

One hundred and 50 UK MPs have written to supermarket chain Asda, urging it to end pay discrimination across its business.

The MPs say it is unfair that mainly female shop workers’ roles are paid up to £3.74 per hour less than predominantly male warehouse workers.

This issue is currently being examained by a employment tribunal, which began earlier this month. Asda is fighting the case, arguing that retail and distribution are two different industry sectors that have their own distinct skill sets and pay structures.”

The letter says:

We, the undersigned MPs, call on you to take action against pay discrimination in ASDA stores.

GMB union have told us that they have estimated women workers on the shop floor earn up to £3.74 per hour less than their male counterparts in warehouses. ASDA’s retail workers are currently owed over £2 billion in back pay.

Over 60,000 current and former ASDA retail workers have lodged claims and with the equal value hearing underway, now is the time for ASDA to begin seriously considering how to address the issue of pay discrimination.

We believe it is simply unfair for people to be paid differently for doing work of the same value.

Everyone deserves equal pay for equal work.

As MPs with ASDA stores and workers in our constituencies, we urge you to urgently commence settlement negotiations with the GMB union.

Signaturies to the letter include senior Labour MPs such as Diane Abbott, Stella Creasy and Rebecca Long Bailey.

It comes as Asda struggles with a falling market share, and rising debts, with veteran retailer Sir Stuart Rose stepping up to run the business.

In June, more than 3,500 workers and former employees of Next have won a similar six-year equal pay claim.

An employment tribunal ruled that Next failed to demonstrate that paying sales consultants (mostly women) – lower hourly pay rates than warehouse operatives (who tend to be men) was not sex discrimination.

Britain’s biggest building society is to let first-time buyers borrow up to six times their earnings in what has been labelled a “game-changing” move that ramps up the mortgage price war.

Weeks after it was announced that the Halifax and Lloyds would allow new buyers to take out loans worth up to 5.5 times their household annual income, Nationwide said it would now go up to six times income – a first for a major high street lender.

Nationwide is also cutting its mortgage rates and increasing its maximum loan sizes, so that someone taking out a home loan for more than 90% of the property’s value will now be able to borrow up to £750,000 – up from the existing £500,000, and higher than the £570,000 limit at many rivals.

The moves come amid an ongoing mortgage price war that has seen lenders jostle to cut their rates in the wake of the Bank of England’s 1 August interest rate cut and the expectation of more reductions to come.

Newsflash: Swedish electric car battery maker Northvolt plans to lay off 1,600 employees in Sweden, including 1,000 positions at its factory in Skelleftea in the north of the country.

Northvolt, which had been Europe’s great hope for a electric battery manufacturer, says it is “adjusting its near-term ambitions” and focusing on deeloping its lithium-ion battery gigafactory at Ett, near the Arctic Circle.

This, Northvolt says, will allow it to prioritize commitments to its current automotive customers.

Northvolt is cutting 1,000 positions at Skellefteå, 400 at Västerås, and 200 in Stockholm.

Peter Carlsson, CEO and co-founder of Northvolt, says:

“While overall momentum for electrification remains strong, we need to make sure that we take the right actions at the right time in response to headwinds in the automotive market, and wider industrial climate.

We now need to focus all energy and investments into our core business. Success in the ramp-up of production at Northvolt Ett is critical for delivering to our customers and enabling sustainable business operations. Recent production records at Northvolt Ett show that we are on the right path, but the decisions we’re taking today, however tough, are required for Northvolt’s future.”

Post office owner-operators from a minority ethnic background are more likely to have been threatened with suspension than those from a white background, the inquiry into the Horizon IT scandal has heard.

An anonymous survey published on the first day of the final phase of the long-running inquiry also received reports from eight subpostmasters who said that they had been suspended or threatened with suspension in the last three years after issues with discrepancies with the IT system had emerged.

The survey, conducted by research firm YouGov, found that 8% of a total of more than 1,000 respondents said that they had been threatened with suspension by the Post Office in the past.

However, it found that 12% of subpostmasters threatened with suspension were from an ethnic minority background, and 17% of those with an Asian/Asian British background.

A further 4% said that they had been suspended and subsequently re-instated.

“Subpostmasters surveyed from ethnic minority back grounds were more likely than white subpostmasters to have been suspended and re-instated - 6% versus 2%,” said the YouGov report.

“As were those who have been serving subpostmasters for 21 years or more.”

Gavin Ellison, the head of public sector and not-for-profit at YouGov, told the hearing that the findings were statistically significant.

Last year, documents released to campaigners revealed that lawyers investigating post office operators in the Horizon computer scandal used a racist term to categorise Black workers.

Investigators were asked to group suspects based on racial features, a freedom of information request found.

The document, which was published between 2008 and 2011, included the term “negroid types”, along with “Chinese/Japanese types” and “dark skinned European types”.

Ellison was asked whether there was a link between suspensions and subpostmasters finding discrepancies in their accounts using the Horizon IT system. However, while he said that while there was “no causation between those two factors” the survey did find respondents who said that this was the case.

YouGov published an addendum document relating to the issue which contained some anonymous written statements about the issue in the past three years.

One respondent said:

“There were shortfalls when we first took over the post office.

We had complained but we were told that the computer doesn’t make mistakes.

An audit [was] done a few months later and we were accused of theft and threatened to be suspended if we didn’t pay back the money. We [were] already told their system had flaws.. but they still accused us. Degrading us. Calling us thieves. Majority post office auditors made postmasters feel like thieves.”

YouGov qualified the experiences of these subpostmasters, pointing out that 69% of the overall respondents to its survey had reported having experienced discrepancies with the Horizon IT system since January 2020.

“A total of eight SPMs surveyed reported being suspended or threatened with suspension in the past 3 years and all stated that they experienced an unexplained discrepancy since 2020,” the research company said in the three-page document. “We can only identify correlation not causation.”

The YouGov report showed that the 89% of the discrepancies reported by respondents was less than £1,000, although 1% reported a discrepancy of £30,000 or more.

Newsflash: UK factories have been hit by a slump in export orders this month.

The CBI reports that export order books are now their weakest since December 2020 – during the first year of the Covid-19 pandemic, and just before the UK signed the Brexit trade agreement.

Its latest industrial trands report has found that total and export order books at manufacturers deteriorated in September.

A net balance of 44% of manufacturers reported that their export order books were below “normal” this month. That’s a considerable deterioration compared to August, where the reading was -22%.

Worryingly, output volumes fell sharply in the three months to September – and manufacturers expect output to decline again in the three months to December. This is the first time since November 2023 that expectations have been negative.

Ben Jones, CBI lead economist, said:

“This was a uniformly disappointing set of results for the manufacturing sector, with output falling over the past quarter, order books deteriorating and manufacturers expecting activity to soften further in the remaining months of the year.”

“The survey highlights that the recovery of the UK economy seen over the first half of 2024 remains fragile, with uneven progress seen across different sectors, and businesses increasingly cautious ahead of the Budget at the end of next month.”

“In the meantime, firms will be looking to the Chancellor to reaffirm the government’s mission of long-term economic growth, providing them with the confidence and opportunities to invest and grow.”

The news that Rachel Reeves is ordering investigations into more than £600m worth of Covid contracts awarded under the Conservatives has been welcomed by anti-corruption campaigners.

The Guardian reported this morning that the chancellor will announce today that she will refer more than half of contracts for material such as masks to the incoming Covid corruption commissioner.

Daniel Bruce, chief executive of Transparency International UK says this is an “important first step” towards accountability over governent spending during the pandemic.

Bruce hopes that some of the money spent on pandemic equipment can be recovered, saying:

“We have repeatedly warned of the scale of corruption risk in the former government’s approach to procurement during the pandemic and have identified over £15 billion of high-risk contracts in need of investigation.

Today’s announcement is an important first step towards full accountability for the serious procurement failings we saw during the pandemic and we urge the Chancellor to launch similar investigations into the 135 contracts we’ve identified.

Such investigations offer an important chance for the new government to recoup some of the millions of pounds of public money wasted on these contracts and implement lessons learned to ensure this never happens again.

The pound has hit a two-year high against the euro, after this morning’s PMI surveys showed the UK economy outperforming the eurozone this month.

Sterling has gained half a eurocent to €1.1967 this morning, its highest level since early August 2022.

Uncertainty ahead of next month’s budget is weighing on the UK economy, the latest survey of purchasing managers across British companies shows.

Data firm S&P Global reports that UK private sector activity growth has slowed this month, across both services firms and manufacturers.

Some companies reported that clients are taking a “wait-and-see approach” to decision-making ahead of the Autumn Budget, which is hitting investment.

Fiscal policy uncertainty ahead of the budget, due on 30 October, was “by far the most cited concern among UK private sector firms”, the PMI survey shows.

Private sector employment growth slowed for the second month running to its weakest since June.

But encouragingly, firms slowed their price rises this month – with the average prices charged by private sector firms rising at the slowest rate since February 2021.

Overall, the Flash UK PMI Composite Output Index dipped to 52.9, down from August’s 53.8. That’s a two-month low, but still in growth territory, and much cheerier than in Germany or the wider eurozone this month (see earlier posts).

Chris Williamson, chief business economist at S&P Global Market Intelligence says:

“The September PMI data bring encouraging news, with robust economic growth being accompanied by a cooling of inflationary pressures. The data therefore hint at a ‘soft landing’ for the UK economy, whereby the fight against inflation is showing increasing signs of being won without higher interest rates having caused a downturn.

Williamson adds, though, that concerns about the budget are “jangling nerves somewhat”, explaining:

Investment plans in particular are reported to have been put on ice pending clarity on the new government’s policies, especially towards taxation. Hiring likewise has been stifled by business uncertainty about the near-term economic outlook ahead of the ‘budget’.

Chancellor Rachel Reeves has pledged this morning that there will not “be a return to austerity”.

Speaking to BBC Radio 4’s Today programme this morning, Reeves said:

“There won’t be a return to austerity, there will be real terms increases to government spending in this Parliament.

“What I’m saying is there will not be real terms cuts to government spending, but the detailed department by department spending will be negotiated.”

The downturn in Germany has pulled the wider eurozone economy into a contraction this month.

Business activity across the euroarea has decreased so far in September, according to the HCOB Flash Eurozone PMI index. It has dropped to 48.9 this month, an eight month low, and below the 50-point mark showing stagnation.

As well as Germany’s slump, the eurozone was also pulled down by a contraction in France’s private sector, as an Olympics-related boost to business activity in August faded.

Business confidence continued to wane, as firms reported a drop in new orders.

The recovery in the UK housing market, and the prospect of more cuts to UK interest rates, makes Rightmove an attractive target for Australia’s REA Group, says Susannah Streeter, head of money and markets at Hargreaves Lansdown:

Streeter explains:

Rightmove shares had been affected by the property market downturn amid a ratcheting up in interest rates. But now, with more cuts eyed on the horizon and a recovery in prices underway, there are now many more eyes on screen.

REA Group is clearly highly tempted by the sturdy fundamentals of the model, which offers an envious operating margin position of around 70%. DIY alternatives may be growing, but they are only a small slice of the market, and many estate agents can’t afford not to advertise on Rightmove. That’s demonstrated by their willingness to pay bigger sums to attract potential buyers.

Although total membership has reduced by 1% in the last full year, average revenue per advertiser was up 9% to £1,431.

Newsflash: the German economy is sinking deeper into contraction, dragged down by its manufacturing sector.

Thw latest HCOB ‘flash’ PMI survey compiled by S&P Global, just released, shows that business activity across Germany is falling at the quickest rate for seven months in September.

German businesses reported increased caution among customers, deterring them from making investments; concerns towards the health of the economy were reported to be a factor.

Total inflows of new business fell at the quickest rate for nearly a year in September, and firms cut jobs for the fourth month running.

This pulled Germany’s flash composite PMI output index down for the fourth month in a row, to 47.2, down from August’s 48.4. That’s the lowest reading since February – anything below 50 shows a contraction.

Manufacturing shrank at the fastest pace in a year, while the modest growth in the services sector was the weakest in six months.

Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, fears that a technical recession (two quarters of negative growth in a row) in Germany is now “baked in”.

De la Rubia says:

“The downturn in the manufacturing sector has deepened again, evaporating any hope for an early recovery. Output plunged at the fastest rate in a year, with new orders collapsing. In a sign of resignation, companies have shed staff at a rate not seen since the COVID-19 pandemic in 2020. This comes as several major automotive suppliers have announced significant job reductions. These troubling figures are likely to intensify the ongoing debate in Germany about the risk of deindustrialization and what the government should do about it.

Optimism is something of the past. Manufacturers are downright depressed about their future activity, with expectations for the coming year plummeting. In a striking shift, moderate optimism in August has quickly turned into the steepest pessimism in a year by September. This rapid downturn in sentiment is most likely linked to the wave of negative headlines surrounding Volkswagen, which has cast a shadow over the broader industry.

Hamburg Commercial Bank predicts Germany’s economy will shrink by 0.2% in the July-September quarter. That would put the country into recession, as GDP fell by 0.1% in April-June.

Newsflash: Rightmove has said it will “carefully consider” the new, inproved, takeover offer from REA Group, and respond “in due course”.

In a statement to the City, Rightmove confirms it has received a third proposal from REA, which it dubs “unsolicited, non-binding and highly conditional”.

Rightmove says its. board will “carefully consider the Increased Proposal, together with its financial advisers.”

Rightmove shareholders should take no action in respect of the Increased Proposal, it says.

Andrew Fisher, chair of Rightmove, reiterates that REA’s first two bids were both rejected for being “uncertain, highly opportunistic and unattractive”.

Fisher says:

“Rightmove is an exceptional company with a very clear strategy, a consistent track record of delivery and a strong management team. The Board is confident in the Company’s short and long term prospects, and sees a long runway for continued shareholder value creation.

“Based on the implied value and structure of REA’s first and second indicative non-binding proposals, we considered these proposals to be uncertain, highly opportunistic and unattractive. Accordingly, the Board unanimously rejected them.

“The Board will continue to act on behalf of our shareholders and respond to the most recent proposal in due course.”

Rightmove also points out that the 2% drop in REA’s shares today has pulled down the value of its cash and share offer, from 770p to 761p [making the offer worth around £6bn].

Rightmove has jumped to the top of the risers on the FTSE 100 share index at the start of trading, after Rea Group upped its takeover offer again.

Rightmove are up 3.8% at 700p.

That’s still some way shy of Rea’s new offer, which values Rightmove at 770p per share.

Spending on health and beauty products is booming despite cost-of-living pressures, a new survey shows.

The latest Barclays Consumer Spend data shows health and beauty has been the highest-performing category in retail since August 2023.

Last month, consumer spending on health and beauty rose 7.3% year-on-year, while overall retail spending was up 0.1%.

Nearly half of consumers see such spending as “essential” – a category which typically includes priority purchases such as groceries and childcare, Barclays says.

Karen Johnson, head of retail at Barclays, says:

“It’s encouraging to see that overall beauty spending has been in growth year-on-year, with August showing the highest level of growth in the past 18 months. Our data shows that social media has proven to play a key role in influencing online purchases, a further demonstration of the rising commercial importance of these platforms.

“The health and beauty sector exemplifies continuous growth, likely driven by social media, particularly among younger generations. The key to a resilient retail model is examining these trends to better understand future purchasing behaviours.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

When bidding for property, it’s important not to take no for an answer. Australia’s REA Group is taking this advice seriously, and has just launched its third offer to buy UK housing portal Rightmove.

After being rebuffed twice this month, REA has upped its offer again. It is now proposing to pay around £6.1bn for the UK’s biggest online property portal.

REA’s offer is worth 770p per Rightmove share – structured as 341p in cash and 0.0422 new REA shares

In a statement to the Australia stock market this morning, Owen Wilson, CEO of REA, insisted the deal made sense, saying:

“We believe that the combination of our world-leading expertise and technology with the attractive Rightmove business will create an enhanced experience for agents, buyers and sellers of property.

We live in a world of intensifying competition and this proposed transaction would bring together two highly complementary digital property businesses for investment and growth.

Wilson added that REA is “genuinely disappointed at the lack of engagement by Rightmove’s Board”.

REA, which is majority owned by Rupert Murdoch’s News Corp, made its first approach to Rightmove on 5 September, when it proposed paying 705p per share, or £5.6bn. That was rebuffed, with Rightmove’s board saying it “fundamentally” undervalued the company.

Then on Friday night, news broke that REA had increased its offer by £300m.

Rightmove weren’t commenting officially on that offer yesterday, but Bloomberg reported that “people familiar with the matter’” said it had been rejected.

Now, Rightmove’s board must ponder this third offer.

The company’s shares closed at 674p on Friday night (before news of the second offer broke), which values Rightmove at £5.32bn.

Also coming up today

Surveys of purchasing managers across the UK, Eurozone and the US will show how major economies are faring this month.

And in Liverpool, chancellor Rachel Reeves is expected to promise “a Budget to rebuild Britain” in her speech to the Labour Party conference today.

The agenda

• 9am BST: Purchasing managers index (flash reading) for the eurozone in September

• 9.30am BST: Purchasing managers index (flash reading) for the UK in September

• 11am BST: CBI industrial trends report on UK factories

• 2.45pm BST: Purchasing managers index (flash reading) for the US in September