Over in the US, the Biden administration has announced new trade investigation into Chinese-made “legacy” semiconductors.

The move that could lead to higher US tariffs on chips from China used in goods from autos to washing machines to telecoms gear.

The US Trade Representative’s office says there is evidence that China is seeking to dominate domestic and global markets in the semiconductor industry, and undertakes extensive anticompetitive and non-market means, including setting and pursuing market share targets, to achieve indigenization and self-sufficiency.

Ambassador Katherine Tai says:

“This investigation underscores the Biden-Harris Administration’s commitment to standing up for American workers and businesses, increasing the resilience of critical supply chains, and supporting the unparalleled investment being made in this industry.”

The “Section 301” probe will be handed over to Trump’s administration, when it succeeds the Biden White House in four weeks.

More details here.

Honda, Nissan and Mitsubishi have confirmed they are in talks over a possible three-way merger as the Japanese companies struggle with falling sales and competition from Chinese brands.

The companies confirmed on Monday that Honda and Nissan had agreed to “start consideration towards a business integration through the establishment of a joint holding company”, and that Mitsubishi would also decide on joining by the end of January.

The merger would combine Japan’s second- and third-largest carmakers, and add the smaller Mitsubishi, in a defensive effort to join forces as the automotive industry goes through its biggest ever period of upheaval. It would create the world’s third-largest carmaker in terms of annual sales, behind only Japanese rival Toyota and Germany’s Volkswagen.

More here:

Before the election, Labour said wanted the UK to have the highest sustained growth in the G7.

But… this mission has got off to a bad start. This morning’s GDP downgrade means the UK was the joint-slowest member of the G7 in the third quarter of the year, with no growth in July-September.

Here’s the latest growth estimates from other leading advanced economies, for comparison.

• US: grew by nearly 0.8% in Q3 2024.

• France: grew by 0.4%

• Japan: grew by 0.3%

• Canada: grew by 0.3%

• Germany: grew by 0.1%

• Italy: stagnated

Andrew Griffith, shadow secretary of state for Business and Trade, has accused the government of “trash talking” the economy, making a recession “a distinct possibility.”

A £3.7bn takeover in the UK insurance sector has been agreed, putting jobs at risk.

Aviva has reached agreement with Direct Line to take over its smaller rival in a cash and share deal.

It values each Direct Line share at 275 pence, which Aviva says is a 73.3% premium to their value in late November before the first offer was made, and rejected.

Today, Dame Amanda Blanc, group chief executive officer of Aviva, says:

“This deal is excellent news for the customers and shareholders of Aviva and Direct Line. It builds on our track record of delivering four years of strong financial performance and, in line with our strategy, it accelerates our growth in capital light business.

Aviva and Direct Line share a deep commitment to excellence in looking after customers, and this will remain a top priority following the Acquisition. The financial strength and scale of the Combined Group means customers will benefit from competitive pricing, an enhanced claims experience and even better service.

The acquisition of Direct Line by Aviva will bring together a number of the UK’s leading brands in a more efficient business, which is very well positioned to generate strong returns for all shareholders.”

But it may not be excellent news for all Aviva and Direct Line staff. Aviva says it expects to cut between 5% and 7% of jobs at the combined company, “in order to achieve the expected benefits of the acquisition”.

Digging into today’s GDP report, we can see that the services sector stagnated in July-September.

The business-facing services sector flatlined, while consumer-facing services increased by 0.1%

The largest positive contributor to growth was “wholesale and retail trade; repair of motor vehicles and motorcycles subsector”, while the largest negative contributor to growth was “financial and insurance activities”.

The production sector shrank by 0.4%, led by a 2.0% decline in electricity, gas, steam and air conditioning supply, while the manufacturing sector contracted by 0.1%.

Construction output is estimated to have grown by 0.7%; new work increased by 1.6%, while repair and maintenance decreased by 0.5%.

Chancellor Rachel Reeves has warned that the goverment faces a “huge” challenge to fix the UK economy.

Reacting to this morning’s news that the economy failed to grow in July-September, Reeves says:

“The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge.

“But this is only fuelling our fire to deliver for working people.

“The Budget and our plan for change will deliver sustainable long-term growth, putting more money in people’s pockets through increased investment and relentless reform.”

The downward revision to UK Q3 GDP from +0.1% q/q to 0.0% appears to be mainly due to external influences rather than the domestic economy, reports Paul Dales of Capital Economics, who says:

This leaves plenty of scope for a lively debate with the family over the festive period about whether or not the economy is heading for a recession.

Capital Economics also estimates that the UK economy also stagnated in the fourth quarter of this year.

Dales adds:

Overall, these data suggest that after a bumper first half of the year, the economy ground to a halt in the second half of the year due to a combination of the lingering drag from higher interest rates, weaker overseas demand and some concerns over the policies in the Budget.

Our hunch is that 2025 will be a better year for the economy than 2024. But more recent data suggest the economy doesn’t have much momentum as the year comes to a close.

The Conservatives’ warning that Britain could be facing a ‘recession made in Downing Street’ next year makes the front page of two right-leaning newspapers.

The Daily Mail says the CBI’s survey of 899 firms painted a downbeat picture of the country’s economic future…

While The Times leads on an admission from Lucy Powell, the leader of the Commons, that the state of Britain’s stalling economy is “disappointing”.

Powell said she understood the public’s frustration with Labour’s tenure so far, arguing:

“We knew [governing] was going to be difficult.”

“I think the voters and the public knew it was going to be difficult too, that’s why they voted for change because we knew the country was in such a bad situation.

“I can understand people’s frustration. It’s a frustration that I share, because we want to make things better, faster for people.”

This morning’s downgrade to UK growth in July-September comes as business groups warn that activity is set to fall at the start of the new year.

The Confederation of British Industry is warning this morning that the UK economy is “headed for the worst of all worlds”, with activity over the next quarter set for a “steep” decline.

And chancellor Rachel Reeves’s budget is being blamed for driving growth expectations down to the weakest level in over two years.

The CBI’s latest growth indicator survey has found that private sector firms expect to cut down on hiring, reduce output and raise prices in the first three months of 2025.

Alpesh Paleja, the group’s interim deputy chief economist, says:

“There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.

Businesses continue to cite the impact of measures announced in the Budget – particularly the rise in employer NICs – exacerbating an already tepid demand environment.

Tory business spokesman Andrew Griffith has claimed that if the UK falls into recesion, it will be one “made in Downing Street”.

Responding to the CBI’s survey, Griffith says:

“Since taking office, the chancellor has made this country a hostile climate for aspiration, for investment and for growth.”

The Conservative MP added: “Rachel Reeves’s tax-raising spree and trash-talking her economic inheritance are literally killing businesses and jobs.

“If there is a recession - and based on these CBI expectations that seems increasingly likely - it will be one made in Downing Street. Labour needs to urgently change course before the damage they are doing becomes even greater.”

The Treasury has defended October’s budget, saying the government is delivering the stability that businesses need.

A Treasury spokesperson says:

“More than half of employers will either see a cut or no change in their National Insurance bills.

“We have capped corporation tax at the lowest rate in the G7, provided 40% business rates relief next year for 250,000 properties where there were no plans to do so, launched a 10-year infrastructure strategy and are creating pension mega funds to boost investment in British businesses, infrastructure and clean energy. This is alongside establishing a National Wealth Fund to catalyse over £70bn in investment to drive growth in our to boost investment in British businesses.”

But…there’s also rising gloom in the shopping sector, with the British Retail Consortium predicting that a January spending squeeze is on the horizon.

According to the BRC’s latest Consumer Sentiment Monitor, consumer expectations for the state of the economy over the next three months have fallen:

Helen Dickinson, chief executive of the British Retail Consortium, says:

“Public confidence in the state of the economy took a nosedive…

This created a widening gap between expectations of the economy and of people’s own finances, which remained unchanged. Perceptions were heavily skewed by age, with 18 to 35 year olds considerably more upbeat than older generations on both questions.

The public’s spending intentions – both in retail and beyond – dropped 6pts, with expectations of spending in nearly every retail category falling. If these expectations are realised, retailers could find themselves facing a New Year spending squeeze just as they unveil their January sales.

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

Britain’s economy stagnated in the first three months of the new Labour government, and was also weaker than expected in the final quarter of the Conservatives’ tenure, new data this morning shows.

The Office for National Statistics has just revised down its estimate of GDP growth in the third-quarter of this year, to 0%, down from 0.1% previously expected. That shows the UK economy flatlined in July-September.

The latest GDP quarterly national accounts report, just released, also shows that real GDP per head fell by 0.2% in Quarter 3 2024, and is 0.2% lower compared with the same quarter a year ago.

On an output basis, the oNS says there was no growth in the services sector in the latest quarter, whilst a 0.7% increase in construction was offset by a 0.4% fall in production.

ONS director of economic statistics Liz McKeown explains:

“The economy was weaker in the 2nd and 3rd quarters of this year than our initial estimates suggested with bars and restaurants, legal firms and advertising, in particular, performing less well.

“The household saving ratio fell a little in the latest period, though remains relatively high by historic standards. Meanwhile real household disposable income per head showed no growth.”

The ONS has also revised down its estimate for growth in April-June to 0.4%, down from 0.5% growth estimated earlier.

We’ll be tracking more reaction to the state of the economy through the day, as the City winds down for Christmas:

The agenda

• 7am GMT: UK GDP quarterly national accounts, UK: July to September 2024

• 1.30pm GMT: Chicago Fed National Activity Index

• 3pm GMT: CB report on US consumer confidence