BUSINESS LIVE: GDP grows 0.1%; Unilever ice cream float; BATS tobacco lawsuit

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘The ice cream business always looked like the odd one out so scooping it away and listing as a separate entity was widely expected. This division also required a cold storage supply chain which its other popular brands like Dove soap, Marmite or Hellman’s mayonnaise had little need for.

‘But Amsterdam has won the cherry for this big dollop of a newly-listed company. Given that a big part of the action plan is to improve simplicity, listing the ice cream entity in Amsterdam makes sense given that this part of the business is run from Rotterdam. While a previous attempt to shift Unilever’s group headquarters to the Netherlands instead of the UK, went down like a lead balloon among shareholders, there is more justification for this part of the business to list in the country.

‘Making operations simpler and more productive are likely to be higher on the list of priorities than consumption trends or historic ties. However, it is worth noting consumers in the Netherland and in most other European countries consume more ice cream than Brits per head, according to Statista.

‘Unilever also has roots in the Netherlands, having been founded through the merger of Dutch margarine maker Unie and the British Lever brothers. But given the perceived ‘dual nationality’ of Unilever, a decision to list in Amsterdam may still be seen as a setback for London, particularly given the recent exodus of firms from the City. But it still earns the stripe of a secondary listing as consolation, with Unilever opting for the triple ‘neopolitan’ flavour approach, with shares still set to be traded in London and New York as well as Amsterdam.’

The devastation caused by last month’s California wildfires will cost London-listed insurer Lancashire Holdings as much as £132million in payouts.

January’s wildfires killed at least 29 people and more than 200,000 were evacuated, as 18,000 homes and structures were destroyed, and over 57,000 acres of land were burned.

Credit where credit is due. Rachel Reeves may have poleaxed the public finances but the Chancellor has fuelled the booster rockets for British infrastructure.

Overseas-owned Heathrow, with Qatar, Saudi Arabia and China among the core investors, is warmly embracing an application for a third runway at Heathrow.

One of the oldest UK department store chains is shutting its last shop, blaming Budget tax and wage increases.

Beales, which opened in Bournemouth in 1881, said trading at its Poole branch would end in May.

Daniel Mahoney, UK economist at Handelsbanken:

‘UK GDP growth for the last quarter of 2024 has been published today. The figures show economic activity managed to end the year in positive territory, with GDP up by 0.1% on a q-o-q basis.

‘Expectations had been for real output in the UK to shrink marginally in Q4 2024 but a robust m-o-m print of 0.4% in December avoided this outcome. December’s monthly print was driven by the services sector, which advanced 0.4% on a m-o-m basis.

‘While it is welcome that the UK avoided contraction at the end of 2024, other data within this morning’s release continue to suggest that growth prospects look weak in 2025, particularly on the private sector side.

‘For example, on a q-o-q basis in Q4 business investment fell by 3.2% and exports dropped by 2.5%, while the key areas of growth were government consumption and government investment.

‘Additional spending announced at the Budget will help to prop up UK growth this year but negative sentiment being expressed in business and consumer surveys will likely continue to weigh on private sector activity. Our latest global macro forecast suggests growth of just 1% in 2025, with risks to the downside not least due to the potential for escalating global trade disruption.

Barclays’ profits surged by nearly a quarter last year thanks to soaring income growth and a recovery in corporate dealmaking.

The banking giant reported its pre-tax profits climbed by 24 per cent to £8.1billion in 2024, with fourth-quarter profits alone surging from just £110million last year to £1.7billion.

Total income shot up by around £1.5billion to £26.8billion following a strong performance in the UK, where the group boosted their structural hedge earnings and enjoyed a £600million day-one uplift from acquiring Tesco Bank.

It came as the FTSE 100-listed tobacco giant’s boss warned of ‘significant’ headwinds in Bangladesh and Australia this year, after the group missed its annual revenue target.

James Smith, developed markets economist at ING:

‘The UK economy grew…though only because of a surge in inventories.

‘These are a notoriously volatile accounting fixture which, unlike other parts of the GDP breakdown, don’t tell us much about the underlying health of the economy. The areas that do – household consumption, exports, and business investment – were all flat or negative.

‘The latter was a particular disappointment, falling by more than 3% in Q4, having outperformed many other economies earlier in the year.

It’s not all bad. December’s monthly figures were better, helped by certain consumer-facing services.

‘And 2024 as a whole was a reasonable year for the UK economy, even if virtually all of that previous strength was concentrated in just a couple of months. Even more remarkably, all of the increase in GDP across 2024 can be put down to population growth. GDP per capita actually fell slightly across the year.

‘2025 promises to be reasonable too, thanks to a substantial injection of government spending, which will only be partially offset by higher taxes. The jobs market is the major downside risk, but barring a spike in layoffs, real wage growth is also set to remain positive, despite rising household energy bills. That should support some modest consumption growth.’

Retail investors piled into UK government debt last month, as the country’s borrowing costs skyrocketed and traders scooped up a bargain.

The yield on 10-year gilts peaked at almost 4.9 per cent in January as international investors fretted about Britain’s fiscal policy and broader macroeconomic concerns.

But investors who bought at the peak will have already seen solid growth in the value of their bonds, with 10-year yields trading at 4.55 per cent on  Thursday.

Heineken said it sold more beers around the world last year with demand for premium brands growing, but warned of weak consumer sentiment in Europe.

Shares in the Dutch brewer, which owns Amstel, Moretti and Desperados, surged 14 per cent after posting a higher yearly profit.

It reported a 1.6 per cent year-on-year rise in the volume of beer sold globally in 2024, helped by growth for brands it labels as premium, with a 9 per cent jump in Heineken.

Matt Britzman, senior equity analyst, Hargreaves Lansdown:

‘Early price action for Barclays looks a little harsh after the group set a decent benchmark for the banking sector, closing the year with an impressive final quarter as both its UK and Investment Banking arms delivered.

‘Credit quality remains solid, with loan loss rates comfortably below target, and while there was a dip in the final quarter, stripping out the higher-risk business from the Tesco deal shows that credit performance actually improved. With more exposure to US consumer trends than most UK peers, stable US card default rates should also be reassuring for investors.

‘In Investment Banking, Barclays didn’t disappoint, surpassing profit expectations and seeing growth in fixed income and equities that outpaced even the US giants. On motor finance, the bank set aside £90m in provisions, and with players like Close Brothers maintaining optimism, there’s growing hope that the impact won’t be as severe as first feared – Lloyds will be the key one to watch and the most exposed from the major UK banks.

‘The £1bn buyback taps into its strong capital position, and with £10bn expected to be returned to shareholders between 2024 and 2026, there’s enough on offer to keep markets happy. The only minor downside was the lack of guidance upgrades, but overall, investors should be pleased with these results, the immediate price reaction likely a result of the strong run up coming into results.’

Scott Gardner, investment strategist at Nutmeg:

‘A pleasant surprise, but we’re not out of the woods yet. Beneath the surface of these latest figures, domestic demand via consumption and business investment was weaker than expected. What will worry some is that we are also yet to see the full impact of the measures announced in the Autumn Budget including changes to National Insurance contributions.

‘Looking ahead, we continue to believe that the housing market is key for a sustained uptick in growth through 2025 beyond the rush to beat the Stamp Duty increase in April. Lower interest rates will definitely help policymakers, but so will a recovery in consumer confidence. If growth remains poor, this will continue to weigh more heavily on the domestic-facing FTSE 250.’

Donald Trump called for interest rates in the US to be cut last night even after inflation hit a seven-month high.

Closely-watched figures showed that inflation in the world’s biggest economy rose from 2.9 per cent in December to 3 per cent in January – their highest level since June.

The rise bolstered the case for the Federal Reserve – America’s central bank – to proceed slowly.

Guy Foster, chief strategist at RBC Brewin Dolphin:

‘A survey showed two-thirds of forecasters expected UK GDP to have declined during the fourth quarter, but their pessimism was confounded – for now. The UK economy appears to have grown modestly in the final quarter, by 0.1%.

‘Obviously that sounds pretty underwhelming, but it was achieved with a very strong December. Although some surveys have shown diminishing activity, retail sales have been on an upward trend, housing demand is very strong and the bank of England seems keen to provide monetary support.

‘This is important, as there are greater hurdles ahead with employment growth slowing in the face of the steep increase in employment taxes and increases in stamp duty due in April.’

Rob Morgan, chief investment analyst at Charles Stanley:

‘The UK economy edged up in December following a previously flat second half of the year.

‘Having slumped to no growth in the third quarter, a 0.1% increase was confirmed for the final three months of the year driven by expansion in services.

‘It provides some rare relief for Chancellor Rachel Reeves as economists had previously expected a slight contraction for the month, which would have meant the economy came within a whisker of recession.

‘While not setting the world alight, the year-on-year figure for economic growth of 1.5% is respectable given the challenges of higher inflation and interest rates.

‘It is not a time for victory laps certainly, and the danger of recession hasn’t gone away, but relative to expectations this is a win for the Chancellor. Concerns of a weak festive period did not transpire, and it offers something to build on this year.’

Barclays profits jumped by a quarter last year as the banking giant benefited from a rebound in global investment and deal-making.

The lender reported a pre-tax profit of £8.1billion for 2024, a 24 per ent leap from the £6.6 billion profit generated in 2023.

Income for its investment bank soared by 28 per cent over the final quarter of the year amid stronger activity in equity markets and increased deal-making.

The UK bank also enjoyed a boost from taking control of Tesco Bank’s savings, loans and credit cards last year.

But Barclays said growth in the UK was partly offset by mortgage costs starting to come down – which means banks generate less income from offering loans.

Group chief executive CS Venkatakrishnan, known within the bank as Venkat, said: ‘In 2024, we met our financial targets, delivering for our customers and clients, with operational and financial performance improvement driven by disciplined execution of the three-year plan.’

British American Tobacco has reported a £6.2billion hit from a long-running lawsuit in Canada, with the tobacco giant warning of ‘significant’ headwinds in Bangladesh and Australia in 2025 after annual revenue missed forecast.

Health risks associated with tobacco and smoking alternatives have been under regulatory scrutiny for several years, and cigarette makers are facing several challenges globally from policy shifts to anti-tobacco activism.

The maker of Lucky Strike and Dunhill cigarettes and some rivals in October had neared a C$32.5 billion settlement in Canada, and new vaping regulations in Australia came into force last year, in a bid to curb youth vaping.

‘In 2025, while we expect significant regulatory and fiscal headwinds in Bangladesh and Australia to impact our combustibles performance, I am confident that we will progressively build on our delivery as we shift from investment to deployment,’ boss Tadeu Marroco said in a statement.

Robinhood UK lead analyst Dan Lane:

‘Throwing weight behind its core assets is exactly the strategy Unilever shareholders will be happy to see.

‘The more focused, leaner strategy only went live at the start of the year so the market will need to be patient for now but it’s a big step in the right direction. A diversified brand portfolio is a great asset but propping up less impactful product lines at the expense of the clear leaders will always hurt returns on capital.

‘We could see disposals of more non-core assets throughout 2025, especially in the Foods category, as the firm is likely to step up spending in its Beauty & Wellbeing portfolio – the recent Wild acquisition is a good example of the direction of travel.

‘And it’s goodbye to ice cream. The business unit has actually been a decent performer but there may be a few fears around weight loss drugs hitting demand in future. It’s not disappearing but the London market will be slightly upset it couldn’t secure a sole listing as a first feather in its cap in 2025.’

Consumer giant Unilever will demerge its ice cream business and list shares of the unit in Amsterdam, London and New York.

‘This decision follows a full review by the Board of separation options,’ the company said.

The owner of the popular Magnum and Wall’s brands had announced plans last year to separate the ice cream division to win back investor confidence after years of underperformance.

Unilever reported underlying sales growth of 4 per cent on Thursday, compared with a 4.1 per cent growth forecast by analysts in a company-compiled poll.

Jean-Francois van Boxmeer has been appointed as chair designate for the separated ice cream business, it said.

Luke Bartholomew, deputy chief economist at Abrdn:

‘While still very weak in absolute terms, today’s GDP numbers were much better than expected and may act as something of a narrative break.

‘Certainly it is difficult to see the economy slipping into a technical recession in the near term now.

‘Nonetheless, it is still very likely that the OBR will need to sharply downgrade its growth forecasts, putting more pressure on the Chancellor to meet her fiscal rules.

‘And there are still material headwinds from the upcoming National Insurance increase, which is likely to weigh on employment and push up on inflation. So further gradual interest rate cuts are still likely.’

The British economy expanded unexpectedly in the fourth quarter, relieving some pressure on Chancellor Rachel Reeves ahead of her Spring Statement next month.

UK GDP grew by 0.1 per cent in the final three months of 2024, upending expectations the economy would shrink by 0.1 per cent, fresh data from the Office for National Statistics shows.