BUSINESS LIVE BofE cuts base rate; FTSE record high; AstraZeneca flags China fine

Watches of Switzerland Group has reaffirmed its guidance following healthy trading in Britain and the United States over Christmas.

Britain’s largest luxury watch retailer saw demand for prominent brands outpace supply across the two countries, especially products on ‘registration of interest’ lists.

Millions of drivers are unaware of major car tax increases coming into force in a matter of months that will see some motorists stung an additional £2,745, new research has suggested.

Up to three quarters of motorists are unaware of new tax rules arriving from 1 April 2025, according to a poll by WeBuyAnyCar.

Lawmakers are pushing to ban DeepSeek from all US government-owned devices amid fears that the AI chatbot may be collecting vital data and sending it to servers owned by the Chinese government, it has emerged.

A new bill proposed by Congressman Josh Gottheimer aims to ban the app from all federal technologies, except for law enforcement and instances of national security-related activity.

Volkswagen has teased it latest electric car due to go on sale in 2027 – and it will genuinely be an affordable option.

A single image of the new compact battery vehicle has been released by the German car giant showing the name ‘ID.ONE’ on its bumper.

Octopus Energy has launched a new investment platform to give customers the opportunity to own a share of its renewable projects.

The energy company is targeting a fundraise of £1million for two wind turbines in Yorkshire and Wales, and will allow retail investors to invest as little as £25 to own a share of the project.

The FTSE 100 was trading at a record high on Thursday afternoon as investors cheered a ‘dovish’ Bank of England base rate cut, despite forecasts of a worsening economic outlook.

Base rate fell by 25 basis points to 4.5 per cent after a 7-2 vote of the bank’s Monetary Policy Committee, with the two dissenting policymakers voting for a more aggressive cut of 50bps.

The Bank of England’s Monetary Policy Committee has posted its latest 78-page report outlining its musings on the future for inflation and the economy.

The outlook made for grim reading, as while the Bank cut base rate from 4.75 per cent to 4.5 per cent, its lowest since June 2023, it also painted a gloomy picture on the UK economy.

Engineering group IMI confirmed it had been hit by a cyber attack just a week after rival Smiths Group said hackers had gained access to its global systems.

Birmingham-headquartered IMI declined to disclose what data had been accessed in the attack, but systems in a number of its locations globally are understood to have been hit.

Vauxhall owner Stellantis has reaffirmed its plans to close its Luton van factory this year despite mounting pressure from Government, unions and local residents to reconsider.

The move, announced in November, puts some 1,100 jobs at risk with its workforce in Bedfordshire offered roles at its Ellesmere Port plant 150 miles away in Cheshire where all electric van production will be moved in 2025.

Simon Dangoor, head of fixed income macro strategies at Goldman Sachs Asset Management:

‘Amid a stagnant economy and a worsening labour market, the BoE delivered the anticipated 25bps cut (7-2 vote with Mann and Dhingra surprisingly voted for 50bps cut), with a dovish tone and vote.

‘Despite the looming inflation risks, the BoE has maintained its “gradual” easing guidance.

‘We foresee the BoE continuing its quarterly easing pace through the uncertain period in H1 but accelerating in H2 when dust settles, with a total of five cuts this year.’

Neil Birrell, chief investment officer at Premier Miton Investors:

‘The Bank of England cut its base rate to give the economy a boost that is much needed.

‘The fact that two members voted for a 0.5% cut is telling, clearly showing concern over the parlous state of economic growth, which is not something the government will appreciate.

‘With growth under threat and inflation remaining higher than hoped, that provides a combination that is likely to see the word “stagflation” being banded around.’

The Bank of England’s latest monetary report identified a slowdown in underlying growth at the end of 2024 and forecast further deceleration ‘into the start of this year’.

GDP growth is projected to pick up to 0.1 per cent in 2025 Q1, but that is 0.3 percentage points weaker than expected at the time of the November Report.

The bank said the weakening in economic activity has been ‘associated with a deterioration in business confidence’, and weaker household spending and businesses investment intentions.

It added: ‘The current weakness in GDP is judged to reflect not only a slowdown in demand but also a degree of weakening in supply growth over the past year.’

Marion Amiot, head of climate economics & European economist at S&P Global Ratings:

‘Although activity is softening, there is no reason for the BOE to rush to more cuts.

‘The most hawkish members of the MPC will want to see more slack opening up in the economy to believe elevated inflationary pressures are moderating. In the short term, moderation in pay growth will also be limited by the 6.7% minimum wage increase in April, which will put pressure on companies’ to raise wages along the salary scale on top of absorbing higher employee contributions.

‘Given we expect household spending to strengthen, companies will have some ability to pass on rising costs, thereby putting prices up.

‘Looking forward, we also expect the BOE to monitor more closely how US developments affect financial conditions in the UK, either via the correlation of UK 10 year yields with the US, or the potential inflationary impacts of the weakening sterling against the dollar as the interest rate differential with the Fed grows’

The Bank of England’s Monetary Policy Committee has voted to cut base rate by 25 basis points to 4.5 per cent.

Policymakers voted for a 25bps cut by a majority of 7–2, with the two dissenters prefering a bigger 50bps cut to 4.25 per cent.

The bank said: ‘There has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations.

‘GDP growth has been weaker than expected at the time of the November Monetary Policy Report, and indicators of business and consumer confidence have declined. GDP growth is expected to pick up from the middle of this year.’

The FTSE 100 is up 1.3 per cent in late morning trading, reaching a new record high.

The index is lifted by shares of AstraZeneca after upbeat results, and ahead of an anticipated rate cut from the Bank of England later in the day.

AstraZeneca shares up 5.1 per cent and set for their best day since April 2024, driving the FTSE 350 pharma and biotech index 3.4 per cent to an over three-month high.

The drugmaker’s update on a likely fine in China reassured investors the business impact would be minimal, while it reported fourth-quarter earnings slightly above analysts’ estimates.

All major subsectors are in the green with industrial metal miners rising 3.6 per cen, led by a 13.6 per cent jump in Ferrexpo, and a 6 per cent gain in Anglo American after its fourth-quarter production report.

Anglo American was also the biggest FTSE 100 gainer.

Meanwhile, focus was squarely on the Bank of England, which is expected to ease borrowing costs by 25 basis points later in the day.

Base rate currently stands at 4.75 per cent, one of the highest among wealthier economies, with policymakers grappling to balance stimulating economic growth with persistent inflation.

Kelly Boorman, National Head of Construction at RSM UK:

‘The headline construction PMI saw a sharp fall in January, continuing the downward trend seen at the end of 2024.

‘The latest downtick comes amidst falls across the board, demonstrating a loss of confidence and increased uncertainty post-Budget, as well as the usual seasonal slowdown expected at the start of Q1.

‘Adverse weather conditions including Storm Eowyn also brought construction activity to a temporary halt.

‘The fall in civil engineering activity further reflects prolonged sector nervousness and scaling down on works, as businesses are waiting on government to commit funding for infrastructure projects in the upcoming Spending Review.

‘As a labour-intensive industry, construction is also bracing for post-Budget headwinds including rises to employers’ National Insurance contributions which could worsen labour shortages. It’s therefore unsurprising to see a slowdown in construction activity, specifically housing which has the added complexity of changing mortgage rates and the removal of Help to Buy, leading housebuilders to reduce their volumes to avoid stockpiling.

‘It’s going to be a bumpy few quarters, but housebuilders should remain optimistic towards housing volumes after Q2 2025, anticipating increased demand as government looks to realise its mandatory targets.

‘The added employment costs may also encourage businesses to invest in technology to bridge the labour gap and move towards modern methods of construction.’