BUSINESS LIVE: GDP growth flatlines; Diageo suffers demand dip; Redrow sales slump

Redrow expects annual profits and revenue to be at the lower end of its forecast range as the builder suffers from a weakening property market in the autumn.

The latest warning from a UK housebuilder about tough housing market conditions comes as high mortgage costs and wider economic concerns keep home buyers away.

Earlier this week, Redrow’s biggest peers Taylor Wimpey and Persimmon flagged uncertainty in the coming months.

The company has had to adapt to a “more difficult business environment” in terms of construction rate and operating costs, said Redrow president Richard Akers.

In September, the company had forecast pre-tax profits for fiscal 2024 of £180 million to £200 million and revenue of £1.65 billion to £1.7 billion.

Emma Mogford, Premier Miton Monthly Income Fund Manager:

‘A flat economy is usually not a cause for joy. However, given the pressures of the cost of living crisis and higher interest rates, it’s a decent result.

“While pressures from higher rates remain, I believe we can start the festive season with a sliver of optimism about the UK economy.”

Diageo expects organic operating profit growth to slow in the first half of its current financial year due to “materially weaker” performance in Latin America and the Caribbean.

“Macroeconomic pressures in the region are resulting in lower consumption and decreased consumer trade,” the world’s largest spirits company said in a statement.

“These impacts are slowing progress in reducing channel inventory to levels appropriate for the current environment.”

Latin America and the Caribbean represent almost 11 percent of the Johnnie Walker maker’s net sales.

Sales in the region are now expected to decline more than 20 percent year-on-year in the first half of fiscal 2024, the company added.

Michael Field, Morningstar European Market Strategist:

‘UK GDP growth was 0.2% in September, compared to economists’ expectations of a flat performance. This adds to August’s reading of 0.1% growth. While this level of growth is far from robust, the important thing here is that the UK economy is in the black, and flat quarter-on-quarter growth means the UK will not enter a technical recession in 2023.

‘The manufacturing sector is often blamed for slow economic growth in the UK, and rightly so in many ways. Manufacturing activity, as shown by manufacturing PMIs, has been declining since mid-2022. However, with the manufacturing sector contributing less than 20% to GDP, this is only part of the problem.

‘The biggest problem lies in the service industry, which contributes almost 80% of GDP and represents almost the same percentage of employment. Here, a big pullback in spending over the past 18 months by both businesses and consumers has hurt the economy. However, the somewhat bright news is that services production rose 0.2% in September, following a 0.7% drop in August.

‘With interest rates at the highest level since the global financial crisis, the cost of interest on debt is starting to hit both businesses and households. With interest rates likely to remain high for a long period of time, it is difficult to see a rapid reversal of spending on services, meaning low GDP growth may persist for some time yet.’

Britain’s economy stagnated in the third quarter, posting flat growth in gross domestic product between July and September and beating expectations for a 0.1 percent drop, new data from the Office for National Statistics shows.