Home Money Time for a rate cut surprise: Bank of England must support UK recovery, says ALEX BRUMMER

Time for a rate cut surprise: Bank of England must support UK recovery, says ALEX BRUMMER

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Base rate: The Bank of England has kept interest rates at 5.25% as it struggles to keep inflation under control.

The economy stagnated in April, which is a disgrace for Rishi Sunak. The lack of growth during the month is interpreted as a blow to the conservatives: as if they needed another one.

Headline figures matter in election campaigns, as the late Labor political wizard Harold Wilson reminded us.

He argued that the import of a pair of jumbo jets, which distorted trade figures, cost his party the 1970 election and put Edward Heath in Downing Street.

Trade figures no longer register much, except among unreformed Remainers. Instead, there is an intense focus on the nation’s total output or gross domestic product (GDP).

Indeed, critics of the Conservative government have uncovered a new measure of GDP per capita designed to demonstrate just how rotten its time in power has been. The impacts of the financial crisis, the pandemic and Russia’s war in Ukraine are dismissed.

Base rate: The Bank of England has kept interest rates at 5.25% as it struggles to keep inflation under control.

April production data is far from an economic disaster. Services, driven by information technology and science, grew 0.2 percent. Manufacturing and construction suffered setbacks.

Forward-looking indicators from purchasing managers suggest that both manufacturing and construction are recovering. Wet weather hurt retail trade and is one of the main reasons production stalled.

There is a solution for that, whoever is in power. The Bank of England needs to support the recovery by cutting interest rates from 5.25 per cent to 5 per cent as soon as possible.

The upcoming elections should not disturb him any more than the European Central Bank was before the worrying EU parliamentary votes.

Quick action by Governor Andrew Bailey and the Monetary Policy Committee, as early as next week’s June 20 session, would do a lot of good for consumption, construction and business.

The credit squeeze has gone on too long and the country could face a double whammy of higher taxes and overzealous monetary tightening if Labor triumphs.

Focusing on one month’s data is always foolish and it is worth noting that in the three months to April output grew by 0.7 per cent.

Forecaster EY Item Club suggests a strong second quarter amid rising real incomes and buoyant consumer confidence.

The National Institute of Economic and Social Research projects growth of 0.5 percent in the second quarter. An interest cut would be the icing on the cake.

corporate killer

At 81 years old, activist Nelson Peltz shows no signs of slowing down. This week, he was among financiers who defended Elon Musk’s proposal to pay £44bn to Tesla.

In the UK it has been a mixed blessing. Influential in the reshaping of Unilever, where he has a seat on the board, he has so far failed to inject momentum into the share price.

Their latest target is Rentokil, the world’s greatest rat catcher, who over the years has had a large presence in royal palaces. Shareholders will welcome the 13.7 per cent rise in Rentokil’s share price.

This is an example of how neglected London-listed stocks have been.

Peltz’s plan for Rentokil is unknown. No one should consider him a friend of Britain despite a family alliance with national treasure David Beckham.

The American interloper will never be forgiven for allowing Kraft to gobble up Dairy Milk champion Cadbury, now buried inside Mondelez.

Rentokil has a large presence in the United States after the purchase of Terminix in 2021.

This should not be an incentive for chairman Richard Solomons to kill off a London listing.

new broom

Unlocking investment in Britain is a central goal of Legal & General’s newly appointed chief executive Antonio Simoes.

At the heart of its strategy is the merger of Legal & General Investment Management with its alternative platform L&G Capital, which should bring dynamism to the way it manages £1trn of assets.

Simoes plans to boost investment in infrastructure, private and unlisted companies and interesting growth assets.

Weed out unwanted offspring, like the homebuilder Cala.

Despite a £200m share buyback, the market was unimpressed.

Investors should not forget that insurance and pensions are long-term.

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