BUSINESS LIVE: CPI falls to 3.9%; Kin and Carta takeover bid upped; Home REIT value slumps

Consumer price inflation fell to 3.9 per cent in November, down from 4.6 per cent in October and lower than economist forecasts of 4.4 per cent, fresh data from the Office for National Statistics shows. 

The FTSE 100 is up 0.8 per cent in early trading. Among the companies with reports and trading updates today are Kin and Karta, Home REIT, London Stock Exchange Group, LBG Media and Tortilla Mexican Grill. Read the Wednesday 20 December Business Live blog below.

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Kin and Carta agrees fresh £239m private equity takeover offer

London-based technology consultancy Kin and Carta has accepted a new and higher cash takeover deal offer by private equity firm Valtech.

Valtech will pay 130p per share to acquire Kin and Carta, formerly known as St Ives, valuing it at around £239million.

Investors and borrowers cheer shock inflation slump to 3.9%

The so-called Santa rally was handed a boost on Tuesday after fresh data showed a shock slump in consumer price inflation last month.

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Heading online to do some last-minute Christmas shopping is not without risk. But that’s just what millions of Brits are doing this week – and they will be hoping their presents arrive in time for the big day.

Some of the responsibility for that will fall to Royal Mail – with the postal service under huge pressure to perform better than it did last Christmas when strikes caused chaos.

Pound set for $1.35 in 2024, says Goldman Sachs

The pound could hit $1.35 against the US dollar next year, experts at Goldman Sachs predict – but a top bond manager has warned the UK economy risks a ‘hard landing’.

A surge for sterling could boost British holidaymakers and would be a far cry from the aftermath of last year’s disastrous mini-Budget when it plunged to a record low of less than $1.04.

Asda owner shrugs off £4bn debt mountain

Asda’s co-owner has insisted he is the best person to run the debt-laden grocer as an 18-month hunt for a chief executive drags on.

Mohsin Issa led a highly leveraged takeover in 2021, backed by his brother Zuber and private equity group TDR Capital that saddled Asda with huge loans just before interest rates sky-rocketed.

Women lead race to run oil giant BP after Looney was forced to quit

Two women have emerged as front-runners to take over at BP after Bernard Looney was forced to quit in disgrace – though they face stiff competition.

The oil giant has been in turmoil since Looney resigned as chief executive in September for failing to be ‘fully transparent’ about personal relationships with colleagues.

Inflation slows but basics have skyrocketed

Kevin Bright, global leader of the Consumer Pricing Practice at McKinsey & Company:

‘The prices of some staple ingredients are still significantly higher than they were two years ago. For example, the world commodity prices of sugar is up by 32% over this period, while UK sugar prices are up more than 69% over the same time frame.

‘At the same time, world commodity prices of wheat, sunflower oil, and palm oil, have fallen by 25%, 33% and 38% respectively. However, these declines are only just starting to find their way to the shelf. For example, wheat price decreases led to a drop in the price of bread and cereals of 0.8% versus October 2023.

‘One reason for this is because many consumer-packaged goods companies are yet to see their margins return to pre-inflation levels, with most still operating with margins that are 2-3% below 2021 levels.

‘These companies will look to recover this margin compression over time – but with there being a high level of “pricing fatigue” amongst retailers and consumers, these companies are looking to adjust promotion investments, reduce discounting, and shift to a more profitable product mix to rebuild margins. ‘

‘Inflation will probably hover around current levels for the rest of the year before taking another leg down in the spring’

Thomas Pugh, economist at RSM UK:

‘Inflation is now almost a full percentage below the forecast the MPC made only back in November. If this trend continues it suggests that the MPC may be able to start cutting interest rates as early as May.

‘The sharp drop in inflation will also be important for the labour market. Real wage growth will pick up sharply in Q4, which should help the economy to avoid a recession at the end of the year. The sharp fall in November should also help to anchor inflation expectations slow nominal wage growth, reducing one of the key risks for the MPC.

‘Inflation will probably hover around current levels for the rest of the year before taking another leg down in the spring. However, while today’s data is good news for the economy it is worth sounding a note of caution. Services inflation at 6.3% is still far too high for the MPC to be comfortable with and unless wage growth slows sharply, the MPC may not be ready to cut interest rates as early as the market is now pricing in.’

A third of UK chief execs have considered moving their listing overseas

A third of UK chief executives have considered moving their listing overseas, according to figures that deliver a fresh blow to London’s stock exchange.

The findings from advisory firm Teneo show 32 per cent of bosses have discussed with their board the possibility of moving away from the UK market.

It comes a day after a senior executive at US exchange Nasdaq admitted it was on the hunt for more British companies to list in New York.

‘Significant drop in inflation’ suggests ‘interest rates will fall sooner than expected’

Ed Monk, associate director at Fidelity International:

‘Another significant drop in inflation in November only adds to the case that interest rates will fall sooner than expected. The Bank of England has been talking tough, but price rises appear on a rapid decline back towards the Bank’s target range and it may soon be that the risk for rate-setters is not under-tightening but over-tightening.

‘The last portion of above-target inflation may still prove difficult to shift – wages may have peaked but remain high by historical standards – and the Bank of England will want to be sure that enough demand has seeped out of the economy before it eases borrowing costs.

‘For investors, today’s fall in inflation is good news and may add to the momentum in markets that has been gathering for the past month or so. However, markets are priced for perfection, with inflation falling back to target next year with no accompanying recession. Anything less than that could see a sharp correction to today’s market levels.

‘The further fall in inflation means cash savers should continue to see a real terms return on their money. Savers should understand, however, that falling inflation benefits not only cash returns but also those of risk-assets like shares, where returns this year have far exceeded those from cash accounts.

CPI falls to 3.9% in November

Consumer price inflation fell to 3.9 per cent in November, down from 4.6 per cent in October and lower than economist forecasts of 4.4 per cent, fresh data from the Office for National Statistics shows.