UK business groups expect economy to shrink this year

Leading business groups in the UK have downgraded their economic forecasts and called for action from the government.

The British Chambers of Commerce (BCC) announced today that it expects the UK’s gross domestic product (GDP) to shrink by 0.4% in 2012, down from its earlier forecast for growth of 0.1%.

It claimed that the prospects for recovery are complicated by headwinds from the slowing global economy and the continuing crisis in the eurozone, as well as the austerity drive in the UK. In addition there are new risks from recent rises in food and oil prices, the BCC said.

Next year the organisation expects the UK economy to show growth of 1.2%, a decrease from its earlier prediction of a 1.9% rise in GDP.

The BCC has urged the government to adopt a hybrid strategy that delivers both deficit reduction and growth. It said that swift action is needed to support business investment, incentivise job creation and stimulate construction, particularly in the housing sector, and that this can be achieved by changing spending priorities or with limited extra borrowing.

“Politicians need to get some political backbone and show leadership,” said BCC director general John Longworth.

Yesterday another business organisation, the Confederation of British Industry (CBI), cut its GDP forecast for 2012, saying that it now expects the economy to shrink by 0.3% in 2012. This is a significant fall from the previous forecast in May of 0.6% growth, reflecting a more negative first half and a more modest rate of growth in the second half than was expected in May.

The CBI expects growth to return to the UK economy towards the end of the year and it forecasts GDP growth of 1.2% in 2013, revised down from its previous estimate of 2%. This matches the BCC forecast. The CBI noted, however, that the ongoing global uncertainty means there is a risk that growth could be lower.

Despite the coalition government’s austerity measures, both the CBI and the BCC have predicted that the government will end up borrowing more in 2012 and in the coming years. The BCC believes that public sector borrowing will overshoot the target by GBP14bn to GBP17bn in each year until 2015 and it said that the task of eliminating the government’s structural budget deficit will probably take two to three years longer than envisaged.


London-listed healthcare firm Care UK acquires Whitwood Care

British health and social care services provider Care UK plc (LON:CUK) has taken over specialist adult residential care operator Whitwood Care, Care UK said without providing financial details.

The buyer said that the deal complements its existing services for individuals with learning disabilities across the range of outreach, care at home, supported living, residential homes and respite live in care. The company will also add a staff of 140 with expertise in personalised support.

Whitwood Care operates three West Yorkshire-based care homes, namely Whitwood House, Whitwood Hall and Whitwood Grange. The homes provide purpose built residential facilities offering specialist care and support for 48 people with learning disabilities, including those on the autistic spectrum.

Libby Eastley, Business Development director for Community Services, Care UK, commented that Whitwood Care’s facilities will complement the company’s services focused on individuals with learning disabilities. Eastley said further that Whitwood Care’s staff will join Care UK’s community services division.

Care UK, established in 1982, operates GP centres, hospitals, care homes and provides support for people within the community. The company’s services for older people care focus on support at home, supported living services, day clubs and residential or nursing homes. Its healthcare services include treatment centres, GP practices, NHS walk-in centres, out of hours GP support and clinical assessment and diagnostics facilities.

Broadcaster ITV acquires production firm So Television

British broadcaster ITV Plc (LON:ITV) said it had purchased production company So Television for a maximum price of GBP17m (USD27m/EUR21.5m), as part of plans to boost its capability in the production of TV entertainment programming.

ITV, carrying out the deal through its fully-owned unit ITV Studios Ltd, will provide GBP10m of the total price in cash upfront and an additional cash payment based on SO Television’s profits to 31 July 2016, the buyer said.

The acquired business, set up by Graham Norton and Graham Stuart 12 years ago, produces entertainment and comedy programmes such as The Graham Norton Show and The Sarah Millican Television Programme.

The Graham Norton Show was recommissioned by BBC earlier in 2012 through 2014 and it is also distributed internationally and broadcast in 100 other countries.
The deal serves ITV’s five-year transformation plan to build world-class content for free and pay platforms in the UK and abroad, the buyer said.

ITV Studios’ managing director Kevin Lygo said in a comment that his company can bring scale to So Television. The new owner will keep The Graham Norton Show as a top programme, while adding new programming, Lygo explained.

Graham Norton and Graham Stuart welcomed the transaction, saying that under the umbrella of ITV, So Television will have the strength needed to continue its growth.

BT sells stake in Indian IT firm Tech Mahindra for $250m

British communications services provider BT Group Plc (LON:BT.A) said it had disposed of 14.1% in Indian IT services firm Tech Mahindra Ltd (BOM:532755) for a total gross cash price of INR13.95bn (USD250.4m/EUR203m).

The vendor said it had sold 17.9m Tech Mahindra shares to institutional investors at a price per unit of INR777.73 and cut its stake in the Indian IT firm to 9.1%. It could further reduce that interest, BT Group noted in its statement.

BT will report the financial impact of the stock sale as an income statement specific item in its next financial results.
The Indian company, which offers technology services to telecommunications companies, will remain a key supplier to BT Group.

The divestment was earlier reported by various media, including Bloomberg and Reuters, which said that BT had hired Credit Suisse Group AG (NYSE:CS) and JPMorgan Chase & Co (NYSE:JPM) to handle the process.

Reuters also cited earlier reports by the Indian media as saying that some global private equity firms had expressed interest in BT’s stake in Tech Mahindra.

BT offers its communications services and solutions to customers in over 170 countries. Its portfolio comprises global networked IT services, local, national and international telecommunications services, broadband and Internet products and services, as well as converged fixed/mobile products and services.