UK stagflation fears rise after grim growth and inflation forecasts; Hong Kong to complain to WTO over US tariffs – business live

Online fast-fashion retailer Shein is set to cut its valuation in a potential London listing to around $50bn, Reuters is reporting,citing three people with knowledge of the matter.

That’s nearly a quarter less than the company’s 2023 fundraising value, reflecting various headwints hitting Shein.

Reuters explains:

The company’s business prospects have come under a cloud in recent days after the Trump administration said it would close the “de minimis” duty exemption in the United States, ending an import rule that had helped Shein keep prices low.

The measure’s removal could hurt Shein’s profitability and push up product prices in the U.S., its biggest market, analysts and industry experts have said.

Shein is also facing challenges in Europe, where parcels sent from China by online retailers will face strict new customs controls as part of a crackdown by the European Commission on “dangerous products” flooding the EU market.

Hong Kong will file a complaint with the World Trade Organisation over tariffs imposed by Donald Trump earlier this week.

The Hong Kong Special Administrative Region (HKSAR) government today said it was unfair that the US was imposing an additional 10% on products of Hong Kong, so it has decided to complain to the WTO.

A HKSAR spokesman said:

“The US’ measures are grossly inconsistent with the relevant WTO rules and ignore our status as a separate customs territory as stipulated in Article 116 of the Basic Law and recognised by the WTO. The HKSAR Government will formally launch procedures in accordance with the WTO Dispute Settlement Mechanism against the US’ unreasonable measures to defend our legitimate rights.”

The spokesman added that Hong Kong is “a staunch supporter” of the rule-based multilateral trading system, and urged the US to take immediate actions to rectify the situation.

The complaint comes three days after Donald Trump imposed an additional 10% tariff on goods from China, prompting Beijing to retaliate with tariffs on some US imports.

Earlier today, India’s central bank cut its benchmark interest rate for the first time in nearly five years.

The Reserve Bank of India lowered the repo rate, which the central bank lends to commercial banks, by a quarter of one percent, to 6.25%.

The move comes as officials try to reverse slowing economic growth in the world’s most populous country.

Announcing the rate cut, the RBI’s monetary policy committee say:

The global economy is growing below the historical average even though high frequency indicators suggest resilience amidst continued expansion in world trade. The world economic landscape remains challenging with slower pace of disinflation, lingering geopolitical tensions and policy uncertainties. The strong dollar, inter alia, continues to strain emerging market currencies and enhance volatility in financial markets.

On the domestic front, as per the First Advance Estimates (FAE), real gross domestic product (GDP) is estimated to grow at 6.4 per cent (y-o-y) in 2024-25 supported by a recovery in private consumption. On the supply side, growth is supported by the services sector and a recovery in agriculture sector, while tepid industrial growth is a drag.

Elsewhere in the property world, the UK government is forcing private landlords in England and Wales to improve the energy performance ratings of their properties.

Under the plan, by 2030 all private landlords will be required to meet a higher standard of Energy Performance Certificate (EPC) C or equivalent in their properties – up from the current level of EPC E.

Currently, 48% of private rented homes in England meet this standard.

Ministers say the plan could save private renters £240 per year on average on their energy bills.

Energy Secretary Ed Miliband said:

For years tenants have been abandoned and forgotten as opportunities to deliver warm homes and lower energy bills have been disregarded and ignored.

Landlords have concerns, though. Ben Beadle, chief executive of the National Residential Landlords Association, says:

“We all want to see rented homes as energy efficient as possible, but that will require a realistic plan to achieve this.

The chronic shortage of tradespeople to carry out energy efficiency works needs to be addressed, alongside a targeted financial package to support investments in the work required as called for by the Committee on Fuel Poverty and Citizens Advice.

Importantly a realistic timetable is needed if the 2.5 million private rented homes, which will not currently meet the Government’s proposed standards, are to be improved.”

The governor of the Bank of England has urged Donald Trump’s administration to maintain US support for the World Bank and the International Monetary Fund.

Andrew Bailey told the BBC he was “following extremely closely” whether the Trump administration will change its support for the two bodies, which are both major global economic institutions.

Sources in Washington said the two institutions were caught by a White House executive order for a review of United Nations (UN) and other international organisations.

Bailey said it is “very important that we don’t have a fragmentation of the world economy”.

He added:

“A big part of that is that we have support and engagement in the multilateral institutions, institutions like the IMF, the World Bank, that support the operation of the world economy. That’s really important.”

Despite the 0.7% rise in UK house prices in January, the rate of annual property price inflation slowed in two thirds of the UK’s nations and regions at the start of the year.

Halifax reports that:

• Northern Ireland continues to have the strongest annual property annual price growth in the UK, though at +5.9% in January this eased considerably compared to December (+7.3%). Properties in Northern Ireland now cost an average of £205,473.

• House prices in Wales were up +3.6% compared to the previous year, with properties now costing an average of £227,397.

• Scotland once again saw a lower rise in house prices compared to the rest of the UK, with properties in the country now worth an average of £210,690, +2.4% more than the year before.

• In England, the North East has overtaken the North West as the region with the strongest annual property price growth, up +5.2% compared to the previous year, with properties now costing an average £178,696. This is the first time since September 2023 that the North West has not topped the table of English regions for annual growth.

• London retains the highest average house price in the UK, at £548,288, up +2.8% compared to last year

Economic growth may be slowing, but UK house prices continues to rise – according to lender Halifax.

It has reported that house prices increased by 0.7% in January, following a dip of 0.2% in December, lifting the average price to a new record high of £299,138 (on Halifax’s index).

On an annual basis, house prices were 3% higher – down from 3.4% in November.

Amanda Bryden, head of mortgages at Halifax, says the UK housing market started the year “on a positive note”.

She suggests that some buyers may have been keen to avoid increases in stamp duty coming this spring in England and Northern Ireland.

Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy. There’s strong demand for new mortgages and growth in lending.

With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.

Bryden predicts that UK mortgage rates are likely to hover between 4% and 5% this year, adding:

“Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come.

Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-ofliving squeeze

Bank of England governor Andrew Bailey told reporters that he doesn’t use the word ‘stagflation’, arguing that it doesn’t have a “precise meaning”.

Some of the UK newspapers disagree – with stagflation fears appearing on several of today’s front pages.

The Guardian points out that the chancellor’s plans for growth suffered a double blow yesterday, with the Bank signalling that people would face a fresh squeeze on living standards from rising inflation even as the economy stalled.

The Daily Mail points out that Britain last suffered a bout of stagflation – soaring prices and falling growth – in the 70s.

The Daily Express calls the growth forecasts a ‘wake-up call’ for Reeves.

While the Financial Times points out that the weakening pound pushed UK stocks to a new record.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Stagflation fears are rippling through the City today after the Bank of England slashed its growth forecasts on Thursday, and lifted its inflation forecast.

As we covered yesterday, the Bank halved its forecast for GDP growth this year to just 0.75%, down from 1.5% expected three months ago.

In another blow to the government, the Bank predicted inflation would peak at 3.7% later this year, nearly twice its 2% target, as rising energy prices push up the cost of living again.

Despite this grim outlook, the Bank cut interest rates, arguing that a “continued, gradual easing of underlying inflationary pressures” is underway in the UK economy.

Weaker growth and rising inflation is a toxic combination for chancellor Rachel Reeves; it could be kryptonite to her hopes of sticking to the fiscal rules laid out in last years budget.

As our economics editor Heather Stewart explains

Economic output is expected to have contracted by 0.1% in the final three months of 2024 and expanded by just 0.1% in the current three-month period – narrowly skirting a recession, defined as two successive quarters of decline. The Bank suggests productivity, which Reeves badly wants to improve, has declined.

If the independent Office for Budget Responsibility (OBR) takes a similar view, it could make a sharp downgrade to its growth forecasts when these are published on 26 March, from the 1.9% it was predicting in October.

Whether that wipes out Reeves’s room for manoeuvre against her fiscal rules depends on how the OBR assesses the longer-term outlook. Market expectations of lower rates in the UK may bear down on the government’s cost of borrowing, helping to offset some of the impact on the public finances from weaker growth.

But the MPC’s gloomy prognosis sits in stark contrast to Reeves’s determinedly upbeat messaging on growth in recent week

BoE governor Andrew Bailey also cautioned that while he is very supportive of Reeves’s growth agenda, measures such as a new Heathrow runway or new reservoirs won’t move the growth dial in the short term.

Yesterday’s rate cut brings down Bank Rate to 4.5%, and the City money markets expect at least two more quarter-point cuts by the end of the year.

But if inflation pushes higher, those forecasts could come under pressure.

Van Luu, head of currency and fixed income solutions strategy at Russell Investments,

Making policy in a “stagflation” environment with high inflation and lackluster growth is a formidable challenge. Tax hikes and rises in administered prices will at least temporarily increase price pressures.

The balance between the inflationary impulse and a slackening jobs market will determine the pace of further rate cuts in 2025.

The agenda

• 7am GMT: Halifax house price index for January

• 7am GMT: German trade data for December

• 1.30pm GMT: US non-farm payroll for January