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UK to be second weakest performer of world’s big economies next year – OECD

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10 months ago

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Source image: https://www.theguardian.com/business/2022/nov/22/uk-growth-oecd-energy-crisis

The UK will be the second weakest performer of the world’s big economies next year as the global economy continues to suffer the knock-on effects of the biggest energy shock in four decades, a leading international institution has warned.

The Paris-based Organisation for Economic Co-operation and Development said only Russia of the members of the G20 group of leading developed and developing nations would suffer a bigger contraction than Britain in 2023.

G20 economies

In its half-yearly economic outlook, the OECD said the UK economy would expand by 4.4% this year – the sixth fastest rate in the G20 – but contract by 0.4% next year.

Although most countries have had their growth forecasts cut by the OECD since June, only Russia’s 5.6% contraction is forecast to be more severe than Britain’s. The poor performance is forecast to continue in 2024 with expansion of 0.2% – the joint weakest alongside Russia.

The OECD’s acting chief economist, Álvaro Pereira, said he was expecting a less severe downturn next year than the 1.4% decline pencilled in by the Office for Budget Responsibility in last week’s autumn statement, but a more subdued recovery in 2024 than the OBR had pencilled in.

Pereira said the OECD thought interest rates would peak at a lower level than the OBR was anticipating, and that the UK would suffer a four-quarter recession ending in the middle of 2023.

Pat McFadden, Labour’s shadow chief secretary, said the OECD’s forecasts were “yet more evidence of the Tories’ 12 years of economic failure”.

Noting that the UK would be alone among the OECD’s 38 members in having a smaller economy in 2024 than in 2019, McFadden added: “This is the Tory doom loop. A low growth spiral leading to higher taxes, lower investment, squeezed wages and poor public services.”

Overall, the OECD expects growth across its 38 rich-country members to be 0.8% in 2023 – half the level expected six months ago. The US and the eurozone are forecast to expand by 0.5%, but growth is expected to be stronger in three big Asian economies – China (4.6%), Indonesia (4.7%) and India (5.7%).

Of the three biggest EU economies, Germany is forecast to be the third worst-performing G20 country (-0.3%), while Italy (0.2%) and France (0.6%) are likely to post modest growth, according to the OECD.

Wind turbines turn on top of a dump next to the BP Refinery Scholven in Gelsenkirchen, Germany
The OECD forecasts that Germany will be the third worst-performing G20 country. Photograph: Michael Sohn/AP

Pereira said: “The global economy is reeling from the largest energy crisis since the 1970s. The energy shock has pushed up inflation to levels not experienced for many decades and is lowering economic growth all around the world.

“Higher inflation and lower growth are the hefty price that the global economy is paying for Russia’s war of aggression against Ukraine. Although prices were already creeping up due to the rapid rebound from the pandemic and related supply chain constraints, inflation soared and became much more pervasive around the world following Russia’s invasion.”

Pereira said the upshot of the unexpected surge in prices was that real wages were falling in many countries, slashing purchasing power and hurting people everywhere.

The OECD economist said the UK’s poor performance was because of a combination of rising interest rates, government action to bring down borrowing and debt, and the market turbulence during Liz Truss’s brief period as prime minister.

The economic outlook said the untargeted energy price guarantee announced in September 2022 had increased pressure on already high inflation in the short term, requiring higher interest rates and raising debt service costs.

It also stressed the risks of blackouts in the coming months: “Although Britain is not reliant on Russian exports, it imports gas and electricity from the continent during the coldest months. A particularly cold winter could risk supply disruptions, exposing the economy to rolling power cuts.”

Source: https://www.theguardian.com/business/2022/nov/22/uk-growth-oecd-energy-crisis

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No need to send it back: Netflix posts its final DVDs to customers

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43 mins ago

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September 30, 2023

Most of Netflix’s 238 million streaming customers around the world will be unaware that the company first launched 25 years ago as a DVD mailing service. Even fewer might realise that operation has continued, with under 1 million people still subscribing.

But now the company is finally hitting the stop button, with its five remaining US distribution centres mailing out their final discs to American customers on Friday.

These DVD diehards will be allowed to keep these titles rather than return them, meaning some will get up to 10 as a goodbye present from a business that boasted as many as 16 million subscribers at its peak.

“It is very bittersweet,” Marc Randolph, Netflix’s co-founder and the chief executive when the company shipped its first DVD, told Associated Press. “We knew this day was coming, but the miraculous thing is that it didn’t come 15 years ago.”

Netflix does not break out the number of DVD subscribers in its figures, but according to an AP estimate fewer than 1 million people now subscribe to the service.

Randolph came up with the idea of a DVD-by-post service in 1997 – in a challenge to then rental market leader Blockbuster – with his friend and fellow entrepreneur, Reed Hastings, who eventually succeeded Randolph as CEO. He only stepped aside from that role this year.

The first disc sent out by Netflix was Tim Burton’s Beetlejuice in March 1998 and since then the company has shipped 5.2bn of them. Its most popular title was the Sandra Bullock vehicle The Blind Side.

However, Randolph said he knew that DVDs would not be the mainstay of the business and would be overtaken by watching films and TV shows through internet connections.

In 2011 Netflix decided to separate the DVD business from the streaming business, one year after Blockbuster went bankrupt – having turned down an opportunity in 2000 to buy Netflix for $50m (£41m) instead of trying to compete against it. The streaming giant is now worth about $166bn.

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“From day one, we knew DVDs would go away, that this was transitory step,” Randolph said. “And the DVD service did that job miraculously well. It was like an unsung booster rocket that got Netflix into orbit and then dropped back to Earth after 25 years. That’s pretty impressive.”

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Evergrande halts share trading as woes mount for China property giant

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1 day ago

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September 29, 2023

Embattled Chinese property giant Evergrande has suspended share trading on the Hong Kong stock exchange only a month after it resumed trading after a 17-month suspension.

Trading in its two other units – the property services and electric vehicle groups – also stopped at 9am on Thursday, according to notices posted by the stock exchange.

The halt in trading comes a day after reports that the chair of Evergrande had been put under police surveillance. Hui Ka Yan, who founded Evergrande in 1996, was taken away earlier this month and is being monitored at a designated location, according to Bloomberg.

It is not clear why Hui might have been placed under residential surveillance, which falls short of a formal detention or police arrest and does not mean a criminal charge follows.

Evergrande had only resumed trading on 28 August after the company was suspended for 17 months for not publishing its financial results. Earlier this month, several employees of Evergrande’s wealth management unit were arrested in Shenzhen on unspecified charges.

Two former executives were also reportedly detained recently. Pan Darong and Xia Haijun had resigned last year after it emerged that 13.4bn yuan (£1.5bn) of deposits had been used as security for third-party loans.

Earlier this week, Hengda Real Estate, Evergrande’s primary unit in mainland China, missed principal and interest payments on a 4bn yuan bond. Hui resigned from his position as Hengda chair in 2021.

On Sunday, Evergrande said it was unable to issue new debt as Hengda was being investigated.

And on Friday it said meetings planned this week on a key debt restructuring plan would not take place, adding it was “necessary to reassess the terms” of the plan in order to suit the “objective situation and the demand of the creditors”.

China’s property sector is a key pillar of growth – along with construction, it accounts for about a quarter of GDP – and has experienced a dazzling boom in recent decades.

The massive debt accrued by the industry’s biggest players has, however, been seen by Beijing in recent years as an unacceptable risk for the financial system and overall economic health.

Authorities have gradually tightened developers’ access to credit since 2020 and a wave of defaults has followed – notably that of Evergrande.

Another Chinese property giant, Country Garden, narrowly avoided default in recent months, after reporting a record loss and debts of more than $150bn.

Agence France-Presse contributed to this report

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Musk ditches X’s election integrity team ahead of key votes around world

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1 day ago

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September 29, 2023

Elon Musk, owner of X, has confirmed he has ditched his team working to prevent disruption to elections, just days after the EU announced the platform, formerly known as Twitter, had the highest proportion of disinformation in three European countries.

Ahead of 70 elections around the globe in the coming year, the controversial businessman confirmed on X: “Oh you mean the ‘Election Integrity’ Team that was undermining election integrity? Yeah, they’re gone.”

According to reports, several staff working out of the Dublin office including the co-lead of election disinformation team, Aaron Rodericks, have left the company.

Overnight Musk appeared to give his first reaction to EU claims that X had the highest ratio of disinformation of the large social media platforms with a picture of three penguins bearing the logos of Facebook, Instagram, TikTok and YouTube saluting another penguin bearing the X logo.

Rodericks had recently secured an injunction against the company restraining the company from taking disciplinary action after he had posted information about the company’s recruitment of staff for his team on his personal account.

He claimed the company did nothing after he had been subjected to a barrage of abuse from people who accused him of trying to suppress freedom of speech on X.

Last month he posted an advert on LinkedIn for eight new roles revealing he was seeking people with a “passion for protecting the integrity of elections and civic events, X is certainly at the centre of the conversation”.

Sweeping new laws came into force in August, compelling social media platforms to remove fake accounts, disinformation and hate speech, with X rivals Facebook, TikTok, Instagram, Google and Microsoft all taking action and reporting back to the EU.

While Twitter quit the code of practice designed by the EU to help the companies comply with the new laws, Musk promised earlier this year he would comply with the rules.

Concerns over the platform’s approach to content moderation under Musk’s leadership have triggered an advertising boycott of the company, which relies on ads for the majority of its income.

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Musk has admitted that advertising revenues have fallen by about 60% since he bought the business last year and has blamed anti-hate speech campaign groups for the decline. He is suing the Center for Countering Digital Hate over its coverage of X and has also threatened to sue the Anti-Defamation League, which has raised concerns about antisemitic content on the platform.

Farhad Divecha, managing director of London-based digital marketing agency Accuracast, said: “The fact that Elon Musk seems to have disbanded the team that deals with election integrity sends a clear signal that preventing disinformation or maintaining a level of integrity isn’t a priority for X. This is one more factor adding to the concerns about brand safety, or ensuring brands aren’t associated with objectionable content.”

The company was approached for comment.

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