The Bank of England has cut base rate to 5 per cent. The bank’s Monetary Policy Committee voted to cut by 25 basis points to 5 per cent by a margin of 5-to-4.
The FTSE 100 is up 0.2 per cent in afternoon trading. Among the companies with reports and trading updates today are Shell, Barclays, Next, Rolls-Royce, BAE Systems and Wizz Air. Read the Thursday 1 August Business Live blog below.
Shell cost measures drive $6.3bn profit despite oil and gas trading slump
Shell profits slumped by almost a fifth in the second quarter, but beat estimates even as refining margins and oil and gas trading weakened.
The energy giant saw a 19 per cent drop in profit from $7.7billion to $6.3billion between the first and second quarter, beating analyst estimates of $6billion.
It marks the third consecutive quarter that Shell has beaten City estimates.
Rate cut ‘should add to the already building momentum in UK business and consumer confidence’
Indriatti van Hien, fund manager at Henderson Small Companies Investment Trust:
‘The Bank of England’s decision to cut rates by 25bps to 5% today is welcome news for the UK economy and stock market.
‘Whilst nominal in absolute terms it is a meaningful milestone in the direction of travel for monetary policy should add to the already building momentum in UK business and consumer confidence.’
Next expects annual profits of near £1bn
Next has upgraded full-year profit guidance after the retailer’s sales smashed expectations in the first half, driven by a surge in overseas online demand.
The FTSE 100-listed high street giant saw full-price sales jump 4.4 per cent in the first half of the year, beating guidance of 2.5 per cent, after securing £42million more in revenues than forecast in the second quarter.
Next told investors it had planned for a 0.3 per cent full-price sales dip in the second quarter, owing to ‘exceptionally favourable’ trading conditions last summer.
Pace of rate cuts will be slower than hikes
Jill Mackay, savings specialist at Scottish Friendly:
‘The peak of the base rate lasted just shy of one year, having risen meteorically in 2022 and 2023 in order to quell inflation. The cut is good news for households under mortgage pressure but will be bad news for savers who will begin to see their interest earnings slashed.
‘Despite having risen like a rocket, it is likely that rates will now fall like a feather. With the economy growing better than expected, wages rising and employment still relatively robust, the bank will be keen to take a softly-softly approach in order to not reignite inflation. Where its neutral rate lies is an open question, but it will take time to arrive at.’
Barclays investment banking profits cushion core UK business struggles
Barclays profits slumped in the fist half, as a strong performance in its investment banking division failed to offset a decline in its core UK businesses.
The FTSE 100-listed lender’s pre-tax profits fell 9 per cent in the first-half to £4.2billion, beating estimates of £3.8billion but down from £4.6billion a year ago.
Group income was flat at £6.3billion in the second quarter, beating expectations of £6.16billion and bringing total half-year income to £13.3billion, down 2 per cent year-on-year.
BoE cuts base rate to 5%
The Bank of England has cut base rate to 5 per cent. The bank’s Monetary Policy Committee voted to cut by 25 basis points to 5 per cent by a margin of 5-to-4.
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