Japan’s economy shrinks faster than expected; BT in new £3bn cost savings push – business live | Business

EasyJet’s chief executive is stepping down after a grueling seven years dealing with Covid-19 disruption and soaring oil prices following Russia’s invasion of Ukraine.

The budget airline has announced that CEO Johan Lundgren will leave the company early next year. CFO Kenton Jarvis has been appointed as his successor.

EasyJet also said its losses narrowed over the past six months to £347m in the half year to March 31 from £411m a year earlier.

The company says it is on track to hit its “ambitious medium-term target” of pre-tax profits above £1bn.

Lundgren will be a loss, he says Zoe Gillespieinvestment manager in RBC Brewin Dolphin. explaining:

“easyJet continues to reduce losses during the quieter winter period, while summer bookings are strong. The airline’s increased capacity, increased ancillary services revenue and growth of easyJet Holidays contribute to the spread of revenue streams and provide customers with a better connection to the brand.

Johan Lundgren has been through a particularly turbulent time for easyJet over the past seven years and his departure will be a loss for the company. But he leaves the airline in a strong position and has clear succession plans that provide much of easyJet’s stability as it continues on its upward trajectory. Although stocks have risen since October 2023, they remain some way from their pre-pandemic peak – so there is still plenty of room for growth.”

Thames Water’s largest shareholder has pulled its representative from the utility’s board as uncertainty over the future of the debt-ridden utility continues.

Thames told City this morning that Michael McNicholasrepresentative of the giant Canadian pension fund Omersis withdrawn with immediate effect.

The members of Thames’ board of directors have been in a difficult position ever since its owners pulled the plug for £500m of emergency funding at the end of March and indicated they were not prepared to raise more funds to invest in Thames infrastructure.

The company’s investors – a consortium of funds from Canada, Abu Dhabi, Australia, Britain and China – had deemed the company “uninvestable”, claiming industry regulator Ofwat was too strict.

FT says McNicholas’ departure is a further sign that Thames’ owners are “prepared to divest themselves of their stake in the UK’s biggest water company”.

British telecommunications group BT announced a new cost-cutting drive to save £3bn a year after reporting a drop in profits.

BT’s new chief executive, Alison Kirkby, says the group is now aiming to make £3bn of gross annual cost savings by the end of its 2029 financial year.

This is in addition to an existing £3bn cost saving and service transformation programme, which costs jobsand which BT reported to have raced a year earlier.

Kirkby reports that BT has now reached the ‘tipping point’ of its long-term strategy, having passed the peak cost point of its full-fibre broadband rollout.

It is now announcing new financial guidance, including doubling BT’s free cash flow over the next five years.

The company is also raising its dividend by 3.9% this year to 8p per share.

Kirkby says:

BT Group has built and connected customers to our next-generation networks at record speed and efficiency over the past year, while continuing to grow revenue and EBITDA.

Having passed the peak capital expenditure for our full fiber broadband roll-out and achieved our £3 billion cost and service transformation program a year ahead of schedule, we have now reached the inflection point of our long-term strategy.

Kirkby is under pressure from skeptical investors who have exited £300m worth of short positions against BT’s share price.

This morning the company also reported a 31% drop in pre-tax profits for the latest financial year to £1.186bn from £1.729bn.

This is despite BT raising prices; average revenue per user for its Openreach the broadband division grew 10%, driven in part by higher prices and increased volumes.

Good morning and welcome to our ongoing coverage of business, financial markets and the global economy.

Japan’s economy made a weak start to 2024, contracting faster than expected and confirming the UK as the fastest growing G7 country this year.

Japan’s GDP shrank at an annual rate of 2% in January-March compared with October-December, worse than the forecast decline in activity of 1.5%. That works out to a 0.5% quarterly drop in activity as households and companies cut back.

Weak consumer spending slowed growth, as did declines in capital spending and net exports.

Temporary factors are to blame – including earthquake near Tokyo on New Year’s Day that killed more than 200 peopleand a safety scandal at the automaker Daihatsu which disrupted production.

But in another blow to Tokyo, data for the fourth quarter of last year was revised down to show GDP was flat. That marks nine months of no growth since Japan’s economy collapsed last summer.

This contraction of 0.5% in January-March puts Japan at the bottom of the G7 growth league.

We already know that Great Britain rose 0.6% in Q1, outpacing US with 0.4% growth and Italy by 0.3%, while Germany and France both increased by 0.2%. Official Q1 data for Canada it’s not out yet, but it is appreciated to have increased by 0.6%.

Japan’s sluggish growth is a headache for the Bank of Japan as it tries to normalize monetary policy after a massive stimulus program. Predictions that the BoJ will struggle to raise interest rates have hurt the yen against the US dollar in recent weeks.

Fortunately for the BoJ, however, the dollar is weakening after yesterday’s drop in US inflation.

The agenda

• 7am BST: Norway Q1 2024 GDP report

• 9am BST: European Central Bank Financial Stability Review

• Noon BST: Bank of England policymaker Megan Green delivers a speech on ‘The Current State of the UK Labor Market’

• 13.30 BST: Weekly US unemployment data

• 14.15 BST: US industrial production data