Adobe’s $20bn merger with Figma abandoned; UK economy ‘limping’ as high interest rates bite – business live | Business

Newsflash: Adobe’s $20bn deal to buy design software company Figma has dramatically collapsed, in the face of opposition from regulators.

Adobe and Figma have mutually agreed to terminate the deal, which was announced on September 2022, after strugging to persuade regulators to approve the merger.

They say that there is no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority.

Last month, the CMA warned that the deal would harm competition in product design software by bringing two of the main companies in the sector together.

The European Commission also told Adobe in November that it believed the proposed acquisition of Figma may reduce competition in the global markets for the supply of interactive product design software and of other creative design software.

Shantanu Narayen, chair and CEO of Adobe. says both companies “strongly disagree” with the regulators, but have decided it is best to move forward independently.

Narayen adds:

“While Adobe and Figma shared a vision to jointly redefine the future of creativity and productivity, we continue to be well positioned to capitalize on our massive market opportunity and mission to change the world through personalized digital experiences.”

The companies have signed a termination agreement that resolves all outstanding matters from the transaction, including Adobe paying Figma a termination fee, thought to be $1bn.

Figma produces a collaborative web application for interface design, allowing teams who are producing user interface and user experience design projects to collaborate together online.

Back in September 2022, The Observer’s John Naughton wrote that the $20bn fee was “way above any rational valuation of Figma”.

He compared the Adobe-Figma deal to Facebook’s acquisition of WhatsApp in 2014 (which took out a potential competitor), adding that “The deal should be challenged, investigated and banned.”

BP Plc said it will pause all its oil tanker shipments through the Red Sea.

The move follows an escalation of attacks on merchant shipping being mounted from Yemen’s ports by Houthi forces.

In a statement, BP says:

“The safety and security of our people and those working on our behalf is BP’s priority.

“In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea.”

It emerged over the weekend that the US is preparing to announce the launch of an expanded maritime protection force, to guard shipping in the Red Sea, which is a crucial routes for oil and fuel shipments.

Some shipping firms, including Denmark’s Maersk, have alread paused journeys through the Red Sea until tensions in the Middle East fall.

Speaking of wage growth…. the head of bowling chain Hollywood Bowl has warned that the “quite painful” increase in the UK’s minimum wage may force it to raise prices.

Hollywood Bowl CEO Stephen Burns told Radio 4’s Today Proogramme that the near 10% increase in the minimum wage was an “unexpected hit” for the business, as it had expected a smaller rise of around 7.7%.

Burns said the new rate, which begins in April, was “quite painful”. It’s estimated to cost around £1.2m per year.

He added:

“Clearly it’s put a bit of pressure on.

“We have managed to keep our prices pretty low to try and mitigate that but we may need to do something again towards the mid or the end of the year.”

From April, the minimum wage for workers over 23 will increase to £11.44 per hour next April, from £10.42.

Just in: Bank of England deputy governor Ben Broadbent is hinting that the UK’s central bank needs to see a deeper slowdown in wage inflation before it can consider cutting interest rates.

Broadbent is giving a speech to the London Business School, outlining the challenge of settting monetary policy in a time of uncertainty.

That uncertainty covers both the supply side of the economy, and the incoming data showing the state of the economy, Broadbent explains.

And he singles out earnings growth as a key indicator, saying it is too soon to say that wage growth is slowing.

Last week, the latest labour force data showed that wage growth including bonuses fell to 7.2% from 8%.

Broadbent, though, says the Bank’s monetary policy committee will need to see a clearer fall, saying:

One current example is wage growth.

Given the volatility in the official estimates, and the disparity (such as it is) among the various indicators we have, it will probably require a more protracted and clearer decline in these series before the MPC can safely conclude that things are on a firmly downward trend.

German business morale has worsened in December, according to the latest data from the Ifo institute.

Ifo’s business climate index, just released, shows that companies are less happy about current economic conditions, and also gloomier about the economy outlook.

Ifo’s current situation index has fallen to 88.5 from 89.4 in November, while its gauge of economic expectations declined to 84.3 in December from 85.1 in November.

Ifo says that “sentiment in German business has clouded over”.

Within manufacturing, Ifo says order books are shrinking, while energy-intensive industries are having “a particularly tough time”.

In the services sector, the business climate improved slightly, but future expectations in the restaurants and catering business “took a nosedive”.

Ifo president Clemens Fuest says:

“As the year draws to a close, the German economy remains weak.”

The UK government has announced it will bring in a new import carbon pricing mechanism by 2027.

Under the plan, goods imported from countries with a lower or no carbon price will incur a new levy.

The new carbon border adjustment mechanism (CBAM) is part of the UK’s decarbonisation efforts, and will effectively penalise overseas manufacturers who pay a smaller charge for carbon emissions than UK factories, or none at all.

It will, the government hopes, avoid emissions being displaced from Britain to other countries which have a lower or no carbon price.

Currently, the UK Emissions Trading Scheme puts a price on emitting a tonne of CO₂, similar to the European Union’s own carbon trading scheme.

The CBAM will apply to carbon intensive products in the iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement sectors.

Chancellor Jeremy Hunt says:

“This levy will make sure carbon intensive products from overseas – like steel and ceramics – face a comparable carbon price to those produced in the UK, so that our decarbonisation efforts translate into reductions in global emissions.

“This should give UK industry the confidence to invest in decarbonisation as the world transitions to net zero.”

Earlier this month the head of the International Monetary Fund, Kristalina Georgieva, said putting an implicit price on carbon emissions would generate the vast amounts of cash needed to tackle the climate crisis.

The path of interest rates next year will have a huge impact on economic growth, and the markets, in 2024.

Last Wednesday, the Federal Reserve sparked a share rally after appearing to signal that US interest rates have peaked. That cheered investors, who welcomed the suggestion that the Fed was looking forward to cutting US interest rates in coming months.

But on Friday, Federal Reserve Bank of New York President John Williams pushed back against these expectations, insisting that “we aren’t really talking about rate cuts right now”.

Williams’ comments lifted the dollar at the end of last week.

And today, Asia-Pacific markets are in the red, as some of last week’s rate-cut exuberance deflates.

China’s Shenzhen Composite is down over 1%, while Hong Kong’s Hang Seng has lost 1% and Japan’s Topix is down 0.66%.

Kyle Rodda, senior financial market analyst at capital.com, explains:

The markets sobered up slightly at the end of the week as Fed speakers appeared to push back on the notion of rate cuts next year. The central bank wheeled out New York Fed head John Williams to clarify things, suggesting that the Fed “isn’t really talking about rate cuts” and tabling a March cut is premature.

The Fed’s use of Williams is telling because his commentary a few weeks ago about the case for lowering rates as inflation falls to keep real rates steady fuelled the euphoria about cuts.

The mixed messaging raises the question of whether the Fed has fumbled its communication and potentially scored an unfortunate own goal as financial conditions loosen as a result of the new forward guidance.

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

It’s the start of the last working week before Christmas, and investors’ minds in the City are turning to 2024 (unless they’ve clocked off already).

After a turbulent 2023, what will next year bring to the markets, and Britain’s economy, they ponder.

Well, according to KPMG, Britain’s growth in 2024 will be modest, at best.

The accountancy giant’s latest global economic outlook, released this morning, cautions that the UK economy is “limping with a sprained ankle”, at at time when global growth is being held back by high interest rates and policy uncertainty.

KPMG estimates UK GDP will rise by 0.5% in 2024, the same as in 2023, picking up to 1% in 2025.

That’s a small upgrade on their old forecasts, of 0.4% growth in 2023 and 0.3% in 2024. And it’s more optimistic than the Bank of England, which projects zero growth next year.

But it’s still a weak prospect, partly due to high borrowing costs. Even though UK interest rates have been stuck at 5.25% since August, much of the impact is yet to be felt as many households have yet to roll onto new, pricier, mortgage deals.

KPMG explain:

Mortgage rates on new loans have risen by 370 basis points since the end of 2021, reflecting higher policy rates. However, the effective rate on the stock of mortgages has only increased by around 120 basis points, as a large share of mortgages with repayments fixed up to five years has been insulated from the immediate impact of higher rates.

UK unemployment is tipped to rise, from 4.1% this year to 4.7% in 2024, and 4.9% in 2025.

Yael Selfin, chief economist at KPMG UK, says:

“While the UK economy is resilient, it needs to get its mojo back. We expect monetary and fiscal policies to act as a headwind to growth over the next two years, and a sudden revival in productivity is not likely to come to the rescue.

This means that even the expected continuation of positive growth should not be celebrated prematurely, as the outlook is dominated by downside risks.”

Looking globally, KPMG predicts global GDP growth of 2.2% in 2024 – down from 2.6% in 2023, with a return to 2.6% growth anticipated in 2025.

Here are the key points from the report:

• Activity has outperformed expectations, but the UK economy remains weak and vulnerable to shocks.

• Risks to the UK outlook are skewed to the downside, and stem from a more persistent inflation, delayed impact of monetary policy, and structural weakness of labour supply.

• Deceleration in growth in some of the world’s largest economies, coupled with little impetus elsewhere, could see global GDP growth easing slightly in 2024.

• Weaker momentum should help push down inflation, with average world inflation expected to halve by 2025.

Also coming up

We’ll hear from Bank of England deputy governor Ben Broadbent this morning, when he gives a speech at London Business School. Last week, the BoE warned that fighting inflation was tougher in the UK than in the eurozone and US.

On the economics front, the latest German IFO business survey will test the temperature of Europe’s largest economy, as it struggles towards 2024.

Michael Hewson, chief market analyst at CMC Markets UK, says:

Given the weak nature of last week’s PMI numbers it would be surprising to see a significant improvement on the November numbers when the current assessment improved slightly to 89.4.

The agenda

• 9am GMT: IFO Institute’s index of Germany’s business climate

• 10.30am GMT: Bank of England deputy governor Ben Broadbent speech at London Business School

• 3pm GMT: NAHB index of US housing market