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Week Ahead (7 October)



Monday, 7 October – Eurogroup to discuss updates on digital euro, the Capital Markets Union, and competitiveness 

Eurozone finance ministers convene this afternoon to review the progress of the digital euro project. According to the agenda, the discussions will focus on the ongoing preparatory phase, which began in October 2023 following a two-year investigation by the European Central Bank (ECB) into the feasibility of a central bank digital currency (CBDC). The decision to proceed with issuing a digital euro is expected by the end of 2025, pending the completion of the EU’s legislative process. To establish the necessary legal framework, the European Commission introduced a digital euro legislative package in June 2023. 

 

In addition to the digital euro, the Eurogroup will address two interlinked topics; the Capital Markets Union (CMU) and euro area competitiveness. Both were highlighted in Mario Draghi’s recent report on the EU’s future economic outlook, which pointed out key challenges, such as limited financing for innovation and strategic sectors like energy, defence, and telecommunications. The report noted that integrating Europe’s capital markets is crucial to redirect household savings into productive investments, which would enhance competitiveness and support economic growth. 

 

However, there is a divide among member states on how to approach investment support. While the CMU is seen as a viable option to attract private capital, the report warned that it may still require public financial backing to stimulate private investment, a point of contention between more fiscally conservative northern countries and those in southern Europe advocating for greater EU-wide public spending. As a result, advancing the CMU may be viewed as the least contentious path forward for now.  

 

W/C Monday, 7 October – European Commission likely to announce decision on EQOS' acquisition by leading European construction company Eiffage 

This week, the European Commission is likely to announce its decision on whether to allow the acquisition of EQOS, a Luxembourg-based European operator in the energy infrastructure market by the French-based Eiffage, one of the largest construction companies in Europe.  

 

In April, Eiffage Énergie Systèmes, a subsidiary of Eiffage, signed an agreement to acquire 100% of EQOS. EQOS specialises in energy transmission and distribution, telecommunications, and rail infrastructure, operating mainly in Germany and Austria with 43 sites and generating €459 million in revenue last year. The company employs nearly 1,700 people and is considered a key player in Europe’s energy infrastructure sector, a market central to the ongoing energy and digital transitions. 

 

Per the announcement, the proposed acquisition will bolster Eiffage’s presence in Germany’s energy market, complementing its existing subsidiaries in the country, which include Elomech, Schwarz and Grantz, Nat, and the recently acquired Salvia Group. With almost 3,000 employees and €630 million in annual revenue, these companies position Eiffage as a significant player in Germany’s tertiary and industrial sectors, making it a key participant in every segment of the German energy sector. The transaction will be financed using Eiffage’s available cash reserves. 

 

The parties submitted a notice of the proposed acquisition to the European Commission in August, and the deal is expected to be finalised by late 2024, pending regulatory approval. Commitments were submitted on 24 September and the Commission’s deadline for its Phase 1 investigation of the deal is 16 October.   

 

Wednesday, 9 October – Thursday, 10 October – Conservative MPs to vote on the final list of two candidates to replace Rishi Sunak in the party’s leadership 

This week marks an important stage in the Conservative leadership contest as MPs will hold two more rounds of voting, scheduled for 9 and 10 October, to narrow down the remaining four candidates to the final two. The contenders, James Cleverly, Kemi Badenoch, Tom Tugendhat, and Robert Jenrick, all had the chance to make their cases during the party conference in Birmingham last week. 

 

The former Levelling Up Secretary, Robert Jenrick is widely considered the frontrunner, having the broadest base of support among MPs.  The former Foreign Secretary and most recently Home Secretary, James Cleverly, is seen as representing the moderate wing of the party. He appears to have gained momentum following his strong conference performance, and is seen as a potential frontrunner along with Jenrick.  

 

A prominent figure from the party’s right, Badenoch served as Business Secretary under Rishi Sunak and held ministerial roles under Boris Johnson and Liz Truss. Launching her current bid, she warned that the party must “stop acting like Labour” to regain power, appealing to members looking for a stronger conservative stance. Tugendhat is currently the Shadow Security Minister and is seen as a centrist. However, he has also sought to broaden his appeal to the party’s right by taking a hardline stance on immigration and even suggesting the UK could leave the European Convention on Human Rights if necessary.  

 

MPs will vote on 9 and 10 October to narrow down the final list to two contenders. Once this selection is made, the contest will move to the Conservative Party membership, who will cast their votes between 15 and 31 October to choose the next party leader and, ultimately, the person tasked with taking on Labour in the next general election. The final two candidates will need to solidify support across a deeply divided party. A key challenge for the next party leader will be to redefine the party’s direction and restore its fortunes after a historic defeat in the general election of 4 July. 

 

Friday, 11 October – ONS monthly GDP estimate for August in the UK 

On Friday, the UK Office for National Statistics (ONS) will release its monthly GDP estimate for August.  

 

Over the three months leading up to June 2024, real GDP increased by 0.6% compared to the previous three-month period, marking the strongest growth since January 2022. This growth was primarily driven by a 1.1% increase in services output, while production remained stagnant, and construction fell by 0.7%.  

 

However, according to last month’s release of growth data, the UK economy stagnated for a second consecutive month in July, after growing by 0.4% in May, with sector-specific data for July showing a mixed picture. The services sector saw marginal growth of 0.1% after a 0.1% decline in June, while production output fell by 0.8% following an equivalent increase in the previous month. The construction sector also contracted by 0.4% in July, reversing a 0.5% growth in June. July's disappointing data also fell short of economists’ expectations of a 0.2% increase and is a setback for Chancellor Rachel Reeves, who has made economic growth a cornerstone of the Labour government’s agenda. Reeves has pledged to “take the brakes off Britain” ahead of her first Budget on 30 October. 

 

Therefore, although the UK was the fastest-growing economy in the G7 during the first half of the year, a slowdown is now widely anticipated in the second half. The Bank of England (BoE) forecasts a 0.4% growth for the three months to September, which is expected to further slow to just 0.2% in Q4 2024. 

 

In an attempt to boost the economic sentiment, the BoE made its first rate cut since March 2020 on 31 July, reducing the base rate to 5%. This marked a significant shift after the Bank’s rate-setting Monetary Policy Committee (MPC) had raised the base rate 14 consecutive times from December 2021 to August 2023, where it peaked at 5.25%. Despite slowing growth, the Bank decided to maintain rates at 5% in its September meeting. However, the release of GDP estimates for August this week could further bolster the dovish elements of the MPC to make the case for more rate cuts this year, including its upcoming meeting on 7 November. 

 

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