Published: 20 August 2021
By Suzanne Evans, Director, Political Insight
Government borrowing fell in July compared with last year, according to the latest Office for National Statistics (ONS) released this morning. Although the difference between spending and tax income was £10.4bn - £10.1bn lower than July last year – the amount is still the second-highest for July since records began. Government debt now stands at more than £2.2 trillion, around 98.8% of GDP, a rate not seen since the early 1960s. The ONS now estimates that the government borrowed a total of £298bn in the financial year to March, amounting to 14.2% of GDP, the highest level since the end of World War Two. The ONS said the cost of measures to support individuals and businesses during the pandemic meant day-to-day spending by the government rose by £204.3bn to £942.7bn last year.
Stock markets worldwide fell sharply yesterday after the minutes of the latest meeting of the US Federal Reserve suggested it could start pulling away emergency support for the world's biggest economy later this year and ease off its $120bn monthly programme of bond purchases. In London, the FTSE 100 lost $50bn when it closed 1.5% down, losing more than 110 points, having dipped briefly under the 7,000 mark. The release of the minutes added to a plethora of woes for the markets, which include the turmoil in Afghanistan, signs of weakness in the Chinese economy, the continued spread of the Delta covid variant amid apparent weaking of vaccine protection, and ongoing inflation fears. Oil prices also continued their six-day losing streak, with a barrel of Brent crude dipping below $67 a barrel.
Thames Water has agreed to pay out £11.1m after thousands of wholesale customers were wrongly billed, regulator Ofwat said yesterday. The case relates to 13,800 non-household customers and water retailers to whom Thames was supplying water and sewerage services. Ofwat launched an investigation in 2019 after receiving a complaint alleging Thames was abusing its dominant position in the business retail market by removing information about discounts from which customers had previously benefited, and incorrectly calculating water usage at some unmetered premises. "Ofwat found that data used to calculate the invoices for nearly 14,000 water supply points was incorrect," the regulator said, adding that the errors “had a negative impact on retailers who have faced increased costs and, in some cases, lost customers as a result of incorrectly being blamed for the problems." Thames has agreed to pay back affected customers and retailers and strengthen its processes - moves accepted by the regulator which has proposed to issue only a nominal £1 penalty on top of the compensation package.
Supermarket group Morrisons has accepted an improved £7bn takeover bid from US private equity group Clayton, Dubilier & Rice (CD&R), dropping its recommendation for investors to accept a previous £6.7bn offer from a consortium led by US based investment group Fortress. Fortress told the BBC it was "considering its options".
Philip Morris International (PMI) has bought some 175 million shares in London-listed inhaler maker Vectura in the last two days, ahead of a proposed takeover deal deadline set for 15th September. The US tobacco giant now owns around 29.2% of the company, according to Sharecast News. Vectura announced last week that its directors were planning to unanimously recommend the takeover by PMI at 165p a share. PMI will need more than 50% of shareholders to accept its offer for the deal to go through.
Marks & Spencer says its turnaround plan is working and that it is on track to surpass the top end of its previous profit guidance of £300 million to £350 million for the year. M&S said it believes the performance provides “strong confirmation” that it has benefited from its Never the Same Again overhaul programme, which has seen the group axe dozens of stores.
The UK’s largest mortgage lender, Lloyds Banking Group, is aiming to buy 50,000 homes by the end of the decade, according to the Financial Times. The bank launched Citra Living last month to try and satisfy growing demand for private rental housing across the country, and the FT says it has seen an internal job advertisement which outlines long-term targets including a 'strategic challenge' to own 10,000 properties by the end of 2025, with another 40,000 coming by 2030. This would make it a larger company than Grainger, the country's biggest private residential landlord, and give it an estimated balance sheet of £4billion and £300million in pre-tax profit. The advert also said Citra may consider 'M&A (mergers and acquisitions) opportunities and/or strategic alliances' to help it reach its targets.
Broadcaster ITV said yesterday that it has concluded an investment in Feel Holdings, a UK-based digital health start-up. ITV has agreed to subscribe for up to £3m convertible loan notes in Feel in three tranches and that Feel will begin its tailored media campaign across the broadcaster's channels later this year. Feel operates on a direct-to-consumer subscription model. ITV said the company's "science-led approach in developing innovative products with potent ingredients and no additives, resonates with the modern consumer, resulting in significant growth in the past 12 months".
Mecca bingo halls owner Rank Group has reported a hefty loss following the forced closure of its venues during UK lockdowns. The group, which also owns the Grosvenor casino chain, slid into a pre-tax loss of £72m in the year to the end of June, down from a £9.4m profit in the previous year.
Net gaming revenues fell by 48% to £329.6m, compared with £629.7m. Chief executive John O'Reilly described the year as "exceptionally challenging" and said: " Frankly, we are delighted it is over." However, the group said trading since reopening was "encouraging" and likely to get even better as tourists return.
Industrial real estate developer Panattoni is to invest £700 million redeveloping the closed Honda plant in Swindon. The investment by the California-based firm is the largest in the company's history. Panattoni expects to create 16,000 jobs at the site and across the UK's supply chain.
Toyota is to cut production by 40% next month because of the global shortage of semiconductor chips, Sky News reports. The Japanese company said it would reduce global output in September by around 360,000 vehicles - 140,000 of them at its Japanese plants and the rest at overseas factories. Germany's Volkswagen, which had already warned earlier this year of an impact, said yesterday it too may have to cut back output even further. The Society of Motor Manufacturers' and Traders (SMMT), the UK industry's lobby group, has warned that the issue is holding back its recovery after pandemic shutdowns last year.
Cleaning products maker McBride has warned of profits slump as it counts the cost of higher raw material costs and HGV driver shortages. Sky News said the UK-based company, which makes own-label goods from detergents to dishwasher tablets on behalf of retailers, said it was starting to see "distribution challenges" - particularly in the UK and Germany.
Sky News reports that retail investment platform Interactive Investor (II) has this week invited investment banks to pitch for a role on an initial public offering valuing the company at up to £2bn. The firm has grown rapidly under the majority ownership of JC Flowers, the private equity firm, having more than 400,000 customers and £55bn of assets under administration. It trails only Hargreaves Lansdown by size in the UK market. Investors' appetite for retail platforms such as II, Hargreaves and AJ Bell has soared recently, not least because the pandemic has fuelled activity.
Amazon.com Inc is planning to open large physical shops in the United States that will operate like department stores, the Wall Street Journal reported yesterday. Some of Amazon's first department stores are expected to open in Ohio and California, the report said, adding that the shops will be about 30,000 square feet in size and offer products from well-known consumer brands. Reuters says Amazon declined to comment on the report.
Japanese cryptocurrency exchange Liquid has been hit by hackers, with almost $100m (£73m) estimated to have been stolen, says the BBC. Liquid said it is tracing the movement of the stolen cryptocurrencies and working with other exchanges to freeze and recover the assets. Founded in 2014, Liquid operates in over 100 countries, has millions of customers worldwide, as is one of the world's top 20 biggest cryptocurrency exchanges by daily trading volumes, according to CoinMarketCap data. This heist is the second major theft of cryptocurrencies to take place in recent days. Last week, digital token platform Poly Network was at the centre of a $600m raid.
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