The Bank of England yesterday raised the basic rate of interest to 0.5% from 0.25%

By Suzanne Evans, Director, Political Insight

The Bank of England yesterday raised the basic rate of interest to 0.5% from 0.25%, the second rate rise in a row, for the first time in 18 years. Last month it was raised from 0.1%.
 
Meanwhile, the governor of the Bank of England, Andrew Bailey, has warned that the rising cost of living will not ease until next year, and suggested workers should not ask for big pay rises. Some "moderation of wage rises" was needed to prevent inflation becoming entrenched, he said. The BBC says the central bank has forecast that post-tax incomes are forecast to fall by 2% this year, after considering the rising cost of living, which represents the biggest fall in living standards since records began in 1990. Workers are currently getting pay rises of just below 5% on average, according to a Bank survey. “It is going to be a difficult period ahead, I readily admit, because we are already seeing, and we're going to see, a reduction in real income," Bailey said. "We're going to start coming out of it in 2023, and two years from now, we expect inflation back to a more stable position." Inflation is expected to peak at 7.25% in April, and average close to 6% in 2022, making it the fastest price growth since 1991 and well above the Bank's 2% target. Bailey added that while soaring energy costs were outside of the Bank's control, the monetary policy committee had "acted" to "prevent things getting worse" until energy prices " start to ease, not least because they are somewhat seasonal". Bailey was paid £575,538 including pension, in the year from 1 March 2020, more than 18 times higher the median annual pay of £31,285 for full-time employees.
 
Energy regulator Ofgem has lifted the energy price cap from £1,277 to £1,971, meaning nearly 18 million households in England, Wales and Scotland will pay an average of £693 extra a year for gas and electricity. In response to the increase, Chancellor Rishi Sunak announced a £9bn package of support, including a £200 discount on electricity bills for all households in October, to be repaid from people's bills in equal £40 instalments over the next five years. Other measures include a £150 rebate in April for people in council tax bands A to D and a discretionary fund of £150m to help lower-income households in England only. According to Sunak, the measures will offset half of the price cap rise impact.
 
The Commons transport committee is urging the government to tax zero emission vehicles to offset the £35bn in fuel duty losses once the 2030 ban on sales of new petrol and diesel cars come into force. Yahoo Finance UKsays that in its report, the committee of MPs said that “zero emission vehicles should not mean zero tax revenue” and suggested a new road pricing system, based on miles travelled and vehicle type. Currently, owners of electric vehicles do not pay any fuel or car tax as their vehicle does not emit any CO2. As the government pushes for its goal of net zero emissions by 2050, the use of electric cars will only continue to increase. The report warned that without reform, policies to deliver net zero emissions by 2050 will result in zero revenue for the government from motoring taxation and urges ministers to act now to replace a potential loss of £35bn.
 
UK service companies have increased their prices at the fastest rate since 1996 as higher energy bills and transport costs squeezed the cost of living. The IHS Markit/CIPS Purchasing Manager's Index (PMI) rose to 54.1 in January from December's 10-month low of 53.6. Any figure above 50.0 denotes growth.
 
Foreign direct investment (FDI) into UK companies saw an increase in 2020. According to data from the Office for National Statistics (ONS), the value of the UK’s inward FDI saw the biggest upswing, rising by 17.6% or £288.7bn in comparison with 2019 (+£67.6bn). Outward FDI stocks - the profits UK firms receive from their affiliates in other countries - also grew by 0.8% or £13.5bn, a rise of £119.4bn in 2019 on 2018.
 
The government is suing accountancy firm KPMG for £1.3bn over its audit of construction giant Carillion, which collapsed into administration in 2018. The Official Receiver, which is handling the liquidation of the former government contractor, alleges KPMG failed to spot misstatements in Carillion's accounts. Carillion had run up debts of more than £7bn when it went bust. KPMG said the Official Receiver's claim was "without merit". Carillion held about 450 governmental contracts, spanning the UK education, justice, defence, and transport ministries but ran into trouble after losing money on big contracts. The damages claim includes the sums Carillion paid out in dividends to its shareholders, advisory fees and losses encountered as the group continued to trade. The negligence claim against KPMG for its alleged role in Carillion's collapse was filed in London's High Court in January, according to court documents released yesterday. KPMG was Carillion's auditor for 19 years, earning a total of about £29m for its audit work.
 
Five British pharma firms have been slapped with a combined £35m fine from the competition watchdog for illegally driving up the price of an anti-nausea drug used by the NHS. The Competitions and Markets Authority (CMA) said the price the NHS paid for prochlorperazine surged 700% from £6.49 to £51.68 per pack of 50 tablets between 2013 and 2017. Prochlorperazine is used to treat nausea, dizziness, and migraines. The CMA said Alliance Pharmaceuticals, Lexon, Medreich and the former and current owners of Focus broke the law by striking an illegal arrangement to limit supply of the tablets. Focus is now owned by Advanz, and was previously owned by the private equity firm Cinven.
 
The UK’s Medicines and Healthcare products Regulatory Agency (MHRA) has approved Novavax's Covid-19 vaccine for use in adults. This brings the total number of Covid vaccines approved for use in the UK to five.
 
Britishvolt and Glencore are set to open new battery recycling plant in the UK. Expected to be operational by 2023, the Kent-based site will be capable of recycling 10,000 tonnes of lithium-ion batteries a year.
 
Banknote printer De La Rue has signed a five-year contract with the Oman Tax Authority to implement a digital tax stamp solution for tobacco products compliant with the World Health Organisation's Framework Convention for Tobacco Control (FCTC) and product marking and serialisation for other excisable goods.
 
Shell has seen its fourth-quarter profits hit their highest in eight years. Earnings rose by 55% from the previous quarter to $6.4 billion, well beyond analyst projections. Reuters says the strong results cap a dramatic recovery in 2021 for Shell and the oil and gas sector after energy demand and prices collapsed in 2020 in the wake of the COVID-19 pandemic. Shell shares were up 0.7% by 1448 GMT, compared with a 0.5% decline for the broader European energy index yesterday. Shell, which moved its headquarters from The Hague to London last month, said it expected to lift its dividend by 4% in the first quarter of 2022 to $0.25 per share, which would be the fourth rise since Shell cut its dividend in early 2020 for the first time since the 1940s.
 
Playtech has been approached by a firm linked to its second largest shareholder, TTB Partners, about a potential takeover offer, a day after the collapse of its £2.7 billion buyout by Australian slot machine firm Aristocrat. Playtech’s board had recommended the deal but failed to gain sufficient support from shareholders, receiving only 56% of votes in favour of the deal after a block of Asia-based investors raised concerns about the move. A 75% threshold was needed to agree to deal.
 
Taxpayer-backed bank NatWest Group, rescued from collapse in 2008, is to hand out close to £300m in bonuses on last year’s performance, the first time it has pushed through a year-on-year increase in the pot since its bailout. Sky News has learnt that the bonus pool will be over 40% bigger than the £206m paid out in 2021, but still below the pre-pandemic pot of £305m that was awarded in 2020. The Treasury currently owns a 52% stake in the bank, but is expected to reduce its interest to below 50% this year.  
 
The European Central Bank (ECB) has decided to leave interest rates at record lows of 0% despite rising inflation in the eurozone.
 
Facebook's owner Meta Platforms saw its stock market value slump by more than $230bn (£169bn) on Thursday, in a record daily loss for a US firm. Shares fell 26.4% after quarterly figures and news that Facebook's daily active users (DAUs) had dropped for the first time in its 18-year history disappointed investors. The company's share price slide saw chief executive Mark Zuckerberg's net worth fall by $31bn (£22.84bn), according to the Bloomberg Billionaires Index. The drop in Zuckerberg's personal fortune was equivalent to the annual gross domestic product of Estonia. Even after that drop however, Zuckerberg has an estimated net worth of almost $90bn (£66.3bn), which means he is still one of the richest people in the world.
 
Amazon is raising the price of its Prime service for US customers after reporting record sales and profits. The e-commerce giant said it was hiking the price by 17% to $139 (£102) for annual membership. The firm, which cited increased wage and shipping costs, said it had no announcements to make about other countries "at this time". It is the first increase since 2018 for Prime, which gives subscribers access to benefits like faster shipping. More than 200 million people globally pay for the service, many of them in the US. Amazon shares soared almost 15% in after-hours trade on the news, which accompanied the release of its end of 2021 performance.
 
A digital platform through which consumers buy, sell and swap designer handbags has won backing from a host of luxury goods executives including a former boss of Jimmy Choo. Sky News says that Luxury Promise, founded in 2017, has raised $11m (£8.1m) in a funding round led by existing investors including Beringea, a venture capital firm which has held stakes in companies such as Chargemaster, the maker of electric vehicle charging equipment. Money will also come from Pierre Denis, the former Jimmy Choo chief executive and Francois Delage, the ex-CEO of De Beers.

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