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UK economic growth bounced back in January

   News / 11 Mar 2022

Published: 11 March 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight


UK economic growth bounced back in January. GDP grew 0.8% in the month, compared with a 0.2% fall in December, the Office for National Statistics said, with wholesaling, retailing, restaurants and takeaways all performing well. Construction and manufacturing also grew, as did computer programming and film and TV production. Darren Morgan, ONS director of economic statistics said: "GDP bounced back from the hit it took in December due to the Omicron wave and is now 0.8% above its pre-pandemic peak. All sectors grew in January with some industries that were hit particularly hard in December now performing well."
 
The European Central Bank (ECB) has held key eurozone interest rates at their 0% record low but announced a quicker reduction in its bond-buying plans this year, saying it would reduce asset purchases to €40bn in April, €30bn in May and €20bn in June.
 
Rising prices in the USA have pushed the annual inflation rate up to 7.9%, the biggest year-on-year leap since 1982 and up from the 7.5% rate reported in January. Fuel prices are up 38%, natural gas has risen 23.8%, and groceries are up 8.6%. President Joe Biden and central bank officials are under pressure to rein in the increases, which have proven more persistent than many expected. The Federal Reserve - the US central bank - is widely expected to raise interest rates at its meeting this month.
 
Russia has hit back at western sanctions by imposing export bans to some 48 countries on around 200 products including telecoms, medical, vehicle, agricultural, and electrical equipment, as well as some forestry products such as timber. The economy ministry said further measures could include restricting foreign ships from Russian ports. It said: "These measures are a logical response to those imposed on Russia” and added that the bans on countries that have "committed unfriendly actions" were "aimed at ensuring uninterrupted functioning of key sectors of the economy". The measures will last until the end of the year.  On Wednesday, Moscow also approved legislation that took the first step towards nationalising assets of foreign firms that leave the country. In a statement yesterday, Russia's former president Dmitry Medvedev said: "The Russian government is already working on measures, which include bankruptcy and nationalisation of the property of foreign organisations. Foreign companies should understand that returning to our market will be difficult." He accused foreign investors of creating "panic" for ordinary Russians who could now lose their livelihoods.
According to the most recent figures, Russia is the UK's nineteenth largest trading partner, with trade between the two nations totalling £15.9bn over a year from the end of September 2020, the BBC says.
 
Energy bosses have urged Chancellor Rishi Sunak to provide new financial support to customers and businesses as the war in Ukraine deepens the crisis which has already engulfed the industry during the last six months. Sky News has seen a letter from Energy UK to Sunak in which it laments the use of energy "as a geopolitical weapon" and expresses deep concerns about repeated spikes in prices. The trade association - which counts the likes of British Gas-owner Centrica among its members - said it was "not concerned about UK security of supply" because of Britain's low dependence upon Russian gas imports. However, it warned the chancellor that he may need "to act to provide extra measures to protect the UK economy and support households and businesses with the costs of energy".
 
The escalating conflict in Ukraine has "highlighted" the importance of Britain and the European Union working closely together to improve trade relations, a report by MPs and business leaders says. The cross-party and cross-sector UK Trade and Business Commission (UKTBC), suggests 21 actions aimed at improving cooperation and trade between the pair to help industries avoid costly red tape and barriers to trade. The proposals also aim to remove points of political tension including around the Northern Ireland Protocol; suggest more flexible visa rules for seasonal workers, service industries and the creative sector; and a more defined process and increased scrutiny of new trade deals including new bodies to assess the impact they will have on UK standards and net zero goals. Alison WIlliams, global head of data at DunnHumby and member of the UKTBC, said: "The government’s Brexit deal has touched all parts of our economy and has unfortunately been failing a large number of British businesses, costing investment, income and jobs in the UK. With more checks on the way and huge economic challenges facing us, it is imperative that the government acts on these recommendations now so we can work with our European partners to weather the storm."
 
UK food prices will rise as a result of the war in Ukraine, the National Farmers' Union (NFU) is warning, as it calls on the government for urgent action to help UK farmers produce enough food to keep supermarkets stocked and affordable. Some 30% of the world's wheat comes from Ukraine and Russia and exports will stop during the conflict, it says, plus the price of gas - which is used to heat greenhouses and to make fertiliser - has soared. "The government must act now, with a clear signal that food security is a priority for the nation," the NFU said in a letter warning that disruption to food production, supply chains and the availability and affordability of food in the shops could last for years. NFU president Minette Batters told the BBC that the rising cost of producing fruit, vegetables and meat could cause farmers to make less at a time when the nation needs more. She also said the shortage of crops would also affect meat production as farmers need it to feed their livestock; the cost of producing a chicken was 50% higher than it was a year ago, but farmers were absorbing much of these costs, she said. The NFU is also asking the government to release an additional 10,000 visas under the Seasonal Workers Scheme, in addition to the 30,000 already granted. Ukrainian workers have previously accounted for 60% of recruits under the scheme, the NFU said.  
 
UK feed wheat prices are already 39% up on March 2021 at £279.40 a tonne, according to the Agriculture and Horticulture Development Board (AHDB). Earlier this week, the boss of one of the world's biggest fertiliser companies, Yara International, warned that the war in Ukraine would deliver a shock to the global supply and cost of food. The Federation of Wholesale Distributors has also warned that the increase in fuel prices will lead to people paying more for food in shops and restaurants. Russia and Ukraine produce 80% of the world's sunflower oil exports and 20% of corn exports, according to the United Nations' Food and Agriculture Organisation (FAO).
 
Shares of Russian steelmaker Evraz have been temporarily suspended from trading after Russian oligarch and Chelsea Football Club owner Roman Abramovich - who also has a majority stake in the company - was hit by UK sanctions. The London Stock Exchange said in a notice that the Financial Conduct Authority had suspended the shares as of 1100 GMT "in order to protect investors pending clarification of the impact of the UK sanctions". The shares had fallen sharply following news of the sanctions on Abramovich and were down 11% at 81.68p before the suspension.
 
Tui Group has terminated an agreement allowing its brand to be used by its largest shareholder in Russia. Tui Russia was established as a joint venture in 2009 between Tui and Severgroup, which is controlled by oligarch Alexei Mordashov. A major investor in Tui, Mordashov sat on the German holiday firm's supervisory board until he was forced to resign last week, after the European Union added him to the sanctions list. Tui sold its shares in Tui Russia in March 2021 and no longer has a stake in the business, but Tui Russia had been allowed to continue using the Tui brand in several countries, including Russia, Ukraine and Belarus, under a brand licencing agreement. That licence was terminated yesterday.
 
Credit Suisse said it had a CHF848m (£696m) net exposure to Russia and that it was monitoring the impact on its 125 employees in the country after President Putin's invasion of Ukraine.
 
UK starting salaries for permanent staff increased by the second-fastest rate on record in February, reflecting candidate shortages, according to survey by the Recruitment and Employment Confederation (REC) trade body and accountancy firm KPMG. Pay pressures for permanent staff rose at the second-fastest pace since the survey started in 1997, the survey, compiled from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies, showed.
 
The Telegraph has been forced to apologise after alleging that skincare company Dermalogica was among brands that had been restricting the flow of stock to ecommerce group THG on concerns it was discounting too aggressively to hit sales targets. Sharecast News reports that the article, published on Sunday 20 February, caused THG shares to tumble the following day. THG subsequently refuted the claims in a filing to the stock exchange, insisting that Dermalogica - which is owned by Unilever - had not placed and was not looking to place any restrictions on its trading relationship with THG Beauty, including regarding the supply of stock, nor was it aware of any other key supplier to its beauty business who had or was intending to reduce supply or take any similar steps. In its "corrections and clarifications" yesterday, the Telegraph acknowledged the statement from THG, removed its online article and said it was "happy to update the record to reflect that we are not aware of any such disputes or restrictions".
 
Shell Chief Executive Ben van Beurden's annual pay rose by a quarter to more than £6m after the oil group posted record results boosted by rising prices that have caused the cost of living to soar. His total pay rose to €7.4m (£6.3m) in 2021 from €5.8m the year before, Shell said in its annual report. He was paid €5.4m in bonuses and long-term incentives on top of €2m fixed pay. He also received a €14,400 "motoring allowance" €2,494 for transport between his home and office. His total pay was 57 times that of the median Shell employee, the company said.
 
The boss of estate agent Purplebricks is stepping down after nearly three years in the job due to “personal reasons”. Vic Darvey, who has been in the top role since May 2019, will leave at the end of March and hand over to chief operating officer Helena Marston. His departure comes after he led a sweeping overhaul amid a difficult time for the group, PA Media says. It tumbled to a loss of £12.9 million in the six months to October 31 as it lost market share to rivals and suffered a 38% plunge in new instructions. The firm also suffered higher staff costs due to switching field agents from self-employed status to full employment last year, while it also recently revealed a £3.6 million hit from claims related to failings in how it communicated with tenants. The group’s shares have plummeted as a result of its woes, losing more than 80% of their value in the past year.
 
Peter Bazalgette is to step down as chairman of the board of ITV after just over six years in the role and nine years on the board. Andrew Cosslett, the former IHG CEO will succeed him, joining the board as an independent non-executive director and chair designate on 1 June before becoming non-executive chair with effect from 29 September when Bazalgette stands down.
 
Marks & Spencer said yesterday day that Steve Rowe will step down as chief executive after the annual results on 25th May as part of a planned succession programme, following six years in the job. Stuart Machin and Katie Bickerstaffe will become joint chief executives. Machin will take on responsibility for day-to-day leadership of the business and the Executive Committee, while Bickerstaffe will focus on driving the global omnichannel, digital & data future for the business. Eoin Tonge will become chief strategy & finance officer. However, in an unusual move, Bickerstaffe will report to Machin, who is de facto chief executive and will run the day-to-day business, despite her joint title, leading some industry analysts to describe the joint appointment as a ‘fudge.’


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