IMF slashed its forecast for global economic growth by nearly a full percentage point

By Suzanne Evans, Director, Political Insight

The International Monetary Fund (IMF) yesterday slashed its forecast for global economic growth by nearly a full percentage point, citing Russia's war in Ukraine, and warning that inflation was now a "clear and present danger" for many countries. The IMF is also predicting that UK growth will halve from 7.4% in 2021 to 3.7% this year, one percentage point lower than predicted before the war in Ukraine, before falling to just 1.2% in 2023, weaker than any other country in the G7, and the biggest downgrade of any large nation. Pierre-Olivier Gourinchas, IMF chief economist, said: “The UK is facing elevated inflation pressures and is tightening its monetary policy, and this is one of the factors that’s going to weigh down on economic activity both this year and the next.”
 
Russia's economy will not recover anytime soon from sweeping sanctions imposed by Western nations over its war in Ukraine and could see further damage if those sanctions are expanded to hit energy exports, the IMF also said yesterday. In an interview with Reuters, Pierre-Olivier Gourinchas said that Western sanctions and export bans had put the Russian economy on a "very different trajectory," making the kind of rebound often seen after economic shocks unlikely. "We're viewing this as ... something that is really hurting the Russian economy going forward and could hurt it even more if the sanctions are escalated," he said. "The shock is already pretty sizeable ... and we don't expect that there would be a bounce back from where the Russian economy is." Gourinchas said the IMF expects Russian GDP to contract 8.5% this year, with a further drop of 2.3% expected next year, but that sanctions targeting Russian energy exports could cause Russia's economic output to drop by as much as 17% by 2023. Then, Russia's economy would effectively be "thrown into autarchy" if sanctions were expanded to include energy, leaving it with only a few trading partners, he said. While countries like China and India have not joined Western sanctions on Russia, the threat of secondary sanctions was still having a chilling effect on their trade with Russia, he added.
 
HM Revenue & Customs (HMRC) said yesterday that it plans to revoke the Moscow Stock Exchange's status as a recognised exchange. The move cements Russia’s position as a pariah from the global financial system even further, Yahoo Finance UK says, and means investors will not be able to access certain UK tax benefits when trading on the MOEX. However, existing investments will be protected. "As we continue to isolate Russia in response to their illegal war on Ukraine, revoking Moscow Stock Exchange’s recognised status sends a clear message – there is no case for new investments in Russia," said Lucy Frazer, financial secretary to the Treasury. A two-week consultation on the decision has now started.
 
Business Secretary Kwasi Kwarteng yesterday failed to deny media reports yesterday that the government is planning to scrap some or all green levies from energy bills to help Brits cope with the rising cost of living crisis. In response to a verbal question from Caroline Lucas MP in parliament, he said only: “I engage with my colleagues on the frontbench and the backbench all the time and they’ve got lots of brilliant ideas,” before going on to defend the energy security strategy. The Daily Telegraph was among those to report that the levy which adds £153 to the average energy bill could be scrapped in response to soaring bills.
 
The Business, Energy and Industrial Strategy (BEIS) Committeehas heard from Hayden Wood, the co-founder and CEO of collapsed energy company Bulb Energy, who confirmed he is continuing to draw a £250,000 salary, funded by UK taxpayers. Once the seventh-biggest energy supplier, Bulb was effectively nationalised in November 2021, leaving the taxpayer to foot the potential £3bn bill, the largest bail out since the collapse of the Royal Bank of Scotland in 2008, so it could keep supplying gas and electricity to its 1.7 million household customers. Labour MP Andy McDonald said it was “staggering” that he was continuing to get paid “the same salary that you were pre-collapse”.
 
Scottish Power CEO Keith Anderson says the Chancellor must act urgently and be “more radical” to limit the impact of rising gas and electricity prices. He told MPs on the BEIS committee that Scottish Power had been inundated with 8,000 calls from customers worried that they would not be able to afford to power their homes and warned that the UK’s energy price crisis will become “truly horrific,” with as many as 40% of people being pushed into fuel poverty, unless Rishi Sunak takes urgent action. His biggest concern, he said, was what would happen in October, when the price cap is set to jump again after the respite of summer, taking the average bill close to £3,000 a year. Anderson called for a deficit fund and a “social tariff” that would replace the energy price cap, a plan that would see vulnerable households and customers on lower incomes receive a discount of up to £1,000 a year on their bills, repaid by energy customers and taxpayers over a 10-year period. E.On UK CEO Michael Lewis also backed a social tariff, but said more immediate measures, such as a reduction in VAT, were also required. He agreed that up to 40% of people in Britain might go into fuel poverty from October.
 
British renewable power generator and network operator SSE has agreed to buy a portfolio of onshore wind development projects from Siemens Gamesa, the company said yesterday, confirming a Reuters report. SSE will pay 580 million euros (£481 million) for the wind farm projects, which have the capacity to generate 3.9 gigawatts of electricity in France, Greece, Italy and Spain. A team of up to 40 staff will be integrated into SSE as part of the agreement.
 
The prices of fridges, freezers and dishwashers are up by a third since last year and set to climb higher, Nick Glynne from Buy It Direct, which owns Appliances Direct, has said. He blamed Covid lockdowns in China, shortages of materials and sky-high shipping costs for the increase. He told BBC Radio 4's Today programme: "A large American fridge freezer that we bring in over from China, pre-Covid that cost around £12 to ship…and that would take six months lead time. Now we're looking at 12-14 months lead time and the price for freight alone has gone up to around £80 for that unit. So, a £299 fridge has now got a £70 increase in cost, which has a knock-on effect to the consumer." Retailers AO World and Currys also said their prices had been impacted by a rise in wholesale prices which Amdea, a UK appliance maker trade association, said had risen by nine per cent in three months.
 
A court in Paris yesterday fined British meal delivery group Deliveroo after ruling it was guilty of "undeclared labour" for using freelance riders who should have been classified as employees, depriving the state of millions of euros in payroll taxes. The court ordered the maximum fine of €375,000 euros (£311,000) and the firm was also ordered to pay €50,000 (£41.472) in damages to each of five labour unions who joined the case as plaintiffs. The court also handed suspended one-year prison sentences and €30,000 (£24,833) fines to two former French executives at Deliveroo. A third executive got a suspended four-month sentence and a 10,000-euro fine for complicity. "Deliveroo will appeal this decision," a spokesperson for the company told Reuters. "The judgement goes against previous decisions in civil courts covering the same historic period, which have repeatedly found riders to be self-employed."
 
Details have emerged regarding the inspections of P&O Ferries by the Maritime and Coastguard Agency which flung the book at the ferry operator when it sacked 800 crew to replace them with cheap agency staff in March. According to an analysis by the PA news agency, an unprecedented 31 separate failings were found on the detained European Causeway alone,failings which ranged from problems with fire safety and lifeboat drills, to issues with labour conditions, navigation, and documentation. PA said more failures were found on that sole ship than in 46,000 Port State Control inspections of ships in the last three years. The Spirit of Britain and Pride of Kent are still being held in Dover after safety issues were uncovered. The Pride of Kent had 25 deficiencies, eight of which were serious enough to be grounds for detention. No details have been released about why The Spirit of Britain failed inspections and was detained.
 
Rekom, the owner of Pryzm and Atik nightclubs, plans to open at least 10 more bars this year, as attendance at the group’s 48 UK outlets has recovered to pre-pandemic levels. CEO Peter Marks said he will open the UK’s second Heidi’s Bier Bar in Birmingham next month and the first Proud Mary bar in Swansea, both tried-and-tested concepts of the group’s Scandinavian owners. Marks also said Brits are spending more on drinks in nightclubs and bars than they did in March 2020 – and turning up earlier on a night out – with young people trying to catch up on more than two years of pandemic restrictions.
 
WH Smith was forced to suspend orders at its Funky Pigeon operation over the Easter weekend after the online card and gift retailer was hit by a cyber-attack on 14^th April. No customer payment data such as bank account or card details were at risk, WH Smith said, but it was checking whether personal data such as names, email addresses and personalised designs were exposed.
 
FTSE 250 precision instrument maker Spectris has sold its Omega Engineering unit to Arcline Investment Management for $525m (£403m) and unveiled a £300m share buyback. Omega, which makes specialist sensors, will join the Dwyer Group, an Arcline portfolio company
 
London listed Chill Brands has promoted its international brand director, Callum Sommerton, to chief executive, replacing the tobacco alternative products group's joint CEOs Antonio Russo and Trevor Taylor.
 
Michael Leiters, who left Ferrari in December, is among the leading candidates to replace Mike Flewitt as CEO of McLaren Automotive, Sky News claims.
 
Adverts placed by The Otley Burger Company on Mother’s Day have been banned by the Advertising Standards Authority for causing offence. Posts on the burger van’s social media accounts read: “Burgers for dinner?” above images of Madeleine and her mother Kate McCann, with further text stating: “With burgers this good, you’ll leave your kids at home. What’s the worst that could happen?” The posts, on Twitter and Instagram, have since been deleted.
 
Netflix’s share price fell as much as 23% yesterday as the subscription streaming service announced it lost 200,000 subscribers in the first quarter of business in 2022 and that it expects to lose another 2 million subscribers in the second quarter. Netflix has 221.6m subscribers worldwide and had expected to gain 2.5m subscribers in the first quarter. It is the first time in more than a decade that the company has admitted to losing subscribers. Bosses said that suspending its streaming services in Russia following Vladimir Putin’sunprovoked attack on Ukraine resulted in a loss of 700,000 subscribers.

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