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The Bank of England (BoE) warned of an economic downturn and further interest rate hikes yesterday

   News / 06 May 2022

Published: 06 May 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight

Yesterday, 6,000 councillors across 200 councils were up for election across the UK. The results are coming in this morning. The headline news so far is that the Conservatives have lost three of their flagship London Councils to Labour. Analysis from the Political Insight team will follow shortly.
The Bank of England (BoE) warned of an economic downturn and further interest rate hikes yesterday, as it raised the base rate to 1%, its highest level since 2009. The move is intended to counter inflation, which the bank says is now heading for above 10%. Six out of the nine BoE's rate-setters voted for the quarter-point rise from 0.75%; Catherine Mann, Jonathan Haskel and Michael Saunders had called for a bigger increase to 1.25% to stamp out the risk of the inflation surge becoming embedded in the economy. The increase was the central bank’s fourth consecutive rate hike since December - the fastest increase in borrowing costs in 25 years. The BoE now anticipates that the UK economy will shrink by 0.25% in 2023, just avoiding a technical recession, and stagnate with further growth of just another 0.25% in 2024. The International Monetary Fund predicts British growth will slow to the weakest in the G7 next year at 1.2%.
Bank of England Governor Andrew Bailey said yesterday he would forgo a pay rise for a third year in a row, having previously urged people in Britain to show wage restraint in the face of fast-rising inflation. Bailey’s annual salary is £575,000.
Private-sector growth slowed to its weakest pace in four months in April according to new figures from the S&P Global/CIPS Purchasing Managers' Index (PMI).  The index fell to 58.9, down from 62.6 in March, dropping to its lowest level since January, but still signifying growth, being over the 50.0 mark. "The twin headwinds of the cost-of-living crisis and the war in Ukrainestarted to bite on the UK service sector during April, as evidenced by a sharp slowdown in new order growth to the lowest in the year so far," S&P Global economics director Andrew Harker said.
Unemployment in the three months to February fell to 3.8%, down from 3.9% in the previous quarter, reaching a level last seen in late 2019 and one that has not been lower since 1974. The data matches claims by employers that they are facing staff shortages: job vacancies rose to a record high of 1.288 million in the first quarter of 2022. Annual growth in average earningsexcluding bonuses also picked up to 4.0% from 3.8% but fell short of rising inflation - which hit 6.2% in February, leading to a 1.3% drop in its real value, the Office for National Statistics said.
Culture Secretary Nadine Dorries is to press ahead with the creation of the Digital Markets Unit, sitting within the Competition and Markets Authority.The new watchdog will have statutory powers to investigate alleged anti-competitive behaviour by tech giants such as Google and Facebook, and levy multi-billion-pound fines of up to 10% of global turnover for serious breaches.
Convenience store chain McColl's is on the brink of collapse, potentially placing thousands of jobs at risk. The retailer said it was "increasingly likely" it would fall into administration unless ongoing talks around a rescue deal were successful. Earlier this week, trading in the firm’s shares were suspended when it announced it could not publish its annual reports on time. Despite successfully raising £30m from shareholders last year to invest in expanding its Morrison’s Daily convenience stores, Sky News suggests the company could call the administrators in today. More than 16,000 people are employed in 1400 stores by McColl's, which has a wholesale tie-up with Martin's newsagents as well as Morrison’s. According to its website, McColl serves about five million customers each week. The chain was founded in Glasgow in 1901.
Pig farmers already still struggling with an export slump, Covid disruptionand a Brexit-related shortage of abattoir workers are now having to deal with soaring farm costs because Russia’s invasion of Ukraine has pushed up the cost of commodities such as wheat and soya, the National Pig Association(NPA) says. The NPA said the price shock was turning a “very challenging financial situation to a critical one” and that there were still 100,000 pigs stuck on farms that should have gone to slaughter, with farmers losing more than £50 per pig due to the gap between the cost of production and the price that retailers are willing to pay. The trade body singled out Tesco for criticism, saying the supermarket is not paying a “fair price” for pork. In an open letter to Tesco CEO Ken Murphy, the NPA also noted that the retailer had recently doubled profits to more than £2bn. Waitrose, the Co-op, Marks & Spencer, Aldi, Asda, Morrisons and Sainsbury’s have agreed to support suppliers, with many paying more for British pork through their dedicated supply chains. Waitrose has just announced it will put £16m into the 250 farms from which it sources pork to cover the full cost of rearing and producing pigs – including labour, feed, and fuel.  
Just Eat Takeaway.com partnered with Domino’s in an exclusive trial partnership to become the only food delivery app to offer Domino's pizza in the UK and Ireland. "Our customer base of over 18 million and our extensive UK reach means we’re well placed to enable Domino’s to access new food orders and incrementally grow orders," Managing Director Just Eat UK Andrew Kenny said in a statement. The pizza chain also reported a 5.5% rise in first-quarter orders yesterday, but also said sales were hit by a rise in VAT as the rate on hot takeaway food returned to 12.5%, having been reduced to 5% in 2021 to help businesses during the pandemic.
Airbus is set to invest £100 million expanding capacity at its Broughton wing manufacturing plant to support a ramp up in aircraft production. The investment is expected to create more than 500 jobs at the North Wales site.
The average UK rent has soared to over £1,000. Tenants are now paying a record high of £1091 as every single region has seen an increase in average rental costs. London remains the most expensive area to rent, with prices rising to a new average of £1,804 in April, according to the HomeLet Rental Index. Scotland had the second highest increase, with tenant now paying on average £774, up 12% from last April. The North West region saw rents jump 11% to £878 in April. Outside of London, the South East region commands the highest rent prices, with properties there going for £1,164 a month.
The Big Issue has equipped 1,000 of its vendors with contactless technologyas part of a drive to help the magazine’s sellers become cashless. The homeless charity magazine aims to enable all its 1,500 vendors to become cashless by the end of the year.
Coca-Cola, PepsiCo and Heineken products made up almost a quarter of branded litter found by volunteers during a UK environmental clean-up project, PA Media reports. More than half (51%) of identifiable litter can be traced back to just 10 brands – Coca-Cola, McDonald’s, Cadbury, Red Bull, Walkers, Lucozade, Stella Artois, Tesco, Budweiser and Strongbow – according to the third annual Planet Patrol report. The drinks industry is the largest polluter for the second year running and responsible for more than a third of litter found in 2020 and 2021, with items including cans, plastic and glass bottles, single-use cups and lids.
Italian luxury brand Gucci will start accepting payments in cryptocurrencies in some of its stores in America, the BBC says. Customers will be able to pay using Bitcoin, Ethereum, Dogecoin and Litecoin, for example, at flagship outlets, including Rodeo Drive in Los Angeles and New York's Wooster Street, from next month. Gucci says it plans to introduce the policy to all the North American stores it operates directly soon.
Two of Argentina’s largest private banks, Banco Galicia and Brubank, are offering customers the ability to purchase bitcoin, ether and the stablecoin, USDC. Financial analyst Marcus Sotiriou from GlobalBlock told Yahoo Finance the growing popularity of cryptocurrencies in Argentina has been fuelled by a sharp rise in inflation in the country, to 55%.  
Over 500 kg of cocaine estimated to be worth more than 50 million Swiss francs (£41.07m) has been found in a container of coffee bean bags for Nestle's Nespresso factory in Romont in western Switzerland, the cantonal police said on Thursday. Staff had found the drug while unloading bags of coffee beans that had just arrived from Brazil. “We want to reassure consumers that all our products are safe to consume," the maker of single-serve coffee capsules said in a statement.

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