"£15bn support package should help the UK avoid falling into a recession"

By Suzanne Evans, Director, Political Insight

Deutsche Bank’s chief UK economist Sanjay Raja has said in a note to clients that Chancellor Rishi Sunak’s additional £15bn support package should help the UK avoid falling into a recession. The £400 energy bill rebate and the "material benefits boost" of £650 to the lowest income households announced on Thursday will give a "modest" lift to growth, of around 0.4% of GDP, Raja said, pointing out that the UK’s cost of living support is now above the average for Europe’s largest economies. "In total, chancellor Sunak has now pushed close to 1.5% of GDP in support measures to help households through one of the worst income shocks since the Second World War. This is now, on average, above what has been announced across the Euroarea Big Four," he said, adding that overall, it is Deutsche Bank’s view that “the UK will just about avoid a technical recession around the turn of the year, though we still continue to think that intensifying headwinds leave the economy on the brink of one."
 
Asked by Bloomberg UK whether the UK was headed for a recession, Prime minister Boris Johnson replied: “not necessarily at all.” “We’re going to have a difficult period, and we’ve got to be absolutely clear with people it’s going to be difficult, and the government cannot solve every problem,” he added, “but what we can do is make sure that we deal with the underlying causes of inflation, but also keep our economy strong and open to investment.”
 
The Department of Business, Energy and Industrial Strategy (Beis) is reportedly warning of potential power cuts to as many as six million households this winter in a “reasonable” worst-case scenario if Russia cuts off all supplies to the EU. According to The Times, energy supplies could then be rationed, with limits could be imposed on industrial use of gas - including on gas-fired power stations, thereby causing electricity shortages - and households cut off during morning and evening peaks, in curbs that may last more than a month. A Beis spokesperson told the PA news agency the UK “has no issues with either gas or electricity supply, and the Government is fully prepared for any scenario, even those that are extreme and very unlikely to pass”. “Thanks to a massive £90 billion investment in renewable energy in the last decade, we have one of the most reliable and diverse energy systems in the world,” the spokesperson added, “and unlike Europe, we are not dependent on Russian energy imports.”
 
However, Business Secretary Kwasi Kwarteng has asked National Grid’selectricity system operator, ESO, to bolster electricity supplies using coal this winter amid concerns Russia’s supply of gas to Europe will be cut off. In a letter to Fintan Slye, executive director of the ESO, this week, Kwarteng warned of “high levels of uncertainty and volatility expected in energy markets over the winter” and said the risks should be mitigated “by significantly increasing the amount of capacity that is available over the winter, particularly non-gas-fired capacity”. Coal-fired power stations in Drax, Ratcliffe and West Burton, which were due to shut in September, have been asked to stay open, however the government has reaffirmed its commitment to end the use of coal power by October 2024.
 
PM Boris Johnson’s plans for a nuclear energy revolution are facing a fresh hurdle after the Austrian government officially raised concerns about the safety of a new reactor design, The Telegraph reports. In a letter to the Business Department, Austria's energy ministry raised the spectre of “severe accidents with high releases” at the Sizewell C plant to be built in Suffolk. The warning, made under the Espoo convention in which nearby countries are allowed to comment on nuclear projects, raises the prospect of legal action to derail Sizewell and will be considered by the Government as part of a planning decision in coming months. Austria is a longstanding critic of Britain’s nuclear programme and tried to block the construction of its Hinkley Point C plant at the European Court of Justice on the grounds that it violated state aid rules, the newspaper says. Hinkley and Sizewell, which are due to come online in 2027 and the 2030s respectively, use a new reactor design called EPR that is widely regarded as safe, and is cleaner and more efficient than existing models. However the Austrians said: “At this time, it cannot be proven beyond doubt that severe accidents with high releases cannot occur.” Johnson has said he wants eight new reactors to be built by 2050 to replace closing generators and supply about 25% of projected electricity demand.

Britain has signed its first trade agreement with a US state. The deal with Indiana is being hailed by Downing Street as “a major milestone” from which businesses will “start reaping the rewards”. The agreement will help remove barriers to trade and investment, improve procurement processes, and pave the way for professional qualifications to be recognised in both countries. Talks are continuing with around 20 other US states - including California, Georgia, Tennessee, Oklahoma and South Carolina - and the Department for International Trade expects around eight “memorandum of understandings” to be agreed soon. Meanwhile, hopes for a post-Brexit deal with the whole of the US remain elusive. Talks have been largely frozen since President Joe Biden took office.
 
Sky News says it has learnt that ministers will publish their response to a consultation on the future of auditors and boardroom governance on Tuesday, a response the broadcaster suggests has been “watered down”. A government white paper last year proposed that all private companies with more than 500 employees and a turnover of more than £500m would become defined as public interest entities (PIEs), which carry enhanced disclosures requirements and fall under the remit of the new Audit, Reporting and Governance Authority (ARGA), which is to be established in place of the Financial Reporting Council (FRC). However, sources said on Sunday that those thresholds had been increased to 750-strong workforces and turnover of more than £750m, removing several hundred organisations from the scope of the new rules. Additionally, strict new laws holding directors accountable for corporate failure have been dropped. Additionally, strict new laws holding directors accountable for corporate failure have been dropped. The government consultation was begun in response to scandals at Carillion and BHS which cost in excess of 20,000 jobs and saw their auditors fined more than £25m in total. Since then, questions have also been raised about governance standards at companies such as Liberty Steel, the metals conglomerate headed by Sanjeev Gupta, which last year was rebuffed in its efforts to secure a £170m government bailout.

Taxpayer funds may be used to bail out Newport Wafer Fab, Britain’s largest microchip factory if ministers reverse its sale to a Chinese company last year, Telegraph reports. Last week, Business Secretary Kwasi Kwarteng announced a national security review of the £63 million sale to Chinese-owned Nexperia. Meanwhile, the newspaper claims there are two expressions of interest on the table for the south Wales plant if the Chinese deal is reversed. One from the £1bn government sponsored Automotive Transformation Fund(ATF), which was set up last year to fund investment in electric vehicles and infrastructure, and the other a consortia put together by Ron Black, the former chief executive of British microchip design company Imagination Technologies.
 
Chancellor Rishi Sunak and the Royal Mint are to forge ahead with plans for an “NFT for Britain” despite market turmoil that has wiped billions of pounds off the digital assets. The Telegraph reports that the size of the NFT market has fallen from a peak of $37bn (£29bn) in April to around $26bn now, and several high-profile sales have flopped. Julian Jessop at the Institute of Economic Affairs said: “Frankly, I don't see the point of this, other perhaps than raising a relatively small amount of money. The NFT market is either going to recover and thrive on its own, in which case there is no need for the Government to get involved, or it won't, in which case no-one will thank the Treasury for encouraging the general public to jump on board.” A spokesman for the Royal Mint said the idea was “still in development” and there were no updates on when an NFT may be released. An annual wealth survey published by Knight Frank earlier this year said NFT ownership was on the rise, with 11% of ultra-high net worth individuals now in possession of one, and sales of NFT art climbing to an estimated $25bn in 2021, representing almost one third of the global art market’s value as a whole.
 
Nadine Dorries MP, the Secretary of State for Digital, Culture, Media and Sport, has made a TikTok rap video to explain details of the Online Safety Bill. As of Friday evening the video had been viewed more than 10,000 times. The Bill aims to protect internet users from harmful content and proposes blocking sites and introducing fines that could potentially run into billions of pounds for larger companies who fail to remove banned content.
 
EasyJet and Tui have cancelled dozens of flights this week, blaming a number of issues including air traffic restrictions, airport handling delays and runway works. EasyJet said it plans to cancel 240 flights at airports across the UK over the next 10 days, and 24 flights a day from London's Gatwick airport between 28 May and 6 June. Last Thursday, a software failure forced EasyJet to cancel about 200 flights. Tui apologised for its cancellations, which it said were due to “operational and supply chain issues”.
 
British Airways (BA) is preparing to slash pilots’ pay by as much as 9% to fund salaries for staff left out of work during the pandemic, who would otherwise have lost their jobs, The Telegraph says. BA was swiftly accused of “dipping their snouts back into the bonus and dividend troughs” by pilots’ union Balpa, which earlier this month rejected a new version of the pay deal which would have reduced the percentage cut to 7.5% over the rest of 2022, then falling to 4.5% next year. However, pilots would have been locked into the schedule until 2028, when they would be docked 2.3% of their pay.
 
Chelsea Football Club has confirmed that its £4.25 billion takeover is set to be completed today. The English Premier League club is being sold to a consortium led by Los Angeles Dodgers part-owner Todd Boehly and backed by Clearlake Capital. A statement from the club on Saturday said: "Chelsea Football Club can confirm that a final and definitive agreement was entered into last night to sell the club to the Todd Boehly/Clearlake Capital consortium. "It is expected that the transaction will be completed on Monday. The club will update further at that time." Chelsea was put up for sale on 2 March.
 
Sky News has learnt that Authentic Brands Group (ABG), is the preferred bidder for London-listed fashion retailer Ted Baker. The American consumer goods giant owns a controlling stake in David Beckham's portfolio of branded products and is run by the billionaire businessman Jamie Salter. ABG is said to be paying in the region of £300m to takeover Ted Baker, more than 150p per share. 
 
Manchester based ‘fast fashion’ retailer Missguided is on the brink of collapse after being issued with a winding-up petition by creditors. Sky News says it understands that the business, which has about 330 staff, could call in administrators today. Missguided was rescued last autumn by the finance firm Alteri Investors but has since suffered from supply chain problems, rising freight costs and increasing competition from rivals like Boohoo and Chinese firm Shein.
 
Sainsbury’s CEO Simon Roberts has said the supermarket will invest move than £500m to offset rising costs because shoppers are “increasingly concerned” about their finances. The focus will be on keeping down the price of essentials such as milk, eggs, meat, fish, fruit and vegetables, and key household products, he said. The strategy will extend Sainsbury’s Price Lockcampaign, which commits to holding the price of more than 1,800 items for at least a week, and continuing a price match campaign with German rival Aldi.On Sunday, Iceland’s managing director Richard Walker said some of its customers are “disappearing into food banks”. He told Sophy Ridge on Sky News that cashiers at the supermarket have been asked by some shoppers to alert them when the price of their shopping hits £40 so they can abandon the rest of their items at the checkout.
 
Foxtons has poached the former boss of rival Chestertons to become its new chief executive.  Sky News says it has learnt that the London-based estate agent Foxtons will announce the appointment of Guy Gittins early as today, to replace Nic Budden, who has run the business for nearly eight years. Gittins was reported late last week to have stepped down from his role at Chestertons with immediate effect, but with no indication of his destination.
 
Sir Nigel Wilson, CEO of L&G, one of HSBC's ten largest shareholders has said that employees should be encouraged to voice dissenting views.  His comments supporting free speech come as HSBC continues to keep senior banker Stuart Kirk suspended pending an investigation following a presentation in which he criticised climate "nut jobs" and the "apocalyptic" language used when discussing climate change policy.  and the part British companies should play in the transition to a low-carbon economy. Wilson is a leading supporter of the fight against climate change and has frequently said that L&G is committed to encouraging its investments to go green, but said: "Not everybody is going to have the same views on lots of different issues in our business. We have a 'speak up' policy, and if people aren't happy about things then they are encouraged to speak up…It's very useful”.
 
According to the latest House Price Index from Zoopla, the average UK property price has risen to £250,200 for the first time in April, despite signs of a market slowdown emerging as homeowners face mounting pressure on finances because of inflation and interest rate rises. The data also revealed house sales are taking longer, with the average time between listing and sale agreed for a three-bed home outside London up from 16 days in March to 18 days in April, and up from 17 days in March to 21 days in April in London. Price reductions are also increasing: one in 20 (5.1%) properties listed posted discounts of 5% or more this month, compared with one in 22 (4.7%) in the previous 28 days. The average price cut reduction of 9% , when applied to the value of an average home, equals approximately £22,500.
 
The number of women aged 50 and over either in work or looking for jobs has increased by millions in the 70 years since the Queen has been on the throne, The Independent reports. In 1952 1.3 million women in that age group were working or looking for employment, but there are now 5.1 million, according to Rest Less, which offers advice and help to older people. However unemployment levels among women over 50 have also increased dramatically – from 27,000 in 1952 to 114,000 in 2022.
 
The cost of car rental in European holiday destinations has almost doubled in the past three years, The Guardian reports. An analysis of car rental prices in six European destinations by iCarhireinsurance.com shows it cost an average of £675 to rent a car for a week at the beginning of August, up from £339 for the same week in 2019, mostly because global shortages mean car hire firms are paying more for new vehicles they need having sold off much of their stock of vehicles during the pandemic as demand collapsed.
 
A Twitter investor is suing Elon Musk and the social media platform over the handling of the billionaire's $44bn (£34.9bn) bid for the company, the BBCreports. The case alleges he violated California corporate laws in a number of ways and engaged in "wrongful conduct" as his "false statements and market manipulation have created 'chaos' at Twitter's headquarters in San Francisco". Twitter shares are around 27% lower than Musk's $54.20 offer price. Meanwhile, the US financial watchdog, The Securities and Exchange Commission, has contacted Musk about the disclosure of his acquisition of a 9.2% stake in Twitter on 4 April, asking the Tesla chief why he appeared to file a crucial form late.

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