Published: 01 June 2022
Location: London, UK
By Suzanne Evans, Director, Political Insight
Food price inflation has accelerated to a ten-year high, rising 4.3% in the year to May, according to the British Retail Consortium (BRC).
There are mixed signals coming from various business and research groups about confidence in the economy this morning. The Confederation of British Industry (CBI) expects private sector activity to remain broadly flat in the three months to August as its latest Growth Indicator suggests output growth in the manufacturing sector will “remain solid.” Business and professional services activity, however, is expected to fall 1%, while consumer services activity is forecast to slump by 23%. There was a “sharp deterioration in optimism” over the three months to May across all key industries, the CBI said, noting that the -31% fall in confidence among manufacturers and a -21% fall in professional services, was the sharpest since min-2020. Meanwhile, a survey by the Institute of Directors suggests business confidence has fallen to an all-time low, with two-fifths citing inflation as their top concern. In stark contrast, the latest business barometer from Lloyds Bank tells a very different story: it shows business confidence has increased for the first time in three months, by five percentage points to 38%, the highest since February 2022 and 10 points above the long-term historical average of 28%. Still, Lloyds does note that confidence in the retail sector fell two points to 27% because of the rising cost-of-living. Overall, 57% of firms anticipate higher prices, and 46% of respondents cited higher costs as one of their biggest concerns. 34% cited economic slowdown as a worry. Only 5% of firms are planning to reduce prices. 53% are planning to hire new staff, with 61% of construction companies specifically planning to do so. Concerns about covid decreased to 20%, down from 45% at the start of the year. Regionally, the Lloyds survey showed confidence was highest in London, the West Midlands and the North West.
Food producers and retailers warned yesterday that Prime Minister Boris Johnson’s plans to reintroduce imperial weights and measures could lead to further price rises. The Department for Business, Energy and Industrial Strategy will launch a consultation on whether retailers should be able to sell in both metric and imperial measurements on Friday. The British Retail Consortium said the move would be a “distraction” from the country’s problems and increase costs because of the need to re-measure and relabel products. The trade body pointed out that manufacturers are already free to list both imperial and metric measures on goods. Joe Harrison, CEO of the National Market traders Federation told The Telegraph it “made little sense” for stalls to shift back to imperial when most young people had grown up with metric measures, and that the shift would be a “hassle.” Britain formally introduced the metric system in 1965, although beer, milk and cider continued to sold in pint measures.
Tui has said it will cancel more than 180 flights from Manchester airport over the next month, six flights a day, because of ongoing disruption due to staff-shortages as a consequence of layoffs during covid lockdowns. The cancellations will affect some 34,000 people. Apparently, the company was so short-staffed, local police had to read out a statement from the firm to stranded passengers telling them their holiday had been cancelled, and outlining their right to compensation. Manchester airport said TUI’s ground handler Swissport, which manages its check-in and baggage handling facilities, was partly to blame. Tui is not alone in having to made cancellations; easyJet and British Airways are also leaving travellers stranded at major airports across the UK. Before lockdowns, airports and airlines across the UK employed around 140,000 people, but then thousands of jobs were cut, including some 30,000 for UK airlines alone.
Transport Secretary Grant Shapps has washed his hands of any responsibility for the chaos at airports and criticised airlines and travel operators, saying it is all their fault because they have “seriously oversold flights and holidays.” He said it had been “very distressing” to see people facing disruption at airports with “holidays cancelled, and plans left in disarray”. He stressed that it was up to industry leaders to tackle travel disruption but that he would meet with airports, airlines, and ground handlers, to find out what has gone wrong and when the current run of cancellations will end. However, Paul Charles, CEO of travel consultancy The PC Agency and a former director of Virgin Atlantic blamed the government as “responsible for this chaos”. “The transport secretary has got a bit of a nerve I’m afraid,” he told the BBC. “It’s because of government restrictions that changed so much during the pandemic, and then the shutdown of the industry with the Omicron variant last December, that has created this problem,” saying that without certainty as to when travel restrictions would be eased, the industry was not able to recruit more staff”. Airlines UK said the sector had “only a matter of weeks to recover and prepare for one of the busiest summers we’ve seen in many years”.
Mike Ashley’s Frasers Group has bought Missguided out of administration. The Sports Direct and House of Fraser owner snapped up the stricken fashion retailer just hours after it went bust, also buying the intellectual property of its sister brand Mennace, for around £20 million. There will be a transition period of around eight weeks, after which time Frasers will run Misguided as a “standalone” brand within its group. Frasers Group has also recently picked up Game, Evans Cycles, Jack Wills and Sofa.com in similar deals.
Ofcom has launched an investigation into Royal Mail because of a failure to meet delivery targets over the past year. Under Ofcom’s rules, the postal service must deliver 93% of first-class mail within one working day of collection in 118 postcode areas, and 98.5% of second-class post within three working days of collection. According to the communications watchdog, however, that in 2021-22 only 81.8% of first-class and 95.4% of second-class mail was delivered on time.
Cybersecurity firm NCC Group said yesterday that CEO-designate Mike Maddison is taking up his position earlier than expected, on 1st August. The FTSE 250 company said this was because he had received permission to do so from EY, his current employer.
The quarterly FTSE 100 reshuffle is due. Looking certain of relegation are Royal Mail, following a drop in the share price of some 43% over the past year, and broadcaster ITV which has lost 47% of its market value since it re-joined the blue-chip index in June 2021. Harbour Energy, formerly Premier Oil, could also be ousted after just one month, which would make it one of the shortest FTSE 100 stays on record. Meanwhile, British Gas owner Centrica looks set to be promoted from the FTSE 250 along with student housing firm Unite. The changes will be announced after the markets close today and take effect on 20th June.
77% of all small UK firms – some 4.2 million companies - have no plans for Net Zero, according to research from Lloyds bank. The bank’s survey also found that 50% didn’t know what was meant by the term, and only 15% knew how to calculate their carbon footprint. 12% of British small businesses did know what their carbon footprint was. 40% think there is not enough support available to meet green targets.
A report has named the UK as one of the countries most likely to fully phase out combustion vehicles by 2038, along with Germany, France and China. Internationally, electric vehicle (EV) sales are poised to more than triple by 2025, soaring to 20.6 million, higher than the 14 million forecast, mainly due to faster uptake in China, according to research firm BloombergNEF (BNEF). However, BNEF warns that road transport is not on track for carbon neutrality by 2025 and there will need to be “aggressive action” by policymakers to achieve this goal. The report calls for measures to “combat car dependency” by 11%; says governments should completely phase out sales of new combustion vehicles by 2035; and enforce stricter fuel-economy and battery recycling standards. BNEF estimates $1.4 trilllion of investment will be needed to build out charging infrastructure by 2040.
The Kremlin-controlled Russian energy firm Gazprom says it will cut some supplies to British energy giant Shell and Denmark’s Orsted from tomorrow, to stymie their contracts to supply gas to Germany, after both firms refused to make payments in roubles. Russia has already cut supplies to Poland, Bulgaria, Finland and the Netherlands for the same reason.
Thank you for reading, we will take a break now until Monday. The Political Insight team wishes you all a lovely long Jubilee Bank Holiday weekend.
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