The Bank of England is expected to announce its fifth consecutive interest rate rise since December

By Suzanne Evans, Director, Political Insight

The Bank of England is expected to announce its fifth consecutive interest rate rise since December shortly, pushing its benchmark rate above 1% for the first time since 2009. Yesterday, the US central bank announced its biggest interest rate rise in nearly 30 years. The Federal Reserve said it would increase its key interest rate by 0.75% to 1.75%.
 
Lord King of Lothbury, a former governor of the Bank of England, writes in The Spectator saying the cost of living crisis is “reminiscent of the 1970s” and suggesting the prime minister should make it clear that living standards would fall. “Our leaders need to give us a clear narrative explaining why recent events will inevitably lower our national standard of living, how that burden will be shared, why it is important to bring inflation down, and why measures to raise economic growth and reduce regional disparities will take many years to come to fruition but will work only if we make a start now,” he wrote. He also suggested that the Bank should have moved faster to raise interest rates given that inflation had reached a 40-year high of 9%.
 
Petrol prices have hit new record highs every day for the past month, according to motoring organisation the RAC. The cost to fill a family car now stands at about £103 for petrol, and £106 for diesel, the BBC reports. The RAC said the war in Ukraine and moves to reduce dependence on Russian oil have helped drive up fuel prices, putting households under pressure as food and energy bills also soar. The average petrol price is now 186.59p per litre, with diesel at 192.48p. The RAC called on the government to cut fuel taxes to ease the cost burden on motorists, and to help lower the cost of living.
 
The International Energy Agency (IEA) says Russia’s oil-export revenues surged to around $20bn last month, an 11% increase from the month before, despite a global boycott from companies and most countries following its invasion of Ukraine. The IEA’s monthly report, published yesterday, said this takes Moscow's total revenue for shipping oil and crude products roughly back to levels experienced before the Ukraine war.
 
Germany’s economy minister Robert Habeck has accused Russian state-controlled gas giant Gazprom of attempting to push up energy prices by sharply reducing supplies. Gazprom has limited the amount of gas to Germany to under 70m cubic metres per day - well under half the current rate. The reason it gave was to service equipment in the Nord Stream pipeline, but Habeck labelled it was "a political decision" and not a technical one. "It is obviously a strategy to unsettle and drive up prices," he said.
 
The Government is pushing ahead with proposals to ban landlords from evicting tenants in England without good reason. The Renters Reform Bill will also end blanket bans on benefit claimants or families with children, and landlords must consider requests to allow pets, a published white paper confirms. The government has also promised tenants stronger powers to challenge poor practice and unjustified rent increases and obtain rent refunds for unhealthy, unsafe or poor quality homes. The Decent Homes Standard will be also extended to the private sector, meaning homes must be free from serious health and safety hazards and kept in a good state of repair, with clean, appropriate and useable facilities. The Bill also proposes ending "arbitrary" rent-review clauses, so tenants can leave poor-quality housing without being liable for the rent; doubling notice periods for rent increases; and giving councils stronger powers to tackle the worst landlords and increase fines for serious offences. Housing charity Shelter called it a "game-changer," but landlord associations warned it could exacerbate the housing crisis.
The National Residential Landlords Association CEO Ben Beadle welcomed additional clauses in the Bill promising speedier possession grounds for bad tenants and a mediation process but said “the detail to follow must retain the confidence of responsible landlords, as well as improving tenants' rights.” "We will be analysing the government's plans carefully to ensure they meet this test,” he added, as “a failure to do so will exacerbate the housing crisis at a time when renters are struggling to find the homes they need."
 
Passengers are being advised not to travel by train unless absolutely necessary during strikes next week. Network Rail says only a fifth of services are expected to run; about half of all rail lines will be closed; and services that do run will start and finish earlier. There will be trains at all in many places, including north from Glasgow or Edinburgh, to Penzance in Cornwall, to locations including Bournemouth in Dorset, Swansea in south Wales, Holyhead in north Wales, Chester in Cheshire and Blackpool in Lancashire, the BBC reports. "Make no mistake, the level of service we will be able to offer will be significantly compromised and passengers need to take that into account and to plan ahead and only travel if it's really necessary to do so," Network Rail boss Andrew Haines said. Thousands of workers are walking out across the country on 21, 23 and 25 June.
 
Consumer body Which? is warning that the Department for Transportation is planning to slash compensation payouts when UK domestic flights are severely delayed or cancelled, by £163 on average, according to its research. The government’s plan comes after lobbying from low-cost airlines, which claimed compensation fees could amount to up to 3% of their annual turnover, Which? says. The new scheme would only offer refunds based on ticket price and the length of delay instead.
 
The Treasury Committee has warned the government against "any inappropriate weakening" of the UK’s "strong" regulatory standards in a new report on the Future of Financial Services Regulation. Ministers have been urged to remember the lessons from the 2008 global financial crisis while reforming financial services sector post-Brexit. Mel Stride MP, the committee chair, said: "The financial services sector is at a turning point, with regulators taking on new powers following the UK’s exit from the EU. While it is vital that regulators are not leant on to inappropriately water down regulations…there are likely to be real opportunities to lessen regulatory burdens without weakening standards. It is also important that the regulators have an objective to promote growth, not just for the financial services sector, but for the wider economy."
 
Analysis from the Institute for Fiscal Studies (IFS) has found that 53% of the increase in the number of 50-to-69-year-olds leaving the workforce since the period immediately before the Covid-19 pandemic – some 250,000 people - is because they have retired. The think tank said this is a "reversal of a decades-long trend" which had seen economic inactivity in this age group fall since 2000. 36.5% of people in this age group are not in work, a percentage the IFS said “may look modest but is economically important, especially in the face of very high numbers of job vacancies". Movements into inactivity were particularly pronounced in those in their 60s, part-time workers, and the self-employed who are nearing retirement age, the IFS found.
 
The Institute of Grocery Distribution (IGD) says food prices will peak at a rate of 15% this summer as households pay more for staples such as bread, meat, dairy and fruit and vegetables, and that prices would rise faster for longer than the Bank of England estimates. The IGD, which provides analysis to major grocers, said the UK was facing the highest cost of living pressures since the 1970s, mainly down to the Ukraine war, as both Ukraine and Russia are major global grain producers. Together, the countries account for nearly a third of global wheat exports. The trade body expects high prices to continue into 2023.
 
Sainsbury's is to ramp up its Aldi Price match campaign and Sainsbury’s Quality rage, saying it will now cover around 250 products. In addition, the promotion will cover the retailer's 20 most popular product lines, a move that take around a tenth off the price of popular packs of chicken breasts and beef mince, and lower the price of onions, orange juice, cauliflowers and double cream. Last month, Sainsbury's announced a £500m price investment in a bid to help customers with the surging cost of living.
 
Both WH Smith and Whitbread – two businesses battered by harsh covid restrictions - have reported a surge in post-pandemic revenue. WH Smith says it now expects its annual results to be at the upper end of expectations, returning to pre-pandemic levels for the first time, mostly as a result of the recovery in the travel market. The newsagent, which runs store on the high street and at train stations and airports, said sales in the 15 weeks to June 11 were up 107% on the same period in 2019, with its travel division surging by 123%. Trading at pub and hotel operator Whitbread, meanwhile, beat expectations in the first quarter with strong performance that was well-ahead of pre-pandemic levels. The Premier Inn, Brewers Fayre and Beefeater owner saw UK accommodation sales surge 221.6% on a like-for-like basis year-on-year, or by 21.3% when compared to the same period in 2019. UK food and beverage sales were 566.5% ahead year-on-year, and down 7.6% on the same period in the 2020 full year.
 
British manufacturer Hybrid Air Vehicles (HAV) has secured an order worth hundreds of millions of pounds from Spanish airline Air Nostrum for ten of its Airlander 10 hybrid aircraft. HAV is set to begin production in South Yorkshire this year, creating 1,800 jobs.
 
London-listed THG says it has rejected two unsolicited takeover offers, including one from Belerion Capital and King Street Management, as all have "significantly undervalued" the e-commerce group. The group’s shares are currently down 14% on the news.
 
Capital & Counties and Shaftesbury have agreed the terms of a £3.5bn all-share merger that will create a combined group with a property portfolio valued at around £5bn, which includes “some of the most iconic destinations across London's vibrant West End.” The new company will be called Shaftesbury Capital and will be led by Jonathan Nicholls as non-executive chairman and Ian Hawksworth as CEO.
 
Online gaming software provider Playtech confirmed yesterday that the sale of its financial trading division Finalto, to Gopher Investments, is expected to complete on 30 June.
 
"The completion of the transaction is a significant step in Playtech's stated strategy to simplify the group and to focus on its technology led offering as a pure-play business in the high growth B2B and B2C gambling markets," the board said in its statement.
 
Safety equipment maker Halma has reported a rise in adjusted annual pre-tax profits of £316m, up 14% on increase revenue of 16% which passes £1.5bn for the first time. The company also announced yesterday that CEO Andrew Williams is to retire after 18 years in the role. He will be succeeded by CFO Marc Ronchetti.  
 
Online clothing retailer Asos has issued a profit warning, saying "inflationary pressures on consumers" meant cash-strapped customers were returning more items, which was adding to warehouse and delivery costs. Asos now expects adjusted pre-tax profit to fall to between £20m to £60m, well below predictions of between £110m and £140m announced in January. Over the three months to 31 May, with the resolution of supply chain issues which had dogged previous performance, sales rose by 4% to £987.9m, but COO Mat Dunn said: "What is now clear, based on the significant increase in returns rates that we have seen, is that this inflationary pressure is increasingly impacting our customers shopping behaviour." He added that it was "too early" to tell how long this behaviour would continue.
 
Regretfully, there will be no daily business news from us tomorrow. We will see you again on Monday.

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