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UK inflation has risen again to 9.1%

   News / 22 Jun 2022

Published: 22 June 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight


UK inflation has risen again to 9.1%, the highest rate in 40 years, according to figures just released by the Office for National Statistics.
 
The Bank of England’s chief economist has warned further interest rate hikes are on the cards to tackle record high inflation. "We will do what we need to do to get inflation back to target. And at least in my view, that will require further tightening of monetary policy over the coming months,",” Huw Pill said during a conference organised by the Institute of Chartered Accountants in England and Wales. Last week the Bank of England warned inflation was on track to reach 11% later this year amid soaring gas and electricity prices.
 
The Yorkshire Building Society says it has recorded an 88% rise in the value of “early repayment charges” paid by customers so far this year, compared with the same period in 2020. It attributes the rise in the number of homeowners willing to take a financial hit by paying thousands of pounds in penalties to their wish to end their current mortgages and lock in a new deal before interest rates rise even further.
 
Yesterday’s rail strikes: “All the advance publicity and media coverage about the biggest national rail strike in decades seems to have had an impact, with many passengers apparently heeding advice not to travel by train,” the BBC reports. “During the peak commuting time on Tuesday morning, many station concourses around the country were virtually empty,” the broadcaster says, noting that at Manchester Piccadilly just before 7am yesterday there were “more pigeons than people” and that it was a similar picture at Liverpool Lime Street as picket lines formed. At Glasgow Central station, normally Scotland's busiest, the departure board and the concourse were empty at 05:30 because although ScotRail is not involved in the strike, it still had to cancel 90% of its trains because it relies on staff from Network Rail. In Wales fewer than 10% of normal services were running. In London, a strike on the London Underground led to 95% fewer passengers on the network than Tuesday last week, according to Transport for London, while use of Santander Cycle hire had surged by 46% by 10am compared with the previous day. London bus journeys were up 7%. The AA said there were "traffic hotspots" on the M25 in south-east England, and on roads near London, Manchester, Leeds and Glasgow as people switched from the train to the roads. However, the National Traffic Operations Centre for National Highwayssaid motorways across England were marginally quieter than a normal Tuesday.
 
A nine-day strike by EasyJet cabin crew based in Spain will no doubt add to British holidaymakers’ woes over the summer period. EasyJet has already had to cancel thousands of flights this summer because of staff shortages at Gatwick and Heathrow Airport is still attempting to clear a baggage backlog which led to 5,000 flights being cancelled on Monday. EasyJet and Spanish union USO have been holding talks on cabin crew pay since February, but are now in a "deadlock situation", the union said. Union members working from El Prat in Barcelona, Malaga and Palma de Mallorca will walk out from 1-3 July, 15-17 July and 29-31 July.
 
The National Audit Office (NAO) has accused energy watchdog Ofgem of allowing an industry to develop on that made it “vulnerable to large shocks” by setting a "low bar" for allowing new domestic energy suppliers into the market to encourage competition and choice for customers, in a move designed to break apart the monopoly of the “big six” companies. Ofgem later introduced tighter rules for new entrants in 2019, but not for existing suppliers until 2021, meaning many suppliers lacked the financial resilience to deal with the six-fold increase in wholesale prices seen last year, the NAO said. All billpayers are now having to pay about £94 more each to cover the £2.7bn cost of the failure of some 30 suppliers which folded after wholesale gas prices soared. Meg Hillier MP, who chairs the Public Accounts Committee told the BBC: "Ofgem's approach created an energy market built on shaky foundations. As a result, many companies simply collapsed under the shock of energy price increases. Once again, it's the public who has to pay for the mistakes of those charged with protecting them. It's unacceptable." Gareth Davies, head of the NAO, said: “A supplier market must be developed that truly works for consumers".
 
The Payment Systems Regulator (PSR) is to investigate fees set by Mastercard and Visa following a “significant” increase in card charges between 2014 and 2018. The two credit companies account for 99% of all debit and credit card payments in the UK. Natalie Timan, head of strategy at the PSR, said: "To accept card payments, merchants must pay certain fees which can ultimately impact the cost we all pay for goods and services. We want to understand whether card payments are working well, and to make sure that merchants - and ultimately consumers - get a good deal. We've been gathering information since the start of this year and have identified that a detailed review of the market is needed." Cross-border interchange fees have increased five-fold since the UK left the European Union, the PSR says, as the cap on transaction fees between the UK and Europe was dropped post Brexit.
 
The government could be forced to pay a £40bn compensation bill if a legal challenge launched yesterday over the recalibration of the retail prices index (RPI) is successful, the Times newspaper reports. The BT, Marks & Spencer and Ford UK pension schemes are challenging Chancellor Rishi Sunak in the Royal Courts of Justice. In 2020, Sunak said he was changing the definition of the RPI after a request from the UK Statistics Authority to make it identical to CPIH, the consumer prices index adjusted for housing costs, with the change coming in from 2030. However investors in inflation-protected bonds, known as linkers, say they bought the bonds - whose interest rate is determined by RPI - on the reasonable expectation that the terms would not be changed, the newspaper stated. The BT scheme, which has 275,000 members, has calculated it would be £1bn worse off because of the formula change. The case is expected to last two days but a judgment is not expected before September.
 
According to the latest CBI Industry Trends Survey released yesterday, manufacturing output growth slowed slightly in the three months to June and is expected to ease further in the three months ahead. Output increased in 12 out of 17 sectors the survey tracks during the quarter, led by the motor vehicles and aerospace sub-sectors. However, the food, drink & tobacco sub-sector shrank for the first time in just over a year. Anna Leach, deputy chief economist at the CBI said: “While manufacturing output is still being supported by a backlog of orders, growth appears to be softening. Stocks of finished goods are now seen as broadly adequate and we may be seeing the first signs that weaker activity is beginning to slow the pace of price increases in the sector”. Price expectations also fell to a nine-month low, with fewer manufacturers planning to raise their prices than earlier this year. A net balance of 58% of firms expected domestic price growth for the three months ahead, down from 75% in May.
 
Brexit has damaged the UK’s competitiveness and will make the country poorer in the decade ahead, according to a new joint report by the Resolution Foundation and LSE and funded by the Nuffield Foundation. Britain leaving the European Union has not had the expected effect of reducing exports to the bloc but has instead more broadly reduced how open and competitive the economy is, which will hit productivity and wages, The Big Brexit report claims. It said: “The research estimates that labour productivity will be reduced by 1.3% by the end of the decade by the changes in trading rules alone. This will contribute to weaker wage growth, with real pay set to be £470 per worker lower each year, on average, than it would otherwise have been”.  The report also claims that the manufacture of electrical equipment, which is particularly reliant on cross-border supply chains will be hardest hit, while the manufacture of food products is set to grow post-Brexit as it supplies the UK market. On a regional level, the North East is expected to be hit hardest by Brexit because its firms are particularly reliant on exports to the EU. The East of England (which has a high share of food manufacturing) and Scotland are expected to outperform the rest of the country.
 
UK property transactions increased by 1.6% last month, according to HM Revenue & Customs (HMRC). There were 109,210 transactions in total in May, 1.3% higher than in April 2022, but 5.1% lower than the previous year. 100,879 of those sales were residential property transactions, 2% lower year-on year but 1.6% higher than the month before. All-in-all this was the third busiest May for a decade. The number of transactions is currently 11% above the long-run average of 98,048.
 
Electrical safety checks should be mandatory for social housing after thousands of hazards were uncovered in private rentals, a charity has said. Five-year mandatory checks were introduced in the private rented sector in England in June 2020, mirroring an existing scheme in Scotland, the BBC reports. The charity, Electrical Safety First, said the checks had found 7,000 faults including exposed live wiring. It wants the law to now cover England's four million social housing properties. The government said it was consulting on the issue.
 
A British subsidiary of the mining giant Glencoreformally pleaded guilty on seven counts of bribery in connection with oil operations in Nigeria, Cameroon, Equatorial Guinea, Ivory Coast and South Sudan in Southwark Crown Court yesterday. The Serious Fraud Office (SFO) found that bribes of over $28m (£22.8m) were paid via the Swiss-based firm's employees and agents to secure access to oil and make illicit profit across its oil operations in the five countries between 2012 to 2016. The aim was to encourage officials to “perform their functions improperly, or reward them for so doing, by unduly favouring Glencore Energy UK Limited in the allocation of crude oil cargoes, the dates crude oil would be lifted and the grades of crude oil allocated," the SFO said. Glencore has also pleaded guilty to corruption charges in the US and Brazil and still faces investigations in Switzerland and the Netherlands. The miner expects to pay up to $1.5bn (£1.2bn) in fines. It has just posted record profits for the first half of the year in excess of $3bn (£2.4bn) but is currently making record profits.
 
Britain's biggest private pension fund is said to be in advanced talks to buy into the real estate assets of Butlin's, the holiday camp operator, in a deal worth more than £300m. Sky News says it has learnt that the investment arm of the Universities Superannuation Scheme (USS) is closing in on an agreement that will effectively see it becoming the famous resort chain's landlord. Bourne Leisure Group, Butlin's owner, is in separate discussions with one potential buyer of the three-site chain's operating business, according to insiders. In recent weeks, bidders including Queensgate Investments, TDR Capital and Terra Firma Capital Partners have dropped out of the auction process. Sky says it is unclear on Tuesday whether Bain Capital or Epiris,which have also expressed interest in a deal, were still in discussions.
 
British manufacturer GSK has opened a new £90 million factory at its Barnard Castle site. The  pharmaceutical giant employs more than 1,000 people at the County Durham campus supplying nearly half a million packs of products per day to 140 global markets.
 
Covid vaccine maker Moderna is planning to open its first vaccine factory in Britain, but has yet to lay out plans for how large the facility will be or where it will be built, although reports have suggested it was a choice between Oxford, Cambridge or London.
 
US food giant Kellogg is splitting into three public companies by spinning off its North American cereal and plant-based divisions, Sharecast News reports. Kellogg's had net sales of $14.2bn (£11.6bn) in 2021, with $11.4 billion dollars (£9.3bn) generated by its snack division. Cereal, for which it is most famous, accounted for another $2.4bn (£1.96bn) in sales last year while plant-based sales totalled around $340m (£277 million). The North American cereal branch is expected to be hived off first, with Kellogg aiming to finish both transactions by the end of next year. It added that the global snacking business was forecast to be a "higher-growth company than today's Kellogg Company".
 
The US Supreme Court has refused to hear an appeal brought by German chemical maker Bayer AG, leaving in place a ruling upholding a $25m award to a California man who claimed use of the firm’s glyphosate-based Roundup weedkiller gave him cancer. Bayer has argued that it should be shielded from liability because government regulators had approved the product, but the Supreme Court decision now leaves it exposed to billions of dollars in potential legal claims. Bayer said it "respectfully" disagreed with the court's decision, saying it "undermined the ability of companies to rely on official actions taken by expert regulatory agencies". Bayer acquired the Roundup brand as part of its $63bn takeover of Monsanto in 2018, also maintains the chemical is safe. In 2015, the World Health Organization determined that glyphosate was "probably carcinogenic to humans", but it remains approved in the US and much of the rest of the world.


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