The Conservative party leadership race is now between Liz Truss, Penny Mordant, and Rishi Sunak

By Suzanne Evans, Director, Political Insight

The Conservative party leadership race is now between Liz Truss, Penny Mordant, and Rishi Sunak, as Kemi Badenoch failed to secure enough votes to go through to the next round yesterday.

UK inflation has risen again to 9.4% in the 12 months to June, the Office for National Statistics (ONS) said earlier this morning. This is an increase from 9.1% in May. Grant Fitzner, chief economist at the ONS, said inflation now stood at its highest point for more than 40 years and that the June increase “was driven by rising fuel and food prices".
 
Bank of England governor Andrew Bailey said in a speech yesterday that interest rates could be raised by as much as 0.5% at its next rates meeting on 4^th August. “At the MPC's last meeting we adopted language which made clear that if we see signs of greater persistence of inflation, and price and wage setting would be such signs, we will have to act forcefully," he said. "In simple terms this means that a 50 basis point increase will be among the choices on the table when we next meet”.
 
Eurozone inflation also pushed higher in June. Eurostat, the European Union's statistical office, announced yesterday that annual inflation was 8.6% last month, up from 8.1% in May. In the wider bloc, annual inflation was 9.6%, compared to 8.8% a month previously.
 
Average annual supermarket bills are going to increase by £454, according to research by retail experts Kantar. Kantar says grocery price inflation leapt to 9.9% over the four weeks to July 10, rising sharply from 8.3% in the previous month. The firm predicts this will soar past 10% in August, and that the fastest price increases are for products such as dog food, butter and milk. Fraser McKevitt, head of retail and consumer insight at Kantar, also noted that own label products were rising as a result of inflation. Overall sales of branded groceries were down over the period by 2.4%, while own-label sales rose 4.1%.  Kantar also announced that total supermarket sales increased by 0.1% over the 12 weeks to July 10, the first time the market has been in growth since April last year. German discounters Aldi and Lidl have seen increases of 11.3% and 13.9% respectively – as shoppers turned to them for cheaper prices amid pressure on their household budgets – while Tesco was the only one of the big four grocers to report growth for the quarter. The weakest performer was Morrisons, which witnessed a 6.7% drop for the period, according to the figures.
 
A postal strike by 115,000 workers is potentially on the cards. The Communication Workers Union (CWU) says 97.6% of members who voted backed industrial action in a 77% turnout yesterday and suggested it was the greatest strike mandate it had ever won from Royal Mail workers. The result was announced 24 hours after a three-day walkout by 2,400 Royal Mail managers, due to start yesterday, was called off by Unite after a ballot on new proposals to help end their row with bosses over jobs, pay, conditions, and efficiency reforms to the service. A Royal Mail spokesperson said: “We are disappointed that CWU members have voted in favour of industrial action. We offered a deal worth up to 5.5% for CWU grade colleagues, the biggest increase we have offered for many years, which the CWU rejected...In the event of industrial action, we have contingency plans to minimise customer disruption and will work to keep people, businesses and the country connected." No strike dates were announced in response to the new ballot, and Dave Ward, CWU general secretary, said there will now be a "small window" for talks to avoid walkouts before strike dates are set.
 
The Royal Mail said this morning that revenues had sunk 11.5% year-on-year during this first quarter, reflecting weakening retail trends, lower covid test kit volumes, and a return to a structural decline in letters. The postal service posted an operating loss of £92m due to the "inflexibility" in its cost base to adjust to lower volumes and a "disappointing performance" in terms of delivering further efficiencies. "The pandemic boom in parcel volumes bolstered by the delivery of test kits and parcels is over. Royal Mail is currently losing one million pounds per day and the efficiency improvements which are needed for long-term success have stalled,” Chairman Keith Williams said.
 
Heathrow Airport is experiencing strike action by 50 staff at refuelling firm AFS (Aviation Fuel Services) after they rejected a revised pay offer. The Unite union confirmed three-days of industrial action started at 5am this morning, saying it is likely to cause delays for hundreds of flights at Britain's busiest airport, as AFS provides fuelling services to almost half of all non-British Airways traffic at Heathrow, some 70 airlines including Virgin Atlantic, American Airlines, United, SAS, Air France, Emirates, Delta, JAL, KLM and Singapore Airlines. The company had made a revised pay offer of a 10% increase, which Unite said members rejected because it "did not meet their expectations". Unite said staff had not received a pay increase for three years and had seen their pay fall by 15% when accounting for inflation. General secretary Sharon Graham said AFS is "wholly owned by incredibly wealthy energy companies who are entirely able to provide our members with a decent pay increase…This is yet another example of energy companies boosting profits at the expense of workers". AFS is a joint venture operation with partners including BP, Total Energies, Q8 Aviation and Valero Energy.
 
Santander UK and Virgin Money have become the latest firms to help employees cope with the cost of living crisis amid soaring inflation that is eating away real terms pay, Yahoo Finance UK says. Santander is giving 11,000 employees who earn under £35,000 – 60% of the bank’s workforce - a 4% pay increase from the start of August which it says will “make a real difference to the majority of our customer-facing and contact centre staff…in the current economic climate," CEO Mike Regnier said in a statement. Santander also said it would increase its entry level salaries to £19,500. Meanwhile, Virgin Money is offering the majority of its staff a £1,000 one-off bonus. The offer is for all employees who are paid £50,000 a year or less, which represents 78% of its workforce. Unite, the union representing the bank’s workers, is claiming credit for the Virgin Money deal.
 
Amazon paid £648m directly to HMRC last year as UK revenue increased by 12.4% to exceed £23bn, boosted by the online shopping boom caused by covid lockdowns and other restrictions. This is an increase in taxation of almost a third, the company said, up from £492m in 2020, and driven mostly by an increase in the size of its UK workforce, which grew to around 70,000 workers by the end of 2021. Amazon intends to expand that still further to almost 75,000 staff by the end of this year. Taxes were also increased by the expansion of the company’s real estate footprint, with the group opening new warehouses and growing its grocery store operation. “We are proud of the significant economic contribution we are making to the UK economy," Amazon said in a statement.
 
Amazon filed a lawsuit in Seattle yesterday against the administrators of more than 10,000 Facebook groups that allegedly acted as fake review brokers, soliciting reviews for items in exchange for money or free products. One of the groups, “Amazon Product Review,” had over 43,000 members, and allegedly offered refunds or other payment to buyers willing to leave fake reviews on products like cameras or laptops.
 
SoftBank has halted plans to list chip designer Arm in London because of the political upheaval in the UK, the Financial Times said yesterday. The Japanese conglomerate had been in talks about a potential initial public offering of the Cambridge-based business with prime minister Boris Johnson, investment minister Gerry Grimstone and digital minister Chris Philp. However, all three resigned as Johnson's government collapsed, leading SoftBank to pause discussions, the FT reported.
 
One of Britain's biggest fund managers, abrdn, is preparing to sell its division which manages private equity funds as part of its ongoing streamlining under CEO Stephen Bird, Sky News reports. Rothschild has been appointed to oversee the sale of the division, which managed nearly £14bn in assets at the end of last year. Bird’s most ambitious deal to date, since he took over two years ago, was the £1.5bn takeover of Interactive Investor, which catapulted abrdn into the top ranks of Britain's direct-to-consumer investment providers, the broadcaster says. Bird has focused on simplifying the company, exiting a number of non-core businesses, and focusing on areas where it already has the advantage of scale. Abrdn declined to comment on the story.
 
FTSE 250 aerospace, defence, and security giant Babcock has agreed to sell certain aerial emergency services businesses to funds managed by mid-market infrastructure investor Ancala Partners for €136.2m. Babcock said yesterday that the disposed businesses provide aerial emergency medical, firefighting and search and rescue to customers services to communities in Italy, Spain, Portugal, Norway, Sweden and Finland. Babock intends to retain its aerial emergency services units in its core countries of the UK, France, Canada and Australia, where it also operates defence businesses.
 
Ocado Retail, the 50:50 joint venture between Ocado and Marks & Spencer, has announced the departure of CEO Melanie Smith at the end of August after three years. She was instrumental in the formation of the joint venture, established in August 2019. Lawrence Hene, previously deputy CEO at Ocado Retail and a current non-executive director will take over on an interim basis, with a permanent successor appointed in due course.
 
Tesla CEO Elon Musk has lost his fight to delay Twitter's lawsuit against him. On Tuesday a Delaware judge set a date for a trial in October, citing the 'cloud of uncertainty' over the social media company after the billionaire’s backing out of a deal to buy it. Twitter had asked for an expedited trial in September, while Musk's team called for waiting until early next year because of the complexity of the case. 'Delay threatens irreparable harm,' said Chancellor Kathaleen St. Jude McCormick, the head judge of Delaware's Court of Chancery, which handles many high-profile business disputes, the Daily Mail says. 'The longer the delay, the greater the risk.' Twitter is trying to force the billionaire to make good on his April promise to buy the social media giant for $44 billion. Musk is alleging their agreement has been breached as Twitter has repeatedly failed to provide information about the number of fake and spam accounts on the platform.
 
The EU is set to add Russia's top lender Sberbank and the head of giant zinc and copper firm UMMC to its list of individuals and companies banned for supporting Moscow's invasion of Ukraine, according to draft documents seen by Reuters. Meanwhile, Russia is now seeking payment in United Arab Emirates dirhams for oil exports to some Indian customers, as Moscow moves away from the US dollar to insulate itself from the effects of Western sanctions.
 
Shares in Anglo-Russian precious metals miner Polymetal surged 32% yesterday after it said it was considering disposing of its Russian assets. If completed, the disposal would result in Polymetal focusing primarily on its operations in Kazakhstan. The outcome would be to restore shareholder value, de-risk its ongoing operations, and make it more likely Polymetal would be able to re-enter all the relevant equity and sustainability indices and regain a significantly wider institutional audience, it said. Polymetal was delisted from the FTSE Russell Group index back in March.
 
A Google Cloud data center in London faced an outage yesterday, according to an update on the Alphabet Inc unit's status page. Google Cloud said it was a "cooling related" failure at one of the buildings as temperature in the UK soared to a record high. Oracle also suffered a near-identical issue with its cooling system at its South London data centre. Early this morning, both companies said some issues were ongoing.
 
Reuters reports that expectations of global growth and corporate profits have plunged to a record low, according to a monthly Bank of America fund manager survey of nearly 300 investors overseeing $800 billion in assets under management. The survey shows cash levels have risen to their highest in more than two decades – to 6% - as investors cut their exposure to risky assets. The “dire level of investor pessimism" is said to surpass the depths of the Covid-19 pandemic and the global financial crisis in 2008.
 
The Chinese authorities are preparing to impose a fine of more than $1 billion on ride-hailing firm Didi Global, people familiar with the matter said yesterday, a move that could bring an end to a probe into the firm's cybersecurity practices.
 
After numerous unsuccessful lawsuits, UK-based luxury shoe brand Manolo Blahnik has finally won the right to use its name in China. It has not been able to operate in China for over 20 years, after a local businessman Fang Yuzhoutrademarked "Manolo & Blahnik" in 1999 and sold shoes under the brand. China’s "first to file" trademark rules meant Fang's claim was viewed to be stronger than that of the original company, which was made later. However, the law has since been amended to consider that filings could be made in "bad faith" and, in a statement issued yesterday, Manolo Blahnik - named after its Spanish founder Manolo Blahnik - said it had won its case at the Supreme People's Court of China,  the country's highest court. The brand now plans to begin selling in China next year.
 
The cryptocurrency market cap is back above $1tn with Polygon and Ethereum taking the lead in the latest rally, Yahoo Finance reports. Polygon, a side-chain of the Ethereum network which offers much lower transaction fees, has risen almost 200% in one month to sit at $0.90, including a 60% increase in the last seven days. Ethereum meanwhile, the second largest cryptocurrency by market cap is up 39% in one week at $1,521. Bitcoin broke back through the $22k level on Monday, and is now trading at $21,822, up 9.2% in the week.

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