Published: 04 August 2022
Location: London, UK
By Suzanne Evans, Director, Political Insight
The Bank of England (BoE) is expected to raise interest rates by half a percentage point today, in an attempt to rein in the highest level of inflation in 40 years. The increase, which will take the base rate to 1.75%, will be the largest interest rate hike in 27 years. Inflation hit 9.4% in June and the BoE expects it to peak at 11% by the end of the year, well above its 2% target. The central bank has increased interest rates for a record fifth time in a row in seven months so far. The Telegraph says the move will immediately mean nearly two million homeowners will be hit by rising mortgage costs, being on either standard variable rate or tracker mortgages. The majority (80%) of mortgaged homeowners will be protected by their fixed-rate deals, but a third of these will expire in the next two years.
Parliament has closed down its TikTok account after the Speakers of the House of Commons and Lords ordered officials to do so, saying they had not been consulted about its creation and had serious concerns about the risk of data being passed to the Chinese government. TikTok is owned by Chinese company ByteDance, which has denied it is controlled by Beijing. The former Conservative party leader Iain Duncan Smith MP says Downing Street and senior ministers with TikTok accounts should now follow suit, and close them. A TikTok spokeswoman told the BBC it was "disappointing" that Parliament would not be able to connect with users of the app in the UK. Only one video had been posted on the TikTok account, showing the best way for tourists to take a selfie with Big Ben in London.
UK services sector activity growth crawled to its slowest pace since early 2021, when the country was in lockdown, according to the monthly S&P Global/CIPS UK services PMI survey. It fell to 52.6 in July, down from 54.3 a month earlier. There is still growth, as the reading is above 50, but analysts had expected better, anticipating a score of 53.3, Yahoo Finance says. "Reduced levels of discretionary consumer spending and efforts by businesses to contain expenses due to escalating inflation have combined to squeeze demand," Tim Moore, S&P Global Market Intelligence's economics director, said. "Any slowdown in inflationary pressures can't come soon enough for service providers, with many firms reporting growing customer resistance to price hikes and a subsequent downturn in demand," he added.
Analysis by Which? claims 5.7 million households experienced problems paying for essential connectivity services in April, and had to reduce spending on other essentials, cancel or change their service or miss a payment. The consumer group is consequentially asking the government to cut VAT on mobile, broadband, and telephone services “from 20% to 5%, to be in line with other essentials such as gas and electricity". Its analysis of Ofcomsurvey data concluded that the number of households struggling with affordability issues increased to 20% in April 2022, up by a fifth from 16% in February. The Which? study also found that in March 2022 an estimated 3.5 million households reduced their spending on other essential items, such as food and clothes — up from an estimated 2.2 million in February.
Octopus Energy claims that rural households are eager for stronger onshore wind turbines to help bring down energy bills. The company is planning to take over and boost the output of around 1,000 existing onshore wind turbines, many in the north of England, in a move that could see hundreds of turbines made 20 metres taller to treble output power. Octopus also plans to extend a tariff which offers households living near turbines cheaper energy when the wind is blowing hard. Writing in The Telegraph, Zoisa North-Bond, CEO of Octopus Energy Generation, said: “It’s an absolute no-brainer to look at these existing older onshore wind turbines, and see how we can upgrade some of them to generate even more local power... We’re working really closely with planning authorities and local communities to optimise areas that have already been used for onshore wind – and it’s clear that we’re pushing on an open door.”
Having already stopped selling short-haul tickets to domestic and European destinations until at least 8th August, British Airways (BA) announced yesterday that it is also set to limit long-haul flights to destinations such as New York amid disruption at Heathrow Airport. BA, which is owned by Spain's IAG, told The Telegraph that it could not rule out disruption to long-haul routes out of Heathrow while the daily passenger cap remains in place. Heathrow has limited the number of people allowed to fly per day at 100,000 until 11thSeptember in order to limit queues, baggage delays and cancellations. The BA spokesman told the newspaper that ticket sale suspensions were being dealt with on a case-by-case basis, with no blanket restrictions being imposed. For example, if ticket sales for a morning flight to New York were paused, travellers may still be able to book themselves on to an afternoon flight.
Management consultancy Bain has been banned from government contracts for three years over its involvement in a South African corruption scandal as part of its work for the national tax agency during South Africa's former President Jacob Zuma’s nine years in power. The firm was found to have acted unlawfully by undermining the South African Revenue Service through consultancy work that allegedly benefited Zuma's allies. Bain said it was "disappointed and surprised" by the decision but acknowledged it had made "mistakes". A Cabinet Office spokesperson said that after reviewing Bain's role and taking account of the "evidence and conclusions of the South African Government Commission", the Minister for Government Efficiency, Jacob Rees-Mogg, considered Bain to be "guilty of grave professional misconduct".
The chairman of failed luxury Caribbean hotel and resort developer Harlequin Group was convicted yesterday defrauding £226m from more than 8,000 investors in Britain. David Ames was found guilty by a jury at London's Southwark Crown Court of two counts of fraud by abuse of position, the UK Serious Fraud Office (SFO) said in a statement, adding that he offered no evidence in his defence. The 70-year-old Briton will be sentenced on 22ndSeptember. From 2005, investors paid a 30% deposit to purchase an unbuilt villa or hotel room in places such as the Dominican Republic, Barbados, St Lucia, Saint Vincent and the Grenadines, the SFO said. Half went towards fees for Harlequin and salespeople, while Harlequin put the remaining 15% towards construction, but the venture faced a 1.2 billion pound funding shortfall and went into administration in 2013. More than 99% of investors, some of whom had invested retirement and life savings to finance deposits, received no return. Meanwhile, the SFO said Ames made £6.2m from the projects, and repeatedly ignored warnings that the business was likely insolvent and sacked associates who raised the alarm.
British manufacturer Lofthouse of Fleetwood, best known for its Fisherman's Friend lozenges, is to build a new multi-million pound factory adjacent to its current site. Founded in 1865, the family-owned firm exports more than 95% of the products it makes.
Marks & Spencer has stopped selling disposable barbecues “to help protect open spaces and reduce the risk of fires" after the London Fire Brigade called for a ban on their sale last week.
Cardiff has dropped out of the running to host Eurovision in 2023. In a joint statement Cardiff council, the Welsh government, and the Principality Stadium Officials said staging the song contest would have meant cancelling a "significant number" of other events next spring, and so it would not be possible for a bid to go forward. Britain is hosting the contest because last year’s winners, Ukraine, cannot hold the event there because of the war.
The former Liberal Democrat deputy prime minister Sir Nick Clegg is to join a string of senior Facebook executives moving to London after four years in Silicon Valley, despite predicting that an “economically insecure” Britain would haemorrhage tech businesses in the wake of Brexit, The Telegraph reports. Back in 2017, he warned in an interview that Brexit would damage UK Plc, saying: “Pretty much everyone I speak to in the tech sector privately, they feel this sucking sound. Things that could have started here are starting in Berlin. Investments that could be made here being put on ice. New innovations that could have flourished here are starting to flourish in Paris, Amsterdam, Copenhagen, Lisbon," he said. However, Meta has been expanding in London despite Clegg’s concerns. Earlier this year Meta opening a new 620,000 sq ft office in Kings Cross for 4,000 staff.
FTSE 100 investment manager M&G has agreed to buy Continuum, a provider of independent financial advice, for an undisclosed sum. M&G will take an initial 49.9% stake in the business this year, with a scheduled agreement in place to acquire the remainder over the following two years. On completion, Continuum will become part of M&G Wealth, bringing more than £1.5bn of assets under advice to the company. It will retain its own brand.
The Competition and Markets Authority has provisionally cleared Fortune 500 company NortonLifeLock's $8.6bn (£7.09 bn) acquisition of UK rival Avast. The acquisition was referred for an in-depth investigation in March, but the CMA has in principle concluded that the acquisition will not lead to British customers getting a worse deal when looking for security software. The deal, which would combine NortonLifeLock's strength in identity theft protection and Avast's privacy credentials, has already received the green light in the United States, Spain and Germany.
Airbus has struck from its books its entire outstanding order from Qatar Airways of 19 A350 jets, worth in the region of $3 billion (£2.47bn), effectively severing all new jetliner business with the Gulf carrier, two industry sources have told Reuters. The aviation firms have waged a public battle for months over surface damage to more than 20 of the long-haul jets that the airline says are a design fault that could pose a risk to passengers, but Airbus insists it is only a cosmetic issue and the planes are completely safe. Qatar - the first airline to introduce the intercontinental A350 jet to the skies in 2015 - is suing Airbus for at least $1.4 billion after almost half its A350 fleet was grounded by Qatar's regulator over damaged or missing patches of anti-lightning mesh left exposed by peeling paint and has refused to take delivery of more A350s until the matter is resolved. Airbus also revoked the whole contract for 50 smaller A321neo jets in retaliation for Qatar refusing to take A350 deliveries. The dispute comes at a difficult time for Qatar Airways, as it is preparing to handle the bulk of some 1.2 million visitors expected for the FIFA World Cup in November and December. Qatar Airways posted its first annual profit since 2017 in June, and maintains it needs more capacity for the World Cup, forcing it to lease planes and bring less efficient A380s out of retirement to plug a gap left by grounded A350s. Airbus has argued that the airline is using the dispute to bolster its finances and reduce its fleet of costly long-haul jets as its target long-haul market recovers sluggishly. So far, none of the A350's other three dozen or so customers have voiced concerns over safety as a result of surface flaws, and they are continuing to fly the jet. Barring a settlement, the dispute is set for a corporate trial in London next June. No comment was immediately available from Airbus or Qatar Airways on the latest developments.
BMW warned yesterday of a “highly volatile” second half, saying challenges from inflation to gas shortage fears as well as ongoing supply chain bottlenecks were depleting demand, and higher prices were only partially offsetting this. The German car manufacturer posted a 31% fall in earnings over the second quarter, dropping to $3.5bn (£2.89bn), albeit still beating forecasts. US-based Lucid Group has also halved its production forecast for electric vehicles, blaming extraordinary supply chain and logistics challenges. The company now expects to produce between 6,000 and 7,000 luxury electric vehicles this year, down from 12,000 to 14,000 units it targeted in February. Mercedes, however, has raised predictions for the year, saying that while supply disruptions led to a 7% drop in sales, revenue still rose 8% from a year ago, and adjusted earnings before interest and taxes (EBIT) spiked 20%. Italian supercar brand Lamborghini, meanwhile, has announced record first-half deliveries and profitability, up almost 70% to $435m (£358.7m), although CEO Stephan Winkelmann said he is preparing for a challenging winter if Europe's energy crunch gets worse. Lamborghini plans to produce an all-electric model in 2028.
US-based trading platform Robinhood is cutting nearly a quarter of its staff, some 780 people, having experienced a slump following a boom in trading activity at the height of the Covid-19 pandemic. Then, its commission-free trading proved hugely popular with amateur traders and the number of its account holders doubled. Since then, monthly active users appear to have fallen by roughly a third, at 14 million for June 2022 compared with 21.3 million in the second quarter of 2021, Reuters reported. The firm already slashed 9% of its workforce in April, a move boss Vlad Tenev said: "did not go far enough". "Last year, we staffed many of our operations functions under the assumption that the heightened retail engagement we had been seeing with the stock and crypto markets in the Covid era would persist into 2022," Tenev said. "In this new environment, we are operating with more staffing than appropriate. As CEO, I approved and took responsibility for our ambitious staffing trajectory - this is on me." The firm reported quarterly revenues of $318m (£260m), 44% down on $565m (£466m) a year earlier.
Nearly $6m (£4.9m) has been drained from accounts linked to the Solana crypto network after a hacker targeted 8,000 wallets, the virtual equivalent of physical wallets where users store their cryptocurrency and the private keys that give them unique ownership of their assets.
The new $70 million (£58m) Batgirl movie has been scrapped by Warner Bros Discovery months before its planned release. It was due to be shown in cinemas and on the streaming service HBO Max later this year, but a poor reaction to test screenings means it will not now see the light of day.
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