Why not enquire now?      Or give us a call 020 3007 6002

| ES IT
Subscribe
Business

The Bank of England (BoE) raised the base rate of interest by the most in 27 years yesterday

   News / 05 Aug 2022

Published: 05 August 2022
Location: London, UK

By Suzanne Evans, Director, Political Insight


As anticipated, The Bank of England (BoE) raised the base rate of interest by the most in 27 years yesterday. The central bank’s Monetary Policy Committee also warned that a long recession is on the way by the end of the year, and predicted an even higher peak in inflation of 13%, up from previous forecasts of 11%. The committee voted 8-1 to take the base rate up half a percentage point from 1.25% to 1.75%, its highest level since late 2008. It said Britain was facing a recession with a peak-to-trough fall in output of 2.1%, so not as severe as the 2008 financial crisis, although it is expected to last as long, for five quarters. The BoE also estimated that dual fuel energy bills will, on average, reach £300 a month this winter, three times that of last Winter. BoE Governor Andrew Bailey defended the decision to raise interest rates, saying yesterday that “returning inflation to the 2% target remains our absolute priority, there are no ifs or buts about that,” and that as economic uncertainty was exceptionally large, “all options are open”. He also admitted that Britain was facing its biggest slump in living standards since records began in the 1960s. On the BBC Radio 4 Today programme this morning he further said that action was necessary because otherwise there is a "real risk" that soaring prices becoming "embedded".
 
Sterling dropped 0.2% against the US dollar to $1.2116 on predictions from the BoE that Britain would enter a recession at the end of 2022 from which it will not emerge until early 2024, wiping out earlier gains. The pound is now 10% down on the dollar in the year to date. It also dropped 0.4% against the euro yesterday afternoon.
 
Ofgem has confirmed it will now review and, if necessary, update the energy price cap four times a year instead of two, in January, April, July and October. The energy regulator says the change will allow energy companies to provide more accurate pricing for customers, and help provide “the stability needed in the energy market, reducing the risk of further large-scale supplier failures which cause huge disruption and push up costs for consumers”. “It is not in anyone’s interests for more suppliers to fail and exit the market,” Ofgem added. A rise in the current price cap is anticipated for October - Ofgem is set to announce by now much on 26th August. The price cap was last adjusted in April, when it rose from £1,277 to £1,971, but analysts are predicting the October price cap could hit £3,358. Energy industry analysists Cornwall Insight are then predicting a further rise to £3,616 in January 2023.
 
Meanwhile, The Times says businesses are facing energy bill increases of up to 500% that could put their survival in jeopardy this winter. According to Cornwall Insight, energy costs for companies are rising even faster than for households and risk pushing businesses "over the edge" unless the government intervenes. Companies usually negotiate fixed-price energy contracts to begin from the beginning of October, the consultancy says, so firms whose two-year contracts are coming to an end face a fivefold increase, while those who took out a contract a year ago are likely to see bills double.
 
Staff hiring in the UK has slowed amidst uncertainty over the economy, according to a report from KPMG and the Recruitment and Employment Confederation, which suggests July saw the slowest increase in the number of permanent jobs filled for 17 months. KPMG said recruiters are becoming more tentative over hiring new staff, while ongoing skills shortages, a drop in foreign workers and hesitancy from candidates to move jobs had all led to a tighter supply of suitable staff. However, the report also concluded that the soaring cost of living and tougher competition for a smaller pool of qualified candidates has meant that the rate of starting pay continued to rise in July.
 
The average house price in the UK has dropped for the first time since June 2021, falling £365 to £293,221, but remaining £30,000 higher than this this last year, according to the Halifax house price index. The annual rate of price growth slowed to 11.8% in July, down from 12.5% in June. “While we shouldn't read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time, Russell Galley, managing director at Halifax, said. “Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios,” he added.  
 
UK new car registrations fell by 9% in July 2022 to 112,162 units, down from 123,296 a year earlier. The figures, from the Society of Motor Manufacturers and Traders (SMMT), show this is the fifth consecutive month of decline, but the smallest drop in 2022 so far. The SMMT blames the ongoing semiconductor shortage and supply issues, further exacerbated by lockdowns in China. The Nissan Qashqai was July’s best-selling car in the UK, selling 2514 units. That was followed by the Mini Hatch, with 2410 units sold, and the Hyundai Tucson with 2267.
 
UK construction output fell for the first time in 18 months in July, with lower volumes of residential work and civil engineering activity offset a rise in the commercial segment. The S&P Global/CIPS UK construction purchasing managers’ index reading for July came in at 48.9, down from 52.6 in June. This the first time it has fallen below the 50-point ‘no-change’ threshold since January 2021. Survey respondents blamed reduced client demand from rising inflation, fragile consumer confidence and higher interest rates.
 
British energy giant Shell is handing most of its 82,000 workers a one-off 8% bonus after the company reported record profits from high oil and gas prices. Top executives will be excluded from the payout, which Shell said reflected its financial success and was "not a response" to the rising cost of living.
 
Staff at an Amazon warehouse in Tilbury, Essex, who were seeking a £2 a hour pay increase, staged a walkout on Wednesday and Thursday when the online retail giant offered just 35p an hour extra. Amazon said its pay was "competitive" and staff were also offered a benefits package worth thousands annually, but GMB regional organiser Steve Garelick said: "Amazon is one of the most profitable companies on the planet. With household costs spiralling, the least they can do is offer decent pay”.
 
Locals living in tourist areas in Wales could get first refusal on homes sold nearby because of the implementation of a new "fair chance scheme" that means properties will only be marketed locally for a fixed period, the BBC reports. The measure is part of a wider project – the Welsh Language Communities Housing Plan, and the Commission for Welsh-speaking Communities – that has been created to protect and strengthen the Welsh language and identity. The Labour-run devolved government said the housing proposals will not be imposed, but will work with the cooperation of local estate agents. Janet Finch-Saunders, the Welsh Conservatives’ Housing Spokesperson, slammed the decision however, saying the approach "appears to be promoting discrimination against house buyers who do not speak Welsh". "This is, of course, completely unacceptable,” she said. The Welsh government has previously announced local councils can charge a second home council tax premium of up to 300% from April 2023.


Why Media is an award-winning design, marketing, digital communications and PR agency offering tailored solutions to companies on a global scale. We have extensive experience in delivering design and marketing services to a spectrum of companies including professional services, property companies, financial institutions and shopping centres. We have offices in London UK, Hertford UK, Finestrat ES & Brescia IT.


Marketing Contact

Name:  Claire White
E-Mail:  claire@whymedia.com
Telephone:  01992 586 507