Credit card borrowing in July was 13% higher than a year earlier

By Suzanne Evans, Director, Political Insight

British households borrowed on their credit cards last month at the fastest annual rate in over 17 years, a potential reflection of consumers struggling to make ends meet as the cost of living crisis intensifies, Sky News says. According to data from the Bank of England, the annual rate of credit card borrowing in July was 13% higher than a year earlier, the biggest annual increase since 2005. Consumer credit rose by a net £1.4bn in July, down from a £1.8bn increase the month before, split evenly between credit card borrowing and other forms of consumer credit, such as car financing.
 
UK firms reported surging selling prices, record high cost pressures, and gloomy outlooks for the future, according to a CBI survey of the service sector, reported by Yahoo Finance. The percentage of firms surveyed which said they are feeling cost pressures rose from 64% to 69%, even though growth is set to remain strong next quarter at 65%. The percentage of firms which reported increasing their average selling price increased from 23% to 31%, with businesses expected to continue passing on costs to customers’ next quarter. Charlotte Dendy, CBI head of economic surveys, says: “There are slim pickings for those looking for positive signals in the services sector over the last quarter. Just as rising inflation is hurting households and every business sector, the services industry is no different. The survey, which was based on responses from 199 services firms, also showed that profitability had dropped down by 11% in the quarter to August, similar to the previous quarter which was down by 12%, with profits expected to decline again and more quickly over the next quarter - when they are expected to fall by a further 25%.
 
Mortgage borrowing has dropped slightly amid rising interest rates, figures from the Bank of England (BoE) show. Net mortgage borrowing decreased slightly to £5.1bn in July, from £5.3bn in June, although gross lending rose to £26.1bn in July, up from £24.6bn June. Gross repayments increased to £20.8bn, from £19.4bn. The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 18 basis points to 2.33% in July and is the highest since June 2016 when it was 2.39%. Approvals for house purchases, an indicator of future borrowing, increased slightly to 63,800 in July, from 63,200 in June. Despite the increase, approvals remain below the 12-month pre-pandemic average up to February 2020 of 66,800.
 
Transport for London (TfL) has secured around £1.2bn in funding from the government, a package that replaces TfL's last bailout, the fourth since the beginning of the COVID-19 pandemic in early 2020. Andy Byford, Transport for London commissioner, said the agreement, which lasts until the end of March 2024, would help avoid large-scale cuts to services and mean the company would commit £3.6bn to capital investment over the period. Among the projects to benefit will be new Piccadilly line trains, the repair of Hammersmith Bridge and the extension of the Northern line, he said. However, London Mayor Sadiq Khan said that while the agreement brought "a number of key concessions from the government", it was "far from ideal," because, he claimed, there would still be a £740m funding gap in TfL's budget over the next 20 months. "We will likely have to increase fares in the future and still proceed with some cuts to bus services," he said. He also criticised the “onerous” strings attached, “such as the government's condition requiring TfL to come up with options for reform of TfL's pension scheme at pace, which could well lead to more industrial action and more disruption for commuters…these are things we have had no choice but to accept in order to get the deal over the line to avoid TfL becoming bankrupt, to save the jobs of thousands of transport workers and to keep trains, tubes and buses running across our city". He added: "The sole cause of TfL's financial crisis was the impact of the pandemic so it's simply wrong to punish Londoners and transport workers in this way. Levelling up the country should not be about levelling down London." Transport Secretary Grant Shapps responded by saying: "This deal more than delivers for Londoners and even matches the mayor's own pre-pandemic spending plans, but for this to work the mayor must follow through on his promises to get TfL back on a steady financial footing, stop relying on government bailouts and take responsibility for his actions. Now is the time to put politics to one side and get on with the job - Londoners depend on it".
 
Staff at nine train companies, plus staff at Network Rail, will take part in a 24-hour strike starting at midday on 26 September, the TSSA union has said. Although the union added that it remains in discussion with National Rail over the possibility of a settlement to avoid the strike, boss Manuel Cortes blasted Transport Secretary Grant Shapps this morning, saying that he was getting in the way of real progress. "The dead hand of Grant Shapps is sadly stopping Department for Transport train operating companies from making a revised, meaningful offer," he said. "Frankly, he either sits across the negotiating table with our union or gets out of the way to allow railway bosses to freely negotiate with us, as they have done in the past." The train companies likely to be involved in this strike include the TransPennine Express, West Midlands Trains, Avanti West Coast, c2c, CrossCountry, East Midlands Railway, Great Western Railway, LNER and Southeastern. In June, an RMT strike became the largest British rail industrial action in 30 years.
 
The Scottish government’s Deputy First Minister John Swinney has said the devolved authority "cannot offer" any more money to help resolve the ongoing council worker pay dispute, and that "people needed to understand there [are] finite limits" on finances. The current offer to local government employees consists of a 5% pay rise and a £1,925 uplift split between one-off payments and consolidated salary, but the three unions involved - Unite, Unison and the GMB - are seeking a similar offer to the one made to council workers in England - which included a £1,925 flat-rate pay rise. A first wave of industrial action by refuse collectors began on 18 August and a second wave is scheduled to begin on 6 September, and will also involve staff at schools, nurseries and early learning centres.
 
Doctors have told the BBC it could take months to process mounting piles of medical paperwork caused by a continuing cyber-attack on NHS software and services supplier Advanced. Criminal hackers took seven of Advanced's health systems offline, including software used for patient check-ins, medical notes and the NHS 111 service. One out-of-hours GP says patient care is being badly affected as staff enter a fourth week of taking care notes with pen and paper. Advanced says it may take another 12 weeks to get some services back online.
 
Asda has confirmed it will buy the Co-op Group’s petrol forecourts division for £600m. The supermarket chain will pay £438m in cash for the acquisition, plus lease liabilities of around £162m.  Asda said the deal - which includes 132 sites - is part of its growth strategy to move into the convenience market and bring "Asda value" to more local communities.
 
The Advertising Standards Authority (ASA) has banned a Unilever advert for laundry detergent Persil for being misleading about its environmental benefits. The TV ad said Persil was "kinder to our planet", and featured children picking up litter on a beach, but the ASA said the claim was unsubstantiated after a viewer complaint. The ban follows a crackdown by the ASA on "greenwashing" - claims made by firms branding products as eco-friendly, green or sustainable. Unilever said it is "disappointed" with the result.
 
BAE Systems is reportedly in the 'final phase' of talks over a multi-billion-pound deal for five new submarine-hunting ships. The British FTSE 100 arms, security, and aerospace firm is already building three Type 26 models at its Govan shipyard in Glasgow under a £3.7bn deal signed in 2017. But the government has until now not confirmed details of a new contract for five more of the warships - designed to provide ultra-quiet capabilities in the North Sea. According to the Daily Mail, however, the next prime minister could sign off the project within months of taking office with frontrunner Liz Truss pledging to increase defence spending to 3% of GDP. Sir Simon Lister, managing director of naval ships for BAE, told the newspaper that Vladimir Putin's invasion of Ukraine had created an "increased sense of purpose". "We've been in negotiation with the Ministry of Defence (MoD) for the last 18 months. There's an intensity that builds towards the end. We're in the final phase of that negotiation but it hasn't yet concluded," he said.
 
British FTSE 100 listed company Dechra Pharmaceuticals said yesterday that it has bought California-based veterinary pharmaceutical manufacturer Med-Pharmex for $260m (£221.5m). Chief executive Ian Page said: "I am delighted that we have completed the acquisition of Med-Pharmex, a company that I have been in dialogue with for a number of years…The US market is highly consolidated, therefore this is a unique opportunity to add several new products to our portfolio, enter the US FAP (food producing animal products) market and improve the manufacturing footprint for our North American business." In the 12 months to the end of December 2021, Med-Pharmex generated audited revenues of $43m and an adjusted EBITDA of $15.3m.
 
The boss of Ryanair says the cut-price airline will grow even faster in the event of an economic downturn in the UK. CEO Michael O'Leary told the BBC that people would still fly during a recession but would be “trading down from high-fare airlines like BA and Easyjet, to low-fare airlines like Ryanair," in the same way that “many people have switched from shopping in Sainsbury's to Lidland Aldi".
 
Inflation in Germany rose to 8.7% in August, its highest level in almost 50 years.
 
With a trial looming, Tesla billionaire Elon Musk is redoubling his efforts to end his $44 billion deal to buy Twitter, sending a new deal termination letter to the social media firm, citing a recent whistleblower complaint from the former security head at the company, Reuters reports. Last week, Peiter Zatkoalleged that Twitter prioritised user growth over reducing spam and falsely claimed it had a solid security plan. If the allegations are true, then Twitter has breached some of the provisions of the merger agreement, Musk and his legal team said in a letter dated 29^th August. Musk decided to terminate the deal in July, saying the company misled him and regulators about the true number of spam or bot accounts on the microblogging platform. The two sides are due in court on 17^th October. Twitter is hoping Musk will be ordered to buy it for the agreed $54.20 per share.

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