Published: 08 September 2022
Location: London, UK
By Suzanne Evans, Director, Political Insight
New British Prime Minister Liz Truss has selected her Cabinet. Kwasi Kwarteng is Chancellor; James Cleverly is Foreign Secretary; and Suella Braverman has become Home Secretary. This means that for the first time, a white man will not hold one of the country's four most important ministerial positions. Other appointments include:
- Nadhim Zahawi, Chancellor of the Duchy of Lancaster
- Jacob Rees-Mogg, Business Secretary
- Kemi Badenoch, International Trade Secretary
- Chloe Smith, Work and Pensions Secretary
- Ben Wallace, Defence Secretary
- Thérèse Coffey, Deputy Prime Minister and Health Secretary
- Anne-Marie Trevelyan, Transport Secretary
- Ranil Jayawardena, Environment Secretary
- Kit Malthouse, Education Secretary
- Michelle Donelan, Culture Secretary
- Vicky Ford, Minister for Development
- Chris Philip, Chief Secretary to the Treasury
- Robert Buckland, Secretary of State for Wales
- Chris Heaton-Harris, Secretary of State for Northern Ireland
- Alistair Jack, Secretary of State for Scotland
- Simon Clarke, Levelling Up Secretary
- Brandon Lewis, Justice Secretary.
Liz Truss is to unveil her energy plan in the House of Commons at 11.30am today. She is expected to announce a freeze on average energy bills of around £2,500, more than £1,000 below the latest energy cap of £3,549, which is due to come into effect in October. The freeze is likely to be funded by government loans to energy companies. It is strongly rumoured that Truss will also give her backing to fracking. Chancellor Kwasi Kwarteng has already said that borrowing is set to be higher in the short term, because of the scale of the gas crisis and rising energy bills. Truss has already ruled out a windfall tax on energy companies to help fund support for households and businesses.
Paul Johnson, director of think-tank the Institute for Fiscal Studies, told the BBC’s Today Programme: “If this is a straightforward bill freeze then the majority of the money will go to better-off people who use more energy. So this is very poorly targeted”.
The Bank of England said yesterday that the new Prime Minister’s plans to freeze energy bills could curb surging inflation. "One of the things that does seem to be under consideration... is a change to the relationship between gas prices and retail gas prices in a direction that will lower headline inflation, relative to what we were forecasting," Huw Pill, the Bank of England’s chief economist, told the Treasury committee. However, Pill, who is also a member of the Monetary Policy Committee, said it was too soon to say what that means for interest rates. Goldman Sachs concurred, saying that the move could help inflation peak lower in October, at 10.8% rather than the 14.8% predicted. Liz Martin, UK economist at HSBC also said: "Cancelling all or most of the planned October and January prices rises could be a game-changer in our view. It would mean that, on a mechanical basis, inflation might already have peaked”.
Chancellor Kwasi Kwarteng met with 14 banks, insurers, and investment houses yesterday, among them the bosses of HSBC, NatWest and Barclays, to set out what he called the government’s new, “pro-growth economic approach”. “We face extraordinary economic challenges in the coming weeks and months, and I know that families and businesses across the UK are worried,” he said. “We need to be decisive and do things differently. That means relentlessly focusing on how we unlock business investment and grow the size of the British economy, rather than how we redistribute what’s left.” He committed yesterday to “ensuring that the UK economy grows faster than debt, and that the government will keep debt as a proportion of the economy on a downward path.”
Vladimir Putin warned Russia will cut off energy supplies if price caps are imposed on oil and gas exports, as proposed by the G7 finance ministers earlier in the week. Speaking at an economic forum in Vladivostok, the Russian President called the plans "stupid" and said Russia was prepared to walk away from supply contracts should caps be imposed. According to Reuters, he said: "Will there be any political decisions that contradict the contracts? Yes, we won't fulfil them. We will not supply anything at all if it contradicts our interests. We will not supply gas, oil, coal, heating oil - we will not supply anything. We would only have one thing left to do: as in the famous Russian fairy tale, we would sentence the wolf's tail to be frozen." Last week, Kremlin-backed Russian energy company Gazprom switched off the main Nord Stream 1 pipeline, ostensibly for maintenance.
As Russia already restricts gas supplies to Europe, some of the continent’s largest banks are preparing back-up generators and to dim the lights as they brace for potential power cuts and energy rationing that threaten the money system underpinning the region's economy, Reuters reports. Banks are stress-testing how they can cope with power shortages and lining up alternative sources of energy, so ATMs and online banking don't go dark. There is a special urgency for financial firms to act because of the importance of payments and transactions to Europe's economy, already fragile due to the fallout of Russia’s war with Ukraine. JPMorgan, which employs thousands across European hubs in London and Frankfurt, has conducted power outage simulations, a source familiar with the matter told the news agency. Depending on the severity, the bank could switch to diesel generators that could keep key office locations up and running for several days, the person said.
Commercial Insurance Broker Lloyd's of London has set aside £1.1bn to pay claims related to the war in Ukraine, it confirmed yesterday, as it recorded a first-half pre-tax loss of 1.8 billion pounds. "We've taken a very early view of what we think the financial implications will be," Lloyd's Chief Executive John Neal told Reuters, adding the losses were likely to be about the same size as "a small to medium-sized natural catastrophe". Around a quarter of Lloyd's' Ukraine losses may come from the aviation market, Neal said, as aviation lessors and insurers are wrangling over planes trapped in Russia due to its invasion of Ukraine and subsequent Western sanctions.
Royal Mail workers are on strike again today and tomorrow. The Communication Workers Union (CWU) said in a statement that the strike involves 115,000 postal workers, and is currently the biggest ongoing strike of the year. The CWU is protesting an "imposed" 2% pay rise.
More than half (54%) of UK small and medium enterprises (SMEs) are at risk of collapse from rising fuel and energy prices, according to a new report from insurance provider Simply Business, which surveyed over 1,000 SMEs. 36% also stated that tax and national insurance hikes are their greatest concern, with lack of funds or access to credit also top worries. 49% of the respondents admitted they will be raising prices this year in an attempt to offset increased expenditure.
Homebuyer enquiries have fallen at their sharpest rate since the early stages of the pandemic, according to the Royal Institute of Chartered Surveyors (RICS) residential market survey. August saw the fourth consecutive month of negative readings, with enquiries down 39% from 26% in July. Sales predictions for the next three months ahead also slipped further into negative territory, and expectations for the 12 months ahead are the most downbeat they have been since the series began in 2012, RICS said. The data also revealed that average stock levels on estate agents’ books were pushed to an all-time low of 34 homes per branch. “This lack of supply has been a crucial factor in underpinning growth in house prices,” RICS said. However, house prices have continued to rise: yesterday it was reported that the Halifax puts the increase at 0.4% on average in August, or 11.5% on an annual basis. The average house price is now £294,260.
Barratt Developments has recovered to pre-Covid levels: the housebuilder saw pre-tax profit jump 14.7% to a record £1.05bn, with revenues up 9.5% to £5.27bn. The FTSE 100 company said it had made "excellent" progress in a year of strong housing demand as completions increased 3.9% to 17,908.
British engineering firm Avon Protection has secured an order worth $15.1m (£13.17m) from the US Department of Defense, sending shares in the London-listed provider of protective equipment surging 15%. The group has received an order for around 380,000 pairs of M61 filters, with deliveries expected to begin in early next year. The company also said that trading in the second half of the year has improved in line with management's expectations.
Defence specialist Babcock has signed an 11-year agreement with BAE Systems for continued support to the Royal Air Force (RAF) Hawk fleet at RAF Valley, Anglesey. The contract will secure hundreds of jobs in North Wales, and provide local economic value and job opportunities, including aeronautical engineering apprenticeships, the firm said. As part of the contract, Babcock will continue to provide maintenance and groundcrew training in support of the RAF’s Hawk TMk2 fleet, ensuring the output of fast jet pilots, who then go on to operate the Typhoon and F-35 aircraft. Babcock will also be providing both forward and depth maintenance to the RAF’s Red Arrows display team, ensuring that they continue to ‘wow’ the world with their aerobatic displays.
Sales, marketing and support services firm DCC said this morning that its DCC Healthcare subsidiary is to buy German medical devices business Medi-Globe Technologies for €245m (£212.31m) in cash. The FTSE 100-listed group also noted that the transaction represented DCC Healthcare's largest acquisition to date and was a further material expansion of its DCC Vital unit's presence in the European healthcare market, following the acquisition of primary care supplier Wörner Medical in May 2021.
Turnaround specialist Melrose Industries is planning to demerge its GKN Automotive and GKN Powder Metallurgy businesses and list the new holding company. Melrose intends to seek shareholder approval for the proposed demerger in the first half of next year, and retain ownership of GKN Aerospace.
JCB has created more than 150 new jobs for apprentices and graduates with an £8 million investment in its industry-leading early careers programme. JCB’s CEO, Graeme Macdonald, said: “JCB’s future growth and success depends on recruiting and training new talent. JCB always plans for the long term and that is more important than ever as the business goes through a period of rapid growth. We are delighted to welcome our new apprentices and graduates as they embark on challenging and rewarding careers.”
Heineken UK is to purchase the remaining shares in London's largest brewery, Beavertown Brewery, having purchased a minority share in Beavertown in 2018. Beavertown Brewery founder Logan Plant is now stepping down as CEO to take on a new advisory role, whilst Jochen Van Esch will become the new Beavertown Managing Director.
Cineworld has filed for Chapter 11 bankruptcy in the US. The cinema operator said the filing involves businesses in the US, UK and Jersey and that the subsequent restructuring process should significantly reduce debt and strengthen its balance sheet and liquidity position. Chief executive Mooky Greidinger said: "The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point. This latest process is part of our ongoing efforts to strengthen our financial position and is in pursuit of a de-leveraging that will create a more resilient capital structure and effective business. This will allow us to continue to execute our strategy to reimagine the most immersive cinema experiences for our guests through the latest and most cutting-edge screen formats and enhancements to our flagship theatres." Cineworld operates in 10 countries, with 747 sites and 9,139 screens globally.
A steep sell-off across the cryptocurrency market wiped out more than $15bn (£13bn) overnight on Tuesday, to now stand at around $984bn (£858bn). Bitcoin dropped by 5.5% in the space of 24 hours to $18,806 (£16,396). Ethereum, the second largest cryptocurrency by market cap, dropped 8.7% to $1,519 (£1,324). There appear to have been no obvious reasons for the sudden wipe-out, although analysts have attributed it to the macroeconomic reaction to Russia cutting off natural gas supplies to Europe.
The Wall Street Journal says a judge has ruled that Tesla owner Elon Musk can amend his countersuit against the social media company to include a whistleblower report that backs his claim that Twitter failed to provide evidence for the number of spam and bot accounts on the site as part of his proposed £44bn (£38.36bn) takeover deal, which he now wishes to abandon. However, the judge denied Musk's request to delay the forthcoming trial between the two parties to November. It is expected to go ahead on 17th October.
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