Published: 14 October 2022
By Suzanne Evans, Director, Political Insight
The head of the International Monetary Fund has criticised the UK government's mini-budget, implying it is contradicting the work of The Bank of England. Asked by the Sky News US correspondent Mark Stone at a news conference in Washington if she had any messages for Prime Minister Liz Truss and the UK, Kristalina Georgieva replied saying: "Fiscal policy should not undermine monetary policy, because if it does, the task of monetary policy becomes only harder and it translates into the necessity for an even further increase of rates and tightening of financial conditions.” "Don't prolong the pain. Make sure that actions are coherent and consistent,” she added, saying it is "correct to be led by the evidence, so if the evidence is that there has to be a recalibration, it's right for governments to do so".
Chancellor Kwasi Kwarteng has cut short his trip to meet other global finance ministers in Washington to join colleagues looking at how to balance the books for his fiscal plan announced just three weeks ago. Yesterday, the pound, government bonds and the FTSE all rallied as the Truss administration began re-examining a package for the programme. When asked in an interview yesterday whether the financial markets had improved because of expectations of a U-turn on his plans to scrap an increase in corporation tax, Kwarteng said “let’s see,” the Telegraph reported.
Sky News reported yesterday that more U-turns on the mini-budget are planned, while The Sun newspaper suggested Liz Truss is considering raising corporation tax next year, in a complete reversal of the original fiscal plan, which included a move to scrap a planned rise in the tax from 19% to 25% next year. "No final decision has been made.. but there's deffo (definitely) movement," the Sun's Harry Cole said on Twitter.
Meanwhile, Conservative party colleagues have begun open discussions about whether Liz Truss and Kwasi Kwarteng should be replaced, just 37 days after they entered office.
Trade minister Greg Hands backed both the Prime Minister Liz Truss and Chancellor Kwasi Kwarteng, and called for the Conservative Party to unite when asked about media reports on plans to replace her. "I am dealing with the situation that we are in, which is that Liz Truss is our prime minister, she has my confidence," he told Sky News. "She should have the confidence of all Conservative MPs, the whole Conservative Party and actually deserves the confidence of the country as we go into quite difficult economic times." He also told Sky: “I think we're just going to have to wait and see what the chancellor says in the medium term fiscal plan on the 31st of October," a position Mel Stride, a backer of Truss's leadership rival Rishi Sunak and the head of the influential parliamentary Treasury Select Committee, said that suggestion was unacceptable. "I think we have reached a point now where we need this very powerful, significant signalling to the market that fiscal credibility is now firmly back on the table. And I think that means doing something right now," Stride told BBC radio.
The latest statistics from the Office for National Statistics (ONS) suggest the number of employees in the UK increased by 896,500 between 2020 and 2021, from 30.3 million to 31.2 million. Private sector employees increased by 693,100 (2.8%) and public sector employees increased by 203,500 (3.7%). Full-time employees increased by 3.3% in 2021, while the number of part-time employees was up 2.2%. All countries and English regions of the UK saw an increase in employees between 2020 and 2021, with the largest rise in the North East at 5.1%. However two areas – the South East and Wales – were still below pre-covid levels. The industries with the biggest increase in employees in 2021 were accommodation and food services (up 159,200) and health (up 137,100). The largest drop in employees was in wholesale (down 33,200).
The ONS also says the System Average Price of gas fell by 19% in the week to 9 October 2022, according to the National Grid. This is 65% lower than its peak level recorded on 28 August 2022. Also, spending fell in all sectors in the week to 9 October 2022 according to credit card data from Revolut. Spending on “automotive fuel” decreased by 6%, 29% lower than its August 2022 peak. Additional data from The Bank of England’s aggregate CHAPS indicator of payment card purchases increased by 5% in the week to 6 October 2022, with “work-related”, “staple” and ‘’social’’ spending above pre-pandemic levels, but “delayable” spending still below.
Bonuses paid in the finance and insurance sector have hit a record high of £20,000 a year, the TUC says, almost two thirds of an average worker’s pay. The TUC said its analysis revealed City bonuses have increased at more than twice the speed of wages since the 2008 financial crash. A current cap in place means an employee’s bonus can be no bigger than 100% of their annual pay, or 200% if there is approval from shareholders, but plans unveiled by chancellor Kwasi Kwarteng in the mini-budget will remove this limit.
Bank fraud has cost British consumers nearly £610m so far this year, lobby group UK Finance said yesterday. Although fraud levels fell 13% from an exceptional spike in the first half of 2021, as covid lockdowns forced more consumers online, it said there was no downward trend. The level of bank fraud "must be considered a national security threat," Katy Worobec, UK Finance's managing director of economic crime, said in a statement.
Royal Mail has announced plans to make between 5,000 and 6,000 people redundant by next August, blaming ongoing strike action and rising losses at the business. The move will contribute to an overall reduction in headcount of 10,000, partly achieved by natural attrition. The Royal Mail also said it expects its full-year losses to hit £350m because of "the direct impact of eight days of industrial action" as well as lower volumes of parcels being posted. The Communication and Workers Union (CWU), which represents some 115,000 Royal Mail postal workers, initiated strikes in September and early October, and has threatened more strikes this month and next. CEO Simon Thompson said: "This is a very sad day. I regret that we are announcing these job losses. We will do all we can to avoid compulsory redundancies and support everyone affected." He added: "Each strike day weakens our financial situation."
London's Stansted Airport workers have called off a potential strike after its union, Unite, secured an improved pay offer. The lowest paid workers will receive an 11% wage increase over the year, while other grade workers will get a 10% rise, comprising an 8% increase from April and a 2% hike from this month. The offer includes a £250 one-off payment.
Around 200 people look set to lose their jobs at Coventry-based aerospace and weapons firm Meggitt. Meggitt was taken over by US firm Parker last month, and Parker said the merger meant some of the work previously undertaken at Meggitt may no longer be required, potentially affecting up to a 10th of the company's UK workforce.
London-listed Rank Group, the owner of Mecca Bingo, saw its shares fall as much as 10% on an otherwise good day for the stock markets yesterday, after it revealed its energy bill is expected to rise to £34m for the current year. The bingo hall and casino firm said costs have continued to soar, with its new energy forecast up from the £23m bill last year. It is also under pressure from wage inflation and higher food costs, and expects “challenging” conditions to continue in the months ahead, after already recording weaker customer spending at its casinos amid a sharp cost of living crisis. However, the chain also posted a 2% rise in group like-for-like revenues to £165.7m over the three months to 30 September, boosted by 2% growth in its bingo business and 13% digital growth.
The Royal Mint has reported record profits in the year to March as investors turn to gold in the midst of volatile markets. Britain's oldest company, and the official maker of UK coins, posted sales of more than £1.2bn during the period, with pre-tax profits of £18m. This was a near £6m jump from the £12.4m profits reported last year, and its largest since becoming a limited company in 2010. All British legal currency, including gold Britannia coins, silver Britannia coins and gold Sovereigns, is exempt from Capital Gains Tax.
Sub-prime lender Amigo Holdings Plc has received approval from The Financial Conduct Authority (FCA) to begin lending under certain conditions. Amigo stopped lending in November 2020 following a loan mis-selling scandal, and has been scrambling for survival. The FCA now says Amigo is permitted to resume lending on a "pilot basis", with a limit on the level of new loans the company can issue, for a duration of two months.
NatWest says it will close 43 branches across the UK to further move retail banking online, however the bank says only six jobs are expected to be at risk from the closures, due between January and March next year. A NatWest spokesperson said: "As with many industries, most of our customers are shifting to mobile and online banking, because it is faster and easier for people to manage their financial lives…We take our responsibility seriously to support the people who face challenges in moving online, so we are investing to provide them with support and alternatives that work for them." NatWest announced the closure of 32 branches, including 11 Royal Bank of Scotland branches in February.
Italian-owned Guala Closures, a supplier to Scotland's whisky industry, is set to build a new £36 million factory in Gartcosh, Lanarkshire. The bottle top manufacturer's huge investment will safeguard more than 400 jobs.
Netflix says it will launch its new advertisement-supported streaming service in November. It hopes the less expensive option, which will be available in 12 countries including the UK, US, Canada, Mexico and Australia, will enable it to retain subscribers. Netflix lost more than 1 million subscribers in the first half of this year. The cost of the new service in the UK will be £4.99 a month.
US CPI inflation dropped to 8.2% over the 12 months to September, down from 8.3% in the year to August, the US Bureau of Labor Statistics said. The raise was driven by the increased cost of shelter, food, and medical care. If food and energy costs were excluded, inflation would be 6.6% from the 12 months to September. It's the third month in a row that inflation has declined in America, but a greater fall to 8.1% had been predicted by a Reuters poll of economists. The still high rate makes it more likely that the US central bank, the Federal Reserve, will raise interest rates again next month in an effort to bring inflation down to its 2% target.
The Japanese yen has touched a 32-year low against the US dollar, falling to 147.66 yesterday before regaining some ground. Japanese Finance Minister Shunichi Suzuki said the government will take "appropriate action" against the currency's volatility. Last month, Japan spent almost $20bn (£17.6bn) to prop up the country's struggling currency, the first time the Japanese authorities had intervened in the currency market since 1998. Inflation in Japan was 8.2% in the 12 months to September, down from 8.3% in August, the BBC says.
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