Published: 20 October 2022
By Suzanne Evans, Director, Political Insight
Home Secretary Suella Braverman resigned yesterday, following a ‘technical’ breach of government rules on sending emails. "I have made a mistake, I accept responsibility, I resign," she said in a letter to Prime Minister Liz Truss. However, it was clear from her letter that Braverman was unhappy with the government’s direction of travel. “Not only have we broken key pledges that were promised to our voters, but I have had serious concerns about this Government’s commitment to honouring manifesto commitments, such as reducing overall migration numbers and stopping illegal migration, particularly the dangerous small boats crossings,” she wrote. Braverman was swiftly replaced by former Secretary of State for Transport, Grant Shapps. Like her new Chancellor Jeremy Hunt, Shapps did not back Truss in the Conservative Party Leadership race, voting for her final rival Rishi Sunak.
Yesterday in parliament during Prime Minister’s Questions, Liz Truss pledged to stick with the pensions triple lock mechanism which is used to calculate the increase in the state pension, meaning payments rise annually by the higher of earnings, inflation or 2.5%. If she sticks to this pledge, it means state pension payments will increase by 10.1% in April 2023. Later in the day, the Labour Party tabled a motion requiring parliament to introduce legislation which would keep the ban on fracking for shale gas in Britain, which Truss has pledged to overturn, however it was defeated by 96 votes, with MPs voting 326 to 230 against the ban.
Chancellor Jeremy Hunt is considering a windfall tax on bank profits as well as extending the energy profit levy on oil and gas producers beyond 2025, according to the Financial Times (FT). Banks currently pay corporation tax of 19% plus a bank surcharge of 8%, but are expected to make bumper profits because of rising interest rates. Energy companies have already benefited from the surge in wholesale oil and gas prices. Prime Minister Liz Truss and her former chancellor, Kwasi Kwarteng, were opposed to further windfall taxes - but Hunt told MPs on Monday that he was “not against the principle of taxing profits that are genuine windfalls.” "Nothing is off the table," he said. Asked if banks might face higher taxes, a Treasury spokesperson told the FT: "We can't comment on specific speculation.” The bank surcharge, introduced in 2016, had been due to be lowered to 3% from April. Michael Hewson, chief market analyst at CMC Markets, said: "This comes across as incredibly short-sighted at time when the government should be looking to encourage investment into the UK economy. It is true that banks look set to make higher profits from the rise in interest rates, as well as reserves from overnight deposits held overnight at the BoE. But they are also likely to have to make further provision for impairments as the UK economy deteriorates over the next 12 months. It seems ludicrous to double down on windfall taxes on a sector that dares to make too much in the way of profit."
UK house prices are continuing to rise. Although price growth slowed in August, it remains in double-digits, with the market appearing resilient to inflationary pressure and turmoil in the wider UK economy. The latest figures published yesterday by the Office for National Statistics (ONS) show property prices increased 13.6% year-on-year in August, down from 16% in July. The average cost of a home now stands at £296,000, £36,000 higher than in the year before.
Britain's tourism and recreation sector experienced the sharpest decline of any industry in the UK in September, the latest Lloyds Bank UK Sector Tracker shows. The sector contracted for the fourth month in a row, falling at the fasted pace since February last year, when the nation was last in lockdown. Lloyds says the drop was caused by falling demand as consumers cut discretionary spending amid rising inflation. The metals and mining sector was second in seeing rapid output contraction. However, output grew across five of the 14 UK sectors tracked last month, with the highest boost seen for software service and healthcare providers.
A report by the Association of the British Pharmaceutical Industry (ABPI) has concluded that the number of clinical trials started in Britain each year has dropped by 41% between 2017 and 2021, posing a "clear and serious threat" to tthe country’s reputation as a clinical research destination. In particular, the report highlighted a near halving in new late-stage trials, which are typically key to securing regulatory approvals for medicines. This pushed Britain to 10th from 4th in global rankings for such trials, the ABPI said. Jennifer Harris, ABPI’s director of research policy said: "The reality is that industry are finding it increasingly difficult to conduct clinical trials in the UK and are increasingly looking elsewhere”. The loss of research potentially reduces benefits to patients and between 2020 to 2021, is estimated to have hurt NHS finances by up to £447m, the report said.
Some 300 North sea oil workers have begun a 48-hour strike, after 95% of Unite members rejected a 5% pay increase offer, in a ballot turnout of 86%. Unite said the workers involved are employed by Archer, Maersk, Transocean and Odfjell. The industrial action covers several North Sea installations today and tomorrow, with further strikes planned for later in the year.
Amazon launched a new UK insurance market comparison website yesterday, causing shares in long-standing portal moneysupermarket.com to slump 11%. Amazon’s site will focus initially on home insurance policies. It currently has three insurers on board - Co-op, LV= General Insurance and Ageas UK - but plans to add more next year. "This is just the beginning," Jonathan Feifs, general manager of Amazon’s European payment products division said. The Seattle-based company will earn commission from policies sold over the platform, which it hopes will be universally available in the UK by the end of the year.
London-listed Deliveroo is closing its operations in The Netherlands on 30th November, saying achieving and sustaining "a top-tier market position in the Netherlands would require a disproportionate level of investment with highly uncertain long-term potential returns". The Netherlands represented 1% of gross transaction value in the first half of 2022 for Deliveroo.
Sky News reports that Microsoft has cut around 1,000 jobs this week. The strong US dollar has “hammered the overseas earnings of multi-nationals because profits are squeezed when they are booked back at their respective American headquarters” Sky says. A Microsoft spokesperson said of the cuts: "Like all companies, we evaluate our business priorities regularly and make structural adjustments accordingly”.
Shares on the benchmark Hang Seng index in Hong Kong have slumped to the lowest level since the global financial crisis. Yesterday, the index fell by more than 3% to its lowest level since May 2009, before regaining some ground. Investors are concerned about the threat of a global economic slowdown as central banks around the world raise interest rates to tackle rising prices, the BBC says. Hong Kong's economy is currently in a technical recession, after seeing two three-month periods in a row of contraction this year. Until recently the city had some of the world's toughest coronavirus rules as it followed China's zero Covid policies.
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