Published: 28 October 2022
By Suzanne Evans, Director, Political Insight
Andrew Griffith MP was re-appointed as the government's City Minister yesterday, in addition to being named Economic Secretary to the Treasury under new Prime Minister Rishi Sunak. The former position is a key liaison role between the financial sector and government, while the latter sees him have responsible for tax policy and customs. Griffith was first appointed City Minister in September by then Prime Minister Liz Truss, and will continue to oversee the Financial Services and Markets Bill (FSMB) which passed its first reading in the House of Commons on Wednesday. If passed, the Bill will implement post-Brexit reforms to insurance capital rules, regulate stablecoins, and give regulators a new objective to aid the financial sector's global competitiveness. John Glen MP, a former City Minister who did much of the work in drafting the FSMB, has been appointed Chief Secretary to the Treasury.
The Office for National Statistics (ONS) says the number of businesses created in Quarter 3 (Jul to Sep) 2022 was 17% lower than the same time in 2021. Transport and storage saw the most significant drop in creations, falling 45%, and health and social care saw the most significant rise, increasing by 24%. Meanwhile, the number of businesses removed from the Inter-Departmental Business Register (IDBR), (meaning they closed), dropped by 5%, with 9 out of 16 main industrial groups seeing fewer businesses being wound up. Firms working in information and communication saw the most significant decrease. The average size of businesses that closed in Quarter 3 2022, by employment, was 2.4 employees. A business is removed from the IDBR if its turnover and employment are zero for several periods, or if the ONS is notified that the business has ceased trading through an administrative or survey source.
Retail sales rebounded this month, according to The Confederation of British Industry's monthly retail sales balance, which mostly covers major stores. The gauge rose to +18 in October from -20 in September. However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics consultancy, said: "The reported sales balance likely was depressed in September by the additional public holiday for the Queen’s funeral, so it was always likely to rebound". Other data was less positive: credit and debit card data from the ONS showed spending fell during the week to 20th October to 97.5% of its pre-pandemic level in February 2020.
The number of shuttered shops in Britain’s high streets is still higher than before covid lockdowns, a joint report from the British Retail Consortium (BRC) and the Local Data Company (LDC) has found. The high street shop vacancy rate was 13.9% in the third quarter of 2022, only 0.1% higher than in the second quarter. Shopping centre vacancies also dropped 0.1 percentage points to 18.8%. Retail parks have the lowest vacancy rates, at 9.7%. “Some locations are benefitting from a pickup in tourism and a gradual return to offices, but levels of footfall are still below those of 2019,” Helen Dickinson, CEO of the BRC, said.
The gap between housing benefit and the actual cost of private rent has risen by 40% in just five months, Sky News has learned. Figures from the homeless charity Crisis and Zoopla show that affordable homes in England, for those on housing allowance, have declined by more than a third. It means only 8% of private rental properties, on average, are now affordable to those on housing benefit. Around 1.7 million households in England currently rely on Local Housing Allowance (LHA) to pay their private rent.
More than half a million healthcare workers and teachers are to vote on strike action over pay, the Unison and NASUWT unions said yesterday. Unison said it would ballot 350,000 workers on strike action as it sees what it called an "inflation-busting pay rise". "The NHS is losing experienced staff at alarming rates. Health workers are leaving for work that pays better and doesn't take such a toll on them and their families," Unison General Secretary Christina McAnea said. The NASUWT meanwhile, said it was balloting roughly 162,000 workers in schools and colleges on industrial action for the first time since 2011. "It is unacceptable that teachers are being forced to work longer and harder than ever - but are being rewarded less and less in real terms," Patrick Roach, NASUWT General Secretary, said. The announcement follows comment by new Prime Minister Rishi Sunak in both his initial address to the nation and at Prime Minister’s Questions in the House of Commons on Wednesday, that a "stronger NHS" and "better schools" are among his top priorities, but that fixing the public finances will require difficult decisions on spending. A spokesperson for the Department of Health said over a million NHS workers were being given a pay rise of at least £1,400 this year, in addition to 3% last year. "We urge them to carefully consider the potential impacts on patients," they said.
The government is set to help close a deal that will see Octopus Energy buy Bulb Energy as soon as this week, according to Bloomberg. The deal will make Octopus one of the UK's largest energy suppliers after adding Bulb's roughly 1.6m household customers. Bulb went bust in November last year, at which point the government appointed Teneco to run the business using £2.2bn of taxpayers' money until a buyer could be found.
British Airways owner IAG has returned to profit in the third-quarter, despite chaos at London's Heathrow last summer and continued restrictions in Asia. The company posted an operating profit of €1.2bn (£1.04bn) compared with a loss of €452m (£390m) a year ago. It said it now expected an annual profit of €1.1bn (£950m). Revenue rose €0.9% to €7.33bn (£6.33bn) with passenger capacity at 81.1% of pre-pandemic levels. "All our airlines were significantly profitable, and we are continuing to see strong passenger demand, while capacity and load factors recover," said CEO Louis Gallego. "Leisure demand is particularly healthy and leisure revenue has recovered to pre-pandemic levels. Business travel continues to recover steadily."
British oil giant Shell does not expect to pay any UK windfall taxes in the current quarter as it is investing in new North Sea oil and gas projects, triggering a mechanism largely offsetting the tax, its chief financial officer said. The levy, introduced in May, meant Shell wrote down around $360m (£310m) in the third quarter to reflect future tax payments. Sinead Gorman added she expected the tax to kick in again early next year.
FTSE 100 consumer goods maker Unilever has raised prices by an average of 12.5% worldwide across its 400 brands, the biggest increase in its history. The firm admits the move has had a “some negative impact”, with consumers buying fewer home care products following the hike. Unilever's home care division declined 3.6% after a 17.8% jump in price of everyday household products such as detergents Omo, Sunlight and Comfort and cleaning product Cif. Items in Unilever’s beauty and wellbeing, such as Dove soap, Sunsilk hair care products, and Dermalogica skin care products experienced a 7.3% increase in price. Nutrition, which includes brands like Knorr, Hellmann's, Horlicks and Maille, saw a 11.7% price hike, while its Ben & Jerry's, Magnum, Cornetto and Wall's ice creams went up 12%. Geographically, the Americas experienced the biggest price increases in the quarter, with a 15.4% increase, followed by Asia Pacific and Africa with 12.1% and Europe at 8.9%. Unilever also admitted to reducing the pack sizes of some products to prevent further price rises.
Football’s Premier League is lining up a new £30m-a-year deal to sell digital tokens to fans after talks with rival provider ConsenSys, that was on the verge of being signed earlier this year, collapsed. Sky News has learnt talks will now be held with the League’s 20 clubs to discuss a proposed multi-year contract with Sorare, a Paris-based start-up Sorare iacked by French footballer Kylian Mbappe and Japanese tech investor SoftBank, valued at more than $4bn in a fundraising last year. A separate deal between the Premier League and Dapper Labs, another specialist in the NFT market, is also under discussion.
The European Central Bank (ECB) raised interest rates again yesterday, by a further 75 basis points to 1.5% - the highest rate since 2009. Until as recently as July, ECB rates had been in negative territory for eight years. The central bank for the 19 countries that use the euro also announced it was changing the terms of its ultra-cheap loans to commercial banks in a bid to shrink its bloated balance sheet and fight off a historic surge in inflation, Reuters reports. Worried that rapid price growth is becoming entrenched, the ECB is raising borrowing costs at the fastest pace on record, with further hikes almost certain as unwinding a decade's worth of stimulus will take it well into next year and beyond, the news agency added. The euro dropped and European government bond yields slid after the announcement, which was in line with market expectations. The ECB offered no hints yesterday about plans to start winding down its bond holdings, after hoovering up trillions of euros of debt issued by eurozone governments since 2015.
US GDP has reversed a steep decline of 0.6% in the second quarter of the year, coming in at 2.6% between July and September, therefore pulling back from recession. Sky News says much of the growth in the third quarter can be attributed to an increase in US exports, and a decrease in imports. Usually, recession is defined as two consecutive quarters of economic contraction, however the US recently began using a different measure, with a group of economists at the National Bureau of Economic Research looking at a number of key indicators before announcing that the country has fallen into recession. Additional data released this morning suggests that higher interest rates are impacting consumer spending, which accounts for more than 65% of the US economy’s activity.
Consumer spending growth dropped to 1.4% from 2% between April and June, while spending on goods fell for the third quarter in a row.
US President Joe Biden yesterday compared the Republican party’s plans on taxes and spending if they take control of Congress following the mid-term elections next month to the economic plan rolled out by Britain's former Prime Minister Liz Truss, warning of similar results. "You read about what happened in England recently, and the last Prime Minister, she wanted to cut taxes for the super wealthy," Biden said during a fundraising call for Michigan lawmaker Cynthia Axne. “It caused economic chaos in the country. Well, that's what they did last time and they want to do it again. And they want to make that tax cut permanent — that’s $2 trillion (£1.73tn)," Biden said. Some Republicans on the U.S. House Ways and Means Committee, which oversees taxation and tariffs, have pledged to make permanent part of the tax cuts introduced in 2017 under President Donald Trump.
Tesla Inc (TSLA.O) is under criminal investigation in the United States over claims the company's electric vehicles can drive themselves, three people familiar with the matter have told Reuters. The previously undisclosed probe was launched last year following more than a dozen crashes, some of them fatal, which occurred when Tesla’s driver assistance system Autopilot was activated, they said.
Tesla has long trumpeted its “driverless” car capabilities. On a conference call in 2016, Tesla CEO and founder Elon Musk described the system as “probably better” than a human driver. In an interview with Automotive News in 2020, Musk said that any Autopilot problems stemmed from customers using the system in ways contrary to Tesla’s instructions. Last week, on another call, he said Tesla would soon release an upgraded version of “Full Self-Driving” software allowing customers to travel “to your work, your friend’s house, to the grocery store without you touching the wheel.” Meanwhile, a video currently on the company’s website says: “The person in the driver’s seat is only there for legal reasons. He is not doing anything. The car is driving itself.” Federal and California safety regulators are already scrutinising whether claims about Autopilot's capabilities and the system's design imbue customers with a false sense of security, inducing them to treat Teslas as truly driverless cars, and become complacent behind the wheel with potentially deadly consequences. The Justice Department investigation potentially represents a more serious level of scrutiny because of the possibility of criminal charges against the company or individual executives, the people familiar with the inquiry said. However, the Tesla website cautions that, before enabling Autopilot, the driver first needs to agree to "keep your hands on the steering wheel at all times" and to always "maintain control and responsibility for your vehicle.” The Tesla technology is designed to assist with steering, braking, speed and lane changes but its features “do not make the vehicle autonomous,” the company says. Such warnings could complicate any case the Justice Department might wish to bring, the sources said. Tesla, which disbanded its media relations department in 2020, did not respond to written questions from Reuters yesterday; Musk also did not respond to written questions seeking comment; and a Justice Department spokesperson also declined to comment.
Meanwhile, Elon Musk has completed his takeover of Twitter. “The bird is freed” he tweeted when the deal was done. CEO Parag Agrawal, CFO Ned Segal, and the firm's top legal and policy executive, Vijaya Gadde, were reportedly sacked, and escorted out of the social media giant’s San Francisco headquarters after the deal closed, according to Reuters. The latter was responsible for former US Donald Trump’s permanent Twitter ban. Bret Taylor - who had served as Twitter's chairman since last November – also updated his LinkedIn profile to indicate that he was no longer in the post.
Shares in Facebook, Instagram, and WhatsApp owner Meta plunged for a second day on the US Nasdaq yesterday, losing more than $80bn (£69.14bn) overnight, following a 23% slide in quarterly profits. $520bn (£449.41bn) has now been wiped from Meta’s market value since the start of the year. Tech giants, which for several years have acted as the main engine of growth for the US stock market, are now warning that advertisers are pulling back amid an uncertain economic outlook. Meta’s net income has fallen to £3.78bn (£3.27bn) from £7.9bn (£6.83bn) a year earlier. The company has come under fire for failing to cut back on spending, following a rapid growth in hiring over lockdowns, and for focusing too heavily on virtual reality and the metaverse, neither of which are expected to generate returns for several years.
A transgender Thai celebrity and media tycoon has bought the company that runs the Miss Universe beauty pageants for $20m (£17.1m). Anne Jakapong Jakrajutatip, the boss of JKN Global Group, which makes television shows in Thailand, has herself starred in the Thai versions of popular reality shows Project Runway and Shark Tank. The Miss Universe Organization was once co-owned by former US President Donald Trump, from 1996 to 2015, but he was forced to sell it after two television partners said they would not broadcast the pageant, over comments Trump made about illegal immigrants on his 2016 presidential campaign. The pageant has been held annually for 71 years and is broadcast in more than 160 countries.
South Korean electronics giant Samsung has named convicted heir and de facto boss Lee Jae-Yong as its executive chairman, meaning the world's largest smartphone maker will now be officially run by the third generation of its founding family. Lee, who was convicted of bribery and embezzlement in 2017, was granted a special presidential pardon in August. He was imprisoned twice for bribing a former president.
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