Published: 17 November 2022
By Suzanne Evans, Director, Political Insight
The Chancellor will present his Autumn Statement at around 11:30 am this morning. What are we expecting to hear from Jeremy Hunt? Pulling together the various Treasury leaks and hints from both Hunt and Prime Minister Rishi Sunak, some or all of the following are likely, but of course, not confirmed:
· An aim for the government to save £50bn within the next five years
· Maintenance of the pensions triple lock
· Benefit rises to match inflation
· Cuts to child benefit for some 700,000 families by 2028
· A rise in the National Living Wage for over-23s from £9.50 an hour to £10.40 an hour
· Across-the-board 2% public sector pay rises
· Several ‘stealth taxes’ such as a freeze on the amount at which businesses must register to pay VAT, on the pension lifetime allowance, on inheritance tax, on personal tax and national insurance allowances and thresholds
· A 16% reduction in the threshold at which taxpayers pay the higher rate of income tax, from £150,000 down to £125,000
· Tax hikes or changes to thresholds to increase revenue from dividend and capital gains taxes
· A delay to the proposed cap on social care costs announced by former PM Boris Johnson
· Fresh windfall taxes on energy firms
· New rules to allow local councils to increase Council Tax bills by up to 5% without having to hold a referendum.
· New rules allowing insurance firms to invest in green energy and infrastructure projects.
Hunt is also said to be unlikely to commit to a defence spend of 3% of GDP set by former Prime Minister Liz Truss, or to make a temporary cut to the foreign aid budget. An announcement on what will happen regarding the Energy Bills Support Scheme post-April next year is also expected.
The FTSE is slipping for a third straight session this morning ahead of Hunt's new budget announcement.
Bank of England Governor (BoE) Andrew Bailey told parliament’s Treasury Committee yesterday that there were signs that core inflation - which excludes volatile components such as energy and food prices - was easing. "The core goods numbers do seem to be now beginning to come off," he said. He also said interest rates could rise further. However, the BoE's latest appointment to its rate-setting Monetary Policy Committee, Swati Dhingra, expressed caution. "You could think of getting into a much deeper, much longer recession if rates continue to rise because there is already about a fairly sizeable chunk of the previous rate rises that have got to take effect in terms of what they do to GDP," she told the committee. "There is a risk of over-tightening, and that's the thing I am worried about at this point”.
The Office for National Statistics (ONS) said yesterday that the average UK house price remained flat at £295,000 in September 2022, the same as in August 2022. This was £26,000 higher than the same period a year ago. Overall, average house prices increased over the year by:
· 9.6% England to £314,000
· 12.9% in Wales to £224,000
· 7.3% in Scotland to £192,000
· 10.7% Northern Ireland to £176,000
However, private rental prices paid by tenants in the UK rose by 3.8% in the 12 months to October 2022. This was up from 3.7% in Sept 2022. London rents rose for the tenth consecutive month.
Amidst a long and bitter dispute with trade unions, Royal Mail's parent company International Distributions Services yesterday reported a first-half loss of £57m. The firm said higher costs and disruptions arising from strikes by its postal workers put a strain on its finances. It expects a full year adjusted operating loss for Royal Mail of around £350m to £450m. The company has said previously it may have to cut up to 10,000 jobs if it cannot reach an agreement with unions, notably the Communication Workers Union (CWU). Meanwhile, talks between Royal Mail and the CWU aimed at averting strike action in the run-up to Christmas have been extended.
Government outsourcer Serco has won a Royal Navy marine services contract worth £200m. The contract will run for 27 months starting next month and follows on directly from a current private finance initiative. The Ministry of Defence has an option to extend the contract for up to six months, Serco said.
London-listed food delivery firm Deliveroo said yesterday that it has placed its Australian subsidiary into voluntary administration with the intention of ceasing trading permanently in the country because it failed to keep up with competitors. Deliveroo noted that the market in Australia is "highly competitive", with four global players. The company itself "does not hold a broad base of strong local positions," it said. The group said it would not have been able to reach a sustainable and profitable scale in Australia without considerable financial investment, and that "the expected return on such investment is not commensurate with Deliveroo's risk/reward thresholds".
British investment bank Panmure Gordon is reportedly in talks about a £37m takeover of rival City broker finnCap. According to Sky News, Panmure - which is controlled by former Barclays chief Bob Diamond's Atlas Merchant Capital - has proposed an all-cash deal worth just over 20p a share. Sources told Sky that the two companies have been locked in discussions for several weeks.
Jaguar Land Rover CEO Thierry Bollore has resigned for "personal reasons" and will leave the company at the end of the year. Bollore, who joined from French car maker Renault in September 2020, will be succeeded by CFO Adrian Mardell on an interim basis.
Renault SA (South Africa) may transfer more than half its stake in Nissan Motor Co. to a trust to match the Japanese car maker's holdings in itself, the Nikkei newspaper reported yesterday. Renault would transfer a 28% stake it owns in Nissan to a trust and would be left with a 15% stake, equivalent to what Nissan owns in the French automaker, the Nikkei said. Renault, which currently owns 43% of Nissan, would give up voting rights tied to the transferred shares, the newspaper added. Renault and Nissan both declined to comment on the story.
Global banking giants are starting a 12-week digital dollar pilot with the Federal Reserve Bank of New York, it has been announced. Citigroup Inc, HSBC Holdings Plc, Mastercard Inc, and Wells Fargo & Co are among the financial companies participating in the experiment alongside the New York Fed's innovation center [sic], they said in a statement. The project, which is called the regulated liability network, will be conducted in a test environment and use simulated data, to test how banks using digital dollar tokens in a common database can help speed up payments. Earlier this month, Michelle Neal, head of the New York Fed's market's group, said it sees promise in using a central bank digital dollar to speed up settlement time in currency markets.
Airbnb Inc said on Wednesday it had recorded a "disproportionate" 31% rise in single-room listings on its platform in the third quarter, as more people sought extra income in the face of a cost-of-living crisis. The company said property listings rose across regions, without disclosing specific numbers. "We have seen a lot of people being more interested than even before in hosting to defray their cost of living," Airbnb CEO Brian Chesky said. Around 46% of hosts on Airbnb said they used the extra money from renting out properties to pay for food and other items, while one in 10 said it helped them avoid eviction or foreclosure, the company said, citing a survey.
The fallout from collapsed cryptocurrency exchange FTX is continuing. Crypto lender BlockFi is said by the Wall Street Journal to be making preparations for potential bankruptcy and planning to lay off staff, having acknowledged it has “significant exposure” to the bankrupt exchange and its the associated trading firm Alameda Research. Blockfi has already halted withdrawals of customer deposits, and is said by crypto media outlet Decrypt to be in talks with Binance about possible financial help. While BlockFi sought to reassure customers, saying "The rumours that a majority of BlockFi assets are custodied at FTX are false,” it added: “That said, we do have significant exposure to FTX and associated corporate entities that encompass obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US.” Meanwhile, crypto broker Genesis told clients it was suspending withdrawals from its lending arm only, citing "unprecedented market turmoil" following FTX’s demise. Genesis' derivatives trading arm has revealed roughly $175 million in exposure to the collapsed firm. There are reportedly over one million creditors listed in FTX’s bankruptcy filing. It has also been revealed that the FTX exchange was hacked after its bankruptcy filing on Friday, and more than $663m in a variety of crypto assets was drained from its account, according to blockchain intelligence company Elliptic. The hacker is now one of the world's largest holders of ethereum, with a stolen haul worth an estimated $288m at current market prices.
Testifying in a Delaware court in defence of his $56bn Tesla pay packet, Elon Musk said yesterday that Tesla was struggling to survive in 2017 when the current package was developed, and that he would not accept a plan that required him to punch a card or work certain hours. “I work all the time,” he said. The claim against him is that his pay package was based on easy to achieve performance targets which didn’t even require his presence at the firm, and was approved by a compliant board of directors. Musk also said he expected to reduce his time at Twitter; complete an organisational restructuring this week; and eventually find a new leader to run the social media company, which he bought recently for $44bn. He also admitted that some Tesla engineers were assisting in evaluating Twitter's engineering teams, but he said they were doing so on a "voluntary basis" and "after hours."
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