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Bank of England (BoC) Governor Andrew Bailey described a near total breakdown in communications

   News / 30 Nov 2022

Published: 30 November 2022

By Suzanne Evans, Director, Political Insight


Appearing before the House of Lords Economic Affairs Committee yesterday, Bank of England (BoC) Governor Andrew Bailey described a near total breakdown in communications with the government in the days running up to the mini-budget of 23rd September, when Liz Truss was Prime Minister and Kwasi Kwarteng Chancellor.  The BoC was given little indication of the contents of the fiscal statement, Bailey said, when quizzed by former governor Lord Mervyn King.  "It was just not known. It was not clear what was going to be in this statement," he said. "In normal circumstances, we have channels of communication. It wasn't happening in this case." He described it as "a most extraordinary process", adding that part of the problem was the then government's determination not to involve the Office for Budget Responsibility (OBR) in the event. "By not involving the OBR in the process, that took away a good deal of the substance that we rely upon to go with a budget, from the point of view of forecasting and understanding the measures that were in it," he said. "That was just not there. There was nothing." He added that the Bank was not given any detail about the measures or the detail on the scale of the event, which also triggered a sharp fall in the pound. He said: "The abolition of the top rate of tax... was something we certainly had no idea was going to happen." Bailey also said that while government bond yields had dropped back down following the period of stress after the mini-budget, the market was "not back to normal at the moment."

Giving evidence to parliament's Environment, Food and Rural Affairs Committee yesterday, Richard Griffiths, CEO of the British Poultry Council said about half of Britain’s free-range turkeys and geese intended for the Christmas table have either died or been culled due to the country's largest-ever outbreak of avian flu. He told MPs that British farmers usually produce 1.2 to 1.3 million free-range birds for the festive period, but that “around 600,000 of those free-range birds being directly affected". Griffiths said total turkey production for Christmas in the UK was usually about 8.5 to 9 million birds. Of these, just over one million have died or been culled as a result of almost 140 cases of avian flu. He said 36% of poultry farms in the UK were now subject to avian flu controls, which means birds must be kept indoors.

The government confirmed yesterday that China will not be involved in the Sizewell C nuclear power plant, which will now ahead, backed by a £700m investment in taxpayer cash. Initially, investment was sought from state-owned China General Nuclear, but since then, as Prime Minister Rishi Sunak said a couple of days ago, the “golden age” of Anglo-Chinese relations is over, as greater suspicion circles around possible breaches of national security. Ministers said the move to take a 50% stake in the project - first announced in Chancellor Jeremy Hunt's autumn statement - would create 10,000 highly skilled jobs and provide power to the equivalent of 6 million homes for more than 50 years. There was no indication of who would fund the rest of the project other than the government saying it would seek other investors before making the final investment decision and beginning construction. The plant on the Suffolk coast will be the second to be developed by French energy company EDF, the Hinkley Point C scheme in Somerset being the other one. Hinckley has been severely hampered by delays and soaring costs.

Meanwhile, EDF has admitted it is struggling for technical staff, and has launched a new recruitment campaign to find a new generation of welders, pipe-fitters and boiler makers to fix its ageing nuclear reactors and build more of them, Reuters reports. In France, such skilled workers are in short supply, so much so that EDF has had to fly in around 100 of them from the United States and Canada. EDF is expected to build at least six new generation reactors over the next 25 years, at a total investment of some €52bn. EDF also co-financed the opening of a training centre for welders in Normandy - the Haute Ecole de formation en soudage (Hefais) - last month, with an intake of around 40 students this year, expected to rise to 200 from 2023. But, EDF estimates that France's nuclear industry alone needs to recruit between 10,000 and 15,000 workers a year over the next seven years, meaning EDF alone must find 3,000 new workers a year over that time - or 15% of the workforce currently deployed at its nuclear plants.

The number of mortgages approved by lenders in Britain fell to their lowest level in two and a half years in October, according to Bank of England data released yesterday. Lenders approved 58,977 mortgages for house purchase, down from 65,967 in September.

Letting people seeking financial advice pay in instalments is one of several measures the financial watchdog is looking into as they look for ways to make investing more accessible, Yahoo Finance UK reports. The Financial Conduct Authority (FCA) has set out new proposals to ensure people’s access to financial advice is cheaper and easier in the wake of its recent Financial Lives survey found 4.2 million people in the UK hold more than £10,000 in cash and are open to investing some of it.

According to the latest BRC-NielsenIQ Shop Price Index, annual shop price inflation in November was 7.4%, compared to October's 6.6% and the three-month average of 6.5%. Annual food inflation surged to 12.4%, up from 11.6% in October, while non-food inflation was 4.8%, against 4.1% in October, leaving retailers braced for an increasingly difficult Christmas. The British Retail Consortium (BRC) said fresh food prices rose most and are now 14.3% higher this month than a year ago.

Energy watchdog Ofgem has proposed new price controls for electricity distribution network companies for the next five years, setting how much they can earn, and requiring them to focus their investment on supporting the move away from a high dependence on imported fossil fuels.

Chris O'Shea, CEO of British Gas owner Centrica has told Sky News he thinks that more energy suppliers could go bust this winter and potentially take government payments intended for customers with them, because monies paid by government into its Energy Support Scheme it is paid to suppliers in advance. "The government gives [the payments] in advance and that increases the risk. If that supplier goes under, and have taken that government money before they've given it to consumers, then that will just increase the cost of failure," he said. He also warned customer deposits were at risk. More than 30 retail suppliers have already collapsed in the last 18 months as a consequence of soaring gas prices, and O’Shea claimed some remaining suppliers could technically be trading while insolvent this winter. "The energy retail market has been loss making for a number of years and so there are a number of energy suppliers that are in a precarious financial position and that's just getting worse every day," he said.

The Competition and Markets Authority (CMA) has completed its study into the music streaming market, concluding that record labels and streaming services were not likely to be making significant excess profits that could be shared with artists or songwriters. "These are understandable concerns, but our findings show that these are not the result of ineffective competition ... and intervention by the CMA would not release more money into the system that would help artists or songwriters," Sarah Cardell, CMA's interim CEO, said. The price that streaming platforms charged between 2009 and 2021 have fallen by more than 20% in real terms, the CMA added, noting that many services offered their services for free with ads.

Postal workers at Royal Mail have begun a fresh 48-hour strike in a row over pay and conditions.

The Royal College of Nursing (RCN) now says that up to 100,000 nurses at half of all National Health Service locations in England, including London's Great Ormond Street Hospital for Children, will take part in unprecedented strikes next month over pay. The trade union had already said that nurses would walk out on 15th and 20th December. RCN General Secretary Pat Cullen also said in a statement there would be strikes at every NHS employer in Wales except one, and throughout Northern Ireland. The Scottish government has engaged the union in talks with a separate pay offer, and so no strikes were announced there. More strikes might be called if talks are not held, the RCN added.

Driving examiners and rural payment officers at more than 250 sites across the UK are to go on strike in a series of walkouts by civil servants, the BBC reports. Members of the Public and Commercial Services (PCS) union will hold rolling strikes from 13th December to 16th January. The Driver and Vehicle Standards Agency and Rural Payments Agency are striking in pursuit of a 10% pay rise, better pensions, job security and no cuts to redundancy terms. The government said the union's demands were "unaffordable".

EasyJet says bookings for next year are looking positive, despite higher prices. Christmas ticket yields were up about 18%, the budget airline said, amid strong demand for travel. Although the group posted an underlying pre-tax loss of £178m for the 12 months to September 30th, this is a significant improvement given its £1.1bn loss the previous year when significant covid restrictions were in place. CEO Johan Lundgren said: "EasyJet has achieved a record bounce back this summer with a performance which underlines that our transformation is delivering”.

Topps Tiles has reported a second year of record revenues, having grown its share of the specialist tile market from 17.6% last year to 19% in this. In the year to 1st October, adjusted pre-tax profit ticked up 4% to £15.6m. Revenues rose 8.4% to £247.2m. On a statutory basis, pre-tax profit fell 22.1% to £10.9m.

London’s West End landlord Shaftesbury said yesterday it swung to a full-year profit, having returned to pre-pandemic occupancy. In the year to 30th September, the company swung to a profit after tax of £119.1m from a loss of £194.9m the year earlier.

Wilko has swung to a pre-tax loss of £36.8m from a £2.5m profit a year before and is reportedly looking to shore up its funding, despite the chain's owners taking £3m in dividends. The homewares-to-cosmetics retailer, whose managing director Alison Hands is leaving in January 18 months after taking the job, is said to be trying to secure a £30m debt facility with alternative lenders. One of these is understood to be Bantry Bay, a firm backed by the hedge fund Elliott Advisers, which is reported to be in similar discussions with the fashion retailer Superdry, the Guardian newspaper says.

British fashion retailer Primark plans to invest €100m (£86.33m) to open new stores and refurbish existing ones in Spain. Primark is owned by FTSE 100 company Associated British Foods.

HSBC bank has agreed to sell its Canadian business to Royal Bank of Canada in a $13.5bn (£11.26bn) cash deal.

Credit Suisse shares slid below 3 Swiss francs (£2.63) yesterday as investors dumped rights to subscribe to new shares in a cash call aimed at raising $2.3bn (£1.92bn) for the loss-making bank. The offering, part of a broader capital raise worth 4bn francs (£3.51bn) which won shareholder approval last week, is intended to help fund Credit Suisse's attempt to recover from the biggest crisis in its 166-year history, a series of scandals, including a domestic prosecution involving money laundering for a criminal gang.

Reuters reports that Russia has asked India for a list of more than 500 products for potential delivery as sanctions squeeze Russia's ability to keep vital industries running. The list includes parts for cars, aircraft, and trains, four sources familiar with the matter told the news agency. It is not clear how many of the items will exported and in what quantity, but an Indian government source admitted the request was unusual in its scope. A further industry source in Moscow said Russia's Ministry of Industry and Trade had asked large companies to supply lists of raw materials and equipment they needed ahead of a visit to Moscow by Indian Foreign Minister Subrahmanyam Jaishankar starting 7th November. Prime Minister Narendra Modi's government has not joined Western countries in openly criticising Moscow for the war in Ukraine, and has sharply increased purchases of Russian oil that have cushioned it from some of the impact of sanctions. Neither Russia's Ministry of Industry and Trade nor the Indian foreign and commerce ministries, or the prime minister's office, responded to requests for comment.

 


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