Published: 14 December 2022
By Suzanne Evans, Director, Political Insight
The latest monthly inflation figure, published by the Office for National Statistics (ONS) this morning, was 10.7% in November, down from 11.1% in October and a sharper drop than expected. Economists polled by Reuters had forecast the consumer price inflation rate would drop to 10.9%, and the drop has raised hopes that the current wave of inflation may have peaked. However, the Bank of England’s target is a 2% inflation rate, and most economists expect the central bank to raise interest rates again tomorrow to 3.5% from 3%.
Responding to the latest inflation data, Chancellor Jeremy Hunt said: "I know it is tough for many right now, but it is vital that we take the tough decisions needed to tackle inflation - the number one enemy that makes everyone poorer. If we make the wrong choices now, high prices will persist and prolong the pain for millions".
US inflation also slowed to 7.1% in the year to November compared to 12 months ago, a drop from 7.7% in October, leading both European and US stock markets to rise yesterday.
The pound has risen to its highest level against the US dollar in six months. One pound could buy $1.24 yesterday afternoon, the highest amount since early June.
The ONS also released data yesterday showing that Britain's employment rate for the three months to October increased by 0.2 percentage points to 75.6%, but is still below pre-covid levels. The rate of UK unemployment rose to 3.7% in the three months to October, up from 3.6% in the previous quarter. The ONS also says that while wages in Britain are rising faster than at almost any time in at least two decades, they are falling in real terms because of inflation: while regular pay grew by 6.1% in the three months to October, after taking inflation into account, wages fell by 2.7%.
The Bank of England (BoE) yesterday warned about "significant pressure" on households and businesses due to higher inflation and borrowing costs, but said there was more resilience in the banking system than before the 2008 global financial crisis. "Falling real incomes, increases in mortgage costs and higher unemployment will place significant pressure on household finances," the BoE said in its half-yearly Financial Stability Report. The report highlighted the fact that around 4 million households were likely to face higher mortgage payments in 2023, with the average monthly mortgage payment rising to £1,000 from £750 pounds, equivalent to about 17% of pre-tax income, the report said. However, it stressed that UK households were not yet showing “widespread signs of financial difficulties and that “both households and businesses are more financially resilient than they were in previous periods of stress.” However, the bank estimates that 2.4% of households will find themselves with mortgage payments they would find hard to afford, a smaller proportion compared to 2008 and the recession in the early 1990s, in part because more households have fixed-rate mortgages and lending regulations are stricter than in earlier decades. The BoE also warned tenants that landlords are likely to pass on higher mortgage costs, with rents forecast to increase by around 20%. The central bank report also warned of the dangers of investing in crypto assets, which it said would benefit from "enhanced regulatory and law enforcement frameworks".
The Bank of England Deputy Governor Sam Woods told journalists yesterday that he is not worried about the number of bankers who have left London for EU financial hubs after Brexit. The Bank predicted in 2018 that between 5,000 to 10,000 financial jobs might be lost when Britain formally left the European Union, and the number of staff that have moved so far is about 7,000, according to calculations by consultants EY in March.
The Financial Conduct Authority (FCA) has launched a campaign warning shoppers to not fall victims to loan fee fraud this Christmas, a scam involving consumers paying a fee for a loan they never receive. The financial watchdog said it usually receives an increase in reports of loan fee fraud over the festive period and, this year alone, the number of cases reported has already jumped by 21% compared to last year. The average loan fee fraud costs consumers £260, more than half the total amount people expect to spend on Christmas presents this year (£444), the FCA says.
Energy consultancy Cornwall Insight has suggested more British energy suppliers could fail because consumer debts are likely to rise to some £1.9bn in unrecoverable debt when more households become unable to pay their bills. The consultancy’s report says debt owed by consumers with no arrangements in place to repay their debt stood at over £1.4bn in the second quarter of this year. However, in the past six months, the End Fuel Poverty Coalition estimates that around 1.6 million customers have entered fuel poverty, meaning, Cornwall Insight says, that if only half of those face challenges because of rising energy prices, then that debt will rise to around £1.9bn. "The knock-on effect of unpaid bills has the chance to be harmful to suppliers, many of whom were already working with very tight profit margins, Matthew Chadwick, lead research analyst at Cornwall Insight says, adding: “The sad truth is, as bad-debt increases, so does the chance of supplier failure". Come March next year, when the Government’s energy price guarantee ends – no extension plan is yet in place – the risk of supplier failures from April 2023 will be intensified, Chadwick said. The associated costs of failure, such as moving customers to another supplier, will also be passed on to consumers under current rules, exacerbating existing issues around paying for energy. There are currently under 30 UK energy suppliers operating in Britain, down from a peak of nearly 70 in 2018.
HSBC will no longer provide new lending or capital markets finance for new oil and gas fields, the British bank said on Wednesday, as part of a wider update to its energy policy.
Clive Watson, the co-founder of the City Pub Company, has warned that pubs face a "bleak" future as costs climb and customers rein in their spending. Watson said pubs have put refurbishment plans were on hold and closing kitchens at quiet times because of the rising price of food and energy. "I don't want to be sensationalist about it, but it is bleak," he told the BBC. "After Christmas, trade is always very quiet and, I think, it is going to be a long haul for operators who, let's face it, have had two years of Covid challenges. These are businesses who have been through a lot of pain already". He added: "To go into the new year with all the high costs we have talked about, plus consumers feeling the pinch as well, I genuinely fear for a lot of pubs' long-term survival." The City Pub Company runs 45 bars, four of them in Wales.
Supermarket sales rose last month, driven by double digit food inflation, Sharecast News reports. According to industry data provider NielsenIQ, total till sales jumped 7.6% in the four weeks to 3 December, compared to growth of 5.3% in the previous month. Growth in core categories such as dairy, pet food and frozen food did especiallty well, in contrast to beer, wine and spirit sales - normally a key category in the build-up to Christmas – which fell by 1.5% in value and by 3.6% in volume. Mike Watkins, head of retailer and business insight at the market research firm, said: “If the current momentum is maintained, the sales at the grocery multiples will be the highest yet - around £12.6bn - in the next week, with spending during Christmas week ending 24 December topping £4bn for the first time”. “Even so, volume sales will fall by around 4% at the supermarkets this Christmas," he added. Among individual grocers, annual sales at Lidl jumped 12.9% in the last 12 weeks and by 12.4% at rival discounter Aldi. At frozen food specialist Iceland, sales jumped 7.6%. At Tesco, the UK's largest grocer by market share, sales rose 6.5%, while at J Sainsbury they increased 6.6%. Wm Morrisons saw sales fall 3.3%, while Waitrose sales eased 1.5%. According to recent figures from the British Retail Consortium and NielsenIQ, UK food price inflation hit a high of 12.4% in November, with fresh foods leading the hike.
London-listed advertising technology provider Tremor International has been forced to abandon plans to recalibrate a multimillion-pound executive pay scheme because of shareholder pressure, Sky News reports. Tremor has withdrawn two resolutions that were to be voted on at its AGM today, one related to a repricing of share options, and another to increase the amount of stock that could be awarded under the company's equity compensation plans. One source close to the company confirmed that the two resolutions would almost certainly have been defeated given the level of investor unrest at the proposals after a year in which thte company’s shares have slumped by more than 40%.
Poundland owner Pepco has announced plans to open 550 new stores across Europe in the current financial year thanks to strong demand driven by growth in central and eastern Europe, and from new and returning customers facing pressure on their budgets. The firm had 516 net new store openings over the previous year, excluding the closure of 59 Fultons Foods shops. The firm’s revenues increased by 17.4% to €4.8bn (£4.1bn) in the year to September 30th, compared with the same period last year, outperforming the wider retail market despite challenging economic conditions, including significant cost inflation, it said.
Sam Bankman-Fried, the 30-year-old founder and former CEO of collapsed crypto-exchange FTX has been arrested by police in the Bahamas - where FTX was based - at the request of the US government, and was yesterday charged with fraud and violating campaign finance laws by US federal prosecutors. The man said to have committed ‘one of the biggest financial frauds in American history’ by the US Securities and Exchange Commission (SEC) faces further charges from the Commodity Futures Trading Commission (CFTC). In the indictment, the prosecutors for the SEC said Bankman-Fried had engaged in a scheme to defraud FTX's customers by misappropriating their deposits to pay for expenses and debts and to make investments on behalf of his crypto hedge fund, Alameda Research LLC. He also defrauded lenders to Alameda by providing them with false and misleading information about the hedge fund's condition, and sought to disguise the money he had earned from committing wire fraud, prosecutors said. "While he spent lavishly on office space and condominiums in The Bahamas, and sank billions of dollars of customer funds into speculative venture investments, Bankman-Fried's house of cards began to crumble," the SEC filing said. Bankman-Fried founded FTX in 2019 and rode a cryptocurrency boom to build it into one of the world's largest exchanges of the digital tokens, Reuters reports. Forbes estimated Bankman-Fried’s net worth a year ago to be $26.5 billion, and he became a substantial donor to US political campaigns, media outlets and other causes, contributing $5.2 million to President Joe Biden's 2020 campaign. When FTX filed for bankruptcy on 11th November, an estimated 1 million customers and other investors faced losses in the billions of dollars. The collapse reverberated across the crypto world and sent bitcoin and other digital assets plummeting. Bahamas attorney general Ryan Pinder said the US government had given "formal notification" of criminal charges, and that it was expected to request Bankman-Fried's extradition to the US. It was not immediately clear whether Bankman-Fried would decide to fight that.
Netflix Inc's documentary series about Prince Harry and his wife Meghan racked up more viewing time on the streaming service than any other documentary during its first week, the company said yesterday. The first three episodes of "Harry & Meghan" recorded 81.55 million viewing hours after its debut last Thursday, Netflix said in a statement, as more than 28 million households watched at least part of the series.
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