Published: 03 February 2023
By Suzanne Evans, Director, Political Insight
As expected, the Bank of England (BoE) raised interest rates to 4% from 3.5% yesterday, their highest level in over 14 years. Following the announcement, the BoE suggested interest rates may now be nearing a peak, as “we've seen the first signs that inflation has turned the corner," and indicated they will only raise rates further if the bank sees future signs that inflation will remain high. Bank governor Andrew Bailey said in interviews yesterday that inflation now appears to be falling, but warned: “It is too soon to declare victory just yet. Inflationary pressures are still there”. Bailey was also forced to admit that while the UK is still set to enter recession this year, it will be much shorter and less severe than he previously thought: the slump is now expected to last just over a year, rather than almost two, as energy bills fall, and price rises slow. The European Central Bank also lifted its benchmark by another half a percentage point, and signalled there would be at least one more hike of the same magnitude next month.
Ofgem condemned the forced instillation of pre-payment meters for customers who fall behind on their bills yesterday, issuing a statement via their social media channels saying: “We are aware of the extremely serious allegations from The Times which we will investigate urgently with British Gas and won’t hesitate to take firm enforcement action if required”. The energy regulator has meanwhile banned British Gas from force-fitting the much more expensive meters, and all other major suppliers have agreed to suspend the practice, the newspaper says this morning. Yesterday, the energy regulator also published the results of what it called its fourth “deep dive” into domestic energy supplier standards, looking at customer service and complaints performance from information submitted by 17 of the biggest suppliers, and found that none of them were free from weaknesses, and many were “not up to scratch”. The worst weaknesses were at E.ON, Ofgem said, with “severe” problems resulting in specific enforcement action to bring E.ON into compliance with its licence conditions. “Moderate weaknesses” were found at 11 suppliers (British Gas, E Gas & Electricity, EDF, Good Energy, Outfox the Market, OVO, ScottishPower, SO Energy, Utilita, Utility Warehouse and Tru Energy), and “minor weaknesses” at Bulb, Ecotricity, Green Energy, Shell and Octopus. E.ON has 4.6 million domestic electricity customer accounts and 3.1 million domestic gas customer accounts across Great Britain.
Train drivers are on strike again today. NHS nurses and Ambulance workers will strike on Monday. Postal workers have announced they will strike on 16th and 17th February due to "unagreed changes" to the structure of work by Royal Mail at offices across the country.
Mayor of London Sadiq Khan has called on Chancellor Jeremy Hunt to reinstate duty-free shopping for overseas visitors and extend it to EU visitors. Khan said he had been told that the capital has been disadvantaged by the end of the perk by the bosses of Heathrow, Selfridges and Harrods. Before Brexit in 2020, international visitors could receive a VAT refund on items bought in High Street shops, at airports or other departure points from the UK which they exported in personal luggage. The refund was set to return as part of former Chancellor Kwasi Kwarteng's "mini-Budget" but was dropped by Hunt when he took up the post last year. "Our rich ecosystem of shops, hospitality venues, and cultural attractions, is heavily dependent on both domestic and international tourists," Khan wrote in a letter to the Chancellor on 31st January. Reinstating duty-free shopping would help London's retail and hospitality sectors "at a time they need it most," he said.
The Office for National Statistics (ONS) has published data this morning showing that in Quarter 4 last year, October – December 2022, business closures were down 5% on a year earlier. The most significant drop came from transport and storage (down 35%) and the most significant rise came from construction (up 16%). However, the number of business creations in Quarter 4 2022 was 13% lower than a year earlier, and the second lowest since the start of this series in 2017. Transport and storage saw the most significant decrease in creations (down 30%).
Britain’s service sector saw business activity at the start of 2023 decline for the fourth consecutive month, with the weakest performance for two years, Reuters reports. The S&P Global/CIPS UK services PMI surveyshowed a reading of 48.7 in January, down from 49.9 in December. Any reading below 50 is considered a decline.
Motor insurance bills rose by 8% on average over the last three months of 2022, according to data published by the Association of British Insurers (ABI) today. The average premium paid for private motor insurance was £470, the ABI said, adding that some member companies reported high energy costs and an increase in the cost of paint had added nearly £72 pounds to each vehicle repair bill.
Shares in JD Sports Fashion surged yesterday, ending the day 11.15% up as the company revealed it is aiming to grow revenues and margins by double digits over the next five years under a strategy outlined by new CEO Regis Schultz. The plan includes capital expenditure of £500m - £600m a year with 50% - 60% of spend focused on rapid store expansion in underpenetrated markets – mostly Europe and North America - with 250 to 350 new stores a year anticipated. Schultz took over as CEO last September, after the ousting of long-standing executive chairman Peter Cowgill in May of 2022. "Today marks a new, distinct chapter in the growth story of JD as we set our plans to become the leading global sports-fashion powerhouse," Schultz said in a statement.
UK transport giant Stagecoach has launched its first fully electric city bus network, the BBC reports. The company said it had invested £10.8m in 25 new zero-emission buses to operate on its routes in Inverness, and that the Yutong E10 buses could run on a single daily charge. Stagecoach plans have all its buses electric in Perth and Dunfermline in coming months, and is planning a wider rollout of 159 electric buses across its UK services. Stagecoach's investment was supported by the Scottish government's Zero Emission Bus Challenge Fund.
Harland and Wolff is set to create 900 jobs and invest £77 million at its historic Belfast and Appledore shipyards after formally signing a sub-contract worth up to £800 million for the delivery of three naval support ships. In total, more than 1,200 jobs are to be created, and £100 million will be invested, at UK shipyards after the British-led Team Resolute consortium was awarded a £1.6bn contract to manufacture three Fleet Solid Support ships for the Royal Fleet Auxiliary.
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