Published: 07 February 2023
By Suzanne Evans, Director, Political Insight
Prime Minister Rishi Sunak is expected to announce a mini-reshuffle of his Cabinet later today. It is also being widely reported – initially by The Sun newspaper - that he is considering breaking up the Department for Business, Energy and Industrial Strategy (BEIS) into three separate Ministries. There will also be a new science and digital department created too, the Sun said, while The Department for Digital, Culture, Media and Sport could also be broken up, with culture and sport as their own standalone departments.
Chancellor Jeremy Hunt formally announced a consultation on the introducing of a digital pound by the Bank of England (BoE) yesterday. "While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use,” Hunt said, adding that so-called ‘Britcoins,’ which could technically be held by individuals in accounts directly with the BoE, without the need for a bank account, could be available within a decade. BoE governor Andrew Bailey, said: “As the world around us and the way we pay for things becomes more digitalised, the case for a digital pound in the future continues to grow. A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability.". “However, there are a number of implications which our technical work will need to carefully consider. This consultation and the further work the Bank will now do will be the foundation for what would be a profound decision for the country on the way we use money,” he added. There are many critics of potential digital currencies, who say mobile banking services offer the same function as a CBDC. They have also raised civil liberty concerns about governments being able to closely monitor individuals’ finances and ultimately dictate how and on what people spend their money, should they be introduced.
Transport Secretary Mark Harper is set to confirm today that a trial by the publicly-owned railway LNER, which scrapped return tickets in a bid to make fares simpler, is to be extended as part of a shake-up of the country's railways. Under the trial, a single is always half the cost of a return, and such reform, Harper’s office said, could provide "better value" for passengers. In his planned speech, Harper will also outline how a new organisation, Great British Railways (GBR), will work to replace an "overcomplicated and fragmented" system as well as set timetables and prices, sell tickets in England and manage rail infrastructure, the BBC reports. He will also announce plans to roll out pay-as-you-go ticketing across the South East, which will enable travellers to pay for journeys by tapping in and out with contactless cards or phones - similar to London's Oyster card system.
Croydon Council has been given permission by the Government to increase Council Tax by 15% without the need for a referendum, after it declared itself bankrupt for the second time in three years in November. Conservative mayor Jason Perry blamed the hike on "financial failures of the previous administration" and said the increase in tax would amount to "around an extra £4.50 a week, or 63p a day, for the average property." The Council is currently under no overall control. Elsewhere, Thurrock and Slough councils, have also had requests approved to raise council tax by 10%, the BBC says.
The National Audit Office (NAO) has this morning published a report saying the government is likely to spend just £69bn on the Energy Bill Support Scheme, just half of the original £139bn estimate, because the mild winter softened energy costs.
The British Retail Consortium says spending in chain stores rose by 4.2% in annual terms in January, weaker than December's 6.9% rise and lagging behind inflation, hence signifying a fall in sales volumes. Separate data from Barclays, meanwhile, showed some strength in consumer demand, Reuters says. Total spending on Barclays payment cards rose by 9.7% last month from January 2022, helped by a 66% jump in holiday bookings and a 21% rise in entertainment spending, notably at the cinema. The bank did note, however, that the growth comparisons were flattered by last January's coronavirus restrictions. It also reported that colder weather in January this year pushed up spending on utilities by 45%.
House prices were largely unchanged in January after falling in month-on-month terms in each of the previous four months after borrowing costs rose, the Halifax said earlier. The mortgage lender pegged the annual rate of house price growth at 1.9%, the weakest increase in three years, and said the average sale price stood at £281,684 in January, down only £29 on December. Halifax’s conclusions contrast with those of rival lender Nationwide, which last week said its measure of house prices dropped by a larger-than-expected 0.6% in January, and put the average sale price at £258,297.
Returns on real estate investment has taken a clear hit, however, falling 11.9% in the fourth quarter of 2022, MSCI's quarterly UK property index showed yesterday. The data marks the largest quarterly drop since 2008. For 2022 as a whole, UK property returns fell 8.9%, the company said. The quarterly index measures returns across a larger sample size than MSCI's monthly property index, looking at 7,375 properties - mostly industrial, office and retail buildings - worth £140bn.
Meanwhile, Britain's construction industry outside London has held up through 2022 despite rising economic uncertainty, the latest Deloitte Regional Crane Survey shows. The data, which covers Birmingham, Manchester, Leeds and Belfast, showed 74 new construction projects started across the four cities last year, compared with 72 in 2021. The volume of office, residential and student housing construction increased on the year, although for the hotels sector it declined by 25%. “Developer confidence is a key indicator for economic health and, despite many market uncertainties over the last few years, construction in our surveyed UK regional cities remained remarkably resilient," John Cooper, partner at Deloitte, told Reuters.
BMW is reportedly in talks with the Government about a £75m grant to secure production of electric Minis in the UK. According to several sources, the German vehicle manufacturer and officials from the Department for Business, Energy and Industrial Strategy (BEIS) are in discussion about a support package from the government's Automotive Transformation Fund, which could be finalised within weeks. Neither BMW nor the government would confirm any talks were taking place. Around 200,000 Minis are built annually at BMW's plant at Cowley, Oxfordshire, which employs around 4,000 people. The majority of cars made are sold overseas. In 2021, BMW said it would cease making the electric Mini at the plant, saying the plant was running inefficiently by having to produce both electric and petrol cars, and that it would shift electric vehicle production to China.
Manchester City Football Club (MUFC) has been accused of breaking more than 100 of its financial rules between 2009 and 2018 after a four-year investigation by the Premier League, which has now referred the current League champion to an independent commission. If found guilty, MUFC could be fined, expelled from the league, or have points deducted. In a statement, the League said City breached rules requiring them to provide "accurate financial information that gives a true and fair view of the club's financial position", including details around club revenue, which includes sponsorship income and operating costs. Further allegations relate to rules requiring full details of manager remuneration from the 2009-10 to 2012-13 seasons, when current Italy manager Roberto Mancini was in charge, and player salaries between 2010-11 and 2015-16. It is also alleged that MUFC breached rules related to regulations laid down by Uefa, the European football governing body, including Financial Fair Play (FFP), from 2013-14 to 2017-18, as well as Premier League rules on profitability and sustainability from 2015-16 to 2017-18. In 2020 Uefa ruled that City committed "serious breaches" of FFP regulations between 2012 and 2016, but a two-year ban from European competitions was overturned by the Court of Arbitration for Sport. MUFC said in a statement: "Manchester City is surprised by the issuing of these alleged breaches of the Premier League Rules, particularly given the extensive engagement and vast amount of detailed materials that the EPL has been provided with".
Profits at BP more than doubled to a record $27.6bn (£23.3bn) last year, the FTSE 100 oil giant announced this morning. CEO Bernard Looney said: 'We are strengthening BP, with our strongest upstream plant reliability on record and our lowest production costs in 16 years, helping to generate strong returns and reducing debt for the 11th quarter in a row. 'Importantly, we are delivering for our shareholders - with buybacks and a growing dividend. 'This is exactly what we said we would do and will continue to do - performing while transforming.' BP has hiked dividend payments by 10% and announced a $2.75bn (£2.29bn) share buyback scheme. Last week, Shell also announced record – and doubled - profits of £32.3bn.
Royal Mail workers have called off a planned strike over pay and conditions next week after receiving legal challenges by the company, the Communication Workers Union (CWU) said yesterday. In a statement, the CWU said it had been advised by lawyers that it could defend its position in court, but that the risk of losing in court may impact a new ballot. Some 115,000 workers had planned to walk out for 24 hours from lunchtime on 16th February.
Retailer M&Co has confirmed it will shut all its 170 stores this Easter with almost 2,000 jobs set to be lost. The 189-year-old clothing retailer – which used to be known as Mackays went into administration in December. The brand was bought by AK Retail Holdings last week, but the purchase did not include its UK wide stores.
EY, the administrators for collapsed battery start-up Britishvolt, have confirmed its team has chosen Australia-based Recharge Industries - owned by US investment firm Scale Facilitation Partners - to acquire the "majority of the business and assets" of the firm following its demise last month. David Collard, CEOE of Scale Facilitation and founder of Recharge, said: "We're thrilled to be progressing with our proposed bid for Britishvolt and can't wait to get started making a reality of our plans to build the UK's first Gigafactory”. Sky News says it understands that 26 members of staff, who were retained during the administration process, will be kept on by the new owner, but that Recharge indicated it could not yet comment on its wider employment plans and whether it would seek to rehire those who were made redundant.
Ukraine-focused FTSE 250 miner Ferrexpo said this morning it had been issued with a court order requiring it to freeze the bank accounts of its largest Ukraine subsidiary, as part of a probe relating to potential iron ore royalty underpayments between 2018 and 2021. "Ferrexpo denies all accusations made as part of the Investigation, and confirms that it has consistently operated in accordance with the legal and fiscal frameworks of Ukraine," the company said in a statement, adding: “As such, the group is seeking to resolve matters through the Ukrainian legal system and will appeal the above decision."
The Rothschild family is planning to take its Paris-listed investment bank Rothschild & Co private, it emerged yesterday. The bank, which famously helped fund the Duke of Wellington’s victory in 1815 at the Battle of Waterloo, has traded on the Paris CAC since 1838. The family already owns 38.95% of the shares and 47.5% of the voting rights though its holding company Concordia. In a statement, Concordia said: "None of the businesses of the group needs access to capital from the public equity markets. Furthermore, each of the businesses is better assessed on the basis of their long-term performance rather than short-term earnings. This makes private ownership...more appropriate than a public listing." Its shares ended the day nearly 17% up.
Dell Technologies Inc is cutting about 6,650 jobs, or 5% of its global workforce, as it struggles with a slump in the personal computer market and braces for a potential recession. The move, announced yesterday, aligns Dell with a raft of US companies from Goldman Sachs Group Inc to Google parent company Alphabet Inc that have laid off thousands this year to ride out a demand downturn wrought by high inflation and rising interest rates, Reuters says.
US Treasury Secretary Janet Yellen said yesterday that she believed the country could avoid a recession. "You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years," Yellen told ABC's Good Morning America. "What I see is a path in which inflation is declining significantly and the economy is remaining strong," she added. On Friday, the US Labor Department released data showing job growth accelerated sharply in January, with non-farm payrolls up by 517,000 jobs and the unemployment rate dropping to a 53½-year low of 3.4%.
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