Published: 10 February 2023
By Suzanne Evans, Director, Political Insight
The UK very narrowly avoided a recession over the last three months of 2022 as GDP was flat. However, the economy contracted sharply over Christmas, by 0.5%, official Office for National Statistics (ONS) figures out today show. For last year at a whole, GDP increased by an estimated 4%, following a 7.6% increase in 2021, the ONS said. In response to the figures, Chancellor Jeremy Hunt said: “The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared. However, we are not out the woods yet, particularly when it comes to inflation. If we stick to our plan to halve inflation this year, we can be confident of having amongst the best prospects for growth of anywhere in Europe.”
Bank of England (BoE) Governor Andrew Bailey suggested yesterday that its run of interest rate hikes might be nearing an end, but that he wants to see “more evidence” of the rate of price increases falling this year before taking his foot off the brake. The Central Bank raised borrowing costs for the 10th time in a row last Thursday. In a question-and-answer session with parliament's Treasury Committee, Bailey said: "We are concerned about persistence (of inflation) and that's why, frankly, we raised interest rates this time... I am very uncertain particularly about price-setting and wage-setting in this country. We have got the largest upside skew in our forecasts that we have ever had on inflation." However, he also said that inflation is almost “guaranteed” to come down rapidly this year unless there is a new, unexpected global event.
The Financial Conduct Authority (FCA) said yesterday that it will push ahead with plans to make "synthetic data" available to help increase innovation and choice in financial services, following a consultation last year. Synthetic data is explained by Reuters as referring to customer data that has been stripped of some information or encrypted to preserve privacy, making it easier to share between companies, such as fintechs, that want to offer competing financial services in an era where data privacy laws make it harder to do so. "Based on the feedback to the Call for Input and previous research, our current position is that synthetic data can potentially make a significant contribution to beneficial innovation in UK financial markets," the financial regulator said in a statement.
The Government has announced it will pay the European Commission a further £1.7bn to settle a long-running dispute with the EU over import fraud. In 2018, the commission sued the UK for €2.7bn (£2.39bn), on the grounds the UK had failed to pass on the correct amount of tax for imports between 2011 and 2017, and in March 2022, EU judges largely ruled against the UK in the case. The Treasury acknowledged the money was a "substantial sum" but argued it would "draw a line" under the case.
The European Parliament’s Environment Committee yesterday backed an amendment to extend the reach of draft legislation to force companies to check whether their suppliers use slave or child labour, or pollute the environment, at every point in their supply chain, and voted to extend the scope of the proposed new law. The European Commission proposed the draft Corporate Sustainability Due Diligence (CSDD) law last year to put pressure on companies to meet net-zero climate targets, and ensure they would have to identify, monitor and mitigate the adverse impact of their activities on the environment, as well as adopt transition plans to meet net-zero goals. The Commissioners proposed that only companies with at least 500 staff and a worldwide turnover of more than €150m (£132.76m) need comply, meaning few companies would be impacted. However, the environment committee’s vote called for a more ambitious scope covering companies with just 250 staff or more and an annual worldwide turnover of only €40m (£35.40m), so the draft rules with the EU's rules on corporate sustainability reporting. "With its position, the environment committee sends a strong signal: We want to oblige companies to ensure their entire value chain is climate neutral by 2050," German centre-left committee member Tiemo Wolken said in a statement.
Ofcom is starting a probe into inflation-busting price rises mid-contract for phone and broadband customers. Millions of consumers are facing massive increases in bills of up to 17% as telecoms firms implement price rises linked to inflation, currently running at just under 10%, Sharecast News reports. The firms usually calculate increases using inflation measured by either the consumer prices index (CPI) or retail prices index (RPI) plus an extra increase on top of between 3.4 - 3.9%. Customers also face the added insult of not being able to switch provider without penalty. "We are concerned about the degree of uncertainty consumers face about future price rises specified in contracts on the basis of inflation. The unpredictability of inflation rates means it can be difficult to know - months in advance - what an inflation-linked price rise will equate to in pounds and pence when consumers enter a contract," Ofcom said yesterday. "Among those who do know their provider can increase their price, around half do not know how this would be calculated, and nearly half of all customers do not know what CPI and RPI measure," the telecoms regulator said.
City A.M. says it understands that The Department for Culture, Media and Sport is in talks with the Rugby Football Union (RFU) to block the sale of Worcester Warriors to the Atlas consortium. The newspaper says the department is expected to lobby against Worcester’s administrators Begbies Traynor selling the club to a bid that has not passed the RFU’s fit and proper tests. However, Atlas was previously given until Valentine’s Day to meet all necessary tests.
The Department for Transport has exercised an option to extend FirstGroup’s South Western Railway operating contract for another two years, to 25th May 2025 on the existing terms.
MPs will receive a 2.9% pay increase from April, taking their salary from £84,144 to £86,584.
The Independent Parliamentary Standards Authority (Ipsa), which sets MPs' pay, says this is in line with the average public sector workers' rise in 2022/23.
Ambulance workers are on strike in five regions in England today. Some 70,000 staff at 150 universities are also on strike, with action organised by the University College Union.
Teachers in Wales are postponing strike action planned for 14th February until 2nd March so members of the National Education Union can consider an improved pay offer. The Welsh Government has also offered a lump sum award.
Sales of second-hand cars fell sharply last year as a shortage of parts driven by Covid restrictions meant fewer new cars were produced, so people hung on to their existing cars for longer. Some 6.9 million used cars changed hands, down from 7.5 million in 2021, according to the Society of Motor Manufacturers and Traders (SMMT). However, it said the problem was starting to ease, and that sales of second-hand electric vehicles had bucked the trend.
Over half of the Londoners who took part in a Zoopla survey admitted they were relying on their parents’ wealth to get them on the property ladder or pay off their mortgage. The online estate agent found that seven in ten of those it spoke to planned to pay off their mortgage and move home using inheritance from their parents, although only 30% had actually spoken to their parents about how much they were likely to inherit.
The Financial Conduct Authority (FCA) is investigating Barclays PLC for suspected failings in its compliance and anti-money laundering systems, the Financial Times says this morning. The financial regulator requested an independent review after noting the number of anti-money laundering incidents, the newspaper reports, citing people familiar with the matter.
First Abu Dhabi Bank, the United Arab Emirates' biggest lender, said on Friday it was not currently evaluating an offer for Britain's Standard Chartered, having confirmed it was considering a bid early last month.
Jon Thompson, head of the Financial Reporting Council (FRC), Britain’s audit watchdog, is set to step down to take up a new position as the chair of HS2. He has handed in his notice to the FRC and will now serve out his six-month notice period before the move, Sky News reports.
German carmaker Mercedes Benz yesterday stood accused at London’s High Court of cheating on regulatory emissions tests by using ‘defeat devices’ to hide the levels of toxic nitric oxide and nitrogen dioxide emissions coming out of their diesel cars - the so-called ‘dieselgate’ scandal. Leigh Day solicitors has brought a class action on behalf of Mercedes Benz owners, having been given permission to do so in July last year. Senior partner Martyn Day said: “We believe Mercedes willingly misled its customers and these claimants have a right of compensation against the car manufacturer.” Volkswagen AG – which owns the Porsche, Audi, SEAT, and Lamborghini car brands – has already paid out more than €30bn (£26.6bn) in compensation and legal fees over its part in the scandal, including a $14.7bn settlement with US authorities. In 2020, the UK’s High Court ruled against Volkswagen in a claim brought forward on behalf of 90,000 British drivers, in stating the carmaker misled its customers by cheating on emissions tests. The case is expected to end today.
Broadcaster ITV is reportedly at the centre of a fresh round of takeover speculation, according to markets blog Betaville, although the identity of the company interested in buying ITV was not at all clear, with sources suggesting the suitor could be a US or possibly French company. In 2006, ITV received an approach from a private equity firm consortium comprising Apax, Goldman Sachs and Blackstone, Sharecast News says.
Unilever says price hikes due to inflation helped the firm deliver turnover of more than £50bn last year, with the group seeing a 9% increase in underlying sales. The British firm – which owns brands such as Ben & Jerry’s, Dove, Hellman’s and Magnum – said turnover also increased 14.5% to £53.2bn for 2022. CFO Graeme Pitkethly said price increases would continue, "but it will be a lower rates of increases...we are probably past peak inflation, but not yet past peak pricing".
Shares in Ladbrokes owner Entain tumbled 13.97% yesterday after rumours of a possible takeover by MGM were quashed.
British meal delivery company Deliveroo says it will cut around 9% of its workforce, or 350 roles because of what Founder and CEO Will Shu called “serious and unforeseen economic headwinds. The company has recently exited the Netherlands and Australia, where it struggled to become a market leader.
Credit Suisse Group has reported its biggest annual loss since the 2008 global financial crisis – a total net loss in 2022 of 7.29bn Swiss francs (£6.52bn) - marking its second straight year in the red. The bank blamed a sharp acceleration in withdrawals after rattled clients pulled more than 110bn Swiss francs (£98.43bn) from the bank in the fourth quarter of last year alone, following scandal after scandal. It warned that a further "substantial" loss would come this year, although saying the picture has been improving. The 167-year old bank was hard hit by the collapse of US investment firm Archegos in 2021 as well as the freezing of billions of supply chain finance funds linked to insolvent British financier Greensill Capital. Other scandals to rock the bank included a prosecution in Switzerland involving laundering money for a criminal gang.
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