Published: 10 March 2023
By Suzanne Evans, Director, Political Insight
GDP grew 0.3% in January according to data released by the Office for National Statistics (ONS) this morning, after falling by 0.5% in December 2022. Services grew 0.5%, with the largest contributions to growth coming from education, transport and storage, human health activities, and arts, entertainment, and recreation activities. Manufacturing fell 0.4%; and construction fell 1.7%. Darren Morgan, ONS director of economic statistics, said: "The main drivers of January's growth were the return of children to classrooms, following unusually high absences in the run-up to Christmas” adding that “the Premier League clubs returned to a full schedule after the end of the World Cup”. “Private health providers also had a strong month,” he said, and “postal services also partially recovered from the effects of December's strikes." The pound has risen against the dollar and euro on the back of the figures, however the FTSE is falling sharply this morning: the FTSE all share index is down 1.96% at the time of writing, although with banking and insurance stocks falling particularly heavily, this is more likely to be a consequence of a rout following sharp falls in US banks yesterday. Commenting on the figures, Chancellor Jeremy Hunt said in a statement: “In the face of severe global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go".
According to the British Chambers of Commerce (BCC), GDP is on track to shrink 0.3% this year, but Britain will avoid a technical recession, the definition of which being two straight quarters of negative growth. Instead, the country will suffer a slow burning economic slump that will leave the economy smaller than before Covid-19 lockdowns until the final quarter of 2024, the BCC’s latest forecast claims. Previously, the business group predicted a 1.3% contraction for 2023.
In his Spring Budget next week, Chancellor Jeremy Hunt is expected to hand middle-class workers a pension boost in a bid to encourage them to extend their careers into later life, the Daily Mail reports. Whitehall sources have told the newspaper Hunt will use the Budget to unveil 'significant' increases in pension allowances that have been blamed for driving doctors and other professionals out of the workforce. “The £1million lifetime allowance on tax-free pension savings will see the first substantial increase for a decade,” the Mail claims, adding that the £40,000 cap on annual pension contributions will also be raised to tackle the so-called 'pension trap' which can leave some professionals facing punitive tax charges if they continue working into later life. When the Government announced a 6-year freeze in the annual allowance in 2020, the British Medical Association said it would 'push doctors out of the NHS'.
The government will play a bigger role in tackling unfair trade practices, Trade Minister Kemi Badenoch said yesterday, as she announced new proposals to change how the system works. Primarily, she reduced the role of The Trade Remedies Authority (TRA), which was established in 2021 to police trade and investigate unfair practices after the UK left the European Union, in favour of “giving ministers greater power to look at wider public interest considerations". The new proposals come after a U-turn in the approach to the dumping of Chinese reinforcement steel. Last July, the TRA recommended that anti-dumping measures on the reinforcing steel - known as HFP Rebar - should be dropped. But earlier this month, after a lengthy reappraisal, it decided the duties should be extended after all, a move welcomed by ministers as protecting the steel industry from unfair competition. Badenoch said the government would have the "flexibility to make decisions that balance the interests of UK producers, importers and consumers," adding the changes would also allow ministers "to apply an alternative remedy from that recommended by the TRA." However, “this will only be where justified and in line with the evidence provided," she added. TRA Chair Simon Walker said: "I welcome the fact that this Government review has recognised the value the TRA holds as an independent body. We look forward to working closely with the Department for Business and Trade to ensure our current and future users of trade remedies understand the changes so they can be implemented smoothly”.
More than a quarter of British companies were hit by worker shortages last month, an ONS survey showed yesterday. The latest Business Insights and Conditions Survey found 27% of businesses with ten or more employees were suffering worker shortages in late February, largely unchanged on early January, when 28% reported difficulties. One in ten businesses were also affected by industrial action in January, and of those, 26% said they were unable to fully operate as a consequence. Other data released included a rise in hourly wages, with 13% of all respondents seeing increases in January compared to December 2022. That figure rose to 24% for businesses with ten or more staff. The survey also found that energy prices and inflation remain the two top concerns for businesses, at 19% and 15% respectively, however half of those surveyed said they had been able to get the materials, goods or services they needed from within the UK in January without encountering supply issues. Only 12% said they had experienced supply chain issues in January 2023. The number of larger companies experiencing global supply chain disruption also eased, down 3% on December to 12%.
UK Hospitality says restaurants, pubs and bars are being hit with 600% rises in standing charges on their energy bills with "absolutely no justification or explanation," the BBC reports. The British Beer and Pub Association has also raised the issue, saying its members have reported costs "being layered onto bills," including demands for large deposits up front; and Chris Jowsey, the boss of Admiral Taverns, which has 1,600 pubs, is calling for energy firms to be held to account to "make sure they are not profiteering". “Onerous" energy contracts put many pubs at risk of closure, he says. However, Energy UK, the trade body for suppliers, said it was a "misconception to imply that standing charges are rising to compensate for unit prices being capped," and said charges were higher due to costs. Unlike households, businesses are not covered by an energy price cap, which limits the amount suppliers can charge per unit of energy. Although the government has fixed the cost of wholesale electricity and gas prices for pubs and many other businesses since October, the standing charge element of the bills is not covered under this support scheme. Energy regulator Ofgem told the BBC it was "aware" some businesses were being asked to pay additional costs and is looking to see if action is needed.
The Birmingham to Crewe leg of high speed railway HS2 is to be delayed by two years to cut costs, Transport secretary Mark Harper says, also suggesting the opening of Euston station's HS2 hub could also be delayed as an "affordable" design is worked on. He blamed "significant inflationary pressure" but insisted he was "committed" to the line linking London, the Midlands and North of England. Originally, in 2010, HS2 was expected to cost £33bn but the bill is now expected to be at least £71bn. John Foster from business group CBI said the delay would harm investor confidence in the rail sector. "Delays to projects may create short-term savings, but they can ultimately lead to higher overall costs and slow down the UK's transition to a better, faster and greener transport network," he added. Labour said the decision to pause the HS2 at Birmingham was "astonishing," and the head of the Northern Powerhouse Partnership, Henri Murison, said the delay was "disappointing" and "holds back economic benefits".
Harbour Energy said yesterday that windfall taxes had "all but wiped out" its full-year profits and forced it to cut jobs and investment. The North Sea oil producer said pre-tax profits had risen almost 700% to $2.5bn in 2022 from $315m a year earlier, however, its after-tax profits fell to just $8m from $315m as the company was hit with a tax bill of $2.4bn - including $1.5bn from the UK energy profits levy. "The UK Energy Profits Levy, which applies irrespective of actual or realised commodity prices, has disproportionately impacted the UK-focused independent oil and gas companies that are critical for domestic energy security," said CEO Linda Z Cook. "For Harbour, the UK's largest oil and gas producer, it has all but wiped out our profit for the year. This has driven us to reduce our UK investment and staffing levels." "Given the fiscal instability and outlook for investment in the country, it has also reinforced our strategic goal to grow and diversify internationally," she said.
Payments firm Network International yesterday revealed both revenue and profit growth in 2022, with total revenues having risen 24.5% to $438.37m, with merchant services revenue up 41.4% at $183.34m, and outsourced payment services revenue growing 13.3% to $242.51m. Full-year profits grew 41.6% to $80.1m. Looking ahead, Network International said it remains "encouraged" by the dynamics seen across its markets, with a high growth transition to digital payments that was "significantly ahead" of more developed economies. However, Network also stated it was "cognisant of macroeconomic conditions" and growth slowing in some markets across Africa.
Asda has removed limits on shoppers buying cucumbers, lettuce, salad bags, broccoli, cauliflower and raspberries, but is still limiting customers to a maximum of three packets of tomatoes and peppers. Morrisons has also removed a purchase limit on cucumbers but still has a cap of two items per customer across tomatoes, lettuce and peppers.
Ben van Beurden, Shell's recently departed chief executive, was paid nearly £10m last year, the oil giant’s annual report shows. His pay - a 53% jump on the previous year – of £9.7m included a base salary of £1.4m, an annual bonus of £2.59m and nearly £5m under the company's long-term incentive plan. The bonus was paid in cash and shares. Van Beurden, who has spent his entire career at Shell, announced last September he would step down as CEO after nine years at the helm. Wael Sawan, who took over from van Beurden in January, will also receive a base salary of £1.4m.
Tesco is sounding out candidates to replace long-serving chairman John Allan, Sky News reports, working with a headhunter to approach a number of heavyweight boardroom figures in recent weeks. Allan will step down next year, by which time he will have served for nearly a decade and be 'timed out' under corporate governance guidelines. Allan, a former president of the CBI, has been an outspoken figure during his tenure as Tesco chairman, and has recently lavished praise on the Labour Party leadership.
Layoffs by US companies over January and February touched the highest since 2009, with the tech sector accounting for more than a third of the over 180,000 job cuts announced, according to a report published yesterday by employment firm Challenger, Gray & Christmas Inc. In February alone, layoffs stood at 77,770, more than five times higher than the 15,245 job cuts announced a year earlier. The number of Americans filing new claims for unemployment benefits rose 21,000 in the week ended 4th March, the Labor Department said - the biggest increase in five months.
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