Published: 14 April 2023
By Suzanne Evans, Director, Political Insight
Chancellor Jeremy Hunt said yesterday it would be a "terrible mistake" to give pay rises above the rate of inflation, even though strikes are hitting the economy. In particular, he singled out the current junior doctors' strike, saying the impact on NHS patients was "regrettable" but that wage increases that fuelled inflation would have a "more damaging" impact on the UK economy. Junior doctors are calling for a 35% pay rise, a demand the government says is "unreasonable". Hunt told the BBC the government's aim was to "put this high inflation period behind us," adding that if the government stuck to its plans inflation could be brought below 3% by the end of the year. "The worst possible thing that we can do for junior doctors, nurses, train drivers, teachers is to manage the economy in a way that they are still worried about 10% cost of living increases, in a year's time," he said. Thousands of workers at the Environment Agency have begun a three day strike today over claims of "endemic low pay" according to trade union Unison. Staff working on flood defences, river pollution and fires are walking out in protests at a 2% pay offer by the Government which they say is not enough to cover the impact of inflation and equates to a 20% real terms pay cut since 2010. A greater proportion of the British population than before recent economic shocks may need to be unemployed in order to keep a lid on inflation, the Bank of England’s chief economist claimed yesterday while speaking at an event. Huw Pill, a former Goldman Sachs banker, said the natural rate of unemployment has risen as a result of the Covid-19 crisis and Russia’s invasion of Ukraine choking the economy and that an increase in joblessness would “reassure” them that inflation is headed back towards their 2% target. He agreed that the so-called “natural rate of unemployment”, a phenomenon in economics that tries to pinpoint the level of joblessness needed to ensure inflation doesn’t spiral out of control, has climbed due to a reduction in the UK’s economic potential since the pandemic. Pill also said inflation may be "bumpier than we expect" but was still expected to fall in the second quarter as last year's surge in energy prices drops out of annual comparisons. Banks and building societies are reporting increases in defaults on both secured and unsecured loans – i.e. on mortgages and credit cards - and the trend is expected to continue for at least the next three months, according to new data published by the Bank of England (BoE) yesterday. Credit for large businesses was unchanged, and was likely to remain constant over the next few months, the Bank said, however default rates for medium-sized businesses was expected to “increase slightly.” The BoE conducts its credit conditions survey every quarter to help it understand trends and maintain financial stability. Lenders are asked to report changes in the previous three months and their expectations for the next three months. “The results are based on lenders’ own responses to the survey. They do not necessarily reflect our views on credit conditions,” the Bank said. The latest survey was conducted between 27th February and 17th March, meaning the impact of problems in the banking sector during March were unlikely to have been fully captured in the results. Meanwhile, tens of thousands of homeowners who rushed to buy properties during the Covid 'stamp duty holiday' face a steep jump in mortgage repayments as fixed rate deals taken out during the pandemic come to an end, the Daily Mail said yesterday. In September 2021 alone, 6,220 fixed-rate deals of up to two years were taken out, data from UK Finance shows. This was just before the tax break which was introduced to boost the property market during the pandemic expired. However, housebuilder shares jumped yesterday after fresh findings from the Royal Institution of Chartered Surveyors projected growing property sales in the latter months of 2023. Taylor Wimpey and Barratt Developments shares were up by over 2% yesterday morning, but remain down on a year ago. Sterling rose to its highest since last June yesterday, while the US dollar hovered at a two-month low after a slowdown in US inflation. Britons have become stranded in France due to air traffic control strikes. British Airways has been forced to cancel and delay flights on both sides of the channel, and easyJet and Ryanair are warning of disruption, the Daily Mail says. London Stock Exchange Group has teamed up with Global Futures and Options to offer Britain's first regulated trading and clearing in bitcoin index futures, the companies said yesterday. GFO-X, which is licensed by the Financial Conduct Authority, is a start-up platform aimed at global institutional investors who want to trade digital asset derivatives. The new service is anticipated to start in the fourth quarter of this year. Home REIT has delayed a ‘put up or shut up’ deadline for a takeover to 11th May, City A.M. reports. The scandal-ridden social housing investor is mulling a bid from potential suitor Bluestar group, a firm with former ties to Home REIT’s now-ditched investment advisor Alvarium. FTSE 100 drinks firm Diageo has announced it will delist its shares from the Euronext Paris and Euronext Dublin following a review of the trading volumes, costs and administrative requirements related to those two listings. Although subject to approval by the boards of the two exchanges, the delisting is expected to go ahead on 26th May and take effect on or around 30th May. It will keep its listings on the London and New York Stock Exchanges. Shares in FTSE 250 payments company Network International ended the day more than 23% up yesterday as it confirmed it has received a preliminary takeover offer from private equity firms CVC Capital Partners and Francisco Partners. Under takeover rules, the consortium now has until 11th May to either announce a firm intention to make an offer or walk away. Dechra Pharmaceuticals has confirmed it is in discussions with private equity firm EQT regarding a possible all-cash offer for the company. Under the terms of the offer, which it will recommend should EQT firm it up, shareholders in the FTSE 250’s veterinary pharmaceuticals group would receive 4,070p per share in cash. At the time of writing, shares in Dechra had surged more than 43%. Copper miner Teck Resources has rejected a sweetened bid from FTSE 100 miner Glencore, which has offered Teck’s shareholders 24% of the combined metals group and up to $8.2bn in cash for those who may not want exposure to thermal coal. Marks & Spencer has announced it is closing three of its stores, in Middlesborough, Bolton, and Castleford, West Yorkshire. British manufacturer Caterham has announced plans to open a new multi-million pound factory and global HQ in Dartford, Kent. The 54,000 sq ft facility will boost the iconic sports car firm's production capacity by 50%. Administrators overseeing the closure of a firm suspected of supplying processed meat wrongly labelled as British have said they will support an ongoing fraud investigation. Loscoe Chilled Foods, near Heanor, Derbyshire, made 120 staff redundant last month ahead of the appointment of advisory firm FRP. It follows an ongoing probe by the National Food Crime Unit (NFCU). Three people have been arrested and released under investigation, the BBC says. TSB Bank’s former chief information officer has been fined £81,620 by The Prudential Regulation Authority (PRA) for failures relating to the botched merger of the firm’s IT services in 2018. The industry watchdog said Carlos Abarca, who left the bank in December 2019, “failed to take reasonable steps” to ensure that TSB managed the outsourcing for its 2018 IT migration programme.
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