Published: 26 April 2023
By Suzanne Evans, Director, Political Insight
Bank of England (BoE) Chief Economist Huw Pill walked into another storm yesterday after saying Brits “need to accept” they are poorer as a result of higher inflation, and that “the refusal to “take our share” of the pain was making matters worse. Two weeks’ ago, Pill said unemployment needs to go up to crack down on inflation, saying the interest rate setting Monetary Policy Committee (MPC), need to see an increase in joblessness to “reassure” them that inflation is headed back towards their two per cent target. City A.M.’s Jack Barnett wrote yesterday: “Pill’s comments will be seen as the latest tin-eared response to the crisis from the BoE, which is tasked with keeping inflation at 2 per cent”. Inflation has outpaced wage growth for nearly two years and contributed to the tightest squeeze on living standards in recent memory. BoE governor Andrew Bailey has previously been criticised for telling Brits not to ask for pay rises. Pill was speaking to the Beyond Unprecedented podcast, produced by Columbia Law School, and also addressed criticism of the Bank’s handling of inflation, admitting it was not alive to the dangers of gummed up global supply chains and the effect that would have on pricing. “If we had understood supply chains better than we did. We could have probably understood that this was going to be a more difficult process than we anticipated,” he said. Pill is a former Goldman Sachs banker.
Meanwhile, claims the Bank of England itself caused the worst inflation surge in the UK for more than 40 years by printing money are “not well supported by the evidence,” Ben Broadbent, a deputy governor at the Bank, said yesterday in a speech at economic think tank, the National Institute of Economic and Social Research (NIESR). NIESR has argued that pumping into the economy via bond buying for too long and low interest rates has pushed inflation higher, but Broadbent said: “broad money grew more than twice as rapidly” in the years leading up to the global financial crisis in 2008 “than in the decade or so after”. “Average inflation, in both periods, was close to two per cent,” he added. He also said BoE officials constructed a model in which they predicted where interest rates would have had to have risen to keep inflation at the central bank’s two per cent target amid Russia’s invasion of Ukraine jacking up international energy prices and supply chains faltering after pandemic restrictions were scrapped. “The simulation suggests that interest rates would have to have risen well into double digits,” Broadbent said, adding at the in-person NIESR speech he thought this was somewhere around 20%. Such a move would have made millions of Brits unemployed and taken the jobless rate into the double digits as well, he claimed.
Rain Newton-Smith takes over as director general of the CBI today, having worked previously as chief economist at the lobby group, which is fighting for its survival amid a string of sexual abusee and misconduct allegations. However, Baroness Morrissey, a City fund manager who currently chairs investment firm AJ Bell, told the BBC: "I'm sure she is wonderful in lots of respects but it doesn't quite cut the mustard if you're trying to show that you're embracing a new approach to all of this." Asked if she thought the CBI was finished, Morrissey said: “I do I'm afraid”. Since the allegations emerged, dozens of organisations have either ended their membership or suspended activity with the CBI, including the Government. Earlier this week, Chancellor Jeremy Hunt said: "There's no point engaging with the CBI when their own members have deserted them in droves." Previously, the CBI claimed to represent 190,000 companies employing around seven million people, and had huge influence with the government on business matters.
A survey by the British Chambers of Commerce (BCC) suggests that nearly every business in the UK is struggling to hire staff. Some 80% of 5,000 firms surveyed by the lobby group said they ran into hurdles when recruiting, with small and medium sized companies the most likely to be unable to source new talent. Just over nine in ten SMEs told the BCC they faced staffing challenges. Some 500,000 people have left the UK labour market since the beginning of Covid lockdowns in 2020.
John Neil, the boss of Unipart, has told the BBC he is considering moving investment to the US or Europe due to new subsidies offered there. He wanted to invest in Britain, he said, but UK companies could not "compete on a level playing field" as the US is spending billions to help electric car firms, green energy and microchips via loans and tax breaks. Europe is also planning to ease state help rules for firms in green sectors, but the British Government has yet to announce its strategy, with the chancellor saying previously he would wait to see what the EU did before making any decisions. Neill, who is also a key board member of the car industry body the SMMT, said America's Inflation Reduction Act (IRA), passed last year, was offering firms a "completely game changing set of incentives and fiscal support" that was hard to ignore. Based in Oxford and employing more than 8,000 people, Unipart is a major UK manufacturing firm which makes vehicle parts, components and manages supply chain logistics.
The London Stock Exchange Group has taken aim at the Government after the failure to woo Arm back to the UK, the Daily Mail reports. According to a source at the exchange, government upheaval in 2022 resulted in Masayoshi Son, boss of Japanese conglomerate Softbank, which owns the British tech group, announcing in March they would list it in New York. The deal was undone by the UK having three different Prime Ministers in the space of two months at the back end of last year, the source said, a critical period when New York and London were both vying to secure Arm’s listing.
Meanwhile, building supplier CRH said it will press ahead with plans to ditch its London listing in favour of New York today, saying it wants to tap into more “commercial, operational and acquisition opportunities” in the US.
More than half of pension scheme leaders expect to increase their investment in UK infrastructure projects in the next year, with many arguing a series of pending post-Brexit reforms will be the “key driver” behind their plans, according to a new survey exclusively shared with City A.M. Over 60% of pension scheme leaders are expecting to boost investment in UK infrastructure in the next year, the survey, conducted by Censuswide on behalf of the investment fund GLIL Infrastructure, found.
A total of £2.9bn was invested into UK firms in the opening three months of the year, the lowest amount of cash raised in the opening quarter of a year since 2020, according to data from big four firm KPMG. The figure marks a sharp fall from the £8.2bn raised in the first quarter of 2021 and £12.3bn raised in the first quarter of last year, when low interest rates still fuelled a deal boom. Soaring inflation and the shocks of war in Ukraine sparked a sharp end to the previous funding frenzy, KPMG concludes, with investors souring on loss-making start-ups and shifting their focus towards profits.
Online supermarket Ocado said yesterday that Ocado Retail - its joint venture with Marks & Spencer - is planning to end operations at its Hatfield Customer Fulfilment Centre, putting some 2,300 jobs at risk. Around 20% of Ocado's 400,000 orders per week are handled at Hatfield, but these are set to move to the company's "high-productivity, next-generation facilities" around the UK, including the nearby Luton CFC, which is scheduled to open later this year, and where Ocado says it hopes to redeploy as many people as possible.
The founders of Planet Organic have bought the business back from administrators Interpath in a bid to keep the health-focused grocery store alive, however four stores within London and the South East will be forced to close as part of the process. Founders Renée and Brian Elliott set up Bioren Limited last month to buy the firm back, however the value of the deal has not been disclosed. 10 Planet Organic stores will continue to trade in London, with 194 store jobs and 71 jobs at its head office saved. However, its shops in Henley-on Thames, Teddington, Bermondsey and Tottenham Court Road, will close, resulting in 64 job losses.
Shares in the FTSE 250’s Watches of Switzerland shares rose nearly 8% yesterday on speculation about possible takeover posted on the Betaville blog, despite the identity of the company remaining a mystery.
Ted Baker CEO Rachel Osborne, who took the helm at the retailer in the midst of a governance and accounting crisis in 2020, is expected to leave in the coming months, Sky News reports. The company was taken over by Authentic Brands Group (ABG), a giant American brands and entertainment conglomerate, six months’ ago, in a £212m deal, and is progressing its conversion into a brand licensing business. ABG, which also owns Forever 21, Reebok and a stake in David Beckham's portfolio of consumer goods, is in talks to sign a number of new partners in the UK to take over Ted Baker's design, logistics and other functions. It has already signed similar deals in the US and China. Sky cited a person close to the situation as saying that this shift means that Ted Baker no longer requires a group CEO.
FTSE 100 consumer goods giant Reckitt Benckiser announced the appointment of a new cCEO this morning, while posting a rise in first-quarter sales. Reckitt said Kris Licht - who has served as president of its health business and as chief customer officer since July 2020 - will become CEO designate as of 1st May and will immediately begin the transition to the role, working alongside current boss Nicandro Durante.
Standard Chartered said yesterday that bitcoin could reach $100,000 (£80,257) by the end of 2024, despite crypto prices crashed following over two weeks of gains. Standard Chartered pointed to the collapse of Silicon Valley Bank and other mid-tier US lenders as promoting the case for bitcoin as a "decentralised, trustless, and scarce digital asset".
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