Published: 07 June 2023
By Suzanne Evans, Director, Political Insight
The Organisation for Economic Co-operation and Development (OECD) has upgraded Britain's growth prospects, following The International Monetary Fund (IMF) in radically altering its gloomy predictions for the UK economy and saying we will now not go into recession this year. Instead, it says the economy will grow by 0.3% this year, and by 1% in 2024. However, the OECD still predicts the UK will have the highest inflation of any major developed economy this year, averaging 6.9%, and lower only than Argentina and Turkey. The Paris-based club of wealthy countries also said higher interest rates will be needed to dampen economic growth and incomes in the coming months. It justified its prediction saying: "The high interest burden on public debt and the recent drop in average debt maturity leave the public finances exposed to movements in bond yields,” and added: “Renewed increases in wholesale energy prices due to Russia's war of aggression against Ukraine would further squeeze real incomes given the United Kingdom's high dependence on natural gas. Faster-than-expected resolution of uncertainty regarding future trade relationships is an upside risk".
The Confederation of British Industry (CBI) survived yesterday’s confidence vote on its future. 93% of its remaining members agreeing that governance changes and commitments to reform the business lobby group were sufficient to ensure its survival, after being told by newly-appointed President Brian McBride: “We’re here today to make the case for why this organisation, which has served you and been at the centre of UK politics for nearly 60 years, should continue to exist. I hope by now you are reassured that we are not the same organisation we were 12 weeks ago. And I hope that we can merit your trust, your confidence and your vote”. However, Prime Minister Rishi Sunak was unwilling to confirm the body would be invited back into key meetings on business policy with the Government. “We work and engage with lots of different business groups and businesses individually, but the CBI have their issues that they need to work through which we should just let them do,” he told reporters, adding that “Matters at the CBI are for the CBI and for its members to work through”.
Increases in savings rates have easily lagged behind mortgage rate increases in recent weeks, according to data from Moneyfacts, which says mortgage rates on a two-year fixed rate have jumped from 5.34% on 24th May to 5.75% today; and on a five-year fixed rate from 5.01% to 5.44% in the same period. Meanwhile, the average interest rate on an easy access savings account has increased much more slowly, rising from 2.17% to only 2.25% since 24th May.
The British space sector contributed £7bn to the UK economy last year, according to data collected by aerospace and defence trade organisation ADS Group. CEO Kevin Craven said Britain continues to be a “world leader” in space, but that “innovation and expertise must be fully utilised and leveraged to secure UK advantage”.
UK housebuilding activity fell at the fastest rate since the start of covid lockdowns in May 2020, as a consequence of higher mortgage interest rates and 'subdued market conditions,' according to data from the S&P Global and the Chartered Institute of Procurement and Supply’s (CIPS) latest construction purchasing managers’ index. Worse declines were only seen during the 2009 recession, S&P said. Overall, however, the construction sector continued to grow because of an increase in commercial and civil engineering projects.
SSE has been fined nearly £10m by Ofgem for overcharging National Grid. Ofgem said SSE Generation had secured "excessive" payments from National Grid Electricity System Operator in exchange for reducing output at its Foyers pumped storage power station near Loch Ness in northern Scotland, in breach of its generation licence. Although the regulator acknowledged it had not seen any evidence that the breach was deliberate, it concluded that it said it should have been clear to SSE, including senior management, that its revised pricing strategy, introduced in May 2020, carried a "significant risk" of breaching its licence conditions. The £9.78m fine will be paid into Ofgem’s Energy Redress Fund, which helps support vulnerable customers. An SSE spokesperson said: "We aim to comply with regulations at all times, and believe we were doing so in this case. Following the investigation, we are updating our relevant procedures accordingly."
Shell has put its household energy supply business in the UK, the Netherlands and Germany up for sale, following the completion of a strategic review highlighting poor returns in the three countries. Shell Energy was launched in 2008 as First Utility, but bought by the oil major a decade later. It employs around 2,000 people in the UK and supplies energy to around 1.4 million homes. Half a million households also get broadband from Shell Energy. "Neither our B2B wholesale and SME customer supply businesses under the Shell Energy brand, or our home energy retail businesses outside Europe, are in scope of this potential divestment," Shell said in a statement. Ovo and Octopus Energy are said to have launched early bids for the unit.
Meanwhile, The Advertising Standards Authority (ASA) has banned three Shell adverts promoting the energy giant's low-carbon products, saying they could potentially mislead customers. The ASA ban applies to a poster in the Bristol area, one TV ad, and a promotional video on Shell’s YouTube channel, all of which, it says, failed to make any mention of Shell's ongoing 'large-scale' investment in oil and gas, which still comprises the vast majority of the company's operations and turnover. Shell said it strongly disagreed with the ASA's decision, claiming consumers are 'well aware' that the company produces oil and gas, and indeed would mainly associate the brand with petrol sales. It added that not allowing it to promote cleaner fuels could slow Britain's renewable energy transition.
Clop, the cybercrime gang behind the hacking of popular business software MOVEit that led to staff data being stolen from British Airways, Boots, and the BBC, has threatened the companies concerned to contact them to open ransom negotiations by 14th June or they will publish the personal information, believed to include names, surnames, employee numbers, dates of birth, email addresses, the first lines of their home address, national insurance numbers and bank account details. Aer Lingus, the Nova Scotia Government and the University of Rochester are also now known to have been targeted. The gang is thought to be based in Russia. Earlier this week the UK’s leading payroll provider Zellis said that eight of its customers have been impacted by the “global issue”. Professor Ciaran Martin, a former head of cyber security at the UK's spying and intelligence surveillance agency GCHQ and who set up the National Cyber Security Centre, said victims could become susceptible to "sophisticated identity fraud" but warned in an interview with the BBC against companies paying the criminals.
Microsoft President Brad Smith has added his voice to calls for a licensing regime for artificial intelligence firms, arguing that such a system would be needed to ensure AI models are used safely.
“There is some category of models that is so powerful, so impactful, there will need to be certain regulations and laws – new regulations and laws – that will apply to them,” he said at a TechUK conference. Smith also met with Chancellor Jeremy Hunt yesterday as he said he would look to work with regulators to seek UK approval for its $69 billion purchase of Call of Duty maker Activision Blizzard. Smith had blasted the decision by the UK's Competition and Markets Authority (CMA) to block the deal as “bad for Britain” and said it had knocked Microsoft’s confidence in the UK, but yesterday said: “Hope springs eternal.”
Sky News reports this morning that Lloyds Banking Group, having seized control of the publisher of the Daily and Sunday Telegraph and the Spectator magazine amid an ongoing row over longstanding debt running into the hundreds of millions owed by the titles’ parent company, Press Acquisitions, now wants to remove the company directors and put it up for sale for around £600m. The Times first reported yesterday that Lloyds had threatened Press Acquisitions with receivership after talks with sibling owners Aiden and Howard Barclay broke down. According to the FT, Lloyds had already appointed AlixPartners as the receivers should Lloyds decide to take action. The billionaire-Barclay family first acquired the newspapers in 2004 in a £665m deal, taking over from the Canadian-British publisher and businessman Conrad Black. The Barclays roundly condemned the reports, saying: “The loans in question are related to the family’s overarching ownership structure of its Media Assets. They do not, in any way, affect the operations or financial stability of Telegraph Media Group”. “Speculation about the business entering administration is unfounded and irresponsible,” they added.
The Odeon cinema chain has reported its busiest Friday in 18 months on 2nd June, when the latest Spider-Man movie was released.
City Pub Group has bought the remaining 52% of shares it did not already own in Mosaic Pub and Dining Group, taking its portfolio of up-market pubs to 52 sites across London, Wales and the South of England.
N Brown, the owner of fashion chains Simply Be, JD Williams and men’s clothing brand Jacamo has warned of a ‘very challenging’ few months ahead after reporting annual losses of £71.1m for the year to 4th March. In the previous 12 months, the firm posted a £19.2m profit. It blamed inflation weighing on consumer spending for the slump, and said it had started the new financial year with fewer active customers, and that demand for its summer ranges has been hit by poor early spring weather. N Brown has already made around 1,800 staff redundant after seeing revenues fall.
Revolut Chairman Marton Gilbert is, according to Sky News, planning to hold talks with officials from the Prudential Regulation Authority (PRA) this week in an effort to resolve an impasse over its application for a UK banking licence. The Telegraph has reported previously that the PRA was preparing to reject Revolut's application altogether – the challenger bank has been beset by compliance and governance issues, recently losing its finance chief. Nik Storonsky, the digital bank’s founder and CEO has, however, publicly criticised the Government and watchdogs in recent months over the length of time its licence application has taken and reportedly threatened to move the company's headquarters overseas as a consequence.
Long-time Diageo CEO Ivan Menezes has died aged 63, following a brief illness. On Monday, the world's largest spirits company said Debra Crew would assume his role on an interim basis, announcing that Menezes had to undergo emergency treatment in hospital following stomach ulcer surgery. Menezes joined Diageo after its formation through the merger of Guinness and Grand Metropolitan in 1997, and was due to retire at the end of this month. Diageo Chairman Javier Ferrán said: 'This is an incredibly sad day. Ivan was undoubtedly one of the finest leaders of his generation”.
Unilever is hunting for a new Chair to replace Nils Andersen, with executive search firm Spencer Stuart reportedly been hired to find one. The move is the latest board shake-up since the consumer goods giant appointed activist investor Nelson Peltz to the board last year. Hein Schumacher is to become CEO in July, replacing Alan Jope, and CFO Graeme Pitkethly plans to retire next year. Unilever shares have underperformed the rest of the FTSE 100 since Anderson became Chair in 2019.
In the USA, the Securities and Exchange Commission is suing Binance, the world's largest cryptocurrency exchange; its founder Changpeng Zhao; and cryptocurrency exchange Coinbase. Binance, the SEC claims, inflated trading volumes, diverted customer funds, failed to keep wealthy US customers off its platform, and misled customers about its controls. Coinbase, meanwhile, is accused of earning billions of dollars while operating illegally because it failed to register with the regulator. "You simply can't ignore the rules because you don't like them or because you'd prefer different ones," SEC Enforcement Chief Gurbir Grewal said in a statement.
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