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UK inflation driven up by 'brutal' energy bills; Brexit woes hit pound - business live UK inflation driven up by 'brutal' energy bills; Brexit woes hit pound - business live
(32 minutes later)
British Steel’s collapse is the biggest industrial insolvency since Rover in 2005, says Freddy Khalastchi, business recovery partner at accountancy firm Menzies LLP.
He fears the worst for the company...
“Unfortunately, the writing has been on the wall for some time and the business has been struggling to compete in a market flooded by cheap imports from China. The business has also experienced a slump in orders due to Brexit.
“In the past we might have expected the Government to intervene to protect a major industrial employer and key supplier to the UK defence sector. However, we are in uncertain times and it is not clear whether it will be possible to tap into Brexit mitigation funds in this case. The fact that British Steel recently borrowed more than £100m from the Government to pay an EU carbon bill and avoid further fines also suggests further intervention may be unlikely.
“Having failed to secure a last-ditch £30 million rescue package, regrettably there is unlikely to be a way back from the brink on this occasion.
Rebecca Long Bailey MP, Labour’s Shadow Business Secretary, says the solution to the British Steel collapse is to nationalise it.
Long Bailey says:
“This is absolutely devastating news for the thousands of workers, their families and the communities in Scunthorpe and Teesside and those throughout the supply chain.
“The Tories’ legacy will once again be industrial decline whilst they endlessly squabble over the European Union.
“The Government must act quickly to save this strategically important industry and the livelihoods and communities of those who work in it, by bringing British Steel into public ownership.’’
Roy Rickhuss, general secretary of the Community trade union, is hopeful that jobs can be saved at British Steel, even though it’s now in the hands of the Official Receiver (an employee at the Insolvency Service).
Rickhuss says:
“This news will heap more worries on workers and everyone connected with British Steel, but it will also end the uncertainty under Greybull’s ownership and must be seized as an opportunity to look for an alternative future.
“It is vital now that cool heads prevail and all parties focus on saving the jobs.
“In these very difficult circumstances we know the workforce will continue to fight for the business as they have done for so many years.
“We would urge the management, contractors, suppliers and customers to support them in that fight for the future.”
Breaking: British Steel has collapsed, after failing to agree a £30m rescue funds from the UK government.
EY has been appointed as administrators for the company, which employs around 5,000 workers and runs a major blast furnace in Scunthorpe.
Business secretary, Greg Clark has just confirmed that an application by the directors of British Steel to enter an insolvency process has just been granted in the courts.
This means that the Insolvency Service will now conduct a compulsory liquidation. EY has been lined up to carry out the administration.
Clark says it would have been ‘unlawful’ to provide fresh funds to British Steel:
“The government has worked tirelessly with British Steel, its owner Greybull Capital, and lenders to explore all potential options to secure a solution for British Steel.
“The Government can only act within the law, which requires any financial support to a steel company to be on a commercial basis. I have been advised that it would be unlawful to provide a guarantee or loan on the terms of any proposals that the company or any other party has made.”
Here’s our latest news story on the crisis:
British Steel enters insolvency after rescue talks with government fail
The long slowdown in UK house price inflation ended last month.The long slowdown in UK house price inflation ended last month.
The average price of a home rose by 1.4% in the 12 months to March, new ONS figures show. That’s up from 1% in February.The average price of a home rose by 1.4% in the 12 months to March, new ONS figures show. That’s up from 1% in February.
However, prices in London continued to fall -- dropping by 1.9% in the last 12 months.However, prices in London continued to fall -- dropping by 1.9% in the last 12 months.
They fell 2.7% year-on-year in February, so the slide may be bottoming out.They fell 2.7% year-on-year in February, so the slide may be bottoming out.
House price changes across the UK in March. Yorkshire & the Humber seeing the fastest growth at 3.6%y/y with London, the N.East & the S. East all seeing average price falls. pic.twitter.com/ZPVKdYfQR4House price changes across the UK in March. Yorkshire & the Humber seeing the fastest growth at 3.6%y/y with London, the N.East & the S. East all seeing average price falls. pic.twitter.com/ZPVKdYfQR4
Suren Thiru, head of economics at the British Chambers of Commerce (BCC), is also concerned that real wages are shrinking as inflation rises:Suren Thiru, head of economics at the British Chambers of Commerce (BCC), is also concerned that real wages are shrinking as inflation rises:
“UK inflation moved above the Bank of England’s 2% target for the first time since December 2018, with rising energy prices and higher air fares, placing the largest upward pressure on price growth in April.“UK inflation moved above the Bank of England’s 2% target for the first time since December 2018, with rising energy prices and higher air fares, placing the largest upward pressure on price growth in April.
“Rising inflation alongside slowing wage growth is a concern as it squeezes real household incomes. If this trend continues it could well choke off the recent improvement in consumer spending, a key driver of UK growth.“Rising inflation alongside slowing wage growth is a concern as it squeezes real household incomes. If this trend continues it could well choke off the recent improvement in consumer spending, a key driver of UK growth.
This jump in inflation to 2.1% means that real wage growth in the UK has slowed.This jump in inflation to 2.1% means that real wage growth in the UK has slowed.
Average earnings rose by 3.3% in the 12 months to March, which means real wages are only up by 1.2%Average earnings rose by 3.3% in the 12 months to March, which means real wages are only up by 1.2%
Phil Smeaton, chief investment officer at wealth manager Sanlam UK says:Phil Smeaton, chief investment officer at wealth manager Sanlam UK says:
“With progress on Brexit completely paralysed, rising inflation poses a challenge for Carney. As prices creep up above 2% target, the improvements in wages seen earlier in the year are being cancelled out.“With progress on Brexit completely paralysed, rising inflation poses a challenge for Carney. As prices creep up above 2% target, the improvements in wages seen earlier in the year are being cancelled out.
Uncertainty persists around the UK’s future relationship with the EU and the US trade war with China shows little sign of abating.Uncertainty persists around the UK’s future relationship with the EU and the US trade war with China shows little sign of abating.
The message from today’s inflation report is clear -- consider changing your energy provider now!The message from today’s inflation report is clear -- consider changing your energy provider now!
Peter Earl, head of energy at comparethemarket.com, says households on standard energy tariffs have suffered “brutal” increases since Ofgem lifted the price cap three months ago.Peter Earl, head of energy at comparethemarket.com, says households on standard energy tariffs have suffered “brutal” increases since Ofgem lifted the price cap three months ago.
The new price cap level that came into force on 1st of April saw those customers face an average annual price rise of £117, a hefty 10% increase, which all of the Big Six energy companies were quick to implement. Rather than preventing energy companies from repeatedly upping the cost of energy, the price cap looks to have done the opposite. Many customers have already switched to a more competitive fixed price tariff but, for the millions that remain, we strongly recommend shopping around to ensure they are on the best deal possible as this will help to minimise their household bill inflation.”The new price cap level that came into force on 1st of April saw those customers face an average annual price rise of £117, a hefty 10% increase, which all of the Big Six energy companies were quick to implement. Rather than preventing energy companies from repeatedly upping the cost of energy, the price cap looks to have done the opposite. Many customers have already switched to a more competitive fixed price tariff but, for the millions that remain, we strongly recommend shopping around to ensure they are on the best deal possible as this will help to minimise their household bill inflation.”
Beer and tobacco prices fell last month, the ONS adds:Beer and tobacco prices fell last month, the ONS adds:
Prices for cigarettes overall fell by 0.6% between March and April 2019 compared with a rise of 1.4% between the same two months a year ago.Prices for cigarettes overall fell by 0.6% between March and April 2019 compared with a rise of 1.4% between the same two months a year ago.
Prices for beer, particularly larger packs of canned lager, also had a small downward contribution, although this was partially offset by spirits, which rose in price between March and April 2019 by more than a year ago.Prices for beer, particularly larger packs of canned lager, also had a small downward contribution, although this was partially offset by spirits, which rose in price between March and April 2019 by more than a year ago.
Consumers were hit by a 10% jump in electricity costs last month, today’s inflation report shows.Consumers were hit by a 10% jump in electricity costs last month, today’s inflation report shows.
That’s MUCH more than the rise in wholesale prices -- as energy firms responded to Ofgem’s decision to lift the cap on bills.That’s MUCH more than the rise in wholesale prices -- as energy firms responded to Ofgem’s decision to lift the cap on bills.
Consumer prices for electricity rose by almost 11% between March and April 2019, while input producer prices for electricity rose by around 2% over the same period.Consumer prices for electricity rose by almost 11% between March and April 2019, while input producer prices for electricity rose by around 2% over the same period.
Wholesale electricity prices are only available until December 2018 but rose by around 3% between November and December 2018, and rose considerably faster than producer and consumer electricity prices between June 2017 and September 2018.Wholesale electricity prices are only available until December 2018 but rose by around 3% between November and December 2018, and rose considerably faster than producer and consumer electricity prices between June 2017 and September 2018.
Consumer prices reflect more than just wholesale prices as they also include the cost of transmission, distribution and regulatory costs, as well as profits for energy suppliers and others in the supply chain.Consumer prices reflect more than just wholesale prices as they also include the cost of transmission, distribution and regulatory costs, as well as profits for energy suppliers and others in the supply chain.
This chart shows how air fares surged in April - unlike in 2018, when Easter came earlier:This chart shows how air fares surged in April - unlike in 2018, when Easter came earlier:
The ONS explains:The ONS explains:
Prices for air fares typically rise during the school holidays, which follow similar patterns each year for the summer and Christmas holidays. As such, we see similar price patterns with prices rising through the summer before falling back in the autumn and rising again in December.Prices for air fares typically rise during the school holidays, which follow similar patterns each year for the summer and Christmas holidays. As such, we see similar price patterns with prices rising through the summer before falling back in the autumn and rising again in December.
For Easter, however, school holidays typically move as the timing of Easter moves from year to year, sometimes falling in March and sometimes in April.For Easter, however, school holidays typically move as the timing of Easter moves from year to year, sometimes falling in March and sometimes in April.
Newsflash: The cost of living in the UK jumped last month, back over the official target.
Consumer prices jumped by 2.1% in April, compared to a year ago, up from 1.9% in March, the Office for National Statistics says.
This is partly driven by rising electricity and gas bills, after the cap on energy costs was lifted earlier this year (sending utility firms scrambling to hike their bills).
Air fares also surged, by over 26%, as airlines took advantage of demand for flights over Easter.
The Office for National Statistics says:
Rising energy prices and air fares, which were influenced by the timing of Easter, produced the largest upward contributions to change in the rate between March and April 2019.
The largest, offsetting, downward contribution came from across a range of recreational and cultural items, which included computer games and package holidays.
Marks & Spencer are the top faller on the FTSE 100, down 4%, after launching a £600m rights issue to fund its new tie-up with Ocado.
The high street chain is also speeding up its latest transformation plan, by closing another 20 of its full-line stores.
My colleague Zoe Wood explains:
The retailer said it planned to close 85 of its big high street stores, which is on top of the 35 it has already shut. The company is battling the transfer of clothing sales online and it had already told the City to expect about 100 closures.
The news of the extra branches being axed came as the group pointed to “green shoots” of recovery despite annual profits being pulled down by a £440m bill for a modernisation programme. The overhaul of the struggling chain will also involve the closure of 25 of its Simply Food convenience stores.
Marks & Spencer to close another 20 stores as profits plunge
UK housebuilders are always vulnerable to Brexit uncertainty, so it’s not surprising to see them among the top fallers on the FTSE 100 this morning.
Persimmon and Barratt Development are both down 2.5%, with Taylor Wimpey losing 1.7%.
The pound’s weakness today shows that the brief optimism that Theresa May might drag her Withdrawal Deal through parliament has faded, fast.
Michael Hewson of CMC Markets explains:
The brief move higher in sterling yesterday in the wake of the Prime Minister’s pledge to add a confirmatory referendum to her withdrawal agreement turned out to be yet another false dawn.
If anything it appears to have made it much less likely that the deal will pass at the fourth attempt.
Numerous MPs who might have voted for it have already said they won’t, and the calls for her to go have once again become that much louder.
Sterling is taking a pounding this morning, as Theresa May’s latest attempt to get her Brexit deal through parliament flounders.
The pound has hit a four-month low against the US dollar, falling to $1.2662.
Against the euro, it’s fallen for the 13th day in a row to a three-month trough, around €1.136. That’s a new record losing streak against the single currency.
The PM’s new Brexit offer, pitched last night, has already been rejected by opposition MPs and many on her own side. It’s extremely hard to see how the deal could pass, and how May could cling onto the keys to Downing Street if it is rejected.
Brexit: May’s final effort to win backing falls flat as MPs reject ‘new' deal
One government minister has just suggested that the prime minister might not survive until Monday!
Quite... if govt tries to delay bringing the bill forward extremely hard to see how your party allows PM to stay on past sunday/monday - just asked a minister if she can stay on past this weekend - answer, ‘I hope not’ https://t.co/53Pj4YSCEU
A leadership contest could easily be won by a Brexiteer (Boris Johnson is the front-runner, with Dominic Raab also in the pack).
Jim Reid of Deutsche Bank explains why this is hurting sterling:
Any more negative responses to the new proposed deal and Prime Minister May could resign as soon as this week and attention will shift to the likely Conservative leader contest.
That will probably yield a hard-Brexit supporting PM, which in turn will incrementally raise the odds of a hard Brexit.
Breaking: Beijing has hit back against the threat of more Chinese companies being blacklisted in the US.
Foreign ministry spokesman Lu Kang has told reporters that Beijing opposes America using its powers to “smear” Chinese firms.
He’s calling on the US to provide a fair and non-discriminatory environment for Chinese firms.
Chinese Foreign Ministry: China Opposes US Using National Powers To Smear US Companies -Urges US To Provide Fair And Non-Discriminatory Environment For Chinese Firms
Bloomberg is reporting that America could impose tough sanctions on five more Chinese technology firms - not just Hikvision.
The US is apparently concerned that the firms are helping Beijing suppress Chinese Muslims such as the Uyghur people (who face discrimination, and the threat of being placed in ‘re-education) camps).
It says:
The U.S. is considering cutting off the flow of vital American technology to as many as five Chinese companies including Hangzhou Hikvision Digital Technology Co., widening the dragnet beyond Huawei to include world leaders in video surveillance.
The U.S. is deliberating whether to add Hikvision, Zhejiang Dahua Technology Co. and several unidentified others to a blacklist that bars them from U.S. components or software, people familiar with the matter said.
The Trump administration is concerned about their role in helping Beijing repress minority Uighurs in China’s west, they said, asking not to be identified talking about private deliberations. There’s concern also that Hikvision’s or Dahua’s cameras, which come with facial recognition capabilities, could be employed in espionage, the people said.
Trump is considering blacklisting two Chinese surveillance giants over accusations of human rights violations https://t.co/f1EpA0cpFg
While China seeks fresh talks, America is pressing on with its crackdown on Chinese firms.
According to the New York Times, the US is considering banning Chinese surveillance kit-maker Hikvision from buying US components. A similar ban was slapped on Huawei last week, in a dramatic escalation of the spat between the two sides.
From Beijing, my colleague Lily Kuo reports:
The report has sent the company’s shares down, even as Hikvision said it received no notice of the potential blacklisting and said its operations in Xinjiang had never been “inappropriate”.
China has come under increasing international scrutiny over mounting evidence of the mass surveillance and detentions of millions of Muslim minorities in Xinjiang.
Adding Hikvision to the US trade blacklist would add to tensions between China and the US, which have been locked in a protracted tariff war for most of the last year. It also raises concerns that the world’s two largest economies are on the edge of a full-blown tech cold war as the US moves to restrict Chinese technology.
US may blacklist Chinese surveillance kit firm Hikvision - reports
China is calling on Washington to resume trade talks, as the dispute between the two major economic powers rumbles on.
Chinese Ambassador to the United States Cui Tiankai said last night that Beijing hadn’t slammed the door, despite the clampdown on Huawei.
Cui told Fox News:
“China remains ready to continue our talks with our American colleagues to reach a conclusion. Our door is still open.”
But... Cui wouldn’t take the blame for the breakdown in talks this month, which let to another painful round of tit-for-tat tariffs being imposed.
Instead, he firmly blamed the White House:
“It’s quite clear it is the U.S. side that more than once changed its mind overnight and broke the tentative deal already reached.”
“So we are still committed to whatever we agree to do, but it is the U.S. side that changed its mind so often.”
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Today we learn whether the cost of living in the UK accelerated last month, as Easter price hikes hit customers in the pocket.
Economists predict that UK inflation jumped to 2.2% in April, up from 1.9% in March, with higher energy bills also pushing consumer prices higher. That would put CPI back over the Bank of England’s target of 2%.
In normal times, higher inflation would lead to an interest rate rise. But these are abnormal times, so the Brexit crisis means the BoE won’t be rushing to raise interest rates soon.
We’re also expecting the latest public finances to show Britain borrowed around £5bn to balance the books in April. That would be a significant improvement on a year ago, when the monthly deficit came in at £7.8bn.
We’ll also be watching the British Steel crisis, as the company wobbles on the brink of administration after talks to secure an emergency £30m loan from the government stalled.
British Steel on verge of collapse as government talks stall
On the corporate front, Royal Mail and Marks & Spencer have both just ported sharp falls in profits (more on that shortly). Energy firm SSE, engineering group Babcock and Pets at Home are also reporting results.
Marks & Spencer has reported a 9.9% fall in underlying pre-tax profits to £523.2m for the year to March 31
Plus, central bankers are gathering in Frankfurt for a farewell conference for outgoing chief economist Peter Praet.
The agenda
8.30am BST: ECB chief Mario Draghi speaks in Frankfurt
9.30am BST: UK inflation figures for April
9.30am BST: UK house prices for March
9.30am BST: UK public finances for April
10.30am BST:ECB chief economist Peter Praet speech in Frankfurt