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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)
Financial analyst Frances Coppola certainly isn’t convinced that Brexit uncertainty drove British Steel to the wall.
The fact the company is now being liquidated means it is effectively insolvent, suggesting more deep-seated problems.
OMG. British Steel has gone in to compulsory liquidation, not administration as was predicted. In other words it is totally bust and short-term loans would not have saved it. Just like Carillion.
I agree. British Steel tried to coerce the government into supporting them by arguing that their problems were due to Brexit uncertainty, but I don't believe it. Compulsory liquidation means they are completely bust. Can't see Brexit slowdown causing that.
Greybull Capital has insisted that Brexit uncertainty, not mismanagement, caused British Steel’s demise.
A spokesperson says:
“Having rescued the business from closure over three years ago, we have worked hard to bring this important company back on its feet. Since 2016 we have arranged a financing package of more than £500 million, appointed a new and talented management team, helped the business open up new markets and reduce costs whilst addressing long-term underinvestment.
“The turnaround of British Steel was always going to be a challenge, and yet the business overcame many difficulties, and until recently looked set for renewed prosperity.
That “until recently” probably refers to the shortfall of EU carbon credits to cover its emissions.
The statement continues to blame political instability:
“The Workforce, the Trade Unions and the Management team, have worked closely together in their determination to strengthen the business, however, the additional blows dealt by Brexit-related issues have proven insurmountable.
We are grateful to all those who supported British Steel on the attempted journey to resurrect this vital part of British industry. We are now focused on assisting all involved as best we can through this process.”
Here’s our news story on today’s rise in inflation:Here’s our news story on today’s rise in inflation:
Higher energy bills and transport costs drive up UK inflationHigher energy bills and transport costs drive up UK inflation
British Steel's owners charging firm £20m a year in fees and interestBritish Steel's owners charging firm £20m a year in fees and interest
British Steel’s liquidation has already sent shockwaves through the sector.British Steel’s liquidation has already sent shockwaves through the sector.
Industrial and property group Hargreaves Services warned investors this morning that its revenues and profits would be hit if British Steel failed. Its share price has slumped by 15% this morning, to a two year low.Industrial and property group Hargreaves Services warned investors this morning that its revenues and profits would be hit if British Steel failed. Its share price has slumped by 15% this morning, to a two year low.
Tens of thousands of jobs could be threatened across the UK economy, at companies which worked with British Steel.Tens of thousands of jobs could be threatened across the UK economy, at companies which worked with British Steel.
Mike Cherry, National Chairman at the Federation of Small Businesses, says many small businesses will be “very concerned”.Mike Cherry, National Chairman at the Federation of Small Businesses, says many small businesses will be “very concerned”.
“The closure will have a huge knock on impact across the communities surrounding the company’s plants. A raft of small firms like caterers, cafes, cleaners, shops and visitor attractions, all of which employs their own staff, rely heavily on British Steel.“The closure will have a huge knock on impact across the communities surrounding the company’s plants. A raft of small firms like caterers, cafes, cleaners, shops and visitor attractions, all of which employs their own staff, rely heavily on British Steel.
“Businesses throughout the supply chain will need guidance and support as the situation develops.”“Businesses throughout the supply chain will need guidance and support as the situation develops.”
The first potential casualty in the supply chain- Hargreaves Services warns of profit hit from possible British Steel... https://t.co/lMNAr6pycy #BritishSteelThe first potential casualty in the supply chain- Hargreaves Services warns of profit hit from possible British Steel... https://t.co/lMNAr6pycy #BritishSteel
Greybull Capital, the private equity firm which owned British Steel, is facing serious questions over the company’s collapse.Greybull Capital, the private equity firm which owned British Steel, is facing serious questions over the company’s collapse.
Greybull bought the business for £1 in 2016, and have since taken millions out of the company in management fees.Greybull bought the business for £1 in 2016, and have since taken millions out of the company in management fees.
My colleague Nils Pratley points out that management hasn’t always gone smoothly either:My colleague Nils Pratley points out that management hasn’t always gone smoothly either:
A fortnight ago the government agreed a £120m loan to cover British Steel’s cost of buying carbon credits under an EU-scheme to limit emissions. At the time it seemed a respectable use of public money since the delay in the UK’s exit from the EU meant the allocation of credits to all UK companies had been temporarily suspended.A fortnight ago the government agreed a £120m loan to cover British Steel’s cost of buying carbon credits under an EU-scheme to limit emissions. At the time it seemed a respectable use of public money since the delay in the UK’s exit from the EU meant the allocation of credits to all UK companies had been temporarily suspended.
But the FT later reported that Greybull had already sold surplus allocations in what appeared to be an a badly timed trade. Other UK steel producers, note, have not asked for loans to get over the permit obstacle. Again, there is an issue of trust with Greybull.But the FT later reported that Greybull had already sold surplus allocations in what appeared to be an a badly timed trade. Other UK steel producers, note, have not asked for loans to get over the permit obstacle. Again, there is an issue of trust with Greybull.
Who are the villains of the British Steel crisis? | Nils PratleyWho are the villains of the British Steel crisis? | Nils Pratley
Devi Shah, Partner at law firm Mayer Brown, hopes that some jobs at British Steel can be saved:Devi Shah, Partner at law firm Mayer Brown, hopes that some jobs at British Steel can be saved:
The immediate priority will be to seek a buyer, and secure the future of as many employees as possible, especially since this is an area where options for those affected will be limited, and the repercussions are likely to be felt across the region.The immediate priority will be to seek a buyer, and secure the future of as many employees as possible, especially since this is an area where options for those affected will be limited, and the repercussions are likely to be felt across the region.
British Steel’s collapse is the biggest industrial insolvency since Rover in 2005, says Freddy Khalastchi, business recovery partner at accountancy firm Menzies LLP.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...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.“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.“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.“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.Rebecca Long Bailey MP, Labour’s Shadow Business Secretary, says the solution to the British Steel collapse is to nationalise it.
Long Bailey says: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.“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 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.’’“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).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: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.“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.“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.“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.”“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.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.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.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.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: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 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.”“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:Here’s our latest news story on the crisis:
British Steel enters insolvency after rescue talks with government failBritish 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.