Business news 8 September 2022
James Salmon, Operations Director.
Liz Truss to set out plan to help with soaring energy costs. Energy price freeze would peg inflation. Over a million more people in UK face poverty this winter. The new chancellor Kwarteng. House prices defy gloom. And more business news.
Liz Truss to set out plan to help with soaring energy costs
Liz Truss will today set out her plan to help households and businesses with soaring energy costs. Ahead of the announcement, the new PM said Vladimir Putin’s weaponisation of the gas supply in Europe only made it “clearer that we must boost our long-term energy security and supply.”
She continued: “We will take action immediately to help people and businesses with bills but also take decisive action to tackle the root cause of these problems, so that we are not in this position again.” Ms Truss is expected to freeze household bills at about £2,500, but has rejected the idea of using a windfall tax on oil and gas giants’ profits to fund the package – reported to cost up to £150bn.
Labour leader Sir Keir Starmer attacked Ms Truss for refusing to impose a fresh windfall tax on the energy industry to help fund her rescue package. The Telegraph has learned that Ms Truss’s plans to increase the UK’s energy supply will include scrapping the moratorium on fracking and ending green levies on energy bills. Regulations could also be changed to speed up investment in North Sea oil and gas drilling.
BoE: Liz Truss’s energy price freeze would peg inflation
The chief economist at the Bank of England told the Commons Treasury Select Committee on Wednesday that Liz Truss’s plan to freeze energy prices would suppress inflation, preventing it from reaching the more than 13% peak the Bank projected in August.
However, interest rates may have to stay higher for longer, Huw Pill added. He explained the likely result of freezing energy bills and cutting taxes would be to raise spending in the economy and this would “probably lead to slightly stronger inflation”. Markets adjusted their bets on a 0.75% hike at the Bank’s meeting next Thursday, determining instead that a 0.50% rise is more probable following Pill’s comments.
Over a million more people in UK face poverty this winter
Analysis by the Legatum Institute estimates that around 1.3m more people will be forced into poverty this winter as a result of rising energy costs, compared with pre-pandemic rates. Even if the Government freezes energy prices at current levels UK deprivation levels will be pushed to their highest for two decades, the conservative thinktank said. The institute estimated that if the energy price cap rose as projected to £3,549 in October and again in January to £5,300, then numbers in poverty in the UK would increase to 16.65m, compared with the 2019-20 rate of 13.9m.
Kwarteng assures Bank that independence is “sacrosanct”
The new Chancellor set out to calm jittery markets on Wednesday after the pound hit its lowest level against the dollar since 1985. Kwasi Kwarteng met with the bosses of Britain’s biggest banks and assured Bank of England Governor Andrew Bailey that Liz Truss’s government would not interfere with the central bank’s independence.
Mr Kwarteng’s public support for the Bank’s mission to get inflation under control comes after Ms Truss promised a review of its mandate in her leadership campaign, a move some analysts say has weighed on UK assets. Mr Kwarteng said he would meet Mr Bailey weekly to “coordinate closely to support the economy” as he described the Bank’s independence as “sacrosanct”.
Kwarteng lays out plans to City chiefs
In a meeting with top banks and insurers on Wednesday, the new Chancellor Kwasi Kwarteng relayed his and the Prime Minister’s commitment to generating growth rapidly through easy-win reforms and regaining the City’s status as the world’s leading international financial centre.
The meeting was attended by senior figures including the chief executives of NatWest, HSBC, Barclays and Lloyds, as well as the bosses of the London Stock Exchange and the insurers Legal & General and Aviva. Holdovers from the EU-wide financial services regime including the Solvency II rulebook, which forces insurers to hold vast sums of cash on their balance sheets, hindering investment, and the MiFID II rulebook for trading stocks and bonds, which is widely felt to have harmed capital markets.
Mr Kwarteng was also reported to have impressed on banks the importance of supporting their customers through the cost of living crisis, one insider told Sky News.
Chancellor to be granted ultimate control over financial regulation
The new City minister, Richard Fuller, confirmed on Wednesday that the Government was planning to give itself powers to override City regulators, including the Bank of England if they threaten to hold up reform. Amendments to the Financial Services and Markets Bill would enable ministers to “make, amend or revoke rules if in public interest,” Fuller told MPs: “[The intention is] to bring forward an intervention power that would enable Her Majesty’s Treasury’s to direct a regulator to make, amend or revoke rules where there are matters of significant public interest,” he explained.
House prices defy gloom, rise in August
Halifax has reported that the average price of a UK home rose by 0.4% in August following a 0.1% dip in July. The rise last month takes the annual rate of property price growth to 11.5%. The average price of a home has now risen by more than £30,000 to £294,260 over the year. Kim Kinnaird, director of Halifax Mortgages, said: “While house prices have so far proved to be resilient in the face of growing economic uncertainty, industry surveys point towards cooling expectations across the majority of UK regions as buyer demand eases and other forward-looking indicators also imply a likely slowdown in market activity.” Ms Kinnaird added: “With house price-to-income affordability ratios already historically high, a more challenging period for house prices should be expected.” Martin Beck, chief economist adviser to the EY ITEM Club, said: “House prices are unlikely to defy the economy’s wider problems indefinitely.” However, he said new prime minister Liz Truss’s plan to cap household energy bills could lower the downside risks to the market.
Markets
US markets rallied yesterday (S&P500 up 1.83% and the NASDAQ up 2.14%) and global markets have followed suit as traders look beyond threats of rising interest rates. Sterling is at $1.15 against the US dollar, has fallen below 1.2 Swiss francs and below 1.15 Euros
Cineworld
The London based Cineworld Group, the world’s second-largest cinema chain, filed for bankruptcy in Texas. The company intends to restructure its $9bn in debt and lease liabilities while maintaining theatre operations.
Halfords
Halfords said its revenue growth in the 20 weeks to August 19 was helped by product price cuts, and reconfirmed its annual profit target. Total revenue in the 20-week period was up 9.2% year on year, but like-for-like sales were down 1.9%. Halfords pinned the revenue slowdown on a surge in sales when the UK emerged from its final Covid-19 lockdown.
Restaurant Group
The Restaurant Group said total sales hit £423.4m in the 26-week period to 3 July, versus £216.8m in 2021. Diners returned to the group’s restaurants and pubs after the easing of C-19 restrictions, with an adjusted EBITDA of £41.7m. This was compared to £11.2m in 2021, when the country’s hospitality venues were closed for a number of months.
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we charge our members a fixed annual subscription irrespective of how high the debt value is!
It takes less than 17 minutes to see how you would benefit, do you have the time now?
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.