Business news 9 September 2022
James Salmon, Operations Director.
RIP Queen Elizabeth II. What happens to money and stamps? Liz Truss unveils £150bn UK energy plan. Energy must be rationed to avoid blackouts. Small business leaders welcome energy cost support. And more business news.
RIP Queen Elizabeth II.
Queen Elizabeth II, Britain’s longest-reigning monarch, passed away at the age of 96 on Thursday after 70 years on the throne. Her Majesty is succeeded by her eldest son and heir, the Prince of Wales, who becomes King Charles III.
In a statement, the King said: “The death of my beloved mother, Her Majesty The Queen, is a moment of the greatest sadness for me and all members of my family. I know her loss will be deeply felt throughout the country, the Realms and the Commonwealth, and by countless people around the world.”
Reacting to the news of Her Majesty’s death, Prime Minister Liz Truss described the Queen as “the rock on which modern Britain was built. Our country has grown and flourished under her reign. Britain is the great country it is today because of her.”
What happens to money and stamps?
As the commonwealth mourns the passing of Queen Elizabeth and the nation enters a 10 day period of mourning leading to her funeral, you may have wondered briefly what happens to all the coins, notes and stamps bearing the queens image?
There are some 29 billion coins in circulation and some 4.5 billion bank notes. They will remain legal tender and in circulation for many years. new notes and coins will be designed showing Charles III but a design has yet to be agreed. Tradition dictates that the direction in which the monarch faces on coins must alternate for each new monarch, so he will be facing the other way – to the left.
Likewise Royal Mail will now stop producing Queen Elizabeth II stamps – although existing stamps can still be used on letters and parcels – and will begin the process of designing new stamps with Charles III.
Liz Truss unveils £150bn UK energy plan
Prime Minister Liz Truss has announced a support package to protect households from soaring energy prices. Average bills will be capped at £2,500 annually until 2024 at a cost of up to £150bn. A previously announced £400 energy bill discount will be retained and green levies costing £150 will be temporarily removed, meaning that average household bills will remain at roughly their current level of £1,971. As part of a plan to make Britain energy independent again by 2040,
Ms Truss also pledged to increase domestic oil and gas production and lifted a ban on fracking with immediate effect. Additionally, renewable power generators have agreed in principle to accept new long-term contracts at fixed prices well below current rates.
Businesses and public sector bodies such as schools will also receive assistance, but only for six months. After this period support will be focused on those industries deemed vulnerable, Ms Truss said.
Ms Truss claimed that her scheme would curb inflation by up to 5%.
Energy must be rationed to avoid blackouts
The decision by Liz Truss’s government to support energy spending could make blackouts more likely, according to the Institute for Fiscal Studies (IFS). “Households, businesses or governments…will have to reduce their energy use” to correct the UK energy market or supplies would have to be rationed, the IFS said.
The think tank’s director, Paul Johnson, criticised Truss’s administration for failing to provide any costings despite launching the biggest fiscal intervention in peacetime. He also noted taxpayers would have to pay 75p for every £1 of energy usage.
Torsten Bell, the CEO of the Resolution Foundation, concurred: “Liz Truss is asking future taxpayers to pick up a large and very uncertain bill on behalf of today’s energy bill payers, but declined to set out the cost of this huge package,” he said.
Small business leaders welcome energy cost support
Responding to news that businesses will receive support against rising energy costs, Martin McTague, national chair of the Federation of Small Businesses, said the pledge was “a huge relief for millions of small businesses”. However, he said Liz Truss offered “not enough information, yet, for them to plan”. The business support is expected to focus on subsidies for wholesale gas prices. The Government has promised to keep prices lower for all businesses for six months, and will consider how to cut back support to certain sectors in a review at the end of the year.
Bank of England to lend energy industry £40bn
Liz Truss has announced a joint scheme between the Bank and the Treasury to provide emergency short-term help to energy providers as surging prices put huge pressure on their capital. The Energy Markets Financing Scheme will make up to £40bn available in Covid-style loans to energy companies in a move designed to help reduce costs and stabilise energy markets.
Markets
London markets struggled for direction yesterday, as investors responded to newly-appointed Prime Minister Liz Truss’ plans to tackle to the ongoing energy crisis, and as the European Central Bank announced its biggest ever rate hike designed to stem rising inflation (from 0.75% to 1.25%). The FTSE100 advanced 0.33% higher.
The Oil price rose on Thursday after Russia threatened to halt oil and gas exports to some buyers, although weighing on the market were concerns that China’s extension of Covid-19 lockdown measures would slow global economic activity and hit fuel demand.
The dollar reversed and the Euro regained parity. Overnight US markets rose with the DOW up 0.61%, the S&P 500 rose 0.66% and the NASDAQ rose 0.60%
Royal Mail
As it is plagued by striking staff, Royal Mail said it is not involved in any “secret talks” with a private equity investment group. The London-based postal service and courier company denied accusations it said were made by Dave Ward, general secretary of the Communication Workers Union, in interviews that the company is in talks with a private equity group regarding a takeover.
Meanwhile workers postponed their strike following the death of the queen.
UK job vacancies grow at slowest pace in 18 months
The latest KPMG and Recruitment & Employment Confederation report reveals that UK job vacancies grew in August at the slowest pace in 18 months, adding to signs that the labour market is starting to ease. “August’s data show an increasingly challenging jobs market, both in the sharp decline in the supply of candidates and in the slowdown in recruitment,” said Claire Warnes, head of education, skills and productivity at KPMG UK.
EY bosses approve break-up
Bosses at Accounting giant EY have approved a plan to split the Big Four firm into separate audit and advisory businesses. The plan will see EY’s audit-focused business, with revenues of about $18bn, remain in the existing partnership structure while a separate, larger advisory business would be spun out into a standalone company, with a stake of up to 15% sold to external investors. The move comes amid severe pressure from regulators worldwide over concerns around conflicts of interest at the Big Four firms. Deloitte, KPMG and PwC have said they have no plans to engineer a similar split, but they may yet come under pressure from their own partners to identify a similar strategy.
RICS: Fewer homes on the market lifts prices
Figures from the Royal Institution of Chartered Surveyors show buyer inquiries fell at the sharpest pace since the beginning of the pandemic last month as rising interest rates and a surge in the cost of living put buyers under pressure. But despite the sharp drop in interest, house prices were driven up by a record low number of houses for sale. The August residential market survey from RICS found there was an average of 34 homes available for sale per estate agent branch, the lowest level since the survey began in 1978. Housing stock reached a high of nearly 200 homes per branch in 1990. A net balance of 53% of agents reported an increase in house prices, down from 62% in July but well above the long-term average of 13%. Since the start of the pandemic, house prices nationwide have risen by nearly 25%.
ECB raises rates by 75 basis points and promises more to come
The European Central Bank has announced its biggest ever interest rate rise in an effort to tackle record inflation. Policymakers unanimously agreed to the 75 basis points rise, taking the bank’s benchmark deposit rate from zero to 0.75% – the highest level since 2011. Christine Lagarde, the ECB’s president, suggested that rates would need to keep rising for “several meetings” to bring inflation back in check.
Evergrande crisis deepens after lender seizes headquarters
Receivers from Alvarez & Marsal have taken charge of Evergrande’s Hong Kong headquarters after the Chinese property developer defaulted on a loan, thought to be owed to China Citic Bank International.
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.