Fuel shortages ease; petrol prices hit eight-year high; car sales slide – as it happened

Time to wrap up:

The petrol crisis has eased slightly today, with more forecourts in London and south-east England being restocked with fuel. Petrol retailers reported that the use of military drivers has helped, but warned that more help is needed to get supplies back to normal.

Members of the armed forces helped to tackle the crisis by driving fuel lorries, including restocking a petrol station in Waltham Abbey.

But petrol prices have hit an eight-year high, driven by rising crude oil prices, after more than a week of shortages at the pumps.

Brent crude has hit a new three-year high tonight over $83 per barrel, while gas prices have climbed to new records - driving up the UK’s cost of borrowing.

UK firms have hiked prices at a record pace last month, as they passed on increased energy costs and staff wages to their customers.

Service sector firms also reported that shortages of staff, raw materials and transport cost them business last month.

UK car sales tumbled to their lowest level for any September since 1998, with the shortage of semiconductors crimping demand. Van sales also fell, to their lowest since 2009.

Engineering group Melrose reported that its auto clients have been cancelling orders for parts, because they can’t get enough chips to build vehicles.

The supply chain crisis has also forced farmers to start culling healthy pigs, due to a lack of abattoir workers to butcher them.

Britain’s biggest bakery chain Greggs warned of staff and ingredient shortages and said costs would rise this year, as it reported higher sales for the past three months. But its sausage rolls should be safe, it pledged.

But Boris Johnson insisted there is no crisis in supply chains but admitted just 127 visas for tanker drivers had been granted.

Asked by BBC Radio 4’s Today programme if he believed there was a crisis, the prime minister said “no” and said difficulties were linked to the revival of the economy, calling it “a giant waking up”.

Elsewhere.... US treasury secretary Janet Yellen warned that America would fall into recession if Congress doesn’t agree to lift the debt ceiling.

The IMF warned that the world economy remains “hobbled” by the Covid-19 pandemic, leading it to revise down its growth forcasts.

More than 40 small TV and film production companies behind shows such as Derry Girls and Say Yes to the Dress have warned that the government’s proposed privatisation of Channel 4 could put them out of business.

Two in three UK finance workers from black and minority ethnic backgrounds have suffered discrimination in the workplace, according to an industry survey revealing shortfalls in the City of London’s diversity agenda

The insurers Direct Line and Churchill have resumed offering cancellation cover to travel customers forced to cancel a holiday due to Covid-19.

Goodnight. GW

In the City, the blue-chip FTSE 100 index has closed 66 points higher at 7077, up almost 1% today.

Banks led the risers, with Barclays and Lloyds both up around 3.9%, as traders anticipated that interest rates will rise in the coming months (good for bank profitability) in response to rising inflation.

Commodities giant Glencore (+3.5%) was also in the risers, along with retailer JD Sports (+3.3%) which announced plans for a share split today.

Other European markets also rallied, with the pan-European Stoxx 600 index jumping almost 1.2%, and there are gains on Wall Street after yesterday’s losses.

David Madden, market analyst at Equiti Capital, says inflation and growth worries are on the rise.

Stock markets in Europe and the US are in positive territory after a few days of losses. In recent sessions, traders have been preoccupied by fears of higher inflation, but today equities have rebounded. The gains made today are small when compared with the ground lost in the past week.

This time last month, the narrative was very different, because bond yields were relatively low, and inflation wasn’t a major concern. Now there is chatter of persistently high inflation, concerns about lower growth in China and the UK, as well as the possibility of the Fed tapering in early 2022. To an extent, the FTSE 100 has weathered the sell-off reasonably well since BP and Royal Dutch Shell have rallied because of the booming oil market.

The energy crunch has driven UK government borrowing costs to their highest level since May 2019.

British 10-year government bond yields have jumped to 1.09%, up from just over 1% last night, a larger move than for other government debt today.

Yields, which measure the interest rate on the debt, rise when bond prices fall.

British government bond yields have risen sharply in recent weeks on expectations that the Bank of England will raise interest rates early next year, to try to tame inflation.

With gas and petrol prices rising, and supply chain problems pushing up firms’ costs and their prices, pressure is building on the Bank’s policymakers.

The fuel shortages in London and south-east England have eased a little, after military drivers took to the wheels of fuel tankers.

Around 64% of fuel stations in the region worst hit by the crisis had both petrol and diesel available today, up from 62% on Monday, according to the daily survey of forecourts by the Petrol Retailers Association.

Just 15% were dry, an improvement on Monday’s 20%. Another 21% were offering either petrol or diesel, up from 18% yesterday.

“Today’s figures show the situation is improving further around London and the Southeast,” said PRA executive director Gordon Balmer.

But Balmer points out that London and the South East are still lagging, and that there are still shortages in other parts of the country too:

“Whilst there has been a significant reduction in dry sites, these areas are still lagging behind in having both grades of fuel available compared to the rest of the UK.

“Fuel supplies are increasing across the rest of the country: 86% of sites report having both grades of fuel thanks to steady deliveries and stabilising demand, 3% having only one grade and 11% are dry.

“Members are reporting they are now receiving deliveries from military drivers using commercial tankers, however further action must be taken to address the needs of disproportionately affected areas”.

The head of the International Monetary Fund has warned the world economy remains “hobbled” by the Covid-19 pandemic as she revealed her organisation has revised down its forecast for global growth this year.

Kristalina Georgieva, the IMF’s managing director, said the most serious obstacle to a full recovery was the vaccine divide between rich and poor nations and warned the global economy could suffer a cumulative $5.3tn loss over the next five years unless it was closed.

Speaking ahead of the IMF’s annual meeting next week, Georgieva called on rich countries to make good immediately on their pledges to share stockpiles of vaccines with developing countries.

Georgieva said:

“We face a global recovery that remains hobbled by the pandemic and its impact.

We are unable to walk forward properly – it is like walking with stones in our shoes!

“The most immediate obstacle is the ‘great vaccination divide’ – too many countries with too little access to vaccines, leaving too many people unprotected from Covid.”

The culling of healthy pigs has begun on British farms, with farmers forced to kill animals to make space and ensure the continued welfare of their livestock, amid an ongoing shortage of workers at slaughterhouses.

Pig farmers have been warning for several weeks that labour shortages at abattoirs have led to a backlog of as many as 120,000 pigs left stranded on farms long after they should have gone to slaughter.

About 600 pigs have been culled at farms across the country, according to Zoe Davies, the chief executive of the National Pigs Association, who said that culling had begun at a “handful” of farms.

“We have moved to stage two,” Davies said.

“Stage one was contingency planning and putting pigs in temporary accommodation. Stage two, we have not got any more space and pigs are growing, there are more on farm that we can manage.

“You either stop mating sows, which some farmers are doing, or you thin out pigs so the welfare of those on farm isn’t negatively impacted. We shouldn’t have to be here and we shouldn’t be doing this at all.”

Here’s the full story:

Over in the US, treasury secretary Janet Yellen has warned that America would fall into recession if Congress doesn’t agree to lift the debt ceiling.

Speaking to CNBC, Yellen says is it “utterly essential” that the limit on government borrowing is raised by 18th October, when the government will run out of funds.

It would be catastrophic to not pay the government’s bills, Yellen explained:

It really undermines confidence in the full faith and credit of the United States, or willingness to stand behind our debts and make sure that we pay them.

It would hit 50 million seniors expecting social security checks, US troops’ paychecks, and 30 million households waiting for child tax credits.

And it would undermine the reputation of US Treasury bills as the safest asset around, which underpins the dollar’s reserve currency status, said Yellen, adding:

I fully expect it would cause a recession as well.

The debt ceiling caps how much money the federal government can borrow, which only Congress has the power to raise or lower.

The US treasury has said it will be unable to pay its bills by around 18 October, unless Congress raises the current debt limit of $28.4tn. Failure could trigger the first US default in modern history.

President Joe Biden on Monday blasted Republicans for blocking efforts to raise or suspend the U.S. borrowing limit and avert a first-ever default on the national debt.

Members of the military have helped refuel a BP petrol station in Waltham Abbey, in Essex, today.

Military drivers were deployed this week to ease the fuel crisis that’s still hitting London and the South East, where 20% of forecourts were dry yesterday.

UK fuel prices at the pumps rose to an eight-year high during the petrol crisis, as rising energy costs hit consumers.

Average petrol prices rose to 136.1p per litre on Monday, up 0.91p a litre over the last week, according to new data from the Department Business, Energy and Industrial Strategy. That’s the highest level since September 2013.

Diesel prices also hit an eight year high, climbing 1.25p compared with September 27 to 139.20p.

Crude oil prices have been increasing sharply this year as demand has increased, with Brent crude rising from $51 per barrel at the start of 2021 to $82/barrel today, a three-year high. That feeds through to prices at the pumps.

The increases also came as motorists scrambled to find fuel, after panic buying led to many stations running out of supplies.

There had been reports that some forecourts had hiked prices in response. The Petrol Retailers Association warned petrol station owners against profiteering, with PRA chairman Brian Madderson saying:

“People have got long memories and I would urge anybody who thinks about trying to make a fast buck to think again because it just isn’t right.”

Sales of vans also tumbled in September, as chip shortages hit production.

Sales of light commercial vehicles slumped by almost 40% year-on-year last month, with 31,535 new vans registered, the Society of Motor Manufacturers and Traders reports.

That’s the lowest figure for any September since 2009, when the economy had suffered a recession after the financial crisis, and 41.8% below the pre-pandemic five year September average.

Sales of small vans, weighing less than two tonnes, fell 54%, while registrations of vans weighing between 2.0-2.5 tonnes plunged by 70%.

Mike Hawes, SMMT chief executive, said,

“September was a disappointing month for new van registrations, as the much-documented semiconductor shortage has started to impact supply.

Manufacturers are doing all they can to fulfil orders and, after a strong year so far, demand still remains high. With businesses continuing to renew their fleets, there is a greater choice than ever of new zero emission models coming to market, helping ensure the commercial vehicle sector plays its part in decarbonising road transport.”

New van registrations are still up 28.4% so far this year, despite the September slide, led by strong demand for heavy vans as the economy recovered from the pandemic.

Britain’s ‘relentless’ supply chain disruption may worsen in the run-up to Christmas, warns Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.

Brock adds that the jump in prices charged by services firms last month shows that ‘the floodgates are open for higher inflation to wash through the UK economy’:

Relentless supply chain disruption put a cap on activity and orders in September, as new work dropped to its lowest expansion level for over 6 months. Domestic sales faltered and export orders were hit by Brexit restraints as the thrust of recovery in the last few months slowed again.

Though job creation was maintained in September, the services sector still had obstacles to overcome in terms of skills gaps and talent shortages as the competition for good employees deepened. Whilst many paid higher wages to secure necessary skills, some others responded with redundancies as furlough support ended and operations were restructured, leaving a mixed employment picture.

The chokehold on supply chain deliveries also made food, fuel and logistics much more expensive, which was a factor in dampening business optimism for activity in the next 12 months. As prices charged rose at their fastest rate since 1996, it seems the floodgates are open for higher inflation to wash through the UK economy and firms fear the growth this month may be eroded further by higher costs and shortages as we move towards the festive period.”

UK companies hiked their prices at the fastest rate on record last month, as the energy crisis and staff shortages hit the economy and push up inflation.

Severe supply constraints created escalating inflationary pressures last month, with service sector companies reporting the slowest rise in new orders since March (after the winter lockdown).

Rapid rises in fuel, energy and staff costs were passed on to customers in September, with the ‘rate of prices charged inflation’ accelerating sharply to the highest since the data began in July 1996.

That’s according to the latest IHS Markit/CIPS UK Services PMI, a closely-watched survey that tracks the economy.

Service sector businesses “widely noted” that supply problems, higher transport costs and rising salary payments had all added to inflationary pressures, as customer demand recovered.

That may show that firms are lifting pay to attract and retain staff. It also suggests that the surge in gas prices, ongoing shipping delays and transport problems due to a shortage of HGV drivers are driving up costs.

Many services firms blamed the fall in new orders on staff shortages, supply issues and the end of the stamp duty holiday (which had spurred the housing market).

Some companies, particularly in the hospitality sector, reported a fall in activity caused by supply chain disruptions and shortages of staff.

The PMI survey also found that employment growth slowed, due to lack of candidates to fill vacancies, and persistently high numbers of departing staff.

Worryingly, some companies also reported they’d made redundancies as the furlough scheme ended last week.

Tim Moore, economics director at IHS Markit, says companies are passing their rising costs onto consumers:

“The supply chain crisis put a considerable brake on recovery in the UK service sector during September. Survey respondents widely noted that shortages of staff, raw materials and transport had resulted in lost business opportunities. Consequently, new orders expanded at the slowest pace since the end of the winter lockdown, while backlogs of work accumulated as service providers struggled to find candidates to fill vacancies.

Another spike in operating expenses was reported in September, even though this data is yet to fully reflect the inflationary impact of the UK fuel crisis and surging energy prices at the end of the month. Higher wages were also a key reason for increased cost burdens in September.

Tight constraints on business capacity and rampant supply chain uncertainty meant that service providers have become more willing to pass on higher costs to customers. The latest rise in average prices charged by UK service sector firms was the fastest in over 25 years of data collection, with many businesses reporting more frequent reviews of pricing due to escalating cost increases by suppliers.”

James Fairclough, CEO of AA Cars, points out that the slump in car production has left dealers with less to sell:

“The traditional September boost from the arrival of new registration plates was nowhere to be seen. August’s sales figures were lacklustre, but September’s fall in sales was an out and out disappointment.

“The supply of new cars has stubbornly failed to improve. In August the number of cars leaving UK factories slumped by a further 27%, the second successive fall in output. Despite dealers’ best efforts to fulfill customer orders as quickly as possible, too often they just don’t have the vehicles to sell.

“While these supply shortages are likely to be temporary, for now they are proving frustrating for both dealers and motorists.

Last month’s fuel shortages and panic buying could spur more people to buy electric vehicles, Fairclough adds:

“One thing that is improving is sales of electric vehicles. BEVs accounted for 11% of all new car sales in August and 15% of sales in September. EVs and hybrids now account for well over a quarter of the cars made in UK factories, their highest ever level.

“For those already thinking of going electric, the sight of EV drivers breezing past long queues at service stations during September’s fuel crisis may have been a clincher.

UK car registrations may not show any real recovery until next March, predicts Seán Kemple, Managing Director of Close Brothers Motor Finance.

Kemple says the shortages of vehicles on offer, due to production problems, means some nearly-new cars are changing hands for more than a new one [with second-hand car prices pushing inflation up].

“September 2020 was an indisputably challenging year for new car sales, yet we’ve seen another 34% drop in sales year on year for this month. The ongoing chip shortage, compounded by rocketing manufacturing costs, continues to present challenges for dealers, manufacturers and consumers.

“Consumer demand is there, but choice is stifled. Buyers are turning to ‘nearly new’ options, a growing trend where vehicles up to 12 month old are outstripping the price of their new counterparts. This is something we’ve never seen before in the car market and will likely never see again.

The supply chain pressures are unlikely to ease up this side of Christmas and with second-hand vehicles going for premium prices, customers looking for a car are left in an unenviable position.

“Realistically, it could be March next year before we see any real recovery. In the meantime, dealers need to reassess their forecourt strategies in these unprecedented circumstances, ensuring that they can satisfy the high levels of consumer demand and offer buyers more choice for their next purchase.”

It’s official, the UK car market has recorded its weakest September since 1998..despite record sales of battery-powered electric cars.

New car registrations plunged by over 34% compared with September 2020 to 215,312, which is the weakest September since 1998.

Supply issues caused by semiconductor shortages “continue to plague” the industry, says the Society of Motor Manufacturers and Traders (SMMT), which calculates the data.

September is typically the second busiest month of the year for the industry, due to the autumn plate change.

But with the ongoing shortage of semiconductors impacting vehicle availability, registrations last month were down around 44.7% compared to the pre-pandemic ten-year average.

But, September was the best month ever for new battery electric vehicle (BEV) sales, with over 32,000 registered, while diesel sales slumped 77% as drivers shunned them.

The SMMT explains:

With a market share of 15.2%, 32,721 BEVs joined the road in the month, reflecting the wide range of models now available and growing consumer appetite. Indeed, the September performance was just over 5,000 shy of the total number registered during the whole of 2019.

Plug-in hybrid (PHEV) share also grew to 6.4%, meaning more than one in five new cars registered in September was zero-emission capable. Meanwhile, hybrid electric vehicles (HEVs) grew their overall market share from 8.0% in 2020 to 11.6%, with 24,961 registered in the month.

Mike Hawes, SMMT Chief Executive, said reduced availability of semiconductors is hurting the auto sector.

“This is a desperately disappointing September and further evidence of the ongoing impact of the Covid pandemic on the sector. Despite strong demand for new vehicles over the summer, three successive months have been hit by stalled supply due to reduced semiconductor availability, especially from Asia. Nevertheless, manufacturers are taking every measure possible to maintain deliveries and customers can expect attractive offers on a range of new vehicles.

“Despite these challenges, the rocketing uptake of plug-in vehicles, especially battery electric cars, demonstrates the increasing demand for these new technologies. However, to meet our collective decarbonisation ambitions, we need to ensure all drivers can make the switch – not just those with private driveways – requiring a massive investment in public recharging infrastructure.

Chargepoint roll-out must keep pace with the acceleration in plug-in vehicle registrations.”

High street bakers Greggs has pledged that its sausage rolls are safe, despite the crisis in the UK’s food industry due to a lack of butchers.

Greggs CEO Roger Whiteside told Reuters that:

“The sausage roll is safe, that’s one thing we haven’t gone short of.

Whiteside was speaking after Greggs lifted its profit forecasts for this year, after a strong summer partly boosted by a ‘staycation’ effect in August.

Sales in the last quarter were 3.5% higher than in 2019 (before the pandemic), despite staffing and supply chain disruption.

Greggs told shareholders that:

Subject to any unexpected COVID disruption we expect the full year outcome to be ahead of our previous expectations.

But, Greggs also warned that it is struggling to get hold of some ingredients -- and that prices are rising.

Greggs has not been immune to the well-publicised pressures on staffing and supply chains and we have seen some disruption to the availability of labour and supply of ingredients and products in recent months.

Food input inflation pressures are also increasing; whilst we have short-term protection as a result of our forward buying positions we expect costs to increase towards the end of 2021 and into 2022.

UK engineering group Melrose has been hit by a surge in cancelled orders, as the global chip shortages hit carmakers.

Melrose’s automotive clients are cancelling orders at 25 times the rate seen earlier this year, due to supply chain issues gripping the industry.

Melrose’s “in-month” cancellations from automotive customers has jumped to about 20% to 25% in the July-September quarter, it told the City this morning. That’s up from a normal 1% rate seen during the January-March period.

Melrose owns GKN, which supplies parts for the automotive industry including modular eDrives (used in electric cars), all-wheel drive systems and drivelines (which transfer power from the engine to the wheels).

But if its customers can’t get hold of semiconductors -- to control everything from digital displays and navigation systems to emergency braking and stability control systems -- that hits their demand for other parts.

Melrose’s aerospace business is showing an improvement, though, with revenue in the last three months up 16% year-on-year.

Melrose chief executive Simon Peckham says the chip shortages are frustrating, and hard to plan for:

“ All internal management actions are on track, and many are ahead of plan. We are very pleased with the internal progress being made. Tightened supply of semi-conductors to the automotive industry are frustrating and difficult to plan for, but whilst they affect current trading, they don’t impact long-term value, particularly as cash is well controlled and debt reduced.

We have made our businesses better, more flexible and resilient to deal with near term headwinds, and all our businesses are on track to achieve their margin targets assuming partial end market recoveries.

Shares in Melrose have fallen 2% in early trading, to the bottom of the FTSE 100 leaderboard.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the UK’s supply chain crisis and business.

September has proved a cruel month for UK car dealers, as the global shortages of semiconductors hits the auto sector.

New UK car registrations tumbled by 35% year-on-year in September to around 214,000 units, according to preliminary industry data this morning.

That would be the weakest September for at least 23 years, Reuters says, as the industry struggles with supply chain problems following the pandemic.

September is normally a strong time for car sales, with motorists keen to get hold of a new number plate showing they have the latest model (they update in the spring and autumn).

But the global shortage of semiconductors is continuing to hurt production across the automotive industry, leaving dealers struggling to get hold of models to sell to consumers.

But as Reuters explains, electric car sales hit a new record (in a month that ended with motorists queuing for fuel).

The Society of Motor Manufacturers and Traders said the auto industry continued to be plagued by a global shortage of semiconductors used in the production of cars.

With widespread panic-buying at the petrol pumps late last month caused by a shortage of goods vehicle drivers, the SMMT said more than 32,000 battery-powered cars were registered last month - a new record.

British licence plates denote the age of a vehicle and update every March and September - meaning these are usually bumper months for car registrations as buyers like to show they have the newest model.

The chip shortage also hit car production in August; output fell 27% year-on-year as manufacturers struggled to get hold of parts (figures last week showed).

Worries about the cost of living squeeze, and the move towards remote working, may also be weighing on car sales.

But, fewer cars on the roads - especially fossil-fuelled models - might help the UK hit its target of becoming net zero by 2050.

We get the full data at 9am UK time.

Also coming up today...

Financial markets are on edge after big falls on Wall Street last night. The Dow Jones industrial average shed 323 points, or almost 1%.

Technology-focused Nasdaq Composite slid 2.1% as fears that rising inflation will lead to higher interest rates drove investors out of Big Tech companies.

Facebook’s shares tumbled almost 5%, wiping almost $50bn off its value, after a huge outage took its services offline for hours. The crash affected millions of people, organisations and businesses who use Facebook, Instagram and WhatsApp.

The energy crunch continue, with US oil prices hitting their highest levels in seven years last night after Opec and its allies resisted pressure to speed up their crude production.

That could feed through to higher energy costs this winter, and prices at the pumps.

The UK’s petrol crisis is easing, with military drivers now helping to get fuel to forecourts. But problems remain, particularly in London and the South East, so it could take a week to return to normality.

We also get new healthchecks on UK, eurozone and US service sector companies this morning, which will show the impact of supply chain problems.

The agenda

• 9am BST: UK car registrations for September
• 9am BST: Eurozone services PMI for September
• 9.30am BST: UK services PMI for September
• 1.30pm BST: US trade balance
• 2pm BST: IMF Managing Director Kristalina Georgieva gives a speech ahead of the IMF’s Annual Meeting later this month
• 3pm BST: US services PMI for September