Hut Group shares hammered

Plans by online retailer THG to win support from shareholders for its strategy backfired spectacularly on Tuesday after an investor day sparked a sell-off that wiped a third from its share price.

The retailer, formerly known as The Hut Group, which is run by its founder Matt Moulding, held a capital markets day, where it shared its 2030 sustainability strategy with investors.

But investors took fright at the update and concerns that Japanese investment giant SoftBank’s support for THG was cooling, drove down its share price almost 35% from Monday’s closing price of 437p, to close at 285p on Tuesday.

That wiped £1.85bn from the company’s market value, taking it down to £3.48bn from £5.33bn at the start of the day.

The Manchester-based e-commerce specialist owns a range of online beauty and nutrition brands including Lookfantastic and Myprotein, and is also planning to expand its role as a technology provider, helping brands such as Unilever and Danone to sell directly to consumers.

It has been less than 13 months since THG first floated on the London Stock Exchange in September 2020, with an offer price of 500p per share, which valued the business at £4.5bn....

The Hut Group's share price

Here’s the full story:

British American Tobacco will cease all operations in military-ruled Myanmar and withdraw from the country by the end of this year, the company said on Tuesday.

This makes BAT the latest Western firm to pull out of the country in turmoil since a February coup, as Reuters explains:

Responding to a query from Reuters about the status of its operations in the Southeast Asian country, the company said the decision was taken having assessed the long-term viability of its Myanmar business.

“Like any global company, we continuously evaluate our operations around the world,” the company said.

“Having evaluated the long-term operational and commercial viability of our business in Myanmar, we have taken the decision to withdraw from the country and cease all operations.”

Myanmar has been in chaos since the coup, ending a decade of tentative democracy and economic reform that followed the end of a half century of military rule in 2011 and years of crippling western sanctions.

Many big companies in Myanmar initially expressed their commitment to the country in the weeks after the coup, but a months-long army crackdown on strikes and protests and the killing of more than 1,000 civilians has forced many firms to rethink.

More here: REUTERS: British American Tobacco pulls out of army-ruled Myanmar

Sky News are reporting that Ofgem, the energy regulator, is braced for a fresh wave of supplier collapses this week as the crisis engulfing the industry continues to accelerate.

They say:

Sky News understands that at least four suppliers were in talks with Ofgem on Tuesday about entering its Supplier of Last Resort (SOLR) system in a development expected to add several hundred thousand households to the toll of those impacted by soaring wholesale gas prices.

Industry sources said the decision of at least some of those four companies to cease trading could be announced as early as Wednesday.

More here: Energy watchdog Ofgem braced for fresh wave of supplier collapses

Exclusive: Ofgem, the energy regulator, is braced for a fresh wave of supplier collapses on Wednesday, with one industry executive suggesting that as many as four companies could cease trading and see their customers transferred into the SOLR system. https://t.co/vV57ITiDol

— Mark Kleinman (@MarkKleinmanSky) October 12, 2021

Christmas shortages loom as Felixstowe struggles with backlog

Gantry cranes and containers at the Port of Felixstowe,.
Gantry cranes and containers at the Port of Felixstowe,. Photograph: James Veysey/REX/Shutterstock

Fears are growing about Christmas stock shortages after Felixstowe, the UK’s biggest container port, was forced to turn away ships from Asia because of a backlog of containers caused by the HGV driver shortage.

The world’s largest container shipping company, the Danish firm AP Moller-Maersk said the Suffolk port – which handles about 40% of containers coming in and out of the UK – was among the most challenging ports in the world, after Los Angeles and Savannah in the US.

It’s a timely example of the supply chain problems which the IMF warns is slowing the global recovery.

“Felixstowe has come back up as one of our challenges,” said Lars Mikael Jensen, head of east-west network at Maersk.

“There is a shortage of truckers in the UK. Normally after four to five days the containers are out of the terminal and into a warehouse in Birmingham or wherever before coming back empty.

“The trouble is that now we don’t have the same speed of flow of boxes moving in and out. With fewer truckers on average it takes longer to get boxes out of the terminal, so they are left standing there.”

Jensen said congestion has been building for the past fortnight and as a result, Maersk was diverting as many as one in three large vessels to dock at Rotterdam in the Netherlands, where the goods are unloaded and brought to the UK on smaller ships.

The Guardian understands there are as many as 50,000 empty containers at the port of Felixstowe, out of a total capacity of around 145,000.

Here’s the full story:

Steel industry calls for state support to avoid ‘full blown crisis’

The UK steel industry has called for urgent state support to avoid a “full blown steel crisis”, warning that plans to issue loans to soften the impact of soaring gas prices “won’t address the problem”.

As industry leaders voiced dismay at the perceived lack of support from government, trade unions wrote to the prime minister warning he was at risk of making a “historic mistake with devastating consequences” for an industry employing 32,000 people.

Uncertainty about how to support power-hungry industries such as steel has already sparked a political row between the Treasury and the business secretary, Kwasi Kwarteng, over whether to offer financial support.

While the Treasury is understood to be reluctant to fund a bailout, ministers are weighing up proposals from Kwarteng to provide short-term loans or guarantees while gas prices are high, to help sectors such as steel, glass, chemicals and paper.

Representatives from the industry met officials from BEIS on Tuesday but left disappointed at a lack of detail on the proposals and concerned that the loan plan won’t help.

“If it is only these loans that are on the table, then for the steel industry that won’t address the problem,” UK Steel’s director, Gareth Stace, told the Guardian.

“We need to get back round that table to discuss and agree better solutions.”

More here:

Gas and oil production company Diversified Energy had a particularly rough day, with shares sliding almost 20% after a Bloomberg investigation into its assets.

https://t.co/9r8vdsiAb1 pic.twitter.com/aUbU9Z8NlO

— Neil Wilson (@marketsneil) October 12, 2021

Diversified has built up a large portfolio of tens of thousands of old oil and gas wells across America, which it plans to run down and seal off gradually over the coming decades.

Bloomberg visited 44 of these sites (often rusting, overgrown with vegetation, and home to spiders, mice and the occasional porcupine) and found that many were leaking methane -- a gas which contributes to global heating.

On average, the article explains, Diversified’s CEO Rusty Hutson estimates his wells have an additional 50 years in them - so no rush to start saving money to cover plugging costs.

However, that’s well beyond president Biden’s net zero goal of 2050.

Here’s a flavour of Bloomberg’s piece:

Outside of hunting season, few people visit the Tri-Valley Wildlife Area in the rolling hills of southeast Ohio. When a couple of Bloomberg Green reporters showed up on a muggy June morning, the only sounds were birdsongs and the whirring of our infrared camera. We set out on foot and soon spotted the first of several rusty natural gas wells scattered across a broad meadow. Their storage tanks, half-covered with vines and brush, looked like the forgotten monuments of some lost civilization.

There are hundreds of thousands of such decrepit oil and gas wells across the U.S., and for a long time few people paid them much mind. That changed over the past decade as scientists discovered the surprisingly large role they play in the climate crisis. Old wells tend to leak, and raw natural gas consists mostly of methane, which has far more planet-warming power than carbon dioxide. That morning in Ohio we pointed our camera at busted pipes, rusted joints, and broken valves, and we saw the otherwise invisible greenhouse gas jetting out. A sour smell lingered in the air.

To Rusty Hutson, it smells like money.

Hutson is the founder and chief executive officer of one of the strangest companies ever to hit the American oil patch and the reason for our four-day visit to the Appalachian region. While other oilmen focus on drilling the next gusher, Hutson buys used wells that generate just a trickle or nothing at all. Over the past four years his Diversified Energy Co. has amassed about 69,000 wells, eclipsing Exxon Mobil Corp. to become the largest well owner in the country. Investors love him. Since listing shares in 2017, Hutson’s company has outperformed almost every other U.S. oil and gas stock, swelling his personal stake to more than $30 million...

A sprawling empire of dying oil and gas wells is cooking the planet — and making one man very rich

Read The Big Take ➡️ https://t.co/TgzpLZ5aYG pic.twitter.com/hjYnhdaIZN

— Bloomberg (@business) October 12, 2021

Diversified have defended their business, saying that otherwise mature wells could “fall into disrepair” and potentially emit more gases.

“The company believes that aggregating producing wells and tailoring operating programs designed to improve their performance and emissions profile addresses a void in the industry whereby wells often pass from one operator to another creating a ‘churn’ effect, removing long-term accountability for asset integrity.

“Without capable operators like Diversified, often less capable, less financially stable or less accountable, operators acquire assets from companies that are more focused on developing new wells. As a consequence, mature wells sometimes fall into disrepair and potentially emit in excess of levels that simple, routine maintenance would limit.”

European stock markets have ended the day slightly lower, as worries over growth and inflation continue to weigh on equities.

European stock markets, close, October 12 2021
European stock markets, close, October 12 2021 Photograph: Refinitiv

In London, the FTSE 100 finished 17 points lower at 7130 points, down 0.23%.

Travel and hospitality had a bad day, with airline group IAG losing 3.4%, and catering firm Compass down 2.15%. Miners also dropped, along with engineering group Melrose (-1.9%).

Michael Hewson of CMC Markets sums up the day:

A negative lead from Asia saw markets in Europe open sharply lower earlier today, and although we’ve rebounded off the lows, it’s still difficult to determine an overall direction. Investors shrugged off a minor downgrade to global growth for this year from the IMF, however no one really pays much attention to what these organisations have to say in the wider scheme of things.

The biggest laggards have been in basic resources, which helped underpin yesterday’s FTSE100 gains. The problem facing investors right now is the bi-polar nature of markets one day to the next. Since July we’ve seen moves to the upside, as well as the downside, but within a clearly definable range.

While investors want to believe a narrative that can see equity markets move higher, any optimism is being tempered by the prospect that rising prices, as well as supply chain disruptions, may well negatively impact profit margins, as well as prompting a consumer slowdown.

The main change since July has been a sell-off in bond markets, which has seen yields move quite a bit higher, reflecting much more elevated inflation expectations over the next six to 12 months, and it will be company guidance over the next few months that may well dictate where we head next.

Airlines have been another drag today, with IAG and Ryanair in negative territory after easyJet announced a full year loss of just over £1.1bn.

The numbers weren’t all bad, however today’s update also serves to illustrate the challenges facing the industry as we head into another fiscal year which is still likely to be pandemic affected. We’ve seen a decent rally off the lows this year, however the rebound has been somewhat constrained with the shares pretty much where they were at the start of this year.

Today’s Q4 update showed that the airline reached 58% of 2019 capacity, flying 17.3m seats, which was slightly above what it expected in early September, and well above the 17% in Q3. Nonetheless it still fell slightly short of the 60% it had hoped for in its initial Q3 numbers. In a sign that it is more optimistic about its next financial year it raised its capacity guidance for Q1 from 60%, to 70% of 2019 levels.

The recent rights issue has helped reduce its debt to £900m from £2bn giving the airline a solid platform from which to build its resilience for its next fiscal year. With rising fuel prices, a significant headwind easyJet has said it is 55% hedged for the year at $500 a metric tonne, with current spot prices currently 50% higher.

Royalties firm behind Beyoncé strikes $1bn music rights deal

The US private equity giant Blackstone has struck a deal with Merck Mercuriadis, which advises the London-listed music rights business Hipgnosis, to set up a $1bn (about £735m) venture to acquire music rights and manage catalogues.

Over the past three years Mercuriadis has overseen an acquisition spree at Hipgnosis, buying the royalty rights to the music of stars from Neil Young and Barry Manilow to Beyoncé and Blondie and building up a portfolio of almost 61,000 songs worth $2.2bn.

Blackstone has struck a deal with Mercuriadis’s separate advisory business, Hipgnosis Song Management (HSM), backed by an initial $1bn, in the latest move by big investors to tap into the streaming boom that has fuelled a recovery in the music industry.

“The music industry is at the forefront of the fast-growing streaming economy and is unlocking new ways of consuming content,” said Qasim Abbas, senior managing director at Blackstone Tactical Opportunities.

“This partnership underscores the long-term, sustainable value we see in creative content across the wider entertainment industry.”

IMF says Covid support has left the world open to a new financial crisis

Back in Washington... the IMF has warned that the emergency support provided by central banks and finance ministries during the Covid-19 pandemic has fuelled speculation and left the world vulnerable to another financial crisis.

Policy makers were faced with a “challenging” trade-off between continuing to support economic activity while preventing unintended consequences and medium-term financial stability risks, the IMF says in its half-yearly Global Financial Stability Review (GFSR).

Noting that share prices appeared to be overvalued and house prices had risen rapidly in many countries, the Washington-based body said investors were becoming increasingly concerned about the economic outlook amid rising virus infections and greater uncertainty about the strength of the recovery, particularly in emerging markets.

Financial stability risks have been contained so far. But investors are increasingly worried about the economic outlook amid uncertainties that could lead to higher interest rates. https://t.co/c2FRKBCbHy #GFSR pic.twitter.com/nLuDymlXsU

— IMF (@IMFNews) October 12, 2021

It said:

“Warning signs – for example, increased financial risk-taking and rising fragilities in the nonbank financial institutions sector – point to a deterioration in the underlying financial stability foundations.

If left unchecked, these vulnerabilities may evolve into structural legacy problems, putting medium-term growth at risk and testing the resilience of the global financial system.”

Low interest rates during the pandemic have allowed for high asset valuations to persist. If this continues, financial vulnerabilities could intensify. Read our latest #IMFBlog for the full analysis: https://t.co/mSSFcQLCNf #GFSR pic.twitter.com/RUSJHIuk97

— IMF (@IMFNews) October 12, 2021

Financial stability risks have been contained so far. But investors are increasingly worried about the economic outlook amid uncertainties that could lead to higher interest rates. https://t.co/c2FRKBCbHy #GFSR pic.twitter.com/nLuDymlXsU

— IMF (@IMFNews) October 12, 2021

US job vacancies dropped amid Delta wave

The number of job openings at US companies has fallen, for the first time this year, but remain close to record levels.

There were 10.4m unfilled positions at American companies in August, down from almost 11.1m in July (a record), according to the latest JOLTS report.

That’s still a very high number, but it suggests that demand for labor may have weakened slightly as Covid-19 cases rose.

More people voluntarily left their jobs, as the surge in vacancies forced employers to offer more attractive starting salaries and signing-on incentives. The quits rate (the number of quits in the month as a percent of total employment), increased to a record 2.9%.

The August JOLTs report had Delta COVID-19 written all over it. Retail workers quit to avoid exposure, #Jobs openings in leisure and hospitality fell because fewer people wanted to travel. The questions are, as Delta drops how and when will the labor picture change? pic.twitter.com/gSlfPpjDM1

— Robert Frick (@RobertFrickNFCU) October 12, 2021

Job openings fell to 10.4 million in August, the first monthly decline since last year, as the Delta variant crimped hiring demand.

Job openings are still near record levels though as employers pause hiring temporarily while the Delta wave passes.#JOLTS 1/ pic.twitter.com/qlNLJS6WZp

— Daniel Zhao (@DanielBZhao) October 12, 2021

The argument that this is a temporary pause in labor demand is supported by layoffs & discharges, which hit a record low in August, as employers hoard scarce labor in anticipation of continuing difficulty hiring after the Delta wave abates.#JOLTS 2/ pic.twitter.com/28Y9xC1XG5

— Daniel Zhao (@DanielBZhao) October 12, 2021

Quits again rose to record highs. Almost 4.3 million workers voluntarily quit their jobs in August, well above any historical precedent.

This is likely due to a combination of Delta concerns & increasing leverage workers have amidst the tight labor market.#JOLTS 4/ pic.twitter.com/ccLfhRhedJ

— Daniel Zhao (@DanielBZhao) October 12, 2021

IMF: UK at risk from inflation shock

The IMF has also singled out the UK as a country which faces the risk of an inflation shock.

Today’s World Economic Outlook says:

We project, amid high uncertainty, that headline inflation will likely return to pre-pandemic levels by mid-2022 for the group of advanced economies and emerging and developing economies.

There is, however, considerable heterogeneity across countries, with upside risks for some, such as the United States, the United Kingdom, and some emerging market and developing economies.

So central banks should be ready, the IMF says, in case inflation expectations become more materials:

Central banks should chart contingent actions, announce clear triggers, and act in line with that communication.

The IMF’s latest growth forecasts
The IMF’s latest growth forecasts Photograph: IMF
IMF growth forecasts
IMF growth forecasts Photograph: ONS

IMF: Central banks may need to act quickly on inflation

IMF chief economist Gita Gopinath has warned central banks that they should be prepared to act quickly if inflation becomes a more serious problem.

Presenting today’s World Economic Outlook, Gopinath says central banks need to tread a fine line -- addressing inflation and financial risks while supporting the recovery.

While monetary policy can generally look through transitory increases in inflation, central banks should be prepared to act quickly if the risks of rising inflation expectations become more material in this uncharted recovery.

Gopinath also said the Fund takes data integrity ‘incredibly seriously’ and has ‘robust systems’ in place, when asked about allegations that IMF MD Kristalina Georgieva pressured World Bank staff to manipulate data to benefit China during her time as World Bank chief.

[The IMF board backed Georgieva overnight -- saying the evidence presented “did not conclusively demonstrate” that she played an “improper” role in China’s ranking in a flagship report while at the World Bank.]

Gopinath insists that the global growth picture doesn’t look remotely close to stagflation at the moment, with global growth still seen at 5.9% this year and 4.9% next year, and eurozone growth at 5% in 2021 and 4.3% in 2022.

But there are risks of supply side shocks, with rising commodity prices and shortages, meaning firms are creating less and lifting their own prices

On the move towards home working, Gopinath says that employment growth has been weaker than output growth in the recovery, and weaker than normal.

Working from home can provide flexibility to those who aren’t ready to return to customer-facing roles in the pandemic, help workers be productive as they don’t have to commute, and give more flexibility to women, she says.

However, we are not seeing that flexibility translating into more women returning to labour force.

And on the latest US debt ceiling crisis, Gopinath says the brinkmanship is unproductive, and creates uncertainty [the House of Representatives will vote on a short extension to the ceiling today].

It would be good if the debt limit were reformed, perhaps replaced with a medium-term borrowing target, or automatically lifted in line with Congress’s tax and spending decisions. she suggests.

This chart from the IMF’s WEO shows how the recovery has slowed in recent month....

IMF global activity indicators
IMF global activity indicators Photograph: IMF

...while this chart highlights the vaccine inequality which is worrying the IMF:

Breakdown of vaccination rates
Breakdown of vaccination rates Photograph: IMF

IMF calls for rich countries to fulfil promises on vaccines and climate

The IMF has also warned that rich nations need to deliver on their promises on vaccine availability and climate change measures.

In the World Economic Outlook, the Fund warns that the unequal access to Covid-19 vaccines risks undermining the recovery.

If Covid-19 were to have a prolonged impact into the medium term, it could reduce global GDP by a cumulative $5.3 trillion over the next five years relative to our current projection. It does not have to be this way.

The global community must step up efforts to ensure equitable vaccine access for every country, overcome vaccine hesitancy where there is adequate supply, and secure better economic prospects for all.

Gita Gopinath, the IMF’s economic counsellor, explains in a blogpost that there is a “great vaccine divide”, with the pandemic hitting low-income countries harder:

“The dangerous divergence in economic prospects across countries remains a major concern,”

“Aggregate output for the advanced economy group is expected to regain its pre-pandemic trend path in 2022 and exceed it by 0.9% in 2024.

More here:

IMF cuts global growth forecasts as supply chain problems hit recovery

Just in: The International Monetary Fund has cut its forecasts for the world economy this year, and warned that supply chain problems are hitting growth and driving up inflation.

In its latest World Economic Outlook, the IMF says that the momentum of the global recovery has weakened, hobbled by the pandemic and the rise of the Delta variant.

It says:

Fueled by the highly transmissible Delta variant, the recorded global COVID-19 death toll has risen close to 5 million and health risks abound, holding back a full return to normalcy.

Pandemic outbreaks in critical links of global supply chains have resulted in longer-than-expected supply disruptions, further feeding inflation in many countries. Overall, risks to economic prospects have increased, and policy trade-offs have become more complex.

The IMF has trimmed its forecast for world economic growth in 2021 to 5.9%, from 6% back in July. Growth in advanced economies this year has been cut to 5.2%, from 5.6%.

The Fund says this is largely due to downgrades to three major economies:

  • United States (due to large inventory drawdowns in the second quarter, in part reflecting supply disruptions, and softening consumption in the third quarter);
  • Germany (in part because of shortages of key inputs weighing on manufacturing output); and
  • Japan (reflecting the effect of the fourth State of Emergency from July to September as infections hit a record level in the current wave).

The IMF now predicts the US will expand by 6% this year, down from 7% estimated back in July, with Germany’s growth forecast cut to 3.1% from 3.6%, and Japan trimmed to 2.4% from 2.8%.

The UK is now forecast to growth by 6.8% this year, down from 7% previously forecast. That would still make the UK the fastest-growing advanced economy this year (after one of the largest contractions in 2020)

IMF’s new growth forecasts
IMF’s latest growth forecasts Photograph: IMF

The IMF also warns that gaps in expected recoveries across economy groups have widened since the July forecast, for instance between advanced economies and low-income developing countries -- due to “large disparities in vaccine access and in policy support”.

As recoveries proceed, the risks of derailments and persistent scarring in heavily impacted economies remain so long as the pandemic continues.

The Fund also warns that inflation has increased “markedly” in the US, and also in some emerging market economies, as supply has struggled to keep pace with rising demand.

Although price pressures are expected to subside in most countries in 2022, inflation prospects are highly uncertain, it warns, which is “forcing difficult choices on policymakers—particularly in some emerging market and developing economies”.

Supply disruptions pose another policy challenge, the IMF adds:

On the one hand, pandemic outbreaks and weather disruptions have resulted in shortages of key inputs and dragged manufacturing activity lower in several countries. On the other hand, these supply shortages, alongside the release of pent-up demand and the rebound in commodity prices, have caused consumer price inflation to increase rapidly in, for example, the United States, Germany, and many emerging market and developing economies.

Food prices have increased the most in low-income countries where food insecurity is most acute, adding to the burdens of poorer households and raising the risk of social unrest.

Updated

Petrol retailers: fuel situation in London and South East still serious

A Shell petrol station in Southwark, south London, yesterday.
A Shell petrol station in Southwark, south London, yesterday. Photograph: Yui Mok/PA

One in ten petrol stations in London and the southeast of England are still out of fuel, with forecourts still in the dark about when fresh supplies might turn up.

Brian Madderson, chairman of the Petrol Retailers Association (PRA), says the fuel supply is improving (more than two weeks after panic buying began).

However, it remains ‘serious’ in London and the South East, where supplies aren’t getting through in time, Madderson explains:

“Whilst there has been a welcome improvement over the weekend in the London and South East region with 10% reporting dry sites which is not far behind the rest of the country, a large majority of retailers continue to express concerns that they have no forward visibility of their next deliveries.

“There are many reports of wet sites quickly going dry because the continuity of tankers remains out of kilter with orders.

“The situation in London and the South East remains serious. According to the RAC Foundation, filling stations in London and the South East are used more intensely than other regions of the country.

“Not only are there more vehicles per filling station (each London filling station serves 5112 cars on average), but the distance travelled per filling station is higher in London and the South East than any other region. These filling stations therefore need to be refuelled more often.

“The need to refuel filling stations in London and the South East is even more necessary when customers panic buy, because there are more cars to be filled per station there than the GB average”.

The Petrol Retailers Association chairman Brian Madderson says the situation in London and the South East remains serious, with 10% of sites currently dry

Read today's top stories here: https://t.co/Gk97JUvZT5 pic.twitter.com/EoRrlXGsc0

— Sky News (@SkyNews) October 12, 2021

Back on this morning’s jobs data... and the NIESR thinktank have predicted that underlying wage growth will pick up in the last quarter of this year.

That’s despite the slowdown in headline earnings in the last quarter (as flagged earlier, the ONS estimates that underling pay rose).

NIESR say:

  • The growth rate in average weekly earnings including bonuses (AWE) in Great Britain decreased in the three months to August to 7.2% compared to a year ago, down from 8.3%in the three months to July. This is in line with the 7.1% we forecast last month.
  • Excluding base effects, the growth in average weekly earnings was at 4.2% in the three months to August, unchanged from the three months to July.
  • A record level of vacancies and rising inflation suggest a future acceleration in wage growth.
  • We forecast underlying average weekly earnings (excluding base effects) to accelerate from 4.2% in the third quarter to 4.5% in the fourth quarter.

Updated

The logo of the new Financial Conduct Authority is seen at the agency’s headquarters in the Canary Wharf business district of London

Staff at the UK’s Financial Conduct Authority (FCA) have launched a formal petition for union recognition following months of growing disenchantment with the regulator’s leadership, according to a union (PA Media’s Simon Neville reports).

Unite said staff want to be represented by an independent trade union after new pay proposals will leave three out of four workers facing pay cuts of 10%, it is claimed.

The union revealed it has seen a significant rise in membership at the regulator and called on bosses to hear the concerns of its workforce.

A petition has been set up to gauge interest, with the results to be presented to the organisation responsible for regulating the UK’s financial sector.

Staff are said to be unhappy with chief executive Nikhil Rathi’s transformation plans, which they believe will see wages cut but are unlikely to affect the FCA’s leadership team.

Dominic Hook, Unite national officer, said:

“Staff across the FCA are joining Unite in unprecedented numbers and want their voices heard.

“The significant growth in trade union membership demonstrates that the recognition of an independent trade union at the FCA is long overdue.”

He added:

“Staff at the FCA are demoralised by the consultation launched by the CEO in September and feel it is a poor way to reward FCA staff who worked tirelessly throughout the pandemic to deliver credit card and mortgage payment holidays that were a lifeline to people up and down the country.”

According to staff, morale has plummeted in recent months, resignations are rising on a daily basis and recruitment is failing to keep up.

Unite members are angered that Mr Rathi, currently paid more than 455,000, has proposed allowing the highest paid FCA staff to be paid more to avoid caps on the tax breaks for the largest pension pot holders.

Formal communication events have attracted waves of criticism, leading to union membership increasing four-fold, Unite said.

The Bank of England and the Pensions Regulator already formally recognise trade unions.

✊FCA staff ‘want right to be represented by an independent trade union’ as fight for #UnionRecognition steps up.https://t.co/GEU3BDr3V5#FightForYourRight pic.twitter.com/EGhtdRXfzR

— Unite South West (@unitesouthwest) October 12, 2021

NFIB Small Biz Optimism index miss: 99.1 vs. 99.5 exp. Uncertainty index rose five points; a net 42% reported raising compensation (48-yr record high); and 51% reported job openings that couldn't be filled (below). Bet we'll hear a lot about labor issues in Q3 earnings season. pic.twitter.com/6bUWBhjDKB

— Liz Young (@LizYoungStrat) October 12, 2021

US small business confidence hit by supply problems and labour shortages

Supply chain problems and labour shortages are hitting confidence among Americas’s small businesses.

Optimism among small firms has fallen to its lowest lowest reading since March, according to the latest survey from National Federation of Independent Business (NFIB).

The NFIB Small Business Optimism Index fell to 99.1 in September from 100.1 in August.

NFIB chief economist Bill Dunkelberg said:

“Small business owners are doing their best to meet the needs of customers, but are unable to hire workers or receive the needed supplies and inventories,”

Expectations for better business conditions over the next six months deteriorated, and more than 35% of small-business owners said supply-chain disruptions have had a significant impact on their business - leading many to lift prices.

Dunkelberg explained:

Supply chains are still in disarray, with ships and containers piling up on the coasts but only slowly being unloaded and distributed to businesses as truck drivers are in short supply.

a nugget: NFIB measures % of survey that see inflation as the single most important problem. That sub index edged down. The uncertainty sub index, however. moved up (see graph). NFIB optimism index is also at lowest reading since May. Inflation slowing business down (?) .. pic.twitter.com/MuLFFsNZ1S

— Global_Macro (@Marcomadness2) October 12, 2021

In contrast to the post-GFC period, demand is not the problem in the current US economic recovery. According to NFIB, the percent of small business reporting "poor sales" as their single most important problem fell to a fresh low of 4 in September, the lowest in several decades. pic.twitter.com/wYugOIhta7

— RenMac: Renaissance Macro Research (@RenMacLLC) October 12, 2021

🇺🇸 Wake up @federalreserve ! NFIB was very "anti-transitory". Labour demand => wage increases. Wages + other costs + slowdown tendency => profit margin pressure => broader price hikes = inflation!

All explained in 4 charts pic.twitter.com/r8mlygsnEm

— Mikael Sarwe (@MikaelSarwe) October 12, 2021

Last week’s non-farm payroll showed that the US economy added just 194,000 jobs in September, as the Delta variant and a tight labor market appeared to be holding back hiring.

Activist hedge fund Bluebell targets GSK chairman, as private equity 'eye consumer arm'

GlaxoSmithKline shares spiked 4% this morning after a report that private equity firms are circling its consumer arm, which is set to be split off from the pharmaceuticals and vaccines business next summer.

The drugmaker has come under pressure from two hedge funds – the New York-based Elliott Management and the much smaller London-based firm Bluebell Capital Partners – to explore a sale of the consumer business, whose value analysts have estimated at around £45bn. GSK is pushing ahead with a demerger, though, and insists that this is what the majority of investors want.

Bloomberg reported that private equity firms Advent International, Blackstone, Carlyle Group, CVC Capital Partners, and KKR are among those running the rule over the consumer business. It is understood, however, that GSK is not currently in discussions to sell off the unit.

A GSK spokesman said:

“As we have said, the GSK Board will fulfil its fiduciary duties to evaluate any alternative options for Consumer Healthcare which may arise that maximise value for all shareholders.”

JUST IN: GlaxoSmithKline’s consumer unit is drawing interest from private equity firms as the pharma giant prepares to split off the business https://t.co/G9dLta8Hkv

— Bloomberg (@business) October 12, 2021

Elliott and Bluebell have also repeatedly demanded that GSK chief executive Emma Walmsley reapply for her job, while the company continues to insist that she will lead the pharma and vaccines division after the split.

The GSK chairman, Sir Jonathan Symonds, held a virtual meeting with GSK’s top 50 investors last week where the Elliott founder Gordon Singer questioned Walmsley’s leadership and asked why the drugmaker’s share price had fallen below pre-Covid levels.

luebell emerged on the scene last month, when it made similar demands as Elliott. It has taken a small stake in GSK, worth €10m, or 0.01% of the company, while Elliott is thought to have taken a substantial stake.

Bluebell’s managing partners Marco Taricco and Giuseppe Bivona upped the pressure on GSK’s board when they wrote to the company again on Monday to demand the replacement of its chairman.

Bluebell claimed that among the leading shareholders “there remains a broad scepticism of the current leadership, well beyond what has been voiced publicly by selected shareholders”.

Bluebell wrote:

“The separation of Consumer Healthcare should represent a new beginning for New GSK. This is why, given what we learned at the Investor Forum, we have reached the conclusion that a more radical change agenda than we have previously envisaged is required at New GSK Board’s level, and that this includes the appointment not only of a new CEO but also of a new Chairman.”

A GSK spokesperson responded:

“We completely reject the content and claims made in this letter, which are not representative of the discussion at the meeting or the majority of our shareholders’ views. We are disappointed that Bluebell have deliberately sought to misrepresent the meeting and to distort what was said in order to advance their own narrow agenda.

“We laid out a very clear strategy for GSK at the Investor Update on 23rd June, including very specific performance KPIs. The Board and Executive team have engaged extensively and directly with GSK’s major shareholders with over 500 meetings since the start of the year. The feedback we have had from shareholders is supportive of this strategy - the focus is now on execution.

“We remain absolutely focused on tackling the root causes of previous historical under-performance and delivering improved and sustained value for all shareholders. We are making good progress but there remains more to do. The Board is confident that we have the right strategy and the right team to deliver a step-change in growth and performance.”

Activist hedge fund Bluebell Capital wants GlaxoSmithKline to replace its chairman as well as CEO, piling further pressure on the drugmaker https://t.co/mdSP2B9X6c

— Bloomberg (@business) October 12, 2021

Updated

Brexit rules and high energy prices hit UK carmakers' competitiveness

Cars remain the UK’s No 1 export but volatile energy prices and the cost of complying with EU regulations post-Brexit are blunting the industry’s competitive advantage, the sector’s trade body has said.

Nine in 10 firms in the industry told the Society of Motor Manufacturers and Traders (SMMT) that costs, measured in time and resources, had increased as a result of leaving the EU, with 60% saying the extra expense for trading with the bloc was a “much more significant rise than other export destinations”.

Mike Hawes, the SMMT chief executive, said: “The cost of complying with new regulations has made the UK potentially less competitive compared with some of our European counterparts.

“The first few weeks months were incredibly difficult. There were delays at borders, some of those were teething problems, some of those issues were more substantive.

Undoubtedly the industry is facing additional cost and complexity; costs which generally have to be absorbed, to maintain competitiveness.”

The SMMT said that regardless of such issues, the EU would “remain a central trade partner”, with about half of all cars made in Britain exported to EU member states, while almost all vans exported by the UK end up on European roads.

Overall vehicle export revenues to all markets reached £27bn in 2020, even as the Covid pandemic disrupted trade flows and shut down markets around the world.

SMMT calls for automotive sector to be the engine of the UK’s future international trade deals

Total automotive sector trade drops -26% during pandemic-hit 2020 but still reaches £74 billion, benefiting every UK regionhttps://t.co/s1AGSfR1vc pic.twitter.com/ktAymhBuVb

— SMMT (@SMMT) October 12, 2021

The SMMT hopes for caps on energy prices in recognition of the importance of the new generation of electric cars to the country’s climate emergency goals.

Here’s the full story:

Chinese electric automaker Nio’s stand during the Tianjin Auto Show 2021 last month.
Chinese electric automaker Nio’s stand during the Tianjin Auto Show 2021 last month. Photograph: Xinhua/REX/Shutterstock

Car sales in China fell last month, as chip shortages and the energy crisis hit automakers.

Reuters has the details:

China’s auto sales slumped 19.6% in September from a year earlier, industry data showed on Tuesday, falling for a fifth consecutive month as a prolonged global shortage of semiconductors and a domestic power crunch disrupt production.

This time of year, known as “Golden September, Silver October”, is usually a high point in sales for the industry, with consumers making purchases after staying away from showrooms during the stifling summer months.

Sales in the world’s biggest car market totalled 2.07 million vehicles in September, data from the China Association of Automobile Manufacturers (CAAM) showed.

The sales drop was due to the domestic power crunch caused partly by the shortage of coal and prolonged global chip shortage that has forced many major automakers to idle or curtail production, said Chen Shihua, a senior official at CAAM.

More here: Chip shortage and power crunch hit China auto sales in ‘Golden September’

Tesla China Shipments Rise Even as Wider Car Sales Slump
- Tesla shipments +27% in Sept vs Aug
- That's as overall China car sales FELL 17% in Septhttps://t.co/KDPcbDX5C2 pic.twitter.com/7STnNDwZBV

— Tom Mackenzie (@TomMackenzieTV) October 12, 2021

German economic sentiment hit by supply bottlenecks again

Global supply chain bottlenecks have hit economic sentiment in Germany again.

The ZEW Institute’s gauge of economic sentiment for Germany dropped by 4.2 points this month to 22.3 points, the lowest since March 2020 during the first lockdown.

The index of investor confidence has now fallen for five months in a row, as the assessment of the economic situation in Germany has worsened since a bright start earlier this year.

The outlook for the economic development in the next six months has noticeably deteriorated, warned ZEW.

ZEW President Professor Achim Wambach said problems obtaining raw materials are hitting German industry:

The economic outlook for the German economy has dimmed noticeably. The further decline of the ZEW Indicator of Economic Sentiment is mainly due to the persisting supply bottlenecks for raw materials and intermediate products.

The financial market experts expect profits to go down, especially in export-oriented sectors such as vehicle manufacturing and chemicals/pharmaceuticals.”

#ZEWEconomicSentiment for Germany decreased in the October 2021 survey, falling 4.2 points to a new reading of 22.3 points. „The economic outlook for the German economy has dimmed noticeably,“ says #ZEW president @AchimWambachhttps://t.co/DFhDOI7RmF pic.twitter.com/XxvUJCQg1L

— ZEW_en (@zew_en) October 12, 2021

German investor confidence worsens amid raw material shortages: ZEW expectations gauge drops to 22.3 vs. est. decline to 23.5. Profits seen falling, particularly in export-oriented firms. pic.twitter.com/zpOGG5SFlD

— Holger Zschaepitz (@Schuldensuehner) October 12, 2021

Miners, travel groups, and hospitality companies are among the fallers on the FTSE 100 this morning.

Rio Tinto (-2.7%) and Anglo American (-2.2%), two commodities giants, are among the fallers, with British Airways parent company IAG (-1.9%) and catering group Compass (-1.4%) also dropping.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, says the prospect of higher UK interest rates is keeping shares down.

“The big squeeze on companies as higher costs take hold has again choked off gains for the FTSE 100, keeping the index down 0.5% by mid-morning. It’s the expectation that the Bank of England will step in to try and squash down inflation by raising interest rates by the end of the year, that’s weighing down stocks, given the financial markets have become so addicted to ultra-low rates and easy financing.

With vacancies hitting 1.1 million between July and September, the highest level since records began 20 years ago, it’s putting even more pressure on many companies which are already struggling to cope with the tourniquet of higher energy costs and supply chain problems.

The crisis at indebted property group Evergrande crisis is also worrying investors, she adds:

The company looks set to miss payments on interest payments due yet again. It’s feared the waves of repercussion risk pulling down a flotilla of smaller property companies. Although it’s still likely Beijing will try and stop the crisis spreading to financial firms, with the expectation that more state owned companies could step in and buy parts of Evergrande, the situation is still likely to cause a further marked slowdown for China’s property and construction sector, with a knock on effect on mining companies in particular.

The additional concern is that a big slide in house prices will knock consumer confidence in China and if consumption dips, that might cause fresh ripples on financial markets.”

Markets dip as supply chain problems create perfect storm

Growth and inflation worries are weighing on the stock markets today, with the FTSE 100 index dipping by 0.5% this morning:

European stock markets, October 12 2021
European stock markets, October 12 2021 Photograph: Refinitiv

Marios Hadjikyriacos, senior investment analyst at XM, says investors are worried about a ‘stagflation’ scenario, where companies suffer rising prices and a slowdown in growth:

Stock markets started the week on the wrong foot. From paralyzed supply chains to an energy crisis that threatens to cripple Europe and Asia to growing credit risks in the Chinese property sector, there are several threats on the radar forcing traders to play defense.

It’s a perfect storm. Supply chains seem overwhelmed, with disruptions spilling over from ports to the mainland lately amid lorry driver shortages, squeezing corporate profit margins as transportation and energy costs soar simultaneously. This burden could be passed onto consumers, taking a bite out of real incomes.

The fear is that global growth slows down as companies can’t cover demand but inflation remains hot thanks to cost pressures - a toxic combination that central banks are powerless against. And with the fallout from Evergrande spreading across the Chinese property market as more developers miss debt payments, there is a dimension of credit risk as well.

That said, this isn’t a catastrophe either. Growth is unlikely to slow enough to turn this into another recession and investors remain fairly confident that any credit events in China will remain isolated. Hence, there is light at the end of the stagflation tunnel, although it’s too early to call for the bottom ahead of an earnings season that will likely echo worries around growth and inflation.

Passengers preparing to board an easyJet flight to Faro, Portugal, at Gatwick Airport

EasyJet expects to make a pretax loss of more than £1bn this year but said its recovery was under way, with a 400% surge in demand for winter sun breaks after the UK government relaxed travel restrictions.

The low-cost airline is adding 100,000 seats thanks to the popularity of destinations such as Egypt, Turkey and the Canary Islands, and expects to fly up to 70% of 2019 levels in the three months to 31 December.

October half-term bookings have also been strong, particularly to the Canaries where easyJet has increased its capacity to 140% of 2019 levels. Bookings for the first half are double those of the same time last year.

Johan Lundgren, the easyJet chief executive, said:

“It is clear recovery is under way. Business travel is returning to easyJet with corporates and SMEs attracted by our value, network and approach to sustainability.

We have seen city breaks beginning to return alongside growing demand for leisure travel from customers looking for flights and holidays to popular winter sun destinations including Egypt and Turkey.”

Shares in easyJet have dipped by 2.2% this morning to 633p; here’s Victoria Scholar, head of investment at Interactive Investor:

-#EasyJet shares swung from gains to losses this morning
-Trading down more than 3%
-Forecasts £1.15bs pre-tax loss
-Stock down ~30% from May peak
-Next major support at 600p
-A break below could point to a move down to the Sept low at 565p pic.twitter.com/QRtIupk6v1

— Victoria Scholar (@VictoriaS_ii) October 12, 2021

Here’s economist Julian Jessop’s take on the jobs data:

Another strong set of UK labour data, including an increase of 207,000 in payroll #employment in September...

(IMHO, increasingly hard to argue that interest rates still need to be at emergency low of 0.1%) pic.twitter.com/HuHvW8vQFR

— Julian Jessop (@julianHjessop) October 12, 2021

Two more snippets from the UK labour data:

1. Headline #pay growth predictably slowed as the base effects faded, but the ONS estimates that the underlying rate for regular pay has picked up to between 4.1% and 5.6% (keeping pace with where #inflation is likely to be)... (1/2)

— Julian Jessop (@julianHjessop) October 12, 2021

2. Less positively, the recovery in the LFS measure of employment (which includes self-employment) appears to have stalled in August and, unlike payroll jobs, it was still about 650k below it's pre-Covid peak. But more timely data and surveys suggest it will catch up soon. (2/2)

— Julian Jessop (@julianHjessop) October 12, 2021

Full story: UK job vacancies hit record amid Brexit and Covid staff shortages

Job vacancies soared to a record high of almost 1.2m in September, according to official figures, as employers hunted for staff to meet shortages brought on by Brexit and the pandemic.

The Office for National Statistics (ONS) figures also showed a 207,000 increase in the number of people on payrolls to a record 29.2 million – 120,000 above pre-pandemic levels – and a steep fall in unemployment before the furlough scheme came to an end at the end of September.

London experienced the biggest rise in employment as the capital made up ground with the rest of the country after a large drop during the pandemic, but unlike many other areas, failed to reach pre-pandemic levels.

In the three months to September, vacancies grew across most sectors driven by a jump in demand for workers by shop owners and wholesalers while motor garages looked for 35,000 extra staff....

More here:

IES: UK economy struggles with a “labour gap” of nearly one million workers

Britain’s economic recovery is being held back by a “labour gap” of nearly one million workers, says Institute for Employment Studies’ director Tony Wilson.

He’s spotted that the UK labour market is the tightest in decades, with the lowest number of unemployed people per vacancy on record (just 1.45, compared to 4.1 in the first lockdown in 2020).

The labour gap is partly due to fewer older people in work and more young people in education, as well as the drop in migration.

Wilson says the UK must do more to help people back into work:

These shortages are holding back our economic recovery, and won’t fix themselves by just exhorting firms to pay people more. Instead we need to do far better at helping some of the six million people who are outside the labour market because of ill health, caring or full-time study to get back into work.

He’s also written a very informative thread about today’s jobs data:

Today's jobs stats: worker shortages and record vacancies are driving tightest labour market in modern times.
This has been a jobs light recovery - we need action to get more people the help they need to work: older people, those with health conditions, parents, students.
Thread

— Tony Wilson (@tonywilsonIES) October 12, 2021

First up, the good news. Vacancies are highest they've ever been. 1.2 MILLION in single month of September. And this isn't a flash in the pan - for first time, they're above pre-crisis levels in every single industry. Even retail. But... 2/ pic.twitter.com/Xs1v1hwrAO

— Tony Wilson (@tonywilsonIES) October 12, 2021

While unemployment is dropping back to pre-crisis levels, the employment rate is recovering far less quickly.
Left pic shows rates; right shows changes in levels - most recent quarter in yellow.
650k fewer in work, with econ 'inactivity' +350k and falling v slowly
3/ pic.twitter.com/syEGwfd9Bh

— Tony Wilson (@tonywilsonIES) October 12, 2021

As a result, there are fewer than 1.5 unemployed per vacancy for first time in 40 yrs (this chart to 2001, but BoE historic data goes back to 1971 and was never lower).
This is a key way of measuring demand vs supply, and suggests officially tightest labour market ever...
4/ pic.twitter.com/ec4C5xU8je

— Tony Wilson (@tonywilsonIES) October 12, 2021

And here's a 'Beveridge curve' which shows how far these shortages are being driven by very high demand (vacancies on the y axis). Unemployment is still a bit elevated by recent standards, although way below previous crises and even the 'NICE decade' (x axis).
5/ pic.twitter.com/B8R8d6eA4F

— Tony Wilson (@tonywilsonIES) October 12, 2021

So why can't we meet the demand? Short answer is, we've far fewer workers.
Below shows labour market 'activity' (employed plus u/e) since 1971. Dotted line is pre-crisis trend - we're below it by 975 THOUSAND. This is biggest contraction since at least early 1990s.
6/ pic.twitter.com/S4RCeLmU8P

— Tony Wilson (@tonywilsonIES) October 12, 2021

So why can't we meet the demand? Short answer is, we've far fewer workers.
Below shows labour market 'activity' (employed plus u/e) since 1971. Dotted line is pre-crisis trend - we're below it by 975 THOUSAND. This is biggest contraction since at least early 1990s.
6/ pic.twitter.com/S4RCeLmU8P

— Tony Wilson (@tonywilsonIES) October 12, 2021

And who are the missing million? One third is lower population (blue bars), so mainly migration, but two thirds is 'economic inactivity'(yellow bars). Especially older women, men in their 50s, and young men (especially students).
So not people being helped thru 'Plan for Jobs' 7/ pic.twitter.com/cU90S1CtmQ

— Tony Wilson (@tonywilsonIES) October 12, 2021

So where are the workers? They're mainly still here, but aren't looking for work.
And while the rise in 'economic inactivity' is driven by students, we're also seeing worrying up-tick in long-term ill health, which has reached it's highest ever at 2.2 million. 8/ pic.twitter.com/2I0MEWejHS

— Tony Wilson (@tonywilsonIES) October 12, 2021

Just to end my thread on three positives in today's figures.
First, long-term unemployment looks to have levelled off and may be falling for young people. Great news, and reflects really strong recovery (plus e.g. Kickstart for young people) 9/ pic.twitter.com/pNRQBxkIPI

— Tony Wilson (@tonywilsonIES) October 12, 2021

Still no sign of redundancies rising - with advance employer 'notifications' as well as the official estimates both suggesting below pre-crisis levels 10/ pic.twitter.com/rj0IxWFObg

— Tony Wilson (@tonywilsonIES) October 12, 2021

And athe number of people in work but 'away' from jobs is back to pre-crisis levels. If true, it implies that there's not going to be a surge of unemployed when the end of CJRS feeds thru into LFS.
(LFS 'furlough' estimates also fell to ~300k in Aug) 11/ pic.twitter.com/z29M3Mggkx

— Tony Wilson (@tonywilsonIES) October 12, 2021

So all told - the recovery is still going strong but held back by a 'missing million' from the labour mkt. Across industries and mainly not migration.
It won't fix itself by just telling firms to 'pay more' or hoping for the best. We need a proper, new Plan for Jobs that will...

— Tony Wilson (@tonywilsonIES) October 12, 2021

Focus on helping those who aren't looking for work to do so - so more help for older people, parents, students; specialist support around health and disability; help with childcare; for students etc.
Firms also need to do more - on flexibility, security, training, recruitment.

— Tony Wilson (@tonywilsonIES) October 12, 2021

Grocery prices rise, as fuel crisis hits visits to supermarkets

A supermarket in Manchester, Britain, last month
A supermarket in Manchester, Britain, last month Photograph: Xinhua/REX/Shutterstock

UK consumers cut their trips to supermarkets last month amid the petrol crisis, but those who got to the shops faced higher prices.

Research firm Kantar reports that visits to grocery stores in the last month fell to the lowest level since the February lockdown.

With some forecourts closed, and others seeing lengthy queues, people may have limited the number of trips they made to supermarkets to avoid draining their tanks.

Overall, grocery sales fell by 1.2% year on year in the 12 weeks to 3 October 2021, Kantar says.

Fraser McKevitt, head of retail and consumer insight at Kantar, explains:

“Queues outside petrol stations made headlines last month and visits to forecourts in the south of England increased by 66% on Friday 24 September as people topped up their tanks ahead of the weekend. The reduced availability of petrol saw shoppers limit the number of trips they made to supermarkets.

The average household made 15.5 store visits in the past four weeks, the lowest monthly figure since February. Shoppers staying off the roads also meant the proportion of groceries bought online, which has been steadily decreasing over the past seven months, crept up to 12.4% compared with 12.2% in September.

Kantar also reports that grocery prices jumped by 1.7% in the last four weeks, compared with a year ago, as the cost of living squeeze hit families.

McKevitt explains:

“In real world terms, the average household had to spend an extra £5.94 on groceries last month than they did at the same time last year. The typical household spends £4,726 per year in the supermarkets, so any future price rises will quickly add up.

Shoppers will look to manage their spend by carefully selecting the products and retailers that offer them the best value.”

Economists: Solid UK jobs report does little to dampen rate hike expectations

City analysts say today’s jobs data may bolster the case for the Bank of England to raise interest rates (with traders expecting

Laith Khalaf, head of investment analysis at AJ Bell, says the UK now looks “firmly on the path to higher interest rates”; the question is how quickly the BoE takes us there.

“The dials in the labour market are pointing towards an interest rate rise, with job vacancies at a record high, unemployment falling, and the number of payrolled employees back to pre-pandemic levels. The only sign that tightness in the labour market might be easing was the continued fall in average earnings, as base effects start to fall out of the equation. The record number of job vacancies suggests even this moderation may peter out, as employers find themselves competing for workers with cold hard cash.

“The number of job vacancies is now within touching distance of the number of unemployed people in the country, which suggests this is not simply a transitory or frictional matter. However the jury is still out on exactly how dry the labour market is until the full effects of the end of the furlough scheme can be seen. If lots of previously furloughed jobs are axed, the resulting job seekers could fill some holes, though their skills probably won’t map neatly across to the jobs being advertised.

ING developed markets economist James Smith says today’s solid UK jobs report does “little to dampen rate hike expectations”:

If markets are right, we may only be a matter of weeks away from the first Bank of England rate hike. That’s undoubtedly bold, but at face value there’s little in the latest UK jobs report that will sow any fresh seeds of doubt in the minds of investors.

Hiring demand is clearly strong, and the rebound in employment in the hardest-hit consumer services sectors continues apace. Wage growth is around pre-virus levels, if ONS estimates of underlying trends are to be believed. And so far, there’s no discernible increase in redundancies ahead of the furlough scheme ending.

In short, it’s an uncertain backdrop in the jobs market. At a time when the cost of living is increasing sharply – and inflation is set to be at or above 4.5% next April – it’s likely that real wages will be flat, or indeed negative for many workers over the winter.

UK payroll changes
UK payroll changes Photograph: ING

Nye Cominetti, Senior Economist at the Resolution Foundation, fears inflation could overtake wage growth this winter:

“With households across Britain facing a triple whammy of rising prices, energy bills and benefit cuts, the jobs market is providing some welcome relief amid a turbulent autumn.

“Record vacancies levels in September were matched by a record hiring surge, which should help formerly furloughed workers find work as a quickly as possible in October.

“But while encouraging, the UK labour market remains smaller than it was pre-pandemic. And though wage growth looks almost unbelievably strong right now, there are big questions over whether it will remain strong enough over the coming months to prevent real wages from falling this winter.”

Jonathan Reynolds MP, shadow Work and Pensions Secretary, points out that the UK’s long-term unemployment total (those out of work for at least a year) hasn’t improved:

“Long term unemployment remains persistent and the Government’s Plan for Jobs has done nothing to alleviate supply shortages or prepare for the future.

Families and businesses are facing an energy crisis, shortages and price rises because of this Government’s poor decisions and lack of planning. And now working people are being hammered by tax hikes and cuts to Universal Credit.

Our country faces a difficult winter and people need a Government on their side, not the complacency and chaos of the Conservatives.”

UK long-term unemployment
Quarterly decreases in those unemployed for up to 6 months have slowed in the latest periods, while those unemployed for between 6 and 12 months continued to decrease, but those in long-term unemployment (unemployed for over 12 months) were largely unchanged on the quarter Photograph: ONS

Although basic and total pay growth has slowed, the ONS’s estimate of underlying UK pay growth has gone up.

They now estimate that underlying regular earnings (trying to strip out the impact of the pandemic) are rising at between 4.1% and 5.6%, up from last month’s 3.6% to 5.1% range.

But, the ONS cautions that there’s a lot of uncertainty about how best to control for the impact of the pandemic.

Paul Dales, chief UK economist at Capital Economics, says a rise in underlying earnings could worry Bank of England policymakers (who already sound nervous about inflationary pressures).

The distortions from the furlough scheme and the change in the composition of employment that have boosted average earnings growth have now started to ease. The 3myy rate fell from 8.3% in July to 7.3% in August. But the ONS said that excluding those distortions, underlying wage growth accelerated from a range of 3.6-5.1% in July to 4.1-5.6%.

That may fuel some of the concerns at the Bank of England that the rise in inflation is becoming more persistent, even though the outlook for overall economic activity has weakened since August.

Dales also warns that there’s no real signs in this release that the labour shortages have started to ease.

The end of the furlough scheme will probably help, but we’re increasingly of the view that labour shortages will last at least until the middle of next year.

UK pay growth
UK pay growth Photograph: ONS

Updated

PwC: winding down furlough creates 'sternest test'

A cloud is hanging over today’s jobs report -- the ending of the furlough scheme at the end of September.

Rob Clarry, economist at PwC, says the labour market faces its ‘sternest test’ since Covid-19 hit.

“September marked another positive month for the UK labour market. The number of payrolled employees reached a record high of over 29 million, exceeding the pre-pandemic level for the first time. And demand for employees remained elevated with a record 1.2 million job vacancies open.

“However, with the furlough scheme winding down at the end of September, the labour market now faces its sternest test since the start of the pandemic. We expect to see a period of adjustment as workers made unemployed either enter sectors experiencing high demand for labour, such as transport and construction, or retrain to pursue new vocations.

The gradual increase in the supply of available workers should also soften wage growth over the coming months, as people move into the sectors which are running hot. This could provide some welcome respite for the transport sector, which recorded a 56% increase in the number of vacancies open over the last 3 months.”

🇬🇧 U.K. Payrolls Rise Above Pre-#Covid Levels With Record Hiring - Bloomberg
*Link: https://t.co/GzShExAMSw pic.twitter.com/QOXn2dep2N

— Christophe Barraud🛢 (@C_Barraud) October 12, 2021

Updated

Fidelity: workers have more power to demand higher wages.

The surge in vacancies shows that the UK labour market is tight - and should give workers bargaining power for pay rises.

So says Ed Monk, associate director at Fidelity International:

The shortage of HGV drivers has been well documented, but other sectors from hospitality to retail are also dealing with talent gaps - 12 of 18 sector categories are showing record levels of vacancies.

“The rise in open job vacancies should hand workers even more power to demand higher wages.

Monk also points out that the picture on pay is less rosy than the headline figures suggest:

Working out the real rate of pay rises is difficult, however. The headline rate of 7.2% comes a with a big asterisk. Last year’s pay figures were brought lower by many people having seen their wages drop while on the furlough scheme, making this year’s number look better. Meanwhile, many lower paid workers have lost their jobs, with the effect of pushing the average higher. Stripping out these effects brings the underlying rate of regular earnings down a bit, to between 4.1% and 5.6%.

“That’s still enough for the Government to claim wages are rising in real terms because inflation is currently 3.2% - but the rise is far less that the headline rate of wage rises suggests. While some jobs are seeing significant pay increases, many are seeing below-inflation rises - and public sector workers are seeing their pay frozen completely. With inflation forecast to rise significantly further, it would be a mistake to be complacent about a squeeze on the cost of living in the months ahead.”

The surge in vacancies shows that UK firms are struggling to fill jobs, says Matthew Percival, CBI Programme Director for Skills & Inclusion:

“Companies have found hiring difficult this autumn and the official data is beginning to tell the same story, with the number of people on payroll exceeding pre-Covid highs and record vacancies.

“It’s welcome that Government has set up a new taskforce chaired by Sir David Lewis to advise on the impact of supply chain disruption and labour shortages on the recovery.

Business and Government working together is the best way to create the high-wage, high-skill, high-investment, high-productivity economy we all want to see.”

(Business leaders have felt unfairly blamed for the UK mounting supply-chain problems, with ministers also accusing some firms of using immigration to keep wages low).

The easing of lockdown restrictions in the spring led to a rise in the number of hours worked over the summer.

Total actual weekly hours worked in the UK increased by 39.9 million hours from the previous quarter, to 1.02 billion hours in June to August 2021.

Thats’s still 30.9 million below pre-pandemic levels, though.

UK hours worked
UK hours worked Photograph: ONS

Part-time workers made up the majority of the increase in employment in June-August, after bearing the brunt of layoffs during the pandemic:

Part-time and full-time employment levels

Minister for Employment Mims Davies MP says:

“With unemployment falling once again, and another record rise in the number of workers on employer payrolls, it’s clear our plan to create, support and protect jobs is working.

“As we enter the next phase of recovery, the £500m boost to our Plan for Jobs will continue to deliver more skills and opportunities for people up and down the country whilst crucially helping to fill vacancies across growing sectors as we push to build back better.”

UK unemployment statistics

Vacancies at record, as transport industry struggles to hire

In September alone, there were almost 1.2 million vacancies across the UK, the ONS says, which a record high.

This chart shows vacancies over the July-September quarter also soared to a record (at 1,102,000):

UK vacancies

There were 3.7 vacancies for every 100 employee jobs, which is another record high, the Office for National Statistics says.

Vacancies rose fastest in transport and storage -- up a blistering 56.1% in the quarter, amid the scramble to find lorry drivers and other logistics staff.

UK vacancies, July-September

The ONS adds:

  • July to September 2021 saw continued growth across the majority of sectors with 12 of the 18 categories displaying a record number of vacancies; the largest quarterly increase was seen in Wholesale and retail trade; repair of motor vehicles and motorcycles, which was up 35,000 (32.4%)
  • Across the majority of industry sectors the rate of growth in vacancies began to slow down; vacancies rose by 239,000 (27.7%) in July to September 2021, down from 242,000 (38.9%) last quarter.
  • In July to September 2021, all industry sectors are above or equal to their January to March 2020 pre-pandemic levels with accommodation and food service activities increasing the most, by nearly 50,000 (59%).
  • All industry size bands displayed a record number of vacancies in July to September 2021.

Introduction: Unemployment drops as payrolls and vacancies surge

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Unemployment across the UK has dipped, as company payrolls continued to swell over the summer as the economy recovered from the economic shock of the pandemic.

Figures released by the Office for National Statistics this morning show that the jobless rate fell to 4.5% in the three months to August. That’s down from 4.6% in the three months to July, and 0.4 percentage points lower than the previous quarter.

In another sign that the labour market continuing to recover, the number of payroll employees rose by 207,000 in September to a record 29.2m, back at pre-pandemic levels.

New @ONS data:
- Payrolls +207k in September
- Record vacancies
- Headline employment/unemployment/inactivity figures all improved on previous quarter pic.twitter.com/wAxPXNHJ9t

— Pawel Adrjan (@PawelAdrjan) October 12, 2021

Firms are also struggling to fill jobs, the survey confirms. Job vacancies in July to September 2021 hit a record high of 1,102,000 - an increase of 318,000 from its pre-pandemic January to March 2020 level.

Headline indicators for the UK labour market for June to August 2021 show

▪️ employment was 75.3%
▪️ unemployment was 4.5%
▪️ economic inactivity was 21.1%

➡️ https://t.co/7MWyGSe7u7 pic.twitter.com/9XHhZI9l2f

— Office for National Statistics (ONS) (@ONS) October 12, 2021

But the surge in pay growth seen earlier this year (and hailed by Boris Johnson) has slowed.

Total pay, including bonuses, rose by 7.2% in the June-August quarter, down from 8.3% in May-July. Regular pay rose by 6.0% in the quarter, down from 6.8%

And adjusted for inflation, that leaves real total pay at 4.7% and real regular pay at 3.4%.

UK average earnings

But, the ONS points out that this data should be treated cautiously, as the loss of more low-paid jobs in the pandemic has pushed up average earnings.

They explain:

Annual growth in average employee pay is being affected by temporary factors that have inflated the increase in the headline growth rate: base effects where the latest months are now compared with low base periods when earnings were first affected by the pandemic, and compositional effects where there has been a fall in the number and proportion of lower-paid employee jobs, therefore increasing average earnings.

https://t.co/pAFYZDvuOU The real time PAYE data has the number of employees above pre-pandemic levels.
Median pay growth slowing from late Spring/Summer highs as base effect drops out but still above pre-pandemic rates. pic.twitter.com/cftgq69Vz6

— Duncan Weldon (@DuncanWeldon) October 12, 2021

Overall, the ONS estimates that underlying regular earnings growth rate is between 4.1% and 5.6% -- but again, given the uncertainty around this range, interpretation should be treated with caution.

ONS Director of Economic Statistics Darren Morgan says the jobs market continues to recover:

Commenting on today’s labour market data, ONS Director of Economic Statistics Darren Morgan said: (1/3) pic.twitter.com/tOUdUBxmxj

— Office for National Statistics (ONS) (@ONS) October 12, 2021

Continuing, Darren Morgan said: (2/3) pic.twitter.com/V4picdZUrf

— Office for National Statistics (ONS) (@ONS) October 12, 2021

Darren Morgan added: (3/3) pic.twitter.com/cHLVMSRBrU

— Office for National Statistics (ONS) (@ONS) October 12, 2021

More details and reaction to follow...

Stock markets are expected to open lower, as fears about weakening growth, the global energy crunch, higher prices and the possibility of interest rate hikes keep investors on edge.

European Opening Calls:#FTSE 7096 -0.71%#DAX 15093 -0.70%#CAC 6522 -0.74%#AEX 768 -0.79%#MIB 25758 -0.66%#IBEX 8828 -0.80%#OMX 2217 -0.72%#STOXX 4041 -0.76%#IGOpeningCall

— IGSquawk (@IGSquawk) October 12, 2021

Yesterday, the odds of a UK interest rate rise before the end of 2021 increased, as rising fuel and food prices push up inflation.

And the International Monetary Fund is holding its annual meetings in Washington, where its expected to issue a downbeat economic outlook, as supply-chain bottlenecks and rising inflationary pressures threaten the recovery.

The agenda

  • 7am: UK labour force survey
  • 10am BST: ZEW survey of German investor confidence
  • 11am BST: NFIB index of US Small Business Optimism
  • 2pm: IMF publishes its World Economic Outlook
  • 3pm BST: JOLTS survey of US job vacancies
  • 3.30pm BST: IMF publishes its Global Financial Stability Report

Contributors

Graeme Wearden

The GuardianTramp

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