Closing post

Time to wrap up:

Ministers are very close to reaching a deal to restart carbon dioxide (CO2) production at factories on Teesside and in Cheshire, in an effort to ease fears of food shortages.

The talks were held as food and drink bodies warned that UK consumers would see shortages in 10 days time, unless carbon dioxide supplies were restored. Poultry producers, pig farmers and fizzy drinks makers are all warning that supplies are short.

The UK public’s inflation expectations have jumped this month, amid rising consumer prices and surging energy costs.

Analysts have warned that millions of households could face a second record jump in energy bills next spring, on top of the £139 increase due next month, as the global gas crisis continues to drive market prices to new highs.

The world’s energy watchdog has called on Russia to send more gas to Europe as the energy supply crunch bleeds across the continent, in a rare public rebuke of the Kremlin.

UK factories have reported record orders, but a slowdown in output growth as the supply chain crisis leaves them struggling to meet demand.

UK government borrowing increased by more than expected in August as rising inflation pushed up debt interest payments.

The Office for National Statistics said the government’s budget deficit – the gap between spending and income – dropped to £20.5bn in August from about £26bn in the same month a year earlier as Britain’s economy recovers from lockdown.

However, the latest snapshot showed that the gains from a rebound in tax receipts were offset by inflation driving up interest payments on the national debt by 84% compared with the same month a year ago.

The OECD has raised its inflation forecasts sharply, and trimmed its growth forecasts - with the UK seen as the fastest growing G7 country in 2021 and 2022.

It also warned governments and central banks against an over-hasty withdrawal of support for growth amid concerns that recovery from the pandemic-induced recession is incomplete.

A report by the Institute for Fiscal Studies has shown Britain’s worst labour market shortages in decades are being driven by employers struggling to recruit low-paid workers, while vacancies in other areas are still significantly below pre-pandemic levels.

Entain, the gambling company behind Ladbrokes and Coral, has received a $20bn takeover approach from DraftKings – the latest swoop by an American rival.

Virgin Atlantic has reported a 600% surge in flight bookings to the US after the US said it would lift restrictions to allow fully vaccinated passengers from the UK and most European Union countries to travel to the country from early November. British Airways reported a jump in searches.

National Express is in talks to buy Stagecoach in a deal that would combine the UK’s biggest coach and bus operators.

Ethical kids clothing company Frugi has joined forces with new children’s clothing rental service thelittleloop, to let customers rent clothes rather than buy them.

European stock markets have closed higher, recovering from a sharp drop on Monday.

And Universal Music Group’s shares surged by more than a third in its stock market debut on Tuesday, putting its chairman and chief executive, Sir Lucian Grainge, in line for a potential bonus of almost $150m (£110m).

Goodnight. GW

IEA calls on Russia to send more gas to Europe before winter

The world’s energy watchdog has called on Russia to send more gas to Europe as the energy supply crunch bleeds across the continent, in a rare public rebuke of the Kremlin.

The International Energy Agency (IEA), which advises global governments on energy policy, called out the gas-rich country for refusing to increase exports even as fierce demand has driven market prices to successive record highs, appearing to support claims that Russia is withholding supplies.

“The IEA believes that Russia could do more to increase gas availability to Europe and ensure storage is filled to adequate levels in preparation for the coming winter heating season,” the Paris-based agency said, adding:

“This is also an opportunity for Russia to underscore its credentials as a reliable supplier to the European market,”

The IEA’s intervention has come amid growing unease in Europe over Russia’s decision not to increase gas exports to Europe next month, despite record gas market prices across the continent.

It said Russia had been “fulfilling its long-term contracts with European counterparts – but its exports to Europe are down from their 2019 level”

UK inflation expectations jump

The British public’s expectations for inflation over the next year and over the longer-term have jumped this month -- as prices rise in the shops, and energy costs surge.

It raises the risk that the Bank of England will tighten policy to stop them becoming unmoored, Citi said on Tuesday.

Reuters has the details:

The British public’s expectations for inflation over the next 12 months surged by a full percentage point in September to 4.1% and expectations for five to 10 years’ time rose to 3.8%, Citi said, based on its monthly survey with pollsters YouGov.

“Today’s data, especially the movement in long-term expectations, suggest that growing risks inflation expectations could become de-anchored to the upside. The sharp increase risks a hawkish response from the MPC this week,” Citi said.

UK public inflation expectations for year-ahead rise to 4.1% (prev. 3.1% M/M), 5-10yr expectations rise to 3.8% (prev. 3.4%); risk expectations could become "de-anchored" to the upside - Citi/YouGov

😬😬😬 https://t.co/cfpKhrxDho

— Newsquawk (@Newsquawk) September 21, 2021

UK consumer price inflation jumped to 3.2% per year in August, from 2% - the biggest jump on record, to the highest rate since March 2012.

The Bank of England (which meets this week) has forecast inflation will hit 4% by the end of this year. But it also argues that these inflationary pressures will be temporary, due to supply chain problems following the pandemic, and a burst of demand, pushing up prices.

Full story: UK ministers near deal on CO2 production to ease food supply fears

Ministers are very close to reaching a deal to restart carbon dioxide (CO2) production at factories on Teesside and in Cheshire, in an effort to ease fears of food shortages, my colleagues Rowena Mason and Aubrey Allegretti write tonight.

The business secretary, Kwasi Kwarteng, has been locked in talks with the US firm CF Industries after it stopped work at its fertiliser plants because of the surge in gas prices.

Earlier he suggested the government could be willing to provide the industry with support to restart after warnings that a shortage of the gas could cause food supply problems.

He told the BBC:

“Time is of the essence, and that’s why I spoke to the chief executive, speaking to him twice in the last two days, and we’re hopeful that we can get something sorted today and get the production up and running in the next few days.”

In a sign that taxpayers’ money could be used, Kwarteng said:

“It may come at some cost, we’re still hammering out details, we’re still looking at a plan.”

More details of the agreement to restart production are expected later on Tuesday or on Wednesday morning.

The closure of the fertiliser factories has led to a food production crisis, as CO2 is a byproduct of production and is used to stun animals for slaughter, as well as in baking and vacuum packing.

Boris Johnson acknowledged the government was taking “direct steps” to safeguard CO2 supplies, although the government has not formally confirmed a deal.

Here’s their full story:

Updated

Energy analyst John Kemp has shown how poorer households will be hit hardest by the price surge, as energy bills are a greater share of their income than for wealthier households:

UK GAS AND ELECTRICITY expenditure as a percentage of household income - rising prices will hit lower-income deciles much harder than the rest of the population: pic.twitter.com/jVZlLk805a

— John Kemp (@JKempEnergy) September 21, 2021

RISING gas and electricity bills hit households in the lower half of the income distribution much harder: pic.twitter.com/oS1tAinZ5r

— John Kemp (@JKempEnergy) September 21, 2021

UK HOUSEHOLD spending on food and fuel, 2019/20: pic.twitter.com/KJHYi9wVdC

— John Kemp (@JKempEnergy) September 21, 2021

Markets recover from Monday's swoon

Entain’s surging share price has helped the London stock market more than recover Monday’s losses.

The blue-chip FTSE 100 index has closed 77 points higher at 6980, up 1.1%, after falling to a two-month low yesterday.

Entain (+18%) was the top riser, followed by hedge fund management company Pershing Square (+5%) and oil giant Royal Dutch Shell (after it agreed to sell its Permian Basin assets for $9.5bn, with $7bn being returned to shareholders).

Shell selling its Permian assets to Conoco is a reminder that swapping ownership can reduce the carbon footprint of one company, but does nothing for global emissions.

— John Arnold (@JohnArnoldFndtn) September 21, 2021

Travel stocks also added to yesterday’s gains, on relief that double-vaccinated foreign travellers will be allowed into the US from November. IAG (British Airways parent) gained 3%, while Rolls-Royce (whose jet servicing business could be busier) rose 3.5%.

Bu mining companies and banks lost ground, amid anxiety over China’s indebted property group Evergrande (which faces a debt repayment this week).

DIY chain Kingfisher fell almost 5%, despite lifting its interim dividend by almost 40 per cent and announcing a £300m share buyback -- with analysts wondering how long the pandemic sales boom would last.

European markets recovered from their worst day in two months, with the Stoxx 600 index gaining 1%.

Danni Hewson, AJ Bell financial analyst, says DraftKing’s ‘stonking offer’ for Entain lifted the gambling sector (Flutter gained 3.5%):

Whilst investors are still clearly nervous about the countdown to a potential Evergrande default they’ve been happy to jump on some rebound action today or embrace potential new seams of opportunity. Sports betting group Entain has topped the FTSE 100 risers after it confirmed a takeover approach from US operator DraftKings and there’s been enough of a glow generated that other UK betting companies have been able to bask a little too.

It’s a stonking offer when you compare it to that from MGM earlier in the year and there’s little wonder that shares have shot to an all-time high, though investors in the US company seem a little less enamoured with the prospect.

M&A action is also front and centre for the FTSE 250 with National Express’ plans to snap up rival Stagecoach have been met with a warm welcome all round; there’s just the little issue of the competition watchdog to deal with before any ink can meet paper.

“Though London’s blue-chip index has still failed to claw its way back above that all important 7,000 mark today has delivered some confidence boosters including news that the government has struck a deal to get production back underway at two fertiliser plants. While many headlines will focus on the meat that goes along with our two veg the government has been keen to point out that this deal is a one-off and is primarily concerned with keeping NHS operations on track and cooling vaccines.

Good intentions pave the way to some pretty tricky places and there will be some concerned about the precedent set by the move and there will certainly be questions about contingency plans going forward.

Here’s Nicholas Hyett, equity analyst at Hargreaves Lansdown, on DraftKing’s takeover approach to gambling firm Entain, the owner of Ladbrokes and Coral:

At first glance, staid UK high street bookmakers are not an obvious fit for a US fantasy sports giant, but it’s Entain’s US sports betting venture with MGM that’s drawn DraftKings eye. Rapid growth in a market share in a market which is itself exploding makes Entain hot stuff, and a bid from MGM back in January is proof that rivals are prepared to put their hands in their pockets to secure a slice of the action. A subsequent spin off/sale of more mature assets, as we saw with William Hill, would probably follow.

However, the fact there are so few details available, not even an offer price, means talks are at an early stage and there can be no certainty whatsoever that a firm offer will eventually be forthcoming, let alone that a deal will complete. There’s potential for some added complexity in the deal, since it’s not clear how MGM would react to a rival seizing a good chunk of its growing joint venture and the Entain board have rebuffed offers in the past. Chickens and eggs spring to mind.”

Downing Street would not confirm any details of a deal with CF Industries over the CO2 shortage, PA Media reports.

A No 10 spokesman said:

“The Business Secretary has been in discussions with CF Industries since the weekend on how we get their plants up and running as soon as possible to secure a continued supply of CO2 to UK businesses.”

There’s no official confirmation yet that the government has struck a deal with CF Industries to restart production at its fertiliser plans, and boost CO2 supplies.

As reported earlier, Sky News have said an agreement has been reached.

Here’s Bloomberg take:

The U.K. government reached a deal to restart fertilizer production hit by a gas crunch, in a bid to ease a shortage of carbon dioxide that’s crucial for the food industry.

The deal is with CF Industries Holdings Inc., a person familiar with the matter said. High gas prices forced the fertilizer maker to last week close U.K. plants that make carbon dioxide as a byproduct, threatening to disrupt the country’s food supplies almost immediately.

More here: U.K. in Deal to Restart Fertilizer Output, Easing CO2 Crunch

Entain’s shares have soared to a fresh record high in London, currently up over 18% at £22.67.

That values the firm at around $18bn, or £13.3bn, I think, up from $15.4bn (£11.2bn) last night.

The Financial Times says:

The bid was submitted in recent days and valued Entain at more than £25 a share, according to a person with knowledge of the approach.

The exact terms of the offer could not be learned but CNBC, which first reported the approach, said it was comprised of mostly shares. At £25 a share, the bid would value Entain shares at roughly £14.6bn before the inclusion of £2bn in net debt.

The UK-listed company’s shares were valued at around £18 before news of the deal was first reported on Tuesday. They have since jumped 20 per cent to £22.83.

Entain’s share price
Entain’s share price over the last decade Photograph: Refinitiv

DraftKings have slid by almost 8%, though, as Wall Street investors digest the prospect of potentially paying $20bn (£16.6bn) for the Ladbrokes owner.

US market not enamored with $DKNG plan to buy Entain. Possibly concerned about lots of dilution if DK pay majority of $20bn price tag in stock, as reported pic.twitter.com/OnFplnf0XM

— Brad Allen (@BradAllenNFL) September 21, 2021

Entain has confirmed that it has received a takeover proposal from DraftKings, following CNBC’s report.

In a statement to the City, it says:

The Board of Entain confirms that it has received a proposal from DraftKings to acquire Entain, the consideration for which would include a combination of DraftKings stock and cash.

There can be no certainty that any offer will be made for the Company, nor as to the terms on which any such offer may be made.

A further announcement will be made as and when appropriate. Shareholders are urged to take no action at this time.

Entain confirms that it has received a proposal from DraftKings to acquire Entain, the consideration for which would include a combination of DraftKings stock and cash. CNBC reporting offer c$20bn

— Oliver Haill WFH (@olihaillbiz) September 21, 2021

Updated

The BBC’s Simon Jack has more details of the deal to restart CO2 production at two UK fertiliser factories:...

Govt sources insist Deal with CF to restart CO2 production is one-off because of CO2 use in nuclear plants and cooling of medicines and vaccines in NHS.

— Simon Jack (@BBCSimonJack) September 21, 2021

Lord Adebowale, chair of the NHS Confederation, has warned that operations at NHS hospitals are at risk of being cancelled due to carbon dioxide shortages.

We wrote on Sunday:

“What I am concerned about, and I think Kwasi Kwarteng and others will be focused on, is making sure there’s enough CO2 for the NHS,” Adebowale told Times Radio.

“Because CO2 is used in a number of interventions in the NHS – invasive surgery, endoscopy, for instance, stabilising body cavities so that surgeons can see what’s going on inside.”

One senior health service source said the NHS had this weekend received assurances from the government that its access to the UK’s supply of CO2 would not be affected.

Entain shares jump on reports of DraftKings '$20bn takeover approach'

Back in the City, shares in UK betting group Entain have surged 16% after CNBC reported that DraftKings, the US fantasy sports and sports betting operator, is making a $20bn offer (£14.6bn).

Entain owns Ladbrokes, Coral, bwin, PartyPoker, and Sportingbet - and this offer is sharply higher than an $11bn (£8bn) offer from Las Vegas casino operator MGM it turned down early this year.

CNBC’s David Faber says the offer is largely in DraftKings stock, along with cash, according to sources.

Our @DavidFaber reports that DraftKings is making a $20B cash and stock offer for international sports betting and gambling company Entain.@CNBC $DKNG pic.twitter.com/Pmxq3DncuC

— Squawk on the Street (@SquawkStreet) September 21, 2021

wow. Entain up 20% on CNBC report on Draftkings offer... pic.twitter.com/pK8io4Buv2

— Matt Monks (@MattMonks123) September 21, 2021

Back in January, Entain rejected an £8bn offer from US-based casino giant MGM Resorts International, saying it significantly undervalued” the business.

Analysts and investors have been speculating that the U.S. casino operator could return with a new bid.

MGM and Entain have an online sports betting partnership in the U.S. called BetMGM.

UK gambling companies have been in demand since the US supreme court struck down a federal law that bars gambling on football, basketball, baseball and other sports in most states in 2018.

That has sent US casino companies scrambling for the online betting expertise build up by UK-listed companies over the years.

My colleague Rob Davies explained last month:

Since the supreme court overturned a ban on sports betting, the market has been opening up state by state. Tens of billions are being spent as firms jockey for a leading position in a market that looks like it could be even more lucrative than anyone thought.

The market research firm Ibis World thinks US sports betting could be worth $55bn (£40bn) a year, about 17 times the size of the UK market.

How Entain and Flutter are faring in that race will be interesting. Both have launched major tie-ups with US partners but it’s the nature of the relationship between Entain and its American buddies MGM Resorts that will garner most attention.

In January, Entain knocked back an £8bn takeover bid from MGM, which decided it would rather own the spoils from their joint venture, BetMGM, than share them. Faced with short shrift from the Entain board and investors, MGM walked away, starting the clock on a six-month period during which takeover rules prevented it from having another tilt.

The moratorium expired in mid-July and Entain’s share price since then suggests the board was right to send the American suitor back across the Atlantic with a flea in its ear. Entain’s stock market value has soared to more than £11bn, meaning MGM will have to dig deep if it means business. Shareholders, who have already seen the value of their investments rise thanks to the accelerated movement online during the pandemic, will be licking their lips.

Updated

Here’s a clip of Sky’s News’s Paul Kelso explaining that the UK government has reached agreement with CF Industries to restart carbon dioxide production at its UK sites.

BREAKING: The government has reached agreement with CF Industries to restart carbon dioxide production at its UK sites following talks between the company and Business Secretary Kwasi Kwarteng.

Sky's @PKelso has the latest.

Read more here: https://t.co/Sd7QkhzPcI pic.twitter.com/Bx3Je4qhSq

— Sky News (@SkyNews) September 21, 2021

As he points out, we don’t yet know exactly when CO2 production will restart, easing pressures on the UK food supply chain.

It’s also unclear what the deal will cost, to encourage CF Industries to resume operations at Ince, Cheshire and Billingham, Teeside. Production at both plants halted last week after the gas price surge made fertiliser production uneconomic (CO2 is a byproduct of the fertiliser-making process).

The deal comes just hours after the Food and Drink Federation warned that the UK had just 10 days before consumers saw food shortages.

Pork and poultry producers are already struggling, and fizzy drinks makers have warned that some soft drinks manufacturers have only a few days of CO2 supply left in reserve.

Boris Johnson: we're taking "direct steps" to ensure CO2 remains available

Boris Johnson has said the Government was taking “direct steps” to make sure carbon dioxide would be available for industries such as the food sector, PA Media report.

Speaking to the BBC during his trip to the United States, he said the spikes in gas prices which have led to the disruption of CO2 production “are being caused by the world economy waking up after quite a long period of cryogenic paralysis - it’s unfreezing everywhere and that is causing supply chain problems”.

“Obviously, we’re working with the companies to make sure that we can keep the supplies going.

“On the carbon dioxide issue that’s particularly important for some industries, we’re taking direct steps to make sure that that continues to be available.”

Asked whether that meant subsidies, he said:

“We’ll do what’s necessary and you’ll be hearing a bit more about that later on in the day.”

Sky: major CO2 supplier restarts production after government talks

The government has reached agreement with CF Industries to restart carbon dioxide production at its UK sites following talks between the company and Business Secretary Kwasi Kwarteng, Sky News reports.

They say:

The US firm said last week that it had stopped work at its fertiliser plants at Billingham on Teesside and Ince in Cheshire because of a surge in gas prices.

That prompted a crisis in the food industry because the CO2 which is a by-product of the fertiliser manufacturing process is used to stun farm animals before slaughter as well as in the vacuum packing process.

It prompted warnings that shoppers could start noticing shortages in poultry, pork and bakery products within days.

The Government has reached an agreement with CF Industries to restart CO2 production at its UK sites following talks between the company and Business Secretary Kwasi Kwarteng

For more on this and other news visit https://t.co/8OWd2TNmj1

— Sky News Breaking (@SkyNewsBreak) September 21, 2021

Kate Ferguson, deputy political editor at The Sun, has more details:

Boris Johnson confirms it will subsidise CF Industries to keep CO2 production going and bubbles in our beer

Says he will do “what’s necessary” to keep production going and details are coming “later today”

🍻 🥩

— Kate Ferguson (@kateferguson4) September 21, 2021

Over in the US, the housing market has rebounded.

The number of new housing starts jumped 3.9% in August, the US Commerce Department reports, beating forecasts.

The number of building permits (approval to start a new house) handed out also jumped, rising 6% month-on-month in August.

Housing demand had been hit by the jump in material prices earlier this year; the fall in timber prices may have encouraged activity again.

US housing starts rebounded in Aug, rising well above expectations, although the pace of new residential construction is still middling relative to recent history. Note, however, that newly issue permits are looking firmer--a sign that starts will continue to strengthen: pic.twitter.com/Fw4UlWQDYF

— James Picerno (@jpicerno) September 21, 2021

BREAKING! US Building Permits unexpectedly rose in August. Very solid number. pic.twitter.com/syFzqGggT1

— jeroen blokland (@jsblokland) September 21, 2021

Sky News’s Ed Conway has written a handy thread on the energy crisis, explaining why the UK may face “a very nervy winter”, for several reasons....

The energy crisis is complicated, almost certainly more complicated than you imagine. So be wary of seductive catch-all explanations: it’s Russia’s fault! It’s climate change policy’s fault! It’s all because the wind isn’t blowing! The reality is there’s a lot going on at once.🧵

— Ed Conway (@EdConwaySky) September 21, 2021

A lot of people are convinced this is all because Russia has restricted flows of gas. And flows coming from the Yamal pipeline certainly dropped sharply in Aug. BUT actually Russian flows are UP vs start of 2021 (albeit lower than pre-pandemic). Good @WoodMackenzie chart: pic.twitter.com/PT6nNpnIqE

— Ed Conway (@EdConwaySky) September 21, 2021

A far bigger part of the explanation for rising gas prices is those two red arrows on the left of the chart. We’re not getting as much LNG tanker deliveries as usual and domestic gas fields aren’t producing as much as usual. These seem like bigger deals than Russian supply. pic.twitter.com/IPF5t0Hnaw

— Ed Conway (@EdConwaySky) September 21, 2021

Another claim doing the rounds on Twitter is that the UK is uniquely affected by this crisis, and that it’s all down to Brexit. They seem to derive from graphics like this one, widely shared here. LOOK: UK prices are MULTIPLES higher than in Europe! pic.twitter.com/6oRt8OeTd5

— Ed Conway (@EdConwaySky) September 21, 2021

The problem with snapshots like that 👆is they are just that: snapshots. For a period last week UK prices were indeed WAY higher than most of Europe. But that wasn’t due to Brexit. It was because of the interconnector fire I wrote abt here: https://t.co/81LENuxzxB

— Ed Conway (@EdConwaySky) September 21, 2021

It’s bit like taking this point on this chart (day ahead UK electricity price) and using that to compare UK with elsewhere. Which is what people have been doing; and then blaming Brexit. Both of which seem wrong. Prices certainly higher now. But much, much lower than that spike pic.twitter.com/JGghqChfOY

— Ed Conway (@EdConwaySky) September 21, 2021

HOWEVER, it’s also true that UK energy prices are stubbornly higher than in most EU countries. Gas and power prices are up everywhere, but the level in the UK seems highest. Why? For a few reasons… pic.twitter.com/6YOP9yBf4J

— Ed Conway (@EdConwaySky) September 21, 2021

This shows you where we get our power from in each autumn (well, each Q3) going back over a decade. You can see a few trends: look how coal has nearly disappeared. Nuclear is a bit thinner than before (ageing reactors; fewer reactors) pic.twitter.com/p3H0TJFyX4

— Ed Conway (@EdConwaySky) September 21, 2021

Now look at that wind slice. It was growing and growing (it provided more than a fifth of all our power in 2020). But in 2021 it suddenly shrank. And what took up the slack? Imports. Which helps explain why the interconnected fire freaked ppl out: we NEED power imports right now pic.twitter.com/bYq9v3PlNP

— Ed Conway (@EdConwaySky) September 21, 2021

Wind speeds have been REALLY weak this yr.
Look at this chart, a bit like some of those excess death charts you’ll prob be familiar with.
The whiteish range is where wind speeds tended to be each month over the past 20 years. The black line is this year. Look how low it is! pic.twitter.com/dtUsTQlXpu

— Ed Conway (@EdConwaySky) September 21, 2021

Another factor in the energy crisis is storage. The EU has less gas in storage now than usual.
But on top of that another issue is that the UK’s storage CAPACITY is really, really low in comparison with other EU nations, so we’re reliant on imports of gas as well as power pic.twitter.com/VKUxzAJ9iA

— Ed Conway (@EdConwaySky) September 21, 2021

What does all this portend for the coming months? Are we really facing the prospect of a three day working week and blackouts? National Grid insists no. @WoodMackenzie says it can envisage one scenario (low wind, low gas availability) which would leave UK unable to fulfil demand. pic.twitter.com/nIRKjC9MQ4

— Ed Conway (@EdConwaySky) September 21, 2021

In short, energy may make for a very nervy winter - as if there wasn’t enough to be nervous about. If the wind starts blowing again, that would really help. But hoping for a change in the weather doesn’t constitute an energy policy. And still somewhat unclear what UK policy is…

— Ed Conway (@EdConwaySky) September 21, 2021

The former Conservative leader William Hague has now weighed in on the energy crisis, warning it could be a “more than tricky” winter for many British families.

Hague said the government needed an elite group of ministers chairing meetings each day on how to tackle the crisis – akin to the Covid Operations committee during the height of the pandemic.

He told Times Radio.

“If I was in government, I would be saying: ‘Get an elite group of ministers together in this reshuffled cabinet who are going to meet every day’ to be on top of all of these issues,”

“And to do anything that the government needs to do, but they won’t be able to do everything. There just will be shortages of something.”

Here’s the full story:

Our energy correspondent Jillian Ambrose has explained the many causes of the crisis here; here’s a flavour:

The UK also relies heavily on gas for home heating and cooking. Yet despite the obvious reliance on fossil fuels for electricity, homes and in heavy industry, the UK has some of the lowest amounts of gas storage capabilities in Europe, leaving the market uniquely exposed to the supply crunch. Less than 1% of Europe’s stored gas is held by the UK.

Britain has been forced to temporarily fire up coal power stations, paying millions of pounds to the likes of Drax in North Yorkshire, to plug some of this power shortfall.

That fragile system faces further challenges in the years ahead, with most of the UK’s nuclear power plants, which supply up to 20% of electricity, to close by the end of the decade. Just one new nuclear power station, Hinkley Point C in Somerset, is being built to replace them.

Graphic showing how Britain relies heavily on electricity from Europe

Universal Music Shares Soar in Market Debut

Sir Lucian Grainge, with pop star Billie Eilish
Sir Lucian Grainge (left) with pop star Billie Eilish Photograph: Chelsea Lauren/Variety/REX/Shutterstock

Universal Music Group’s shares surged by more than a third in its stock market debut on Tuesday, putting its chairman and chief executive, Sir Lucian Grainge, in line for a potential bonus of almost $150m (£110m).

Shares in the world’s largest music company, the label behind artists including Taylor Swift and Bob Dylan, rose more than 35% to €25 a share in early trading giving the business a market value of more than €45bn.

Universal’s parent company, Vivendi, had set a reference price of €18.5 a share, a market capitalisation of €33.5bn, ahead of the spin-off of its crown jewel asset on the Euronext stock exchange in Amsterdam.

However, investors eager to cash in on the streaming boom – analysts at JP Morgan Cazenove have described Universal Music as an “extraordinary, must-own asset” – have made it the biggest European listing of the year.

British-born Grainge is now in line for one of the largest corporate payouts in history. Under the terms of the flotation Grainge will receive a “transaction bonus” of a share of $150m and 1% of Universal Music’s equity value above $30bn, relating to the 60% of the music company that Vivendi is releasing in the flotation.

This means that the 61-year-old is in line for a bonus of potentially more than $140m, according to Vivendi’s prospectus on the flotation published last week.

More here:

Updated

BofA cuts China growth forecasts

A top U.S. investment bank cut China’s economic growth forecast on Tuesday for the next three years thanks to the combination of the Delta variant outbreak and tightening controls on the property and the infrastructure sector, Reuters reports.

BoFA Securities said its new real gross domestic product growth forecast for China for this year was trimmed to 8.0% from 8.3%, 5.3% from 6.2% in 2022 and 5.8% from 6.0% for 2023.

BofA lowers their growth projections on China:
2021 growth seen at 8.0% (previously 8.3%)
2022 growth seen at 5.3% (previously 6.2%)
2023 growth seen at 5.8% (previously 6.0%)#China #economy #BOFA

— XGLOBAL Markets (@xglobalmarkets) September 21, 2021

The bank also said its base-case scenario of the ongoing problems at Chinese property giant Evergrande is “there would be little spillover” effect on the property sector as a whole and financial markets if the government comes to the rescue by facilitating an orderly debt restructuring.

Analysts at the investment bank said in a note:

“Any further delay in policy response from the fourth quarter of 2021 to the first quarter of 2022 or mishandling of a major debtor default would potentially raise the risk of growth dislocation.”

BofA cuts China's GDP growth forecast for the next 3 years. The GDP growth forecast for China for this year was trimmed to 8.0% from 8.3%, 5.3% from 6.2% in 2022 and 5.8% from 6.0% for 2023. (combination of the Delta and tightening controls on property and infrastructure sector)

— Alex.A. (@alexandaraware) September 21, 2021

Full story: OECD warns over ending stimulus policies despite inflation pressures

The west’s leading economic thinktank has warned governments and central banks against an over-hasty withdrawal of support for growth amid concerns that recovery from the pandemic-induced recession is incomplete, my colleague Larry Elliott reports.

The Paris-based Organisation for Economic Co-operation and Development (OECD) said a continuation of the stimulus policies of the past 18 months was justified because the recent pickup in inflation was likely to prove temporary.

Central banks – including the US Federal Reserve and the Bank of England – have started to voice concerns about rising cost of living pressures but the OECD said policy support was still needed as long as the outlook was uncertain and employment had not yet recovered fully to its pre-crisis levels.

The thinktank said central banks should combine loose monetary policy – keeping interest lows and continuing with asset purchase programmes – with clear guidance about how high they would be prepared to see inflation go before taking action.

The OECD secretary-general, Mathias Cormann, said:

“The world is experiencing a strong recovery thanks to decisive action taken by governments at the height of the crisis. But as we have seen with vaccine distribution, progress is uneven.

Ensuring the recovery is sustained and widespread requires action on a number of fronts – from effective vaccination programmes across all countries to concerted public investment strategies to build for the future.”

Here’s the full story:

OECD warns over ending stimulus policies despite inflation pressures https://t.co/vXZHqyVKOn

— The Guardian (@guardian) September 21, 2021

NEW @OECD #GDP 2022 Forecast
(🔼🔽change vs 5/21)

🌎4.5%🔼
🇦🇺3.3%🔽
🇨🇦4.1%🔼
🇪🇺4.6%🔼
🇩🇪4.6%🔼
🇫🇷4%
🇮🇹4.1% 🔽
🇪🇸6.6%🔼
🇯🇵2.1%🔼
🇰🇷2.9% 🔼
🇬🇧5.2% 🔽
🇺🇸3.9%🔼
🇦🇷4.8%🔼
🇧🇷2.3% 🔽
🇨🇳5.8%
🇮🇳7.9%🔽
🇮🇩4.9%🔽
🇲🇽3.4%🔼
🇷🇺3.4%🔼
🇸🇦4.8%🔼
🇿🇦2.5%
🇹🇷3.1% 🔽
👉 https://t.co/j5iK1SSL0u pic.twitter.com/a0eFbneEXN

— Anthony Gooch Gálvez (@pitres) September 21, 2021

OECD has just published it's interim report. The forecast for world GDP has been downgraded slightly while they have upgraded the inflation forecast but expect it to moderate again. This is not stagflation! pic.twitter.com/ZaUMS8AgT9

— Helge J. Pedersen (@helgejpedersen) September 21, 2021

Updated

Another very eye-catching chart from the OECD:

Holy hell look at shipping costs.

SOURCE: OECD. https://t.co/nEZaSsG758 pic.twitter.com/d9Eh12NEUX

— Latika M Bourke (@latikambourke) September 21, 2021

Despite rising inflation pressures, the UK is expected to be the fastest-growing G7 economy in 2021 and 2022, according to the OECD’s forecasts today.

OECD growth forecasts
OECD growth forecasts Photograph: OECD

OECD forecasts the UK to be fastest growing G7 economy in 2021 & 2022:

2021 2022
UK 6.7% 5.2%
France 6.3% 4.0%
US 6.0% 3.9%
Italy 5.9% 4.1%
Canada 5.4% 4.1%
Germany2.9% 4.6%
Japan 2.5% 2.1%#Brexithttps://t.co/5y20KHi4QS

— Dilip Shah (@DilipShah_) September 21, 2021

But that follows a very sharp downturn in 2020, which leaves the UK with a lot of ground to make up on growth and employment:

OECD interim economic outlook
OECD interim economic outlook Photograph: OECD

Virgin Atlantic's US flight bookings jump 600% overnight after travel ban eased

A Virgin Atlantic Boeing 747 on the tarmac at South terminal, Gatwick airport
A Virgin Atlantic Boeing 747 on the tarmac at South terminal, Gatwick airport Photograph: Kumar Sriskandan/Alamy

Virgin Atlantic has reported that bookings to the US increased overnight by over 600%, compared to last week, after the White House announced it will relax its ban on overseas visitors.

Bookings surged after the Biden administration said that passengers who are fully vaccinated against Covid-19 will be able to fly to the US from November, ending a long ban on arrivals from the UK and EU countries.

New York had the most bookings of any US city overnight.

Leisure travel destinations also saw a jump from people booking holidays -- flights to Orlando are up 11 fold, Miami 9 fold and Las Vegas 8 fold.

Flight bookings to the US are up 600% overnight compared with the same time last week according to Virgin Atlantic, after President Biden relaxed US travel restrictions.
New York is the most-booked US destination for the airline.

— Joanna Partridge (@JoannaPartridge) September 21, 2021

Last week, UK ministers unveiled simpler Covid foreign travel rules for England, replacing the traffic-light system with a single red list and bringing in a laxer regime for tests.

Juha Jarvinen, chief commercial officer at Virgin Atlantic, says it was a busy weekend in flight bookings for the airline, after this relaxation of Government restrictions:

Flights to the airline’s sunny destinations in the Caribbean have risen 50% week on week, with its newest route to St Vincent and The Grenadines, set to launch on 13th October, becoming the most booked Caribbean flight.

Barbados follows closely behind, with bookings for both October half term and the Christmas break proving the most popular time to visit.

Bookings to both Jamaica and St Lucia have also doubled.

Interest in routes popular amongst those visiting friends and relatives also remain strong. Following its removal from the Red List, bookings to Pakistan increased by nearly 300%, with flights from London to India up by nearly 100%, highlighting the long-awaited desire to reconnect with loved ones.

Updated

Farmers hold emergency summit to discuss crisis

The National Farmers Union is holding an emergency summit to discuss the string of problems facing farmers and food producers currently - ranging from lack of staff and supply chain disruption, to the ongoing CO2 shortage.

At the hastily-convened summit, which was only arranged on Monday according to NFU President Minette Batters, the union is currently discussing labour shortages in the sector, along with representatives from the logistics sector, supply chain organisation and food producers.

This afternoon, the NFU will be discussing what to do about the CO2 shortage impacting farmers. The gas is widely used in the slaughter of animals including pigs and chickens.

The NFU has invited retailers, food service chain organisations and other associations to take part.

Cleared my diary to convene this emergency meeting. Urgent solutions needed on ongoing labour shortage, fertiliser and CO2. https://t.co/aa8zWutsnl

— minette batters (@Minette_Batters) September 20, 2021

UK factories held back by supply chain crisis

UK factories are struggling to keep pace with a record surge in orders, as the jump in energy prices drives up their costs and threatens to disrupt their work.

Manufacturing order books have hit their highest level on record this month (doing back to 1977), according to the latest healthcheck from the CBI.

Export books also strengthened to the best reading since March 2019, as demand for British-made goods picks up.

But, output growth in the three months for September slowed for the second month in a row (although still firm by historical standards), while stocks of finished goods levels improved slightly from record lows in the last three months.

Tom Crotty, group director at chemicals group INEOS, says supply chain problems are hitting growth.

“It is reassuring to see order books reaching new highs, but global supply chain issues and cost pressures are continuing to hold back the sector.

It is important that these issues are addressed as a priority.

Many firms also expect to hike their prices over the next quarter, as they pass on price pressures due to global supply chain disruption onto their customers.

CBI industrial trends

Anna Leach, CBI deputy chief economist, said UK firms are finding it harder to meet high demand, with the surge in energy prices adding to their headaches.

“Today’s survey highlights how amidst a variety of supply challenges, companies are beginning to struggle to meet high demand. Despite close to half of manufacturers surveyed reporting order books above normal, output growth has slowed sharply, albeit remaining relatively robust.

As well as skill and labour shortages, sharply increasing material costs and shortages of key components, producers now face rocketing energy prices.

“Current issues reinforce the need for Government to take a more active approach to gripping the economic recovery. That will mean working together with business to ease these critical supply challenges that are affecting manufacturing production across the UK and risk putting the brakes on the recovery. With pressure on energy supply set to increase in the colder months ahead, energy security is vital for ensuring that crucial parts of the supply chain are able to continue operating.”

Here are the details (the percentages show the balance between firms who agreed and disagreed).

Output

  • Output growth slowed (+16% from +22% in August) for the second consecutive month in the three months to September. However, growth remains firm by historical standards (long-run average +3%).
  • Output increased in 11 of 17 subsectors, with growth mostly driven by the food, drink & tobacco subsector.
  • Manufacturers expect output growth to accelerate in the next three months (+25%).

Orders

  • Total order books improved (+22% from +18% in August) to their strongest on record (since April 1977).
  • Export order books improved to their highest balance since March 2019 (-2% from -16% in August, and long-run average -18%).

Prices

  • Manufacturers’ expectations for output price growth in the next three months remained strong (+41% from +43% in August, long-run average of +3%).

Stocks

  • Stock adequacy picked up slightly from its record low in August (-11% from -14%) but remains weak overall (long-run average of +12%).

The OECD also warns that there are signs that the global recovery is losing momentum, as supply problems hit growth.

In its interim economic outlook, it says:

Retail sales spending weakened slightly in July, and global car sales have fallen sharply. Industrial production and global merchandise trade growth have also moderated, with supply shortages in key sectors, such as semi-conductors and shipping, and rising supplier delivery times holding back output in some industries, particularly car production.

A widening discrepancy between new order levels and inventory holdings suggests that inventory rebuilding will be an important additional source of demand over time, but it also means that there is reduced capacity to meet new orders immediately, likely pushing up prices.

OECD interim outlook

OECD lifts inflation forecast and warns of uneven recovery

The OECD has warned that the global recovery from the pandemic remains uneven, as it lifts its inflation forecasts following the surge in commodity prices.

In its latest economic outlook, the Paris-based group warned that a rapid increase in demand as economies reopen has pushed up the cost of key commodities such as oil and metals.

Food prices are also rising, boosting prices especially in emerging markets, with supply chain tensions pushing up cost pressures and shipping costs rising sharply, it says.

So, the OECD has lifted its forecast for inflation across the G20 group of nations this year to 3.7%, from 3.5%, and for 2022 to 3.9% from 3.4%.

The UK’s inflation rate is now seen at 2.3% this year (up from 1.3% back in May), and at 3.1% in 2022 -- over the Bank of England’s 2% target.

OECD’s inflation forecasts

The OECD says the outlook for inflation “varies markedly”, having risen sharply in the US and some emerging market economies but remains relatively low in many other advanced economies, particularly in Europe.

Headline consumer price inflation has also picked up around the world in recent months, pushed up by higher commodity prices, supply-side constraints, stronger consumer demand as economies reopen, and the reversal of some sectoral price declines in the early months of the pandemic.

Annual inflation has risen to over 5% in the United States but remains at relatively low rates in many other advanced economies, particularly in Europe and Asia.

Part of the current rise in inflation reflects base effects, following price declines in the early phase of the pandemic. In many emerging-market economies, high energy and food prices have pushed up inflation, reflecting both strong price increases and the relatively high share of commodities in consumers’ expenditure.

OECD economic outlook

These inflationary pressures should eventually fade, it adds:

Once bottlenecks are resolved, price increases in durable goods, such as cars, are likely to ease quickly as supply from the manufacturing sector rapidly picks up.

Consumer price inflation in G20 countries is projected to peak towards the end of 2021 and slow throughout 2022. Although sizeable pay increases are happening in some sectors that are reopening such as transportation, leisure and hospitality, overall wage pressure remains moderate.

The OECD's suggestion that UK inflation might
reach 3% in 2022 is no reason for an interest rate increase pic.twitter.com/zKirdVXAH3

— Richard Murphy (@RichardJMurphy) September 21, 2021

The OECD says the global economic recovery remains strong, helped by government and central bank support and vaccination programmes.

But while global GDP has now risen above its pre-pandemic level, the recovery remains uneven with countries emerging from the crisis facing different challenges, it warns.

It now forecasts world GDP would rise 5.7% this year, down from 5.8% forecast back in May, after shrinking 3.4% last year. Growth in 2022 has been nudged up to 4.5% from 4.4%.

It cut its forecast for UK growth this year to 6.7%, from 7.2%, and for 2022 from 5.5% to 5.2%. The US growth forecast this year was cut from 6.9% to 6%, but lifted from 3.6% to 3.9% next year.

The forecast for eurozone growth this year has been lifted by a full percentage point to 5.3%, followed by 4.6% next year (up from 4.4%).

🌎 #OECD Cut Global 2021 GDP forecast below 6% pic.twitter.com/R4pW7McpYa

— Christophe Barraud🛢 (@C_Barraud) September 21, 2021

#UPDATE The OECD said global output is now expected to expand by 5.7% this year, down 0.1% from its previous forecast in May.
But the outlook for 2022 has slightly improved, with 4.5% growth now expected, up by 0.1% points.
➡️ https://t.co/CBB3eMvNHX

— AFP News Agency (@AFP) September 21, 2021

#UPDATE The OECD has warned of an "uneven" global economic recovery as it lowered its 2021 growth forecasts for the world and for the United States while raising the outlook for Europe pic.twitter.com/IL3dG7ctW6

— AFP News Agency (@AFP) September 21, 2021

Kwasi Kwarteng says he is ‘locked in discussions’ with colleagues across Government to find ways to secure CO2 supplies (to get those fertiliser plants running again).

Overnight, the Government and @Ofgem confirmed the Energy Price Cap will remain in place to help protect customers from rising global gas prices.

Our priority is to protect the consumer - and the cap protects consumers. It's our safety net. (1/4)https://t.co/oPFQjYBsYx

— Kwasi Kwarteng (@KwasiKwarteng) September 21, 2021

Today, I'm locked in discussions with colleagues across Government to discuss possible ways to secure vital CO2 supplies.

We are in constant contact with relevant companies who produce and supply CO2 - at home and abroad - and are monitoring the situation minute-by-minute. (2/4)

— Kwasi Kwarteng (@KwasiKwarteng) September 21, 2021

Later I'll also host a roundtable with small energy suppliers who are facing pressure due to rising global gas prices.@Ofgem have well-rehearsed plans in place to protect customers through the Supplier of Last Resort process to ensure there's no interruption to supply (3/4)

— Kwasi Kwarteng (@KwasiKwarteng) September 21, 2021

Global gas price rises are impacting countries across Europe - the UK is no different.

The below explainer sets out the action we are taking to protect the UK’s energy supply, industry, and consumers (4/4) 👇🏿https://t.co/tmgQtzgpyE

— Kwasi Kwarteng (@KwasiKwarteng) September 21, 2021

CO2 latest: Government priority is getting the two CF plants back up-and-running ASAP, announcement could come as soon as today. Business Sec Kwarteng today meeting ministers inc CDL Stephen Barclay. Civil Contingencies Secretariat (Cabinet Office emergency unit) is involved.

— Adam Payne (@adampayne26) September 21, 2021

B&Q HGV lorry

DIY chain Kingfisher has reported that its stock levels of wood, cement and some products that contain semiconductor chips are below target levels -- a sign that global supply chain problems continue.

Reuters has the details:

“Everybody in the world is looking for timber ... we are looking for cement and there is a shortage of chips for computers and it impacts some of our product,” chief executive Thierry Garnier told reporters after the firm published first half results.

However, he said that generally he was “pretty happy” with overall product availability as the group had placed orders significantly ahead of peak trading periods.

“Today we are in a good place,” he said.

Kingfisher, which owns B&Q and Screwfix, also launched a £300m share buyback after the pandemic DIY boom boosted sales, with profits up over 61% in the first half of the year.

Kingfisher (#KGF) raises 2H sales guidance after 20% rise in 1H revs. Also raises FY pre-tax profit guidance to £910m-£950m vs consensus £907m and announces £300m share buyback.https://t.co/U9B9jxAOMW

— Ian Conway (@SharesMagIan) September 21, 2021

In Europe’s financial markets, shares have bounced back from their worst day in two months.

The Europe-wide Stoxx 600 index has gained 0.9%, while the UK’s FTSE 100 of blue-chip shares is up 60 points (0.9%) at 6,963 points.

Airlines are among the risers, after the US lifted its ban on arrivals from the UK and EU, with British Airways parent IAG up 3.5%.

Miners are also rising after a slump on Monday, as worries about the global economy appear to recede.

Oil company Royal Dutch Shell has jumped 3.7% after agreeing to sell its business in the Permian Basin, the biggest oilfield in the US, to rival ConocoPhillips for $9.5bn in cash, with $7bn being returned to shareholders.

Investors are waiting to see if embattled Chinese property developer Evergrande is able to pay out its interest due on a bond this week, or default on it.

AJ Bell investment director Russ Mould explains:

“The miners, scarred by heavy selling on Monday, eked out a recovery while British Airways owner International Consolidated Airlines continued the ascent which begin yesterday afternoon when the US lifted travel restrictions on fully vaccinated UK and EU visitors.

“The major catalyst for market volatility of late, fears about the fall-out from a potential collapse of Chinese property developer Evergrande, haven’t disappeared though.

“Evergrande is due to make a debt repayment on Thursday and this event could be the next major test of investors’ resolve.

“The challenge for the markets is trying to guess how Beijing might react, particularly after its notably strident approach in recent months when it comes to the technology industry. Will it be similarly strict with the property sector?

“Before Thursday there is also the small matter of the latest US Federal Reserve meeting and the question of whether recent events will lead chair Jay Powell and his colleagues to rethink their plans for tapering financial stimulus.”

Updated

Here’s a clip of Kwasi Kwarteng explaining his hopes for a deal to restart the UK’s carbon dioxide production:

"We are looking at ways to make sure the production of CO₂... is resumed as quickly as possible"

Kwasi Kwarteng, Business Secretary tells @MishalHusain he is in contact with the CEO of the country's biggest carbon dioxide producer, CF Industrieshttps://t.co/oNmDzq0EG4 pic.twitter.com/QnJgmjJ8vl

— BBC Radio 4 Today (@BBCr4today) September 21, 2021

National Express in talks to buy rival Stagecoach

National Express is in talks to buy Stagecoach, the UK’s largest bus operator, in an all-share deal

Both companies suffered from the slump in passenger numbers in the pandemic, and a merger would create a business with a fleet of 36,000 buses and coaches, bringing two of the UK’s larger transport groups together.

My colleague Julia Kollewe explains:

Stagecoach shareholders would receive 0.36 new National Express shares for each Stagecoach share they own, handing them 25% of the combined group.

That would value Stagecoach at about £445m, representing an 18% premium on the closing price of the Perth-based company’s shares on Monday.

Stagecoach has a fleet of 8,400 buses and coaches serving 1 billion passengers a year. It is UK-focused and operates mainly in Scotland, Greater Manchester, Sheffield and Greater London.

National Express has a bigger coach operation than Stagecoach and has an overall fleet of 28,000 vehicles, operating across the UK and in Spain, and runs school buses in the US. Stagecoach sold its North American division for £214m in 2018 to focus more on the UK.

More here:

Shares in Stagecoach have surged 21%, with National Express up almost 8%.

National Express says it expects to find annual savings of at least £35m -- including from ‘rationalising’ duplicate back office and IT costs, selling some non-depot property and offices, and from network efficiencies, shared technologies and ‘best practices’.

UK borrowing overshoots forecasts as interest payments on national debt rise

The UK government borrowed more than expected to balance the books in August, as rising inflation pushed up its debt servicing costs.

The Office for National Statistics reports that public sector net borrowing (excluding public sector banks) came in at £20.5bn in August 2021, with Covid-19 costs also still high.

That’s the second-highest August borrowing since monthly records began in 1993, but £5.5bn less than in August 2020.

Public sector net borrowing excluding public sector banks was £20.5 billion in August 2021.

This was the second-highest August borrowing since monthly records began in 1993, but £5.5 billion less than in August 2020 https://t.co/JB9LzHPBK5 pic.twitter.com/dO0O7EYq4y

— Office for National Statistics (ONS) (@ONS) September 21, 2021

It’s also higher than the City expected -- economists had expected borrowing to drop to around £15.5bn for August.

Gains from a rebound in tax receipts and lower government spending were offset by inflation driving up interest payments on the national debt by 84% compared with the same month a year ago.

My colleague Richard Partington has more details:

The ONS also revised upwards its estimate for borrowing in the financial year to the end of March 2021 by £27.1bn, taking the deficit to £325.1bn for the year when Covid-19 triggered the worst fallout for the public finances since the second world war.

It said this was driven mainly by the inclusion of expected losses on government-backed emergency Covid loans to businesses worth £20.9bn, which it had included in the estimates for the public finances for the first time. Although representing about a quarter of the total £80bn emergency lending to businesses, the estimated losses are lower than the previous £27bn forecast made by the Office for Budget Responsibility.

The figures come as Rishi Sunak prepares to scale back emergency Covid support schemes and set out the government’s post-pandemic tax and spending plans at next month’s autumn budget and three-year spending review.

Responding to the latest figures, the chancellor said the government would continue to support businesses and workers in the rebuilding job from the pandemic. “At the same time, we are determined to get our public finances back on track – that’s why we have set out the focused and responsible steps we are taking to keep debt under control,” he said.

So far this year, public borrowing has reached £93.8bn -- the second highest financial year-to-August borrowing since monthly records began in 1993. That’s almost £89bn less than in the same period last year, when the cost of Covid-19 was at its height.

It’s also more than £30bn less than the Office for Budget Responsibility, the UK’s fiscal watchdog, had forecast -- which may give the chancellor some flexibility ahead of next month’s budget.

Borrowing in August 2021 was £20.5 billion, down around 6 per cent from last year. Financial year-to-August borrowing was £93.8 billion, now £31.8 billion below OBR’s March forecast profile. https://t.co/jntwxVxIU8 pic.twitter.com/Y6LnEVD4ZM

— Fraser Munro (@Fraser_ONS_PSF) September 21, 2021

Overall, the UK national debt was £2,202.9bn at the end of August 2021 or around 97.6% of GDP, the highest ratio since the 98.3% recorded in March 1963.

UK national debt

A large chunk of that debt is currently held by the Bank of England, bought through its quantitate easing stimulus programme.

As ever, the ONS misrepresent the national debt. First, most so-called borrowing in August was from the Bank of England, and you can’t borrow from yourself. Second, the UK does not borrow. It takes deposits from people who want to save with the government. That’s very different. https://t.co/nbN1NTLYgl

— Richard Murphy (@RichardJMurphy) September 21, 2021

Kwarteng: Could be a very difficult winter for some families

Kwasi Kwarteng has also admitted that hard-pressed families will face a “difficult winter” with rising energy bills and cuts to benefits.

The Business Secretary told BBC Breakfast that the UK faces a global energy price spike:

“But I’ve said that there are mechanisms in place now to protect consumers. I’ve been very clear that the energy price cap is staying, even though some energy companies I read today are asking for it to be removed.

I’ve been very clear that that’s staying, so we’re protecting customers there. We’ve got the warm home discount, we’ve got winter fuel payments, which are again focused on the most vulnerable customers. So, we’re completely focused on helping vulnerable customers through this winter – particularly with regard to energy prices.”

Pushed on the issue of universal credit, he said

“It’s a difficult situation, it could be a very difficult winter. That’s why, as energy minister, I’m very focused on helping people that are fuel poor. Universal credit, you will know, is an issue for the chancellor and the work and pensions secretary. I’m speaking to them a great deal about it.”

Here’s the full story::

The £20 uplift to Universal Credit ends next week, meaning a £1,000 per year cut for some households. That blow will land as energy bills rise by 12%, or £139 per year, for a typical gas and electricity customer as the price cap is lifted.

Tomorrow's @Guardian: Prepare for winter of discontent, UK warned

• Read our story, by @rowenamason and Jillian Ambrose, here: https://t.co/dZXWfcMTHL#TomorrowsPapersToday pic.twitter.com/JLywhSfNT6

— Richard Preston (@richardpreston_) September 20, 2021

The Resolution Foundation warned yesterday that the UK faces a ‘cost of living crunch’ on several fronts, in which low-income families will be worse hit.

Prices are rising pic.twitter.com/InadV6K9n1

— Resolution Foundation (@resfoundation) September 20, 2021

And energy bills are set to rise sharply too as a result of Ofgem’s energy price cap rising by £139 (12 per cent) to £1,277 (for a typical gas and electricity customer) a year from 1 October, and by £153 (13 per cent) for pre-payment customers. pic.twitter.com/JUsvrO4gUr

— Resolution Foundation (@resfoundation) September 20, 2021

Low-income households are disproportionately affected by rising energy bills, in part because they spend a large share of their income on essentials like fuel pic.twitter.com/twBbBZPhq9

— Resolution Foundation (@resfoundation) September 20, 2021

And with Universal Credit claimants four times as likely to be on pre-payment meters as the rest of the population, they’ll likely face the biggest energy bill rises of all.

— Resolution Foundation (@resfoundation) September 20, 2021

The Government can’t stop this cost of living crunch from happening - after all it doesn’t control global gas prices (though in the longer term we need to be less dependent on them).

— Resolution Foundation (@resfoundation) September 20, 2021

Kwarteng: very confident of sorting CO2 production by end of the week

Kwasi Kwarteng has also told Sky News he was “confident” of a resolution to to get production at CF’s fertiliser plants up and running again, saying “it’s pretty imminent”.

He added the CO2 situation was “critical” (as the food industry have warned).

Update: Kwarteng said:

“We’re definitely looking at trying to secure carbon dioxide supply. I’ve spoken to the CEO of the business, Tony Will. He flew over on Sunday. We spoke very candidly about the situation.

“He said the problem he had was that the natural gas price is much higher than the ammonia which he sells. So essentially what happened last week was that the plant downed tools. And I said of course we’ve got to manufacture this CO2. And that’s what we’re talking about this week. It’s pretty imminent.

“I hope we have a very clear plan to get CO2 production going again. I’m very confident and hopeful that we can sort it out by the end of the week.”

Updated

Kwarteng: Hoping to reach deal today to restart CO2 production

Business secretary Kwasi Kwarteng says he’s hopeful of reaching an agreement with US fertiliser maker CF Industries today to resume production of the CO2 desperately needed by the UK food and drink industry.

Kwarteng says he spoke to the company’s CEO on Sunday and Monday, and has also spoken to chancellor Rishi Sunak about the issue.

“We are looking at ways very soon” to make sure that the production of CO2 is resumed quickly, Kwarteng tells Radio 4’s Today Programme.

But that could come at a cost - if the government provides financial support to persuade CF to resume operations at its factories in Ince, Cheshire and Billingham, Cleveland,Teesside.

Kwarteng explains that CF halted production of ammonia and CO2 (a byproduct of the fertiliser process) last week because the jump in natural gas prices made it uneconomic.

Asked if he’s prepared to subsidise CF, Kwarteng says the government is “looking at different ways in which we can provide support”, and prepared to look at every solution to get production up and running.

If support is provided, it will be on a temporary basis - it’s not something the government wants to do indefinitely.

Kwarteng explains:

Time is of the essence, that’s why I’ve spoken to the CEO twice in the last two days.

We are hopeful that we can get something sorted today - and get the production up and running in the next few days.

Kwarteng adds that this ‘may come’ at some cost -- the government is still hammering out the details.

Nationalising the company isn’t the answer, Kwarteng said -- it would take too long to fix the CO2 shortages.

But between nationalisation and simply doing nothing there are many options to address the problem, says Kwarteng, adding that he’s “very hopeful” of progress today.

Kwasi Kwarteng confirms govt is prepared to subsidise fertiliser company that produces much of Britain’s CO2

‘We’re looking at different ways in which we can provide support’

He says subsidy will be temporary and he is hopeful production will be up and running in next few days

— Steven Swinford (@Steven_Swinford) September 21, 2021

Business Secretary Kwasi Kwarteng says he’s "very hopeful" of getting a deal today with CF Industries on CO2 production. Considering temporary subsidies #r4today

— Lizzy Buchan (@LizzyBuchan) September 21, 2021

Kwasi Kwarteng tells @BBCr4today that he’s hoping to get “something sorted” today to get the fertiliser plants up and running. “Time is of the essence.”

— Emma Simpson (@BBCEmmaSimpson) September 21, 2021

Fizzy drinks at risk from CO2 shortages

Fizzy drinks suppliers have warned that production could soon be hit by the UK’s CO2 shortages -- and that Brexit means importing supplies isn’t feasible.

The British Soft Drinks Association revealed last night that manufacturers have “only a few days” of carbon dioxide left in reserve to produce beverages.

In a sign that the CO2 crisis is causing wide shockwaves in Britain’s food and drink sector, most carbon dioxide suppliers aren’t scheduling deliveries earlier than 24 hours in advance. This means manufacturers have no visibility on stock levels or when they will receive their next batch.

The BSDA said:

“Some soft drinks manufacturers have only a few days of CO2 supply left in reserve. As it stands, most CO2 suppliers are currently not scheduling beyond 24 hours in advance, meaning there is no visibility as to UK stocks and no certainty around deliveries.

If soft drinks manufacturers cannot get hold of CO2 supplies after their reserves have run out, production of certain products will have to cease.

The British Soft Drinks Association says manufacturers have “only a few days” of carbon dioxide left in reserve to produce beverages and can’t import supplies from the EU due to Brexit https://t.co/q2O0nPmhIn

— Bloomberg UK (@BloombergUK) September 20, 2021

Given the ‘perfect storm’ of trading conditions, BSDA also want the government to financially support the operation of UK fertiliser plants through to the end of the year to prevent disruption at Christmas.

They also warned that supplies of CO2 can’t be imported -- partly due to Brexit.

The BSDA says:

Relying on European supply is not feasible given the problems associated with Brexit and the fact that CO2 production on the continent is also disrupted.

While the UK already imports CO2 in large quantities from plants in Norway and the Netherlands, the Norwegian plant is shortly due to close for up to two weeks for maintenance, and the Dutch plant is prioritising its customers in the EU.

There’s a handy FAQ here.

Our latest statement on CO2 and an FAQ ⬇️https://t.co/EI2kvDuWbo

— Becka Steven (@becka_steven) September 20, 2021

UK poultry producers have started taking emergency measures to conserve carbon dioxide used to stun birds for slaughter, as a shortage of the gas poses an increasingly grave threat to the meat supply chain.

The Financial Times explains:

Richard Griffiths, chief executive of the British Poultry Council, said deliveries of carbon dioxide had started to arrive that were short of the amounts that companies had ordered.

Some meat processors have reactivated old electrical stunning equipment — which processes birds about 30 per cent more slowly — and diverted CO2 from packaging to slaughter.

“But not everyone has the kit [for electrical stunning] and not everyone has the people trained to operate it,” added Griffiths.

UK poultry producers take emergency measures as gas shortage intensifies https://t.co/1JZZm7LD6X

— Financial Times (@FT) September 20, 2021

Updated

Introduction: Ten days to sort CO2 crisis, warns food industry

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

Fears are growing that the UK’s carbon dioxide shortage will soon lead to empty shelves, as food producers urge the government to step in and provide support.

Ian Wright, CEO of the Food and Drink Federation, told the BBC’s Today Programme this morning that it is “a real crisis”, explaining that supply chains are under unprecedented pressures.

We have been saying for several weeks now that the just-in-time system which underpins both our supermarkets and our hospitality industry is under the most strain it’s ever been in the 40 years it’s been there.

Poultry producers are warning that production will erode seriously by the end of this week, Wright says, and the same is true of pig production -- both sectors need CO2 to stun animals for slaughter.

Bakery goods and meat packaging is probably only a week behind, he predicts.

We probably have about 10 days before this gets to the point where consumers and shoppers, and diners, notice that those products are not available.

Wright adds that ministers, particularly in DEFRA, take the problem extremely seriously.... he’s hopeful, but not confident, that the industry and government can work together on a solution.

He has written to the secretary for food and rural affairs, George Eustice, urging action.

In a letter seen by the Guardian, Wright says:

“Across industry there is a united view that the situation is worsening, with little prospect of additional CO2 supply unless the UK government intervenes.”

The carbon dioxide shortage is being caused by the gas crisis, because CO2 is a byproduct of fertiliser production.

The surge in natural gas prices has forced the US fertiliser maker CF Industries to halt production at its plants in Billingham in Teesside and Ince in Cheshire last week -- creating disruption across supply chains.

The FDF say the government must take three steps to support the food industry:

  • Subsidise the small number of fertiliser plants who are the key sources of CO2 which the food and drink sector needs
  • Help the industry find alternative sources for materials to stun animals, and for food packaging.
  • Address labour shortages which mean the industry is so acutely susceptible to these shortages.

Ian Wright, Chief exec of Food and Drink Federation, tells @BBCr4today govt have about "10 days" to sort out the CO2 shortage crisis. 1 week before poultry stunning starts to stop, and a few more days before packaging affected.

— Paul Waugh (@paulwaugh) September 21, 2021

"It is a real crisis"

Ian Wright, Chief Executive of the Food and Drink Federation tells @bbcnickrobinson that shoppers will begin to notice products missing on the supermarket shelves in 'about 10 days'https://t.co/nVFh5QDbC0 #R4Today

— BBC Radio 4 Today (@BBCr4today) September 21, 2021

Meat producers are also warning that supplies could be disrupted soon. Cranswick, which makes fresh pork products and gourmet sausages, bacon, ham and and charcuterie, says the UK risks a “major crisis in the food industry”.

Adam Couch, Cranswick CEO, said the government must act immediately, to avoid shortages:

The sector has been asking for support to ease the labour crisis, and now C02 shortages could effectively bring production to a halt throughout the supply chain.

“The industry is already at tipping point ahead of the demanding Christmas period.

We have worked tirelessly throughout the pandemic to keep food on the shelves, but there is a real risk of product shortages across the country if the Government does not act immediately to address these issues.”

As the energy crisis intensified yesterday, the government insisted that the UK was “highly resilient”, with “no question of the lights going out”.

Kwasi Kwarteng, the business secretary, pledged:

“There will be no three-day working weeks or a throwback to the 1970s.

Such thinking is alarmist, unhelpful and completely misguided.”

But No 10 has been warned that hundreds of thousands of Britons face a “very, very difficult” winter thanks to rising household costs fears of a three-day week for factories and further gaps on supermarket shelves.

And with supermarket chain Iceland warning that UK food supplies could be under threat long before Christmas unless carbon dioxide supplies are restored, pressure is mounting...

We also get the OECD’s assessment of the world economy, a healthcheck on UK factories from the CBI, and the latest US housing data - as the Federal Reserve starts its two-day monetary policy meeting.

After heavy falls yesterday, European markets have opened higher, as investors shake off some of Monday’s gloom following the worst session in a couple of months.

The agenda

  • 7am BST: UK public finances for August
  • 8.30am BST: Sweden’s Riksbank decision on interest rates
  • 10am BST: OECD releases its Interim Economic Outlook
  • 11am BST: CBI industrial trends survey of UK factories
  • 1.30m BST: US building permits and housing starts for August

Updated

Contributors

Graeme Wearden

The GuardianTramp

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