Time for a recap
Economic storm clouds are gathering at home and abroad, as a tough winter grows near.
Danish shipping giant Maersk, widely seen as a barometer for global trade, cut its forecasts for container demand this year, and predicted that the global economy could enter recession.
Maersk now expects global container demand to fall by between 2% and 4% this year, and believes freight rates have peaked.
Chief executive Søren Skou warned:
With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon. This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.
Skou also predicted that “It’s quite likely that we either are or will soon be in a recession, certainly in Europe but potentially also in the US.”
Eurozone factories certainly appear to be in recession. Manufacturing activity in the euro-area sank to the lowest level since the first Covid-19 lockdowns in 2020.
Record inflation and a weakening global economy erode demand for goods, with new orders falling at a faster rate.
Spain was the worst hit, followed closely by Germany, which is among the most exposed to Russia’s cut in energy supplies.
The data “are now clearly signaling that the manufacturing economy is in a recession,” warned Joe Hayes, senior economist at S&P Global Market Intelligence.
The UK cost of living crisis deepened, with food price inflation soared to a record annual rate of 11.6% in October.
Staples such as teabags, milk and sugar became more expensive along with fresh food, and retail experts warned that inflationary pressures won’t ease soon.
Here’s the rest of today’s main stories:
The decline in UK train performance has worsened, new figures show.
Just 70.2% of passenger trains in Britain’s arrived at stations on time in September, compared with 72.6% in April, according to the Office of Rail and Road (ORR).
Punctuality has declined since the highs recorded during coronavirus lockdowns, when passenger numbers plummeted.
A Network Rail spokesman said that the long, hot, dry summer, industrial disputes and strikes, and a fall-off in infrastructure reliability has all hit punctuality.
The ORR is pushing Network Rail to improve track reliability in the North West and Central region, raise the resilience of overhead lines in the Eastern region, and to renew track on the Thameslink core route that connects north and south London.
ORR chief executive John Larkinson said:
“Passengers and freight are suffering from poor train performance, with issues extending across all of Network Rail’s regions.
“There are of course factors beyond Network Rail’s control to delivering good train performance, including further industrial action and potential extreme weather events.
“And there are areas such as trespass and theft where Network Rail has worked hard to reduce delays. But it can nevertheless do more.
UK creditors are taking a tougher line on borrowers who can’t repay their loans.
There were 398 winding-up petitions filed in September, according to data compiled by PriceWaterhouseCoopers, more than five times the number filed in the same month a year earlier.
Those winding-up petitions can lead to a company being shut down and their assets sold to pay debts. Restrictions to protect borrowers, brought in during the pandemic, ended earlier this year.
Bloomberg, which reported PWC’s data, says the mood is changing as creditors seek to get their money back:
“If you are a creditor, issuing a petition is a very serious step,” David Kelly, a London-based partner in the PwC’s restructuring team, said in an interview, noting that the increase in such action reflected a tightening market.
“Perhaps patience is wearing thin.”
GSK lifts sales forecasts as shingles vaccine shines
GSK is betting on the success of its shingles shot and a new potential blockbuster respiratory syncytial virus (RSV) vaccine, expected to be launched next May, following the split from its Panadol-to-Sensodyne consumer health business, as it reported better-than-expected results and raised its full-year outlook.
Sales of the shingles vaccine Shingrix nearly doubled year-on-year to £2.2bn in the first nine months of the year, mainly because of a post-pandemic rebound. It is a welcome boost to GSK, which is left with its pharmaceutical and vaccines business following the spin-off and £31bn stock market flotation of Haleon in July, home to brands such as Advil painkillers, Aquafresh toothpaste and Centrum vitamins.
GSK, one of the world’s biggest vaccine makers, has also developed an RSV shot, which has shown high efficacy, of 82.6% in adults over 60 in a late-stage study. Respiratory syncytial virus is a major cause of pneumonia in toddlers and the elderly and causes thousands of hospitalisations and deaths each year.
The new vaccine will go head to head with a rival product from New York-based Pfizer assuming both are approved in the US next spring, but GSK’s chief executive Emma Walmsley is confident in its prospects.
“It’s not a bad thing at all in a new market to have more than one competitor.
“There’s never been one [vaccine] before, and there are over a billion over-60s in the world.”
The company is also rolling out Mosquirix, the world’s first malaria vaccine, and more than 1 million children in Ghana, Kenya and Malawi have had at least one dose, donated by GSK. It has pledged to donate 10m doses to the WHO-led pilot programme.
The drugmaker’s third-quarter sales and adjusted operating profit both rose 18% year on year, to £7.8bn and £2.6bn respectively. It now expects 2022 sales to increase between 8% and 10% and profit to rise between 15% and 17%.
Walmsley said even with government budgets under pressure and higher energy costs, the company was managing “extremely well”.
“Frankly, the really high fiscal interest of preventing disease, quite aside from the societal one, is significant, it’s a lot cheaper to vaccinate ahead of time, which is why we’re so excited about our strengthening vaccine portfolio.
The simple answer is, the demand is there.”
The drugmaker wants to focus on vaccines and infectious diseases following the Haleon demerger, its biggest corporate restructure in two decades. Walmsley said two-thirds of GSK’s drugs pipeline were in infectious diseases and HIV.
In the past year, she has been under considerable pressure to improve GSK’s performance from the activist investor Elliott Management, a US hedge fund that called for a change in leadership in 2021 but has now gone quiet, at least in public. Walmsley said investors overall were “supportive of our strategy”.
GSK’s share price has fallen about 16% since the demerger, while Haleon shares have fallen 13% since their debut. GSK faces US federal and state lawsuits related to the old Glaxo’s Zantac heartburn medicine.
Thousands of cases have been filed against a number of drugmakers that sold it claiming the drug caused cancer, and shareholders fear potential damages could run into billions of dollars. GSK took a £45m charge for legal fees in the third quarter and said it would “defend all claims vigorously”.
Wall Street has dropped in early trading, ahead of tonight’s Federal Reserve meeting.
The Dow Jones industrial average has dipped by 130 points, or 0.4%, to 32,522, while the broader S&P 500 index is 0.5% lower.
The stronger-than-expected increase in US jobs last month (on the ADP payroll report) has dampened hopes that the Fed might strike a dovish tone tonight.
The London stock market has soured too, with the FTSE 100 now down 48 points or 0.66%, at 7,137 points.
UK adds two Roman Abramovich ‘business associates’ to Russia sanctions list
Two Russian oligarchs and business partners of Roman Abramovich have been added to the UK government’s sanctions list in response to the invasion of Ukraine.
Alexander Abramov and Alexander Frolov, whom the UK government said were “known to be business associates” of the former Chelsea FC owner, were on Wednesday among four new Russian steel and petrochemical tycoons added to the sanctions list.
The pair previously owned large stakes in Russian steel and coking coal producer Evraz, which was part-owned by Abramovich and subjected to sanctions in May. Abramovich was one of the first oligarchs to be subjected to sanctions.
Tomorrow, UK households could be hit by the biggest interest rate rise in decades when the Bank of England announces its monetary policy decision.
With inflation hitting a 40-year high of 10.1% in September, the BoE could hike Bank Rate by 75 basis points, or three quarters of a percent, to 3%.
That would be the biggest increase since 1989, if you exclude Black Wednesday in 1992 when rates were briefly hiked from 10% to 12%, and then 15%, before the Major government announced Britain was crashing out of the European Exchange Rate Mechanism.
Nicholas Hyett, investment analyst at Wealth Club, says it’s too early to call time on rate rise, but increases could be slower from here.
The Bank of England’s modest 0.5% interest rate hike in October probably contributed to the market chaos caused by Liz Truss’ catastrophic mini-budget. It’s unlikely the Bank of England will repeat the mistake, and we expect rates to rise by at least the 0.75% the market is expecting.
However, the overall economic picture is probably better now than it was a month ago. The bank may well feel it can ease its foot off the gas going forwards – with rates rising slower and ending lower than we might have thought even a few weeks ago.
It helps that the government and bank are now pulling in the right direction. The Bank raises rates to curb inflation, by discouraging people from spending money. Rishi Sunak’s plans to raise taxes and cut public spending have the same effect. The recent stability in sterling reduces the need to hike rates to defend the currency too.
Supply fears as China lockdown hits world’s largest iPhone factory
Chinese authorities have announced a seven-day coronavirus lockdown in the area around the world’s largest iPhone factory, stoking concern that production will be severely curtailed ahead of the Christmas period.
Foxconn’s plant in Zhengzhou, which employs about 200,000 people, produces the majority of Apple’s new phones, including the new iPhone 14.
It has been rocked by discontent over stringent measures to curb the spread of Covid-19, with workers fleeing the site over the weekend after complaining about their treatment and provisions via social media. Nearby cities have drawn up plans to isolate migrant workers fleeing to their home towns, to prevent the spread of the virus.
Here’s the full story:
Bloomberg have a good Twitter thread on the issue too:
Aston Martin isn’t the only car maker suffering supply chain problems (see earlier).
Ford has reported that US sales fell 10% last month, year on year, due to supply issues that delayed shipments to dealers.
The Detroit carmaker sold 158,327 new vehicles in October, down from nearly 176,000 units in October 2021.
The strikes planned at Royal Mail on Black Friday, and after Cyber Monday, will cause extensive disruption for retailers, warns Nadeem Malik, head of digital technology firm Software AG, UK and Ireland.
These are prime revenue opportunities, and delivery delays for online orders risk a domino effect in the build up to Christmas.
“Strikes affecting the movement of goods in the last mile are becoming more commonplace, adding pressure to supply chains already impacted by global disruption. Therefore, supply chain networks and planning must become more resilient yet again.
US payrolls report beats forecasts
US companies added more jobs than expected last month, thanks to a surge in hiring at bars and restaurants, retailers and travel firms.
Private sector employment increased by 239,000 jobs in October, according to payroll operator ADP, more than the 195,000 expected.
ADP reported that restaurants, retailers and the travel sector ramped up hiring in advance of the holidays at the end of the year, but there was a drop in employment at manufacturers, and in some service sectors.
Natural resources/mining 11,000
Financial activities -10,000
Professional/business services -14,000
Education/health services -5,000
Other services -1,000
European stock markets have had a subdued morning, as traders await the US interest rate decision later today (6pm UK time).
Britain’s FTSE 100 index has dipped by 12 points or 0.17% to 7,173, while the pan-European Stoxx 600 is flat.
With a another 75-basis point hike priced in, investors are keen to hear any suggestion that the Federal Reserve might ease off the whopping rate increases.
But a jump in US job vacancies yesterday, to 10.7m in September, cuts the likelihood the Fed will pivot tonight.
Neil Wilson of Markets.com explains:
The market continues to hope for some kind of careful language about reducing the pace of hikes. In his remarks at the last two press conferences Powell has said that “at some point, as the stance of monetary policy tightens further, it will become necessary to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation”. Any change to this – perhaps suggesting that this point might be arriving – may be seen as a pivot.
If Powell suggests that this point has arrived, and that the FOMC expects to begin slowing the pace of hikes at the next meeting, it would be considered very dovish and spark a major move higher for equities with a move lower for USD and US rates. However, the market is already expecting a slowdown in the pace of hikes in the coming meetings and the Fed will want to remain data-dependent – slowing is not the same as a pivot (starting to cut) but the market might like it anyway.
Iceland pushes government to extend free school meals
Iceland Foods has declared its public support for the Feed the Future campaign which is calling for free school meals to be extended to all pupils living in poverty.
The campaign, coordinated by The Food Foundation, is urging the government to immediately increase the eligibility of Free School Meals to include all families who receive Universal Credit or equivalent benefits.
This would give an additional 1.4 million children nutritious school meals, they say, at a time when many low-income parents are strugging to feed their families due to the surge in inflation.
Currently, children of parents who are on universal credit and have an annual income of no more than £7,400, or are on another benefit such as jobseeker’s allowance, are eligible for free school meals.
Richard Walker, mananaging director of Iceland Foods and prospective Conservative MP (who we heard from earlier), says widening access to school meals would cut the pressures on many families:
“As the cost-of-living crisis continues to worsen, families are increasingly concerned about keeping food on the table – we see these worries first hand from our customers. By widening the criteria for Free School Meal eligibility, we can relieve the burden of stress that so many parents are experiencing and help to give children the support they need.
Iceland is backing the Feed the Future campaign and I would encourage all businesses to get involved and support in any way they can.”
Over 900 bus drivers employed by the Stagecoach group in East London have secured a 10% pay increase, the Unite union has announced, following the threat of strike action.
Wheat prices fall as Russia returns to Black Sea grain deal
Wheat futures prices have tumbled almost 6% in Chicago after Turkish president Recep Tayyip Erdoğan announced that the corridor for Ukraine exports will resume today.
Russia announced last weekend that it would pull out of the UN-brokered grain export deal, following an attack on its Black Sea naval base of Sevastopol.
That agreement allowed vital wheat shipments to flow out from Ukraine to help feed the millions of impoverished people facing hunger worldwide, so Russia’s withdrawal was threatening to reignite the global food crisis.
Today, though, Erdoğan said Sergei Shoigu, the Russian defence minister, had phoned his Turkish counterpart to say Moscow was back on board.
And here’s the result:
Moscow has confirmed it will renew its participation. The defence ministry said in a statement that:
“The Russian Federation considers that the guarantees received at the moment appear sufficient, and resumes the implementation of the agreement.”
World's top bankers expect markets to stay turbulent
Some of the world’s top bankers have warned that markets will remain turbulent as central banks try to cool inflation without plunging the global economy into a downturn.
Reuters reports that Morgan Stanley CEO James Gorman told a summit in Hong Kong that his gut feeling was that central banks would manage to curb price rises but investors would need to get used to higher inflation -- of around 4% versus 1-2% before “this crisis”.
Gorman told the Global Financial Leaders’ Investment Summit that:
“It’s a painful transition, but not an unexpected transition,”
Goldman Sachs CEO David Solomon also spoke, warning that inflation and “very quick” monetary tightening (interest rate rises) after over a decade of relatively accommodative policies are making the world more volatile and uncertain.
“(It) allows exposures where there’s leverage in the system to be amplified very quickly,”
Solomon pointed to the recent turmoil in the UK, where Liz Truss’s mini-budget triggered a slump in gilts and liquidity crunch in pension funds in September and early October.
Energy crisis putting most German firms under duress
The energy crisis is impacting nearly every branch of the German economy, new data shows.
The number of companies that see high energy costs due to the Ukraine war as a threat to business at the highest level on record, a business survey by DIHK (the Association of German Chambers of Commerce and Industry) shows.
Some 82% of the 24,000 businesses surveyed see the prices for energy and raw materials as a business risk, the highest since DIHK began keeping records in 1985.
Euro zone factory downturn deepens as demand slumped
The downturn at Europe’s factories intensified last month, another sign that the region could be in recession.
S&P Global’s eurozone manufacturing PMI index has fallen to a 29-month low of 46.4 in October from September’s 48.4, worse than the ‘flash’ reading last month, and deeper into contraction.
Many countries, including Germany and France, saw their factory sectors shrink at a faster rate.
Firms reported a larger slump in new orders – which fits with Maersk’s prediction of weaker shipping demand.
Joe Hayes, senior economist at S&P Global Market Intelligence, says the PMI surveys are now “clearly signalling that the manufacturing economy is in a recession,” adding:
“In October, new orders fell at a rate we’ve rarely seen during 25 years of data collection – only during the worst months of the pandemic and in the height of the global financial crisis between 2008 and 2009 have decreases been stronger.”
Maersk CEO: Europe close to recession with US not far behind
The boss of Maersk has also warned that Europe is close to entering a recession and the US economy may not be far behind.
After predicting that global container demand could fall 4% this year, CEO Soren Skou told Bloomberg TV:
“It’s really hard to be very optimistic with a war on our doorstep and a bigger energy crisis this winter so that is impacting consumer confidence and therefore also demand.
“It’s quite likely that we either are or will soon be in a recession, certainly in Europe but potentially also in the US.”
Shipping giant Maersk flags slowdown in demand as dark clouds gather
Container shipping giant Maersk has sounded a warning that global demand is slowing, saying that “freight rates have peaked”.
The Copenhagen-based company told investors that the Ukraine war, Europe’s energy crisis, high inflation and a ‘looming global recession’ were all hitting the world economy.
It now expects global container demand to fall by between 2% and 4% this year, down from a previous forecast of +1 to -1%.
Although A.P. Moller – Maersk posted another record quarter for July-September, its chief executive Søren Skou warned that demand was falling:
However, it is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing of supply chain congestion.
The warning knocked shares in Maersk by over 5%.
The world’s biggest shipping company saw its earnings rocket as the global economy reopened after pandemic lockdowns, and demand for containers surged. Its profits tripled in 2021 to $24bn.
But now, weakening demand as soaring inflation hits spending are weighing on the sector.
CEO Skou adds that ‘dark clouds’ are gathering:
With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon. This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.
Shares in Next have risen 2% this morning, to the top of the FTSE 100 risers index, after it reported slightly stronger sales than expected (see 7.37am post).
But the retailer, like the rest of the sector, faces difficult times as customers will have less disposable income to spend.
Matt Britzman, equity analyst at Hargreaves Lansdown, explains:
“Broadly speaking, Next’s had a decent third quarter, though cost-of-living headwinds are still mounting for the retailer. Although the headline points to sales growth, if interest income is stripped out underlying sales saw a small decline.
A bumper week at the end of September was the standout for sales. ‘Winter is coming’ rang true as a colder week meant shoppers headed out to stock up on woollies and other warm clothes.
That’s about where the good news ends as the last two weeks of the quarter showed sales down 3.7% and 1.3% respectively and the outlook for the rest of the year points to a 2% drop over the fourth quarter, in line with previous guidance.
Adam Vettese, analyst at social investing network eToro, agrees:
Conditions are set for a disappointing Christmas period, with many households starting to feel the cost-of-living crisis begin to bite.
“Sales are forecast to dip 2% year-on-year for the rest of the year, although the firm has maintained its profit outlook.
In the City, shares in luxury carmaker Aston Martin have tumbled 10% towards a record low, after it cut its forecast for car deliveries this year.
Aston Martin blamed global supply chain problems for pushing back an expected improvement in its finances, saying deliveries of its DBX SUV vehicle had been held back by logistical disruption.
The company now expects to deliver as few as 6,200 cars, down from an earlier projection of more than 6,600 units, due to parts shortages.
Shares have dropped to 94p, the worst-performing stock on the FTSE 250.
Aston Martin’s shares have tumbled 81% during 2022.
But Lawrence Stroll, executive chairman of Aston Martin Lagonda, says the company made “excellent progress” this year towards becoming the world’s “most desirable, ultra-luxury British performance brand”.
Stroll insists Aston Martin saw “very impressive demand across our product range” and substantial revenue growth, driven by record average selling prices.
However, Stroll adds…
“On the other hand, and in the context of supply chain and logistics disruption as well as inflationary pressures impacting the broader automotive industry, over the last two quarters we have encountered specific supply chain challenges that have delayed our ability to meet customer demand.
Iceland's Walker: households with kids most at risk from food insecurity
Richard Walker, managing director of Iceland Foods, has warned that rising food prices will get worse.
Walker tells the Today Programme that the prices of staples such as milk, bread and eggs have all jumped – which is worst for households who are struggling the most.
The supermarket boss, who has launched a bid to stand for Parliament as a Conservative MP at the next election, says further price rises are coming:
I’ve got cost prices currently on the table from big branded suppliers that we haven’t stomached yet as a business, let alone had to pass on to our customers.
So I think it will get worse.
Walker points out that that people face heating and fuel inflation, as well as rising food costs, adding:
Food insecurity is inevitably on the rise, and it’s the households with kids who are most at risk.
Walker also suggests that some essential items, such as milk and its range of £1 items, will be sold as ‘loss-leaders’ to help struggling customers.
Supermarkets have a responsibility to keep prices of staple items low, he insists:
We don’t make money on milk, and there will be loss leaders that we have to sell because our customers are simply reliant on it.
Walker is also supporting a campaign to extend free school meal eligibility so that more families qualify.
Last month, Walker called on the government to increase Universal Credit to £20 a week.
He also told the Conservative Party conference that then-new Prime Minister’s Liz Truss’ priorities were “odd”, saying he was puzzled by tax cuts for the wealthy coupled with a lack of support for those on low incomes.
Britishvolt staves off collapse with five-week funding lifeline
Just in: Britishvolt has said it has secured a few weeks of funding and its 300 staff have agreed to take a steep pay cut.
The lifeline comes as the the UK government-backed battery startup races to find a buyer or new longer-term investor to avoid collapse.
The company, which planned to develop a £3.8bn “gigafactory” creating 3,000 jobs in the north-east of England, had been preparing to appoint administrators on Monday after the government turned down a request to bring forward £30m in previously promised grant funding.
Britishvolt, launched less than three years ago with the lofty ambition of becoming the UK’s champion in the global race to create next-generation electric batteries for carmakers, said it has secured a funding lifeline to allow it to survive at least until next month.
It declined to give details of the amount of the funding, how long it will last or the identity of any investors.
A company spokesperson said.
“We have now secured the necessary near-term investment that we believe enables us to bridge over the coming weeks to a more secure funding position for the future,”
“To further reduce our near-term costs, our dedicated employee team has also voluntarily agreed to a temporary salary reduction for the month of November.”
Britishvolt’s executive team will work unpaid for November, while directors will receive 25% pay and most of the rest of the workforce will receive 50%, the Guardian understands. The pay cuts were “purely voluntary”, a Britishvolt spokesperson said.
However, a failure to achieve the necessary payroll cuts would probably leave administration as the only option, a source with knowledge of Britishvolt’s operations said.
Here’s the full story:
And here’s an explanation of how Britishvolt’s ambition of making hundreds of thousands of batteries a year to power the switch to electric cars hit problems:
Royal Mail postal workers to strike on Black Friday
Royal Mail workers are to hold two 48-hour strikes to coincide with the busiest online shopping days in a dispute over pay, jobs and conditions.
Communication Workers Union (CWU) at Royal Mail are to strike on 24 and 25 November, and again on 30 November and 1 December, the union announced last night.
That will coincide with Black Friday (on 25th November), and shortly after Cyber Monday (on 28th November) – a particularly busy, and lucrative, time for postal operators.
The CWU, which represents more than 115,000 postal workers, has rejected Royal Mail’s “derisory 7% two-year pay offer”, saying it included “unacceptable changes”.
Royal Mail has urged workers not to strike and damage its business at the “busiest time of the year”. It says its offer is worth 9% over two years, as it includes a 2% ‘lump sum payment’.
Royal Mail says:
The CWU is playing a dangerous game with its members’ jobs and the future of Royal Mail. We urge CWU to withdraw these strikes, for the good of our customers and our people.
Last weekend, the CWU called off strikes set for earlier this month, after a challenge from the company.
CWU general secretary Dave Ward said industrial action will continue in the run up to Christmas unless the dispute is resolved.
“Posties are in the fight of their lives against the Uberisation of Royal Mail and the destruction of their conditions.
“But 115,000 of our members will not just accept this war on their livelihoods and their industry.
“They will never give up the fight to protect this industry and to protect their hard-won working conditions.
Supermarkets are also scrambling to hire staff to get through the Christmas rush.
Sainsbury’s has revealed it is hiring for 18,000 seasonable jobs – 15,000 roles at its supermarkets, 2,000 at its Argos catalogue retailer and 1,000 in its logistics division.
Back in September, Sainsbury’s gave its lowest-paid shop workers a second pay rise in a year as well as extra discounts and free food during their shifts in a £25m package to help them cope with rising living costs this winter.
Angie Risley, group HR director at Sainsbury’s, says:
“We know how tough it is for households right now and as well as excellent value for customers we are committed to leading colleague pay.
“Our new higher base rate, colleague discount and free food during shifts ensures colleagues will be well-rewarded for their hard work.”
Government tests energy blackout emergency plans as supply fears grow
Britons could face long energy blackouts this winter, as well as soaring prices in the shops.
The government has “war gamed” emergency plans to cope with energy blackouts lasting up to seven days in the event of a national power outage amid growing fears over security of supply this winter.
My colleagues Pippa Crerar and Alex Lawson report:
The Guardian has seen documents, marked “official sensitive”, which warn that in a “reasonable worst-case scenario” all sectors including transport, food and water supply, communications and energy could be “severely disrupted” for up to a week.
They show that ministers will prioritise getting food, water and shelter to the young and elderly people, as well as those with caring responsibilities, if the country experiences blackouts, with the Met Office warning that Britain faces a higher risk of a cold winter.
Whitehall officials are currently stress-testing Programme Yarrow, the confidential plan for coping in the event of a power outage, and have held a series of exercises with government departments and councils across the country in recent days.
Here’s the full story:
High street chain Next says its sales were slightly higher than expected over the last quarter, despite the squeeze on customers.
Next has told the City that its full price sales rose 0.4% in the 13 weeks to 29 October.
It was helped by the colder weather in early September, which encouraged customers to buy autumnwear.
Full price sales in the last five weeks have been up +1.4%, boosted by one particularly strong week at the end of September, when temperatures dropped and sales of heavier weight products improved.
Next is sticking with its full-year guidance, having cut its profit forecasts back in September.
It's going to be a tough winter
There’s little hope that food price inflation will ease off soon, warns Andy Clarke, former chief executive of supermarket chain Asda.
Clarke, now the chairman of operational improvement specialist Newton Europe, has told Radio 4’s Today Programme that we faces a tough winter.
With food inflation already at 11.6%, according to the BRC’s survey today, Clarke warns that it could accelerate higher.
We’re seeing inflation numbers at over double-digit. There’s nothing we can see in the near term that suggests it’s going to go south of that. If anything, it’s going to go up.
Clarke adds that Christmas will be challenging for families, who are already facing high fuel costs and rising energy bills.
Everyone wants to enjoy Christmas, but you’ve got to take a view that certainly for the next three to six months we’re not going to see any rapid decline in inflation….
I think it’s going to be a tough winter, and food inflation is clearly adding to the burden for families.
Rising prices are already deterring consumers from spending on non-essential items, which is sending shockwaves through retailers.
As Bloomberg points out:
Fast fashion chain Boohoo Group Plc and high street bellwether Next Plc both issued profit warnings in September while Asos Plc is restructuring its business.
Online furniture store Made.com Group Plc is set to enter insolvency due to weaker demand and supply-chain difficulties.
Supermarkets need to offer good value this Christmas to win business from cash-strapped customers, adds Mike Watkins, Head of Retailer and Business Insight at NielsenIQ.
“External factors are keeping shop price inflation at record highs and the challenging economic conditions are significantly impacting consumer confidence and retail spend.
With pressure growing on discretionary spend across both non-food and food retail, delivering good value is the table stake in the battle for shopper loyalty over the next 8 weeks.”
Introduction: Food prices surging at fastest rate on record
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK food prices are surging at the fastest rate on record as the energy crisis, and the Ukraine war, and a shortages of workers all ratchet up the cost of living crisis.
The cost of fresh food in British shops jumped by 13.3% in October, compared to a year ago, the British Retail Consortium reports this morning. That’s the biggest annual increase since at least 2005, when the BRC started collecting the data.
Food prices overall jumped by a record 11.6%, including a 9.4% rise in store-cupboard staples such as tinned food and other less perishable foodstuffs.
Overall shop price inflation, on the BRC’s gauge, accelerated to 6.6% in October from 5.7% – again, the highest on record.
In a blow to struggling families, even essentials such as tea bags, milk and sugar became much pricier.
Helen Dickinson OBE, chief executive of the BRC, says October was a difficult month for consumers – who also saw their energy bills jump as the price cap was raised. Shops are also paying higher wages to attract and retain staff, with some supermarkets raising pay two or three times in the last year.
And there are difficult times ahead, Dickinson warns:
Prices were pushed up because of the significant input cost pressures faced by retailers due to rising commodity and energy prices and a tight labour market. Even the price of basic items went up, with the price of the humble cuppa rising, as tea bags, milk and sugar all saw significant rises.
While some supply chain costs are beginning to fall, this is more than offset by the cost of energy, meaning a difficult time ahead for retailers and households alike.
Dickinson adds that it will be hard for retailers not to hike prices again in the run-up to Christmas, and urges ministers to help the sector by freezing business rates.
Last month’s official inflation report, for September, also showed that soaring food prices were pushing up costs.
Also coming up today
MPs on the Treasury Committee are holding a session exploring the current state of the mortgage market, looking at what support is in place for vulnerable customers strugging with rising interest rates and the cost of living.
We’ll also be watching Britishvolt, the embattled UK battery start-up, which is trying to raise fresh funding from investors to avoid falling into administration.
Manufaturing data from across the eurozone, and trade data from Germany, may show whether Europe has fallen closer to recession.
Investors are bracing for the US central bank, the Federal Reserve, to agree another large rise in interest rates today. The Fed is expected to hike its benchmark rate by another three-quarters of a percent… but will it give any hint that the tightening cycle might ease soon?
7am BST: German trade data for September
9am BST: Eurozone manufacturing PMI reports for October
11am BST: US weekly mortgage applications
12.15pm BST: ADP survey of US private sector payrolls
2.15pm BST: UK Treasury committee holds hearing into the UK mortgage market
6pm BST: US Federal Reserve’s interest rate decision