‘Bank of Mum and Dad’ gives kids a 10-year head start in housing; IMF lifts global growth forecasts – business live

A late update: Dame Alison Rose has stood down as the chief executive of NatWest Group, after admitting last night to inaccurately briefing the BBC’s Simon Jack about the closure of Nigel Farage’s bank account.

In a statement released early on Wednesday morning, NatWest’s board announced that Rose has agreed by mutual consent to step down as Group Chief Executive with immediate effect.

NatWest Group chairman, Sir Howard Davies, said:

“The board and Alison Rose have agreed, by mutual consent, that she will step down as CEO of the NatWest Group. It is a sad moment.

“She has dedicated all her working life so far to NatWest and will leave many colleagues who respect and admire her.”

Paul Thwaite, chief executive of the bank’s commercial and institutional business, will take over for 12 months while NatWest seeks a permanent replacement.

Rose, who has run NatWest since 2019, said:

“I remain immensely proud of the progress the bank has made in supporting people, families and business across the UK, and building the foundations for sustainable growth.

My NatWest colleagues are central to that success, and so I would like to personally thank them for all that they have done.”

Rose’s resignation comes just a few hours after she admitted being the source of the controversial BBC story that said Farage had lost his Coutts account for commercial reasons, for which she apologised last night (see here).

It follows an emergency board meeting last night to determine her future, after NatWest had said Rose still had their full support.

Here’s our news story on Rose’s departure:

Farage concludes by urges the government, which owns 39% of NatWest’s shares, to say it has no confidence in the bank’s management when it releases its results on Friday morning.

Frankly, I think they should all go.

Nigel Farage goes on to accuse Dame Alison Rose of breaking “an essential confidence” through her conversation with the BBC’s Simon Jack about Farage’s bank account.

And he questions the argument that the BBC’s Simon Jack had been left under a misapprehension that the decision to close Farage’s accounts was solely a commercial one.

Farage points out that the BBC told him yesterday they had gone back to their NatWest source to check they were happy for the BBc to report that his accounts had been closed for commercial reasons.

Farage tells GB News:

There is absolutely no way, if the BBC went back for a second time to confirm the story, that they would not have checked that it was the balance of my account that had led to that commercial decision.

Someone is lying here. Of that I have no doubt at all.

He then cites the UK’s ‘conduct rules’ setting minimum behaviour standards in financial services, including acting with integrity, with due skill and diligence, and treating customers fairly.

Farage says:

I think on all of those counts, there has been complete failure in this regard.

He concludes that the CEO of Coutts, Peter Flavel, “has not done his job”, saying:

It is perfectly clear to me that Alison Rose is unfit to be the CEO of a big group.

Chair Howard Davies, who is in charge of governance, has “failed as well”, Farage adds.

Nigel Farage is discussing this evening’s statements from Dame Alison Rose and NatWest chair Howard Davies on his show on GB News.

After reading out both statements (which are published earlier in this blog), Farage says that “the silence had been deafening” until this evening, but that NatWest clearly “had to say something” ahead of its financial results due at 7am on Friday.

Farage adds that we have now learned that Rose was the source of Simon Jack’s report that the former Ukip leader had lost his Coutts account because he was no longer sufficiently wealthy to hold one.

Farage says Rose has written him a personal letter, in which she “gives me personally her unreserved apology”.

He says Rose’s point, that it was Coutts’s decision to “exit” him, points to the CEO of Coutts, Peter Flavel.

His voice rising, Farage declares:

A man that I have now written to three times. Three times!

I’ve not even had an acknowledgement of the receipt of the letters, though I know he’s received them because he’s got other people to ring me as a result of the letters.

Farage says he has told Flavel that if he can’t find a new bank account soon, he’ll be turning up with a Securicor van to collect the balance of his account in cash.

But despite this prospect, “nothing from him at all”, Farage adds.

NatWest has insisted it has “full confidence” in Alison Rose, despite the chief executive admitting she made a “serious error of judgment” in discussing Nigel Farage’s banking relationship in a conversation with a BBC reporter.

The banking group’s chairman, Howard Davies, said the board’s support for Rose came after “careful reflection” but warned she could see her pay docked as a result of the controversy, which started after NatWest’s private bank Coutts shut the ex-Ukip leader’s accounts earlier this year.

“The board has noted Alison Rose’s statement on the circumstances of her conversation with [BBC journalist] Simon Jack and her further apology to Mr Farage,” Davies said in a statement.

More here:

Britain’s City watchdog has weighed in, welcoming NatWest’s plan to review exactly what happened.

Sheldon Mills, Financial Conduct Authority executive director, consumers and competition, said:

“We have raised concerns with NatWest Group and Coutts about the allegations relating to account closures and breach of customer confidentiality since these came to light.

“We made clear our expectation that these issues should be independently reviewed and note today’s statement from the NatWest Group Board confirming this will happen.

“It is vital that the review is well resourced and those conducting it have access to all the necessary information and people in order to investigate what happened swiftly and fully.

“On the basis of the review and any steps taken by other authorities, such as the Financial Ombudsman Service or Information Commissioner, on relevant complaints, we will decide if any further action is necessary.”

Alison Rose has also insisted tonight that she was not part “of the decision-making process to exit Mr Farage”.

In her statement this evening, the NatWest CEO says:

This decision was made by Coutts, and I was informed in April that this was for commercial reasons.

“At the time of my conversations with Mr Jack, I was not in receipt of the contents of the Coutts Wealth Reputational Risk Committee materials subsequently released by Mr Farage.

“I have apologised to Mr Farage for the deeply inappropriate language contained in those papers and the board has commissioned a full independent review into the decision and process to ensure that this cannot happen again.

“Put simply, I was wrong to respond to any question raised by the BBC about this case. I want to extend my sincere apologies to Mr Farage for the personal hurt this has caused him and I have written to him today.

“I would like to say sorry to the board and my colleagues. I started my career working for National Westminster Bank.

“It is an institution I care about enormously and have always been proud to be a part of. It has been the privilege of my career to lead the bank and I am grateful to the board for entrusting me with this role. It is therefore all the more regrettable that my actions have compounded an already difficult issue for the group.”

The Board of NatWest say they retain full confidence in Alison Rose.

That’s despite her admission tonight that she made a “serious error of judgement” in discussing Nigel Farage’s relationship with the bank.

However, they also hint that Rose’s pay may be curbed as a result of the row.

Howard Davies, chairman of NatWest Group, says it is in the interest of the bank’s shareholders and customers that Rose stays on.

Davies says:

The Board has noted Alison Rose’s statement on the circumstances of her conversation with Simon Jack and her further apology to Mr Farage

As she recognises, she should not have spoken in the way she did. This was a regrettable error of judgement on her part. The events will be taken into account in decisions on remuneration at the appropriate time.

However, after careful reflection the Board has concluded that it retains full confidence in Ms Rose as CEO of the bank.

She has proved, over the last 4 years to be an outstanding leader of the institution, as demonstrated by our results. The Board therefore believes it is clearly in the interest of all the bank’s shareholders and customers that she continues in post.

The Board is clear that the overall handling of the circumstances surrounding Mr Farage accounts has been unsatisfactory, with serious consequences for the bank. The Board will commission an independent review into the account closure arrangement at Coutts, and the lessons to be learnt from this.

The findings of that review will be made public on completion. The Terms of Reference and lead firm will be announced shortly.

Breaking news: The boss of NatWest has admitted a “serious error of judgement” in discussing Nigel Farage’s relationship with the bank.

Dame Alison Rose has admitted she was the source of a BBC story into Nigel Farage’s finances, for which the Corporation apologised last night.

Rose says:

“I recognise that in my conversations with Simon Jack of the BBC, I made a serious error of judgment in discussing Mr Farage’s relationship with the bank.

“Given the consequences of this, I want to address the questions that have been raised and set out the substance of the conversations that took place.

“Believing it was public knowledge, I confirmed that Mr Farage was a Coutts customer and that he had been offered a NatWest bank account. Alongside this, I repeated what Mr Farage had already stated, that the bank saw this as a commercial decision.

“I would like to emphasise that in responding to Mr Jack’s questions I did not reveal any personal financial information about Mr Farage.

“In response to a general question about eligibility criteria required to bank with Coutts and NatWest I said that guidance on both was publicly available on their websites. In doing so, I recognise that I left Mr Jack with the impression that the decision to close Mr Farage’s accounts was solely a commercial one.”

The statement comes a day after the BBC apologised to Farage for reporting that Coutts had closed his account because he was no longer sufficiently wealthy to hold one.

Farage later secured, and released, a Coutts report which indicated his political views were considered.

A quick PS: City minister Andrew Griffith says he will meet with UK bank chiefs tomorrow to discuss the issue of ‘debanking’, which is in the spotlight since Nige Farage lost his Coutts account:

Time for a recap.

• Wealthier parents are giving their children a 10-year advantage in buying property.

  Research from the Bank of England into the Bank of Mum and Dad has shown that recipients of financial support are buying their first homes earlier, are less-leveraged and have lower mortgage payments.
  
  According to the BoE, the average 26 year old with help paid about £254,000 for their first home. Those with no help waited a decade to buy a property for an equivalent sum.

• The BoE has also lifted its estimate for its likely losses from its QE programme to £150bn over the next decade. That money will need to come from the government, eating into the firepower for future governments to improve public services or cut taxes.
  

• Fitch has warned that the UK is on track to run up the highest debt interest costs in the developed world this year, as rising inflation adds to the cost of servicing the national debt.
  

• The International Monetary Fund has warned that interest rates in the UK will need to stay higher for longer than previously forecast in order to tackle stubbornly high inflation.

  The IMF also lifted its forecast for global growth this year to 3%, while the UK is expected to grow by 0.4%.
  

• Unilever has beaten sales forecasts, as customers largely swallowed large price increases which helped it improve its profit margins. Unilever also suggested that peak inflation is behind us, as it continues to face criticism for not withdrawing from Russia.
  

• Luxury goods firm LVMH has reported a 15% jump in revenues so far this year.

And in other news:

The Bank of Mum and Dad is allowing some people to buy homes significantly earlier and with smaller mortgages than those who can’t draw on its support, new research from the Bank of England shows.

May Rostom, head of the modelling team at the Bank, has analysed the impact of parental financial support on the UK housing market.

She found that Britain’s wealthy parents are giving their children a 10-year advantage in buying property.

She did this by crunching the borrower demographics and loan details on mortgages, to spot which borrowers had a down-payment beyond their savings levels, presumably from the Bank of Mum and Dad’, or Bomad.

She concludes that “the results are extraordinary.”

The average 26 year old with help paid about £254,000 for their first home. Those with no help waited a decade – until they were 37 – to buy a property for an equivalent sum.

Rostom says there are three takeaways from her work:

First, getting help is fairly common. Chart 1 shows over 10% of first-time buyers (FTBs) younger than 45 are getting financial help from someone else. This number rises to 28% for the under 25s.

Second, the support is substantial.

Chart 2 shows that, on average, deposits are two and a half times larger, loans are 30% smaller, and houses cost £15,000 more for those getting help, compared with those who are not.

This means ‘Bomad borrowers’ are typically less-leveraged and have lower mortgage payments, leaving more leeway for them to save or spend their incomes on other things.

Third, recipients of financial support buy their first homes earlier – on average four years earlier, at the age of 26 instead of 30. And, as above, they tend to buy more expensive homes.

In conclusion, Rostom adds, whether and when you receive a gift can affect your entire homeownership trajectory – exacerbating the differences not just across generations, but within them.

You can read the full piece on the BoE’s excellent Bank Underground blog, here.

City economists predict UK interest rates will peak at 5.75%, their highest level since 2007.

A Reuters poll has found that the City expects the Bank of England to raise Base Rate by a quarter of one percent at its meeting next week, from 5% to 5.25%.

Two further rate increases are expected before the end of 2023, as the Bank continues to fight inflation.

Elon Musk has faced a hiccup in his drive to rebrand Twitter as X after police stopped work to remove the old name from the sign at the company’s San Francisco headquarters.

On Monday, workers were seen removing the first letters of the word Twitter before the local police department stopped them from continuing the “unauthorised work,” according to an alert sent by the department.

According to police, the social media firm had failed to communicate with security and the building’s owner its plans to remove the sign at the Market Street headquarters. Police were then called amid the confusion, though later concluded that no crime had been committed.

After the initial work by a worker on a cherrypicker, only the blue bird and the letters “er” were left on one side of the sign.

More here.

The UK is expected to be the second slowest-growing economy in the G7 this year, despite the IMF making a major upgrade to the country’s prospects.

Today’s new forecasts predict the UK’s output to grow by 0.4% during 2023, faster than Germany (which is set to shrink by 0.3%), but slower than any other country in the G7.

The UK’s new forecast is an upgrade by 0.7 percentage points compared to the IMF’s previous forecast from April, but not a surprise as the Fund said in May that the UK would avoid recession.

Growth in the US is expected to be the most rapid of all G7 countries at 1.8%.

This will be followed by Canada (1.7%), Japan (1.4%), Italy (1.1%), France (0.8%), the UK (0.4%) and Germany (-0.3%).

The global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine, says Pierre-Olivier Gourinchas, the IMF’s economic counsellor.

Explaining today’s new forecasts, Gourinchas says supply-chain disruptions have returned to pre-pandemic levels, while economic activity in the first quarter of the year was “resilient”.

But he warns it is “too early to celebrate”, with growth forecast to slow to 3% this year from 3.5% last year.

Gourinchas says:

The slowdown is concentrated in advanced economies, where growth will fall from 2.7 percent in 2022 to 1.5 percent this year and remain subdued at 1.4 percent next year. The euro area, still reeling from last year’s sharp spike in gas prices caused by the war, is set to decelerate sharply.

By contrast, growth in emerging markets and developing economies is still expected to pick-up with year-on-year growth accelerating from 3.1 percent in 2022 to 4.1 percent this year and next.

He warns that signs are growing that global activity is losing momentum, as higher interest rates bite.

The global tightening of monetary policy has brought policy rates into contractionary territory. This has started to weigh on activity, slowing the growth of credit to the non-financial sector, increasing households’ and firms’ interest payments, and putting pressure on real estate markets.

In the United States, excess savings from the pandemic-related transfers, which helped households weather the cost-of-living crisis and tighter credit conditions, are all but depleted.

In China, the recovery following the re-opening of its economy shows signs of losing steam amid continued concerns about the property sector, with implications for the global economy.

Interest rates in the UK will need to stay higher for longer than previously forecast in order to tackle stubbornly high inflation, the International Monetary Fund warns.

The IMF’s regular update on the state of the global economy singled out the US Federal Reserve and the Bank of England as two central banks that will need to raise official borrowing costs more aggressively than it assumed only three months ago.

While the UK’s growth prospects are now thought to be brighter than predicted in April, it has taken longer than expected for cost of living pressures to ease. The Washington-based body now assumes it will take until the middle of 2025 for inflation to return to the British government’s 2% target – six months later than its previous estimate.

As a result, the expected peak in UK interest rates – put at 4.5% when the IMF last published forecasts in April – has now been raised to 5-5.5% and it thinks Threadneedle Street will need to keep policy tight until the end of 2024.

After being the fastest growing of the G7 economies in 2021 and 2022, the UK is expected to be the second most sluggish economy this year, despite an upgrade on its performance since April. Only Germany, which is forecast to contract by 0.3%, is predicted to grow more slowly.

The IMF also warns that the balance of risks to global growth are tilted to the downside.

That’s despite the US debt ceiling standoff has been resolved since its last update in April, and the crisis in US and Swiss banking has been contained.

Its updated WEO report cites the risks from extreme weather:

Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy. Financial sector turbulence could resume as markets adjust to further policy tightening by central banks.

China’s recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies.

On the upside, the IMF adds, inflation could fall faster than expected. That would reduce the need for tight monetary policy (high interest rates).

Newsflash: The International Monetary Fund has warned that global economic growth “remains weak by historical standards”, despite lifting its forecasts for this year.

The IMF now expects global growth of 3.0% in 2023 and 2024, a slowdown on the 3.5% recorded in 2022. Back in April, it forecast 28% growth in 2023, but has now nudged that higher.

In an update to its World Economic Outlook, the IMF says:

The rise in central bank policy rates to fight inflation continues to weigh on economic activity.

Global headline inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024.

Underlying (core) inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward.

The Bank of England has raised its estimate for the losses it will incur on its bond-buying stimulus programme to £150bn, up from £100bn.

Its latest quartely report on the Asset Purchase Facility, the Banks outlines how it expects to incur losses as the bonds bought under its quantitative easing scheme mature, or are sold off.

That will require cash transfers from the Treasury to the Bank to effectively bail it out, and cover those losses.

The Bank bought almost £900bn of UK government bonds (and some corporate debt) through the QE programme which started after the financial crisis and was boosted once the pandemic began.

In its early years the APF was profitable – bond prices rose (partly because the BoE was a willing buyer), and it banked coupon payments (interest on the debt).

That boosted the public finances, because in 2012 chancellor George Osborne decided the profits from QE should be used to reduce government debt, yielding around £120bn.

But the Bank is now trying to unwind QE, at a time where rising interest rates and inflation have pushed down bond prices, meaning the Bank may be selling at a loss.

As this chart shows, the Bank expects to make losses of around £150bn over the next decade if interest rates follow market expectations (the pink line).

Back in April, the Bank had forecast a total financial loss of around £100bn.

Losses would be lower if the path of interest rates were lower than the markets expect, but higher if rates are higher than forecast.

The BoE says:

Looking ahead, future cash flows are uncertain and highly sensitive to the assumptions used for market interest rates and how quickly the portfolio is unwound.

It’s another example of the impact of rising inflation and interest rates, which is expected to leave the UK with the highest debt interest bill in the developed world (see opening post).

Airlines flying to Heathrow have been told to carry as much fuel as possible in their tanks because of supply problems at Britain’s largest airport, in a controversial practice that can increase carbon emissions.

The airport asked airlines to carry excess fuel on the way to London and to avoid carrying too much when departing, citing supply issues, in a notice sent on Sunday. The notice covered nine days from Sunday 23 July to Monday 31 July.

Heathrow said there had been no impact on passengers or flights from the request.

Fuel tankering is controversial because the practice significantly increases the weight of kerosene stored in the aircraft’s wings. That extra weight increases the amount of fuel burned on a flight, and therefore its carbon footprint. Yet despite the extra cost and carbon emissions, it can be financially worthwhile for airlines if fuel is cheaper at one airport than at another.

More here.

NatWest bank remains under pressure this morning over the controversial decision to close former Ukip leader Nigel Farage’s accounts at its exclusive private bank, Coutts, and the misreporting of the move.

Cabinet minister Michael Gove has said this morning that NatWest has “further to go” in resolving the matter.

Amid claims in the Daily Telegraph that chief executive Dame Alison Rose’s career is hanging in the balance, Gove told Sky News:

“I have a lot of sympathy for the position Nigel Farage has found himself in.

“As far as I can tell the decision that was taken to deprive him of banking facilities was a big mistake, something done for the wrong reasons.

“But it’s not for me to determine what the company should do but I definitely think he was owed an apology, he’s got one, but I think the company has further to go in order to make sure this matter ends appropriately.”

Last night, the BBC wrote to Farage to apologise for reporting that Coutts closed the account because he was no longer sufficiently wealthy to hold one, and that it was not a political decision.

Simon Jack, the BBC’s business editor who landed this now-corrected story, also apologised… and revealed the line came from “a trusted and senior source.”

NatWest offered Farage its own apology last week, after the politician revealed that an internal Coutts report said he was “considered by many to be a disingenuous grifter”, and “has – and projects – xenophobic, chauvinistic and racist views”.

The report, from last November, recommended keeping Farage as a client “for now”, and setting a “glide path to exiting” him on commercial grounds once his mortgage expired this summer.

But, NatWest CEO Rose is now in the firing line, with the Daily Telegraph suggesting that chairman Sir Howard Davies may face a “fateful decision”.

Boris Johnson argued last weekend that Rose “really needs to go” if she was in any responsible for the misreporting of the circumstances behind Farage’s exit from Coutts.

Johnson wrote in the Daily Mail:

As a subsidiary of NatWest, Coutts belongs nearly 40 per cent to you and me, the taxpayers, because we bailed it out in 2008; and Alison Rose is publicly accountable for her decisions and her £5.2million salary.

That matters because what this bank has done is — paradoxically — disastrous for the reputation of UK financial services.

Conservative MP Jacob Rees-Mogg told Farage’s TV show last night that Rose’s position was “really difficult” following the BBC’s apology:

As we’re about to enter the UK bank reporting season, NatWest will present its latest financial results on Friday morning, so it can’t escape more questions about the issue…

Telecoms giant Virgin Media O2 is to axe up to 2,000 jobs by the end of the year.

The mobile operator said the move, which includes around 800 previously reported job cuts, will affect around 12% of its workforce.

These are the first major job cuts at the group since it was created two years ago by the £31bn merger between mobile operator O2 and broadband and TV specialist Virgin Media.

A spokesman said:

“As we continue to integrate and transform as a company, we are currently consulting on proposals to simplify our operating model to better deliver for customers, which will see a reduction in some roles this year.

“While we know any period of change can be difficult, we are committed to supporting all of our people and are working closely with the CWU (Communication Workers Union) and Prospect along with our internal employee representatives as we have open and honest conversations on the future direction of our business.”

Back in May, rival telco BT announced plans to cut tens of thousands of jobs in the coming years, with Vodafone also planning to cut its workforce.

Over in Germany, business confidence has worsened as the country struggles to leave recession.

German business morale deteriorated in July for the third month in a row, according to the Ifo Institute.

Its business climate index has dropped to 87.3 this month, following a revised reading of 88.6 in June.

IFO says:

In particular, companies were notably less satisfied with their current business. Expectations were also lower. The situation in the German economy is turning bleaker.

UK mortgage rates have climbed again, despite last week’s drop in inflation.

The average 2-year fixed residential mortgage rate today is 6.83%, data provider Moneyfacts, up from 6.81% on Monday.

The average 5-year fixed residential mortgage rate has risen to 6.34%, up from 6.32% on Monday.

More mortgages are available – 4,699 products are on the market, up from 4,557 yesterday.

But… banks have not lifted their savings rates as quickly as their mortgage rates today.

Moneyfacts report:

• The average 1-year fixed savings rate today is 5.15%. This is the same average rate as the previous working day.

• The average easy access savings rate today is 2.74%. This is up from an average rate of 2.73% on the previous working day.

• The average 1-year fixed Cash ISA rate today is 4.90%. This is the same average rate as the previous working day.

• The average easy access ISA rate today is 2.84%. This is up from an average rate of 2.83% on the previous working day.

Unilever has indicated it could continue to hike prices across household brands as it reported a jump in sales despite stagnant consumer spending.

Unilever’s chief financial officer Graeme Pitkethly said that European and UK consumers were more “hard pressed” than those in the rest of the world, thanks to high levels of inflation, PA Media reports.

But he said the company is unlikely to cut its prices any time soon.

Pitkethly said:

“I think we are past ‘peak’ inflation but there will continue to be a high contribution of pricing growth.”

The volatility of commodity markets, particularly in nutrition and ice cream, means prices must be managed responsibly, he said.

But the company stressed that price growth will continue to “moderate” through the year, as flagged earlier.

Shares in Unilever have jumped 5% at the start of trading in London.

Traders are clearly impressed that it has beaten sales forecast this morning (thanks to hiiking prices)

That puts Unilever’s shares on track for their best day since May 2022

Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service says:

“From Tresemmé to Dermalogica and back to Dove, a determined focus by shoppers all over the globe on personal care has seen sales rise at Unilever.

“From the basics such as deodorant (delivering double-digit growth), to high-end beauty launches by the likes of Dermalogica and Paula’s Choice, first-half operating profits rose by 3.3% to €5.2 billion, as consumers simply paid more for the products they wanted.

“There’s no doubt that higher prices are boosting Unilever’s coffers, with the company acknowledging that volumes were virtually flat, aside from the Beauty & Wellbeing and Personal Care businesses.

“All in all, the cost of living is proving profitable for this global giant, with full-year underlying sales growth expected to beat forecasts. While the outlook for cash-strapped consumers is that price growth will ‘moderate’ as the year goes on.”

Consumer goods giant Unilever has beaten sales forecasts, as it continues to hike prices.

The Dove and Marmite maker has reported sales growth of 9.1% in the first half of this year, entirely down to consumers paying more for its goods. Unilever’s prices rose by 9.4%, while sales volumes dipped by 0.2%.

In the second quarter of the year, underlying sales rose by 7.9%, beating analyst forecasts of 6.4% growth, driven by price rises of 8.2%.

Unilever predicts that price growth will continue to “moderate” through the year, which will disappoint those hoping to see price cuts.

The company has also been hit by rising prices. It expects to spend an extra €2bn on raw materials this year, having previously forecast net material inflation (NMI) of €1.5bn for the first half of 2023.

Unilever, which sells a range of food, beauty and wellbeing, and homecare brands, says:

We continue to expect a modest improvement in underlying operating margin for the full year, reflecting higher gross margin and increased investment behind our brands.

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

Rising inflation is driving up the debt burden on countries around the world, with the UK facing a bigger bill than other major economies.

A new report from credit rating agency Fitch shows that governments face a steep rise in interest spending on their debts compared to pre-pandemic levels.

Developed countries face paying 47% more than in 2020, while the bill for emerging market countries has jumped 40%.

“The trend reflects an end to the era of low inflation and, at least for DMs, a period of exceptionally low interest rates,” Fitch warns.

In total, countries will pay around $2.3trn in interest costs in 2023, it has calculated, with developed economies facing a sharper rise – partly because they benefitted more from low borrowing costs previously.

The rise in interest costs among developed economices has been “particularly notable in the UK”, where interest payments on a 12-month basis reached £117bn in May 2023, double the level in the period to September 2021.

Fitch estimates that the UK Treasury will spend £110bn on debt interest in 2023. That would be around 10.4% of total government revenue, the highest level of any high-income country, the Financial Times reports.

The UK’s particular problem is that more of its debt is linked to inflation than other countries.

Inflation index-linked debt makes up almost 25% of UK government debt stock in 2023, so the cost of repaying those bonds has jumped as inflation hit 40-year highs last autumn.

As Ed Parker, global head of research for sovereigns and supranationals at Fitch, puts it:

We’ve had a very large inflation shock which is adversely affecting the public finances and that is obviously a key driver of the sovereign credit rating.”

Parker also warned that a UK downgrade is “more likely than not if current trends continue”. Fitch currently rates the UK as ‘AA-’ with a Negative Outlook.

The next largest issuer of inflation-linked debt among the G7, Italy, had just 12%; France was the only other member with a level of over 10%.

The US has also seen its debt repayments jump – to $616bn in the year to June 2023, breaking over the $600bn mark for the first time.

Also coming up today

The IMF will release updated forecasts for the world economy today, covering growth and inflation. The previous forecasts came in April, when the crisis in the US banking sector was looming over the global economy.

But while that danger has receded, inflation has proved persistent in some countries while dropping quickly in the US. And with the Ukraine war, which drove up energy and food prices, continuing, risks remain elevated….

Consumer goods giant Unilever is reporting results this morning, while Microsoft and Alphabet report financial results tonight.

The agenda

• 9am BST: IFO survey of German business climate

• 11am BST: CBI Industrial Trends survey of UK manufacturing

• 2pm BST: IMF releases an update to its World Economic Outlook (WEO)

• 2pm BST: US house price index for May

• 3pm BST: US consumer confidence report for July