Brexit ‘to blame for austerity budget’, as London stock market overtaken by Paris – business live

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LIVE – Updated at 14:34

Former Bank of England policymaker says Brexit has caused permanent damage to the UK economy.

 

14:34 Zoe Wood

Brexit has also left UK companies struggling to hire staff – last week, the Brexiteer boss of Next warned that current immigration policy was holding back economic growth.

Related: ‘Not the Brexit I wanted’: Next boss calls for more foreign workers in UK

And today, Britain’s foremost business lobby group urged Jeremy Hunt to use this week’s autumn statement to shake up immigration rules to support companies struggling with chronic staff shortages and a looming recession.

The head of the Confederation of British Industry (CBI) said urgent action was required from the chancellor on Thursday to bolster the economy, including “tough political choices” to allow more overseas workers in Britain as employers struggle with a desperate lack of staff.

CB director Tony Danker said:

Not matching action on spending and tax with measures to tackle labour shortages and productivity is likely to be damaging in the short and long term.

A desperate lack of workers is inflating wages and stopping firms growing.”

Related: CBI urges Jeremy Hunt to relax immigration rules to ease UK staff shortages

Brexit ‘permanently damaged’ UK economy, Michael Saunders says

Britain’s exit from the European Union is one of the reasons why the UK is now entering a period of austerity, a former Bank of England policymaker has said.

Michael Saunders, who left the Bank’s Monetary Policy Committee this summer, told Bloomberg TV that leaving the European Union had created permanent damage.

Saunders said the last six years of government had been a ‘chaotic period’, with five prime ministers and seven chancellors.

This upheaval has included the Brexit vote, the depreciation of sterling, a period of political uncertainty, the pandemic, and then renewed political uncertainty, says Saunders, now senior adviser at Oxford Economics.

And the legacy of this period is that the economy’s potential output “has been weak”.

Q: So has the City of London has been damaged, as it loses its crown as the biggest European stock market to Paris?

Saunders says the impact has been wider:

“The UK economy as a whole has been permanently damaged by Brexit.

It’s reduced the economy’s potential output significantly, eroded business investment.

If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week.

The need for tax rises [and] spending cuts wouldn’t be there, if Brexit hadn’t reduced the economy’s potential output so much.

The key is to raise potential output, Saunders concludes, saying that Liz Truss was right to diognose this as the problem.

But, cutting taxes and deregulating was the wrong solution.

Instead, Saunders says the government should focus on improving trade links with the EU, strengthening education and trading, and tackling the worrying rise in long-term sickness that has reduced the UK’s workforce.

Chancellor Jeremy Hunt warned on Sunday that everyone will be paying “a bit more tax” after the autumn budget, while public services are expected to face severe cuts.

Last Friday we learned that the UK was the only major advanced economy to shrink in the last quarter, with business investment now 8.4% below its pre-pandemic levels.

Related: Jeremy Hunt warns of ‘tough road ahead’ as UK economy shrinks

 

As well as permanent damage from Brexit, the UK also faces stubbornly high inflation.

Deutsche Bank predict that inflation rose again in October to 10.9% (we get the data on Wednesday), from September’s 40-year high of 10.1%.

And worryingly for households, Deutsche reckons inflation will average 8.2% through 2023 – or four times the Bank of England’s target – before dropping to 3.4% in 2024.

The weakness of the pound, which is down 13% against the US dollar this year, has pushed up the cost of imported goods.

Opec cuts oil demand forecast again

Oil cartel Opec has revised down its predictions for oil demand this year, partly due to the slowing global economy.

Forecast oil demand this year has been revised down by 100,000 barrels per day, to 2.5m barrels per day.

The revision is due to China’s zero-Covid policy, ongoing geopolitical uncertainties and weaker economic activities.

Opec says:

The significant uncertainty regarding the global economy, accompanied by fears of a global recession contributes to the downside risk for lowering global oil demand growth.

In addition, China’s strict adherence to the “zero COVID-19 policy” adds to this uncertainty, making the country’s recovery path even more unpredictable.

It has also cut its forecast for global oil demand growth in 2023, again by 0.1 mb/d.

SpaceX buys ad campaign on Twitter for Starlink

It’s been a tough few weeks for Twitter’s ad sales department, since Elon Musk’s takeover prompted a clutch of major companies to pause activity on the site.

But they can celebrate a win – from Musk’s aerospace business SpaceX.

According to CNBC, SpaceX has ordered one of the larger advertising packages available from Twitter.

The campaign will promote the SpaceX-owned and -operated satellite internet service called Starlink on Twitter in Spain and Australia, according to internal records from the social media business viewed by CNBC.

Musk has said that the package is ‘tiny’, though – to test the effectiveness of Twitter advertising.

Last week, advertising and marketing conglomerate Omnicom advised clients to pause their spending on Twitter in the short term.

Musk, who sacked half of Twitter’s staff this month, also says he’s overworked.

He told a business conference in Bali that:

“I have too much work on my plate, that’s for sure.”

“I’m working the absolute most that I can work — morning to night, seven days a week.”

 

Back in Europe, eurozone factories performed better than expected in September.

Eurozone industrial production rose by 0.9% in September, thanks to an easing of supply chain problems that cushioned the damage from higher energy prices.

CNN: Jeff Bezos says he will give most of his money to charity

© Provided by The Guardian Jeff Bezos

Amazon founder Jeff Bezos plans to give away the majority of his $124bn net worth during his lifetime.

Bezos has told CNN he will devote the bulk of his wealth to fighting climate change, and to supporting people who can unify humanity in the face of deep social and political divisions.

Bezos’ pledge is light on specifics, though.

He has been criticised in the past for not signing the Giving Pledge, under which some of the world’s richest people promise to donate the majority of their wealth to charitable causes – including his ex-wife, MacKenzie Scott.

CNN reports:

In a sit-down interview with CNN’s Chloe Melas on Saturday at his Washington, DC, home, Bezos, speaking alongside his partner, the journalist-turned-philanthropist Lauren Sánchez, said the couple is “building the capacity to be able to give away this money.”

Asked directly by CNN whether he intends to donate the majority of his wealth within his lifetime, Bezos said: “Yeah, I do.”

Bezos adds that the hard part is working out how do in a levered way.

“It’s not easy. Building Amazon was not easy.

It took a lot of hard work, a bunch of very smart teammates, hard-working teammates, and I’m finding — and I think Lauren is finding the same thing — that charity, philanthropy, is very similar.”

Here’s a video clip of the interview:

Bezos has also awarded a $100m (£84.8m) prize to country music star and philanthropist Dolly Parton, to spend on any charitable donations of her choice

 

Over in the US, there are hopes that inflation may be heading lower.

Goldman Sachs have predicted that the Federal Reserve’s preferred measure of inflation, called core PCE, will fall below 3% by the end of next year as supply constraints ease, the cost of housing falls and the labor market cools.

Last week, the US consumer prices index dropped by more than expected, to 7.7% in October from 8.2% in September, which triggered a market rally.

But, Fed governor Christopher Waller did urge caution over the weekend, warning that the endpoint for rising rates was still “a ways off”.

Pubs and restaurants cut hours over soaring energy bills

Soaring energy bills are forcing some UK pubs, restaurants and cafes to cut their trading hours or even stay shut some days.

A survey by the Office for National Statistics found that food and drink service firms are most likely to cut trading to tackle energy costs

One in five hospitality firms have reduced their daily trading hours, while 7% have closed one day a week.

Another 6% have stayed shut at least two days each week, judging that soaring costs made it uneconomical to operate.

The government has brought in an emergency cap on business energy bills this winter, to help protect non-domestic customers.

But even so, one hospitality business told the ONS they could cut staff if the energy squeeze continues:

We employ three local people to work in our business, paying above living wage as we see this as fair. We will have to let our staff go if energy costs increase.

Around two in five food and drink service businesses expect to raise their prices in November, compared with an overall average of 28%, which would add to the cost of living squeeze.

London loses crown of biggest European stock market to Paris

© Provided by The Guardian A trading floor in the City Of London. Photograph: Paul Painter/Alamy

Britain lost its title of Europe’s largest equity market to France, Bloomberg reports.

The City was overtaken by Paris as economic growth concerns hit UK assets, while China’s relaxation of Covid rules has boosted French luxury shares.

Bloomberg has the details:

The combined market capitalization of primary listings in Paris overtook that of the London in US dollar terms, according to an index compiled by Bloomberg.

Domestically-focused UK shares have slumped this year, while French luxury goods-makers like LVMH and Gucci owner Kering have recently been boosted by optimism over a potential easing of China’s Covid Zero policy.

Currency movements have also worked in Paris’s favor. Former UK Prime Minister Liz Truss’s mini-budget of unfunded tax cuts in September and subsequent storm in UK financial markets sank sterling to the lowest level since 1985 against the greenback.

UK midcaps have been crushed this year on predictions that Britons would be squeezed harder by rising energy costs than elsewhere, while British homeowners are facing a surge in interest payments given the widespread issuance of flexible-rate mortgage loans in the country.

Within about three weeks of Truss becoming prime minister, UK’s stock and bond markets had lost roughly $500bn in combined value, with investor confidence shattered by the tax-cutting budget.

© Provided by The Guardian The Paris all-share index over the last 5 years Photograph: Refinitiv © Provided by The Guardian The UK’s FTSE All-Share index over the last five years Photograph: Refinitiv

The drop in the pound has also eroded the value of UK shares in dollar terms.

Bloomberg adds that the market cap gap between the UK and French stock markets has been narrowing from about $1.5trn since the Brexit vote in 2016.

British equities are now worth about $2.821trn compared with about $2.823trn for French equities, by Bloomberg’s calculations.

 

Joules’s failure to move with the times helped to push it to appoint administrators, says Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Streeter explains:

The apparel retailer, once the darling of the outdoor set, had become stuck in a rut – as athleisure wear took over as the casual clothes for the younger generation and even Joules’ core customers, started falling out of love with the staples of its floral and fashion ranges.

It can be hard for a brand based on British heritage to move with the times, but Joules’ demise shows, fast moving fashion trends can cause serious damage to slow coaches.

The effect of consumers tightening their belts will have caused deeper damage to the company’s furniture and accessories business Garden Trading, as spending on revamped rooms and outdoor spaces has been cut back.

But despite its problems, there is likely to be “significant interest” in acquiring the Joules brand, and its intellectual property, Streeter adds.

The Joules brand is still strong, and although it will need a modern twist to help it survive longer term, there is likely to be significant interest in the name and the intellectual property. ‘’

Workers at Twiglet and cream crackers factory to strike

© Provided by The Guardian Twiglets

Hundreds of workers at a factory which makes products including Jacob’s Cream Crackers, Jaffa Cakes and Twiglets are to strike in a dispute over pay.

Staff at the plant in Aintree have been taking limited industrial action since September, but walked out on Monday on indefinite strike.

Eamon O’Hearn, national officer of the GMB union, said:

“These workers are rightly angry – they put themselves on the line to keep the company going during the pandemic.

“Now they need some help to get them through the cost-of-living crisis, but it’s falling on deaf ears.

“Jacob’s workers will now be on strike 24 hours a day, seven days a week until the company comes back to the negotiating table.”

 

Shares in North Sea oil and gas producers have dropped this morning, amid reports that chancellor Jeremy Hunt is considering increasing the emergency levy from 25% to as much as 35% in his Autumn Statement on Thursday.

Harbour Energy are the top faller on the FTSE 100, down 7%, while Enquest have dropped 9%.

Full story: Joules to appoint administrators as rescue talks fail

09:33 Jasper Jolly

The fashion retailer Joules has announced it attends to appoint administrators, putting as many as 1,600 jobs at risk after talks fell through to find new investors.

The board of Joules on Monday said they had “regrettably” decided to appoint administrators from Interpath Advisory to Joules Group and three subsidiaries including the Garden Trading Company. Trading in Joules shares has been suspended.

Joules, which is best known for its jackets and patterned wellington boots, had been struggling for months with falling sales.

It has in part blamed those woes on the cost of living crisis and on the UK summer heatwave which reduced demand for its posh winter wellies.

Related: Joules to appoint administrators as rescue talks fail

 

Conditions appear to be improving in the events sector, after some torrid years.

UK events organiser Informa has lifted its annual earnings forecast this morning, reporting that demand for physical events and its subscription services has improved.

Informa, which had been hit by pandemic cancellations and lockdowns, now expects adjusted operating profit for the year of £490m-£505mm, up from £470m-£490m.

Informa told shareholders:

“The operating momentum across both our businesses, combined with the strength of our positions in North America, put us in a strong position for continued growth and acceleration in 2023, with incremental growth in China as the market reopens.”

Shares in Informa have gained almost 5%, the top riser in London this morning.

 

Here’s a Twitter thread on the fall in UK business confidence:

UK house prices fall as mini-budget spooks first-time buyers

Another economic warning light is flashing – in the housing market.

Asking prices for British residential properties are dropping, and first-time buyers are pulling back as the turmoil following the “mini-budget” slows the property market.

Figures from the property platform Rightmove show buyer demand fell 20% in October compared with a year ago, as house-hunters put their property searches on hold in response to soaring borrowing costs and rising economic uncertainty.

Related: Exodus of first-time buyers puts brakes on UK housing market

 

09:06 Zoe Wood

Older people face a bigger income hit from surging energy costs this winter but younger households are more at risk of being unable to pay their bill or getting into debt amid the cost of living crisis.

As households across Britain turn their heating on, the research by the Resolution Foundation thinktank found that older generations, in particular the over-75s, will spend a bigger share of their income, up from 5% to 8%, on their energy bills.

For those under 50 the proportion is 5%.

But while older households face a bigger increase, it is younger generations, who have endured years of stalled pay growth and high rents, who will struggle most to cope, according to the report.

Related: Energy bills: older Britons will pay more but youngest will struggle most, report finds

Introduction: Joules intends to appoint administrators after rescue talks fail

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

Struggling high street retailer Joules has decided to call in the administrators, becoming the latest UK company to be hit by the cost of living crisis.

The coats and wellies retailer is on the brink of collapse after failing to raise new funding.

Joules told the City this morning that it will file a notice of intention to appoint Interpath Advisory Limited as administrators to the Company, “as soon as reasonably practicable.”

It explains:

“The board is taking this action to protect the interests of its creditors”

Garden Trading, Joules’ furniture and accessories business, will also file for administration.

Joules has suffered from the milder weather this year, as well as the cost of living crisis, whic both hit sales in recent month.

In August it issued a profits warning, blaming the summer heatwave for plunging sales of clothing such as jackets, knitwear and wellington boots.

Related: Sun not shining for welly seller Joules as heatwave hits sales

Last week, Joules revealed it was in talks with its founder, Tom Joule, over a possible cash injection following those poor sales. It had also hoped to agree a bridging loan, to help it keep operating while refinancing talks took place.

But today, it says:

….discussions with various parties have not been successful and have now terminated.

The crisis at Joules follows the collapse of online furniture retailer Made.com last week, which led to 320 redundancies and left customers worried about their orders.

Related: Made.com enters administration, with 320 more jobs to be lost

Online mattress retailer Eve Sleep also filed for administration, before being rescued by rival Bensons for Beds.

And there are more warning signs across the economy today, with UK business confidence falling to its lowest level in 13 years, according to data from Accenture and S&P Global.

Firms are cutting back on capital investment plans, while rising inflation is creating tough economic conditions.

Simon Eaves, Market Unit Lead for Accenture in the UK & Ireland, said:

“As we head towards what is likely to be a tough winter for the UK economy, business confidence has understandably been shaken. However, many British companies continue to demonstrate resilience in the face of economic difficulties.

Hiring plans remain positive and overall optimism, whilst muted, is higher than many of our European counterparts.

The agenda

  • 10am GMT: Eurozone industrial production for September

  • 10am GMT: ECB board member Fabio Panetta speech at a conference on output gap measurement in the Euro area

  • Noon GMT: India’s inflation rate for October

  • 3.15pm GMT: Treasury committee hearing into the crypto-asset industry

  • 4pm GMT: US consumer inflation expectations for October

How business confidence has hit 13-year low

Here’s a chart showing how business confidence has sunk to a 13-year low, as firms brace for a lengthy recession.

© Provided by The Guardian UK business confidence Photograph: Accenture / S&P Global

As flagged in the intro, bosses haven’t been this gloomy since the aftermath of the financial crisis.

The proportion of manufacturing and service sector firms expecting activity to increase over the next 12 months was the lowest since 2009.

Firms expect inflation to remain elevated, while pessimism about profits will lead to cuts in both capital expenditure (capex) and research & development (R&D) spending.

European bosses are even gloomier, according to the latest Accenture / S&P Global UK Business Outlook.

Here’s the key findings from the report:

  • UK headline index has fallen to its lowest of +18% since 2009, but remains stronger than European peers.

  • Employment still expected to rise, though firms lack confidence in finding skilled staff

  • Companies still expect a considerable rise in costs, with 80% of UK businesses forecasting higher wages

  • UK firms project falls in both capex and R&D over the coming 12 months

Advice for Joules consumers

Lisa Webb, consumer rights expert at Which?, has advice for customers of Joules, and its subsidiary The Garden Trading Company:

“The news that Joules is entering administration will be devastating for its employees, as well as a real concern for customers with orders placed – as exercising your rights is not always straightforward in these circumstances.

“When a company is in administration, it may not accept the return of items.

“Many customers may find themselves in a situation where items have not been delivered. It is always worth trying to claim for a refund in these situations, but customers should know it is not guaranteed. The cost of repairs for faulty items could still be claimed if they came with a warranty.

“If you’ve bought something on your credit card costing more than £100, the card provider is jointly responsible for any breaches of contract.

“You can claim under Section 75 of the Consumer Credit Act if the item is faulty or not delivered.

“If you paid for goods that cost less than £100 on a credit or debit card, you may be able to claim under chargeback.”

 

© Provided by The Guardian The Gieves and Hawkes shop front on Savile Row. Photograph: David Gee 1/Alamy

Elsewhere in UK retail, Frasers Group is reportedly in late-stage talks to seal a deal for Savile Row tailor Gieves & Hawkes.

Sky News has reported that Mike Ashley’s empire is close to sealing the purchase of the 251-year-old Savile Row business after its Hong Kong-based owner fell into administration

The value of the deal is uncertain but will not be material for Frasers, which rejoined the FTSE 100 index this year.

Gieves & Hawkes have been royal tailors since 1809. The Gieves and Hawkes tailoring labels can trace their histories back to 1785 and 1771 respectively, with Giever supplying the British Royal Navy and Hawkes the British Army.

Gieves acquired Hawkes in 1974.

Sky’s Mark Kleinman explains:

Based at 1 Savile Row, the brand has been part of Trinity Group – which is in turn owned by the collapsed Shandong Ruyi Technology Group – since 2012.

 

Sarah Riding, retail partner at the law firm Gowling WLG, predicts another retailer will move to rescue Joules – but there could still be job losses.

“While the potential job losses are regrettable, it seems that Joules has taken the precautionary steps needed to limit further fallout in terms of further job losses and an erosion in their brand equity.

“Given the surprising acquisitions and strategic partnerships that have been made in the retail space recently, there should be at least some optimism that another industry player will come to the rescue of a brand that still holds resonance with consumers.

While the brand may need to identify supply chain contingencies that deliver more value for money for consumers with lighter pockets, the potential is there for a partner to emerge and help facilitate this.”

Joules is “latest victim of UK’s retail crisis”

Here’s Victoria Scholar, head of investment at Interactive Investor, on Joules’s plan to appoint administrators and suspend its shares.

It comes after various discussions with investors about an equity raise including Cornerstone Investment and the retailer Next appear to have fallen through.

Last week Joules reported revenue figures for the 11 weeks to 30th October which fell short of analysts’ expectations driven by softer online sales. The fashion brand’s cash crunch is putting around 1,700 jobs at risk with shares now suspended on AIM this morning, pending clarification of the company’s financial position.

Joules appears to be the latest victim of the UK’s retail crisis with the demise of the high street and the cost-of-living crisis. Just last week Made.com entered into administration after the interior design and DIY pandemic boom faded along with its furniture sales.

Joules has been struggling with the squeeze on household budgets after the post-pandemic and war-driven inflation supercharged the cost-of-living, leaving far less money left over for retail spending. Outdoor goods vendor, the Garden Trading Company which is owned by the same parent company is also on the brink of collapse.

The latest UK retail sales figures underscore the difficulty facing shops across Britain, with a 6.9% slump year-on-year in October as retail sales still languish below their pre-covid February 2020 levels.

Related: Retail sales fall in Great Britain as shoppers rein in food spending

 

 

Joules operates about 130 shops, so its collapse would be a blow to UK high streets as well as extremely worrying news for its staff.

 

Retail analyst Nick Bubb says:

Well, at Friday’s close of c9p, Joules was capitalised at just £10m, so its fall from grace has been alarming (the IPO price in May 2016 was 160p and it peaked at over 300p), but no doubt Next will be poised to pick up the pieces…

 

Joules had hoped that Next, one of Britain’s biggest clothes retailers, would invest in the company to help with its turnaround. However, a deal could not be reached.

Once Joules has appointed administrators, as it intends to, some of its assets could be bought up by a larger rival.

Joules shares suspended

Trading in Joules shares have been suspended at the company’s request, ‘pending further clarification of the Company’s financial position’, says the London Stock Exchange.

Joules shares have fallen 93% this year, from around 140p in January to 9p at the end of last week.

© Provided by The Guardian Joules share price Photograph: Joules

Jobs at risk

Over 1,000 jobs are at risk at Joules and the Garden Trading Company, as it prepares to appoint administrators.

The company is also asking for its shares to be suspended.

Sky News reports:

Joules Group, which has around 1,700 staff, revealed it was to file a notice of intention to appoint administrators and had requested the suspension of trading in the company’s shares.