Closing summary
Time for a quick recap.
Chancellor Jeremy Hunt has declared that he will not ‘pump extra money’ to help households this autumn, while a Bank of England policymaker has declared interest rates should move even higher to fight inflation.
Hunt told Bloomberg TV that it was “unlikely” that he will have more fiscal headroom in the autumn statement, scheduled for November, than he had in March.
Hunt declared:
“When you’re trying to bring down inflation, you have to be really careful not to pump extra money into the economy, as much as you would like to…
Not to pump extra money into people’s pockets - because that can push up prices and keep inflation higher for longer.”
This will fuel concerns that the chancellor might hit benefits claimants with real terms cuts, to fund pre-election tax cuts.
Households have been warned to expect even higher borrowing costs too. Catherine Mann, a member of the BoE’s Monetary Policy Committee, will argue today that it is better to raise rates higher than needed, rather than risk not doing enough.
Mann says:
I believe it would be prudent to risk an error that can be more easily rectified. Right now, that is to err on the side of tightening further in order to prevent the risks of further inflation persistence from crystalizing.
There’s been celebration in Oxford today, where BMW announced plans to invest £600m to upgrade its Cowley factory to produce next-generation electric minis.
The government has refused to confirm how much financial support it offered (though £75m is rumoured to be the price tag).
The U-turn, which will secure 4,000 jobs at Oxford and Swindon, where BMW makes body panels, was lauded by government ministers, including the chancellor, Jeremy Hunt, who said BMW’s investment was “a huge vote of confidence in this country as a global leader in electric vehicles”.
But it’s been a grim day for workers at Wilko. All of the stricken retailers 400-plus stores are to close with the loss of more than 12,000 jobs after talks with potential buyers failed to deliver a rescue deal.
Nadine Houghton, GMB National Officer, said:
“Wilko was far more than a brand, a retailer or the products it sold, it was the thousands of loyal team members now facing an uncertain future.
“Wilko may have ceased genuinely being a family brand many years ago, but the staff kept the real family ethos of Wilko alive until the very end. It is the family that Wilko colleagues made for themselves that will be missed the most.
“This isn’t a tragedy without cause. Wilko should have thrived in a bargain retail sector that is otherwise strong, but it was run into the ground by the business owners.
The bad news came as the boss of John Lewis has called for a royal commission review into the UK’s ailing high streets.
Too many towns and cities are shells of their former selves. Boarded-up shops left vacant, dwindling numbers of banks and post offices. And in their place, seemingly endless rows of vaping and charity shops. For too many local residents, the heart has been ripped out of their community.
In the economic world, the European Commission has predicted Germany’s GDP will shrink this year. The EC’s new economic forecasts also showed a slower-than-hoped recovery across the eurozone and the EU.
Growth forecast for the 6 largest EU economies for 2023 (%):
— European Commission (@EU_Commission) September 11, 2023
🇪🇸 2.2
🇫🇷 1.0
🇮🇹 0.9
🇳🇱 0.5
🇵🇱 0.5
🇩🇪 -0.4
🇪🇺 1.4
Summer #ECForecast ↓
The largest solar farm in Europe to be built on a closed landfill site has begun generating renewable electricity from a former rubbish dump in Essex.
Updated
BoE's Mann: Better to raise interest rates too high than not high enough
A Bank of England policymaker will argue today that it would be better to raise interest ratest too high, rather than not high enough.
Catherine Mann will tell the Canadian Association for Business Economics that she believes it would be prudent to risk an error that can be more easily rectified.
She says that it would be better to “err on the side of tightening further in order to prevent the risks of further inflation persistence from crystalizing.”
In a speech just released, Mann argues:
If I am wrong, and there are excess negative effects to the real economy, it is an easier task to rectify as compared to regaining control over inflation.
She then warns that leaving UK interest rates at their current level of 5.25% would risk letting inflation running too high, requiring tougher action to bring price pressures down.
In a clear hint that Mann would push for another rate rise at the Bank’s meeting next month, she says:
In my view, holding rates constant at the current level risks enabling further inflation persistence which will have to be unwound eventually with a worse trade-off.
If we underestimate the rise in the persistent component of inflation and set policy consistent with a world that may no longer exist we will ourselves contribute to the persistent overshoot of the target. And the longer this overshoot is allowed to continue, the more likely a departure from the old ‘low inflation, low volatility’ steady state.
Mann is known at one of the more hawkish members of the Bank’s Monetary Policy Committee.
And today she also pushed back against calls for the Bank to ease off on bringing inflation all the way down to 2%, down from 6.8% in July.
It’s a risky bet that inflation expectations are sufficiently well-anchored and to wait for core inflation to ease down, as this extends the duration way above the target-consistent rate. We need to prepare for a world where inflation is more likely to be volatile in the future, and the neutral nominal rate is likely to be higher than in the past.
While these might support a “3% inflation is close enough”, popular in some circles, it cannot be our guide. We need to communicate and act on our commitment to do what is necessary to achieve the 2% target, sooner rather than later.
Updated
In the aerospace world, US aerospace and defence group RTX Corp has announced it expects to take a $3bn hit from problems with its Pratt & Whitney engines fitted to Airbus jets.
RTX says it expects to remove between 600 to 700 engines for ‘shop visits’ between 2023 and 2026, to remedy a problem involving contaminated powder metal discovered in July.
These engine removals will lead to “higher aircraft on ground”, RTX says, rather than being able to fly.
Wizz Air, the low-cost airline, has told shareholders this afternoon that it is currently assessing the imllications, but believes its capacity could be cut by 10% in the second half of the financial year.
Jeremy Hunt also touched on the UK’s espionage row with China, saying Britain takes any attempt to subvert its democratic processes “very seriously”.
It emerged on Sunday that a parliamentary researcher with links to senior Conservatives and potential access to sensitive information had been arrested over allegations of spying for China. He has insisted he is “completely innocent”.
Speaking to Bloomberg TV during a visit to Delhi, the chancellor said the government is “very confident that we will be able to keep the fabric and the functioning of our democracy secure.”
He added that “we do not expect other countries to try and interfere with it,” and argued that the UK needs to keep speaking to Beijing.
“Diplomacy is about talking to everyone, and Britain will always understand that.
And of course when you have that dialog, you are able to talk about the things that you disagree about.”
Chancellor Jeremy Hunt says the UK takes any attempt to subvert its democratic processes "very seriously," but spying allegations underscore the need for dialog with Beijing https://t.co/7r1N9LSKJh
— Bloomberg (@business) September 11, 2023
Rishi Sunak’s spokesperson refused to say today if the UK had raised the alleged spying case with China before last weekend (when the PM met with Chinese Premier Li Qiang during the G20 meeting).
Hunt: Mustn't pump extra money into people's pockets
UK chancellor Jeremy Hunt has told Bloomberg that it is ‘unlikely’ that he will have more fiscal firepower this autumn, to fund tax cuts or higher spending.
Speaking to Bloomberg TV today, Hunt says he doesn’t expect to have more fiscal headroom to hit his targets than in March, when it was the lowest on record.
That’s because inflation has been stickier than forecast back in the Spring budget, meaning the UK’s debt repayments have been higher than expected.
[Back in spring, Hunt only had £6.5bn of headroom against his main fiscal rule – to ensure that debt is falling as a share of national income between 2026/27 and 2027/28.]
Hunt says today the government’s priority is to bring down inflation, so that will be the focus of the autumn statement in November, rather than to put ‘extra money’ into people’s pockets to help them.
He explains:
When you’re trying to bring down inflation, you have to be really careful not to pump extra money into the economy, much as you would like to.
Not to pump extra money into people’s pockets, because that can push up prices and keep inflation higher for longer.
"When you're trying to bring down inflation, you have to be really careful not to pump extra money into the economy, much as you would like to"
— Bloomberg TV (@BloombergTV) September 11, 2023
Chancellor Jeremy Hunt drops some hints at what to expect from the UK government's upcoming Autumn Statement https://t.co/x6KqlSZThl pic.twitter.com/4qYMXcZg1V
It was reported last week that the chancellor is considering real-terms cuts to working benefits in the autumn statement – ie, not raising them in line with inflation.
That would be a severe blow to struggling households, with many low-paid workers reliant on working age benefits to pay for essentials.
Hunt rather swerves a question on whether the Bank of England has done a good job, pointing out that many central banks underestimated how persistent inflation would be.
He says the UK is making progess, with inflation falling from 11% last autumn to 6.8% in July.
"Do you think the Bank of England has done a good job?"
— Bloomberg TV (@BloombergTV) September 11, 2023
UK Chancellor Jeremy Hunt says "lots of central banks" across the world underestimated how persistent inflation would be — and says "we are making progress" https://t.co/SX4aN9xEI6 pic.twitter.com/gpu3jRYSrP
Hunt also suggested the UK could agree a trade deal with India by the end of the year, depending how negotiations proceed over the next few weeks.
Chancellor Jeremy Hunt says there's "real political momentum" behind a free-trade agreement between India and the UK
— Bloomberg TV (@BloombergTV) September 11, 2023
Could a deal be done before the end of the year? "We could," he says, but adds the next few weeks are crucial https://t.co/VbqK3RRlDm pic.twitter.com/JlVzj99lEU
Updated
GMB: redundancy now likely for all 12,500 Wilko workers.
The GMB union fears that all 12,500 Wilko staff now face redundancy.
That follows this morning’s news that all Wilko stores are set to close by early October, after the rescue deal proposed by the owner of HMV collapsed.
Nadine Houghton, GMB National Officer, said:
“Wilko was far more than a brand, a retailer or the products it sold, it was the thousands of loyal team members now facing an uncertain future.
“Wilko may have ceased genuinely being a family brand many years ago, but the staff kept the real family ethos of Wilko alive until the very end. It is the family that Wilko colleagues made for themselves that will be missed the most.
“This isn’t a tragedy without cause. Wilko should have thrived in a bargain retail sector that is otherwise strong, but it was run into the ground by the business owners.
“Money was siphoned out of the business for dividends, warnings about what needed to be done to save the business were not heeded and advice around what the business to do to thrive was not listened to.
“No worker caused the downfall of Wilko. But they will be the ones who will suffer – all as the owners get off scot-free. GMB will not stop campaigning for the owners of this debacle to be held to account.”
Updated
Jonathan Reynolds MP, Labour’s Shadow Business Secretary, has responded to today’s sad news that all Wilko stores are due to close:
“This is heartbreaking news for staff and their families who have been holding out hope of a deal that would protect their jobs.
Sadly, shuttered up shops have become the norm under the Conservatives who have weakened the foundations of our economy with local high streets paying the price.
Labour will take the action needed to revive the great British high street reforming business rates, cracking down on anti-social behaviour and putting an end to empty premises to bring shoppers back to their high street.”
https://www.theguardian.com/business/2023/sep/11/wilko-shops-doug-putman-bid-collapses-hmv-owner
Very bad retail news: All of Wilko’s 400-plus stores are to close with the loss of more than 12,000 jobs, after talks with potential buyers failed to deliver a rescue deal for the stricken retailer.
The GMB union said on Monday that the administrators, PwC, had informed staff that all of the chain’s 408 stores are set to close by early October.
This blow comes after the rescue deal proposed by the owner of HMV, which would have saved about half of Wilko’s stores and secured the future of thousands of jobs, collapsed this morning.
Updated
Kemi Badenoch has declined to confirm reports that the UK government is providing £75m of funding to BMW to encourage today’s investment at the Oxford plant.
She told reporters in Oxford:
“I won’t comment on the figure because that creates difficulties in future negotiations.
“What I will say is that we do provide some subsidy, very light subsidy, in the auto industry because it faces so much difficulty, and some of that is regulatory.
“So if we’re asking manufacturers to transition to net zero, that creates additional costs which make it a little bit harder so we do have to factor that in.
Kemi Badenoch also pointed to the ‘many headwinds’ which have hit the UK car industry, speaking at Mini’s Oxford plant today, saying:
“The difficulties with supply chains post-Covid, increased energy costs because of Russia’s invasion of Ukraine, the net zero transition which has been putting, we recognise, a lot of pressure on the auto industry.
“But you are meeting and in fact exceeding the expectations just as we see this morning.
“So I wanted to say thank you for that.”
As flagged earlier (see 8.05am), the car industry fears the new Brexit ‘rules of origin’ requirements will be another disruptive, costly headwind.
Business Secretary Kemi Badenoch told staff at BMW’s plant this morning:
“We want auto manufacturing not just stay in the UK but to be the best in the world.
“This is a part of that story.
“We want you to have great jobs, well-paid jobs, that last for a very long time.
“It doesn’t just happen. We all have to work together and think about it very carefully and make sure that we get it just right.
“If we do too much it goes wrong, if we do too little it goes wrong.”
Local councillers are cheering BMW’s plans to invest £600 million in Mini Plant Oxford:
Oxfordshire County Council leader Liz Leffman says:
“This is fantastic news for BMW Cowley, for the thousands of people who work at the MINI plant, for Oxfordshire’s economy, and for the fight against climate change.
“An investment of this scale shows the faith being placed in Oxford to produce the latest all-electric, emission-free models of this iconic car which is synonymous with the city.
“The future of motoring is electric, and the future of MINI manufacturing is here in Cowley, where it began in 1959. Oxford has a long and proud history of car production, and this investment will see it continue for many years to come, producing cleaner, greener cars which won’t pollute our streets or contribute to climate change by burning fossil fuels.
“It demonstrates what an incredible location Oxfordshire is for those wanting to invest in state-of-the-art manufacturing, and how vital it is to move towards sustainable technology.
“BMW’s role at the heart of the Oxford for more than 20 years has helped the whole county’s economy thrive, and we are grateful that this relationship is going to continue and flourish.
“As the sign outside the Cowley plant proudly proclaims, Oxford is ‘the home of MINI’. Long may that continue.”
Councillor Susan Brown, Leader of Oxford City Council, says the investment will secure thousands of green jobs for local people, protecting the livelihood of many Oxford families.
Brown adds:
It will strengthen Oxford’s position as a key player in the global electric vehicle industry, benefitting small businesses in our area.
“MINI Plant Oxford is an integral part of Oxford’s history, economy and identity. The plant has been at the heart of our city’s communities and industry for over a century, and we look forward to working with BMW and others to help ensure it stays that way for generations to come, starting with the planning.”
Statement from Councillor Susan Brown, Leader of Oxford City Council, on BMW plans to invest £600m in MINI Plant Oxford.
— Oxford City Council (@OxfordCity) September 11, 2023
Read our statement below👇👇 https://t.co/lkqKi9iF9M pic.twitter.com/chuE5ZJalC
Trade Secretary Kemi Badenoch speaking at the BMW Mini plant at Cowley in Oxford Photograph: Joe Giddens/PA
Business and Trade Secretary Kemi Badenoch has travelled to Oxford for today’s announcement at the Cowley car plant, just outside the Oxford ring road.
Badenoch says:
“This decision is a big vote of confidence in the UK economy and the work of this Government to ensure the continued strength of our world-leading automotive sector.
We are proud to be able to support BMW Group’s investment, which will secure high-quality jobs, strengthen our supply chains and boost Britain’s economic growth.”
Mini Plant Oxford can trace its history back to 1912, when manufacturing pioneer William Morris (later Viscount Nuffield) began making his first car, the “bullnose” Morris, at the site (he’d previously assembled and repaired bicycles, and then moved onto motorbikes).
BMW announces £600m investment for all-electric MINI production in the UK.
Newsflash: BMW has confirmed “a new investment of more than £600m” at its Mini factories at Oxford and Swindon.
BMW says the move, “supported by the UK Government”, will help to secure jobs at the Oxford manufacturing plant and at the body-pressing facility in Swindon.
Milan Nedeljković, BMW’s board member responsible for production, says:
“With this new investment we will develop the Oxford plant for production of the new generation of electric MINIs and set the path for purely electric car manufacturing in the future.”
From 2026, the Oxford plant will build two new all-electric Mini models – the MINI Cooper 3-door and the compact crossover MINI Aceman. By 2030 production volume will be exclusively electric.
Oxford currently makes the existing Mini Electric, as well as the 3-door, 5-door and Clubman versions of the classic UK car.
Stefanie Wurst, Head of the Mini brand, says,
“Mini has always been aware of its history – Oxford is and remains the heart of the brand. I am delighted that the two new, fully electric MINI models – the MINI Cooper and MINI Aceman – are also being produced in Oxford, thereby confirming our path to a fully electric future.
The continuing high demand for our locally emission-free vehicles shows the openness of the global MINI community to electromobility, which we will be able to serve optimally, also thanks to Oxford”.
The production line at Oxford has been halted for the £600m electric Mini announcement.
— Peter Campbell (@Petercampbell1) September 11, 2023
Plant boss Markus Grüneisl says the plant already makes more EVs than any other UK factory.
FT story on BMW announcement:https://t.co/LwhHCTbOgH pic.twitter.com/28kWk8M4qY
Financial incentives and a commitment to a Zero Emission Vehicle Mandate policy have helped the UK government win the race to secure electric mini production in Oxford, says Colin Walker, head of transport at the Energy & Climate Intelligence Unit (ECIU), said.
The ZEV Mandate introduces ZEV targets that will require an increasing percentage of a manufacturer’s annual new car and van sales in the UK to be zero emission until reaching 100% in 2035.
Walker explains:
Having stuck to its guns on the mandate, the car industry now urgently wants the detail from Government. This would entrench the UK’s reputation as a stable and attractive place in which to invest in EV manufacturing. This shouldn’t be a hard task given that UK EV sales figures are already surging.
“Following the JLR battery factory commitment earlier in the year, this is good news for the future of the car industry. But more will be needed if the UK isn’t going to see its car industry return to rust again. 80% of the cars built in the UK are exported. Over 70% of these go to markets – the UK, 16 US states and China - that have committed to moving to electric vehicles. If the UK’s car industry doesn’t change to produce the EVs needed to meet that demand, it could find itself losing over £13bn a year in export revenue by 2030.”
The EC also forecasts that inflation across Europe will remain above the official target this year, and in 2024.
Its Summer Forecasts, just released, predict:
Euro area inflation:
2023: 5.6%
2024: 2.9%
EU inflation:
2023: 6.5%
2024: 3.2%
The European Central Bank’s target is to have annual inflation close to 2%, but consumer prices were rising at 5.3% per year in August.
The EC predicts that retail energy prices will continue to fall this year, but rise in 2024, driven by higher oil prices.
#ECForecast l deteriorated growth + inflation outloook +/- unchanged : @EU_Commission summer 2023 economic forecast is out
— Émilie Vanderhulst 🌻 🇧🇪🇪🇺💉💉💉💉 (@BirdingBrussels) September 11, 2023
📄https://t.co/JDSLHUddSp pic.twitter.com/9I7NsUDX27
#ECForecast: Summer 2023 European Commission interim economic forecast main figures
— Émilie Vanderhulst 🌻 🇧🇪🇪🇺💉💉💉💉 (@BirdingBrussels) September 11, 2023
📄https://t.co/JDSLHUddSp pic.twitter.com/tmJZApH6D9
Updated
The reported collapse of Doug Putman’s take-over of a number of Wilco stores appears to be a further blow for Wilko employees, says Jeremy Whiteson, restructuring and insolvency partner at city law firm Fladgate:
One of the primary concerns may be the implication of the TUPE regulations. In simple terms, these have the effect of transferring contracts of employment (with all outstanding liabilities) to a buyer who carries on a similar business. They are designed to stop unscrupulous business buyers sacking staff or changing employment terms without compensating staff. However, they may also have the effect that a buyer of a large part of the Wilco business may be forced to take on employees in warehousing, office and other central functions- in addition to staff at stores they want to take. That cost may make the acquisition unviable. With bitter irony, the effect of regulations designed to protect employees could have the effect of making a rescue which saves jobs less likely.
There are reports of ongoing discussion with other bidders. If successful bidders want a smaller number of sites, it may be possible to structure the deal so that the TUPE regulations do not transfer central employees leaving the position of warehouse, office and other central staff will be left very vulnerable. That is not a desirable outcome but may be all that is possible from this point.
Another hurdle, though, is that some major suppliers want their debts repaid now in order to continue to guarantee supplying Wilko’s stores.
Whiteson adds:
If these goods were supplied under a long terms contract this behaviour by the suppliers, if correctly reported, may fall foul of new legislation introduced during the pandemic period to prevent termination of supply on insolvency.
Those new rules were designed to protect business rescues being torpedoed by suppliers who demanded payment of arrears or other sums on a customer’s insolvency. However, the new rules have not been fully tested through the courts and contain ambiguities which may be exposed on their application to particular cases.
The European Commission has also cut its forecasts for growth across the EU, and in the eurozone.
In its new summer forecasts, it says:
The EU economy continues to grow, albeit with reduced momentum.
The eurozone is now forecast to only expand by 0.8% this year, down from 1.1% forecast in the spring forecasts, and by 1.3% in 2024 (down from 1.6%).
GDP across the whole EU is also foreccast to only rise by 0.8%, down from 1% expected before, and by 1.4% in 2024, (down from 1.7%).
Paolo Gentiloni, EU Commissioner for Economy, says:
The EU avoided a recession last winter – no mean feat given the magnitude of the shocks that we have faced. This resilience, most evident in the strength of the labour market, is a testimony to the effectiveness of our common policy response.
However, the multiple headwinds facing our economies this year have led to a weaker growth momentum than we projected in the spring. Inflation is declining, but at differing speeds across the EU. And Russia’s brutal war against Ukraine continues to cause not only human suffering but economic disruption. Yet we must have trust and confidence in the future of the European economy. There is much that we can do to support sustained and sustainable growth. The effective implementation of national recovery and resilience plans remains a key priority.
Prudent, investment-friendly fiscal policies should be pursued, in sync with the ongoing efforts of our central banks to tame inflation. Lastly, we must work with determination to conclude an agreement on the reform of our fiscal rules by the end of the year.
EC: German economy will shrink this year
Newsflash: The European Commission has predicted that Germany’s economy will shrink this year.
In its updated economic forecasts, just released, the EC forecasts that German GDP will fall by 0.4% this year, down from a previous forecast of 0.2% growth.
The EC points out that Germany has been hit “particularly hard’ by the energy price shock following Russia’s invasion of Ukraine, saying":
Since January 2023, confidence indicators for manufacturing have been on a downward trend. This was particularly pronounced in the energy-intensive industries.
That would make Germany the worst-performing of the six largest EU members.
The economy is expected to grow next year, but by less than expected.
The EC says:
In 2024, real GDP is forecast to rebound by 1.1% driven by a recovery in consumption. This is less than projected in the spring due to a slowdown in the construction sector, as well as to less dynamic exports growth.
Growth forecast for the 6 largest EU economies for 2023 (%):
— European Commission (@EU_Commission) September 11, 2023
🇪🇸 2.2
🇫🇷 1.0
🇮🇹 0.9
🇳🇱 0.5
🇵🇱 0.5
🇩🇪 -0.4
🇪🇺 1.4
Summer #ECForecast ↓
The GMB union say the attempted Wilko rescue deal with Putman Investments has now “run out of time”, and blamed Wilko’s owners for the retailer’s collapse.
Nadine Houghton, national officer for the GMB union, said:
“Due to the incompetency of Wilko bosses the deal has now run out of time.
“If the owners had been transparent and honest, thousands of loyal Wilko workers may not now be in this awful position.
“This is another devastating blow for them, who have seen their lives and futures gambled on the whims of millionaires and billionaires.
“Wilko bosses should be ashamed that this once great family business now appears to be beyond saving.”
The collapse of the Wilko rescue deal proposed by the owner of HMV today will lead to more vacancies on the high street, fears Susannah Streeter, head of money and markets at Hargreaves Lansdown:
It leaves the future of more than 10,000 workers highly unclear, with the administrators who currently run Wilko likely to announce further job losses and store closures this week.
She explains:
‘’Wilko faces disappearing from the high street after a rescue bid to save the name and a vast chunk of stores appears to have collapsed. This is the news thousands of staff had been fearing, and with hopes of a white knight rescue receding into the distance, they are staring at the prospect of redundancy.
B&M has already swooped into the bargain bin and picked up 51 stores from the administrators PwC and it’s likely that other value chains may still be hovering, ready to hoover up a handful of other outlets in cut-price deals. There is a chance that the brand itself may survive but as a range on another retailer’s shelves, and further deals are rumoured to potentially be announced this week. But it looks like the famous red and white shopfronts will be dismantled and Wilko will join Woolworths in the high street history books.
The ditched deal could not come at a worse time for the high street, Streeter adds, amid the cost-of-living crisis and competition from online.
Wilko’s demise comes amid heightened warnings about the long-term decline of town and city centres, with shoplifting on the increase and boarded up outlets now commonplace.
Dame Sharon White, the chair of John Lewis is the latest to warn about the increase in anti-social behaviour and has called for a Royal Commission to look at ways of solving the problems (see earlier post for details).
Rents are forecast to rise more than four times as fast as house prices between the end of 2022 and the end of 2026, according to estate and lettings agent Hamptons.
Hamptons estimate today that rents across Britain could rise by 25% over the four-year period, compared with 5.5% growth in house prices, estate and lettings agent Hamptons predicts.
As mortgage rates gradually fall and households benefit from real income growth, Hamptons said it expects house price falls to come to a halt in 2024, with growth picking up in 2025.
2025 could be the year when a new housing market cycle starts, Hamptons suggests.
EA @Hamptons1869 PREDICTS - Rents will rise 25% over the next 4ys, outpacing the modest 5.5% house price growth across Britain during the same period with London & the North expected to see the most growth. Rates will determine this or not https://t.co/6XxZUFYVch
— Emma Fildes (@emmafildes) September 11, 2023
Oxford Mini plant saved with £600m UK electric car investment
BMW will spend £600m to upgrade its factory in Oxford to electric production of the Mini, my colleague Jasper Jolly reports.
The plant will start production of the electric Mini Cooper and the new electric Mini Aceman crossover SUV, lifting a threat to the future of Mini’s production in the UK.
Wilko rescue hopes fade as talks with HMV owner collapse
Sadly, it does appear that a last-ditch attempt by the owner of HMV to strike a rescue deal for stricken retailer Wilko has failed.
Administrators for the high street chain had been in discussions with Doug Putman, who owns the entertainment retailer, over a deal to buy around 200 Wilko shops. That would have saved around half of Wilko’s stores and secured the future of thousands of jobs has collapsed.
However, those talks have now collapsed (as flagged earlier), intensifying fears over the future of thousands of jobs.
In a statement, Mr Putman says:
“It is with great disappointment that we can no longer continue in the purchase process for Wilko having worked with administrators and suppliers over several weeks to seek a viable way to rescue it as a going concern.”
Sky News has reported that administrators from PwC are now in talks with Poundland over a potential deal to offload about 100 stores.
Wilko, which employed around 12,500 staff, had already announced a £13 million deal to sell 51 shops to B&M, although the rival discounter has not agreed to take on Wilko workers as part of the deal.
Administrators have already announced more than 1,600 redundancies at Wilko in recent weeks.
We should hear details from BMW about its new investment in its Oxford plant later this morning.
But in the meantime, here’s some of the other City news today:
The Restaurant Group has agreed to sell its Frankie & Benny’s and Chiquito brands to Cafe Rouge owner Big Table Group. Both brands are loss-making, so The Restaurant Group is actually paying Big Table £7.5m to take them off its hands.
The move will help Restaurant Group to boost its profit margins and cut debt – sending its shares up 6% this morning.
Housebuilder Vistry has announced a new focus on affordable housing. It will merge its housebuilding operations (which has suffered more from rising interest rates) with its partnerships business
CEO Greg Fitzgerald explains:
“Delivering on the acute social need for housing across the country and increasing the availability of affordable, sustainable homes is at the core of the Group’s social purpose and vision, and I look forward to delivering upon this exciting and unique opportunity for Vistry.”
Retailers warn Chancellor against £400m business rates hike
A group of the UK’s largest retailers are lobbying the government not to increase their property taxes, saying it would cost them around £400m.
Bosses from 44 firms, including Tesco, M&S and B&Q, are urging Chancellor Jeremy Hunt to freeze their property taxes to avoid a roughly £400 million hike in tax bills.
They warn that an inflation-based increase to business rate would threaten “the viability of many shops and hindering the industry’s capacity to invest”.
Currently, business rates are planned to increase in April 2024 in line with the inflation figure for September. This figure is due to be announced in October and is currently forecast at about 6%.
They write:
“Global supply chain issues are already likely to increase costs in the months ahead, including Russia’s withdrawal from the Black Sea Grain Initiative and targeting of Ukrainian grain silos, plus restrictions on Indian rice exports and ongoing labour market challenges.
“Against this backdrop, the Government should not make the situation worse by adding significantly to our cost base – freezing the business rates multiplier at its current level would avoid this.”
Last night, prime minister Rishi Sunak refused to commit to keeping the pensions triple lock in the next Conservative manifesto, as he grapples with how to fund tax cuts demanded by his own MPs.
BMW’s move to invest hundreds of millions of pounds in its Mini factory in the UK to supercharge its electric car production is a win for the UK government, says Victoria Scholar, head of investment at interactive investor:
It follows a similar move from Jaguar Land Rover’s parent company Tata in July when it announced plans to create a gigafactory for battery production in Somerset.
However, Honda said it was exiting its Swindon plant in 2019, resulting in thousands of job losses.
Today’s update on BMW is a win for the UK government, acting as a vote of confidence in Britain’s auto manufacturing sector and hopefully could pave the way for other car giants to follow suit.
It helps to temper the sharp decline in UK car production in recent years with electric vehicle manufacturing and the green transition more broadly, a key growth frontier that many economies are looking to capitalise on.”
Ian Plummer, commercial director of Auto Trader, has welcomed BMW’s decision to invest millions to produce electric Mini cars in Oxford.
Plummer says:
“A BMW decision to keep electric MINI production in the UK provides a desperately needed stake in the future of the electrified car market and cements the continuation of Britain’s manufacturing heritage– something that’s been pulled into question since the impacts of Brexit have been felt in the automotive industry.
“With an ever-growing number of electric vehicles on UK roads and the used electric car market showing record levels of demand, it’s clear EVs will be central to the future of the automotive industry and so it’s vital that Britain is actively engaged in the process.”
Putman rescue bid for Wilko 'has collapsed'
Newsflash: back in the UK retail world, negotiations over a rescue deal that could have preserved hundreds of Wilko stores appears to have collapsed.
The rescue package proposed by businessman Doug Putman, who engineered a turnaround of HMV in the UK, has collaped, reports Sky News’s Mark Kleinman.
Putman’s plan could have saved as many as 300 of Wilko’s stores.
Here’s the details:
Exclusive: The proposed rescue deal for Wilko involving Doug Putman, the owner of HMV, has collapsed after weeks of talks about a transaction that could have salvaged hundreds of stores. Wilko’s administrators are now expected to pursue a deal to sell roughly 100 stores to…
— Mark Kleinman (@MarkKleinmanSky) September 11, 2023
2/2…to Poundland, while The Range, another value retailer, is expected to sign an agreement to acquire the Wilko brand in the coming days. The Putman rescue is thought to have collapsed over the weekend, although it’s unclear whether an announcement is imminent. Full story soon.
— Mark Kleinman (@MarkKleinmanSky) September 11, 2023
Updated
Kemi Badenoch adds that she has been speaking to UK car makers about their concerns over the new Brexit ‘rules of origin’ requirements.
Those new tighter rules mean electric car batteries must be sourced from within the two trade partners or face 10% tariffs.
Several carmakers have called for these rules to be negotiated, warning they will push up the cost of electric vehicles in showrooms.
Badenoch adds that she is also speaking to the EU trade commmissioner about this issue, explaining:
You will have seen the reports that he agrees with me. It’s something we’re working on.
Badenoch argues that the rules made sense when the Brexit trade deal was negotiated, but that was before Covid-19 and the war in Ukraine created supply chain disruption.
"Do you think Brexit was good for the British car industry?" @JayneSeckerSky speaks to @KemiBadenoch following the annoucmenent on a major BMW investment dealhttps://t.co/PAiZ4D1jU3
— Sky News (@SkyNews) September 11, 2023
📺 Sky 501, Virgin 602, Freeview 233 and YouTube pic.twitter.com/5yqlgpnN31
Updated
Business minister Kemi Badenoch says that “quite a lot” of the investment being announced for BMW’s Cowley car factory today is new money.
But, she won’t reveal how much exactly, telling Sky News:
I can’t talk specifically about the investment amount because that is something that I promised BMW, because they want to be able to talk about their investment later on, at their event later today in Cowley, in Oxfordshire.
Badenoch adds that the government’s automotive plan is getting results, pointing out that Stellantis began producing electric vehicles at its Ellesmere Port site last week.
Sky News point out that millions of pounds in taxpayer support from the government have helped persuade BMW to build its next-generation electric Mini in Oxford, adding:
Whitehall sources declined to give details on the level of taxpayer support being offered, but did not dispute Sky’s £75m figure.
The government said BMW’s impending announcement means total investment into the country’s automotive sector has now topped £6bn over recent years.
BMW’s new multi-million pound investment at its Oxford site will avert “a disaster” for the UK car industry, says Bloomberg.
But even so, UK automobile investment is lagging behind some rivals, they add:
The company’s multimillion-pound outlay toward electric Mini production in Oxford averts what would have been a disaster for the UK, where car production slumped last year to the lowest since 1956.
The factory employing more than 3,400 people was dealt a setback 11 months ago when BMW announced it was shifting electric Mini output to China.
While the revival of electric Mini assembly in Oxford adds to recent momentum for the UK car sector, the country isn’t keeping pace with nations taking more aggressive approaches to industrial policy. The more than £6bn ($7.5bn) of investment announced in Britain’s auto industry since 2020 pales in comparison to the $72bn that companies have earmarked for North America since the US passed the Inflation Reduction Act last year.
Full story: BMW U-turns on plans to move electric Mini production from UK to China
BMW will unveil plans today to build its next-generation electric Mini in Oxford after securing a government funding package, in a move that will secure 4,000 jobs.
The decision by the German carmaker to invest in the Oxford plant is the result of “extensive” engagement with the UK government, according to the Department for Business and Trade. It is understood the commitment was made after the government promised tens of millions of taxpayer funds.
It marks a reversal of fortunes for the UK, after BMW last year said it would make most of its electric Minis in China, citing difficulty in producing electric vehicles and cars with internal combustion engines at the Cowley plant.
The U-turn was hailed by government ministers including the chancellor, Jeremy Hunt, who said BMW’s investment was “a huge vote of confidence in this country as a global leader in electric vehicles”.
Hunt said:
“This industry is motoring, creating thousands of jobs and powering our green transition.”
The government said BMW’s move represented a “multimillion-pound investment” but did not disclose a figure.
The carmaker is expected to provide further details on the investment, including the total sum, later on Monday, with the taxpayer also providing government funding (previously reported at £75m).
More here:
Updated
Dame Sharon White calls for Royal Commission review into ailing high streets
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The chair of the John Lewis Partnership is calling for the UK government to launch a new Royal Commission help rescue and restore Britain’s high streets.
Dame Sharon White warns that the UK high street is in poor health, and that planning, taxation, crime, environmental policy, housing and transport all need to be considered together to find solutions.
Writing in the Daily Telegraph today, she says:
Too many towns and cities are shells of their former selves. Boarded-up shops left vacant, dwindling numbers of banks and post offices. And in their place, seemingly endless rows of vaping and charity shops. For too many local residents, the heart has been ripped out of their community.
Britain has lost 6,000 shops in the past five years, according to the British Retail Consortium. There are John Lewis and Waitrose stores amongst these statistics, but the Partnership is still standing strong, with more than 360 physical shops nationwide.
🔴 Dame Sharon White calls for Royal Commission review into the ailing health of town centres https://t.co/41JHJaYEu7
— The Telegraph (@Telegraph) September 11, 2023
The collapse of Wilko this summer, which has already cost over 1,000 jobs, has highlighted the problems in retail.
The sector has endured a tough 15 years. First the financial crisis triggered a recession, followed by a long programme of austerity that squeezed household incomes.
The move to internet shopping forced more retailers to the wall, as the slump in the pound after the Brexit vote drove up import costs.
Between 2013 and 2018, one in 12 shops closed. And that process continued as the Covid-19 pandemic led to months of lockdowns, driving consumers to web shopping instead.
Dame Sharon argues that a Royal Commission could consider the best mix of retail, hospitality, offices and housing needed locally, to return high strees to becoming more welcoming places where people want to live, work and spend time.
She points out that the last Royal Commission into the health of UK towns was 180 years ago, so it’s time to put high streets under the spotlight again.
Dame Sharon writes:
Is it too naive to believe that, with an election approaching, the political parties could join forces for the good of the country on an agenda that aligns so closely with the Government’s levelling-up ambitions and the Opposition’s industrial strategy? Only a Royal Commission can set out a fresh vision for a prosperous high street for decades to come.
Just as the 1848 Public Health Act offered the chance to make a real difference for citizens of Victorian Britain, our generation has the opportunity to leave a lasting legacy for our communities and high streets for decades to come. Britain’s high streets have hope, but they need help.
More here: Bad policy is murdering our high streets
Also coming up today
BMW are announcing plans to build its next-generation zero-emission battery electric Minis in Oxford today, after securing a funding package from the UK government.
The carmaker is making a multimillion pound investment in its electric Mini production, the business ministry has just revealed,
The investment should secure the long-term future of Mini production in Britain, and secure 4,000 jobs.
We’re expecting an announcement from the company this morning.
Rishi Sunak said the government was securing jobs and growing the economy “by backing our car manufacturing industry”, adding:
“BMW’s investment is another shining example of how the UK is the best place to build cars of the future.”
The agenda
9am BST: Bank of England’s chief economist Huw Pill is a panellist at the Kent Invicta Chamber of Commerce
2pm BST: Russia’s balance of trade for July
