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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK recessions risks on the rise; global trade hit; Russia edging closer to default – as it happened

National Insurance NHS United States Resolution Foundation Levy (Organization) NI (Organization) United Kingdom
Shoppers walk past stalls at a market in Walthamstow, east London, as cost of living crisis hits households
Shoppers walk past stalls at a market in Walthamstow, east London, as cost of living crisis hits households Photograph: Tolga Akmen/AFP/Getty Images

Afternoon summary

Time to recap....

Risks of a UK recession have risen as the cost of living crisis, the Ukraine war and the Covid-19 pandemic hit the economy. Deutsche Bank have warned that the economy is slowing, amid renewed supply chain bottlenecks, higher inflationary pressures, heightened domestic and global uncertainty, and staff absences with Covid.

The eurozone also risks a contration, or even a recession, according to BNP Paribas’ Markets 360 team.

The Russia-Ukraine was has also hit global trade, which shank by an estimated 2.8% in March.

Russia has moved closer to a possible debt default, after paying some holders of dollar-denominated debt in roubles this week due to a US freeze on its overseas reserves.

Growth worries have hit markets in Europe, where the Stoxx 600 dropped 1.5% today. Wall Street is also under pressure, with the Nasdaq is down over 2%.

The UK cost of living crisis has intensified, as millions of workers and businesses were hit with higher national insurance rates today.

Health secretary Sajid Javid defended the 1.25 percentage point increase, saying it was needed to pay for health and social care as a result of the Covid pandemic.

Chancellor Rishi Sunak’s popularity has tumbled since last month’s spring statement.

British building firms have seen cost pressures intensify, as supply chain disruption pushes up the cost of materials such as cement, timber, metals and plastic.

MPs warned that a chronic shortage of food workers could push up prices even higher in the shops.

Western allies have imposed fresh sanctions on Russia. The UK will impose a full asset freeze on Russia’s largest bank, end all imports of oil and coal by the end of the year, and also sanctioned eight more oligarchs.

Former Russian president Dmitry Medvedev has said Moscow will fight attempts to seize Russian property abroad in courts around the world.

The lavish wealth of Roman Abramovich’s business partners has been revealed today, including offshore investments in a Caribbean island resort, plans to redevelop a Marylebone church and a vast array of property in the UK and beyond.

In the travel world, holidaymakers and travellers faced fresh disruption after more easyJet and British Airways flights were cancelled due to staffing shortages caused by a soaring number of coronavirus cases.

Trade unions have condemned the owner of struggling Manchester airport for inflating bosses’ pay by almost a quarter in the first year of the pandemic even as the wages for staff were cut and hundreds of workers were let go.

A former P&O Ferries chef is suing the company for £76m over its decision to sack almost 800 staff without notice last month.

The job of keeping the UK’s electricity and gas flowing will be returned to public control by 2024, under government plans for the effective nationalisation of a division of National Grid.

Goodnight. GW

European stock markets have posted losses today, as economic worries hit shares.

France’s CAC index tumbled 2.2% (with concerns that Marine Le Pen could win this month’s presidential election also knocking shares).

Germany’s DAX lost 1.9%, on concerns about possible recession risks in the eurozone as the Ukraine war hurts growth.

Warnings that the UK could slip into recession, and that America’s economy could contract next year, also wieghed on investors.

But the FTSE 100 index held up better in London, ending just 26 points lower at 7588 (down 0.35%).

Michael Hewson, chief market analyst at CMC Markets, says the tone for markets has soured significantly, with Europe possibly moving towards embargoes on Russian oil and gas.

European stocks sank sharply as the mood music over more onerous sanctions on Russia ratchets up further in anticipation of that we could well see evidence of further Russian atrocities in the coming days.

Eurozone contraction 'material possibility', warns BNP Paribas Markets 360

The eurozone economy risks a sharp slowdown or worse, as the Ukraine war drives up inflation and hits growth.

Luigi Speranza, chief global economist at BNP Paribas Markets 360, argues that there recession risks in the euro area are higher than in the US.

A contraction in activity for one or even two quarters (which would then qualify as a
technical recession) is a “material possibility”, Speranza says.

He cites the tightening financial conditions, rising inflation, economic uncertainty, and the ongoing impact of the pandemic.

Eurozone business and consumer confidence
Eurozone business and consumer confidence Photograph: BNP Paribas

In a new research note, he says:

  • The inversion of the US yield curve and a dramatic weakening in sentiment in Europe have raised concerns about the risk of recession in both regions.

  • In the US, we think such fears are overdone in the near term. While the economic data are likely to deteriorate, the economy should withstand the shock thanks to the healthy balance sheets of its private sector we think.

  • By contrast, concerns about Europe’s near-term growth prospects appear well founded, and indeed we think the chances of a contraction in output over the coming quarters are quite high. That said, a strong starting point and a cushion from fiscal policy should, in most scenarios we envisage, prevent this from morphing into a full-blown recession.

  • It may not be exactly like the 1970s, but the similarities with that period are more compelling than the differences, we argue. It will still feel like stagflation though. Expect higher output volatility and less guidance from central banks.

Full story: Liz Truss announces full asset freeze against Russia’s biggest bank

The UK will impose a full asset freeze on Russia’s largest bank and end all imports of oil and coal by the end of the year, the foreign secretary, Liz Truss, has said.

Eight more oligarchs will also be sanctioned, including Moshe Kantor, the largest shareholder of the fertiliser company Acron and Andrey Guryev, the founder of another key fertiliser company, whom the UK described as a close associate of Vladimir Putin.

Others who have been sanctioned include Sergey Sergeyevich Ivanov, president of the world’s largest diamond producer, Alrosa, Leonid Mikhelson, the founder and CEO of leading Russian natural gas producer Novatek, with a net worth of £18bn.

Here’s the full story, by my colleague Jessica Elgot:

UK announces asset freeze against Russia’s biggest bank and coal import ban

The UK has just announced fresh sanctions on Russia too, including asset freezes on Russia’s largest bank Sberbank.

The UK is also imposing a ban on all new outward investment to Russia, and pledging to end all imports of Russian coal and oil by the end of 2022.

A further eight oligarchs were also sanctioned:

Updated

The United States is sanctioning Putin’s daughters and Russia’s Sberbank as part of a new package of measures announced today.

The measures target Russian banks and elites, and include a ban on any American from investing in Russia.

Reuters reports:

The new sanctions will put full blocking sanctions in Russia’s Sberbank, which holds one-third of Russia’s total banking assets, and Alfabank, a senior US official told reporters. Energy transactions are blocked from these sanctions, the official said.

The United States is also sanctioning Russian President Vladimir Putin’s adult daughters, Russian Foreign Minister Sergei Lavrov’s wife and daughter, and members of Russia’s security council, the official said.

Americans are banned from investing in Russia, the official said, including through venture capital or mergers.

The US is “dramatically escalating” the financial shock on Russia by cutting off that country’s largest banks, the official said. Russians may be forced back into Soviet-style living standards from the 1980s, the official said.

That’s via our Russia-Ukraine war liveblog, which is here:

Updated

UK pharmaceuticals group GSK says its Russian Consumer Healthcare arm will no longer import food supplements and vitamins, and will “prioritise supply of over the counter (OTC) medicines.

Information on GSK’s website adds that it will continue to supply medicines and vaccines to Russia, but will not start any new clinical trials (as it also said last month).

Updated

Back in the UK, the job of keeping electricity and gas flowing will be returned to public control by 2024, under government plans for the effective nationalisation of a division of National Grid.

A new public body, the “Future Systems Operator” will have responsibility for planning and managing energy distribution, with a focus on the challenges posed by decarbonisation.

The government said the plan, announced on the eve of the publication of its long-awaited energy strategy, would “drive progress towards net zero while maintaining energy security and minimising costs for consumers.”

BEIS said the National Grid, a stock market-listed company since 1995, would be “appropriately compensated” in a transaction that will see the government take control of its Electricity System Operator, the part of the business that keeps the lights on. Gas distribution assets will also be taken into state ownership.

More here:

Business secretary Kwasi Kwarteng has tweeted about the plan.

US stocks fall on rate hike fears

The New York Stock Exchange.
The New York Stock Exchange. Photograph: Spencer Platt/Getty Images

Stocks are falling in New York, as investors worry that the Federal Reserve will aggressively raise interest rates to tackle inflation.

Technology stocks are leading the selloff, with the Nasdaq Composite down 2.5% or 361 points at 13,843, adding to yesterday’s losses.

The broader S&P 500 index is down 1.4%.

Traders are spooked by yesterday’s comments from Fed policymaker Lael Brainard, who said the US central bank could start reducing its balance sheet as soon as May, and would unwind this stimulus at “a rapid pace.”

Brainard also indicated that interest rate hikes could come at a more aggressive pace than the typical increments of 0.25 percentage point.

European stocks are also falling, with the UK’s FTSE 100 index now down 70 points or almost 1% at 7642.

Minutes of the Fed’s last meeting, due later today, may give more insight into its plans.

Updated

Britain’s largest building group, Barratt, has signed the UK’s new fire-safety pledge, and set aside up to £400m more to fix dangerous cladding on buildings built over the last 30 years.

Fellow housebuilder Redrow also signed this morning, after rivals Persimmon, Taylor Wimpey, Berkeley and Crest Nicholson signed yesterday, as developers and the government hammer out a deal to address fire safety costs following the Grenfell Tower disaster of 2017.

Barratt says it has agreed to address fire-safety issues on all its buildings of 11 metres and above, and committed not to take any money from the government’s Building Safety Fund, which

The incremental cost of remediating buildings or funding remediation will be between £350m to £400m, Barratt estimates, on top of the £200m set aside previousl.

It says:

These are positive steps which align to our belief that leaseholders should not have to pay for necessary remediation works caused by the design, construction or refurbishment of buildings.

Housing secretary Michael Gove has been pushing developers to contribute more to fix unsafe buildings between 11 and 18 metres tall, built since 1992. They are also paying a 4% levy on their profits to cover costs of tower blocks over 18m.

Redrow said its bill for repair work will hit £200m, up from £36m earmarked before.

Airlines will pass on rising oil prices to passengers through higher fares relatively quickly, the head of the International Air Transport Association has predicted.

That would further add to the cost pressures on travellers and businesses.

IATA chief Willie Walsh also warned that the spike in energy costs will worsen the industry’s overall outlook in 2022, at a news briefing today.

Travel journalist Ajay Awtaney has tweeted more details:

Russia nearer debt default after paying dollar debt in roubles

Russia’s Finance Ministry building in Moscow.
Russia’s Finance Ministry building in Moscow. Photograph: Maxim Shemetov/Reuters

Russia has slipped a step closer to potentially defaulting on its debts after paying foreign debt payments on dollar-denominated bonds in roubles this week.

Russia’s finance ministry says it was forced to make payments to holders of its dollar-denominated Eurobonds in roubles, after a foreign bank refused to process an order to pay them $649m for a maturing bond, and a coupon (interest payment) on another debt.

On Monday, the US Treasury department blocked US banks from handling dollar payments from Russia, cutting Moscow off from using those foreign exchange reserves to service its debt.

Paying the dollar obligations in roubles is a blow to Russia’s efforts to avoid its first sovereign default since 1998, with Western sanctions freezing around half its FX reserves.

The bonds in question are not thought to include an option to repay in roubles, rather than dollars (some Russian debt does have this option, though). Failing to meet a debt repayment triggers a 30-day ‘grace period’ for the borrower to fix the problem.

Russia denies that it is close to default, saying Western sanctions are trying to engineer an ‘artificial default’.

Kremlin spokesman Dmitry Peskov told reporters.

“Russia has all the necessary resources to service its debts.”

Russia’s finance ministry says that these rouble payments can be converted into foreign currencies in future, once the Russian Federation has regained access to its foreign currency accounts.

The FT’s Joseph Cotterill tweets that the default countdown is ticking...

Updated

Chancellor of the Exchequer Rishi Sunak delivering his Spring Statement in the House of Commons.
Chancellor of the Exchequer Rishi Sunak delivering his Spring Statement in the House of Commons. Photograph: Jessica Taylor/AP

Chancellor Rishi Sunak’s popularity with voters has plunged, after last month’s spring statement failed to provide more support for households, two polls have shown today.

Polling group YouGov reports that Sunak’s approval ratings have sunk since last month’s mini-budget, to a new low.

Most Britons (57%) now have an unfavourable opinion of Sunak, compared with just 28% who see him in a positive light, giving him a net favourability score of -29. That’s down from -5 the day before the spring statement, and -15 immediately afterwards.

YouGov says:

The aftermath of the spring statement and the ongoing cost-of-living crisis seem to be continuing to have a devastating effect on Rishi Sunak’s popularity among the British public.

The chancellor’s spring statement has been criticised as failing to support lower-income households through the worst cost-of-living crisis in decades and caused widespread anger among those who stand to suffer most from spiralling prices.

There was widespread disappointment that the spring statement didn’t do more to ease the cost of living crisis, with households facing the biggest fall in living standards in decades.

Sunak did cut 5p/litre off fuel duty, and raise the threshold when national insurance begins to be paid, but that only partly compensated for today’s rise in NI rates.

He resisted calls to increase welfare benefits and state pensions in line with the current inflation rate, rather than last September’s 3.1%. That decision will hurt poorer families and pensioners this year, with inflation likely to hit 8% in April.

A separate poll from Ipsos Mori also shows that Rishi Sunak’s favourability ratings have dropped to the lowest since he became Chancellor.

It found that:

  • 26% of Britons are favourable towards the Chancellor and 44% unfavourable.
  • 56% think country heading in the wrong direction – highest number this parliament.
  • 52% think Johnson should resign if issued with a fixed penalty notice over ‘partygate’.

Campaigners dressed as Rishi Sunak have been protesting outside the Treasury in London, today, as the increase in National Insurance Contributions came in:

Campaigners dressed as Rishi Sunak protest outside the Treasury office, London, to coincide with the increase in National Insurance Contributions coming into effect. Picture date: Wednesday April 6, 2022. PA Photo. Photo credit should read: Yui Mok/PA Wire

Over in the US, applications for a mortgage have fallen again, as rising interest rates hit demand.

Total mortgage application volume fell another 6% last week, according to the Mortgage Bankers Association’s seasonally adjusted index, and was 41% lower than a year ago.

The fall was driven by a slump in people refinancing their loans, deterred by a rise in mortgate rates (the US had its first interest rate rise since 2018 last month, with a string of further hikes expected this year).

Updated

UK recessions risks 'remain on the rise' as cost of living crisis hits

Risks of a UK recession have risen as the cost of living crisis, the Ukraine war and the Covid-19 pandemic hit the economy, Deutsche Bank have warned.

In a new report, Deutsche Bank’s chief UK economist Sanjay Raja says there are signs that the economy is slowing, amid renewed supply chain bottlenecks, higher inflationary pressures, and heightened domestic and global uncertainty.

Raja also cautions that the record levels of Covid-19 infections will slow the recovery.

Work absences are rising, and the hit to activity will likely show in the coming months, despite the near full relaxation in rules.

Deutsche now predicts that the UK economy will contract by around 0.2% in the April-June quarter, before rebounding modestly in Q3.

But, it will then flatline by the end of the year as household energy bills ramp up again in October.

Raja writes:

Importantly, we continue to think that recessions risks remain on the rise.

This is something we will be tracking very closely in the coming months. Consumer confidence data are already consistent with recessionary levels.

And our proprietary household surveys are consistent with a materially deteriorating outlook for the household sector. Our surveys point to slowing momentum in household spending, with more households tapping into excess savings to fight off the cost of living shock.

Deutsche Bank research on UK economy
A slide from Deutsche Bank’s latest research on UK economy Photograph: Deutsche Bank

That fits with Scottish Widows warning (see earlier post).

Although Raja thinks that the UK will “just about avoid” a recession (two quarters of negative growth in a row), he points to high-frequency data showing the economy is losing momentum.

That includes some softening of activity at hospitality and leisure activities, worryingly elevated company insolvencies, and a slowdown in adverts for new jobs.

Raja adds:

Our geolocation trackers – from shopping malls, to industrial estates, chemical plants, hotels, train stations, and social hotspots, are either flatlining or slowing into April – perhaps a reflection of weaker consumer confidence in the unfolding cost of living crisis.

Deutsche Bank research on UK economy

With Deutsche Bank also predicting a US recession in 2023, the economic outlook is looking more troubled...

Updated

Ukraine war knocked world trade down 2.8%

A container ship leaving the the harbour of Hamburg.

Global trade fell 2.8% between February and March as Russia’s invasion of Ukraine hit imports and exports, according to the Kiel Institute of the World Economy.

The Kiel Trade Indicator, which tracks traffic at 500 ports worldwide, shows that imports into Russia forecast to have tumbled by 9.7% in March, while Russian exports fell 5%.

The report also shows that European trade was hit by the Ukraine crisis, with EU imports seen down 3.4% and exports falling 5.6% last month.

The US saw a 3.4% drop in exports, while imports only slipped 0.6%.

China, though, seems little affected, with exports down 0.9% and imports rising 0.9%.

Vincent Stamer, head of Kiel Trade Indicator, explains:

“The tense situation in the global economy and a volatile container ship network are visible in the Kiel Trade Indicator as almost only negative signs are reported.

Real distortions caused by Russia’s invasion of Ukraine and the sanctions imposed by the West, as well as a high level of uncertainty among companies with relations to Russia, are noticeably setting back March trade.”

Kiel reports that container freight traffic at Russia’s three largest ports, St. Petersburg, Vladivostok, and Novorossiysk, has already halved.

Stamer says this shows sanctions are having an impact:

“The sanctions imposed by the West are clearly having an effect, and the Russian population is facing an increasingly scarce supply of goods from abroad. Europe’s companies and shipping lines are obviously restricting transport by sea.

The same is likely true for trade via the more important road transport, which explains the sharp decline in Russia’s imports.”

Ukraine is practically cut off from international maritime trade, the report says, adding:

No large container ship has called at the country’s most important port, Odessa on the Black Sea, since the outbreak of war.

Updated

UK households' financial situation worst since early 2020

British households’ financial situation is now the most precarious since the depths of the COVID-19 pandemic in the second quarter of 2020, due to a surging cost of living, a survey released today.

Pensions company Scottish Widows, part of Lloyds Banking Group, said 60% of households had been unable to save more during the pandemic. Those households which did build up savings in the lockdown were now running them down at the fastest rate in nine years.

Emma Watkins, a managing director at Scottish Widows, said.

It’s tough right now for households trying to manage the surge in day-to-day living costs.

Over 70% of households will need to eat into their savings in the next 12 months in order to meet their growing expenses.”

Poorer households without savings, though, will be forced to cut back on spending, including on essentials such as food and energy.

The Scottish Widows index, which measures households’ overall perceptions of financial wellbeing, fell to 38.5 for the first three months of 2022. Anything below 50 shows household finances deteriorating. More here.

The jump in UK construction sector costs last month shows the impact of the cost of living crisis and the Ukraine war on the economy.

Kelly Boorman, partner and national head of construction at RSM UK, warns that the period of gradual improvement since Q3 last year is now in reverse.

‘After a period of steady recovery and alleviated supply chain pressures, the construction pipeline is once again experiencing a squeeze on supply and labour demands, exacerbated further by the cost-of-living crisis, with businesses absorbing inflated material costs and reducing their profit margins.

‘We are yet to see the full impact of the emerging supply chains crisis. Businesses continue to review fixed cost contracts and have been seen stepping away from tendered projects where increased material and labour costs cannot be re-priced under the existing contract terms.

Many businesses are pessimistic about future activity over the coming months, with uncertainty around rising prices and extended supply delivery times impacting an already low margin industry, which looking longer term, is not sustainable.

The EY Item Club says the sector saw robust growth last month, but warns that prices of energy, steel, cement and plastic will keep rising:

The construction sector is particularly vulnerable to the rising price of energy and other raw materials. And it’s unlikely to be immune from the prospect of a slowdown in the wider economy, as high inflation squeezes spending power and uncertainty holds back investment.

Travel chaos at Heathrow Terminal 2 today as families try and get away for the Easter holidays.
Travel chaos at Heathrow Terminal 2 today as families try and get away for the Easter holidays. Photograph: REX/Shutterstock

Holidaymakers and travellers are facing yet more disruption to their plans after easyJet and British Airways cancelled more flights as a result of staffing shortages resulting from soaring coronavirus cases.

BA cancelled 78 flights scheduled to take off from or land at Heathrow on Wednesday, while easyJet cancelled at least 30 flights scheduled to take off from or arrive at Gatwick. Some of the routes affected include journeys to Amsterdam, Kraków, Bologna and Berlin.

The latest cancellations mark another day of widespread disruption for airline passengers, many of whom are taking advantage of the lifting of travel restrictions to get away on Easter holidays.

Here’s the full story:

And here’s an explanation of how the rise in Covid-19 cases among aviation staff, after travel restrictions were relaxed, have caused chaos at the airports:

The latest data on the UK gender pay gap shows that, on average, women earned 90.2p for every £1 men earned last year:

Updated

European stock markets are lower this morning, as investors worry about the health of the global economy as central bankers raise interest rates to cool inflation.

The FTSE 100 is down 0.6%, or 45 points at 7,569 points, away from yesterday’s eight-week highs, while European markets have lost around 1%.

Yesterday, US Federal Reserve governor Lael Brainard hinted America’s central bank will quickly reduce its balance sheet and aggressively push up interest rates, after US inflation hit 40-year highs of 7.9%.

This could slow the US recovery, and even risk a recession, as Russ Mould, investment director at AJ Bell, explains:

Her remarks caused a big sell-off in US stocks and that negativity has now spread to Europe and Asia.

“While investors have been expecting the Fed to do something about inflation for some time, it’s the likely pace of action that really worries the market. Tighten monetary policy too quickly and the economy could fall into recession.

Yesterday, Deutsche Bank warned that the Federal Reserve’s fight against inflation will spark a recession in the United States next year, because policymakers will hit the brakes too hard.

They warned:

“We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the [US] economy into a recession,”

Full story: National insurance increase is right and fair, says Sajid Javid

The increase in national insurance payments for millions of people already struggling to deal with the cost of living crisis is both right and fair, the health secretary has said.

Sajid Javid said the levy of an extra 1.25 percentage points, due from Wednesday, was needed to pay for health and social care after the pandemic.

The government has pressed ahead with its plans to increase national insurance contributions for both workers and businesses, despite calls from businesses groups, unions and some Conservative MPs to at least delay the introduction.

A planned change to free some of the country’s lowest earners from national insurance contributions altogether is not due to be implemented until the summer.

Cost pressures mount at UK building firms

UK construction firms have been hit by the fastest jump in costs in six months, as inflationary pressures hammer the UK economy.

Builders reported problems obtaining supplies, and escalating energy, fuel and commodity prices last month, the latest survey of construction purchasing managers (PMI) shows.

This led to a sharp acceleration in input price inflation in the construction sector, to its highest since last autumn.

Many firms also reported longer delays, due to capacity constraints, a lack of haulage availability and ongoing logistics problems.

Business optimism hit a 17-month low, with builders also concerned about the economic impact of the Ukraine war.

Tim Moore, economics director at S&P Global, says these “intense inflationary pressures” appear to have unnerved some construction companies

Business optimism slipped to its lowest since October 2020 on concerns that clients will cut back spending in response to rising prices and heightened economic uncertainty.

UK construction PMI
UK construction PMI Photograph: S&P Global

Despite these problems, the construction sector kept expanding last month, led by a rise in new work.

There was a pick-up in the commercial property sector, but civil engineering and housebuilding growth slower.

The PMI (which tracks activity) was unchanged at 59.1 in March, well above the 50-point mark showing stagnation.

UK construction PMI
UK construction PMI Photograph: S&P Global

German factory orders have fallen for the first time in four months, highlighting concerns that Europe’s largest economy could be slowing.

Orders at German manufacturers dropped by 2.2% in February, in the run-up to Russia’s invasion of Ukraine (on 24th Febrary).

That’s much worse than forecasts of a 0.3% decline, led by a drop in foreign orders.

The supply chain disruption, and soaring commodity prices, since the Ukraine war began has intensified pressures on German factories, on top of pandemic disruption.

As Bloomberg explains:

Companies including BMW, BASF and ThyssenKrupp have already warned that their earnings will slip. On Monday, Deutsche Bank chief executive Officer Christian Sewing said a recession “would presumably be inevitable” if Germany was cut off from deliveries of Russian oil and natural gas.

Before the invasion, the economy had been grappling with the latest wave of the pandemic. Restrictions have now been loosened, though the caseload remains elevated and Health Minster Karl Lauterbach has urged citizens to remain cautious.

There are worrying signs today that China’s economy has weakened, after the rise in Covid-19 cases led to new lockdowns.

Activity in China’s services sector shrank in March, at the sharpest pace since the first lockdowns in February 2020, according to the latest PMI survey of businesses from Caixin.

Caixin says that the latest wave of Covid-19 and the Russia-Ukraine war both hit China’s firms last month.

That tallies with surveys last week, showing that China’s factory sector contracted last month as the Ukraine conflict disrupted the global economy, and new restrictions were imposed in several cities such as Shenzhen and now Shanghai.

Chronic worker shortfall could force food prices even higher

Serious shortages of workers in the food and farming sector as a result of Brexit and the coronavirus pandemic could push food prices even higher, adding to the cost of living crisis.

The chronic worker shortage could also lead to more food being imported into the UK, and also lead to price increases, reduced competitiveness, and higher wages as food producers try to recruit staff.

MPs on the environment, food and rural affairs committee reported that the sector had half a million vacancies in August last year, representing an eighth of all roles.

The huge labour shortages in the food industry have led to unharvested crops being left to rot in fields, the cull of healthy pigs on farms because of a lack of workers at meat processing plants, and disruption to the food supply chain, as well as threatening the UK’s food security.

The committee – which is chaired by the Conservative MP Neil Parish, along with five other Conservatives, four Labour MPs and one Scottish National party colleague – wrote in a report that the workforce shortfall was the “single biggest factor affecting the sector”.

The food industry is the UK’s largest manufacturing sector but MPs issued the stark warning that it could shrink permanently if the government does not address the acute labour shortages.

Here’s the full story:

Table Setting With Clipping PathsTable setting with clipping path for the plates, forks, spoons and knife.

The calorie content of dishes are being displayed on menus from today as part of a Government drive to tackle obesity and improve the nation’s health.

Businesses with 250 or more employees in England, including cafes, restaurants and takeaways, will be required to display the calorie information of non-prepacked food and soft drinks prepared for customers.

Calories will need to be displayed at the point of choice for the customer, such as physical menus, online menus, food delivery platforms and food labels.

The government argues that the move will address health problems, with obesity-related illnesses costing the NHS around £6bn per year, it says. Almost two-thirds (63%) of adults in England overweight or living with obesity. Putting calorie counts on menus could help people make “healthier choices”.

Some food chains, such as Wetherspoons, do already publish calorie counts, so making it compulsory for larger companies could potentially encourage food producers to make their products healthier.

But the move has been criticised. Tom Quinn, director of external affairs at Beat, said the eating disorder charity was “extremely disappointed”.

“We know from the people we support that including calories on menus can contribute to harmful eating disorder thoughts and behaviours worsening.

“For instance, it can increase a fixation on restricting calories for those with anorexia or bulimia, or increase feelings of guilt for those with binge-eating disorder.

Record increase in petrol and diesel in March

An Esso petrol station on March 31, 2022 in London.
An Esso petrol station on March 31, 2022 in London. Photograph: Hollie Adams/Getty Images

Households and businesses have also been hit by the biggest monthly jump in motor fuel prices in at least two decades.

Average UK petrol and diesel pump prices increased by 11p and 22p per litre respectively in March, according to the RAC’s Fuel Watch.

This is the largest monthly price rise recorded since the RAC started monitoring prices in 2000.

Fuel prices rose to record highs in recent months, meaning the cost of filling a family car with petrol was a third higher in March than it was a year ago, while a diesel car cost 40% more.

It now costs nearly £90 to fill a 55-litre family petrol car, £6.38 more than it did at the start of March and £22 more than a year ago.

RAC fuel watch fuel prices
RAC fuel watch fuel prices Photograph: RAC

Last month, Rishi Sunak announced a 5p/litre cut to fuel duty. But average petrol and diesel prices have only fallen by a disappointing 3.73p and 2.61p respectively since, because rising wholesale oil prices pushed up prices at the pump.

RAC fuel spokesman Simon Williams said:

“March 2022 will go down in the history books as one of the worst months ever when it comes to pump prices – over the 22 years we have been monitoring pump prices as part of our Fuel Watch initiative we’ve never witnessed such extreme rises in prices over such a short period. To describe the current situation facing drivers at the forecourt as ‘bleak’ is therefore something of an understatement.

“Without question, these figures show in the starkest possible terms just how much fuel prices are contributing to the cost-of-living crisis which will be affecting households up and down the country. We know that so many drivers depend on their vehicles – for instance, because of a lack of feasible alternatives – so fuel prices must be starting to have an enormously detrimental effect on people’s finances, especially those on lower incomes.

Updated

The Unite union has also criticised today’s NI rise, arguing the government should increases taxes on firms who have profited from the pandemic and the surge in energy prices.

Unite’s general secretary Sharon Graham said:

“Once again working people are being made to pay for the bad decisions of those in power. Workers and their families are hurting now, hit by rocketing inflation. Some are worrying whether they can afford to heat and eat.

“So why has the government ploughed ahead with an unnecessary rise in National Insurance? Why isn’t it taxing the vast profits piled up by the pandemic profiteers and energy producers who are awash with cash? Unite’s commission on profiteering will shine a spotlight on those who should really be targeted by the Treasury.

Liberal Democrat leader Sir Ed Davey has criticised today’s NI rise - saying there are fairer ways to raise funds for the NHS:

He told BBC Breakfast that:

“It doesn’t tax the unearned income of very wealthy people. It doesn’t tax the income of landlords. It puts all the burden on working people - that is wrong.

“Yes, we need more money for the NHS and social care. The Conservatives starved it of money and one reason why the pandemic was so difficult was that the Tories had underfunded the NHS.

On Good Morning Britain, Davey argued that it’s “simply the wrong time” to raise taxes, given the inflationary squeeze on households.

He points out that the Liberal Democrats argued for a 1p increase to income tax at the last election in 2019, to provide more funds for the NHS.

The Health Secretary has defended the decision to hike up national insurance for millions of workers, saying it is “right that we pay for what we are going to use as a country”.

Sajid Javid told Sky News:

“It kicks in today, the new health and social care levy. All of the funding raised from it is going to go towards the extra £39bn we are going to put in over the next three years to health and social care.

“It’s going to pay in the NHS for activity levels that are some 130% of pre-pandemic, it’s going to be nine million more scans, tests and procedures, meaning people will get seen a lot earlier.

“Why is any of this necessary, whether it is for health or social care? It’s because of the impact of the pandemic. We know it is unprecedented. It has been the biggest challenge in our lifetime. The impact of that is going to continue for many years.”

Javid says that increasing taxes on workers and businesses is fair - because the money to fund public services comes from either taxation or borrowing. He argues that higher-earners will pay the most (because they earn more).

You raise it directly for people today, that’s through taxes, or you borrow it, which essentially you are asking the next generation to pay for it.

“I think it is right that we pay for what we are going to use as a country but we do it in a fair way. This levy, the way it is being raised is the top 15% of earners will pay almost 50%. I think that is the right way to do this.”

Introduction: Millions of workers and firms hit by national insurance hikes from today

Good morning, and welcome to our live rolling coverage of business, economics and financial markets.

The financial pressures on many UK households and businesses have intensified today, as national insurance rates are lifted to raise funds for the NHS and social care.

Despite the cost of living crisis, the government has pressed on with its manifesto-busting 1.25 percentage point rise in national insurance, announced last September.

The move means millions of workers will begin paying higher National Insurance contributions from today, the start of the new tax year.

Businesses will also see their contributions rise, at a time when they’re already juggling rising costs. Tax rates for dividend income also rise by 1.25 percentage points.

Businesses groups, unions and some Conservative MPs had all pushed the government to delay the increase, given the financial pressures on workers and companies.

The “Health and Social Care Levy” is expected to raise around £12bn per year, to tackle the backlog of cases at the NHS due to the pandemic, and also reform routine services.

Today’s changes mean those earning above £9,880 will now be liable for 13.25% NI contributions, up from 12%. Earnings above £50,270 will be charged a rate of 3.25%, up from 2%.

But from July, national insurance will only start to be charged on earnings over £12,570, because chancellor Rishi Sunak announced a £3,000 rise in the NI threshold in last month’s spring statement. That will take around two million workers out of direct tax altogether (if they earn less than £12,570 per year).

According to Resolution Foundation, everyone earning less than £32,000 a year will be better off from the combination of those two policies from July.

UK national insurance changes
UK national insurance changes Photograph: Resolution Foundation

But there are other changes kicking in for the new tax year, including a freeze on income tax thresholds. That will drag more people into paying tax, or more tax, if their pay increases over the next few years.

That will make it harder for households to handle rising costs, such as last week’s surge in energy bills.

Prime minister Boris Johnson has defended the National Insurance increases, saying the health service needs the extra resources:

We must be there for our NHS in the same way that it is there for us. Covid led to the longest waiting lists we’ve ever seen, so we will deliver millions more scans, checks and operations in the biggest catch-up programme in the NHS’ history.

We know this won’t be a quick fix, and we know that we can’t fix waiting lists without fixing social care. Our reforms will end the cruel lottery of spiralling and unpredictable care costs once and for all and bring the NHS and social care closer together. The Levy is the necessary, fair and responsible next step, providing our health and care system with the long term funding it needs as we recover from the pandemic.

The government says the levy means:

  • From today the Health and Social Care Levy will begin raising billions to tackle Covid backlogs and reform routine services
  • £39 billion over the next three years will put health and care services on a sustainable footing
  • Levy will deliver biggest catch up programme in NHS history and end spiralling social care costs

The agenda

  • 7am BST: German factory orders for March
  • 9.30am BST: UK construction PMI report for March
  • 3.30pm BST: EIA weekly US oil inventories
  • 7pm BST: US Federal Reserve publishes minutes of latest meeting

Updated

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