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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Nigel Farage says NatWest management ‘should go’ after CEO Rose admits discussing his bank account with BBC – as it happened

Unilever United Kingdom Inflation Fitch United States Richard Hunter Dermalogica Economy International Monetary Fund
NatWest CEO Alison Rose
NatWest CEO Alison Rose Photograph: Simon Dawson/Reuters

The Financial Times reports that Alison Rose’s resignation comes after Downing Street and the Treasury raised concerns about revelations that she had been the source of an inaccurate report about Farage’s personal finances.

NatWest boss Alison Rose resigns over Nigel Farage Coutts account row

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

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

NatWest Group chairman, Sir Howard Davies, said:

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

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

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

Rose, who has run NatWest since 2019, said:

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

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

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

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

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

Here’s a video clip of Nigel Farage calling for heads to roll at NatWest this evening:

And a reminder, here’s our story on this evening’s developments:

That may be all for this evening, we’ll be back tomorrow morning when another UK bank, Lloyds, are reporting results. NatWest are due on Friday….

Farage’s call was echoed by Tory former cabinet minister David Davis, who said Dame Alison Rose had “little choice but to resign”.

Davis told GB News that a bank clerk or local bank manager who discussed their accounts with a journalist would be summarily dismissed.

Responsibilities get larger, not smaller, as you move up an organisation, Davis argues.

[Reminder: Rose says she did not reveal any personal financial information about Mr Farage, but did confirm he was a Coutts customer to the BBC’s Simon Jack].

Davis says he’s ‘astonished’ that the board of NatWest have said they have full confidence in her.

He adds:

Frankly, if the head of a bank that I was a big shareholder of did this, I would say immediately “I’m sorry, it’s over, find your successor.”

Farage: NatWest management should all go.

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

Frankly, I think they should all go.

Farage: Someone is lying here

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

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

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

Farage tells GB News:

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

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

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

Farage says:

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

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

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

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

Farage: it points to Coutts CEO Peter Flavel

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

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

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

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

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

His voice rising, Farage declares:

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

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

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

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

Updated

Sky News’s Paul Kelso tweets:

Full story: NatWest stands by CEO after ‘error’ of discussing Farage with BBC reporter

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

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

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

More here:

Nigel Farage does not appear to think tonight’s developments are the end of the matter:

FCA raises concerns with NatWest and Coutts

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

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

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

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

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

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

Rose says sorry to board and colleagues

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

In her statement this evening, the NatWest CEO says:

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

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

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

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

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

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

NatWest retains full confidence in Rose, but pay may take a hit

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

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

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

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

Davies says:

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

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

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

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

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

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

Updated

NatWest boss admits "serious error of judgement" in Farage bank closure row

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

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

Rose says:

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

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

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

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

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

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

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

Key event

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

Afternoon summary

Time for a recap.

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

    Research from the Bank of England into the Bank of Mum and Dad has shown that recipients of financial support are buying their first homes earlier, are less-leveraged and have lower mortgage payments.

    According to the BoE, the average 26 year old with help paid about £254,000 for their first home. Those with no help waited a decade to buy a property for an equivalent sum.

A chart showing the impact of the Bank of Mum and Dad on home ownership

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

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

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

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

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

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

And in other news:

Just in: the world’s top luxury group LVMH Moët Hennessy Louis Vuitton has announced it has enjoyed an “excellent first half” of the year, with organic revenue growth of 17%.

LVMH grew its revenues by 15% to €42.24bn, with profits up 13%.

Sales at its Fashion & Leather Goods division jumped 17%, which the company says was due to an outstanding performance by brands such as Louis Vuitton, Christian Dior, Celine, Loro Piana, and Loewe.

Bernard Arnault, Chairman and CEO of LVMH, cited the “enthusiastic reception” given to Pharrell Williams’ first fashion show for Louis Vuitton earllier this year.

Perfumes & Cosmetics and Watches & Jewelry both grew their revenues by 11%.

How Bank of Mum and Dad exacerbates inequality

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

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

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

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

She concludes that “the results are extraordinary.”

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

Rostom says there are three takeaways from her work:

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

A chart showing the impact of the Bomad

Second, the support is substantial.

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

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

The impact of the Bank of Mum and Dad on the housing sector

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

A chart showing the impact of the Bank of Mum and Dad on home ownership

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

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

Updated

US consumer confidence has improved this month, as fears of a recession ebb.

The Conference Board’s Consumer Confidence Index has risen again in July to 117.0, up from 110.1 in June. That’s a two-year high.

Americans’ view of the present economic situation improved, as did their economic expectations.

The Conference Board says:

Despite rising interest rates, consumers are more upbeat, likely reflecting lower inflation and a tight labor market. Although consumers are less convinced of a recession ahead, we still anticipate one likely before yearend.

Updated

Bank of England rates set to peak at 5.75% by year-end: Reuters poll finds

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

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

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

To er is human, Musk finds, in rebranding drive

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

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

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

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

More here.

UK to be second worst economy in the G7 in 2023 despite upgrade, says IMF

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

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

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

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

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

IMF: global activity is losing momentum

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

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

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

Gourinchas says:

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

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

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

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

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

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

UK interest rates need to stay higher for longer to beat inflation, says IMF

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

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

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

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

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

The IMF predicts that the UK will be a growth laggard this year, although Germany is forecast to shrink, and be at the back of the pack of advanced economies.

Here are the IMF’s latest growth forecasts for this year, just released:

Updated

IMF: extreme weather could keep inflation high

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

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

Its updated WEO report cites the risks from extreme weather:

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

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

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

IMF lifts 2023 global growth forecast to 3%, from 2.8%

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

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

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

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

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

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

Updated

Bank of England forecasts £150bn loss from asset purchase scheme

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

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

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

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

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

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

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

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

Cash flows (actual and projected) for the Bank of England’s APF

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

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

The BoE says:

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

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

Updated

In an unusual development, wargaming company Games Workshop has revealed it has accidentally paid an unlawful dividend.

It has told the City that a “technical issue” has been discovered with the interim dividend paid out last November, saying:

When the Company paid the Interim Dividend, the Company had sufficient distributable profits to do so and had prepared interim accounts showing the same, however those interim accounts were not filed at Companies House prior to the payment of the dividend.

As a result, the Interim Dividend was paid in technical contravention of the Companies Act 2006. The Interim Dividend amounts to an unlawful dividend only to the extent that it exceeded the amount of distributable reserves available to pay the Interim Dividend shown in the prior audited accounts, being £700,000.

As a result of this minor technical breach, it is understood that the Company may have potential claims against shareholders who were recipients of the dividend and against its directors for declaring the dividend. The Company has no intention of bringing these claims.

Instead, Games Workshop is proposing a special resolution to fix this somewhat embarrasing problem…

General Motors has raised its profit target for the year by around $1 billion and reported second-quarter earnings which beat analysts expectations.

GM now expects to make underlying profits of between $12bn and $14bn this year, up from a previous forecast of $11bn-$13bn.

The forecast is dependent on GM successfully negotiating new labor agreements without a work stoppage, says chief executive Mary Barra.

Barra told shareholders:

The biggest driving force behind our financial results is customer demand for our vehicles, which have now led the U.S. industry in initial quality for two consecutive years.

We have earned four consecutive quarters of higher retail market share in the U.S. versus a year ago with continued strong pricing and incentive discipline, we’re leading in both commercial and total fleet deliveries calendar year to date, and we’re growing profitably in international markets such as Brazil and Korea.

Ukrainian activists are continuing to urge Unilever to withdraw from Russia.

Valeriia Voshchevska of the Ukraine Solidarity Project, says:

“Unilever’s continuing operations in Russia are turning into a real nightmare.

Their global sales are up: but it’s hard to hear their champagne corks popping over the sound of Russian shelling.

The business and political world is looking at them aghast. Their customers are horrified at the prospect of complicity in war crimes. Russian profits and share of turnover are down.

And now Unilever is staring down the barrel of having to facilitate the conscription of the Russian workers it claimed to be protecting. It’s economically wrong-headed, morally repulsive and reputationally disastrous. Unilever needs to pack up and ship out of Russia before it’s too late.”

Unilever continue to lead the FTSE 100 after beating expectations this morning, with its shares up 4.66%

Chris Beauchamp, chief market analyst at IG Group, says:

Traders are buying up Unilever with abandon this morning after its solid set of numbers.

A solid recovery in activity across the group and a rosy outlook chime with hopes that the UK economy can avoid a recession. But with the CMA’s focus on prices turning to the supply chain, Unilever needs to tread carefully when celebrating this morning’s numbers.

The news that Unilever’s European prices are up 14.2% this year, lifting sales by 6.4% (with volumes falling by 6.8%) does focus attention on the price pressures fuelling consumer price inflation.

Supermarket, who buy from Unilever and pass on (or swallow) these higher prices, have insisted they aren’t profiteering…..

A glimmer of good news – the decline in UK manufacturing orders has eased this month.

The CBI’s monthly’s healthcheck on British industry has found that manufacturing orders declined in July at the weakest rate this year. This lifted its monthly balance of new orders to -9 from -15 in June, the highest reading since December.

Recent falls in output have bottomed out, with firms predicting a pick-up in production over the next quarter.

Encouragingly for consumers, expectations for increases in selling prices cooled further too.

Business sentiment rose, with bosses more optimistic about their export prospects, but investment intentions for the year ahead weakened.

Heathrow asks airlines to carry excess fuel due to supply problems

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

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

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

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

More here.

NatWest under pressure as Gove says bank has ‘further to go’ in rectifying Farage row

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

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

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

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

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

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

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

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

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

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

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

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

Johnson wrote in the Daily Mail:

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

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

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

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

Updated

Having bought Credit Suisse in a rescue deal in the spring, UBS has been coughing up for its misconduct.

Last night, the Bank of England fined Credit Suisse a record £87m for “significant failures in risk management and governance”.

The fine, from the Bank’s Prudential Regulation Authority, related to Credit Suisse’s dealings with private investment firm Archegos Capital Management.

Archegos collapsed in 2021, leaving Credit Suisse nursing around $5.1bn (£4bn) of losses.

The PRA says that the bank’s risk management oversight and practices fell well below the regulatory standards required, and were symptomatic of an “unsound risk culture”.

Sam Woods, deputy governor for Prudential Regulation and Chief Executive Officer of the PRA, said last night:

“Credit Suisse’s failures to manage risks effectively were extremely serious, and created a major threat to the safety and soundness of the firm. The seriousness and widespread nature of those failures has led to today’s fine, which is the largest ever imposed by the PRA.”

Other regulators concur. The Swiss Financial Market Supervisory Authority and the Federal Reserve Board have also announced fines, leading to a total penalty of $387.5m.

Virgin Media O2 to cut up to 2,000 jobs

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

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

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

A spokesman said:

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

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

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

German business sentiment has worsened further

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

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

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

IFO says:

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

UK mortgage rates rises, but some savings rates stagnate

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

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

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

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

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

Moneyfacts report:

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

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

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

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

Unilever: We're passed peak inflation

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

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

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

Pitkethly said:

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

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

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

Updated

Unilever has cautioned this morning that there “remains a risk” that its operations in Russia are unable to continue. That could lead to a loss of turnover, profit and a write-down of assets, it says.

Unilever currently employs around 3,000 people in Russia making personal care and hygiene products, but also ice-cream. It generates 1.2% of its turnover and 1.5% of net profits.

In March 2022, Unilever said it would suspend all imports and exports of Unilever products into and out of Russia and cease any capital flows in and out of the country.

It has defended its decision to keep operating despite the Ukraine war, arguing that it wants to “both to avoid the risk of our business ending up in the hands of the Russian state, either directly or indirectly, and to help protect our people”.

But it has been criticised for not quitting Russia.

Earlier this month, the Ukrainian government named Unilever an international sponsor of war; it is subject to a law in Russia obliging all large companies operating in the country to contribute directly to its war effort.

That could include supplying Vladimir Putin with soldiers. Last weekend, it emerged Unilever will comply with Russian conscription law, meaning its Russian employees could be sent to war in Ukraine if called up.

Unilever’s results also show that prices for its goods in Europe are up over 14% so far this year, fuelling inflation in the region.

Some consumers have baulked at such price increases, with sales volumes down 6.8%, resulting in sales growth of 6.4%.

Unilever says “underlying price growth remained elevated in Europe given its higher exposure to categories with significant cost inflation.”

Here’s a handy chart from the FT showing how the UK’s debt interest costs are surging towards record highs:

Updated

Roberto Rivero, market analyst at Admirals, cautions that Unilever can’t keep raising prices without eventually losing customers.

Following today’s financial results from Unilever, Rivero says:

“As anticipated, turnover has increased year on year. However, whilst analysts had expected operating profit to take a hit in the first half of the year, it has in fact grown as margins increased.

In an inflationary environment, companies need to pass higher input costs on to consumers if they are to preserve profit margins. Whilst this may sound simple enough, not every company can do this without losing customers.

However, Unilever’s wide variety of globally respected brands and consumer staples grant it a fairly high degree of pricing power which, in turn, has allowed it to navigate this inflationary environment well.

Nevertheless, consumers can only be pushed so far. Even a company with Unilever’s pricing power can only get away with hiking prices for so long. Fortunately, inflation has peaked in most of Unilever’s key markets and has been falling throughout the first half of the year. Eventually, this should lead to prices stabilising but this may take some time to filter through to consumers”.

Updated

China’s stock markets have jumped this morning after the country’s top leaders pledged to step up policy support for the economy.

Beijing plans to stimuate the recovery from the Covid-19 pandemic by stepping up its economic policy adjustments, focusing on expanding domestic demand, boosting confidence and preventing risks, state news agency Xinhua reported.

The decision comes after China’s growth slowed in the second quarter of 2023, to 0.8%, down from 2.2% growth in January-March.

China’s CSI 300 share inded has jumped almost 3%.

Victoria Scholar, head of investment at interactive investor, says:

Chinese markets rallied sharply overnight with property stocks jumping, the yuan hitting a 2-week high and the Hang Seng gaining over 4% after the authorities pledged to support its stuttering economy.

Unilever has release a “decent if mixed” set of half-year results this morning, reports Adam Vettese, analyst at trading and investment platform eToro.

Vettese explains:

“One of the strengths of Unilever’s business model is that it houses a lot of well-known brands that have come to be staples of many households. That means it can afford to put up prices in an inflationary environment – sensibly – without it impacting sales.

“However, while overall sales growth has been solid, only 41% of its portfolio is taking market share from rivals, while volumes in Europe, a key market, have been disappointing.

“That said, shareholder have reacted positively to the fact that Unilever has hiked its full-year sales growth forecast, suggesting that it expects to make progress in the second half of the year.”

Despite Unilever’s strength, the UK’s FTSE 100 share index is basically flat in early trading (up 0.02% or 2 points at 7680).

The markets are currently split into two camps, reports Bill Blain, strategist at Shard Capital:

  • Reasons to be cheerful: an increasing number of folk are convinced slowing US inflation and the economy’s resilience means the Fed has achieved the improbable holy grail of central banking – a soft landing. That’s got to be good news for stocks – er, maybe.

  • Reasons to be fearful: Others are delving deeply into the detail of rising credit card defaults, earnings problems, a property bust, and global slowdown (particularly in China and Europe) for proofs of how unsustainable the current happy-clappy market is.

Updated

Unilever has shown today that it can raise its prices without creating an exodus of customers to cheaper rivals.

Richard Hunter, head of markets at interactive investor, says:

“The Unilever juggernaut rumbles on, sweeping aside any inflationary worries through the sheer scale of its pricing power.

There have been concerns that an increasingly cost-conscious consumer would switch to the cheaper, own-brand products of rivals, but this appears only to be happening at the margins. In normal circumstances, significant price rises would be accompanied by large declines in volumes as customers move elsewhere.

For Unilever, however, with its suite of household names, this has simply not been the case.

The strength of this performance can be cut in a number of ways, Hunter says:

By product, the 14 “Billion + euro brands”, which generate annual sales in excess of €1 billion and which account for 55% of group turnover, saw underlying sales growth (USG) of 10.8%, driven by outperformance from the likes of Hellman’s, Omo, Sunsilk and Lux.

By segment, Personal Care and Nutrition each saw USG of over 10%, with Beauty & Wellbeing, Home Care and Ice Cream adding 9.1%, 8.4% and 5.7% respectively.

The strength of the business model is also reflected by the group’s geographical reach, he adds:

In Emerging Markets, USG of 10.6% was driven by price growth of 10% and an additional 0.6% boost in volumes, while in Developed Markets, a more moderate USG of 6.9% was due to price increases of 8.4%, slightly offset by volume declines of 1.4%.

Unilever shares surge to top of FTSE 100

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

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

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

Cost of living crisis is profitable for Unilever, says Fidelity

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

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

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

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

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

On a GAAP basis, Unilever’s profits have swelled by over 22% this year to €5.5bn (£4.74bn), as price rises have boosted its income.

On this measure, operating profits are up almost three percentage points to 18.1%.

On an underlying basis, though, profits and margins were lower:

A table showing Unilever’s financial results

Unilever grows sales as prices keep rising

The logo for Unilever above a trading post on the floor of the New York Stock Exchange.

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

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

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

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

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

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

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

Updated

Introduction: UK set to incur "highest debt interest costs in developed world"

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

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

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

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

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

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

A chart of government interest payments for EMs and DMs

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

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

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

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

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


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

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

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

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

Also coming up today

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

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

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

The agenda

  • 9am BST: IFO survey of German business climate

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

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

  • 2pm BST: US house price index for May

  • 3pm BST: US consumer confidence report for July

Updated

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