Closing post
Time to wrap up.. here are today’s main stories.
Money saving expert Martin Lewis has predicted that there’s a more than 50% chance that the UK government will abandon plans to raise energy bills by 20% in April.
Lewis says that, “reading the runes”, he thinks there’s a better than 50/50 chance that Jeremy Hunt will drop plans to lift the Energy Price Guarantee to £3,000 per year, from £2,500.
Downing Street has said the plan is being kept ‘under review’, while energy secretary Grant Shapps has revealed that he is ‘very sympathetic’ to calls to scrap the rise in bills.
New government data has shown that the fuel poverty crisis is expected to worsen this year, after the number of families in England suffering fuel poverty rose last year.
Households also face escalating price rises in the shops, with grocery inflation hitting a record 17% this month.
Data firm Kantar warned that one in four families are now struggling financially, with the cost of a typical annual shop now up £811 over the last year.
Supermarket giant Sainsbury’s has confirmed it plans to close two Argos depots over the next three years in a move that will impact 1,400 jobs.
The competition regulator is probing the UK’s property sector, launching investigations into house-building and renting.
The Competition & Markets Authority sets its sights on to developers & the rental sector experience following concerns builders aren’t delivering the homes people need at sufficient scale or speed & landlords & agents need to understand their obligations https://t.co/hpB2FiXcYm
— Emma Fildes (@emmafildes) February 28, 2023
And the pound has hit a one-month high against the euro, as investors welcome the Windsor Framework agreement for Northern Ireland.
In other news:
Updated
Sainsbury’s CEO has also welcomed the deal announced between the UK and the EU over Northern Ireland yesterday.
Simon Roberts says it means Sainsbury’s will be able to offer the same products in Northern Ireland as in the rest of the UK:
“We welcome the positive news on The Windsor Framework which will help to simplify processes and reduce friction when we move products between Great Britain and Northern Ireland.
This means that our customers in Northern Ireland will once again be able to access the full range of products as customers in Great Britain – and at the same great prices.”
Sainsbury’s has now confirmed that it is proposing to close its Argos operations in Basildon, Essex and Heywood, Greater Manchester, as flagged earlier.
The changes, which will affect 1,400 jobs, are part of the “further integration and modernisation” of Argos and Sainsbury’s general merchandise logistics network, it says.
Staff affected by the proposals will have the opportunity to explore alternative roles within Sainsbury’s and Argos.
It is also proposing to speng £90m automating a depot in Daventry depot, and create a Habitat digital showroom space as part of post-pandemic property review.
It plans to close its office in Milton Keynes this year, as part of its move to flexible working following the pandemic. Currently, only 11% of available desk space is regularly used by staff, it says.
Simon Roberts, Sainsbury’s Chief Executive, says these changes will create a simpler business.
“As with any major change to our business, we have not taken the difficult decision to start this consultation lightly. As part of our plan to create a simpler business, we previously set out our intention to integrate our Argos and Sainsbury’s logistics networks. Over the last few years, we’ve been working hard to transform this network as we make our business simpler, more efficient and more effective for customers. This also allows us to reduce costs, so we can invest where it will make the most impact for our customers.
“We understand that this will be an unsettling time for affected colleagues, and we will support them however we can throughout this process. We will be consulting closely with unions and colleagues as we look to streamline the number of sites in our general merchandise logistics network.
We are also announcing the significant investment we’re proposing to increase automation at our Daventry distribution centre. This combined with our ongoing plans to open more Local Fulfilment Centres will help us better deliver for our customers in the future.”
Back in the currency markets, the pound has touched a one-month high against the euro today.
Sterling is trading at €1.141 against the single currency, the highest level since 30 January.
Simon Phillips, managing director at the travel money firm No1 Currency, says relief following yesterday’s Northern Ireland Brexit deal is lifting the pound:
“Sterling’s improved fortunes are in sharp contrast to the way it began the month, when it sank to its lowest level against the Euro in two years.
“The UK’s deal with the EU has removed one of the most toxic – if least understood – post-Brexit sticking points, and this has reassured the currency markets and helped the Pound rally.
“All this is welcome news for anyone planning an Easter break in Europe, as their spending money will now go that bit further.
“While sterling still has a way to go to regain the ground it lost against the Dollar in February, the Pound to Euro exchange rate is the strongest it has been since January.
Prime minister Rishi Sunak has been selling the Windsor Framework in Belfast, saying that Northern Ireland will be in the “unbelievably special” and “unique” position of being in both the UK’s home market and the European Union Single Market.
Prime Minister Rishi Sunak says businesses in Northern Ireland would benefit from being in 'the world’s most exciting economic zone' pic.twitter.com/PwlCWHE6Ia
— PA Media (@PA) February 28, 2023
“Nobody else has that, no-one, only you guys, only here,” Sunak declares.
It really does sound great.
Apparently business leaders around the world tell Sunak that they want to invest in Northern Ireland, which he calls “the world’s most exciting economic zone”, as that opportunity to be in both the UK and EU markets simply doesn’t exist elsewhere.
Sainsbury’s "plans to close two Argos depots"
Supermarket giant Sainsbury’s has said it plans to close two Argos depots over the next three years in a move that will impact 1,400 jobs, PA Media reports.
#Breaking Supermarket giant Sainsbury’s has said it plans to close two Argos depots over the next three years in a move that will impact 1,400 jobs pic.twitter.com/l2wUqXiYpv
— PA Media (@PA) February 28, 2023
The Unite union says there is no “economic justification” for closing the Argos warehouses in Basildon and Heywood, in Greater Manchester, by 2026.
Closing both warehouses will lead to the loss of over 750 jobs, Unite says, and also put at risk the jobs of HGV drivers employed by Wincanton, on an outsourced contract.
Unite national officer Matt Draper says the union will pursue ‘all avenues’ to protect jobs:
“Management at Argos/Sainsbury’s has yet to provide any form of business case for the loss of these jobs. Unite will be fighting to preserve every job and will put forward an alternative business case to the company to preserve employment at these two sites.
“This is an incredibly wealthy company which should be investing in its loyal workforce rather than dumping workers in pursuit of short-term profits.
“If Sainsbury’s doesn’t drop its closure plans then Unite will pursue all avenues to preserve employment at these sites.”
Goldman Sachs boss warns of stickier inflation
Over in America, the boss of Goldman Sachs has said that business leaders are a little more confident about the economic outlook.
David Solomon told CNBC that the general consensus is inflation is likely to be ‘stickier’ than hoped – meaning it won’t fall back to 3%, or 2%, as quickly as hoped.
That will mean higher interest rates for longer, and sluggish growth. But, Solomon says there is “a better chance that we can muddle through with a softer landing”.
There’s a little more optimism, he reckons, because people’s businesses have been performing better, and consumers have been more resilient.
Goldman Sachs CEO David Solomon says he thinks inflation will be sticky and “anyone running a business has to be prepared for kind of a bumpy 12-18-24 months.” https://t.co/IgGyEff9Np pic.twitter.com/Rs6rcYwmhK
— CNBC (@CNBC) February 28, 2023
Downing Street has said that the plan to lift household energy bills by 20% in April are being kept under review.
The prime minister’s official spokesman was asked about Grant Shapps’ comments today (see earlier post) that he was “very sympathetic” to calls to scrap the increase in typical bills to £3,000 per year in April.
The PM’s official spokesman said today (via PA Media):
“All I would say on this is it’s something we are just keeping under review. I don’t think there’s a specific time we are working to.”
He added:
“All I would emphasise is the amount of support we have already put in to support the public and businesses, paying around half of a typical household’s energy bill.
“By the end of June the energy price guarantee will have saved the typical household in Great Britain around £1,000 since it began.”
Over in parliament, Conservative MP Richard Fuller has criticised Ofgem’s performance in the energy crisis.
Fuller told the Commons that better oversight of the energy regulator was needed, and questioned why CEO Jonathan Brearley was still in position, PA Media reports.
It emerged last week that Ofgem was facing a boardroom overhaul, with ministers planning to recruit new directors to fill five of the eight seats on the board, including the role of chair.
Fuller, though, says more is needed, telling MPs:
“Many on this side will be wondering what on earth Ofgem has been doing. It is supposed to be a regulator, it is supposed to look after consumer interests?
“It blunders around, it blundered around with the price cap, it blundered around with its market-entry strategy, meaning that energy companies essentially could put all of their bill payers’ money on red in a casino.
“It has ended up with billions of taxpayers’ money being put into bailouts. Please can we have something more than the efforts by the Government to look at new non-executive directors?
“Surely it is time to say, ‘why is the chief executive remaining in post?’ And can we please have better oversight of this regulator and other regulators in general? They are getting away with ripping off consumers and allowing companies to do exactly the same.”
In response, energy Secretary Grant Shapps said he was meeting with Brearley, and such meetings would continue. He told MPs:
“I think it’s always right that we keep what our regulators do under very close watch.”
Shapps added:
“I’ve called them out when I’ve been concerned. I thought they had the wool being pulled over their eyes by the energy companies, and I’ll continue to ensure that whatever happens will be appropriate for the future of this market.”
Competition watchdog to examine home building and renting
Britain’s competition watchdog has launched two new inquiries today, into the UK’s housing crisis.
The Competition and Markets Authority (CMA) has launched a market study into housebuilding, and will start a separate consumer protection project related to rented accommodation.
The move could lead to housebuilders being forced to change their practices, or mean extra protections for tenants.
The CMA is responding to “widespread concerns about housing availability and costs”, it says.
This follows concerns that builders are not delivering enough homes, or building them fast enough to meet people’s needs.
The inquiry into home building will examine four points – housing quality; land management and whether the practice of ‘banking’ land is anti-competitive; local authority oversight of developers; and what factors are holding back innovation such as more sustainable, net zero homes.
The CMA’s work on the rental sector will examine “the end-to-end experience” of being a tenant in the UK, and consumer protection issues that tenants may face.
Sarah Cardell, Chief Executive of the CMA, says the regulator will take action if it sees evidence of anti-competitive conduct:
The quality and cost of housing is one of the biggest issues facing the country. Over the last few years, the CMA delivered real change for leaseholders, with tens of thousands of homeowners receiving refunds after being overcharged unfair ground rents.
With that work nearly finished, we’re now looking to probe in more detail two further areas – the housebuilding and the rental sectors.
If there are competition issues holding back housebuilding in Britain then we need to find them. But we also need to be realistic that more competition alone won’t unlock a housebuilding boom.
In the same vein, we want to explore the experiences people have of the rental sector and whether there are issues here that the CMA can help with.
We will of course be guided by the evidence, but if we find competition or consumer protection concerns we are prepared to take the steps necessary to address them.
Updated
Around 33,000 more civil servants in Britain, including those working for the tax office, have voted to stage a strike on Budget Day next month in a dispute over pay, pensions and job security, the Public and Commercial Services (PCS) union has announced.
They will join 100,000 civil servants across other government departments who were already scheduled to strike on 15 March.
PCS General Secretary Mark Serwotka said in a statement.
“Unless ministers put more money on the table, our strikes will continue to escalate, beginning on March 15,”
The PCS reballoted ten groups of members where the turnout was just below 50% in its original ballot for strike action in November.
The union is holding strike action to support its campaign for a pay rise of at least 10%, pensions justice, job security and no cuts to civil service redundancy pay.
Fuel poverty crisis expected to worsen this year
The number of families in England suffering fuel poverty rose last year, despite government efforts to cap bills.
In 2022, there were an estimated 13.4% of households, or 3.26m, in fuel poverty in England under the Low Income Low Energy Efficiency (LILEE) metric, official figures show today.
That’s up from 13.1%, or 3.16m, in 2021.
Under the LILEE metric, a household is considered to be fuel poor if a) they are living in a property with a fuel poverty energy efficiency rating of band D or below, and b) spending the amount needed to heat their home would leave them with a residual income below the official poverty line.
Alarmingly, the problem is expected to get worst this year – underlining the need to not raise bills in April.
Today’s report, from the Department for Energy Security and Net Zero, says:
It is projected that in 2023, fuel poverty will increase to 14.4 per cent (3.53 million) with the average fuel poverty gap rising by 31 per cent in real terms to £443 (in 2022 prices).
An estimated 53.5 per cent of all low income households are projected to live in a property with a fuel poverty energy efficiency rating (FPEER) of band C or better.
Additionally, the number of households who had to spend more than 10% of their income, after housing costs, on domestic energy soared last year.
In 2022, 7.39 million households, or 30.3%, exceeded this threshold up from 4.93 million, or 20.5%, in 2021.
Adam Scorer, the chief executive of fuel poverty charity National Energy Action, says the data does not show the full scale of the crisis.
Scorer says:
‘Over 3.2 million households in England are in fuel poverty according to Government data released today but the worst of the energy crisis is not represented – people being forced to self-disconnect, struggling with ice on the inside of their windows and living with damp and cold.
And the situation will not get better. From April the average annual bill will rise from £2,500 to £3,000 and that means without Government intervention – both for energy efficiency measures and financial support with bills – the number in fuel poverty will continue to rise.’
The Scottish Government has also called for the UK Government to continue the energy price guarantee at its current rate of £2,500 per year in April.
On Monday, energy secretary Michael Matheson the cut in Ofgem’s price cap strengthened the case for the UK Government to reverse its plan to scrap the energy price guarantee.
Matheson said yesterday:
“This remains an incredibly unsettling time for many thousands of households.
“What matters now is that the UK Government urgently re-assesses the measures it has in place which, at present, would see the average domestic bill increasing from £2,500 to £3,000 from April 1 at the same time as its £400 Energy Bills Support Scheme is ended,” he said.
Mr Matheson said the increase will result in there being 980,000 households in Scotland in fuel poverty – an increase of 120,000.
“I call, once again, on the UK Government to provide additional, targeted support for vulnerable households who are struggling with their energy costs”
Grant Shapps ‘very sympathetic’ to calls to scrap energy bills rise
Interestingly, energy secretary Grant Shapps is reportedly “very sympathetic” to calls to protect people from a 20% rise in their energy bills in April.
This adds to the pressure on the chancellor to act, given the calls from charities and from Martin Lewis to freeze the energy price guarantee at £2,500 per year for a typical household.
Speaking to The Times, Shapps said he was “working very hard” on the issue with Jeremy Hunt, as consumer groups and energy companies urged the government to scrap the planned increase.
Shapps said:
“I completely recognise the argument over keeping that price guarantee in place, and the chancellor and I are working very hard on it.
I’m very sympathetic to making sure that we protect [people]. We’re looking at this very, very carefully.”
More here: Grant Shapps ‘sympathetic’ to calls to scrap energy bills increase
This chart shows how average bills are set to jump 20% to £3,000 in April, even though Ofgem is lowering its price cap from £4,279 to £3,280 (as announced yesterday).
'Better than 50-50 chance energy bills won't rise in April', Martin Lewis says
Money saving expert Martin Lewis has predicted that there’s a more than 50% chance that the UK government will abandon plans to raise energy bills in April.
Lewis has been pushing for the government not to raise its Energy Price Guarantee, which caps the cost of electricity and gas, in April. As things stand, the EPG is set to rise by 20% in April, pushing a typical household bill up to £3,000 per year, from £2,500.
Yesterday, energy regulator Ofgem cut its price cap by around £1,000 per year, to £3,280 – meaning bills would still be set by the EPG, as it is lower.
Ofgem’s price cap is forecast to drop below the price guarantee in July, due to falling wholesale energy costs.
[reminder, the price cap and the EPG do NOT cap the maximum bill, just the maximum cost of each unit of power].
Lewis argues that increasing prices for three months would be an “act of national mental health harm”.
He told LBC’s Tonight with Andrew Marr last night that bills are likely to fall in the summer – so it would be a mistake to hit households with higher costs until the cap is next changed in July.
Lewis said:
The prediction is from July the price cap will drop below the price guarantee so we’ll start to see prices drop.
“That was the reason I wrote to the Chancellor three weeks ago, now supported by 85 charities.”
Addressing the government last night, Lewis said:
“Don’t do it! Protect people from getting the letters, protect people from inflation going up, it is a national act of mental health harm.
He argued that politically, increasing the cap is “not a very clever move either”…
“because it’s the government that sets prices, not the regulator, not firms, it’s the government.”
And in what would be a relief to millions of households, Lewis says he thinks there’s a good chance that the Energy Price Guarantee will not be raised:
“Reading the runes, and I’m careful with my phrasing here, I think we may get a win here. I think there’s a better than 50/50 chance of it not going up…”
Lewis also suggests the decision can’t wait until the Budget, on 15th March, explaining:
Because if you leave it to the budget, energy companies are obligated to write to people saying that their bills are going up 20%.”
'Better than 50-50 chance energy bills won't rise in April', Martin Lewis says @LBC https://t.co/3SABFzBZim
— Will Taylor (@WillTaylor_news) February 27, 2023
Yesterday, Dame Clare Moriarty, chief executive of Citizens Advice, warned there would be “catastrophe for millions of households” if the government dropped its plan to raise the energy price guarantee to £3,000.
Dame Moriaty said:
“Unless the government changes course on planned reductions to the level of support for households under the Energy Price Guarantee, we estimate the number of people unable to afford their bills will double, from one in 10 to one in five.
“The government must keep the EPG at its current level of £2,500. Recent drops in wholesale prices mean they have the headroom to do this. The alternative is millions more people unable to keep their house warm and keep the lights on.”
Updated
BP chief Bernard Looney defends company's tax bill
BP chief executive Bernard Looney has said the oil and gas giant has paid its highest global tax bill in its 113 year history, in the face of calls for an extended windfall tax.
Over the sounds of chanting and singing from climate protestors coming from outside the International Energy Week conference in central London, he said BP had paid $15bn tax last year, my colleague Alex Lawson reports.
Looney said:
“Here in the UK, if we make £4 in the North Sea, we pay £3 in taxes. And quite frankly, the other pound is more than reinvested back into the country.
So we pay our taxes - that’s important that we do that.”.
MPs and campaigners have called for the windfall tax on North Sea oil and gas firms to be toughened, to capture greater profits to hand to those struggling with bills, instead of to shareholders after BP and Shell posted record earnings in recent weeks.
BP was also criticised for scaling back its climate change goals. Looney said BP was committed to pursuing low carbon projects, pledging:
“Net zero is a new era of opportunity for companies like ours”.”
Looney said the company was investing $8bn in the energy transition and was rewarding “millions” of shareholders who relied on its dividends.
He said:
“I there is a narrative that shareholders are somehow faceless institutions, they are far from it.”
Looney did not mention his own rewards, after the Sunday Times reported investor disquiet over his planned £11m bonus.
Labour holds 'emergency summit' over food shortages
Labour shadow ministers are holding what they call an ‘emergency summit’ with food retailers, to find out the causes of the current shortages, our environment reporter Helena Horton writes.
Jim McMahon, the shadow environment secretary, has invited representatives from the food production, manufacturing and retail sectors to Parliament today to discuss the ongoing challenges.
Also hosting the meeting are Jonathan Reynolds, Labour’s Shadow Secretary of State for Business and Industrial Strategy and the party’s Deputy Leader Angela Rayner.
The party is trying to show it takes food security issues seriously after empty fruit and vegetable shelves and rationing hit the UK.
McMahon has been very critical of the government’s handling of the crisis, referring to environment secretary Therese Coffey as “calamity Coffey” and demanding she “get a grip” after she suggested that British people should “cherish” turnips during the salad crisis. He has called for her to produce an assessment of the problem in the UK, and a plan to solve the crisis.
He said:
“Not only is turnipgate an insult to the British public, it’s also two fingers up to our farmers.”
Yesterday, farming minister Mark Spencer met with retailers. He said:
“I have asked retailers to look again at how they work with our farmers and how they buy fruit and vegetables, to further build preparedness for these unexpected incidents.
“We also welcome their commitment to working with government and farmers on longer term solutions.”
BoE defends delays on digital pound work
Down the corridor in parliament, MPs on the Treasury committee are questioning officials from the Bank of England about its plans for a digital pound.
Q: We were expecting to see your new consultation on digital currency last year – what caused the delays?
BoE deputy governor Sir John Cunliffe insists that the delay in releasing the consultation paper was not due to differences of opinion with the Treasury – the cause of the delays was “simply practical”.
He says the Bank’s senior leadership were very busy in September and October, when it had hoped to take the digital currency plans through governance processes.
Cunliffe adds:
Of course, within the Treasury, also business was a bit disrupted.
[I think that’s a reference to the chaos of Kwasi Kwarteng’s mini-budget, which his successor Jeremy Hunt unwound in November’s autumn statement – but not before the non-digital pound had hit a record low].
Q: Then we were told we’d get the paper in January…
Cunliffe says there was pressure of other business, and the Bank thought it was better to get the paper right than to rush it out.
Q: So what were the areas of disagreement with the Treasury, and what changes were needed?
Cunliffe insists there weren’t any disagreements, although there were some ‘drafting changes’ after the document was passed around Whitehall – just “pretty minor” changes and “nothing of substance” though, he insists.
That paper, incidentally, suggests the ‘Britcoin’ digital pound could be in use as an alternative to cash by the end of the decade.
Food and drink manufacturers expect to keep raising their prices this year, MPs have heard this morning, which will add to grocery inflation.
Caroline Keohane, head of industry growth policy at the Food and Drink Federation, has told the Business, Energy and Industrial Strategy Committee that food manufacturers expect to increase their selling prices by around 7% this year.
This is being driven by rising input costs, which are expected to increase by 10% this year, Keohane says.
These tight margins will hit producers’ ability to invest, she say.
Those cost pressures include high energy costs – running at 22% higher than last year – and significant labour shortages. Vacancies in the sector are running at around 7%, which is double the manufacturing and UK average, Keohane explains.
“Poorly designed regulations” are also adding to costs, Keohane says, citing the Extended Producer Responsibilities. Those regulations put the responsibility for a product’s end-of-life environmental impacts on producers, in an attempt to increase recycling rates.
The hearing, on whether UK businesses can keep up with global competition in coming decades, is being streamed here.
Updated
Credit Suisse 'seriously breached' obligations in Greensill affair: Swiss watchdog
Switzerland’s financial watchdog has ruled that Credit Suisse “seriously breached its supervisory obligations” in connection with its business relationship with financier Lex Greensill and his companies.
FINMA announced this morning that it has ordered “remedial measures”, after concluding that Credit Suisse had “seriously breached its supervisory obligations in this context with regard to risk management and appropriate organisational structures”.
The regulator says:
In future, the bank will have to periodically review at executive board level the most important business relationships (around 500) in particular for counterparty risks. In addition, the bank is required to record the responsibilities of its approximately 600 highest-ranking employees in a responsibility document.
FINMA has also opened four enforcement proceedings against former Credit Suisse managers.
In 2021, Credit Suisse suspended $10bn of investor funds after the collapse of the supply-chain lender Greensill Capital, whose loans were packaged and sold to Credit Suisse clients.
FINMA says today that the business relationship with Greensill was repeatedly discussed at Credit Suisse management level, but usually only done selectively because of a specific event or request.
“There was a lack of an overall view as well as regular, consistent engagement with the risks associated with Greensill at the highest level,” the regulator says.
Ulrich Körner, Chief Executive Officer of Credit Suisse, says the bank welcomes the conclusion of FINMA’s work.
Körner says:
This marks an important step towards the final resolution of the SCFF issue. FINMA’s review has reinforced many of the findings of the Board-initiated independent review and underlines the importance of the actions we have taken in recent years to strengthen our Risk and Compliance culture. We also continue to focus on maximizing recovery for fund investors.”
Körner adds that since March 2021 (when Greensill Capital filed for insolvency), Credit Suisse has taken action to directly address many of the issues subsequently highlighted by FINMA.
Elsewhere in the retail sector, union members at an Amazon distribution centre in Coventry have begun a second day of industrial action.
More than 310 Amazon staff at its giant fulfilment centre in the West Midlands city are striking today, and will also strike on 2 March and from 13 to 17 March, in an ongoing pay dispute.
In January, workers at the Coventry warehouse became the first in the UK to take strike action against the online retail giant. As well as seeking higher pay, they have also complained of overbearing management practices and long hours.
The GMB union is calling for a pay rise from £10.50 to £15 an hour, although the union is not recognised by Amazon.
The leader of Amazon’s first union made his first trip outside the United States last week to support striking workers at the Coventry warehouse.
Chris Smalls, who helped coordinate a successful unionisation drive at an Amazon warehouse in Staten Island, New York, in April 2022, travelled to the UK last week to provide advice to British workers as they try to gain recognition from the company.
“It’s important that we amplify each other’s fight and struggles because we want to build that international solidarity,” Smalls told the Observer.
“Just like they’re refusing to talk to these workers and negotiate a fair contract, we’re in the same process back at home.”
UK building supplier Travis Perkins warns of challenging 2023
Travis Perkins, Britain’s biggest supplier of building materials, has warned that 2023 will be challenging as housebuilders slow down projects and home-owners delay improvements.
The country’s gloomy economic outlook is likely to weigh on the housing market this year, with Travis Perkins warning that there is “macroeconomic uncertainty”.
Reuters has the details:
Travis Perkins, which sells bricks, timber and new kitchens, as well as equipment for large construction projects, said adjusted operating profit fell 16% last year to £295m, behind a consensus forecast of £320m pounds.
The miss was blamed on restructuring costs from closing 20 smaller branches out of the group’s 1,500, which Chief Financial Officer Alan Williams said was part of Travis Perkin’s plan to prepare for a tougher year.
The surge in grocery inflation to record levels is adding to the pressure on Ocado, says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
Lund-Yates points out that despite a 13% increase in active customers last year, volumes haven’t followed suit, meaning the cost to serve all those online orders has become a burden.
Ocado is in the eye of the cost-of-living storm because its offering isn’t synonymous with being the best value, it’s a higher-end option, without the same benefits of enticing people in with tangible, physical goods like M&S or Waitrose can.
One quarter of British shoppers are struggling as grocery price inflation goes above 17% for the first time, according to new data from Kantar. It was a year ago that food inflation climbed above 4%, meaning consumers now feel like there’s a hole in their wallet every time they reach the checkout.
If you were ill this month, you weren’t alone.
February also saw sales of cold treatments rising by 82%, cough liquids up 78% and cough lozenges 70% higher, Kantar reports.
Aldi and Lidl grow market share
Sales at discount supermarket chains Aldi and Lidl both rose this month, as UK shoppers tried to cut their grocery bills.
Aldi’s market share rose to a new record, of 9.4% this month, and remains the fastest growing grocer, with sales up by 26.7%.
It was closely followed by Lidl which increased sales by 25.4%, growing its market share to 7.1%. Frozen food specialist Iceland also won share, taking 2.4% of market sales, up from 2.3% last year as spending through its tills increased by 10.8%.
Kantar also reports that Ocado “put in a strong performance, bucking the overall trend in online sales”.
Fraser McKevitt, the head of retail and consumer insight, says:
While online fell by 0.9% over the 12 weeks, the digital specialist [Ocado] grew sales by 11.3% to achieve its largest ever market share of 1.9%.
Tesco edged slightly ahead in the battle between Britain’s biggest retailers, with sales up by 6.6%. Sainsbury’s and Asda were just behind with sales rising by 6.2% and 5.9% respectively. Morrisons’ sales decline of 0.9% was its best performance since May 2021.
Waitrose returned to growth, nudging up sales by 0.7%. It has a market share of 4.7%. Convenience retailer Co-op increased sales by 3.4% while independents and symbols were up by 1.8%.
Updated
Demand for supermarket own label ranges has swelled over the last year, Kantar reports.
Sales of these lines are up by 13.2% this month, well ahead of branded products at 4.6%, and this trend “shows little sign of stopping”, Kantar’s Fraser McKevitt explains.
One quarter of British shoppers struggling as grocery price inflation hits 17%
Supermarket inflation has hit a new record high this month, with prices climbing by more than 17% in the year to February.
Data provider Kantar reports that grocery price inflation rose to 17.1% in the four weeks to 19 February. This means that households face spending an extra £811 on their annual supermarket bills, unless they change their shopping habits.
This is the highest level of grocery inflation Kantar has ever recorded, and shows that the pressures on food shoppers are intensifying this year. One in four shoppers are now struggling financially, they warn.
Fraser McKevitt, the head of retail and consumer insight at Kantar, says:
Shoppers have been facing sustained price rises for some time now and this February marks a full year since monthly grocery inflation climbed above 4%. This is having a big impact on people’s lives.
Kantar’s latest research shows that grocery price inflation is the second most important financial issue for the public behind energy costs, with two-thirds of people concerned by food and drink prices, above public sector strikes and climate change.
The report shows that more households are being dragged into the cost of living crisis. squeeze.
McKevitt says:
One quarter say they’re struggling financially, versus one in five this time last year. The numbers speak for themselves. If people don’t change how they buy their groceries, households are facing an £811 increase to their average annual bill.
However, cost-of-living pressures failed to dent enthusiasm for Valentine’s Day celebrations this year.
Sales of steak up by a quarter in the seven days to February 14 compared to the previous week, sparkling wine sales doubling and shoppers spending an extra £5m on boxed chocolates.
Updated
Reuters: UK home prices to fall, but unlikely to come crashing down
British home prices will fall less than previously expected in 2023, a new poll of analysts has found.
After years of bumper price rises, the average cost of a home will fall 2.4% this year, according to a poll of 19 housing market experts conducted by Reuters in February has found.
That’s shallower than the 4.7% fall predicted in a November poll. This month’s survey found that house prices are expected to rise by 1.0% next year on average and 3.5% in 2025.
Aneisha Beveridge at estate agency Hamptons predicts:
“It’s likely 2023 will be a year of transition as buyers and sellers adapt to a new era of higher interest rates before the market returns to growth again in 2024.”
Higher borrowing costs will weigh on the housing markets this year. The Bank of England is expected to raise interest rates in March, to 4.25%, with rates currently seen approaching 5% by the end of this year.
UK home prices to fall, but unlikely to come crashing down https://t.co/Rmmv4HqhpG pic.twitter.com/t74N48im3W
— Reuters UK (@ReutersUK) February 28, 2023
The cooling in the UK property market is likely to be ‘persistent’, predicts buying agent Emma Fildes, founder of Brick Weaver.
The wind has shifted causing both seller & buyer to chose a different tack to secure a sale. Pandemic gains, which averaged £42,000 are chipped by a 3rd with buyers discounting on AVG 4.5% (£14,000) to secure a property. I expect this new weather front to be…persistent @Zoopla pic.twitter.com/U4uRNWViJT
— Emma Fildes (@emmafildes) February 28, 2023
Ocado has “unsurprisingly reported disappointing financial results this morning” during volatile times for the supermarket industry, says Chris Daly, CEO of the Chartered Institute of Marketing.
Daly says Ocado is approaching a ‘tipping point’:
While the pandemic prompted a jump in demand for online groceries, a return to in-store shopping and the cost-of-living crisis is affecting consumer spending habits.
With competitors such as Tesco increasingly matching the discounts offered by budget supermarkets, Ocado is approaching a tipping point where it must decide how to position itself.
There are testing times ahead for the supermarket industry, with those companies at the top of the market especially vulnerable to price squeezes. Now, it’s essential Ocado defines its target market, creating coherent, clear messaging that stands out in the competitive market.”
Ocado shares drop 9%
Shares in Ocado have dropped by over 9% at the start of trading in London, the top faller on the FTSE 100 index.
They fell as low as 563p, down from over £13 a year ago.
Richard Hunter, head of markets at interactive investor, says Ocado is “caught between a rock and a hard place”.
That’s because the two elements of its business – its technology solutions arm, and the Retail division – continue to face different tests, Hunter explains:
The Solutions business, on which most of the group’s hopes for future growth and profitability is pinned, has yet to deliver on a sufficient scale to appease investors. The promises of large-scale adoption for its cutting-edge technology has yet to fully materialise, after some considerable time, which has led to investors shunning the stock in their droves. Over the last two years, the share price has fallen by 72%.
Yet progress is evident in this part of the business. UK solutions revenue grew by 13% to £802.7 million over the period, while the International unit saw revenues spike by 122% to £148 million. The latter continues to run at a loss, however, leading the group to attempt to accelerate the rollout of its Ocado Smart Platform to partners. Over the last year, 12 new sites were opened, with 23 now live split between 12 overseas and 11 in the UK. Further deals were signed, most notably with Lotte Shopping of South Korea, and Ocado maintains that the new partner pipeline is strong and that further OSP deals are being sought.
For the Retail business, from which the vast majority of revenues are currently derived, the environment is getting tougher. The so-called “Covid unwind” has had an impact as shopping habits normalise, while given some UK economic hardship, customers have begun to seek cheaper product offerings elsewhere. It is also evident that while customers are still coming to Ocado, it tends to be more selective. As such, even though active customers rose by 13% to 940000, average basket sizes falling from £129 to £118, leaving the Retail part of the business with a 3.8% decline in revenues to £2.2 billion, marginally shy of expectations.
Abrdn hit by one of toughest years in living memory
Stock market turbulence has hit earnings at Abrdn, the global investment company.
Abrdn has reported a pre-tax loss of £615m for 2022 this morning, down from a £1.115bn profit in 2021 when markets were
Business was hit by global markets turmoil and runaway inflation last year, as the Ukraine war hit the world economy, knocking global markets down by 20%.
Stephen Bird, chief executive officer of Abrdn plc, says that 2022 was “one of the toughest investing years in living memory”.
But, Bird says Abrdn- created through the merger of Aberdeen Asset Management and Standard Life – is “creating a stronger business model”, and scaling up its UK savings and wealth businesses.
Shares have jumped 4% in early trading.
Ocado’s push to sell its technology to grocery retailers around the world should help it turn its fortunes around, predicts Jocelyn Paulley, retail partner at law firm Gowling WLG:
“As Ocado has been experiencing difficulties since the end of the pandemic when demand for its delivery service dropped, this update will be welcome news to investors but they will be wary of a challenging period ahead as shoppers tighten their belts amidst economic uncertainty and increased energy costs eat into the company’s margins.
“However, the food retailer is actively seeking to be a technology partner for other supermarket chains internationally, and if it is able to secure a number of contracts in this area, then this is likely to contribute to a turnaround for the business.”
Ocado struck two new international partnerships last year, with Lotte Shopping in South Korea and Auchan Polska in Poland, to jointly build warehouses.
Updated
Full story: UK home sellers having to cut average of £14,000 from asking price
Although UK home sellers are shaving an average of £14,000 off the original asking price, separate research from Halifax today has highlighted the sizeable house price gains made by millions of homeowners during the past three years.
Halifax’s data showed that the average UK house price went up by 20.4% – or £48,620 – between January 2020 and December 2022, climbing from £237,895 to £286,515.
Owners of larger homes have been the big winners from the pandemic-fuelled “race for space”, while London flat owners have gained the least.
My colleague Rupert Jones explains:
According to the 2020-22 data, the average price for bigger homes grew at almost twice the rate than for smaller properties. When the UK housing market first reopened after months of Covid lockdown, there was an increase in demand for larger homes as buyers sought more space, a garden or better environments for working from home.
As a result, the average price of a detached home soared by 25.9% between the start of 2020 and the end of 2022.
Here’s the full story:
Introduction: Ocado's annual loss swells to £500m
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Ocado, the online grocery and technology firm, has posted a £500m loss for last year as the cost of living crisis hits spending.
2022 was “a challenging year for Ocado Retail”, the company tells shareholders this morning, reporting that pre-tax losses widened to £500.8m for last year, up from £176.9m in 2021.
That compared to analysts’ average forecast of a loss of 399 million pounds, Reuters reports.
Revenues at Ocado Retail, its joint venture with Marks & Spencer, fell by 3.8% during the year, despite the company reporting record sales over Christmas.
Ocado Retail did swell its customer base, though – active customers increased by 13% to 940,000.
One challenge is that Ocado Retail customers are putting fewer items in their baskets in response to higher prices and the cost of living crisis.
Soaring costs, and the unwinding of the spending boost during pandemic lockdowns, are also biting.
Tim Steiner, Ocado’s CEO, says every company has had its business model tested by a combination of macro-economic and geopolitical headwinds. Ocado has “more confidence” in its model than ever before, he declares.
Steiner tells the City:
Ocado Retail, our UK JV with M&S, has shown its resilience against a backdrop of higher costs and smaller baskets, reflecting the Covid unwind and the UK cost of living crisis, by growing customer numbers and increasing online market share.
As the Covid unwind fades and customer growth continues the business will start to recover the fixed costs of recent capacity commitments.
Ocado’s business also builds robots and software for online grocery deliveries.
The company says that its partners have reported “leading customer satisfaction metrics” and growth ahead of the broader online channel in their respective markets.
Also coming up today
As the UK housing market cools, home sellers are accepting an average discount of 4.5% off their asking prices to find a buyer, property website Zoopla reports this morning.
The average property price in the UK is now £260,800, Zoopla said, which means sellers are taking a cut of £14,100.
It is the highest gap between the asking price and sale price for five years, according to Zoopla, and follows several months of falling house prices.
“The average discount to asking price was 4.5% this month, the biggest discount in more than five years and up from 0.4% in 2022, according to Zoopla”
— Michael Brown (@MrMBrown) February 28, 2023
(via bbg) pic.twitter.com/u7nJ5jf3Sn
But, the surge in house prices since the start of the pandemic means sellers have flexibility to accept lower offers, as Richard Donnell, executive director at Zoopla, explains:
“Greater realism on the part of sellers is supporting housing market activity in the face of higher borrowing costs.
Many homeowners are sitting on sizable house price gains made over recent years and have more room to be flexible accepting offers below the asking price. Discounts to asking price have widened and while 4-5% discounts are manageable, if these were to widen further then this would point to a greater likelihood of larger house price falls.
We believe the market remains on track for a soft landing in 2023 with modest price falls of up to 5% and one million housing sales.”
Investors will be watching Westminster, where MPs are scrutinising Rishi Sunak’s new Northern Ireland Brexit deal.
The pound has dipped a little this morning, to $1.294, having gained ground yesterday as the “Windsor framework” was revealed.
Businesses have been welcoming the deal, which should make it easier to import goods from Great Britain into Northern Ireland.
Andrew Lynas, the managing director of Lynas Foodservice, told us:
The uncertainty was the biggest challenge. So this is good progress.”
European stock markets are set to inch higher on the final day of February, its second ‘up month’ in a row.
The FTSE 100 index is expected to open flat, though, having gained 0.75% to 7935 points on Monday.
European Opening Calls:#FTSE 7935 +0.00%#DAX 15403 +0.14%#CAC 7304 +0.11%#AEX 758 +0.14%#MIB 27463 +0.07%#IBEX 9324 +0.10%#OMX 2237 +0.09%#SMI 11226 +0.06%#STOXX 4253 +0.12%#IGOpeningCall
— IGSquawk (@IGSquawk) February 28, 2023
Michael Hewson of CMC Markets says:
As we come to the end of what looks set to be another positive month for European equities the question being posed is how much further can this year’s rally take us, with the DAX currently up over 10.5% year to date, and the FTSE100 up almost 6.5%?
The agenda
7.45am GMT: France’s inflation report for January
8am GMT: Switzerland’s Q4 2022 GDP report
9.45am GMT: BEIS committee hearing on UK plc 2050
10.15am GMT: Treasury Commiteee ask Bank of England: what is the purpose of a digital pound?
Noon GMT: India’s Q4 2022 GDP report
1.30pm GMT: Canada’s Q4 2022 GDP report
2pm GMT: US house price index for December
3pm GMT: CB survey of US Consumer Confidence report for February
Updated
