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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Energy and inflation worries mount; US jobless claims lowest since 1968 – as it happened

Shell United States Russia United Kingdom Halifax (Organization) Bank of England
A Shell filling station on Novoslobodskaya street, moscow.
A Shell filling station on Novoslobodskaya street, moscow. Photograph: Kommersant Photo Agency/REX/Shutterstock

Time to wrap up - here are today’s main stories:

Goodnight, GW

P&O Ferries owner DP World loses status as partner in Solent freeport

The Dubai-based owner of P&O Ferries has lost its status as a formal partner in one of the government’s biggest freeport projects, after widespread public anger over the firing without notice of 800 workers last month.

Ministers have confirmed that DP World, the Emirati logistics giant behind P&O, no longer had a central role as a “partner” in the Solent freeport after the resignation of its UK commercial director from the scheme’s board last week.

It comes after questions in the Lords from the Green party peer Natalie Bennett who had asked the government what plans were being put in place to withdraw any freeport contracts as a result of the sackings.

Speaking for the government, Stephen Greenhalgh, a levelling up minister, responded on Wednesday night saying:

“On 28 March 2022 DP World resigned from the Solent freeport board and are no longer a partner in the freeport consortium.”

Here’s the full story:

European market close

Europe’s stock markets ended the day lower.

Worries about slowing growth, the impact of the Ukraine war, and the prospect of a series of US interest rate rises in 2022 all weighed on shares.

In London, the FTSE 100 index dropped 36 points, or 0.5%, to 7552 point. Oil giant Shell lost 2.3% after reporting that exiting Russia would mean a writedown of up to $5bn.

Shell also told shareholders that group cashflow in Q1 is expected to be adversely affected to the tune of around $7bn, partly due to margin calls caused by higher prices on forward delivery contracts.

Insurance group Aviva (-4.9%) and housebuilder Barratt (-4.2%) led the fallers after goin ex-dividend today. Other construction firms were also lower, as the sector sets aside more money to fix fire safety problems at properties built over the last 30 years.

European stocks also dipped, with Germany’s DAX and France’s CAC also down around 0.5%.

Michael Hewson of CMC Markets sums up the day:

European markets have chopped between positive and negative territory today, as investors continue to absorb the messaging from last nights Fed minutes, and the outlined plans to reduce the size of the balance sheet, by $95bn a month, and a potential start date in May.

Peace talks between Russia and Ukraine don’t appear to be going anywhere in the short term with the Kremlin complaining that the US sending weapons to Ukraine wasn’t helping the talks to progress. Another view might be that increasing evidence of Russian troops murdering Ukrainian civilians might have something to do with the lack of progress.

More default developments...Sovcombank has become the first Russian bank to say it will miss a payment on foreign-currency bonds due to sanctions imposed on the nation since its invasion of Ukraine.

Bloomberg explains:

Russia’s ninth-largest lender was due to make a $12 million interest payment on notes maturing in 2030 on Thursday, according to data compiled by Bloomberg, but the bank said in a statement that it would stop payments on four notes issued by an Irish vehicle, Sovcom Capital DAC.

Sovcombank, which grew in recent years after buying the local financial units of General Electric Co., India’s ICICI Bank and Turkey’s Garanti Bank AS, was among banks targeted by sanctions in the early days of the war. It’s been cut off from SWIFT -- a bank messaging system -- and its assets abroad have been frozen.

Policymakers at the European Central Bank believe the eurozone faces a period of ‘slowflation’ due to the Ukraine war - less severe than full-blown stagflation.

The minutes of their meeting last month, released today, showed that the ECB saw rising prices and slowing growth:

While the Russian invasion of Ukraine had increased uncertainty surrounding the macroeconomic outlook, related risks to the inflation outlook were seen as largely one-sided, with experience suggesting that wars tended to be inflationary, often fuelled by increased fiscal spending in conjunction with a loose monetary policy stance.

While the war would likely dent economic growth in the short term, annual growth was projected to remain positive even in the severe scenario, pointing to “slowflation” rather than stagflation.

Belarus has followed Russia and begun paying foreign debts in local currencies, after sanctions over its role in the invasion of Ukraine hampered payments.

Bloomberg has the details:

The government has been driven to using Belarusian rubles to service loans owed to the World Bank, the European Bank for Reconstruction and Development and the Nordic Investment Bank, it said in a statement on its official Telegram channel.

The announcement follows President Alexander Lukashenko’s decree in March authorizing the use of the local currency for debt payments.

“This is a forced measure,” the council of ministers said in the statement. “Belarus’ ability to settle its debts in dollars and euros with western creditors is limited because of the sanctions.”

On Monday, Russia was unable to pay around $649m to holders of its debt, after the US Treasury banned US banks from processing the payments, due to the freeze on Russia’s foreign exchange reserves.

Paying in roubles, rather than dollars, on Russia’s dollar-denominated debt could be classed as a default, if the situation isn’t rectified within 30 days.

US central bank policymaker James Bullard has called for a rapid series of interest rate rises, to get US inflation under control.

Bullard, president of the St. Louis Federal Reserve, says the Fed’s short term policy rate should reach 3.5% later this year.

The rate is currently 0.5%, so that would imply a 50 basis point hike at each of the Fed’s remaining meetings, a very sharp tightning of monetary policy.

Reuters has the details:

“I would like to get there in the second half of this year...We have to move,” to get ahead of inflation running at triple the Fed’s 2% target, Bullard said. “We are talking about bigger moves than we have made in a long time so there would be management that has to be done.”

The pace described is slightly quicker than the one Bullard offered at the March Fed meeting, which saw the federal funds rate reaching as high as 3.25% by year’s end.

The minutes of the Fed’s latest meeting, released last night, showed that policymakers were ready to start shrinking their balance sheet from May, unwinding the pandemic stimulus programme.

UK energy security plan criticised as missed chance to reduce bills

Boris Johnson’s energy security plan has been dismissed as a missed opportunity to bring down bills rapidly, over its failure to fund energy efficiency upgrades or back onshore windfarms in the face of Tory backbench opposition.

While the government’s plans set targets for long-term expansion of nuclear, offshore wind and solar capacity, it stopped short of doing so for onshore wind. The proposals also lacked a major intervention to help households lower their gas usage by improving insulation standards.

The shadow business and energy secretary, Ed Miliband, said Johnson had been “held to ransom” by backbench opposition to windfarms.

Energy experts and environmental groups labelled the plan “inadequate”, warning it would do little to address the urgent need to tackle sky-high bills and reduce dependence on gas imports, including from Russia.

The strategy did set ambitious targets for offshore wind generation, with the government raising its target from 40 to 50 gigawatts by 2030.

But Johnson did not back a wind industry proposal to double onshore capacity to 30GW over the same period.

P&O Ferries crisis contributes to travel chaos at Dover

Lorries queued in Operation Brock on the M20 near Ashford in Kent today, as freight delays continue at the Port of Dover, in Kent, where P&O ferry services remain suspended after the company sacked 800 workers without notice.
Lorries queued in Operation Brock on the M20 near Ashford in Kent today, as freight delays continue at the Port of Dover, in Kent, where P&O ferry services remain suspended after the company sacked 800 workers without notice. Photograph: Gareth Fuller/PA

Traffic on major routes in Kent have been brought to a standstill again today due to delays in Channel crossings.

P&O’s shock sacking of 800 workers last month continues to cause disruption, as passengers numbers rise during the Easter getaway.

PA Media has the details:

A 23-mile coastbound stretch of the M20 was closed from junction eight (Maidstone) to junction 11 (Westenhanger) to store thousands of lorries heading for the Port of Dover or Eurotunnel as part of Operation Brock.

This is causing chaos on surrounding local roads.

The A20 Roundhill Tunnel is closed under the Dover TAP scheme to prevent HGVs jumping the queue.

Delays to Channel crossings are being driven by the suspension of P&O Ferries sailings after the operator sacked nearly 800 seafarers without notice last month.

This is putting more strain on other ferry operators amid increased demand as many families travel overseas for Easter holidays.

DFDS said P&O Ferries customers will be unable to transfer their bookings onto its Dover-Calais sailings between Friday and Sunday because of a lack of capacity.

Operation Brock involves using a moveable barrier to create a contraflow system enabling lorries to queue and other traffic to keep moving in both directions.

However, the system has been overwhelmed, with Kent hit by long queues every day since April 1 when poor weather also disrupted crossings.

The Port of Dover said in a statement it handled 30,000 departing passengers last weekend, which was a three-fold increase on the total during the corresponding weekend in 2021.

It added it is “expecting another busy weekend” as it urged customers not to arrive before their booked sailing.

Lorries queue at the Port of Dover, in Kent
Lorries queue at the Port of Dover today Photograph: Gareth Fuller/PA

Trevor Bartlett, leader of Dover District Council, said the port will be “under severe pressure throughout the busy Easter getaway” as he warned residents to prepare for “some disruption again this weekend”.

He said he has “made it clear” to Kent Police, Kent County Council and the Kent Resilience Forum - a partnership of local organisations and agencies - that “we will not tolerate another weekend of gridlock in Dover”.

The Conservative councillor went on: “For too long, local residents and businesses have had to endure disruption and, quite frankly, deserve better.

“We share your concerns about the impact of gridlock on local businesses and access to vital health and social care for our most vulnerable residents.

“Many are rightly worried about how the emergency services would be able to respond to a major incident when all routes into the town are effectively cut off.”

Ashford MP Damien Green called for changes to be made to Operation Brock.

He told KentOnline:

“What we need is to make Brock work.

“We have established that up until now it does work, even in times of stress, because the motorway is kept open.

“Once you close the motorway it makes it impossible, so the Kent Resilience Forum needs to look at what changes need to happen so Brock can cope with what is a very unusual situation, where more than half of the freight-carrying capacity at Dover has disappeared in one time.”

P&O Ferries announced on Wednesday that it is preparing to resume cross-Channel sailings.

A spokesman said:

“P&O is looking forward to welcoming back vital services and we expect to have two of our vessels ready to sail on the Dover-Calais route by next week, subject to regulatory sign-off, namely both the Pride of Kent and Spirit of Britain between Dover-Calais.”

A police car passes lorries queued in Operation Brock.
A police car passes lorries queued in Operation Brock. Photograph: Gareth Fuller/PA

Updated

Here’s Robert Frick, corporate economist at Navy Federal Credit Union, on the tumble in US jobless claims to a 50+ year low:

The labor market is so tight that layoffs hit a new historical low. In only one other week since records began, in November of 1968, were fewer layoffs recorded. But “tight” depends on perspective, because while employers struggle to hire and retain workers, workers have the confidence to change jobs at a near-record pace, switching most often for higher pay or better working conditions.

And for the economy, this means more months of adding around a half million jobs, and that we will hit the pre-pandemic high of Americans employed this summer.

US jobless claims tumble to lowest since 1968

The number of Americans signing on for unemployment support has dropped to its lowest level in over half a century.

The weekly jobless claims total fell to 166,000 last week, the lowest level since 1968.

That suggests that the US jobs market remained solid last week, despite inflationary pressures and worries over the Ukraine war, with firms holding onto staff.

That’s below forecasts of around 200,000 new layoffs, and 5,000 fewer ‘initial claims’ than the 171,000 a week before.

Continuing claims (people receiving at least their second week of unemployment support) rose to 1.52m, from 1.506m [this data lags the initial claims by a week].

Updated

Meta plans ‘Zuck bucks’ virtual coins for Facebook and Instagram users

Mark Zuckerberg is looking to develop virtual coins, nicknamed “Zuck bucks” by staff, for users of Facebook and Instagram as part of a suite of products designed to reduce his platforms’ dependence on advertising in the future metaverse.

Facebook’s parent group, Meta, is looking to develop a range of virtual products – including digital tokens and “creator coins” – to diversify income and revitalise its user base, which is increasingly turning to newer rivals such as TikTok.

While Meta remains the dominant social media network provider – its revenues rose 37% to $118bn in 2021 as advertisers clamoured to reach the 4.9 billion monthly active users of Facebook and Instagram – TikTok has also built up a massive non-ads business based on in-app purchases and e-commerce.

Meta, which has proven quick to ape successful products rolled out by rivals such as Snapchat, is now exploring ways to further monetise its user base, according to the Financial Times, which first reported the story.

Products being looked at include “social tokens” or “reputation tokens”, which could be used as rewards by users. It is also looking at “creator coins”, which could be used by influencers on Instagram.

Here’s our news story on BT’s pay deal:

Tesco has also announced a pay rise for staff.

Its hourly pay for shop staff and warehouse workers will be increased by 5.8% from £9.55 to £10.10. The supermarket group said the pay increase will come into force from July 24.

Jason Tarry, chief executive officer of Tesco UK & ROI, said:

“We are delighted to have reached an agreement with Usdaw that recognises the vital role our colleagues play in our business now and in the future, giving them a well-deserved pay rise, more access to extra hours and setting out a long-term commitment and investment in their careers at Tesco.

“These investments in our colleagues are central to making Tesco what we truly want it to be: a great place to work for all, a place that attracts and retains the best talent in the industry.”

The Usdaw union says the deal is a ‘major step forward’ for its New Deal for Workers campaign which includes aiming to ensure a minimum wage of at least £10 per hour for all workers immediately, ending rip-off youth rates and providing a living wage.

Unions had threatened strike action at Tesco last year, after rejecting previous offers.

BT is planning to hand its UK frontline workers a £1,500 pay increase, although unions say they have rejected the proposal and are preparing a vote on strike action.

The company said the flat rate pay rise is being given to 58,000 workers across BT Group, including engineers, contact centre staff and retail staff.

BT said the increase is “focussed on the lowest paid workers” and will work out as a roughly 8% increase for some members of staff [those on under £20,000 per year].

For higher paid frontline workers, it would be a smaller rise (around 3.33% for someone on £45,000, I calculate).

BT says the deal “contrasts well with the average of 3% typically being awarded by UK employers.”

Philip Jansen, chief executive of BT, said the firm hopes lower paid workers will “benefit most and as soon as possible” amid the rising cost of living crisis.

“BT Group has continued to support the country as it recovers from the pandemic: keeping families connected, helping businesses to grow in new, online markets, and supporting organisations to stay connected and adopt hybrid working.

“We took the decision not to use redundancy and the Government’s furlough scheme as a direct consequence of the pandemic, and thanks to the contribution of all 100,000 BT people, we’ve continued to improve customer ratings and invest in growing our full-fibre and mobile networks.

BT had been in lengthy discussions with unions, who had reportedly opposed a previous offer of £1,200.

But with CPI inflation now 6.2%, the Communication Workers Union says it has rejected this latest pay offer, and will prepare for a vote on strike action:

UK firms expect Ukraine war to hit sales

Nearly half of UK businesses expect Russia’s invasion of Ukraine to hit their sales in the year ahead, according to a survey from the Bank of England.

The BoE’s latest poll of decision makers also found that uncertainty continued to rise, with anxiety over inflation also mounting.

Nearly half of respondents (48%) expected the Russia-Ukraine war to negatively impact their year-ahead sales, with the average impact expected to be around -3%.

Around 11% of firms said the conflict was their largest current source of uncertainty, and nearly half cited it as a top-three threat.

Around 49% of firms said the overall level of uncertainty facing their business was ‘high or very high’, highlighting the anxiety in boardrooms and management meetings. That’s up from 47% a month ago.

Uncertainty about future sales growth also increased modestly, and there was a sharper rise in uncertainty about future inflation.

Firms are expecting to raise their prices over the next year - expected year-ahead annual output price inflation also rose to 5.0% in the three months to March 2023, the BoE says.

Co-op boss: price to rise amid supply shortages

The new boss of the Co-op has warned that supply disruption continues to be a “huge challenge” amid shortages of broccoli, lettuce and sunflower oil on the retailer’s shelves.

Interim chief executive officer Shirine Khoury-Haq, who will permanently replace Steve Murrells in the top job next month, told the PA news agency that “price rises are a given” as higher supply costs add to an array of inflationary pressures.

Allan Leighton, chairman of the group, added that inflation was currently “in the ballpark of 4% to 5%” as the retailer committed to pumping money into keeping key items affordable amid the cost-of-living crisis.

The company said it had invested £18m in price reductions over the past year and will hold the price of around 1,000 popular products.

Bosses said the business also saw significant cost increases away from its retail business, with inflation in coffin materials affecting its funeral arm.

Ms Khoury-Haq said the business has to be prepared for “further volatility” and be well-positioned to react to further supply issues.

She said:

“These issues are not going to go away any time and it is very multi-faceted so we need to work hard to protect our customers and suppliers.

“The supply side of things is still a huge challenge globally.

“For example, flooding in Spain has impacted green vegetables like broccoli and lettuce so we have to switch those out in some products.

“Similarly, the situation in Ukraine has impacted sunflower oil and that is being replaced by rapeseed oil, so we recognise that things are still changing all the time.”

Inflation in Ireland has soared to its highest level in over 20 years.

Consumer prices in the Republic jumped by 6.7% in the year to March 2022, the highest annual inflation rate since November 2000 (when it was 7%).

Prices jumped by 1.9% in March alone, the largest monthly increase since the monthly CPI series started in 1997.

Over the last year, transport costs have jumped 18.7%, while soaring bills have pushed up the “Housing, Water, Electricity, Gas & Other Fuels” costs by 17.4%. Alcoholic Beverages & Tobacco were 7% pricier.

The report also shows that diesel and petrol prices were both up over 30% in the year to February, even before energy prices jumped again last month.

Input price inflation and energy price rises top business worries

UK businesses are growing increasingly worried about rising energy and commodity prices.

The latest analysis of the UK economy, from the Office for National Statistics, shows that rising input costs, and soaring energy bills, are the top two main concerns reported by businesses

The ONS says businesses in the food and accomodation sector are particularly anxious about the jump in energy prices:

Among specific concerns reported for the next month, energy prices saw the largest percentage point increase between February and March 2022, increasing from 15% in late February 2022 to 20% in late March 2022. The accommodation and food service activities industry reported the largest proportion of businesses noting rising energy prices as their main concern, at 35%.

Other main concerns reported by businesses were:

  • input price inflation (inflation of goods and services prices) at 23%, up from 21% in late February 2022
  • supply chain disruption at 6%, unchanged from late February 2022
  • taxation at 6%, up from 5% in late February 2022

Bellway, Countryside and Vistry have become the latest UK housing firms to sign up to the UK Government’s fire-safety pledge in the wake of the Grenfell Tower tragedy.

The trio are joining other housebuilders, including Barratt, Persimmon, Redrow, Taylor Wimpey and Crest Nicholson, who also pledged to fix safety problems at building between 11m and 18m high, built in the last 30 years.

It follows government pressure on building firms to ensure that leaseholders didn’t pick up the bill.

Bellway predicted that works related to the pledge will cost it about £300m, on top of £186.8m set aside since 2017.

Jason Honeyman, chief executive of Bellway, said:

“The issue of life-critical fire safety defects in apartment schemes is a sector-wide challenge and Bellway has engaged extensively and constructively with DLUHC over recent months, both directly and through the Home Builders Federation (‘HBF’).

We have always taken the issue of building safety very seriously and agree with the Government’s principle that residents should not have to fund life-critical fire safety remedial works.

Our engagement to date and commitment to continue our responsible approach has resulted in Bellway today making a pledge that schemes constructed by us or on our behalf in the last 30 years will be remediated. This is a positive outcome for affected residents, made in the best long-term interests of the Group and will help to secure our ongoing reputation as a leading responsible homebuilder.”

Vistry says meeting the pledge will cost £35m to £50m, in addition to its existing fire safety provision of £25.2m, plus up to £3m of extra administrative costs.

Countryside expects it to cost another £24m, on top of £41m provided in 2021 for remedial works on multi-occupancy buildings.

FCA to create 80 roles to crack down on rogue firms

The City watchdog is hiring an extra 80 staff to crack down on “problem firms” and protect customers.

The Financial Conduct Authority says its new three-year strategy, announced this morning, will include a push to shut down problem firms which do not meet basic regulatory standards.

The FCA says the rising cost of living could drive greater demand for credit products (as families struggle to pay soaring bills) and push customers towards new ways to “manage and make more of their money”.

It says the new strategy prioritises resources to “prevent serious harm, set higher standards and promote competition”, adding:

A key focus of the strategy is shutting down problem firms, which do not meet basic regulatory standards.

The FCA is recruiting 80 employees to work on the initiative, which will protect consumers from potential fraud, poor treatment and create a better market.

Shell had previously indicated that pulling out of Russia would cost around $3.4bn, Reuters points out.

Here’s their take on this morning’s announcement:

Shell will write down up to $5bn following its decision to exit Russia, more than previously disclosed, while soaring oil and gas prices boosted trading activities in the first quarter, the company said on Thursday.

The post-tax impairments of between $4bn and $5bn in the first quarter will not impact the company’s earnings, Shell said in an update ahead of its earnings announcement on May 5.

Shell, whose market capitalisation is around $210bn, had previously said the Russia writedowns would reach around $3.4bn. The increase was due to additional potential impacts around contracts, writedowns of receivables, and credit losses in Russia, a Shell spokesperson said.

Shell shares were down 1.2% at the start of London trading.

The start of 2022 marked one of the most turbulent periods in decades for the oil and gas industry as Western companies including Shell rapidly pulled out of Russia, severing trading ties and winding down joint ventures following Moscow’s invasion of Ukraine.

Shell said it will exit all its Russian operations, including a major liquefied natural gas plant in the Sakhalin peninsula in the eastern flank of the country.

More here: Shell raises Russia writedown to as much as $5 billion

Back on Shell... the oil giant says this morning:

Shell has not renewed longer-term contracts for Russian oil, and will only do so under explicit government direction, but we are legally obliged to take delivery of crude bought under contracts that were signed before the invasion.

Shell also told the City that there was “unprecedented volatility in commodity prices” in the first quarter of the year.

House prices: What the experts say

Housing affordability is a growing concern for would-be buyers, says Myron Jobson, senior personal finance analyst at interactive investor:

It is largely dependent on three factors: house prices, household income and mortgage interest rates. All three have been rising, but the two that reduces affordability (house prices and mortgage rates) combined outstrips growth in household income - the area that increases affordability.

“Rising house prices means buyers have to save bigger deposits than they did pre-pandemic. The cost-of-living crisis exacerbates matters, eating into disposable income, making it harder to save for a deposit. The likelihood of higher interest rates to combat soaring inflation means that for those looking to buy their first home, it is only going to get tougher.

Fast-rising rents are not offering any relief and could keep some wannabe homeowners in the hunt for a home for longer than they would like.”

Property agent Emma Fildes of Brickweaver says the search for ‘new beginnings’ lifted average house prices by £43,577 since the first lockdown.

Charlotte Nixon, mortgage expert at Quilter, predicts that worries about the Ukraine war, and rising interest rates, will ‘put the brakes’ on runaway house prices.

The situation in Ukraine remains unstable and the cost of living crisis is being felt increasingly by the day, particularly as the energy price cap and national insurance increase have both now come into play. Given the increased financial instability, first time buyers and prospective home movers will likely think twice before embarking on the expensive process of buying a new home.

“What’s more, the Bank of England is expected to increase interest rates further, which will further reduce people’s spending power. Prior to the outbreak of war in Ukraine, inflation was expected to peak at 7.25%, this is now likely to be considerably higher and the only way to combat it is with increased rates. Should this happen, the already dwindling number of cheap mortgage rates will quickly disappear and monthly costs will see a swift increase. Should less people look to move home as a result, the cost of house prices may finally start to see a slowdown.

Shortages of homes will prevent prices falling back this year, suggests Mike Scott, Chief Analyst at estate agency Yopa:

There was some expectation of a slowdown in the rate of growth of house prices this year, but it is clear that this has not yet happened.

he combination of restricted supply, high demand and interest rates that remain at historically low levels despite the recent base rate increase is continuing to push prices higher. Yopa does expect that the rate of growth will slow down in the second half of the year, as interest rates rise further and cost of living increases start to bite.

However we do not anticipate that the market will turn around completely, with prices starting to fall, since it will take more than one year to rebuild the stock of homes for sale to a more normal level.

The South West of England has overtaken Wales as the UK’s strongest performer in terms of annual price house inflation.

Prices in the South West region jumped 14.6% in the last year, taking average house prices there to a record £298,162, Halifax reports.

House prices in Wales have risen 14.1% over the last year, up to a record £211,942.

Since the first pandemic lockdown began two years ago, the average UK house price has jumped by an astonishing £43,577, or 18%.

Back in March 2020, in the first wave of Covid-19, it was hard to imagine such a house price boom (frankly, who was thinking about house prices anyway?).

But the market has proved surprisingly resilient, supported by measures such as the stamp price holiday and the furlough scheme.

Demand for larger, more rural, homes in the move to home working and home schooling has also pushed prices higher.

Halifax explains:

The impact of the pandemic on buyer demand can be seen most clearly when looking at different property types. With a premium now put on those properties offering greater space – both indoors and out – prices for flats have increased by 10.6% or £15,404 over the last two years.

Compare this to the average price of a detached property which has leapt by 21.3% or £77,717 over the same period

Halifax: Cost of living squeeze should cool market

A shortage of properties helped to push up UK house prices by 11% over the last year, says Russell Galley, managing director at Halifax:

“The story behind such strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances. Although there is some recent evidence of more homes coming onto the market, the fundamental issue remains that too many buyers are chasing too few properties.

The effect on house prices makes it increasingly difficult for first-time buyers looking to make their first step onto the ladder, but also challenges homemovers who face ever bigger leaps to move up the rungs to a larger property.

UK house prices
UK house prices Photograph: Halifax

However, Galley predicts that higher interest rates and inflationary pressures will cool the market:

In the long-term we know the performance of the housing market remains inextricably linked to the health of the wider economy. There is no doubt that households face a significant squeeze on real earnings, and the difficulty for policymakers in needing to support the economy yet contain inflation is now even more acute because of the impact of the war in Ukraine.

“Buyers are therefore dealing with the prospect of higher interest rates and a higher cost of living. With affordability metrics already extremely stretched, these factors should lead to a slowdown in house price inflation over the next year.”

UK house prices hit new high in March

UK house prices continued to surge last month, lifting the average house price to a new record high over £282,000.

But, the cost of living squeeze could take some heat out of the market this year.

Mortgage lender Halifax reports that house prices grew by 1.4% month-on-month in March, the biggest rise in six months, after a 0.8% rise in February.

It’s the ninth consecutive month of increases in a row, and means house prices were 11.0% higher than in March 2021.

UK house prices
UK house prices Photograph: Halifax

Here are the key points:

  • Monthly house price growth of 1.4% the biggest increase for six months
  • Average property price reaches another new record high of £282,753
  • Two years on from the first lockdown, house prices have now risen by £43,577
  • South West overtakes Wales as UK area with strongest house price inflation
  • Cost of living pressure likely to slow the rate of house price growth this year

Introduction: Russia pullout to cost Shell up to $5bn

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

Quitting Russia is set to cost oil giant Shell up to $5bn, but the surge in oil prices will cushion the blow.

Shell reported this morning that it will write off between $4bn and $5bn (£3bn-£3.8bn) post-tax in asset values after deciding to exit Russia following the invasion of Ukraine.

The bill covers the “impairment of non-current assets” and additional charges such as writing down debts owed by customers and credit losses.

Last month, Shell announced it would withdraw from its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas, stop importing Russian crude oil, and shut its service stations, aviation fuels and lubricants operations in Russia.

But, Shell has also reported that its oil and gas trading activities will get a boost from soaring energy prices, which jumped after the Ukraine war began.

It says that earnings from oil trading are expected to be “significantly higher” in the first quarter of 2022 than in the fourth quarter of 2021.

The indicative refining margin is around $10.23/bbl, compared to $6.55/bbl in the fourth quarter 2021.

Trading at its integrated gas division are also expected to be stronger than in the previous quarter.

Shell’s update comes as the UK government announces its long-awaited energy strategy to cut the country’s reliance on overseas energy.

Nuclear energy is at the heart of the strategy, with plans for up to eight new reactors, and a goal to lift offshore wind power capacity to make 95 per cent of the country’s electricity “low carbon” by 2030.

But there’s disappointment that ministers have vowed to continue the exploitation of North Sea oil and gas, and not announced plans to cut demand through a push on insulation.

As our news story explains:

The plans risk infuriating environmental campaigners, after the opportunity to remove barriers to more onshore wind farms appeared to fall victim to Tory in-fighting, new North Sea drilling won the government’s blessing, and ministers appeared to open the door to fracking.

Opposition parties were scathing about the strategy. Two former energy secretaries from Labour and the Liberal Democrats branded it “ludicrous” and “hopeless” for failing to expand onshore wind power or tackle energy efficiency.

The agenda

  • 7am BST: Halifax house price index for March
  • 9.30am BST: ONS publishes latest business insights and economic activity surveys
  • 10am BST: Eurozone retail sales for February
  • 1.15pm BST: Bank of England chief economist Huw Pill speaks at the BoE’s 8th International Conference on Sovereign Bond Market
  • 1.30pm BST: US weekly jobless claims

Updated

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