Closing summary
The FTSE 100 index is having a good day, rising 1.1% or 85 points to 7,755. The Italian market is also 1.1% ahead while the German and French indices have gained 0.7% and 0.5% respectively.
On Wall Street, stocks are also rising, with the Nasdaq up 1.2%.
Inflation ticked higher across the US last month, rising at an annual pace of 3.2%, up slightly from 3.1% the previous month.
Economists had expected a reading of 3.1%. Policymakers at the Federal Reserve are working to bring inflation down to 2%. On the month, the index rose by 0.4% in February. This was also up slightly from 0.3% the previous month.
The so-called “core” consumer price index, a closely watched measure of inflation which removes volatile food and energy costs, slipped from an annual rate of 3.9% in January to 3.8% last month – but this was also higher than expected.
The strength of this reading is likely to test confidence that the Fed, which aggressively increased interest rates in a bid to reduce inflation, could soon begin cutting them.
Shelter costs like rent, airline fares, motor vehicle insurance and the price of clothes all rose last month, according to Tuesday’s report from the labor department, driving the headline inflation indices higher.
Some grocery prices decreased, however, including dairy products and fruit and vegetables.
Unemployment rose and wage growth slowed in the three months to January as the UK labour market showed signs of weakness, reflecting a broader slowdown in the economy.
The unemployment rate rose unexpectedly to 3.9 in January from 3.8% in December according to the Office for National Statistics, while annual average wages growth including bonuses fell to 5.6% from 5.8% in the previous month.
Our other main stories:
Thank you for reading. We’ll be back tomorrow. Take care! – JK
Manchester United's wage bills rises, reports record revenues and £774m debt
Manchester United posted record revenues for the October to December quarter as it participated in the Champions League – while the football club’s early exit from Europe will only show up in future financial results.
The club made revenues of £225.8m in the three months to December, up 35% from a year earlier, “driven primarily by UEFA Champions League participation benefit and continued strong Matchday momentum with record attendance for all teams”.
United’s wage bill rose by 23% to £95m, mainly because of its participation in the Champions League this season, compared to the Europa League last year. However, it dropped out of the Champions League in December after a home defeat to Bayern Munich.
The company reported a net profit of £20.4m for the quarter, up from £6.3m a year earlier, its latest financial results showed. Losses in the first half, the six months to December, narrowed to £5.3m from £20.2m.
United announced the completion of the minority investment by the British billionaire Sir Jim Ratcliffe. Ratcliffe, the owner of the Ineos chemicals group, spent just over £1bn to buy a 25% stake in the club in December, and pledged a further $300m investment in infrastructure at Old Trafford – of which $200m (£157m) has been received so far.
The results show no dividends were paid to its majority owners, the Glazer family.
United also revealed its total borrowings amounted to £774m at the end of last year – $650m (£507m) in long term debt, relating to the Glazers’ buyout, and a revolving credit facility of £267m.
Cliff Baty, chief financial officer, said:
We delivered strong revenues during the first half of the fiscal year and have reiterated our guidance for record revenues for the full fiscal year. This is an exciting time at Manchester United following the completion of Sir Jim Ratcliffe’s investment, and we are all focused on working together with our new co-owners to drive the club forward and deliver success on the pitch.
Serious Fraud Office makes arrests over alleged £76m luxury care home fraud
The UK’s Serious Fraud Office (SFO) has today raided two sites and made three arrests across the south of England, as part of a new investigation into an alleged £76m fraud involving luxury care homes.
The raids in St Leonard’s, Dorset and Aylesbury, Buckinghamshire are part of an investigation into the UK registered property developer, the Carlauren Group, which collapsed into administration in November 2019, requiring some elderly residents to vacate their homes and leaving more than 600 investors out of pocket, the SFO said.
Over four years, the Carlauren Group purchased 23 properties across the UK, mostly former hotels including the historic Windlestone Hall in Durham, offering an annual 10% return on investment in its renovation of these properties into high-end care homes.
Only nine of the properties were ever operational and some continued to be run as hotels, instead of homes. The group also bought a number of vehicles purportedly for the company including two Lamborghinis, a Mclaren 570GT, a private jet and two yachts, the SFO said.
More than 600 people and companies invested in the scheme via purchase of rooms, that were to be rented out to elderly residents, in facilities that boasted of swimming pools, room service and other luxury amenities. Rooms were advertised widely and sold with a guaranteed annual payout and the opportunity to resell the asset back with up to a 25% profit after 10 years, the SFO said.
Nick Ephgrave, the SFO’s director, said:
This company’s abrupt collapse has created turmoil and enormous anxiety for many, with elderly people forced to vacate their homes and investors left with nothing.
Today’s arrests are a major development in our investigation and a step towards getting the answers so many people need.
Paul Ashworth, chief North America economist at Capital Economics, said:
The second-consecutive 0.4% month-on-month increase in core consumer prices index in February leaves Fed officials some way from attaining the “greater confidence” needed to begin cutting interest rates. The annual rate of core CPI inflation edged down to a still-elevated 3.8%, from 3.9%.
Nevertheless, we still believe there is plenty of disinflationary pressure to feed through, particularly with unit labour cost growth back down to its pre-pandemic rate. On balance, we expect the Fed to begin cutting interest rates in June, by which time there will be more evidence of core PCE [personal consumption expenditures] inflation moving close to the 2% target. But that will now require a shift in tone in the March CPI data.
US inflation unexpectedly rises to 3.2%
Inflation in the US unexpectedly edged up to 3.2% last month, suggesting that price growth remains stubborn and that the Federal Reserve probably won’t be in a rush to cut interest rates.
The headline figure rose from 3.1% in January, according to official data from the US Bureau of Labor Statistics. Economists had expected the rate to stay at 3.1%.
Excluding volatile items like food and energy, the ‘core’ measure of inflation fell from 3.9% to 3.8%, the lowest since May 2021, but was higher than the 3.7% forecast by Wall Street.
BREAKING! US Headline #inflation to 3.2% in January, HIGHER than expected.
— jeroen blokland (@jsblokland) March 12, 2024
Core #CPI dropped to 3.8%, also HIGHER than expected.
Remember these two lines from #FederalReserve Chairman #Powell last week:
- 'Interest rates right now are well into restrictive territory.'
- 'We're… pic.twitter.com/Icy7lwuB0H
Updated
OBR economist: UK's productivity so bad the only way is up
Britain’s productivity record has been so bad in the 15 years since the global financial crisis that the only way is up.
That was the guardedly optimistic message from David Miles, a member of the Office for Budget Responsibility, when giving evidence to MPs on the Treasury committee this morning.
Miles said in the years since the financial crisis, productivity growth in the UK had fallen from 2.5% a year on average to 0.5%, and added that the economy would have been 30% bigger had the pre-crisis trend continued.
We are all a lot worse off.
It is an educated – and perhaps not terribly educated guess – that the past 15 years have been so bad it is likely the next 5-10 years will be a bit better.
Miles thinks there is a good chance the use of artificial intelligence will help boost productivity in Britain’s service sector, but even so doesn’t expect productivity to return to its pre-GFC trend.
Miles joined the OBR’s budget responsibility committee in January 2022. He retains a part-time professorship of financial economics at Imperial College in London.
Updated
Starling Bank names new CEO
Starling Bank has finally named a new CEO.
Raman Bhatia will be shifting sectors, moving from energy retailer Ovo, to lead the online-only lender by early summer. He will take over from interim boss, and former chief operating officer, John Mountain.
Bhatia does have experience in the banking sector, though, having previously served as head of digital banking for HSBC’s UK and European arm. As a member of HSBC’s executive committee, he also had responsibility for its First Direction and M&S Bank operations.
Bhatia’s appointment comes roughly a year after founder Anne Boden stepped down in a surprise move that she said was designed to shield the online bank from potential concerns over a conflict of interest, because she is a major shareholder.
Starling chair David Sproul said:
We see significant opportunities for Starling under Raman’s leadership as the economy stabilises, as our truly differentiated offering for personal and small business customers wins market share in the UK, and as our Engine by Starling software-as-a-Service business secures further international contracts.
Updated
Karen Noye, mortgage expert at the wealth management firm Quilter, said the figures “paint a very worrying picture of the mortgage market”.
This shows that the large increase in mortgage rates seen over the last couple of years is really starting to bite for some borrowers and this is unfortunately causing them to fall into arrears as they simply can’t afford to keep up with their increased payments.
The changes to national insurance and child benefit at the budget last week, will barely help considering many people will have seen their mortgage payments shoot up by £300 or more a month.
She advised people who are worried about falling into arrears to contact their lender as soon as possible as there are options that can help ease the pain such as going onto a cheaper interest-only mortgage, or setting up a payment plan.
Positively, the statistics show that new arrears cases decreased by 2.6% from the previous quarter, to 13.2% of the total outstanding balances with arrears, but remained 0.2% higher than a year earlier. This may well continue to climb again though as more people come off fixed term mortgages set when rates were low.
Elsewhere, the data points to a market in a deep freeze similarly suffering from the higher rates. While house prices have remained resilient, the value of new mortgage commitments (lending agreed to be advanced in the coming months) decreased by 6.6% from the previous quarter to £46bn, and was 21.2% lower than a year earlier. This illustrates a serious lack of demand and although prices continue to be buoyant if this dearth in demand continues prices may return to a downward trajectory.
Turning to the buy to let market, she said:
The various measures to make the buy to let market less attractive by the government are clearly having their intended impact as the share of gross mortgage advances for buy-to-let purposes (covering house purchase, remortgage and further advance) decreased by 0.5% from the previous quarter to 7.0%, the lowest since 2010 Q3. The changes to the holiday let rules at the budget may also make things even worse for landlords who have been hit with numerous changes to the buy to let tax landscape in recent years making it a less attractive option. This has resulted in many leaving the market.
UK mortgage arrears rise 50% year-on-year
The value of UK mortgages in arrears has risen sharply, indicating that households are struggling with high interest rates.
The value of outstanding mortgage balances with arrears increased by 9.2% between October and December from the previous quarter, to £20.3bn, and was 50.3% higher than a year earlier, according to Bank of England figures released today.
Loan balances with arrears made up 1.23% of all outstanding mortgage balances, up from 1.12% the previous quarter, and the highest since the end of 2016.
Michelle Lawson, director at mortgage broker Lawson Financial, said on Newspage:
This data makes for grim reading but is sadly not unexpected. People don’t have bottomless pockets and this data places stark emphasis on that fact. Household finances are set to spontaneously combust if the current level of pressure on them continues. You’d like to think the Monetary Policy Committee will read this report given that the Bank of England produced it.
Updated
Over a fifth of people not looking for work
Today’s labour market data show more than a fifth of people aged over 16 were economically inactive between November and January, which means they weren’t working or looking for a job. This is some 9.2 million people – 700,000 more than before the Covid pandemic.
A rise in long-term illness has been cited as a main reason.
Those classed as economically inactive include students, those who care for the elderly or look after young children, people with disabilities and those taking early retirement.
• This post and headline were amended at 11.41 GMT. More than a fifth of people aged over 16 were economically inactive, rather than people aged between 16 and 24 as mistakenly reported in an earlier version.
Here is our full story on the data:
And here is some analysis:
Updated
Pets at Home said it is disappointed and frustrated with the UK competition watchdog’s findings on vet pricing.
The Competition and Markets Authority is worried that large chains are squeezing out small independent practices with negative effects for the UK’s 16 million pet owners, and plans a formal investigation into the £2bn industry.
The watchdog is concerned that pet owners are finding it difficult to access basic information like price lists and prescription costs – and are potentially overpaying for medicines.
Since 2013, about 1,500 of the 5,000 vet practices in the UK have been acquired by six of the largest corporate groups: CVS, IVC, Linnaeus, Medivet, Pets at Home and VetPartners, the CMA said.
Pets at Home, whose shares fell nearly 7% on the news in early trading but are now down 2.3%, said:
We are incredibly disappointed the CMA’s findings today do not fully reflect our unique business model of locally-owned vet practices. Whilst our brand is national, our veterinary practices are led by individual entrepreneurial vets who have clinical and operational freedom. They choose all pricing, products and services to ensure the best care for clients and their much-loved pets in their local area, which promotes competition in the market and helps to keep prices low.
We have been working closely with the CMA on their areas of concern and will continue to do so as their inquiry progresses to ensure the distinctiveness of our model is fully recognised.
Updated
Jack Kennedy, senior economist at the global hiring platform Indeed, has looked at today’s UK labour market figures.
Today’s Office for National Statistics figures paint a familiar picture of further gradual softening in the labour market and easing pay pressures, but it remains an incremental process.
Regular pay growth edged down to 6.1% year-on-year in the three months to January, from 6.2% in the previous period, but is still running well above levels where the Bank of England would be comfortable initiating interest rate cuts.
Elsewhere, the figures point to ongoing constraints on labour supply, with low unemployment and inactivity well above its pre-pandemic level. But the dubious veracity of the Labour Force Survey data makes it harder to accurately gauge underlying dynamics and the extent to which conditions for a sustained moderation of pay pressures are falling into place. Rate setters remain focused on a range of forward indicators of pay pressures as a guide.
He said Indeed Wage Tracker data on advertised pay for new hires shows a similar picture of gradual easing.
But at 6.3% year-on-year in February, down from 6.5% in January, it remains high and is only down around one percentage point from last summer’s peak.
Posted wage growth remains particularly strong in lower-paid occupations like childcare, cleaning, retail and hospitality, running in the 7-9% range. Though the labour market has cooled, hiring challenges persist in these areas and continue to support pay increases. The latest round of supermarket wage hikes is the most recent example of this, in advance of a 9.8% rise in the National Living Wage coming into effect in April.
Aldi UK ups pay ahead of national living wage rise
The UK arm of the German supermarket chain Aldi has raised staff pay for the second time this year.
Hourly rates for store assistants and deputy store managers will rise from £12.00 to £12.40 outside the M25, and from £13.55 to £13.65 within the M25, from 1 June.
Aldi claims its new national minimum rate of £12.40 an hour for store assistants and deputy store managers is the highest level of entry pay paid by a supermarket in the UK.
Aldi is also the only supermarket to offer paid breaks, which for the average store colleague is worth more than £900 a year. It is the UK’s fourth-largest supermarket and has more than 1,000 stores, 11 regional distribution centres and 45,000 staff across Britain.
Aldi is vying with its fellow German-owned discounter Lidl to be the UK’s fastest-growing grocery chain, with both benefiting as the ongoing cost of living crisis has prompted more people to switch to discount chains to save money.
On 1 April, the UK’s national living wage will go up by almost 10% to £11.44 an hour for full-time workers aged 21 and over. This will benefit nearly 3 million low-paid people.
Updated
Persimmon profits halve, flags 'subdued' outlook
Shares in Persimmon fell 3.7%, making it the biggest loser on the FTSE 100 in early trading, after the housebuilder reported a 33% drop in home completions and a halving in annual profits, and flagged a “subdued” outlook.
Persimmon completed 9,922 new homes last year, down sharply from 14,868 in 2022. Profit before tax more than halved to £352m.
Dean Finch, the chief executive, said:
With interest rates expected to remain at current levels and a general election on the horizon, market conditions are expected to remain subdued throughout 2024.
Pets at Home shares have fallen nearly 7% after the UK’s competition watchdog said it planned an investigation into vet pricing, after an initial review threw up multiple issues.
Matt Britzman, equity analyst at Hargreaves Lansdown, has looked at this.
The UK’s Competition and Markets Authority (CMA) has completed its initial investigation into unfair practices in the vet space. The review has thrown up multiple concerns that the CMA feels are worth digging further into, most of which centre around large vet groups having major footholds in certain markets.
This will come as a blow to vet groups like CVS which saw its valuation come under pressure back when the initial investigations were announced. There’s still no formal action being taken, and if there is it’s likely to be around improving awareness for pet owners rather than severe sanctions on the vet sector. Nonetheless, markets don’t like uncertainty, and this is a dark cloud looming over the sector.
Updated
In financial markets, the FTSE 100 index in London has opened higher, taking its lead from Asian markets overnight (Hong Kong’s Hang Seng rose almost 3% while Japan’s Nikkei was little changed). The UK blue-chip index is currently trading almost 60 points higher at 7,7728, a 0.8% gain.
Germany’s Dax opened 0.4% higher while the French and Spanish indices rose 0.3% at the open.
German inflation slows to 2.7%
In Germany, inflation slowed to 2.7% in February, according to final figures.
Consumer price growth slowed from 3.1% in January, the German statistics office said.
Markets are eagerly awaiting inflation data from the US, out at 12.30pm GMT, which is expected to show the rate unchanged at 3.1%.
Stephen Evans, who runs the Learning and Work Institute and previously worked for the Treasury, said:
The labour market shows signs of slowing with vacancies and employment down as weak economic growth takes its toll, though the data need to be treated with caution. The UK is the only G7 country where employment is lower than pre-pandemic.
With the Office for Budget Responsibility forecasting further increases in economic inactivity, the government needs to revisit its approach given that only one in ten out-of-work disabled and older people currently get employment support.
Nominal earnings grew at an annualised 3.5% over the last quarter, broadly consistent with the Bank of England’s inflation target and adding to the case that interest rates have peaked. The good news is real earnings continue to grow as inflation falls. But the bigger picture is people are earning £12,000 per year on average less than if pre-financial crisis trends had continued. That’s a nightmare we have to end.
Signs the labour market is softening with employment & vacancies down & economic inactivity up. Good news: real earnings up & nominal earnings in line with inflation target. Bad news: people are earning £12k less than pre-financial crisis trends. A nightmare that needs to end. pic.twitter.com/8otMId3UII
— Stephen Evans (@Stephen_EvansUK) March 12, 2024
Over half a million more people out of work than pre-pandemic amid rise in long-term sick
Tony Wilson, director at the Institute for Employment Studies, said:
Today’s jobs figures show that the labour market remains pretty subdued. The employment rate is broadly flat but still about one percentage point below where it was before the pandemic, even though unemployment has fallen back to where it was.
So as has been the story in previous months, there are fewer people in work because there are more people outside the labour force altogether – not looking or not available for work. In all, there are well over half a million more people out of work than before the pandemic began. This is being driven by more young people and older people outside the labour force, and in particular because of more people reporting long-term health conditions that stop them from working.
In our view this is holding back the recovery as the economy is continuing to create jobs, with nearly a million unfilled vacancies reported today. This reiterates that we need a different approach to how we reach and engage with people who are out of work and may want to come back to work, and in particular our employment services need to be more accessible, inclusive and supportive. Employers need to play their part too, and do more to keep people in work and to open up opportunities for those who may need more support.
Updated
Introduction: UK unemployment rises; competition watchdog plans formal investigation into vet pricing
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Unemployment has gone up in the UK, with the jobless rate unexpectedly rising, while pay growth has slowed, reflecting wider weakness in the economy.
The unemployment rate unexpectedly ticked up to 3.9% in the three months to January from 3.8%, according to the Office for National Statistics, at a time when the economy entered into recession. City economists had expected the rate to remain unchanged.
The number of people claiming jobless benefits increased by 16,800 in February. Employment growth has tailed off, from an increase of 72,000 in the three months to December to a fall of 21,000 in the three months to January.
As employers cut back on hiring people, the number of job vacancies in the economy declined, by 43,000 to 908,000 in the three months to February. (But they remain more than 100,000 above their pre-pandemic level.)
Average earnings grew by 5.6% between November and January, down from 5.8% in the previous three months. Excluding bonuses, pay growth slowed from 6.2% to 6.1%.
We’ve published the latest UK labour market figures.
— Office for National Statistics (ONS) (@ONS) March 12, 2024
Headline indicators for the UK labour market for November 2023 to January 2024 show:
▪️ employment was 75.0%
▪️ unemployment was 3.9%
▪️ economic inactivity was 21.8%
➡️ https://t.co/F9TC4bkR4d pic.twitter.com/xcLxAH4C03
Paul Dales, chief UK economist at Capital Economics, said:
The easing in wage growth in January is probably still a bit too slow for the Bank of England’s liking. But there are encouraging signs that a more marked slowdown is just around the corner and that an interest rate cut in June is possible.
The Bank of England wants to see evidence that wage growth is slowing before cutting borrowing costs.
The chancellor of the exchequer, Jeremy Hunt, said:
Our plan is working. Even with inflation falling, real wages have risen for the seventh month in a row. And take home pay is set for another boost thanks to our cuts to National Insurance which in total are putting over £900 a year back into the average earner’s pocket.
Britain’s competition watchdog plans to launch a formal investigation into vet pricing, as it has multiple concerns, including that pet owners might be overpaying for medicines or prescriptions.
After taking a look at the market for the UK’s 16 million pet owners, the Competition and Markets Authority flagged these concerns:
Consumers may not be given enough information to enable them to choose the best veterinary practice or the right treatment for their needs.
Concentrated local markets, in part driven by sector consolidation, may be leading to weak competition in some areas.
Large corporate groups may have incentives to act in ways which reduce choice and weaken competition.
Pet owners might be overpaying for medicines or prescriptions.
The regulatory framework is outdated and may no longer be fit for purpose.
Referring to the watchdog’s concerns, Sarah Cardell, chief executive, said:
These include pet owners finding it difficult to access basic information like price lists and prescription costs – and potentially overpaying for medicines. We are also concerned about weak competition in some areas, driven in part by sector consolidation, and the incentives for large corporate groups to act in ways which may reduce competition and choice.
If it finds the market is not working as it should, the CMA can impose measures such as mandating the provision of certain information to consumers, imposing maximum prescription fees and ordering the sale or disposal of a business or assets.
Most vet practices do not display prices on their website – of those practices checked, over 80% had no pricing information online, even for the most basic services. People are not always informed of the cost of treatment before agreeing to it – around one fifth of respondents to its call for information said that they were not told of the cost before agreeing to tests.
Some vet practices make up to a quarter of their income selling medicines, so there may be little incentive to make pet owners aware of alternatives, the CMA said.
A company can own multiple vet practices in a local area without making that clear. The share of vet practices that belong to large corporate groups has shot up to almost 60% from 10% in 2013.
The CMA has launched a four-week consultation on the proposal to launch a market investigation.
The Agenda
12.30pm GMT: US Inflation for February (forecast: 3.1%, previous: 3.1%)
Updated
