Huge spending cuts and tax rises will be unveiled by Jeremy Hunt today as the Chancellor attempts to restore UK economic credibility.
His autumn statement will include figures from the Office for Budget Responsibility showing the size of the black hole in public finances.
The pound has improved to around $1.19 since the government ditched most of September’s mini-budget and the dollar weakened on hopes that US interest rates are near their peak.
FTSE 100 Live Thursday
Chancellor to unveil £50bn+ fiscal tightening
Royal Mail owner reports half-year loss
Burberry operating profits rise 27%
City comment: Lidl shows how discounters gain from cost of living crisis
Thursday 17 November 2022 15:22 , Simon Hunt
To misquote a supermarket rival’s slogan, Every Lidl Helps. The discount grocer, which published its financial results at Companies House today, is rolling out another 15 stores between now and Christmas at a remarkable rate of virtually one every other day. Two of those are in the London area at Borehamwood and East Acton.
Less than three decades after the then unknown German-owned store chain opened its first UK branches in September 1994 there are few corners of the nation that its breezy blue red and yellow logo has not reached. Next year its store estate will pass the 1000 mark.
The results published from Lidl GB are long out of date, covering the period up to the end of February — and the retail world has changed out of all recognition since then with food price inflation galloping to a 45 year high of 16.4%. Lidl is showing a pre-tax profit of £41.1 million on sales of £7.8 billion, a tiny margin that would not be tolerated by shareholders of its quoted or private equity-owned competitors.
But Lidl GB, a subsidiary of the vast family-owned Schwarz Group, can afford to play the long game. Its market share has risen 1,1 percentage points over the past year to 7.2% and CEO Ryan McDonnell has 10% — and overtaking Morrisons — in his sights over the next few years.
The cost of living crisis — such a curse for most retailers — is a boon for the likes of Lidl and its German rival Aldi.
Every day that the squeeze on living standards goes on is a day when more shoppers switch their loyalty to the discounters. And may never return.
Wall Street stocks fall after more strong US jobs data supports Fed interest rate hawks
Thursday 17 November 2022 14:51 , Michael Hunter
New York’s S&P 500 fell in opening trade after another sign that the aggressive approach to rate hikes at the Federal Reserve might have further to run.
There was a drop in weekly jobless claims data, which showed over 220,000 fewer people applying for unemployment benefits for the first time, better than consensus forecasts.
The continued strength in the American jobs market is seen as one of the main factors allowing the Fed to adopt jumbo, 0.75% rate rises as it seeks to tame inflation. Talk that it could move to smaller hikes had followed a string of data implying its fight against rising prices was kicking in, but with job creation running strongly, such expectations took a knock,
The broad Wall Street stock gauge fell 44 points to 3915.0, a decline of over 1%.
Utility stocks higher after Hunt extends energy price support scheme
Thursday 17 November 2022 14:26 , Michael Hunter
Utility stocks moved to the top of the London stock market’s leaderboard as worries about the impact of windfall taxes on the sector soon faded and was replaced by relief at an extension to the government’s energy price guarantee.
Centrica, the owner of British Gas topped the FTSE 100, rallying by over 7% to over 93p a gain of over 6p. Electricity generator SSE was in second place, up almost 4% to 1707p, a rise of 63p.
Victoria Scholar, at Interactive Investor, said: “Stocks in this sector initially moved sharply lower after the Chancellor extended the windfall level to energy generators, imposing a 45% levy, ahead of analysts’ forecasts for 40%. However, these companies swiftly reversed losses to trade multiple percent higher after Hunt announced plans to extend the Energy Price Guarantee for another year until at least 2024.”
James Hughes, analyst at Scope Markets said: "Given the government is continuing to offset high energy prices for longer, as well as offering certainty over the duration of the energy profits levy, it offers the sector more clarity"
Overall, the main UK stock index was down almost 52 points at 7299.54, a retreat of 0.7%. The pressure on it mainly came from resource and fund management stocks.
Pound under $1.18 and benchmark UK government bond yields rise after Autumn Statement
Thursday 17 November 2022 13:35 , Michael Hunter
The pound has fallen back under $1.18 and investors are demanding higher returns to lend to the UK as markets react to the Chancellor’s redrawn tax and spending plans for the country.
The moves are no where near as dramatic as those seen after his predecessor’s now-defunct measures which ended up causing a run on UK financial assets. But sterling was down over 1%, hitting a fresh session low of $1.1769. It came after independent forecasts of the Office for Budget Responsibility predicted a recession reducing the size of the UK economy by 1.4% next year and inflation of over 9%.
The yield on the benchmark 10-year gilt remained nearer 3% than 4%, the level that stoked concern in late September, but it was higher, reaching 3.235%, up from 3.174% before Jeremy Hunt delivered his Autumn Statement.
Mike Owens, senior sales trader at Saxo UK, said: “The broad take is that both gilts and the pound have staged a meaningful recovery in the first few weeks of the Sunak government. Today’s announcement of the Autumn Statement, which is fiscally prudent but nevertheless paints a bleak picture of the state of the UK economy, gives markets an excuse to take a little bit off the table.”
Jeremy Hunt introduces “Tesla Tax,” adding hundreds of pounds to EV running costs.
Thursday 17 November 2022 12:53 , Simon Hunt
Jeremy Hunt has introduced a “Tesla Tax” on new electric cars, adding hundreds of pounds to the running cost of the eco-friendly vehicles and sparking concerns that road users could be put off buying an EV.
In his Autumn Statement, the chancellor removed the exemption for EVs from the £335 “premium supplement” on new cars. That means that any person buying an EV worth £40,000 or more could have to pay a whopping £520 for road tax, despite being the greenest option.
Founder of ChooseMyCar.com, Nick Zapolski, said “This new “Tesla tax” means that some people will now be paying more for their road tax than someone in an old banger, which is not in line with the Government’s green credentials.
“It’s undeniable that the high purchase price of new EVs - and the lack of second hand ones on the market - mean it’s out of reach for many drivers. Any new tax on them will just exacerbate this situation - and could be seen as an indication that other benefits of EV ownership are under threat.
Stamp duty cuts to be in place until March 2025 says Jeremy Hunt
Thursday 17 November 2022 12:34 , Simon Hunt
Stamp duty cuts introduced in Kwasi Kwarteng’s mini Budget will remain in place, Chancellor Jeremy Hunt confirmed today, but only until 2025.
The changes, introduced on September 23 were announced as a permanent measure but Mr Hunt said in today’s Autumn Budget that the property tax break would be a long holiday instead.
He said: “The OBR [Office for Budget Responsibility] expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-Budget will remain in place but only until March 31, 2025.
“After that, I will sunset the measure, creating an incentive to support the housing market and all the jobs associated with it by boosting transactions during the period the economy most needs it.”
Pound hovers around $1.18 as markets measure Hunt’s tax and spending plans
Thursday 17 November 2022 12:30 , Simon Hunt
Sterling was trading around some of its lowest levels for the day as investors took in the detail of Jeremy Hunt’s plans to balance the UK’s books.
Having fallen by over 0.8% at one stage to $1.1803, with pressure coming as the Chancellor outlined bleak independent forecasts on a shrinking economy and rising inflation, the pound fought back somewhat by the end of the speech to $1.1825, leaving it down 0.7%.
National Living Wage to rise by 9.7%; pensions Triple Lock remains
Thursday 17 November 2022 12:26 , Simon Hunt
The National Living Wage is set to rise by 9.7%, following the recommendation of the Low Pay Commission, Jeremy Hunt has said, while the pensions Triple Lock is set to stay.
The National Living Wage will rise to £10.42 an hour, representing an annual pay rise of over £1600 for a full-time worker.
The state pension is set to rise in line with inflation, representing an £870 increase.
Hunt promises to create ‘the world’s next Silicon Valley'
Thursday 17 November 2022 12:18 , Simon Hunt
Jeremy Hunt plans to review and make changes to EU regulations in science, technology and financial services to create “the world’s next Silicon Valley.”
“We learned from the success of Nigel Lawson’s Big Bang in 1986 that smart regulatory reform can spur investment from all over the world,” he said.
The chancellor has said he will publish a decision on changes to the EU’s Solvency II regulations.
Hunt raises NHS budget
Thursday 17 November 2022 12:04 , Simon Hunt
Jeremy Hunt has increased the NHS budget by £3.3 billion for each of the next two years.
The chancellor said: “I recognise that efficiency savings alone will not be enough to deliver the services we all need.
“So because of the difficult decisions taken elsewhere today I will increase the NHS budget,”
Utilities hit as Chancellor Hunt introduces windfall tax on electricity firms
Thursday 17 November 2022 11:59 , Michael Hunter
Utility stocks were lower after Jeremy Hunt announced a windfall tax on electricity generators, alongside and increased levy on oil and gas companies.
There will be a temporary tax of 45% on electricity generators, while the windfall tax on oil and gas firms will go up to 35% from 25%.
SSE, a generator, fell 62p or almost 4% to 1582p. United Utilities fell 12p to 998p, down 1.2%. Centrica lost 1.5% or just over 1p to 86p.
National Grid, which does not generate power but runs the network that distributes it, fell 17p to 994p, a drop of 17p.
Top rate of tax threshold falls and dividend relief falls
Thursday 17 November 2022 11:46 , Simon Hunt
The rate at which people begin to pay the top rate of tax is set to fall, chancellor Jeremy Hunt has said.
The top rate threshold will drop from £150k to £125k, while the dividend allowance will be cut from £2,000 to £1,000.
The capital gains tax exemption will fall from £12,300 to £6,000.
Pound falls as Hunt outlines independent OBR forecasts on inflation and recession
Thursday 17 November 2022 11:45 , Michael Hunter
Sterling fell toward $1.18 as the Chancellor outlined inflation and growth forecasts from the independent Office for Budget responsibility.
Jeremy Hunt said the OBR said inflation would average 9.1% this year and 7.4% in 2023. GDP, the total size of the goods and services produced by the economy, is expected to contract by 1.4% next year.
The pound fell 0.8% to $1.1811.
Hunt introduces two new fiscal rules to restore credibility
Thursday 17 November 2022 11:43 , Simon Hunt
Jeremy Hunt has said he has introduced two new fiscal rules in a bid to restore the government’s fiscal credibility.
He said: “I also today confirm two new fiscal rules. The first is that underlying debt must fall as a percentage of GDP by the fifth year of a five-year rolling period.
“The second, that public sector borrowing, over the same period. must be below 3% of GDP.”
Hunt rules out changing the Bank of England’s remit
Thursday 17 November 2022 11:39 , Simon Hunt
Jeremy Hunt has ruled out changing the remit of the Bank of England.
The chancellor said: “The Bank of England, which has done an outstanding job since its independence, now has my wholehearted support in itys mission to defeat inflation and I today confirm we will not change its remit.”
Hunt warns of ‘international crisis’ as he vows to protect the vulnerable
Thursday 17 November 2022 11:35 , Simon Hunt
Jeremy Hunt has warned of an ‘international crisis’ as he vows to protect the vulnerable.
He said: “We are not not alone facing these problems but today our plan reflects British values as we respond to an international crisis. We also protect the vulnerable because to be British is to be compassionate.”
Jeremy Hunt begins speech
Thursday 17 November 2022 11:32
Jeremy Hunt has stood up at the dispatch box to begin hisd Autumn Statement speech,
Pound just under $1.19, London stocks lower and government debt yields around 3% into fiscal statement
Thursday 17 November 2022 11:17 , Michael Hunter
Here’s a snapshot of the current trading across the UK’s major financial assets as the wait for detail on Chancellor Jeremy Hunt’s hotly anticipated, redrawn tax and spending plans enters its final minutes.
From the government’s plans for its energy support plan after April, to independent forecasts on the economy from the Office of Budget Responsibility, there are a host of factors that could move markets. While Hunt is seen as a safe pair of hands after the chaos sparked by the previous “mini”-Budget, investors will be keeping close watch on Westminster.
In the meantime:
FX: The pound is down 0.4% at $1.861
Stocks: FTSE 100 is down 0.6% at 7309.30
Stocks: FTSE 250 is down 0.4% at 19044.92
Gilts: The yield on benchmark 10-year government bonds is at 3.181%
Gilts: The yield on 5-year government bonds is at 3.209%
Drop in London property valuations hits Great Portland Estates
Thursday 17 November 2022 10:27 , Simon Hunt
Great Portland Estates, one of central London’s major landlords, took a hit today from the revaluation of its property portfolio after a turbulent time for the City and the West End.
The FTSE 250 company reported a loss of almost £87 million and acknowledged that property values are under pressure. But it was upbeat on its prospects and the capital’s ability to get through the looming recession.
Toby Courtauld, Chief Executive, said: “Whilst economic challenges may persist in the near term, our experience is that many customers are looking through the downturn in assessing their real estate needs, seeking to trade up to great spaces that are fit for future working patterns.”
The company is entirely focused on central London and has always highlighted the cyclical nature of its business. Courtauld pointed to its “plan to deliver our £1.1 billion capex programme into this shortage and a recovering economy”.
GPE’s shares fell 18p to 526p, a slip of just over 3%.
Mitie shares up 8%, Ocado leads FTSE 100 lower
Thursday 17 November 2022 10:06 , Graeme Evans
Reassurance from outsourcer Mitie that it is more than filling the gap left by the end of profitable Covid contracts helped to trigger a surge for its shares today.
The FTSE 250 company, which employs 68,000 people in facilities management and other services, cheered investors with better-than-expected half-year results and improved guidance for an annual operating profit of at least £145 million.
It said contract wins, acquisitions and price inflation meant it had more than replaced the short-term boost from Covid work such as testing centres and quarantine services.
Mitie’s new contracts include the Dungavel and Derwentside immigration removal centres, which helped care and custody revenues to improve 32% on a year earlier.
Shares rose 8% or 6.2p to 80.5p and left Mitie up more than 20% this year, although analysts at Jefferies today highlighted a target price of 99p.
The performance by Mitie, which is handing £10 million to staff through a winter support package, failed to prevent the FTSE 250 index falling 71.89 points to 19,040.51.
The FTSE 100 index drifted 38.51 points to 7321.68, with Spirax-Sarco Engineering among the fallers despite the thermal energy specialist leaving guidance unchanged.
It fell 4% or 550p to 11,035p, while Ocado surrendered more of its recent gains by dropping back 5% or 37p to 689p.
Gaming firm Flutter Entertainment fell 100p to 11,190p after hosting an event in New York to showcase US business FanDuel.
The operation, which has a 42% share of US online sports betting and 18% in iGaming, is on course for profitability in 2023 and is seen by Flutter boss Peter Jackson as an enormous value creation opportunity
Return of tourists boosts sales at Fuller’s pubs
Thursday 17 November 2022 09:52 , Simon Hunt
Tourists and commuters flocking back to the capital have provided a much-needed sales boost at pub chain Fuller’s, the firm said today.
The Chiswick-based business, which runs The Banker in Cannon Street and The Counting House in Cornhill, said Central London and City sites have seen revenues rise by 20% against the prior year, despite the impact of tube and train strikes.
It reported turnover of £169 million in the six months to September, up 45% on 2021, while pre-tax profits grew 36% to £10 million.
Fuller’s boss Simon Emeny said: “We’re very optimistic about London reaching a full recovery.
“People are coming back to offices and Fridays are actually an encouraging period, probably the last piece to get back to normality.”
FTSE 100 struggles, Mitie surges 7% on upgrade
Thursday 17 November 2022 08:46 , Graeme Evans
London’s top two benchmarks are lagging the rest of Europe as investors await developments in the Chancellor‘s autumn statement.
The FTSE 100 index stands 6.16 points lower at 7345.03 and the FTSE 250 index is 22.16 points higher at 19,134.56, compared with a 0.9% rise on the Frankfurt exchange after sentiment was boosted by better-than-expected figures from Siemens.
Fire safety business Halma and steam management specialist Spirax-Sarco Engineering were among the biggest blue-chip fallers, losing around 2% after their respective updates.
Grocery technology business Ocado also surrendered more of its recent gains by dropping 2% or 16.8p to 709.2p.
The FTSE 250 index was led by outsourcing firm Mitie, which rose 7% or 4.9p to 79.2p after it increased its full-year operating profit guidance to at least £145 million.
The company, which employs 68,000 people, said contract wins, acquisitions and pricing have more than replaced the short-term revenue boost from Covid-related business.
Royal Mail owner in red amid strike action
Thursday 17 November 2022 08:13 , Graeme Evans
Royal Mail owner International Distributions Services has slumped to a half-year loss of £127 million and reiterated that the postal service will be up to £450 million in the red for the full year.
Revenues for the strike-hit Royal Mail division fell 10.5% to £3.6 billion in the six months to 25 September, leading to an operating loss of £219 million. In contrast, the European logistics division GLS racked up a profit of £162 million.
Chairman Keith Williams said: “The difference between the performances of our two companies could not be more stark.
“GLS has adapted well to inflationary pressures across its geographies. However, we have been standing at a crossroads with CWU in the UK for several months.”
Talks with CWU are continuing but Williams said the company was moving ahead with required changes to rightsize Royal Mail and ensure it has a sustainable future.
The £350m-£450m forecast loss for Royal Mail is based on the direct impact of 12 days of industrial action which have taken place or have been notified to the company.
Chancellor set to target £50bn+ fiscal tightening
Thursday 17 November 2022 07:42 , Graeme Evans
Chancellor Jeremy Hunt has admitted that getting the public finances back in order has required some 'eye-watering' decisions.
These have been set against a backdrop of an continuing energy price shock, soaring interest costs and a deteriorating global economy.
Projections from the Office for Budget Responsibility are set to show a deep and protracted recession in 2023 with growth subdued until 2025 at the earliest.
It is expected that Hunt will target between £50 billion and £60 billion of fiscal consolidation in his statement today.
This will come from stealth taxes as well as higher windfall taxes on the energy industry plus a budget freeze for government departments.
Capital Economics said: “We suspect the autumn statement will probably have to incorporate tightening measures worth £54 bilion but that he’ll tilt the balance to tax hikes and have most policies starting later rather than sooner.”
Hell for leather: Burberry plans to ramp up turnover to £4 billion by doubling sales of leather products
Thursday 17 November 2022 07:27 , Simon Hunt
Luxury brand Burberry has brushed off macroeconomic uncertainty, setting a new target of growing sales to £4 billion in the medium term.
The retailer hopes to achieve this by doubling sales of leather goods and shoes and make accessories worth more than 50% of total sales in the long term.
It reported revenue of £1.3 billion in the 6 months to 1 October, up 11%, while operating profit grew 27% to £263 million.
Charlie Huggins, Head of Equities at Wealth Club, said: “Burberry’s new chief executive, Jonathan Akeroyd, faces a mammoth task to turn around the struggling luxury fashion house.
“The group’s performance has been disappointing for many years. Growth and margins have significantly lagged that of rivals like LVMH, and much more still needs to be done to revitalise and elevate the brand. A new CEO and creative designer could be just the tonic Burberry needs.
“Make no mistake - Burberry has promise. Its brand still carries weight in the world of luxury fashion. But to challenge the likes of LVMH, some tough choices will need to be made, especially around new products. The culture probably also needs reinvigorating - with an injection of much-needed dynamism not going amiss.”