FTSE 100 rises 0.2pc
Ambrose Evans-Pritchard: Let King Charles go to campaign on climate as head of the Commonwealth
UK companies are collapsing at the fastest rate since the height of the global financial crisis as surging energy bills drive thousands of firms out of business.
There were more than 5,600 insolvencies in England and Wales in the second quarter – the highest level since 2009, according to the Office for National Statistics.
The sharp rise in energy bills was cited as the biggest problem for businesses, while difficulties paying debt, rising costs of raw materials and supply chain disruptions also took their toll.
While the squeeze on finances has hit all businesses, construction, retail and accommodation and food services suffered the highest number of insolvencies in the first half of the year.
The Government has outlined support to help companies and public sector bodies struggling with their energy bills. However, the scheme for businesses will run for only six months, unlike the two-year programme aimed at households.
Insolvencies slumped in 2020 as the Government rolled out support to protect businesses during the pandemic. But the number of failures has since spiked sharply as companies grapple with fresh challenges even after lockdowns ended.
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Macron: "Don't Panic", as motorists face shortages at the pumps
The French President Emmanuel Macron urged citizens not to panic and to act responsibly after a refinery strike left 15pc of service stations with supply problems, particularly around Paris and northern France.
“The government is fully-mobilised and appeals for calm,” Macron told reporters in Prague, where a summit of EU leaders is underway. “The government has acted to mobilise its strategic reserves and our available stocks, to release them and supply petrol stations. Don’t panic.”
In recent days, strikes have hit the country’s two largest refineries – plants in Normandy run by TotalEnergies SE and Exxon Mobil Corp. – affecting almost two-thirds of the nation’s oil processing capacity.
While the government works to resolve the dispute, a senior minister said that tanker trucks may be allowed to make deliveries on Sundays, to ease concerns that motorists across France will soon face long queues at the pumps.
Liz Truss sacks international trade minister
The international trade minister has been suspended after "complaints" about his behaviour at the Conservative Party Conference.
A No 10 spokesman said: "Following a complaint of serious misconduct, the Prime Minister has asked Conor Burns MP to leave the government with immediate effect.
"The Prime Minister took direct action on being informed of this allegation and is clear that all ministers should maintain the high standards of behaviour – as the public rightly expects."
Follow the latest on our politics blog.
Beauty brand Sephora to launch in the UK
Beauty brand Sephora is relaunching in the UK almost two decades after it pulled out of the market.
The skincare and cosmetics retailer will open a UK website on October 17, following its acquisition of Feelunique last year.
This will be followed by the opening of a brick-and-mortar store in London in spring 2023.
Sephora, which is owned by French luxury giant LVMH, originally launched in the UK in 2000 with nine stores, but withdrew within five years amid complaints about soaring rents.
Octopus to pay customers to cut energy use
Energy supplier Octopus has said it will pay customers to cut their consumption this winter amid concerns about blackouts.
The Government has said it won't be asking Brits to use less energy even after National Grid said the UK could face three-hour rolling power cuts if the country is unable to secure enough gas and electricity imports.
However, the grid operator said flexibility management – like the scheme announced by Octopus – would form part of efforts to keep the lights on.
Greg Jackson, chief executive of Octopus, said: "Instead of cutting off whole chunks of the country if we are short of gas, we can reward people for using less energy at times of peak demand."
Under the so-called "Saving Sessions", Octopus's 1.4m customers with smart meters and around 5,000 of its business customers will be emailed and texted to be told of time slots when they could be paid for reducing their energy use.
Octopus said it expected to pay an average of £4 for every unit saved during the specific timeframes from November to March 2023, meaning customers could save around £100 over the course of the winter.
It comes after rival Ovo Energy said it will offer households £20 a month to cut their energy usage during peak hours.
Bitcoin falls on rate hike worries
It's not just equities feeling the impact of the jobs report – Bitcoin is in decline too.
The cryptocurrency lost ground after the stronger than expected payrolls report bolstered expectations that the Federal Reserve will continue the aggressive rate hikes that have pulled down risk assets.
Bitcoin dipped as much as 2.8pc to trade as low as $19,485. Ether dropped as much as 2.9pc, with other so-called altcoins like Solana and Avalanche also declining.
Wall Street opens lower after jobs data
Wall Street's main indices have opened lower as solid job growth and a drop in unemployment rate last month pointed to a tight labour market, giving more room for the Federal Reserve to raise interest rates.
The S&P 500 fell 1pc at the open, while the Dow Jones was down 0.8pc. The tech-heavy Nasdaq plunged 1.8pc.
Reaction: Risk assets have further to fall
Seema Shah at Principal Global Investors says the Federal Reserve will keep raising interest rates, slowing the economy and hurting risk assets.
Today’s job number is a hawkish reading, with almost all the elements of the report moving in the wrong direction for the Fed. Payrolls were broadly in line with expectations... but markets were hoping for a downside surprise today.
Instead, the number only confirms that the Fed needs to hike rates by a fourth consecutive 0.75pc in November.
More significantly, with unemployment back down to 3.5pc and participation falling again, where is the evidence that tighter Fed policy is having any impact on the US labour market? Job openings may be coming down, but if that isn’t combined with greater numbers of job seekers, wage pressures will remain still at their elevated level.
With the Fed’s dot plot pointing to policy rates closer to 5pc than 4pc next year, we have a market that is wishing for the economy to slow quickly. That’s when you know there is only one path ahead: risk assets have further to fall.
Pound drops as US jobs data fuels interest rate bets
Sterling has extended its losses against the dollar as hotter-than-expected jobs data from the US fuelled bets on more interest rate rises.
Non-farm payrolls increased by 263,000 in September – a slowdown from the previous month but still ahead of expectations. Unemployment posted a surprise drop to 3.5pc.
The figures will dispel any hopes that the Fed can slow down its cycle of interest rate rises. That's having a knock-on effect on the pound as markets bet the Bank of England will have to follow suit.
The pound dropped 0.6pc against the dollar to $1.1098.
Reaction: US labour market still strong
Richard Flynn, managing director at Charles Schwab UK, says interest rate rises should weaken the labour market further.
Although this month’s jobs report is weaker than the figures recorded last month, the labour market remains relatively strong.
Investors have been concerned about the possibility of a recession for weeks now, as the Fed tightens monetary policy in a bid to control inflation.
From the Fed’s perspective, any weakening in the labour market is an indication that rate hikes are having their desired effect: producing some slack, leading to lower wage growth, and ultimately bringing demand into balance with supply.
That said, the Fed will not want its tightening to result in a material rise in unemployment.
It’s unlikely that the Fed can lower job openings without raising the unemployment rate against the backdrop of high inflation, fading profit margins, and rising interest rates.
The Fed has been increasingly clear that substantial weakness in the economy may be the expense for a return to lower inflation.
As rate hikes feed through to the real economy in the months ahead, the labour market may weaken further, reflecting investors’ recessionary concerns.
US jobs rise while unemployment drops
US hiring continued at a solid – albeit more moderate – pace last month and unemployment fell, showing the labour market remains tight despite the Federal Reserve's steep interest rate rises.
Non-farm payrolls increased by 263,000 in September, the smallest gain since April 2021, following a 315,000 jump in August, official figures showed.
The unemployment rate unexpectedly dropped to 3.5pc and average hourly earnings rose strongly.
— jeroen blokland (@jsblokland) October 7, 2022
Inside the ‘civil emergency’ planning for blackouts this winter
Memories of Ted Heath’s cabinet convening by candlelight will loom large in Westminster all over the coming weeks and months as for the first time in half a century, the spectre of blackouts has returned.
Oliver Gill takes a look at National Grid's doomsday scenario for when Britain's energy supply falls short.
German industry hit by energy costs
German industrial production fell in August, with energy-intensive sectors hit hard as Russian gas cuts take a heavy toll on Europe's top economy.
The manufacturing sector – the pillar of the German economy – produced 0.8pc less in August compared to the previous month, according to data from federal statistics agency Destatis.
Revised data showed that the sector registered zero growth in July from the previous month.
Europe's economic powerhouse is being squeezed as energy prices soar after Russia shut off gas supplies amid tensions over the Ukraine war, and warnings are mounting of a looming recession.
In energy-intensive industries, such as chemicals or metals, production fell more sharply, dropping 2.1pc in August and by 8.6pc since February.
Destatis added that supply bottlenecks due to continued disruptions from the pandemic and the war still pose a problem for many manufacturers.
Interest rate rises will cause more pain for Brits, admits BoE official
Bank of England policymakers are "acutely conscious" that rising interest rates are making life harder for Brits, but they will have to "stay the course" to get inflation under control.
That's according to Dave Ramsden, the Bank's Deputy Governor, who said the question for all nine members of the MPC was "how forceful do we need to be".
The BoE is expected to raise rates at its next meeting in November by as much as one percentage point. That would be the biggest increase since 1989.
Mr Ramsden was in the minority of MPC members last month voting for a more aggressive 75 basis point hike.
In a speech to the Securities Industry Conference today, he said he saw "more persistent inflationary pressures".
He said the Government's energy price freeze would mechanically lower inflation but increase it in the medium term, adding that the Chancellor's tax cuts will be factored into the next interest rate decision.
US futures waver ahead of jobs data
US futures swung between gains and losses this morning as traders await the latest jobs data for clues about future interest rate rises.
The payrolls report is forecast to show employers added a further 255,000 workers in September. While the figure is robust, it would be the fewest jobs added in a month since a decline in late 2020.
Unemployment is seen holding at 3.7pc, which is just above a five-decade low.
Futures tracking the Dow Jones fell 0.2pc, while the Nasdaq was up 0.2pc. The S&P 500 was little changed.
Hedge fund pushes for higher price in £9.5bn Aveva deal
A hedge fund is building its stake in Aveva and will join other investors in pushing Schneider Electric to up its offer for the UK industrial software company.
New York-based Davidson Kempner Capital Management, which now holds a 3.5pc stake in Aveva, is pushing for the £31 per share bid to be increased to as much as £35, Bloomberg reports.
French industrial giant Schneider last month agreed to buy out minority shareholders in Aveva in a deal that values the company at £9.5bn.
The bid has already been branded too low by the likes of M&G and Mawer Investment Management, with funds holding nearly 7pc of the company now said to be opposed to the current terms.
A vote on the takeover is expected in November and the deal will need the backing of 75pc of Aveva's minority investors to go through.
Four-day week workers face huge pay cuts
ICYMI – Workers moving to a four-day week are facing big wage cuts as only 1pc of companies plan to offer full pay for reduced hours.
Tom Rees has more:
A third of companies expect most workers to be on a four-day week within the next 10 years, new research by the Chartered Institute of Personnel and Development (CIPD) has revealed.
However, the survey revealed that only a tiny number of companies plan to reduce hours while maintaining pay.
A tenth of firms said they have cut working hours without slashing pay while only 1pc of companies said they would move to a shorter week and maintain staff wages.
A number of countries and companies are trialling a four-day working week with the idea rising in popularity, particularly on the Left. But there are major concerns that any boost to productivity will not offset the losses to output.
Just Stop Oil block London road in latest protest
Almost two dozen protesters from Just Stop Oil have blocked a key road in central London in the latest wave of protests.
Twenty-two campaigners sat across the road near Vauxhall Bridge. The group is demanding an end to new oil and gas exploration.
It comes a day after Just Stop Oil blocked a number of roads around Trafalgar Square. The protesters have vowed disruption every day in October.
🚨 BREAKING: 22 JUST STOP OIL SUPPORTERS BLOCK 2 ROADS NEAR VAUXHALL BRIDGE 🚨
At approximately 10:05 this morning, 22 supporters of Just Stop Oil sat down on two crosswalks near Vauxhall Bridge, peacefully blocking it to demand an end to new oil and gas.#A22Network pic.twitter.com/e0h8I4i54d
— Just Stop Oil ⚖️💀🛢 (@JustStop_Oil) October 7, 2022
UK hiring slows as outlook darkens
There was a further slowdown in recruitment activity in September as a darkening economic outlook prompted workers to stay put and companies to freeze hiring.
Permanent staff appointments and temp billings increased at the weakest rates in more than a year-and-a-half, according to a report from KPMG and REC.
At the same time, vacancy growth continued to ease and the downturn in candidate availability abated only slightly, while the rising cost of living drove further steep increases in pay.
One to watch: latest @RECPress UK #jobs survey shows hiring continuing to slow... 👇
NB. headline indices still signal growth (>50), and wage pressures remain strong, but headwinds from weaker economy are building
More here: https://t.co/XM1Fq80cYi pic.twitter.com/ZLx2nhIQO6
— Julian Jessop (@julianHjessop) October 7, 2022
Energy worries weigh on businesses
The ONS stats show the recent surge in energy bills is the biggest threat facing UK companies.
More than a fifth (22pc) of companies said energy prices were their main concern in August – that's up from 15pc in February.
Meanwhile, it was construction businesses that felt the impact hardest. They accounted for almost a fifth of all insolvencies in the first half of the year.
This was followed by the wholesaling and retail sector at 14pc.
22% of businesses said energy prices were their main concern in August 2022, up from 15% in late February.
In firms with 10 to 49 employees, this figure was 30%. pic.twitter.com/WlvrokC3kG
— Office for National Statistics (ONS) (@ONS) October 7, 2022
Pound gains as traders brace for more volatility
Sterling has gained ground for the first time in three days as caution prevailed ahead of US jobs data due this afternoon.
Traders are bracing for bigger swings in the currency amid uncertainty over how much longer the Bank of England will support the bond market.
The pound rose 0.3pc against the dollar to around $1.12. Against the euro it was also up 0.1pc at 87.59p.
Indian car makers propose import tax cut in UK trade deal
Indian car manufacturers are said to have proposed cutting the tax rate on imported cars to 30pc as part of a trade deal with Britain.
It's the first time that car firms in the country have backed such cuts, which could ease access to one of the world's most protected automobile markets.
India is the world's fourth-largest car market and has import taxes ranging from 60pc to 100pc – some of the highest in the world.
The levies have attracted criticism from companies including Tesla, which shelved entry plans because of the high tariffs.
Lobby group the Society of Indian Automobile Manufacturers has written to the government backing phased cuts to 30pc over five years, following a grace period of five years with none, Reuters reports.
The UK and India are currently in talks, with the signing of a final deal expected by the end of the month.
IFS: Kwarteng 'giving with one hand and taking away with the other'
Despite his pledges to slash taxes, Chancellor Kwasi Kwarteng is actually increasing the tax burden on households.
That's according to the Institute for Fiscal Studies, which said that for every £1 given to households through tax cuts, £2 is taken away through stealth freezes to tax and benefit thresholds.
For every £1 given to households through the high-profile cuts to taxes, £2 is being taken away in the stealthy freezes to tax and benefit thresholds.
Read @TomWatersEcon and Tom Wernham’s @NuffieldFound-funded #IFSGreenBudget chapter> https://t.co/kDE2QEw04f pic.twitter.com/NaVSEpE7DJ
— Institute for Fiscal Studies (@TheIFS) October 7, 2022
Superdry shares jump as it returns to profit
Shares in Superdry have leapt in morning trading as the fashion brand swung back to profit, though it warned it was cautious amid a darkening economic outlook.
The retailer reported a pre-tax profit of £21.9m in the year to the end of April, after tumbling to a £12.6m loss the previous year. Revenue also rose nearly 10pc to £610m.
Superdry shares jumped almost 13pc.
However, store visits to Superdry haven't yet recovered to pre-pandemic levels and the cost-of-living crisis is pushing up costs and denting consumer demand.
Chief executive Julian Dunkerton said:
These are exceptional times for retail and for the economy more generally, and like all brands we're having to work harder than ever to drive performance.
Against that backdrop, I am pleased that we managed to return the business to full-year profit, driven by increased full-price sales, whilst also making strong strategic progress.
London's most expensive home 'owned by Evergrande founder'
It's emerged that London's most expensive home is now owned by the founder of beleaguered Chinese property giant Evergrande.
The 45-room mansion overlooking Hyde Park was sold by the estate of former Saudi Arabian crown prince Sultan bin Abdulaziz for a record-breaking £210m in January 2020.
Officially, the acquisition of 2-8a Rutland Gate was made by Cheung Chung-kiu, a Chinese property developer whose company CC Land owns the Cheesegrate.
But the real buyer is actually Hui Ka Yan, the founder and chairman of Evergrande and once China's richest man, the Financial Times reports.
Chung-kui was given permission last year to refurbish the 62,000 square foot, seven-storey property, which was originally four large family homes before being converted into one palatial house in the 1980s.
Brits don't need to cut energy use, minister insists
The Government has insisted it's not asking people to use less energy, despite a warning from National Grid that the country could face three-hour blackouts this winter.
Climate Minister Graham Stuart told Times Radio: "We're not in the business of telling people how to live their lives", arguing that any public information campaign would not reduce the risk to Britain's energy supply.
National Grid's warning of power outages was based on a worst-case scenario in which the UK is unable to import electricity from Europe and struggles to attract enough gas imports.
Mr Stuart told Sky News: "If there were such a scenario, it would come at a very sharp point, so the fact that somebody had reduced their energy usage a week before or even a day before you get to a peak wouldn't really make any difference to the security of supply.
"In all the central scenarios, we are going to be fine."
Read more on this story: Inside the ‘civil emergency’ planning for blackouts this winter
Avanti handed six-month contract amid rail chaos
The Government has handed struggling rail operator Avanti a six-month contract, resisting pressure to nationalise the crucial West Coast route following months of disruption.
Avanti can keep operating the network linking London with Birmingham, Manchester, Liverpool and Glasgow until at least April 1, even after it scrapped thousands of services amid a driver shortage.
The decision will come as a relief to Avanti, which is owned by FirstGroup and Italy's Trenitalia, after the Government said it would consider nationalising the West Coast network.
The Department for Transport said Avanti had been placed on a short-term contract as a last chance to deliver an urgently needed increase in the frequency of trains.
Transport Secretary Anne-Marie Trevelyan said:
“We need train services which are reliable and resilient to modern day life. Services on Avanti have been unacceptable and while the company has taken positive steps to get more trains moving, it must do more to deliver certainty of service to its passengers.
“We have agreed a six-month extension to Avanti to assess whether it is capable of running this crucial route to a standard passengers deserve and expect.”
Wetherspoons struggles to lure back punters
Wetherspoons is facing a "momentous challenge" to persuade punters back to its pubs after they got used to drinking cheap supermarket beer during lockdown.
That's according to boss Tim Martin, who used the company's full-year results to have another go at UK lockdown policies.
He said: "During lockdown, dyed-in-the-wool pub-goers, many for the first time, filled their fridges with supermarket beer - and it has proved to be a momentous challenge to persuade them to return to the more salubrious environment of the saloon bar."
The no-frills pub chain posted sales rose of more than £1.7bn in the year to the end of July, up from £773m last year but still behind pre-pandemic levels.
It also cut pre-tax losses from £167m to just £30.4m, but still couldn't return to a profit. Mr Martin also warned of higher labour, repair and energy costs.
Still, shares jumped almost 8pc following the update.
Wetherspoons opened seven new pubs during the year, and sold, closed or ended the leases on 15 others. In July the business ran 852 pubs across its estate.
FTSE risers and fallers
The FTSE 100 is struggling for direction this morning after a volatile week of trading.
The blue-chip index inched marginally higher, with focus turning to US jobs data this afternoon that should give more clues about future interest rate rises.
Energy stocks BP and Shell gave a boost to the index as oil prices climbed after Opec's production cuts. Financial and consumer goods shares also gained.
Retailers including B&Q owner Kingfisher, Ocado and Frasers Group were the biggest fallers amid ongoing jitters about the economic outlook.
The domestically-focused FTSE 250 fell 0.3pc. Landscaping firm Marshalls crashed as much as 28pc after it warned of a slowdown in sales due to faltering demand.
Credit Suisse to buy back £2.7bn of its own debt
Credit Suisse has offered to buy back around 3bn Swiss francs (£2.7bn) of its own debt in a show of financial strength amid worries about the bank's stability.
The offer includes euro and pound sterling debt securities worth up to €1bn and a separate offer for US dollar securities up to $2bn, the Zurich-based lender said.
Credit Suisse is locked in turmoil just weeks ahead of the announcement of a major strategic review following a series of scandals. Its shares have lost half of their value this year.
In August, the Swiss bank appointed Dixit Joshi, a former Deutsche Bank executive, as its chief financial officer to replace David Mathers.
Credit Suisse’s overhaul is likely to also include asset sales or market exits across units, and is expected to significantly pare back the loss-making investment bank.
Adding urgency to the review, the price investors have to pay to insure the bank’s debt also surged recently to unprecedented levels.
Read more on this story: Bank of England monitors Credit Suisse amid market turbulence
Pubs and restaurants hit by 15pc rise in food costs
Britain's pubs and restaurants are now facing 15pc food price inflation as the cost of buying ingredients keeps rising.
The price of food and non-alcoholic drinks supplied to the UK's hospitality sector climbed again in August, according to the CGA Prestige Foodservice Price Index.
Prices were up 2pc compared to July, with milk, eggs, cheese, oils and fats jumping sharply. Inflation has been in double digits every month since February.
James Ashurst at CGA said: "While some pressures may be easing, a tough winter lies ahead."
FTSE 100 opens lower
The FTSE 100 has dipped slightly at the open as investors continue to digest the outlook for the economy.
The blue-chip index was marginally in the red at 6,995 points.
Chart: House prices dip in September
Kim Kinnaird, director of Halifax Mortgages, warns of trouble ahead in the housing market.
The events of the last few weeks have led to greater economic uncertainty, however in reality house prices have been largely flat since June, up by around £250.
Predicting what happens next means making sense of the many variables now at play, and the housing market has consistently defied expectations in recent times.
While stamp duty cuts, the short supply of homes for sale and a strong labour market all support house prices, the prospect of interest rates continuing to rise sharply amid the cost of living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead.
This will undoubtedly be a cause of some concern for homeowners, but the unprecedented rate of property price inflation we’ve seen in recent years has been far above the historic average.
It’s important to look at slower growth in this context – since the start of the pandemic average property values have risen by around +23pc (almost £55,000) with detached house prices up by more than £100,000 over the same period.
Mortgage crisis to hit house prices
Halifax has sounded the alarm over house prices after a surge in mortgage costs.
The average UK house price dipped 0.1pc in September to £293,835, showing the market was already starting to cool after a pandemic-induced boom.
But the recent surge in mortgage rates following Kwasi Kwarteng's mini-Budget threaten to add even more pressure onto the sector.
Halifax warned that the jump in borrowing costs, combined with higher interest rates and a wider cost-of-living squeeze, mean prices are likely to fall further in the coming months.
5 things to start your day
1) Royal Mail pension scheme made emergency cash call amid market turmoil - Emergency move is latest sign of concern within major schemes at the run on liability-driven investments
2) Is Kwarteng really letting us keep more of our money? - The Chancellor gave with one hand and took with the other
3) Four-day week workers face huge pay cuts - Only a tiny number of companies plan to reduce hours while maintaining pay
4) Inside the ‘civil emergency’ planning for blackouts this winter - National Grid sets out doomsday scenario for when Britain's energy supply falls short
5) Stealth tax raid deprives 2m of child benefits - The Exchequer saved around £2.5bn from the freezing of child benefit thresholds
Corporate: JD Wetherspoon, Superdry (full-year results)
Economics: Halifax house prices (UK), nonfarm payrolls (US), average hourly earnings (US), unemployment rate (US), labour force participation rate (US)