Russia will cut off gas supplies to Europe if countries refuse to pay in roubles, Vladimir Putin has warned.
The Russian leader said he had signed a decree saying customers must pay in the local currency from tomorrow or their contracts will be terminated. The G7 has previously rejected the demand.
In televised comments, Putin said buyers of Russian gas should open accounts in Russian banks, adding that the move was an important step in strengthening the country’s ailing economy.
European gas prices reversed earlier losses and pushed higher amid fears Europe could abruptly lose its bigger source of natural gas supplies.
Putin’s doubling down marks a reversal from earlier today, when both Germany and Italy said they’d received assurances from the Russian president that buyers could continue to pay in euros.
04:29 PM
FTSE 100 closes in the red
The FTSE 100 has slipped, weighed down by concerns over the war in Ukraine, closing 0.8pc lower to mark its worst session in three weeks.
Ukrainian President Volodymyr Zelenskiy said the country was prepared for new Russian attacks and that no quick resolution to the conflict was expected.
Meanwhile, Russian President Vladimir Putin is demanding foreign buyers pay for Russian gas in roubles from Friday or else have their supplies cut.
“I think it is the general panic that Putin’s statement has caused,” said Stuart Cole, head macro economist at Equiti Capital.
“There are a lot of European countries that will be severely impacted by this. The price of gas and fuel will potentially sky-rocket and even the traditional staples producers will struggle.”
04:15 PM
Boris Johnson opens the door for a fracking revival
Boris Johnson has raised fresh hopes of a relaxation of fracking rules after halting plans to fill wells owned by the energy firm Cuadrilla with concrete. Rachel Millard writes:
Cuadrilla said it had been given until June 2023 to “evaluate options for the site” after it was originally ordered to seal the three testing wells in Lancashire by June 30.
The company said it would temporarily plug the wells in northwest England and consider its options.
The decision by the North Sea Transition Authority comes just days before Mr Johnson and Kwasi Kwarteng, the Business Secretary, are expected to set out the UK’s new energy supply strategy.
03:54 PM
US oil futures start to weaken ahead of Biden releasing reserves
The US oil futures curve is already starting to weaken on the expected wave of oil supplies from the US Strategic Petroleum Reserve.
West Texas Intermediate crude futures were trading more than $5 a barrel above the next-month price a few weeks ago – a level that indicates traders are willing to pay a huge premium to secure prompt supply.
03:40 PM
Handing over
That’s all from me for today – thanks for following along! Giulia Bottaro will take over from here.
03:24 PM
UK ‘considers’ joining US oil release
Britain is said to be considering joining a US plan to launch a coordinated release of oil from global reserves.
After announcing a record release of US supplies, Joe Biden is now pushing for members of the International Energy Agency to contribute their own barrels.
Bloomberg reports that Business Secretary Kwasi Kwarteng is considering the proposals.
03:16 PM
US to release 1m barrels of oil per day for six months
US President Joe Biden has confirmed plans to launch the biggest ever release of oil from emergency reserves.
The US will release around 1m barrels of oil per day for the next six months in an effort to reduce reliance on Russia and bring down soaring prices. The total could reach up to 180m barrels.
Mr Biden also will invoke Cold War powers to encourage domestic production of critical minerals for batteries for electric vehicles and other uses.
The White House described the move as “unprecedented”.
This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up.
03:05 PM
No 10: UK won’t pay for Russian gas in roubles
Boris Johnson’s spokesman has said the UK does not plan to pay for Russian gas in roubles.
Asked if there were any circumstances in which Britain would pay in Russian currency, the spokesman told reporters: “That is not something we will be looking to do.
He added that the Government was monitoring the implications of Putin’s demand for the European market.
03:03 PM
Putin and Europe insist supplies will continue
There have been efforts on both sides to insist the new decree won’t impact gas supplies to Europe.
Putin’s demands mean European nations could continue to pay Gazprombank in euros. The lender would then change this money into roubles and use this to buy the gas.
In this sense, the arrangement could mean that the West continues its payments as normal, but the gas would ultimately be bought in roubles.
Putin said Russia will continue supplying gas to Europe even as it demands customers pay in roubles, easing fears that the change could lead to damaging disruptions. He said Russia “values its business reputation”.
European officials said the change isn’t likely to affect supplies.
02:55 PM
How has Europe responded to Putin’s threat?
After Putin doubled down on his demand for roubles and threatened to cut off gas supplies to Europe tomorrow, here’s how European leaders have reacted.
German economy minister Robert Habeck:
With regard to the threat, demand or consideration – one doesn’t know how to call it any more – to be made to pay in rouble, it is crucial for us that the contracts are respected.
It is important for us not to give a signal that we will be blackmailed by Putin.
German Chancellor Olaf Scholz:
By all means, it remains the case that companies want, can and will pay in euro.
French economy minister Bruno Le Maire
Contracts are contracts.
02:46 PM
US targets Russian tech firms with fresh sanctions
The US has set its sights on Russian tech companies as it rolled out fresh sanctions against Moscow.
The Treasury Department said it imposed sanctions on 21 entities and 13 people, including Joint Stock Company Mikron, the largest Russian manufacturer and exporter of microelectronics and Russia’s largest chipmaker.
It also expanded sanctions authorities to include the aerospace, marine and electronics sectors of the Russian economy. This allows Washington to impose sanctions on any person or entity deemed to operate in those sectors.
The ratcheting up of measures was also designed to target “malicious cyber actors,” the Treasury said.
Treasury Secretary Janet Yellen said:
We will continue to target Putin’s war machine with sanctions from every angle, until this senseless war of choice is over.
02:33 PM
BASF and Bayer issue warning over German gas crunch
German chemical giants including BASF have warned that disruption to the industry’s gas supplies will force shutdowns that will ripple through the economy.
The warnings echoed calls from the IGBCE chemical workers union and the VCI chemical association, which is in crisis talks with the government over the sector’s reliance on Russian energy.
Covestro – a manufacturer of products for automotive, construction, health and electronics industries – made a similar statement, as did Evonik Industries AG.
Germany has already launched an emergency plan as it gears up for rationing should Russia cut off gas supplies to Europe.
Putin’s vow to halt contracts tomorrow unless buyers pay in roubles – and Germany’s refusal to do so – have made that outcome more likely.
02:18 PM
Scholz: Germany to keep paying for gas in euros
German Chancellor Olaf Scholz said he’s told Vladimir Putin that his country has checked its contracts with Russia for gas deliveries and will keep paying for them in euros and sometimes dollars.
Mr Scholz reiterated that Germany hoped to become independent of Russian oil and coal imports this year, but it would take longer to reduce its dependence on Russian gas.
The Chancellor added that loopholes in sanctions introduced over Russia’s invasion of Ukraine must be closed to keep up the pressure on Putin.
02:14 PM
Cold snap to push French power prices to record high
Russia’s threat to turn off the taps couldn’t come at a worse time.
French power prices have surged to unusually high levels as the country braces for a cold snap next week, while almost half its nuclear reactors are also offline.
Cold weather on Monday is set to bring the highest demand for power since the start of February, while nuclear output remains near an 11-year seasonal low.
This was enough to send the power contract for Monday to a record high and prompt EDF to restart a coal unit.
02:02 PM
How can Europe survive without Russian gas?
01:59 PM
Putin says buyers must use Gazprombank for rouble gas payments
Putin’s decree states that foreign buyers of Russian gas would have to use special accounts at Gazprombank to make payments.
A foreign buyer is now obliged to transfer foreign currency to one special so-called “K”, account. Gazprombank would then buy roubles on behalf of the gas buyer to transfer roubles to another special “K” account, the order said.
Gazprombank would then transfer rouble funds from a ‘K’ type account of the foreign gas buyer to Gazprom’s rouble accounts. Gazprombank can open such accounts without a presence of a foreign buyer’s representative.
01:57 PM
Who relies on Russian gas?
Putin’s threat to cut off gas supplies to Europe is likely to wreak further havoc in energy markets.
Russia is responsible for about 40pc of the continent’s total gas supplies, with Germany reliant on Moscow for about half its imports.
01:53 PM
Gas prices swing as Putin prepares to turn off the taps
Gas prices have swung sharply amid growing signs that Russian gas supplies to Europe will be cut off tomorrow.
Putin and Europe appear to be at loggerheads after Putin threatened to halt contracts unless payments are made in roubles. Germany and France both rejected the demand.
Markets had taken reassurance earlier in the day after comments from Germany and Italy appeared to suggest Putin had backed down on this threat.
But the ratcheting up of rhetoric pushed European prices more than 5pc higher, while the UK equivalent was up a similar amount. Prices have swung around 18pc between today’s highs and lows.
01:48 PM
Germany: We will not be blackmailed by Putin
Germany and France have hit back at Putin’s threat to cut off gas supplies, describing the move as “blackmail”.
Robert Habeck, Germany’s finance minister, said he had not yet seen a new degree signed by Putin mandating gas payments in roubles.
But he said his country was prepared for all scenarios, including a stoppage of Russian gas flows to Europe.
Mr Habeck added that Moscow’s latest attempt to divide western nations had failed and that they were determined not to be “blackmailed” by Russia.
French finance minister Bruno Le Maire also said France and Germany rejected Russia’s demand.
01:32 PM
Putin: We are not going to do charity
Here are the full comments from Vladimir Putin, who’s threatening to turn off the taps tomorrow:
In order to purchase Russian natural gas, they must open rouble accounts in Russian banks.
It is from these accounts that payments will be made for gas delivered starting from tomorrow.
If such payments are not made, we will consider this a default on the part of buyers, with all the ensuing consequences.
Nobody sells us anything for free, and we are not going to do charity either – that is, existing contracts will be stopped.
01:00 PM
Boots sales jump as owner mulls sale
Boots has shrugged off the impact of omicron to post a jump in sales as the potential sale process of the pharmacy chain rumbles on.
Total UK sales grew by 15.2pc in the three months to the end of February as high street footfall continued to pick up.
The company said it suffered “headwinds from the omicron variant” but was optimistic about strong like-for-like trading. Beauty sales were particularly strong over the period, the company added.
It comes as US owner Walgreen Boots Alliance weighs up a sale of the business. Private equity firms Apollo and Sycamore are said to be among the interested suitors in a deal that could value Boots at £7bn.
Sebastian James, Boots’ UK and Ireland boss, said it was a “very exciting time” for the chain.
Boots continues to bounce back strongly from the pandemic and delivered another solid performance this quarter, with sustained retail and pharmacy sales growth and market share gains across all categories.
Our strategic focus continues to be on transforming our beauty, healthcare and digital offerings and this quarter we made excellent progress – with strong take-up of our new and existing healthcare services while maintaining our leading position in the growing beauty category.
12:49 PM
Young Russians mourn the loss of a Western lifestyle as a new iron curtain rises
A daily medium cup of coffee in Moscow has turned into an unrealistic luxury for Katya*, costing “as much as a whole meal in a mid-range cafe”.
Genevieve Holl-Allen and Tom Rees report:
When the Russian capital’s shopping centres were filled with Western brands, “I regularly bought Nespresso coffee, and Ikea products”, says the 21-year-old.
Just one month into Putin’s war with Ukraine, however, the shop spaces are “half-empty”, Katya says. “Chocolate and Coca-Cola are still currently on sale, but soon they may not be either.”
“Uniqlo, H&M, Zara, Pull&Bear, Sephora, Jo Malone, Starbucks, McDonalds, Nespresso, Ikea are closed, as are many brands like Dolce & Gabanna and Gucci.”
As foreign companies pull out of Russia, a new iron curtain is rising between Moscow and the West. Many young Russians are mourning the loss of a lifestyle they have grown up accustomed to.
11:48 AM
Eon blames Martin Lewis for website crash
Energy supplier Eon is getting a bit of heat on social media after it blamed financial journalist Martin Lewis for its website troubles.
Many customers have struggled to gain access to their suppliers’ websites after consumer experts including Mr Lewis recommended submitting meter readings before the energy price cap rises tomorrow.
Responding to a complaint about its website being down, Eon said: “Martin has once again created unprecedented demand bringing down Britain.”
The tweet has since been deleted and Eon said its “sense of humour missed the mark”.
However, it’s still using the same line in response to angry customers – just with a smiley face to soften the blow.
11:22 AM
Italy joins Germany in Putin climbdown claims
Italy has said Vladimir Putin backed down on his demands for gas payments to be made in roubles, supporting similar comments from Germany earlier today.
Prime Minister Mario Draghi said the Russian leader had told him European buyers could keep making purchases in euros, with conversions into local currency made internally within Russia.
He said: “Putin said that current contracts will remain in place. The feeling I had it is not absolutely easy to change the currency without violating contracts.”
German officials said Putin delivered a similar message to Chancellor Olaf Scholz in a call yesterday.
11:18 AM
Wall Street set to open flat as oil prices drop
Wall Street is poised for a muted start to trading, though energy stocks are in decline amid reports the US is preparing a massive release of emergency oil reserves.
Shares in companies including Exxon Mobil and Occidental Petroleum fell in pre-market trading as the mooted release of up to 180m barrels of oil dragged prices down 6pc.
Futures tracking the S&P 500 and Dow Jones were little changed, while the Nasdaq ticked up 0.2pc.
11:14 AM
EU officials raid Gazprom’s German offices
European Union officials have raided Gazprom’s German offices as part of an investigation into the Russian gas giant’s role in pushing up prices on the Continent to record highs.
Simon Foy has more details:
Officials visited Gazprom’s German premises as the bloc ramped up its inquiry into whether the company’s behaviour caused a spike in gas prices and worsened the region’s energy crisis, Bloomberg reported.
Gazprom supplies about one-fifth of the German gas market but capped its additional supplies at a time when inventories were already at their lowest level in more than a decade.
It comes as Europe faces its worst energy crisis in a generation, with the UK’s energy price cap rising by 54pc, an average of £693 per household, from Friday.
11:00 AM
Emissions jumped in 2021 as Brits went back to work
UK greenhouse gas emissions rebounded last year as lockdowns were lifted and people started to go back to work.
Total emissions in 2021 hit 424.5m tonnes carbon dioxide equivalent, or 4.7pc higher than the previous year, the Business Department said.
They were still 5.2pc lower than pre-pandemic levels in 2019, though, with hybrid working patterns and a shift to renewable energy sources driving a long-term decline.
It means emissions have dropped 47.3pc since 1990, with the biggest fall coming from power stations as more and more coal plants shut down.
Still, there’s more work to do. Boris Johnson has set a target of reducing greenhouse gas emissions by 68pc by 2030 and net zero by 2050.
10:41 AM
UK targets ‘Butcher of Mariupol’ in fresh wave of sanctions
The UK has targeted the so-called “Butcher of Mariupol” in a fresh wave of sanctions that also hits media organisations and key figures within them.
Russian general Mikhail Mizintsev, who gained the moniker for his role leading the brutal siege and bombardment of the city, was one of 14 additions to the sanctions list.
Top media figures targeted include RT’s managing director Alexey Nikolov, Sergey Brilev, a prominent news anchor at the state-owned Rossiya Television and Radio network, and Sputnik’s editor-in-chief Anton Anisimov.
Foreign Secretary Liz Truss said: “Putin’s war on Ukraine is based on a torrent of lies.
“Britain has helped lead the world in exposing Kremlin disinformation, and this latest batch of sanctions hits the shameless propagandists who push out Putin’s fake news and narratives.”
It comes after the UK yesterday put in place new legal powers to prohibit maintenance on aircraft and ships belonging to specific sanctioned Russian oligarchs or their businesses.
Read more on this story: Putin’s cronies to have ‘luxury toys’ seized under new sanctions
10:30 AM
Energy websites down as price cap hike fuels meter reading rush
Energy customers are having trouble submitting gas and electricity meter readings ahead of the price cap rise, with many suppliers’ websites unreachable or offline.
The price cap is set to rise 54pc from tomorrow, meaning energy bills will surge by £693 for millions of households.
Consumer advice groups have advised people to submit readings for their electric and gas usage before the rise comes into effect to avoid being charged a higher rate for energy they used before then.
But many customers on social media reported problems accessing the websites of some major providers such as British Gas, Shell Energy, and Eon, or being able to log into their accounts.
Scottish Power said it was working to resolve an issue with its website and told customers they could submit meter reading via an automated telephone line instead.
10:01 AM
Olaf Scholz plays high stakes game of chicken over Putin’s gas
After Putin appeared to climb down in a stand-off over payments, Rachel Millard looks at the risky game being played by Germany Chancellor Olaf Scholz.
Robert Habeck had a stark message for Germany’s citizens on Wednesday morning: use less energy.
“Every kilowatt hour counts,” Germany’s economy minister told reporters, as Europe’s largest economy triggered the first, early warning phase of its emergency gas plan, which could ultimately lead to state-imposed gas rationing.
German Chancellor Olaf Scholz enacted the move in response to the Kremlin’s demands last week for “unfriendly” countries to pay for oil and gas from Russia in roubles instead of euros or dollars.
The apparent attempt to prop up Russia’s currency sowed further tension in the market amid huge concern over supplies.
09:51 AM
S4 Capital slides again amid questions over audit delay
S4 Capital shares have extended their losses this morning as questions swirl over an audit issue that prompted Sir Martin Sorrell’s firm to delay its annual results.
Shares fell 6.7pc after crashing more than a third on Wednesday, wiping £950m off S4’s market value.
The ad firm delayed its results, saying PwC was unable to complete the work in time. It’s the second time the company has postponed the announcement, having already done so at the start of March when it blamed Covid-related delays.
But Morgan Stanley analyst Omar Sheikh said that, based on conversations with the company, the reason for the delay is no longer a resource issue, and the lack of a revised date suggests the problem is “non-trivial.”
S4 Capital and PwC declined to comment.
09:37 AM
Russian stocks rise as trading restrictions eased
Russian stocks pushed higher as the country lifted some of the trading restrictions aimed at staving off a market collapse.
The Moscow Exchange jumped as much as 5.3pc, with energy giants Gazprom and Lukoil leading the gains.
Professional market participants, including brokers and banks, will now be allowed to short some of the index’s biggest stocks, while the clients of brokers – including retail investors – will still be blocked from short-selling.
The Bank of Russia also said trading hours will be extended from a shortened four-hour session to the regular schedule of 9:50am to 6:50pm.
The ban on foreigners making transactions in any Russian stocks remains in place, however.
09:13 AM
Pound slips against dollar
Sterling has slipped against the dollar as uncertainty over the war in Ukraine drives investors away from riskier assets.
Ukrainian forces are preparing for new Russian attacks in the east of the country, suggesting the conflict may still intensify despite Moscow’s withdrawal of troops from around Kyiv.
In the absence of major economic news, the pound has drifted against the dollar, dipping 0.1pc to $1.3126 in trading this morning.
Against the euro it rose slightly to 84.8p, reversing some of the recent weakness that saw it hit a three-month low overnight.
09:02 AM
IoD warns of ‘dramatic collapse’ in business confidence
British businesses suffered a dramatic collapse in confidence following Russia’s invasion of Ukraine, according to a survey by the Institute of Directors (IoD).
The IoD’s confidence index slumped from -4 in February to -34 in March – the lowest level since October 2020.
Investment intentions have also fallen back, with the net proportion of firms planning to increase investment falling from +14pc in February to +2pc this month.
More than half of business leaders said the cost of energy was damaging their organisation – three times as many as a year ago. Surging inflation and rising taxes were also cited as concerns.
Kitty Ussher, chief economist at the IoD, said:
Business has experienced a dramatic collapse in confidence following the invasion of Ukraine, leading to many firms putting investment plans on hold.
The reality of higher energy and commodity prices, plus the hike in employment taxes, all overlaid with a general climate of deep uncertainty, is now having a real economic impact.
The Chancellor has said he will look again at tax incentives for business investment over the next few months. That work has now become even more urgent.
08:53 AM
Gas prices fluctuate as traders weigh Putin’s rouble demand
Natural gas prices swung between gains and losses as traders weighed up Putin’s demand for rouble payments and the potential risk to supplies.
Benchmark European prices rose 1.5pc after declining as much as 9.9pc earlier in the day. The UK equivalent was up just over 2pc.
Putin’s demand has been spurring fears of a supply crisis, with Russian media reporting Gazprom was looking at ways to cut flows to Europe.
But jitters were eased after Germany said Vladimir Putin had told Chancellor Olaf Scholz that European buyers could continue making payments for gas in euros to Gazprom, which would then be converted to roubles.
08:41 AM
H&M slumps as Ukraine war hammers growth
Shares in H&M slumped to a two-year low after the clothing chain reported a sudden slowdown in revenue growth due to Russia’s invasion of Ukraine.
Sales rose just 6pc in March, compared to 23pc growth in the previous three months, while pre-tax profit also missed expectations.
Shares dropped as much as 11pc in early trading, knocking $2.4bn (£1.8bn) off the company’s market value.
The war and a resurgence of Covid cases in China are denting the recovery and hampering H&M’s efforts to clear out a six-year inventory build-up.
Chief executive Helena Helmersson, brought in just before the pandemic started, is now facing an uphill battle to reach her goal of doubling sales by 2030.
08:29 AM
Gazprom ‘studies options’ for cutting gas supplies to Europe
Russian energy giant Gazprom is looking at options for cutting gas supplies to Europe amid a stand-off over payments, Russian newspaper Kommersant reports.
Vladimir Putin has said Moscow will demand gas payments from “unfriendly” nations in roubles and gave Gazprom a deadline of today to work out how this would work.
But the G7 has rejected the demand, sparking fears that the Kremlin could react by turning off the taps.
Kommersant wrote: “Gazprom… is indeed working on an option of a complete stoppage of gas supplies to ‘unfriendly countries’ and is evaluating the consequences of such measures.”
08:19 AM
Trainline jumps on Rail Delivery Group pact
Shares in Trainline jumped by more than a fifth after the company reached an agreement with Rail Delivery Group over the new terms of its retail licence.
The memorandum of understanding will see a 0.5pc reduction in the commission Trainline can take from online sales from 5pc to 4.5pc, with a removal of central industry costs predicted to reduce the drop to 0.25pc.
While the move will dent Trainline’s profits, the sum is better than analysts had feared. Shares rose as much as 21pc.
Chief executive Jody Ford said: “This is a step forward in providing greater certainty to Trainline.”
08:07 AM
Ryanair: Cost-of-living crisis won’t dent summer travel
Strong pent-up demand will fuel demand for air travel this summer even as soaring energy prices squeeze consumer spending.
That’s according to Ryanair chief executive Michael O’Leary, who said families were especially eager to travel across Europe despite the impact of the Russia-Ukraine war, higher oil prices or wider inflation.
He told Bloomberg: “We believe the peak summer travel months, July, August and September, will be very strong.”
Mr O’Leary warned a sustained rise in oil prices could start to blunt demand toward the end of the year, but insisted any concern over consumer spending would generally favor low-cost airlines like Ryanair.
He said: “If oil prices remain high, where we think things will get a bit scary will be next winter. You’ll have rising energy demand, European economies will be somewhat undermined by higher oil prices or concerns over energy supply, and we may be looking at the risk of a recession.”
Ryanair is 80pc hedged at $63 a barrel on its jet-fuel requirements until next March, helping it to keep down prices even as competitors are forced to raise fares in response to the spiralling cost of oil.
07:58 AM
Brewin Dolphin skyrockets on £1.6bn takeover
Shares in Brewin Dolphin have surged after it agreed a £1.6bn takeover offer with Royal Bank of Canada.
RBC Wealth Management will pay 515p a share in cash for the British wealth manager, marking a 62pc premium to its last closing share price.
Shares surged more than 60pc after the deal was announced.
It’s the latest example of wealth mergers as consolidation sweeps through the industry. The deal will create a company with £664bn of assets under management and, based on 2021 earnings, combined annual revenue of £545m.
Doug Guzman at RBC said:
The UK is a key growth market for RBC, and Brewin Dolphin provides us with an exceptional platform to significantly transform our wealth management business in the region.
07:51 AM
British Gas increases support fund to £6m
British Gas has said it’s putting an additional £2m into a support fund to help customers struggling to pay their bills.
The £6m fund, which provides grants of between £250 and £750, was set up in response to surging inflation and the cost-of-living crisis.
Any customers with savings of less than £1,000 who is struggling to pay their bills is eligible to apply for a grant. British Gas said over 2,500 grants have already been given out with an average sum of over £550.
Chris O’Shea, chief executive of parent company Centrica, said:
We hear from customers every day who are struggling with rising household costs and we want to do everything we can to support them during this difficult time.
The extra funding adds to the financial support and advice we already offer and ensures grants will be available for our customers as we go through the year.
I’m proud of the way our colleagues want to help our customers, and we want all of our customers to know they shouldn’t be struggling alone. In addition to helping as many as we can financially, we will also point them in the direction of the right debt services and support that provides them with longer term help.
07:38 AM
Household savings tumble ahead of cost-of-living squeeze
Britons’ savings pots were run down to the lowest level since the start of the pandemic by the end of last year, leaving households exposed to the soaring cost of living, writes Louis Ashworth.
Household saving ratios fell to 6.8pc in the fourth quarter of 2021 according to new figures from the Office for National Statistics, the tightest since the end of 2019.
The measure – which tracks how much of the typical household’s income is being put into savings products – fell from 7.5pc the previous quarter, having peaked at 23.9pc in the early months of the pandemic.
Paul Dales at Capital Economics, said the decline was “encouraging” as it showed households were willing to whittle down their savings to “carry on spending”.
“A continuation of this trend is the key reason why we suspect that the economy will probably avoid a recession this year even as real incomes fall further,” he said.
Samuel Tombs from Pantheon Macroeconomics said households should “in theory” be burning through their savings because of the strong labour market, but warned a fall in confidence and continued high savings rates indicated expenditure may be weak.
07:36 AM
FTSE risers and fallers
The FTSE 100 has started the day in positive territory, extending its gains from yesterday’s rally.
The blue-chip index edged up 0.1pc after data showed the economy grew more strongly than expected in the last three months of last year.
There were gains for industrial, banking and insurance stocks. Pearson was the biggest riser, gaining more than 2pc after plunging yesterday when Apollo backed out of a £7.2bn takeover bid.
Gains were capped by BP and Shell, however, which lost ground as oil prices tumbled.
The domestically-focused FTSE 250 jumped 0.7pc, with Brewin Dolphin surging more than 60pc. It came after Royal Bank of Canada made an all-cash offer of £1.6bn to buy the British wealth manager.
07:28 AM
French inflation jumps to new record high
It’s not just Britain grappling with surging prices – French inflation has jumped by more than expected to reach a new record high.
Consumer prices rose 5.1pc in March from a year ago – the most since data began in 1997. This was above economists’ expectations of 4.9pc.
It follows unexpectedly high readings in both Germany in Spain, with inflation in the latter reaching almost 10pc.
The numbers will pile more pressure on the ECB to raise interest rates, though President Christine Lagarde has doubled down on a cautious approach.
The French figures will also pose a challenge for President Emmanuel Macron, who’s facing elections in little more than a week.
Cost-of-living has been a key part of his campaign, and the Government has already earmarked about €25bn (£21bn) to cap electricity and natural gas prices and offer motorists a rebate on petrol and diesel.
?? French inflation rose above 5% in harmonised terms in March, but it was all about energy and food. Core inflation stabilised – chart below through February. pic.twitter.com/tX6gJX8clm
— Frederik Ducrozet (@fwred) March 31, 2022
07:01 AM
FTSE 100 rises 0.2pc
The FTSE 100 has started on the front foot, extending gains after yesterday’s rally.
The blue-chip index rose 0.2pc to 7,590 points.
07:00 AM
Nationwide: Housing market still set to slow
Robert Gardner, chief economist at Nationwide, says the housing market has retained a surprising amount of momentum, but is likely to slow in the months ahead.
The continued buoyancy of housing demand may in part be explained by strong labour market conditions. The unemployment rate has continued to trend down in recent months (to 3.9pc in the three months to January) from already low levels. Wage growth has accelerated, though it is running below inflation.
The significant savings accrued during lockdowns is also likely to have helped prospective homebuyers raise a deposit.
Nevertheless, we still think that the housing market is likely to slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high.
Moreover, assuming that labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates.
06:59 AM
House prices grow at sharpest rate since 2004
UK house prices jumped at their fastest annual pace since 2004 this month as the red-hot property market defies the wider cost-of-living crisis.
Prices jumped 14.3pc from a year earlier, taking the average value to a record £265,312 , according to Nationwide figures. In March alone, prices rose 1.1pc.
The cost of a home has risen for eight consecutive months, and now stands 21pc higher than before the pandemic.
While rising inflation, interest rate rises and a jump in energy bills are set to put the squeeze on budgets, there’s no sign this is dampening demand just yet.
06:44 AM
ONS: Economy just 0.1pc below pre-Covid levels
Darren Morgan at the ONS said:
GDP grew a little stronger than we first thought in the fourth quarter, meaning it is now only 0.1pc below its pre-pandemic level.
Savings were at their lowest since the start of the pandemic as household spending rose, mainly driven by rising prices.
That underlying current account deficit halved, as UK-based businesses earned more income from abroad than foreign-based companies earned in the UK for the first time in a decade.
06:41 AM
UK economy grew more quickly than expected in late 2021
The UK economy grew more quickly than previously thought in the last three months of last year, when the country was battling a wave of omicron cases.
GDP increased by 1.3pc in the fourth quarter compared to the previous three-month period, according to the ONS. This was above previous estimates of 1pc.
The largest drivers of growth were health and social work activities, driven by increased visits to doctors at the start of the quarter, as well as a large increase in Covid testing and tracing and the extension of the vaccination programme.
The figures mark an acceleration from the economy’s 0.9pc growth in the third quarter but are well below its 5.6pc expansion in the April-June period of last year when it was rebounding from lockdowns.
Plus, the growth is unlikely to last. Investors expect the recovery to slow in 2022 as inflation heads for almost 9pc and households face the biggest fall in living standards since at least the 1950s.
06:36 AM
Oil slumps on US release plans
Oil prices slumped this morning on signs the US is considering tapping its reserves again with a record release.
Brent crude dropped almost 4pc to around $109 a barrel, while West Texas Intermediate was down 5pc at $102.
The potential oil release comes ahead of a planned meeting of Opec. The producer cartel is expected to maintain its strategy of modest output increases and key members have urged the US to trust its strategy for managing supply.
Warren Patterson at ING Group said: “Suggestions that we could see up to 180m barrels released over several months is significant and would help to ease some of the tightness in the market.”
06:29 AM
Biden mulls massive oil release
Good morning.
US President Joe Biden is poised to make a dramatic intervention in energy markets as he looks to keep a lid on surging fuel prices.
His administration is said to be considering the biggest ever release from emergency reserves. It would see around a million barrels released every day for several months, with the total reaching as much as 180m barrels.
At the same time, there’s a diplomatic push to encourage a coordinated global release by IEA members states.
Oil prices have held above $100 a barrel as Russia’s war in Ukraine rattles markets and traders boycott Moscow. Benchmark Brent crude fell 4pc to $109 following reports of the release.
5 things to start your day
1) Olaf Scholz plays high stakes game of chicken over Putin’s gas Germany appears to have the upper hand as it seeks to phase out Russian supplies – but risks severe consequences if it gets things wrong
2) £1,700 a year blow for homeowners as cheap mortgages expire Rush to remortgage before Bank of England raises interest rates to more than 2pc
3) Visa and Mastercard caught in legal storm over card fees Class action alleges that the two providers charge fees up to six times the maximum level on corporate credit cards
4) Sir Martin Sorrell suffers £100m blow as S4 Capital shares crash PwC says it was unable to complete an annual results audit ahead of Thursday’s scheduled release
5) Muck-spreading ban lifted in victory for farmers Rising cost of fertiliser risked creating food shortages if farmers remained unable to use manure as an organic alternative
What happened overnight
Asian stock markets sank Thursday after Chinese manufacturing weakened and Russian shelling around Ukraine’s capital shook hopes of progress in peace talks.
Shanghai, Hong Kong and Tokyo declined while Seoul gained. Oil fell more than $7 per barrel in New York but stayed above $100.
Coming up today
-
Corporate: BBGI Global Infrastructure, Chesnara, Hostelworld Mears Group, Provident Financial, S4Capital (full-year results); 3i Infrastructure, Oxford Instruments, Pets At Home (trading statement)
-
Economics: GDP (UK), Nationwide house price index (UK), retail sales (Ger), unemployment rate (EU), jobless claims (US), personal spending (US), Chicago Purchasing Managers’ Index (US)
