The EU has admitted countries may be able to comply with Putin’s demand for gas payments in roubles without breaching sanctions against Russia.
Putin has demanded that so-called “unfriendly” nations open accounts at sanctioned lender Gazprombank, where payments in euros or dollars would be converted into roubles.
The European Commission has refused to comply with the order and initially said doing so would fall foul of sanctions. It’s now backed down on this claim, although the bloc said it wasn’t clear how such a procedure would work.
It came as the UK issued a temporary licence allowing payments to Gazprombank for gas used in the EU until the end of May.
05:12 PM
Wrapping up
It’s time to close the blog, we shall see you on Monday! Before you set off for the weekend, have a look at the latest stories from the business and money reporters:
05:11 PM
Exxon ban on LGBTQ Pride flag triggers employee backlash
Exxon Mobil plans to prohibit the LGBTQ-rights flag from being flown outside its offices during Pride month in June, prompting a furious backlash from Houston-based employees.
Exxon updated company guidance on what flags can be displayed outside its offices, banning “external position flags” such as PRIDE and Black Lives Matter, according to the policy seen by Bloomberg News.
In response, members of Exxon’s PRIDE Houston Chapter are refusing to represent the company at the city’s June 25 Pride celebration.
“Corporate leadership took exception to a rainbow flag being flown at our facilities” last year, Exxon’s PRIDE Houston employee group wrote in the email Thursday. “PRIDE was informed the justification was centered on the need for the corporation to maintain ‘neutrality.’”
04:55 PM
Germany risks €180bn blow from ditching Russian oil
Germany is at risk of a crippling recession if it bans Russian fossil fuels and has already suffered an economic downturn in the wake of the invasion of Ukraine, according to damning assessments by economic forecasters. Tom Rees has more:
The country’s output will be 5pc smaller if it ditches imports of oil and gas from the Kremlin, according to the Bundesbank central bank – a shock equivalent to €180bn (£151bn).
It came as the International Monetary Fund (IMF) warned the country had already suffered its second recession in two years over the six months to March.
04:36 PM
FTSE 100 closes lower
London’s miners have had another weak day, but this time did not drag the FTSE 100 below the performance of its global peers during a rough day on international markets.
The FTSE 100 closed down sharply, and was likely saved from an even more devastating drop by a rapidly falling pound. It ended at 7,521, 1.4pc lower.
Several miners have reported weaker-than-expected results this week, and earnings are being hit by increased costs. But London was at the mercy of global headwinds as its banks, including HSBC and Barclays were caught up in a sell-off caused by comments from the US Federal Reserve.
CMC Markets analyst Michael Hewson said: “It’s been a disappointing end to the week for markets in Europe, after Fed chairman Jay Powell signalled that the Federal Reserve could well go much harder, and a lot quicker when the central bank pulls the trigger on the first of what might be several 50 basis points rate hikes, starting next month.
“Financials appear to be taking the biggest hit, after a narrowing of yield differentials, prompted concern about the prospect of a policy mistake by central banks, and a possible recession by the end of the year.”
04:17 PM
Ferrari to recall cars in China
Luxury sports car maker Ferrari will recall 2,222 cars in China due to a potential fault in its braking systems, China’s market regulator has announced.
The recall covers the 458 Italia, 458 Speciale, 458 Speciale A, 458 Spider, 488 GTB and 488 Spider series models, the State Administration for Market Regulation said, and is for cars imported between March 2010 and March 2019. The recall will begin on May 30.
Reuters reported that the recall is part of a wider action Ferrari is undertaking globally over the same issue for models produced over the period, which also saw the carmaker agreeing to a recall campaign in the US in November last year.
In the car industry, recalls and their timings are normally decided by each individual national authority after issues emerge or are flagged by the constructor.
03:56 PM
Netherlands aims to cut Russian oil and gas imports by end of 2022
The Netherlands aims to cut Russian oil and gas imports by the end of the year, Dutch Prime Minister Mark Rutte has said, though he admitted Europe remains dependent on Moscow’s supply.
The European Union is scrambling to find alternatives to Russian energy after Moscow’s invasion of Ukraine since Russia currently supplies 40pc of the EU’s gas needs and some 15pc to the Dutch.
Rutte said: “What the Netherlands would actually like to achieve is being independent of Russian gas and Russian oil before the end of the year.
“We can achieve this by working hard on a mix of energy savings and sustainability, but it will also have to lead to the import of energy from other countries, including liquid natural gas.”
03:37 PM
Former Tesco executive Trevor Masters to lead Poundland owner
Former Tesco executive Trevor Masters has been named chief executive of Poundland’s parent company, PepCo, on a permanent basis.
The retail veteran joined the company in 2019 and took over as interim chief executive last month after former boss Andy Bond stepped down for health reasons.
PepCo said the decision comes after an extensive search process. The board also announced finance chief Nick Wharton is also stepping down at the end of the month due to health issues. Mat Ankers has been appointed interim chief financial officer.
Prior to joining PepCo, Mr Masters spent 38 years with Tesco working in a number of senior roles, including as international director.
03:23 PM
Handing over
That’s all from me today – thanks for following! Giulia Bottaro will take over from here.
03:17 PM
How can Twitter fend of Elon Musk?
Image
Have you selected the focal point for this crop?
Elon Musk Twitter
Britta Pedersen / POOL / AFP
The revelation that Elon Musk has secured a $47bn (£36.5bn) financing package to fund his bid to buy Twitter has put the social media giant’s board on the back foot.
Despite a host of critics voicing doubts about the billionaire entrepreneur’s attempts to swoop on Twitter, the world’s richest man emerged on Thursday with an ace up his sleeve.
So what does this latest development mean for Twitter’s board and what can it do to fight back against Musk?
Simon Foy has the answers: Blocked: How Twitter can survive Elon Musk’s trolling
02:22 PM
White House ‘confident’ Europe will ban Russian energy
A top White House adviser has said he’s confident Europe will ban remaining Russian oil and gas exports as Putin’s war in Ukraine drags on.
Daleep Singh, deputy White House national security adviser, told CNN: “I have confidence that Europe is getting the message and they are determined to close off this last source of export revenue.”
Mr Singh, the White House’s point person for sanctions on Russia, said discussions on the topic are ongoing.
He added: “It’s important that they do this as soon as they can. And to do it in a way that’s smart.”
Earlier today German Chancellor Olaf Scholz reiterated his reluctance to sanction Russian gas imports, saying such a move wouldn’t end the war but would spark a major economic crisis in Europe.
02:07 PM
Center Parcs owner taps Barclays ahead of £4bn sale
The company behind Center Parcs is said to be lining up bankers to oversee a potential £4bn sale.
Real estate giant Brookfield Property Partners is close to appointing Barclays to review options for the upmarket holiday resorts, Sky News reports
An outright sale, offloading a minority stake or a stock market listing are all possible options for the business.
Center Parcs recently reported the most profitable half-year in its history despite Covid restrictions as it cashed in on the staycation boom.
01:47 PM
Goldman Sachs bankers pocket £180k bonus
Goldman Sachs’ bankers in London were handed an average bonus of £180,000 for last year, a rise of 70pc following a wave of lucrative dealmaking in the City.
Vice presidents at the investment bank saw their bonuses more than double to an average £350,000 according to a survey by recruitment consultancy firm Dartmouth Partners.
Overall, associates at nine of the biggest investment banks in London were awarded an average bonus of £106,428 last year, up by more than a fifth, according to the 303-person survey.
Vice presidents received an average of £229,760, up 28pc. Globally, the value of mergers and acquisitions topped $5 trillion for the first time last year, fueled by cash-rich buyout firms and an economic rebound from Covid.
However, deals have dropped off this year, with bonuses for 2022 expected to suffer.
01:35 PM
Wall Street dips at the open
US stocks have started the day on the back foot as investors digested hints from the Federal Reserve chair about aggressive interest rate rises.
The benchmark S&P 500 and Dow Jones both dropped 0.2pc, while the tech-heavy Nasdaq dipped marginally.
01:11 PM
Shell accused of using ‘accounting trick’ to keep buying Russian oil
The Ukrainian government has accused Shell of using an “accounting trick” to allow the oil giant to keep buying Russian crude despite promising to cut ties with the Kremlin.
Tom Rees has the story:
A letter sent by Kyiv to Shell boss Ben van Beurden said it was “deplorable” that companies are continuing to “bankroll Putin’s war machine” amid concerns Russian oil is still being bought through backdoor routes.
The FTSE 100 oil major committed to stop purchasing Russian crude in the spot market and said it is legally obliged to accept oil deliveries from contracts sealed before the invasion of Ukraine. However, it defines refined oil products, such as diesel, as not being of Russian origin if less than 50pc of the blend is from the country.
The letter blasted Shell’s strategy, saying that “the notion that any company will continue to bankroll Putin’s war machine through an accounting trick is deplorable”, according to the Wall Street Journal.
“It’s a national shame for many governments and institutions that are financing these aggressions towards us,” said Oleg Ustenko, an adviser to Ukrainian president Volodymyr Zelenskyy.
12:56 PM
Gas prices fall on higher LNG shipments
Natural gas prices fell as ample shipments on liquefied natural gas offset lower deliveries from Norway.
Supplies from Norway are set to slump to the lowest levels in more than three months with seasonal work at the giant Troll field. The lower shipments are being partly balanced by increased liquefied natural gas (LNG) imports.
Benchmark European prices were 3.4pc lower, while the UK equivalent fell 3.6pc.
12:49 PM
Britain is ‘teetering on the brink of recession’ as growth slows
Britain is “teetering on the edge of a recession” as inflation forces hard-pressed shoppers to tighten their belts, writes Tim Wallace.
Retail sales dropped by 1.4pc last month, according to the Office for National Statistics, as families cut back on goods ranging from groceries to petrol.
It follows a 0.5pc drop in retail sales in February.
Online shopping fell 6pc on the month and is down by one-quarter compared with March 2021 when the nation was still under strict Covid rules. The drop shows that people have been returning to physical bricks-and-mortar shops following the end of pandemic restrictions.
At the same time, business surveys have shown a sharp slowdown in growth while consumer confidence plunged close to record lows.
11:26 AM
Brexit port disruption ‘better than expected’, says shipping boss
The head of Europe’s second-biggest shipping port said that any Brexit-related trade disruption has been “better than expected”.
Oliver Gill has more:
Jacques Vandermeiren, chief executive, said on Friday that the Port of Antwerp’s trade with the UK rose 6pc last year. Controls on goods coming in and out of the UK following Brexit have been blamed for long queues at ports and disruption to supply chains.
But Mr Vandermeiren said: “For the United Kingdom, it’s better than what we expected… We expected much more trouble in the port.
“From time to time we see the traffic jams in Dover. The shortage of truckers and the difficulties when it comes to customer and border control. This is from time to time heavy.
“But then you have months where you don’t see any trouble at all.”
His remarks come as Antwerp merges with the Port of Zeebrugge, a move that will allow the two companies to better manage busy times of year.
“We can switch in case of troubles or congestion,” he said. “I hope, of course, that it will completely disappear and that the situation will be under control.
11:13 AM
Wall Street set to open lower
Wall Street looks set to follow the FTSE into the red at the opening bell as investors weighed up hawkish comments by Fed chair Jerome Powell.
Mr Powell yesterday said many officials had noted “one or more” 50 basis-point interest rate rises could be appropriate to curb the biggest rise in inflation in four decades.
Investors are now betting on half-point increases in May, June and possibly July.
Futures tracking the S&P 500 and Dow Jones both fell 0.4pc, while the tech-heavy Nasdaq lost 0.5pc.
10:57 AM
Inspectors begin survey of P&O ferry
Inspectors have begun a survey on one of P&O Ferries’ detained ships, marking a step towards resuming services after the backlash over its decision to sack 800 workers last month.
The Maritime and Coastguard Agency said surveyors were on board the Spirit of Britain, which runs on the key Dover-Calais route, while the Liverpool-Dublin ship Norbay has been cleared to resume operations.
Officials had previously detained the Spirit of Britain over deficiency concerns, while two other ships on the France route are yet to be studied.
There’s been an uproar over P&O’s mass firings, while the halt in services compounded travel chaos over the busy Easter holiday period.
10:45 AM
China’s oil demand slumps to lowest since first lockdown
China is heading for its biggest oil demand shock since the early days of the pandemic as the country’s latest lockdowns hobble vast swathes of the economy.
Demand for petrol, diesel and aviation fuel in April is expected to drop 20pc from last year, Bloomberg reports. That equates to a drop in crude oil consumption of 1.2m barrels a day.
It comes amid renewed lockdowns across the country, most notably in the financial hub of Shanghai, as China pursued its zero Covid strategy.
The decline would be the largest hit to demand since the first lockdown in Wuhan – the epicentre of the global pandemic – more than two years ago.
Oil prices fell this morning, with benchmark Brent crude down almost 2pc to $106 a barrel.
But prices remain elevated by historical standards as the war in Ukraine and talk of EU sanctions on Russian energy spark supply concerns.
10:10 AM
Bundesbank: Germany at risk of recession over energy ban
The German economy is at risk of shrinking nearly 2pc this year if the war in Ukraine escalated and a ban on Russian energy leads to rationing.
That’s according to the Bundesbank, which warned of a hit to output of about five percentage points compared to its March baseline.
While losses in the following years should be smaller, activity in 2024 would still be significantly below previously forecast levels, the central bank said.
It came as the IMF also warned that Germany was on the brink of another recession as the war sparks a “serious setback” to Europe’s recovery
The German economy shrank in the fourth quarter, and IMF forecasts suggest it will suffer a second straight contraction in the following three months.
09:57 AM
Carlos Ghosn faces arrest warrant in French investigation
In other Renault news this morning, French investigators have issued international arrest warrants for former chairman Carlos Ghosn and four others who allegedly helped him siphon millions of euros from the French car maker.
One of the warrants targets billionaire Suhail Bahwan, who owns a vehicle distributor in Oman that prosecutors suspect was used to funnel Renault funds for Mr Ghosn’s personal use.
The others are against two of Mr Bahwan’s sons and the former general manager of Suhail Bahwan Automobiles.
The one targeting Mr Ghosn concerns a wide spectrum of allegations ranging from his interactions with the Omani car distributor to corporate spending on various events and trips that may have been personal.
A spokesman for the former car chief said he was “surprised” by reports of the warrant as he had “always co-operated with French authorities.”
Since his dramatic escape from Japan to Lebanon in late 2019, Mr Ghosn’s main legal risks have largely shifted to France, where he is suspected of using Renault’s funds to pay for a yacht and his wife’s birthday celebration at the Versailles Palace.
09:42 AM
Renault ‘mulls sale of Nissan stake’ in EV push
Renault is said to be considering a sale of part of its stake in Nissan – a move that would raise billions of euros for its shift to electric vehicles.
Nissan itself may be willing to buy some of the 1.83bn shares that Renault owns, but the French car maker may also look for other buyers for its 43pc stake, Bloomberg reports.
By selling part of its stake, worth 983.5bn yen (£6bn), Renault could secured extra funding for its EV division, which it’s considering listing separately. Another potential buyer would be Chinese group Geely, which owns Volvo.
A sale could also help to ease tensions over a power imbalance between the two alliance partners. Nissan owns just 15pc of Renault and lacks voting rights.
09:34 AM
Kremlin: No change to rouble gas payment demands
The Kremlin has stuck by its timetable for making foreign countries pay for gas in roubles after Britain said it would allow payments to Gazprombank until the end of May.
The UK has issued a temporary licence allowing payments to the sanctioned Russian for gas used in the EU.
Kremlin spokesman Dmitry Peskov said all the timings for the payments were set out in Putin’s presidential decree at the end of March, and settlements should be carried out in line with that order.
Earlier this week he said there was still time for so-called “unfriendly” countries to switch to payments for gas in roubles that are due in May.
09:20 AM
Scholz: There can be no nuclear war
German Chancellor Olaf Scholz has vowed to keep shipping weapons to Ukraine, but warned an open conflict with Russia could lead to nuclear war and must be avoided at all costs.
He told Der Spiegel:
We need to do everything to avoid a direct military confrontation between NATO and a heavily armed superpower such as Russia, a nuclear power.
I will do everything to avoid an escalation that could lead to World War III – there can be no nuclear war […]
That’s why it is all the more important that we consider each step very carefully and coordinate closely with one another. To avoid an escalation towards NATO is a top priority for me.
That’s why I don’t focus on polls or let myself be irritated by shrill calls. The consequences of an error would be dramatic.
08:41 AM
UK growth slows as inflation and war dent demand
The latest PMIs show a far less rosy picture for the UK, with growth in private sector output rising at its slowest rate in three months.
The slowdown was driven largely by the smallest rise in new orders so far this year. Survey respondents said the cost-of-living crisis and uncertainty sparked by the Ukraine war had hurt client demand.
The service sector suffered a big loss of momentum as price rises hampered the post-lockdown recovery, while manufacturers were hit by the factory gate prices rising by the fastest on record.
The S&P Global/CIPS Flash Composite PMI came in at 57.6 in April, down from 60.9 the previous month and the lowest since January.
The flash S&P Global/CIPS composite #PMI fell from 60.9 in March to 57.6 in April. Although broadly consistent with GDP growing at a quarterly rate of 0.7-8%, the latest reading signals a marked slowing in the pace of growth 1/ pic.twitter.com/AaSD2bObJH
— Chris Williamson (@WilliamsonChris) April 22, 2022
08:19 AM
Eurozone growth hits seven-month high
Growth in the eurozone surged to a seven-month high in April thanks to rebound in services demand, but prices rose at a record rate.
The S&P Global Composite PMI rose to 55.8 this month from 54.9 in March – the strongest rate of expansion since last September.
Growth was boosted by a rebound in the services sector as Covid restrictions eased. This helped to offset a near-stalling of manufacturing output.
But confidence remains subdued amid concerns over the Ukraine war and lingering pandemic effects. Meanwhile, prices rose at an unprecedented rate in April, with rising costs for firms suggesting that inflation has further to run.
08:13 AM
UK allows payments to Gazprombank until May 31
The UK has issued a temporary licence allowing payments to sanctioned Russian lender Gazprombank for gas used in the EU.
Putin last month ordered Gazprombank to handle all transactions for Russia’s pipeline gas with so-called “unfriendly” states, which includes most of Europe.
A Treasury document published yesterday doesn’t specify which company applied for the permission to work with the lender, which is sanctioned in Britain but not in the EU.
The license allows transactions with Gazprombank and its subsidiaries “for the purpose of making gas available for use in the European Union,” the document said. That includes the opening and closing of bank accounts until the license expires.
Putin has threatened to cut off gas supplies to Europe if buyers don’t comply with his demand for payment in roubles. Gazprombank would be responsible for converting foreign currency into roubles and transferring this to Gazprom.
08:06 AM
Budweiser taps turned off in Russia
Belgian brewer Anheuser-Busch InBev is set to cut off supplies of Budweiser to Russia with the sale of its stake in a joint venture to its Turkish partner.
Helen Cahill has more:
AB InBev has said it is in “active discussions” to offload its share of a Russian joint venture with Anadolu Efes and has asked for the suspension of the sale of Bud as part of the deal.
Global ratings agency Fitch downgraded the joint venture AB InBev Efes last month due to the “challenging macroeconomic environment” in Turkey, Russia and Ukraine. AB InBev is set to take a $1.1bn hit on the sale.
AB InBev’s move is the latest decision by a Western brand to exit the Russian market due to the conflict. Ikea, McDonald’s and Starbucks have led the exodus from the Russian markets, and Russians have also seen supplies of Heineken and Carlsberg products cut off.
AB InBev said it was also introducing the Ukrainian beer brand Chernigivske to a number of markets including the UK, Germany, Belgium, France and the Netherlands.
07:54 AM
Regulator hits out at challenger banks over financial crime checks
The City watchdog has told challenger banks to up their game on financial crime controls, saying some are failing to carry out adequate checks on new customers.
The Financial Conduct Authority said a review carried out last year showed suspicious activity reports filed by the banks had risen, raising concerns about the quality of their checks.
It said some failed to adequately check even basic details such as the occupations and income of customers.
The review focused on relatively new challenger banks, including six digital retail lenders, though it didn’t name the firms.
The FCA last year opened an investigation into Monzo over potential breaches of anti-money laundering rules and financial crime controls.
Sarah Prichard at the FCA said:
There cannot be a trade-off between quick and easy account opening and robust financial crime controls. Challenger banks should consider the findings of this review and continue enhancing their own financial crime systems to prevent harm.
07:44 AM
Pound crashes to 17-month low
This morning’s retail sales report has rattled markets, with the pound extending its losses against the dollar to its lowest in 17 months.
Alex Kuptsikevich at FxPro says sterling now risks falling as low as $1.2600.
Rising prices and wages have little impact on retail activity so far, which may prove to be a complication for the Bank of England in further tightening monetary policy.
Sales returned to their long-term trend level in March after a significant pullback in the second half of 2020. Consumer demand is migrating from retail to services.
Weak sales data interrupted the pound’s consolidation above the 1.3000 area, hoping that the UK economy could digest decisive rate tightening. GBP/USD is renewing multi-month lows, building on the momentum formed a month ago when a rebound in the pair was interrupted.
07:39 AM
B&M boss to quit after 17 years
The chief executive of B&M is stepping down from the discount retailer after 17 years.
Billionaire Simon Arora said he will step down in 12 months to allow time to find his replacement and enable a smooth transition.
During his time running B&M, which he bought with his brother Bobby in 2004, the businessman has turned the discount retailer into a FTSE 100 giant, with 1,100 stores across the UK and France.
Bobby Arora intends to remain with the business, the company added.
Shares in B&M slumped more than 5pc to the bottom of the FTSE 100.
07:32 AM
FTSE risers and fallers
The FTSE 100 looks set to end the week in negative territory amid mounting concerns over economic growth.
The blue chip index pared initial losses but was still trading down 0.4pc, with financial and commodity stocks the biggest drags.
Energy giants BP and Shell lost ground alongside miners including Anglo American and Glencore. Financial stocks including HSBC and Prudential also weighed on the index.
B&M was the biggest faller, shedding more than 5pc after it said billionaire boss Simon Arora was stepping down.
The domestically-focused FTSE 250 fell 0.5pc. HomeServe bucked the trend, jumping 11pc after it said it was in talks with Canada’s Brookfield Asset Management for a possible takeover.
07:24 AM
Ukrainian miner Ferrexpo halts dividend
Sticking with the mining theme, Ferrexpo said it was delaying a decision on paying an interim dividend and pausing projects that are not expected to deliver near-term growth in the wake of Russia’s invasion.
The London-listed company, which makes iron ore pellets used in the steel industry, has all its operations in Ukraine but away from the main conflict zones.
Shares pushed up 1.7pc towards the top of the FTSE 250.
07:21 AM
Petropavlovsk applies for export licence as it struggles to sell gold
Russian miner Petropavlovsk has said it’s applied for a new export licence after sanctions against Gazprombank left it unable to sell gold.
Sanctions have put the London-listed company in a difficult position, as Gazprombank is the only buyer of its entire gold output. Petropavlovsk is even restricted from making debt repayments to the lender.
The miner said it continues to explore options for sale of its gold, including with other potential buyers, even as it cut its annual total gold production outlook, hurt by supply chain disruptions to output from third-party concentrate.
The company said it now expects an annual total gold production in the range of 375 kilo ounces (koz) to 405 koz, down from a previous outlook of 380-420 koz.
Shares in Petropavlovsk, which are down almost 90pc in the year so far, leapt 35pc following the update.
07:13 AM
Pound slumps to lowest this year
Sterling has dropped sharply in early trading after weak retail sales fuelled concerns about slowing economic growth.
Sterling dropped 0.6pc against the dollar to $1.2952, marking a new year-to-date low.
07:10 AM
Regulator raises concerns over £2.6bn North Sea drilling deal
Regulators have raised concerns over the £2.6bn merger of North Sea drilling contractors Maersk and Noble.
Following an initial investigation, the Competition and Markets Authority found the deal raised competition concerns in the supply of jack-up rigs for offshore drilling in the area.
The CMA said that unless the businesses could address its concerns, the deal would be referred for an in-depth Phase 2 investigation.
07:01 AM
FTSE 100 slumps at the open
The FTSE 100 has dropped sharply at the open as the latest economic data fuelled fears of a slowdown in growth.
The blue-chip index slumped 0.9pc to 7,560 points.
06:58 AM
More reaction: We’re in a new phase of pandemic exit
Jessica Moulton at McKinsey & Company says the cost-of-living squeeze is starting to outweigh the desire to return to normal life.
We’re at the beginnings of a new phase of the pandemic exit – where 30-year-high increases in inflation are starting to impact consumers more than their desire to return to the pre-pandemic activities they missed.
Our research shows nearly all consumers are noticing that prices are up, especially in grocery. And, it is starting to impact their spending.
Consumers will need to weigh-up their desire to travel and eat out, as rising inflation could put protracted pressure on discretionary spending.
06:52 AM
Expert reaction: Retailers face tough months ahead
Oliver Vernon-Harcourt, head of retail at Deloitte, says retailers will face a challenge balancing rising costs with declining consumer budgets.
Inflation on food, fuel and household goods is adding pressure to already squeezed consumer spending power.
With UK consumer confidence falling steeply in the first quarter of the year, it could signal the start of consumers making some cuts as they pay more for essential items.
Our data indicates consumers are spending less on large-ticket items, such as furniture and major household appliances as well as some other discretionary categories such as clothing and footwear.
Of those who are spending less, 54pc indicate they are doing so to save money, 35pc said they are choosing cheaper brands or stores and 25pc are taking advantage of sales or discounts.
The next few months will see further disruptions to supply chains and cost pressures. Consumers will also feel the pinch, particularly around discretionary spending, with April seeing the introduction of energy price cap rises and national insurance increases.
The retail industry will need to balance increasing costs with maintaining customer engagement. It will be key to make sure the right products and services are available, and at a price point that meet consumers thriftier spending habits.
06:49 AM
How will the Bank of England react?
The latest data gives more food for though for Bank of England policymakers ahead of next month’s meeting.
Markets are betting that the central bank will raise interest rates again, but officials have started to tone down their language on the need for more increases amid concerns of an economic slowdown.
Governor Andrew Bailey yesterday hinted at further rises, saying he was concerned about the risk that rising wages would push up inflation for longer.
Still, analyst Viraj Patel reckons the new data will rule out a 50 basis point increase.
⚠️ Not great news on the state of the UK consumer today. Retail sales falling last month, whilst consumer confidence plunges in a sign that things aren’t going to get better. BoE said they wanted data to gauge energy fallout… this says a 50bps hike in May is off the table $GBP
— Viraj Patel (@VPatelFX) April 22, 2022
06:43 AM
Expert reaction: Crisis ‘only likely to worsen’
Bethany Beckett, UK economist at Capital Economics, warns more trouble is on the horizon.
The hefty 1.4pc month-on-month decline in retail sales volumes in March follows the downwardly revised 0.5pc fall in February and adds to growing signs that the squeeze on real incomes is hitting household spending.
With CPI inflation already at a 30-year high of 7pc and set to keep rising, there’s a real risk of an outright fall in consumer spending in the coming quarters.
The sharp decline in sales in March suggests that households are already paring back spending to cope with higher costs for food and fuel. That is only likely to worsen in the coming months as the cost of living crisis intensifies.
After all, the March data predated April’s huge 54pc rise in utility bills which will have hit household budgets hard. Indeed, the GfK survey of consumer confidence in April crashed to its lowest level since 2008.
06:41 AM
ONS: Fuel sales slump
Darren Morgan at the ONS said:
Retail sales fell back notably in March with rises in the cost of living hitting consumers’ spending. Online sales were hit particularly hard due to lower levels of discretionary spending.
Fuel sales also fell substantially, with evidence suggesting some people reduced non-essential journeys, following record high petrol prices, while food sales continued to fall, dropping for the fifth consecutive month.
06:37 AM
Retail sales tumble
Retail sales dropped 1.4pc in March in a sign British consumers could be tightening the purse strings amid a squeeze on household finances.
The fall was driven by sales of food, clothing and footwear, as well as fuel. Online sales also declined sharply. The only bright spot came from increased sales of household goods.
A separate survey by the ONS found that 87pc of adults had seen their cost of living rise over the last month, up from 83pc previously. Around 88pc blamed the increase on higher food prices.
Retail sales volumes fell 1.4% in March, with the biggest driver coming from ‘non-store retailing’ (including online shops), which fell 7.9%.
However, retail remains 2.2% above its pre-pandemic level https://t.co/q4w0Tx8mQk pic.twitter.com/fyBUF1mnmI
— Office for National Statistics (ONS) (@ONS) April 22, 2022
06:33 AM
Cost-of-living crunch deepens
Good morning.
There’s more evidence of the cost-of-living crisis this morning, with two sets of data pointing to a big squeeze on household finances.
The latest ONS figures showed retail sales slumped 1.4pc in March. That’s much worse than the 0.3pc decline economists were expecting.
Meanwhile, a survey from GfK showed consumer confidence fell for the fifth straight month to -38. That’s the lowest since the height of the financial crisis in 2008.
5 things to start your day
1) Disney stripped of special tax status in Florida over ‘Don’t Say Gay’ bill Republican governor Ron DeSantis wages war on Sunshine State’s largest private employer
2) Issa brothers plan to open more Leon and Cooplands branches in petrol stations Billionaire Asda owners to create 22,700 jobs in cafés and bakeries push
3) CNN shuts down streaming service after just one month CNN+ was used by fewer than 10,000 people at any given time
4) Bankers left traumatised by their boss’s ’emotional terrorism’ BNP Paribas sacks manager accused of verbal ‘waterboarding’ after dressing-down
5) Hackers for hire attempt to destroy hedge fund manager’s reputation Plus: The reign of terror as hackers for hire ramp up corporate espionage
What happened overnight
Asian markets fell sharply at the open on Friday, trailing losses on Wall Street after the US Federal Reserve boss said an interest-rate hike was likely forthcoming.
Coming up today
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Corporate: No major corporate announcements scheduled
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Economics: Retail sales (UK), consumer confidence (UK), services PMI (UK, US, EU), manufacturing PMI (UK, US, EU), composite PMI (US, EU)
