Closing summary
Time for a recap.
England and Wales are on track for the highest quarterly number of company insolvencies since early 2009, officia data shows.
There was a 27% year-on-year jump in insolvencies in June, as companies struggled to handle higher interest rates, cost pressures, and the burden of repaying Covid-19 loans.
The pressures on households has eased a little, with grocery inflation dropping to its lowest level of this year.
Data firm Kantar reported that grocery price inflation has eased to 14.9%, the lowest rate since Christmas, as supermarket shoppers turned to the boom in loyalty card promotions.
UK mortgage rates have remained unchanged for the second day running, according to Moneyfacts.
Rightmove’s mortgage expert Matt Smith says tomorrow’s inflation data will be crucial for the market.
“Despite the rate rises we’ve seen this week, swap rates – the underlying costs of mortgages for lenders – have responded positively to the news that last week’s US inflation figures fell to a two-year low, and this has taken some pressure off lenders to increase rates further.
“Some commentators have said this may be the peak for mortgage rates, but the UK inflation data for June will be published tomorrow and will be key to what happens next with the pricing of fixed rates. The market is expecting to see inflation fall back in June, but as we’ve seen in the past couple of months, if it remains stubbornly high, and doesn’t fall in line with expectations, this could cause mortgage rates to rise further.
In other news…
ARK, an investor in Elon Musk’s Twitter, has written down their stake in the business by 47% as advertisers rein in their spending on the social media platform.
Bricklayers, plasterers and other construction jobs have been added to the government’s “shortage occupation list”, making it easier for foreign builders to come to Britain amid labour shortages partly caused by Brexit.
A leading thinktank has said that higher pay increases for public sector workers would not be inflationary.
The biggest investor in Thames Water has cut the value of its stake in the debt-laden utility company, which has faced questions over its financial stability and ability to raise crucial funds.
Labour mayors are launching legal action to prevent the closure of railway station ticket offices across England.
Pret a Manger returned to profit for the first time since 2018 last year as the launch of a subscription service helped the coffee and bakery chain bounce back after the Covid crisis.
And…shares in Ocado are up almost 20% today after it reported a return to underlying profits, and a 59% jump in revenues from its Technology Solutions arem.
UK on track for most company insolvencies since 2009
England and Wales are on track for the highest quarterly number of company insolvencies since early 2009, Reuters has spotted.
Insolvency Service figures show that over the three months to the end of June, there were 6,403 companies declared insolvent. If this figure is confirmed when official quarterly numbers are published later this month, it would be the highest non-seasonally-adjusted calendar-quarter total since the first quarter of 2009.
That shows the struggle businesses are facing to repay Covid-19 loans against a tough economic backdrop, leading to June’s 27% jump.
Gareth Harris, a partner at RSM UK Restructuring Advisory, says:
“The monthly figures confirm what we are seeing on the ground - that UK corporates are struggling to cope with a challenging combination of rising interest rates, sticky inflation, higher wage expectations whilst recovering from a hangover of Covid debt.
UK on track for most company insolvencies since 2009 https://t.co/iMe2RIsLfo pic.twitter.com/ZXB22xJ8B6
— Reuters (@Reuters) July 18, 2023
Nick O’Reilly, director of restructuring and recovery at accountancy firm MHA, fears that UK companies will continue to collapse, following the 27% year-on-year rise in insolvencies in June.
O’Reilly writes:
Insolvencies will continue to rise throughout 2023 as the effects of Covid-19 recovery loans continue to bite businesses and the economy. Businesses previously propped up by the loans are failing in greater numbers, particularly hospitality, construction and real estate, which will be the biggest victims of business insolvencies this year.
“The fall in customer demand, an economic downturn and increased interest rate of 5%, on top of high inflation and the cost of living crisis, has meant businesses and small to medium enterprises (SMEs) have had little time to build a healthy cash reserve or recover from the post-pandemic impact. Many are considering closing or have closed their doors for good, and its crucial government initiatives are introduced quickly to help stem the flow.
O’Reilly argues that an overhaul of business rates, and a reform to Covid-19 repayment terms, would help prevent insolvencies spiraling out of control:
“Reforms within the business rate regime are urgently needed to encourage businesses to invest, grow and innovate. The Non-Domestic Rating Bill1 will introduce new business rates for property and building improvements and provide much-needed relief and tax breaks for the construction sector, however sectors including leisure and hospitality continue to be left in the lurch.
Gatwick DHL strikes suspended after new pay offer
In a relief to holidaymakers, strikes by nearly 600 DHL workers who work for easyJet at Gatwick have been suspended following an improved pay offer.
The Unite union has announced that strikes scheduled to take place from 28 July to 1 August will now not go ahead, while DHL workers are balloted on a new offer.
If the workers reject the deal, fresh strike dates will be announced, it says.
Unite regional officer Dominic Rothwell said:
“As an act of good faith, Unite’s Gatwick DHL members have agreed to suspend their first set of strikes while they are balloted on the new offer.
However, separate strikes at Gatwick by around 450 ASC, Menzies Aviation and GGS workers are still scheduled to take place from 28 July to 1 August, with a further four days from 4 August to 8 August.
Updated
Wall Street has opened cautiously:
DOW JONES DOWN 34.61 POINTS, OR 0.10 %, AT 34,550.74 AFTER MARKET OPEN
— First Squawk (@FirstSquawk) July 18, 2023
S&P 500 DOWN 4.89 POINTS, OR 0.11 PERCENT, AT 4,517.90 AFTER MARKET OPEN
NASDAQ DOWN 30.96 POINTS, OR 0.22 PERCENT, AT 14,213.99 AFTER MARKET OPEN
After that flurry of US economic data… the pound is trading flat against the US dollar at $1.3077.
That’s not too far from last week’s 15- month high of 1.3144, as traders await tomorrow’s UK inflation report.
The CPI index is forecast to drop to 8.2% from 8.7% in May – still four times over the Bank of England’s target, meaning further interest rate increases are likely.
Matthew Ryan, head of market strategy at global financial services firm Ebury, says:
Markets are expecting a drop in the headline number and a stable core index, which we think should be consistent with another 50bp hike at the August Bank of England meeting.
“This is not yet fully priced in, so we see room for continued sterling strength.”
US industrial production drops 0.5%
US industrial production declined by 0.5% in June, the Federal Reserve has reported, in a second piece of disappointing economic data this morning.
That’s the second monthly fall in a row, and missing expectations that output would be flat.
The Fed reports that manufacturing output dropped by 0.3% in June, while mining dropped by 0.2% and utilities declined 2.6%.
US Industrial Production MoM Actual -0.5% (Forecast 0%, Previous -0.2%)
— HaiKhuu (@HaiKhuuTrading) July 18, 2023
US Manufacturing Output MoM Actual -0.3% (Forecast 0%, Previous 0.1%)
US Capacity Utilization Actual 78.9% (Forecast 79.5%, Previous 79.6%) pic.twitter.com/aCMYBQ7HEc
Most major market groups posted declines in June, says the Fed, adding:
The index for consumer durables fell 2.7%, led by notable decreases in the output of appliances, furniture, and carpeting (3.8%) and of automotive products (3.6%).
The decrease of 0.9% in the index for consumer nondurables reflected declines in clothing (2.1%), energy (1.8%), and food and tobacco (1.3%).
Retail spending across America grew by less than expected last month, data just released shows.
US retail sales increased by 0.2% in June, missing expectations of a 0.5% rise, and were 1.5% larger than a year ago.
🇺🇸US retail sales growth rate falls below expectations.
— MacroMicro (@MacroMicroMe) July 18, 2023
MoM 0.2% (est. 0.5%, prev. 0.5%)
YoY 1.5% (est. 1.6%, prev. 2.0%)
📍More Info: https://t.co/sp7UBeEz0v pic.twitter.com/Fu8neBDchv
Sales were pulled down by a 1.2% drop at building material and garden equipment and supplies dealers, and a 1.4% drop at gasoline station sales.
But underlying retail sales rose by 0.6%.
Paul Ashworth, chief North America economist at Capital Economics, suggests that the wildfire smoke which hit parts of the northern US restricted spending:
Motor vehicle sales increased by 0.3%, but we had expected a little more given the rise in light vehicle unit sales already reported by manufacturers.
Food services sales increased by a muted 0.1% m/m which, together with the drop back in building materials sales, could reflect the impact of wildfire smoke, which kept people inside across large swathes of the Northeast.
#retailsales come in just okay, and add to the "cautious consumer" storyline. With more jobs, rising wages and lower inflation, plus relatively low debt, there's plenty of spending power. But we're choosing prudence, maybe because the jobs market is losing steam. pic.twitter.com/bs0q2b4yoZ
— Robert Frick (@RobertFrickNFCU) July 18, 2023
IMF chief worried by elevated food and fertilizer prices
The head of the International Monetary Fund has warned that global economic activity is slowing, particularly in the manufacturing sector, and that medium-term growth prospects remain weak.
Kristalina Georgieva, managing director of the IMF, told G20 financial leaders gathered in Gandhinagar, India, today that the global economy has shown some resilience.
But, she says, there are concerning “divergences in economic fortunes across countries” – with some pockets of the global economy doing well, others weakening, and vulnerable countries falling further behind.
Georgieva also told the G20 that inflation was finally trending downward – but headline inflation is still too high and core inflation remains sticky, despite increases in interest rates.
She adds:
Elevated food and fertilizer prices are particularly worrying, especially for low-income households for which food insecurity and malnutrition are now much more persistent.
Georgieva also urged central banks not to let-up in the fight against inflation, saying:
The top priority is to durably bring inflation down. While there is progress, the job is not yet done — monetary policy must stay the course.
A premature celebration can reverse the hard-won gains made so far in the disinflation process.
On a quarterly basis, company insolvencies in England and Wales were up 7% in April-June, reports James Burgess, head of commercial at trade credit insurance firm Atradius UK.
Higher interest rates, inflation, Brexit and the Covid-19 pandemic are all factors, Burgess explains:
“One of the major reasons firms find themselves filing for insolvency is the fall down of supply chains, and this will have huge implications for firms during a recession. If a customer fails to pay on time – or at all – the domino effect on supplier firms is wide-reaching, particularly at times when cash is tight.
“Firms across nearly all sectors are facing multiple ongoing challenges: rising interest rates, stagnant inflation, the ongoing impact of Brexit and Covid, labour shortages, and soaring costs. Many business leaders will no doubt already be having difficult conversations about whether they can continue to operate at all, let alone profitably – and we are seeing the impact of that in the late and failed payment claims, which peaked in Q1 of this year.
Chancellor Jeremy Hunt has warned retailers that the government is ‘watching closely’ to ensure they pass on lower food inflation to consumers, following the drop in price pressures reported this morning.
Food inflation was driven by the global cost of energy rocketing and supply chains being hit. Yet consumers should share the upside as both issues unwind, and we’re watching closely to make sure they do. Hopefully that’s what we’re starting to see. https://t.co/43qWhM710t
— Jeremy Hunt (@Jeremy_Hunt) July 18, 2023
Key event
Back in the City, shares in cybersecurity firm Darktrace have surged by 20% after reporting its finances have been given a clean bill of health.
In February, Darktrace engaged EY to conduct an independent review of its finances after claims of questionable marketing, sales and accounting practices by a hedge fund.
EY has now submitted that report, and Darktrace says it does not believe it has any impact on previously filed public company financial statements.
The company says:
In its review, EY reported a number of areas already known to Darktrace where systems, processes or controls could be improved.
It also says the UK’s auditing watchdog, the Financial Reporting Council, has inspected its audits, without any “key findings arising”.
Shares in Darktrace jumped by up to 25%, to the highest level of this year.
Victoria Scholar, head of investment at interactive investor, says:
The stock has surged today by almost 20% bringing its six-month rally to over 40%, reflecting the optimism towards the third party review that rebukes the short-seller concerns. Shares had already been rebounding significantly this year after the company raised its 2023 guidance in April.
The stock is now trading around 350p a share, sharply higher than its IPO price of 250p where it began trading on the London Stock Exchange in April 2021. However, Darktrace still has a long way to go to reclaim the highs from October 2021 at around 945p.”
Updated
PwC: Rise in company insolvencies is concerning
Today’s data showing there were 2,163 insolvencies in June is concerning, says James Lewin, director in PwC’s South East Restructuring practice.
Lewin explains:
The total number of insolvencies for the first half of 2023 is approximately 13,000, which is almost 17% higher than H1 2022. Winding up petitions have also doubled in the first half of this year compared to last year, with June 2023 seeing the highest number since November 2019.
“Although so far it’s primarily been smaller businesses falling into insolvency, with 97% being companies with less than £1m turnover, larger businesses are not exempt to the pressures. Similarly, no sectors are immune from the headwinds, with business services, construction and hospitality and leisure the most affected on an aggregate basis. The hospitality sector was particularly hard hit during H1 with nearly a 60% increase in insolvencies compared with the same period in 2022. This reflects the continued pressure on household budgets, with consumers being more selective about their spending.
“In addition, the retail sector is very exposed to the current climate of high interest rates and stubborn inflation, due to its tendency to have low operational leverage and demanding working capital requirements. As a result, unfortunately, we expect to see an increasing number of insolvencies in this sector as the year unfolds.”
Overall figures for Company Insolvencies in the UK are 27% higher than in June 2022 and also higher than pre-pandemic levels. Take a look at the full Monthly Insolvency Statistics of June 2023. https://t.co/7LoTCUHIqa pic.twitter.com/V4iTp6nfGb
— KSA Group (@KSAGroup) July 18, 2023
Updated
Guardian Newsroom: Can the UK avoid a recession?
Guardian Newsroom: Can the UK avoid a recession?
Join Larry Elliott, Heather Stewart and Ann Pettifor in this livestreamed event on the desperate state of the UK economy. On Thursday 20th July, 8pm. Book tickets here
UK insolvencies: the details
Of the 2,163 registered company insolvencies in June:
There were 1,759 CVLs, which is 21% higher than in June 2022;
260 were compulsory liquidations, which is 77% higher than June 2022;
14 were CVAs, which is 75% higher than June 2022;
There were 130 administrations, which is 44% higher than June 2022.
Inga West, counsel at the law firm Ashurst, says total company insolvencies remain high compared to both last year and pre-pandemic.
West explains:
It’s not just creditor voluntary liquidations and compulsory winding-up numbers that are up – both administrations and company voluntary arrangements are also above June last year. This suggests that insolvencies of mid-market and larger businesses are also creeping up because they tend to use these more expensive processes.
We have now caught up with the Covid backlog – that is the so-called ‘zombie companies’ that were able to avoid insolvency during the pandemic partly or wholly due to the Covid government support measures, and which subsequently needed to liquidate when the support ran out. This boosted numbers for a while, but it looks as if they have now been processed. So today’s high rates reflect the current financial pressures, including high interest rates and high inflation. Businesses that levered up on low interest rates will need to adjust their business models to cope with a sustained period of higher interest rates, which is forecast to last at least into 2024. If they can’t do that, they face some difficult choices and it seems likely that restructuring and insolvency activity will remain high for the foreseeable.
Anecdotally, Ashurst are seeing pressure across all sectors including infrastructure, casual dining and retail.
The recent restructuring plans for Fitness First, Prezzo and Chaptre Finance are “clear examples of this,” West says.
High inflation and interest rates are pushing many struggling companies under, says Sarah Rayment, managing director and co-head of global restructuring at Kroll.
“Insolvencies are on the rise and we are tracking higher rates of administrations and liquidations compared to last year. Ultimately, I don’t think this comes as a surprise. Many companies emerged out of the pandemic already over leveraged.
They are now managing higher borrowing costs and cost inflation, alongside wider economic factors. It’s inevitable not all will survive, especially those in consumer facing sectors. This week’s inflation figures will be watched with great intent.
There were 260 compulsory liquidations in June 2023, which is 77% higher than in June 2022.
The Insolvency Service say:
Numbers of compulsory liquidations have increased from historical lows seen during the coronavirus pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.
Chart: how insolvencies have risen
Here’s a chart showing how company insolvencies in England and Wales have climbed since early 2021.
Updated
The 27% jump in company insolvencies last month shows that higher interest rates are hurting the economy.
Colin Hardman, Restructuring & Recovery Partner at Evelyn Partners, explains:
“Many businesses are continuing to have a really tough time at the moment as they face rising costs and consumers scaling back on their spending, in particular their discretionary spend. The resulting higher interest rates is also adversely affecting profits and access to new funds. As wage rises typically lag inflation, we can expect the business environment to continuing to be extremely challenging, particularly but not exclusively in the construction, retail. leisure and healthcare sectors.
Company insolvencies jump 27%
Company insolvencies in England and Wales have jumped, as firms are hit by a slow-growing economy and high interest rates.
There were 2,163 registered company insolvencies in June, the Insolvency Service reports.
That is 27% higher than in the same month in the previous year – 1,698 firms filed for insolvency in June 2022.
It is higher than levels seen while the Government support measures were in place in response to the Covid-19 pandemic and also higher than pre-pandemic numbers.
But it is a drop on May, when 2,553 insolvencies were reported – a 40% year-on-year surge.
Corporate insolvencies rise 27% - 2,163 in June in England and Wales... https://t.co/uq1cO6CrL7 pic.twitter.com/xD0heoXiwX
— ABP Club (@abpclub) July 18, 2023
Updated
Pret back in profit as sales jump 20%
Pret a Manger sales rose by a fifth in the first half of this year after returning to profit for the first time since 2018 last year as the launch of a subscription service helped the coffee shop chain bounce back from Covid restrictions.
The group, which suffered during the pandemic lockdowns when office workers stayed at home, has reported that sales reached £429.9m in the six months to the end of June.
The increase came after it relaunched its subscription service, which first kicked off in September 2020, as Club Pret, upping the cost by a fifth to £30 a month for – but adding a 10% discount on food and snacks alongside up to five hot drinks a day.
Sales have also been boosted by international expansion with Pret now operating in 15 countries on three continents. It aims to have over 700 shops overseas by the end of 2023, up from 600 at present. International sales now account for 18.9% of revenue.
Sales soared 71% to £790m in the year to the end of December 2022 and the company booked an annual operating profit of £50.6m – bouncing back from a loss of £168m a year before.
.@pret returns to profitability for the first time since 2018; H1 2023 sales reached £429.9m, up 20.2% vs H1 2022 (£357.8m), growth boosted by success of Club Pret launch; expects to have over 700 shops worldwide by the end of 2023 #propelinfo
— Mark Wingett (@Wingers76) July 18, 2023
The boss of McDonald’s in the UK has apologised after more than 100 workers at the fast food chain, past and present, alleged they had been sexually harassed or assaulted or subjected to racism or bullying.
Alistair Macrow told the BBC the company had “fallen short” in some cases after the corporation spoke to dozens of workers.
It comes four years after 1,000 women reported they had been subjected to sexual harassment and abuse while working at McDonald’s restaurants, according to the Bakers, Food and Allied Workers’ Union.
The claims published by the BBC on Tuesday bear a close resemblance to what the BFAWU said in 2019.
Both say that managers failed to act on some complaints, and that predatory employees were moved to different McDonald’s sites rather than being fired.
McDonald’s has a toxic culture of sexual assault, harassment, racism and bullying in its UK restaurants, more than 100 workers tell the BBC https://t.co/atSM9pUdWr
— BBC Breaking News (@BBCBreaking) July 18, 2023
The BBC says:
The BBC was told that workers, some as young as 17, are being groped and harassed almost routinely.
The UK equality watchdog said it was “concerned” by the BBC’s findings and is launching a new email hotline.
McDonald’s said it had “fallen short” and it “deeply apologised”.
More here: McDonald’s workers speak out over sexual abuse claims
The increase in savings rates has also faded today, although easy access savings rates are slightly higher.
Moneyfacts says:
The average 1-year fixed savings rate today is 5.10%. This is the same average rate as the previous working day.
The average easy access savings rate today is 2.62%. This is up from an average rate of 2.61% on the previous working day.
The average 1-year fixed Cash ISA rate today is 4.78%. This is the same average rate as the previous working day.
The average easy access ISA rate today is 2.72%. This is the same average rate as the previous working day.
Mortgage rates unchanged for second day in a row
UK mortgage rates have remained unchanged for the second day running, as the surge in borrowing costs stabilises.
Financial data firm Moneyfacts reports that the average cost of both two-year and five-year fixed mortgages were unchanged today, as they also were on Monday.
Here’s the details:
The average 2-year fixed residential mortgage rate today is 6.78%. This is the same average rate as the previous working day.
The average 5-year fixed residential mortgage rate today is 6.30%. This is the same average rate as the previous working day.
Mortgage providers also brought more products onto the market today, after a drop yesterday
There are currently 4,334 residential mortgage products available, up from 4,246 on Monday, Monayfacts reports.
London new home sales hit 11-year low as interest rates rise
Sales for newly-built homes in London have slumped to their lowest in over a decade, Bloomberg reports, as surging borrowing costs weigh on the city’s housing market,
Developers in the capital sold just over 3,000 new homes between April and June, according to data compiled by Molior London and seen by Bloomberg News.
That’s lower than any quarter since 2012, and is ever worse than in the second quarter of 2020, when 3,855 homes were sold despite the Covid-19 national lockdown.
The report’s authors said:
“Marketing suites are reliant on incentives and a refocusing towards a small pool of discretionary purchasers.
“Overseas sales, particularly from Hong Kong buyers, have also recently slid.”
Little more than 3,000 new homes were sold in London between April and June.
— Julian Harris (@Hariboconomics) July 18, 2023
Amid a population of around 8,900,000.https://t.co/ogem1fYPic
The data is based on transactions for projects with at least 20 units. It also shows that around 70 housing development projects are currently stalled in the capital.
Full story: UK grocery price inflation eases as shoppers turn to loyalty cards
Grocery price inflation has eased to 14.9%, the lowest rate since Christmas, as supermarket shoppers sought out loyalty card promotions, my colleague Sarah Butler writes.
The fall in inflation over the four weeks to 9 July was partly the result of shoppers spending more via schemes such as Tesco’s Clubcard and Sainsbury’s Nectar, but it was also driven by a comparison with a step up in inflation a year ago.
Despite the dip in supermarket inflation from 16.5%, prices are still rising at a much faster pace than they have done historically. More here.
Shares in Ocado have jumped almost 11% in early trading to a five-month high, as traders welcome its return to underlying profits in the last six months (although statutory losses widened).
Ocado shares jump over 7% on open this morning as they returned to underlying profit in the first half of its financial year$OCDO pic.twitter.com/Ych2zj8Du9
— IG (@IGcom) July 18, 2023
Chris Beauchamp, chief market analyst at IG Group, explains that the 59% jump in revenues at Ocado’s Technology Solutions has impressed the City:
Ocado’s figures have put new strength into the shares this morning, building on their recent surge.
Perhaps the most encouraging number was the surge in its Tech Solutions business, reminding investors that the great hope for Ocado shares is that they can license their technology to a broad audience around the globe rather than being just another UK supermarket.
Updated
Ocado CEO Tim Steiner has also told reporters that we are definitely over the worst on UK food inflation, speaking after its results this morning.
Ocado’s CEO has declined to comment about speculation of a takeover by Amazon that sent its shares soaring last month.
Asked about reports of possible takeover interest from US suitors, including Amazon, Tim Steiner told reporters:
“Speculation is speculation, I have nothing to say.”
Updated
Kantar’s grocery sector report also shows the impact of summer spending.
Sales of chilled burgers rose by 7% and chilled dips by 5%, as people dined outside in the hottest June on record.
But, sales of hay fever remedies grew by 16% over the past month as people dealt with seasonal allergies.
Sainsbury’s sales growth edged ahead this month, marking the first time since January this year it has led Asda and Tesco, Kantar reports.
Sansbury’s grew by 10.7%, ahead of Asda with 10.5% and Tesco with 10.2% growth.
Aldi was again the fastest growing grocer, with sales up by 24.0%, with rival Lidl’s sales increasing by 22.3%.
Morrisons saw growth of 2.5%, both Waitrose and Co-op grew by 5.1%, Iceland’s sales rose by 8.9%, while Ocado’s sales rose by 2.0%, Kantar reports.
Retailers ramp up loyalty card deals
The fall in UK grocery inflation was partly due to an increase in supermarket promotions, as the retailers push their loyalty card deals.
Kantar’s Fraser McKevitt explains:
“One of the biggest shifts we’ve seen in this area is retailers ramping up loyalty card deals like Tesco’s Clubcard Prices and Sainsbury’s Nectar Prices.
“This could signal a change in focus by the grocers who had been concentrating their efforts on everyday low pricing, particularly by offering more value own-label lines.
“The boost to promotional spending has contributed to bringing inflation down but this isn’t all that’s driving the change. Prices were rising quickly last summer so this latest slowdown is partially down to current figures being compared with those higher rates one year ago.”
In April, Sainsbury’s began offering lower prices on more than 300 items to members of its Nectar loyalty card scheme, challenging Tesco’s Clubcard scheme.
Despite easing grocery inflation, households would have spent £683 more on their annual grocery bill to buy the same items as they did a year ago.
But, many shoppers have changed their buying habits to limit the increase.
Kantar says the average annual increase to household spending over the past 12 months has actually been £330 – well below the hypothetical £683.
Updated
Biggest drop in UK grocery price inflation since the peak
Newsflash: UK grocery price inflation has dropped to its lowest level this year.
Analysts at Kantar have reported that average supermarket prices were 14.9% higher than a year ago in the four weeks to 9 July.
That’s a drop from the 16.5% recorded in the previous four weeks, and its steepest decline since inflation peaked at 17.5% in March.
It suggests that the drop in commodity prices, and the easing of other cost pressures, could now be feeding through to customers (a trend that is expected to continue, as covered earlier).
Fraser McKevitt, head of retail and consumer insight at Kantar, said:
“This will be good news for many households although, of course, the rate is still incredibly high.
Updated
Iceland Foods has become the latest supermarket group in Britain to announce food price cuts.
It’s a further sign that a surge in food inflation over the last year could be abating.
Reduced items include a pack of 15 Youngs fish fingers, cut to £2.0 from £3.50, McCain home chips (2.25 kg), cut from £5 to £4.25, and Iceland chicken breast fillets (600g), cut from £4 to £3.60.
Ocado posts EBITDA profit as price inflation continues
British online supermarket and technology group Ocado has reported a widening loss this morning, despite raising prices.
Ocado made a pre-tax loss of £289m in the six months to 28 May, larger than the £211m in the same period a year ago, including the costs of closing its Hatfield warehouse.
But on an underlying basis, Ocado made an EBITDA profit of £16.6m, better than the loss of £13.6m recorded in the first half of 2022.
Ocado also reports that “price inflation has continued”, with the average item price up 8.4% to £2.72.
But customers at its retail arm, a joint venture with Marks & Spencer, are spending less – the average basket size declined by 6.3% to 45 individual items, down from 48 a year ago,
Ocado also reports an increase in active customers, offset by lower frequency of orders., leading to a 4% rise in total orders per week.
Ocado Retail made an EBITDA loss of £2.5m in the first half of the year, down from a £31.3m profit a year ago.
#OCDO OCADO Revs £1.4bn vs £1.33bn est. EBITDA of £16.6m vs an expected loss of £25.1m. However there is a £289m charge due to depreciation & amortisation & exceptionals. Retail sales look a small beat and expect a return to profitability in Q2, with avg orders per week in line.
— The Dude (@Redpanda73) July 18, 2023
Tim Steiner, CEO of Ocado Group, says the company has made good progress over the last six months, adding:
Technology Solutions has continued to deliver our industry-leading Ocado Smart Platform around the world and the opening of the first CFC for AEON, Japan’s biggest food retailer, in Chiba City, just outside Tokyo, is a landmark for the grocery sector.
It demonstrates that our proprietary AI and robotics can be applied to businesses across the globe.
Updated
UK food and drink manufacturers cut prices for the first time in more than three years
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK food and drink manufacturers have cut their prices for first time in over three years, offering hopes that the inflationary squeeze on households may be easing.
Producers across the food and drink sector reduced their ‘factory gate’ prices for the first time since February 2020, as they passed on falls in their own costs to their customers.
The Lloyds Bank UK Sector Tracker, releaased this morning, showed that the prices paid by manufacturers’ direct customers, such as wholesalers and retailers, fell from the previous month.
This was driven by a drop in input costs for the second month runnng, as global food commodity prices fell between May and June.
The data will drive hopes that Britons could soon see prices fall at the till.
Six of the 14 sectors monitored by Lloyds reported falls in input costs in June, including manufacturers of food and drink, chemicals manufacturers, and automobile and auto parts producers.
Nikesh Sawjani, senior UK economist at Lloyds Bank Corporate & Institutional Banking, explains:
“June’s data shows that more and more sectors are seeing moderations in cost pressures, which could – if sustained – carry through to falls in prices charged to customers.
“However, any benefit this has in terms of future inflation trends could be cancelled out by what is clearly still strong demand in some areas of the economy, which could lead to inflation being ‘stickier’ than hoped.
“This will be a factor that will pose serious consideration for the Bank of England as it continues to deliberate over how much further interest rates need to go in the UK.”
Relief on prices cannot come soon enough for households. Yesterday, consumer group Which? reported that supermarket prices have surged by a quarter since the cost of living squeeze began, up 25.8% between June 2021 and June 2023.
Tomorrow, June’s inflation rate is expected to drop to 8.2% from 8.7%.
Also coming up today
At 8am, data firm Kantar releases its monthly report on the grocery sector, showing how prices changes and which supermarkets grew market share.
The UK government is launching a new body to support the nuclear power industry, Great British Nuclear (GBN), with an offer of £157m of grants.
And prime minister Rishi Sunak is convening 14 senior bosses on a new business advisory council today, covering banking, pharmaceuticals, retail, construction, energy, tech, insurance, telecoms and defence.
Senior leaders from AstraZeneca, NatWest Group, BAE Systems, SSE, Google Deepmind, Sainsbury’s, Vodafone, GSK, Aviva, Shell, Sage, Taylor Wimpey, Diageo and Barclays are all attending.
Sunak says he wants to learn how to break down the barriers facing businesses, and help them to thrive.
The PM adds:
My new Business Council is one of the many ways we are making the UK the best place to do business and invest, so we can future-proof and grow our economy.
Sunak calls on 14 bosses to serve on business advisory council https://t.co/tsE0kRiqih
— Financial Times (@FinancialTimes) July 17, 2023
The agenda
8am BST: Kantar’s grocery price inflation report
11am BST: Great British Nuclear launch at the Science Museum
1.30pm BST: Canadian inflation report for June
1.30pm BST: US retail sales report for June
2.15pm BST: US industrial production report for June
Updated
