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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Jobs at risk as Morrisons shuts 132 McColl’s stores; calls grow for broader energy windfall tax – as it happened

British Petroleum United States United Kingdom Oil Alok Sharma North Sea Shell
A British convenience store chain McColl's in Paddock Wood, Kent.
A British convenience store chain McColl's in Paddock Wood, Kent. Photograph: Ben Stansall/AFP/Getty Images

Closing summary

Time to recap.

Calls for a bigger, bolder windfall tax on UK oil and gas firms are growing after BP racked up another massive quarterly profit.

The energy giant made profits of $8.2bn (£7bn) in the third quarter of the year, even more than expected, thanks to ‘exceptional’ trading by its gas division as the Ukraine war drove up prices.

BP says it expects to pay $800m this year under the current windfall tax, but Friends of the Earth said chancellor Jeremy Hunt should remove the loophole that lets producers avoid the tax if they spend more on oil and gas production.

BP is also planning to buy back even more of its own stock, with a new $2.5bn share buyback announced today.

Hunt has also been urged to allow the energy price cap to run beyond the existing six-month deadline to act as a “shock absorber” that would reduce inflation.

UK house prices have been knocked by the turmoil following September’s mini-budget fiasco.

The average price fell by around £5,000, or 0.9%, in October, as buyers were hit by a surge in mortgage rates, on top of the squeeze on their incomes.

Economists predicted that the housing market would continue to slow in the coming quarters, as borrowers face higher interest rates.

Supermarket chain Morrisons has warned that 1,300 staff at the McColl’s convenience store chain are at risk, as it plans to shut 132 loss-making stores.

The supermarket group said 55 of the 132 stores earmarked for closure include Post Office counters and will therefore shut next year, following their busy Christmas period.

The overhaul plan will see Morrisons convert McColl’s stores to its own Morrisons Daily brand.

Uber is to pay £615m payment to the UK taxman to resolve a legal demand that the company should have charged VAT on fares.

The payment follows a High Court ruling that its business model was unlawful, and that its drivers should be classed as employees. This means Uber must now charge VAT on service fees.

In other news….

The Bank of England has begun to unwind its quantitative easing programme, by selling £750m of shorter-dated bonds to investors today.

Pfizer has lifted its earnings forecast, and predicted it will make $2bn more than expected on Covid-19 vaccine sales this year.

Britain’s factories suffered their biggest drop in activity since the 2020 pandemic lockdowns, as manufacturers were hit by falling orders and weak export demand.

America’s factories also slowed, while manufacturers across Asia also reported falling output.

The online furniture retailer Made.com is planning to call in administrators after talks to find a buyer failed and it stopped taking customer orders last week.

Shares in Ocado have now surged almost 40% today, after it struck a deal to build robotic warehouses for South Korean retailer Lotte Shopping.

Hopes that America’s central bank might ease the pace of its interest rate hikes have taken a knock today, after data showed a jump in job vacancies in September.

Bank of England begins QT

The Bank of England has just made a little bit of history – by starting to sell off some of its huge store of UK government bonds.

The Bank successfully auctioned £750m of shorter-dated bonds today, as it began its quantitative tightening (QT) programme.

The sale of bonds, with a remaining maturity of between three and seven years, saw solid demand from investors, who bid for over three times the amount available.

The launch of QT was delayed from last month, following the market mayhem unleased by the government’s mini-budget. The BoE plans to sell £80bn in total, out of its stock of £838bn of government debt which it began buying in 2009, in the financial crisis.

The Bank has also decided not to sell long-dated bonds yet, to avoid adding to pressures on pension funds who risked a ‘doom-loop’ when 30-year gilt prices crumbled.

It’s an important moment for the markets, as Sky’s Ed Conway explains:

Updated

Jobs at risk as Morrisons plans to close some McColl's stores

Around 1,300 jobs are at risk at convenience store chain McColl’s, with its owner Morrisons announcing plans to shut 132 loss-making stores.

Morrisons won the battle to buy McColl’s earlier this year after the troubled chain fell into administration.

It has now unveiled plans to overhaul the convenience retailer, after UK competition watchdog said they were set to clear the takeover last week.

Morrisons said it expects some McColl’s stores to return to profitability as part of its turnaround plans but says there are “132 stores where there is no realistic prospect of achieving a breakeven position in the medium term”.

Bradford-based Morrisons, says all 1,300 workers at risk from the closure plans will be offered roles elsewhere in the company.

Joseph Sutton, Morrisons’ convenience, online and wholesale director, said:

“We have a great deal of work to do but there’s no question that McColl’s is a business with strong potential.

“I’m confident that the combination of McColl’s conveniently located stores and great colleagues, together with Morrisons scale, brand, systems and fresh food expertise, will lead to a transformation of the business.

“We very much regret the proposed closure of 132 loss-making stores but it is, very sadly, an important step towards the regeneration of the business.

“I am confident that McColl’s can, in the Morrisons family, once again become a growing, thriving and vibrant convenience business serving local communities across the UK.”

The takeover moved a step closer last week when the Competition and Markets Authority said they would accept Morrisons’ offer to sell 28 stores from McColl’s existing estate, and not escalate their inquiry into the deal.

McColl’s had been suffering from financial pressures for some time before its collapse into administration this year. It was hit by supply chain difficulties during the pandemic, resulting in gaps on the shelves and poor sales.

Updated

US JOLTS report stronger than forecast

The number of US job vacancies has rebounded, easing concerns that demand for workers was cooling.

There were 10.7m job openings in September, the Bureau for Labor Statistics reports, as vacancies rebounded after a sharp drop in August

The 437,000 increase in vacancies surprised economists, who had expected a drop to around 10m openings.

Good news for US workers, who may be able to negotiate higher pay, but that won’t be welcomed by the US Federal Reserve as it tries to cool inflation.

Updated

America’s factory sector slowed last month amid the global weakening, but just managed to keep growing.

The Institute of Supply Management reported that economic activity in the US manufacturing sector grew in October, indicating that the overall economy has expanded for 29 months running.

Its manufacturing PMI index dropped to 50.2 – just above the 50-point mark showing stagnation. That’s down from 50.9 in September, and the weakest reading since May 2020.

That’s stronger than UK factories, which contracted last month (see earlier post), but could indicate demand is tailing off.

US factory bosses reported that new orders contracted, but production grew and there was a welcome easing of price pressures.

The ISM’s Timothy Fiore says:

The U.S. manufacturing sector continues to expand, but at the lowest rate since the coronavirus pandemic recovery began.

With panelists reporting softening new order rates over the previous five months, the October index reading reflects companies’ preparing for potential future lower demand.

The US stock market has opened higher, following gains in Europe today.

The S&P 500 index of US stocks jumped 1%, on hopes of slowing interest rate rises soon.

Jo Maugham, director of Good Law Project – which brought a court case against Uber for failing to charge VAT – has tweeted about the news that it’s settled with HMRC today:

Battery start-up Britishvolt is holding emergency talks today as it seeks a last-minute reprieve to avoid tumbling into administration, PA Media reports.

The company has been developing a 3.8 billion gigafactory in Blyth, Northumberland, which it had hoped would employ up to 3,000 workers.

However, it is teetering on the brink of insolvency as it seeks fresh funding in order to continue operations.

It is understood the business has fielded interest from potential investors and has not yet entered administration.

Britishvolt has lined up the accountancy firm EY to carry out the administration if it goes ahead.

One source cautioned yesterday that Britishvolt was also still examining other options to try to find a last-ditch rescuer, with administration possible later in the week if those talks failed.

My colleague Jasper Jolly has written about how Britishvolt has faced mounting difficulties as the start-up spent heavily to develop its technology, to attract senior people and to start construction of its factory.

Over the summer, the funding pressures became so acute that it was forced to put the project on “life support” to conserve cash.

Both of its co-founders had departed by August this year. Ex-Ford executive Graham Hoare led an effort to professionalise the operation, amid questions over extravagant practices within the startup, revealed by the Guardian. They included leasing a seven-bedroom £2.8m mansion with an indoor swimming pool and Jacuzzi for executives, hiring a Dubai-based fitness instructor to conduct yoga classes for staff over video, and travelling in a private jet owned by one of its billionaire shareholders

The oil price has jumped today, helped by the weaker US dollar.

Brent crude has gained 2.8% to $95.46 a barrel, with US crude rising over 3% to $89/barrel as the dollar eased back from a one-week high.

Tight supplies are also helping the oil price, after Opec and its allies decided to cut output this month.

Think tank Common Wealth has criticised oil giants such as BP for diverting so much of their free cash to share buybacks, rather than spending more on the transition to renewables.

They say the energy crisis is “enriching the oil and gas giants”, as Sophie Flinders, Data Analyst at Common Wealth, explains:

The record profits BP have raised this quarter highlight just how broken our energy system is: while millions struggle with rising household energy bills, energy giants are handing billions to investors. Further, this quarter’s results show that there has been very little investment in low carbon initiatives.

For every £1 BP invested in low carbon, £26 was spent on fossil fuels. We know we need to rapidly decarbonise to avoid the worst outcomes of climate change.

Energy giants like BP are clearly unwilling to face up to the task.

Uber to pay £615m VAT bill

Uber also says it will pay around £615m to UK tax authorities to settle an investigation into unpaid VAT.

In today’s results, the company explains that it reached agreement with HM Revenue & Customs yesterday:

On October 31, 2022, we resolved all outstanding HMRC VAT claims related to periods prior to our model change on March 14, 2022. We do not expect any significant impact to the income statement as we have adequate reserves recorded as of September 30, 2022, related to this resolution.

We expect a cash outflow of approximately £615m during Q4 2022 for this resolution.

Uber has originally argued that it was exempt from paying VAT because its drivers are self-employed.

But it started adding 20% Value Added Tax in March this year, following landmark court rulings that its drivers were workers.

There had been reports that Uber could have owed upwards of £1bn in unpaid VAT, on bookings before March 2022.

HMRC are also chasing thousands of private hire drivers who take bookings through online apps for unpaid tax, suspecting some have not declared all of their income.

Pfizer raises 2022 earnings guidance and Covid-19 vaccine sales forecast

Pharmaceuticals giant Pfizer has lifted its forecast for Covid-19 vaccine sales, and hiked its earnings forecast too.

The company now expects revenues of $34bn from its Comirnaty vaccine, developed with BioNTech, this year an increase of $2bn on its previous prediction.

There was strong demand for Pfizer’s new bivalent booster, with sales also higher after the US approved Comirnaty for use in children from 6 months to under 5.

It is sticking with its forecast of $22bn revenue from Paxlovid, its Covid-19 antiviral treatment, despite ‘unfavorable impacts from foreign exchange’ (ie, the strong dollar which makes foreign sales less lucrative).

Overall revenues were 6% lower than a year ago. But Pfizer has lifted its earnings per share forecast to between $6.40 and $6.50 for the year, up from its previous forecast of $6.30 to $6.45.

Pfizer has been raising the price of its Covid-19 vaccine since it launched almost two years ago – and last week forecast that it could raise the price to between $110 and $130.

Last month the European Medical Agency’s human medicines committee recommended extending the use of Comirnaty to children aged 6 months to 4 years.

Updated

Uber shares jump on upbeat outlook

An Uber car in the center of Krakow.

Over on Wall Street, shares in Uber have jumped 9% in pre-market trading after it beat revenue forecasts and gave an upbeat outlook.

The ride-hire and food delivery company reported a 32% jump in gross bookings year-on-year, to $29bn.

Revenues jumped 72% to $8.3bn as lockdowns were relaxed and people travelled more than a year ago.

The mobility division grew faster than the food delivery arm (which may suffer as customers cut back on takeways). Trips during the quarter grew 19% year-on-year to 1.95 billion, or around 21 million trips per day on the average day.

Uber continued to report positive free cash flow too. It racked up net cash flows of $358m, on top of the $382m in Q2, which should further ease worries it could run out of cash.

Uber grew earnings, on an adjusted EBITDA basis, to $516m from $508m –- but actually made a net loss of $1.2bn, partly due to revaluating its equity investments.

CEO Dara Khosrowshahi said Uber was achieving more profitable growth, adding:

Even as the macroeconomic environment remains uncertain, Uber’s core business is stronger than ever.”

Uber cheered investors by forecasting adjusted EBITDA of $600m to $630m in the last quarter of 2022 – which is above Wall Street forecasts.

In July, The Uber Files exposed how the company had flouted laws, duped police, exploited violence against drivers and secretly lobbied governments during its aggressive global expansion.

Last weekend, my colleague Gywn Topham wrote about Uber’s push to remodel itself (as the ‘centrist dad of the tech-meets-mobility world’).

Whatever the product, total revenues from deliveries work such as Uber Eats now pretty much match those of its rides, as people adapt to a life spent more at home. Freight is a growing patch for Uber, and it has recently launched a new advertising division to capture users at every stage, from booking on the app to the car ride itself. The ads will potentially generate $1bn annually from 2024, but also smack of slight desperation, as market doubts over big tech stocks engulf the company.

Uber is, of course, not the first global empire built on a dodgy past that leaders would like to airbrush. And it is still valued at $55bn, which is pretty good going for a cab firm. Quite where the modern regime heads, or turns a profit in a post-pandemic era, remains uncertain. But decline and fall still look some way off.

Updated

The UK isn’t alone. Factory activity also shrank in South Korea, Taiwan, Malaysia and China in October, according to the latest PMI surveys.

Flash readings from the eurozone last month also showed a contration (we get final data tomorrow).

Global factory output has been hit by widespread recession fears, high inflation and China’s zero-COVID policy. which all hurt demand – with manufacturers continuing to face supply disruptions and rising prices.

UK manufacturing shrinks: what the experts say

British factories may already be in recession after activity shrank again last month, warns Fhaheen Khan, Senior Economist at Make UK (which represents manufacturers).

As the economy tries to find its bearings after months of political crisis, manufacturing may already be in a recession with demand falling rapidly. Until recently, the consumer’s willingness to spend on goods and services was the final saving grace ensuring industry’s persistence in trying times, despite record levels of inflation.

It is clear there is a limit to how long this can go on for with a slowdown pointing to further decline and a deep recession next year looking more likely by the day.”

Manufacturing, like the housing market, did not benefit from the political turmoil of the Truss regime.

David Atkinson, SME and mid corporates head of manufacturing at Lloyds Bank, says industry craves stability – but didn’t get it in October.

Political and economic stability gives manufacturers the confidence to plan and invest, which drives positive consumer sentiment and sales.

“Speaking to industry leaders, it’s clear the number of challenges they currently face surpasses anything they have previously experienced. Many businesses will have cash to invest, but with supply chain challenges, high energy costs, and labour shortages driving wage inflation, the current environment makes immediate investment decisions a challenging conundrum.

“Manufacturers are hoping the next fiscal statement will provide the stability they need to help drive investment and long-term growth. But for now, they will continue to operate with caution.”

A Made.com high street shop in central London.
A Made.com high street shop in central London. Photograph: Chris J Ratcliffe/Getty Images

Online furniture retailer Made.com is on the brink of collapse after efforts to find a buyer failed, putting 700 jobs at risk, my colleague Julia Kollewe reports.

Made.com is planning to call in administrators after talks to find a buyer failed and it stopped taking customer orders last week.

The company, which sells furniture for the home and garden to younger shoppers, put itself up for sale in September, but said rescue talks with a number of would-be buyers had not resulted in a firm offer. Trading in Made.com shares was suspended on Tuesday.

During the pandemic, Made.com’s sales surged as people spent more time at home during lockdowns and splashed out on furniture and homeware purchases online.

However, more recently households have cut back on big-ticket purchases, under pressure from soaring food and energy bills, while global supply chain problems have disrupted deliveries.

The business employs 700 people, but is in the process of making a third of them redundant.

UK manufacturing shrinks at fastest pace since 2020 lockdowns

Workers on the production line at Nissan's factory in Sunderland.
Workers on the production line at Nissan's factory in Sunderland. Photograph: Owen Humphreys/PA

Britain’s factory sector continued to shrink last month as the UK slid closer to recession.

Purchasing managers across UK manufacturers reported that output, new orders and new export business all declined in October, leading them to cut jobs.

Firms were hit by lower demand at home, and a weakening global economy – with softer Chinese demand, the war in Ukraine and ongoing issues relating to Brexit all hitting exports.

This pulled S&P Global’s manufacturing PMI down to 46.2, from 48.4 in September. That’s the lowest reading since May 2020; any reading below 50 shows that activity shrank.

Rob Dobson, director at S&P Global Market Intelligence, warns that the factory sector won’t help keep the UK out of recession:

“UK manufacturing production suffered a further decline at the start of the fourth quarter, with the sector buffeted by weak demand, high inflation, supply-chain constraints and heightened political and economic uncertainties. New work intakes fell at the quickest pace since May 2020 as demand in domestic and export markets weakened.

While the downturn has lessened the pressure on prices, the weak pound and high energy prices mean elevated cost inflation remains a prime concern for manufacturers.

The darkening situation also knocked business optimism down to a two-and-a-half year low, as concerns about the weak demand outlook, recession, inflationary pressure and sustained uncertainty hit confidence.

The labour market picture has also deteriorated, with companies cutting jobs for the first time in almost two years while still struggling to recruit and retain appropriate staff. On current form manufacturing is in no position to help prevent the broader UK economy from sliding into recession.”

FTSE 100 at five-week high

UK shares have hit their highest level in five weeks, as a weaker US dollar pushes up commodity stocks.

The FTSE 100 index of blue chip shares has gained 1.4%, or 101 points, to 7195 points this morning, the highest since late September. Nearly every shares is up, as the City makes a strong start to November.

Ocado (+34%) is leading the way after signing a deal with Lotte Shopping, followed by mining companies such as Glencore (+4.6%) and retailers including JD Sports (+5%).

Investors are hoping that central banks will slow the pace of their interest rate rises soon, which is pushing the dollar lower, boosting raw material prices.

The US Federal Reserve is expected to hike its key rate by another three-quarters of a percent tomorrow, but could potentially also sound more dovish about future moves.

Government urged to extend UK energy price cap

Jeremy Hunt should allow the energy price cap to run beyond the existing six-month deadline to act as a “shock absorber” that would reduce inflation and give consumers £90bn of extra spending power, a leading thinktank has argued.

The left-leaning IPPR said the energy price cap could repay the exchequer in lower wage demands and lower interest rates, boosting economic growth and raising tax receipts.

In a report ahead of the chancellor’s 17 November autumn statement, the IPPR said the funds released from preventing a deep recession could be used to support public services and boost welfare and pension payments.

But the thinktank warned tax rises would be needed to give Hunt leeway to support households and businesses, in particular from a broader windfall tax on the extra profits generated by energy companies.

More here:

BP is on track for one of the most profitable years in its history, after more than doubling its profits in the third quarter of 2022 to over $8bn, points out the Financial Times.

The FT says:

Though slightly down from its 14-year high profit of $8.5bn in the second quarter, BP’s third-quarter earnings were once again the strongest since 2008.

The performance was helped by “exceptional” profits from its gas trading and marketing business, the company said. Underlying earnings in the gas and low-carbon energy division were $6.2bn, up from $3bn in the second quarter.

“Exceptional gas trading strikes again,” said Biraj Borkhataria, analyst at RBC Capital Markets, adding that it was “particularly impressive” given the outage earlier this year at one of BP’s main sources of liquefied natural gas in the US.

Updated

Ocado shares surge 35% after South Korea deal

Elsewhere in the City, shares in online grocery operator Ocado have rocketed by 35% after it announced a deal with South Korea’s Lotte Shopping.

Ocado will build a network of robotic warehouses for Lotte using its Smart Platform, and providing technology for building online grocery orders from Lotte’s stores.

The deal is a much-needed boost to Ocado, which has suffered from the move away from home deliveries as Covid lockdowns ended, and the cost of living crisis.

Shares have jumped from 472p to 631p this morning, having started this year around £16.

Victoria Scholar, head of investment at Interactive Investor, says:

This is a smart opportunistic move from Ocado that will allow the business to gain a foothold in an important growing economy. The tech business will be able to generate fees from Lotte during the development phase and fees linked to sales as well, which will likely be revenue accretive. The tie-up will also help Lotte to expand its delivery business with Ocado’s robotic warehouse technology.

However investors in Ocado have had a tough time with the stock which is the worst performing company on the FTSE 100 over a one-year period, shedding nearly 70% even after today’s bounce. The share price decline reflects its lack of growth, dividend and profitability which have seen investors shift away from the stock.

BP’s share price has touched its highest level since February 2020, early in the Covid-19 pandemic, this morning.

BP’s share price over the last five years
BP’s share price over the last five years Photograph: Refinitiv

The company’s shares have jumped by around 44% since the start of the year.

ITV’s Robert Peston tweets that BP’s profits could encourage the government to lift the windfall tax rate:

(Not all BP’s profits were made in the North Sea, of course – so Rishi Sunak and Jeremy Hunt can’t impose a higher tax rate on the company’s entire earnings).

Updated

Biden urges energy firms to stop 'war profiteering'

US President Joe Biden speaking in the Roosevelt Room of the White House, calling on Congress to consider tax penalties for oil and gas companies.
US President Joe Biden speaking in the Roosevelt Room of the White House, calling on Congress to consider tax penalties for oil and gas companies. Photograph: REX/Shutterstock

Last night, US president Joe Biden threatened US energy companies with a windfall tax, as he accused the industry of “war profiteering”.

Biden piled pressure on oil and gas companies to use their record profits to lower costs for Americans and increase production, or face paying a higher tax rate.

Speaking at the White House, Biden said the oil industry “has not met its commitment to invest in America and support the American people.”

He said he would work with Congress to levy tax penalties on oil companies, unless they did more to lower costs for American consumers, declaring:

“It’s time for these companies to stop war profiteering, meet their responsibilities in this country and give the American people a break and still do very well.”

With inflation a hot topic ahead of the 8 November midterm elections, Biden said gasoline would be significantly cheaper at the pumps if energy companies passed on their profits to customers.

And he pointedly added:

“Oil companies’ record profits today are not because of doing something new or innovative.

Their profits are a windfall of war, a windfall for the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe.”

Updated

BP has ‘cleaned up’ thanks to the jump in the oil price this year, explains ITV’s Joel Hills:

Updated

Ed Miliband MP, Labour’s Shadow Climate Change and Net Zero Secretary, says the prime minister should be ashamed that his levy on the energy industry’s profits hasn’t brought in more money.

“Today’s profits at BP are damning evidence of the failure of the government to levy a proper windfall tax.

“Rishi Sunak should be hanging his head in shame that he has left billions of windfall profits in the pockets of oil and gas companies, while the British people face a cost of living crisis.

“Even if he U-turns on a windfall tax now, the oil and gas companies have taken billions from the cash machine that is the British people’s energy bills —and Rishi Sunak has let it happen.

“The Conservatives are not on the side of working people. Labour led the way in calling for the energy price freeze, and only our plan to make Britain a clean energy superpower by 2030 can cut bills for good.”

As flagged earlier, BP expects to pay around $800m in windfall taxes on its North Sea division this year, only a fraction of the money it will be spending on share buybacks.

Updated

Friends of the Earth calls for bigger, bolder windfall tax

The case for a “bigger, bolder windfall tax” is now overwhelming after BP raked in another £7n of profits in the last quarter alone, says Friends of the Earth.

Their energy campaigner, Sana Yusuf, says:

“With the economy sinking, energy bills soaring and the climate crisis deepening, Rishi Sunak must surely act on the excessive profits that fossil fuel firms like BP are raking in.

“The case for a bigger, bolder windfall tax is now over-whelming. This must address the ridiculous loophole that undermines the levy by enabling companies to pay the bare minimum if they invest in more planet-warming gas and oil projects.

“Some of the billions of pounds raised should be used to pay for a street-by-street, home insulation programme to cut energy bills and reduce emissions. As well as providing long-term financial relief to households – especially those most in need – this would boost energy security, cut our gas reliance and help the UK meet legally binding climate targets.”

The Labour party have also been pushing for a “proper” windfall tax on oil and gas companies.

They want the levy back-dated to January, and the removal of the tax break on companies’ investment spending which meant Shell hasn’t actually paid any windfall tax yet.

With Cop26 president Alok Sharma MP calling for the windfall tax to be changed last week, the government could be persuaded, too.

The Sunday Times reported that the windfall tax on energy companies could be raised to 30% (from 25%) and extended by three years, when Jeremy Hunt announces his fiscal plans later this month.

They said:

Under options being considered by Jeremy Hunt, the chancellor, the energy profit levy would increase by up to five percentage points to raise billions of pounds in extra revenue on top of the £25 billion it had been due to bring in by 2025.

The tax could be extended until 2028, the end of the period for which the Office for Budget Responsibility has drawn up forecasts, according to senior government sources.

Updated

Calls for 'polluter tax' on oil firms

Profits at the world’s biggest oil companies have soared to around £150bn so far this year as Russia’s war on Ukraine pushed up energy prices, analysts estimate.

Global Justice Now, which campaigns for a more equal world, is calling for these major polluters to pay the cost of the climate damage caused by fossil fuels.

They say:

The Big 5 oil companies alone have announced over ~$170 billion in profits in 2022. To put this into perspective, that is more than the $116 billion a year that loss and damage are estimated to cost the global south, to date.

It doesn’t take much to connect the dots to see what’s happening here.

When fossil fuel companies are announcing record profits just days before COP27, its high-time leaders joined those dots once and for all too and make polluters pay up for loss and damage. It’s clear they can afford to, and a polluter tax could help reduce household energy bills closer to home as well.

People here and the global south have one thing in common when it comes to companies like BP, they’re ripping us off and think they can keep getting away with it at the expense of people and the planet. It’s high time we showed them the game is up.”

Updated

UK house prices fall: what the experts say

The sharp drop in house prices last month is probably a ‘sign of things to come’, says Martin Beck, chief economic advisor to the EY ITEM Club.

“Given the recent challenges for the housing market from financial market turmoil, an associated rise in mortgage rates, and concerns that the Bank of England may opt for a particularly significant rise in interest rates in November, a 0.9% month-on-month fall in Nationwide’s measure of house prices in October did not come as a surprise.

“October’s fall could likely be a sign of things to come. Although mortgage rates have retreated from the highs seen just after the mini-budget, they’re still elevated compared to early-mid September. For example, the current standard variable rate on a Nationwide mortgage is 5.24%, compared to 3.74% pre-mini-budget. Cost of living pressures remain challenging, and face being exacerbated by tax rises and public spending restraint in November’s Autumn Statement, and consumer confidence is notably depressed.

Jonathan Hopper, CEO of Garrington Property Finders, says buyers can play ‘hardball’ by refusing to pay asking prices:

“The chaotic aftermath of the mini-Budget sent tremors through the property market that left both buyers and sellers shaken.

“The worst of it is, we’re likely to feel the aftershocks for months to come.

“A fundamental recalibration of what’s affordable is underway. Fewer mortgages are available, with interest rates having gone up in an express lift, rather than the gradual escalator we’d been expecting.

Tomer Aboody, director of property lender MT Finance, says political uncertainty and interest rate fluctuations have left buyers and sellers unsure whether to proceed.

‘Rising cost of living and higher interest rates translate into less money in people’s pockets and therefore a different approach, until these higher costs become the norm.’

UK house prices fell after 'mini-budget' turmoil

The turmoil following the UK’s mini-budget drove down house prices last month, Nationwide reports.

Prices fell by 0.9% during October, the first such fall recorded by Nationwide since July 2021 and the largest since June 2020.

The average price dropped to £268,282, from £272,259 in September.

Robert Gardner, Nationwide’s chief economist, blamed the surge in market interest rates after Kwasi Kwarteng’s announcement in September.

Kwarteng’s plan for huge unfunded tax cuts drove up the cost of mortgages, with many deals vanishing, as the money markets anticipated a very sharp hike in UK interest rates.

Gardner says:

“October saw a sharp slowdown in annual house price growth, to 7.2% from 9.5% in September. Prices fell by 0.9% month-on-month, after taking account of seasonal effects, the first such fall since July 2021 and the largest since June 2020.

“The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates. Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.

For example, the increase in mortgage rates meant that a prospective first-time buyer (FTB) earning the average wage and looking to buy a typical FTB home with a 20% deposit would see their monthly mortgage payment rise from c.34% of take-home pay to c.45%, based on an average mortgage rate of 5.5%. This is similar to the ratio prevailing before the financial crisis.

On an annual basis, house prices were 7.2% higher in October than a year ago, down from 9.5% in September.

Gardner also warns that the market is likely to slow in the coming quarters.

Inflation will remain high for some time yet and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures.

The Bank will set interest rates on Thursday, and could lift borrowing costs by another half of a percent (from 2.25% to 2.75%), or even by 75 basis points (to 3%).

Updated

BP has spent $8.5bn on share buybacks this year

The $2.5bn buyback announced this morning means that BP will have spent $8.5bn so far this year buying its own shares back.

That’s around 60% of its surplus cash flow – money which could have gone into, say, extra investment in renewables.

George Dibb of the Head of Centre for Economic Justice at the IPPR, says such buybacks should be taxed:

“Companies like BP are making huge profits and channelling these straight back to already-wealthy shareholders through share buyback schemes. Instead of reducing costs for consumers or investing in renewable energy, these fossil fuel giants are prioritising transfers to shareholders. BP has announced a new buyback programme today of $2.5bn, totalling $8.5bn this year alone.

“There is an alternative. The US have recently levied a tax on share buybacks and the UK should follow suit. A 25 per cent windfall tax on the share buybacks of BP and Shell would raise up to £4.8 billion per year for the treasury. Taxes which could be spent on supporting households across the UK.”

Updated

BP’s $8.2bn profits in the last quarter were driven by “exceptional gas marketing and trading result and higher gas realizations”, it says.

Gas prices shot up in August and early September, as Russia squeezed gas supplies to Europe by cutting capacity on its Nord Stream 1 pipeline, and then closing it.

BP to pay $800m in windfall tax this year

BP expects to pay around $800m, or £700m, in windfall tax on its North Sea operations this year.

That will be part of a tax bill of around $2.5bn for North Sea earnings, a company spokesman has said.

The 25% Energy Profits Levy (EPL) was announced by then-chancellor Rishi Sunak in May, to fund support for struggling households.

But, the tax includes incentives to increase spending in new oil and gas projects – and last week, rival Shell said it hadn’t paid any windfall tax yet, due to spending more on investments in the North Sea.

There are reports that chancellor Jeremy Hunt could increase the windfall tax rate to 30%, and run it until 2028, to help fix the UK’s fiscal ‘black hole’.

Introduction: BP racks up £7bn profits

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

Oil giant BP has racked up another quarter of surging profits, thanks to the jump in energy prices caused by the Ukraine war.

BP beat City expectations by racking up underlying profits of $8.15bn, or £7bn, in the July-September quarter, helped by strong natural gas trading.

That’s more than double the $3.32bn it made in the same quarter a year ago (based on BP’s preferred ‘underlying replacement cost’ earnings measure).

BP will continue to push cash to shareholders, by announcing a fresh $2.5bn share buyback, on top of a dividend worth 6p per share.

Bernard Looney, BP’s chief executive officer, says the company is continuing to “perform while transforming”:

We remain focused on helping to solve the energy trilemma - secure, affordable and lower carbon energy. We are providing the oil and gas the world needs today - while at the same time - investing to accelerate the energy transition.

2022 has been an extremely profitable year for BP. Three months ago it tripled its quarterly profits to $8.5bn for April-June, leading to accusations of ‘unfettered profiteering’.

Such large profits will reignite calls for larger windfall taxes on the bumper profits earned by oil and gas companies.

Last week Alok Sharma, the outgoing president of the Cop26 UN climate summit, told The Guardian that the existing windfall tax should be changed to raise billions more and to stop companies using loopholes to invest in further fossil fuel extraction.

As Sharma pointed out:

“These are excessive profits, and they have to be treated in the appropriate way when it comes to taxation,”

We’ll have more reaction to BP’s profits through the day.

Also coming up today

UK house prices fell 0.9% in October as the housing market cooled, new figures from the Nationwide Building Society show (more on that shortly).

European stock markets are set to open higher, extending their recent rally. Investors are hoping that some central banks might soon slow the pace of interest rate rises, as the global economy weakens.

Overnight, Australia’s Reserve Bank has lifted its cash rate by 25 basis points to 2.85%, the highest since 2013, while America’s Federal Reserve will start its two-day meeting to set monetary policy.

The agenda

  • 7am BST: Nationwide house price index for October

  • 9.30am BST: UK manufacturing PMI report for October

  • 2pm BST: US manufacturing PMI report for October

  • 2pm BST: JOLTS survey of US job openings

Updated

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