Closing summary: Foreign lenders expected to agree debt extension for Thames Water
The Dutch bank ING and two Chinese state-owned lenders could play a crucial role in deciding the fate of beleaguered Thames Water, it has emerged.
The banks are expected to agree an extension on a £190m loan to the parent company of Britain’s biggest water supplier, which is due to be repaid at the end of this month.
You can read the full story here:
In other finance news today:
Trade groups have warned that consumers could see a rise in food prices after the UK government announced the introduction of post-Brexit charges on imports of EU food and plant products later this month.
The gender pay gap among UK staff at Goldman Sachs has hit its highest level in six years, raising concerns about a lack of women among the bank’s most senior ranks.
Rio Tinto is facing a likely lawsuit in an English court brought by the UK-based law firm Leigh Day on behalf of people living in villages near a mine in Madagascar.
Holidaymakers will continue to face limits on the amount of liquid they can carry on flights out of the UK this summer after the government extended the deadline for airports to install new security scanners by a year.
Despite record levels of shoplifting in its food stores, the Co-op increased profits in its grocery business last year as it signed up 1 million new members and invested more than £90m in cutting prices, including introducing special discounts for members.
UK rail passengers are bracing for travel disruption as train drivers bring some routes on the national network to a halt in a wave of strikes, but two days of similar action on the London Underground have been called off.
You can continue to follow our live coverage from around the world:
In the UK, Rishi Sunak is criticised for saying border security more important than staying in European court of human rights
In the US, Joe Biden is to speak to Netanyahu amid reports US president is furious over Gaza aid convoy strike
In our coverage of the Middle East crisis, Israel says investigation into its airstrike that killed aid workers in Gaza will take weeks
In our coverage of the Russia-Ukraine war, Volodymyr Zelenskiy reiterates calls for stronger air defences as his foreign minister asks Nato for Patriot missiles
Thank you for joining us today. Please click again tomorrow morning to see out this shortened Easter work week. JJ
US stock markets appear to have taken heart from Federal Reserve chair Jerome Powell’s dovish comments last night.
The tech-focused Nasdaq index has gained 1% in the opening minutes on Wall Street, while the S&P 500 gained 0.8% and the Dow Jones industrial average rose 0.7%.
When it rains, it pours (and flushes faeces into the UK’s rivers): S&P Global has also cut its rating for Thames Water’s debts.
S&P said that it has a “negative outlook” because of “persistent uncertainties on support from existing or new shareholders”. It added:
Delays in injecting equity during the currently regulatory period bring into question shareholder support and the recovery in the company’s operational performance in the next regulatory period. Without the equity injections needed to execute the business plan, Thames Water could endure longer periods of weak performance.
Thames Water’s bonds are unsurprisingly showing the strains. Here is Reuters on the move in bond prices (which move inversely to yields):
The price of Thames Water’s November 2028 bond fell nearly 1.4 pence to around 95.13, its lowest since October, according to Tradeweb data.
Kemble’s May 2026 bonds fell to their lowest on record, down 1.4 pence to 15.127 pence.
The below graph illustrates the struggles of what is meant to be a boring, dependable utility: the yield on its 30-year bonds from 1998 has surged in the last two years.
It is back at six-month highs today. Higher yields generally mean that investors see an increased risk of default.
The Bank of England’s decision maker panel (DMP) survey of about 2,500 businesses from all parts of the economy has eased pressure to keep interest rates high after it found that that firms are finding it easier to recruit staff, wages growth has fallen, and inflation expectations are lower.
Firms reported that prices charged to customers rose by an average annual rate of 5.3% in the three months to March, down from 5.4% in the three months to February. The BoE said businesses expect this still high level of output price inflation to decline over the next year.
Year-ahead own-price inflation was expected to be 4.1% in the three months to March, down from 4.3% in the three months to February. The BoE said:
Output price inflation is, therefore, expected to decline by 1.2 percentage points over the next 12 months based on three-month averages.
Expectations of where wages growth will be over the next three months fell to 4.9% – the lowest since June 2022. The single-month figure at 4.7% was lowest since May 2022.
Illustrating how the demand for staff has eased, firms reported annual employment growth of 2.0% in the three months to March, lower than the 2.3% in February. Looking ahead for a full year, firms said employment growth would be 1.4%.
The DMP came to prominence last year when members of the BoE’s interest rate setting body – the monetary policy committee (MPC) – cited how firms expected to keep prices elevated, despite forecasts that it would fall steeply across the economy.
External MPC member Catherine Mann said responses showing that many firms intended to increase their margins in 2024 showed that the inflation genie was far from being put back in its bottle.
Rob Wood, chief UK economist at Pantheon Macroeconomics, a consultancy, said:
The MPC will take further confidence from the falls in wage growth and price expectations in March’s Decision Maker Panel. It’s still quite a long path back to target consistent services inflation, so rate cuts are likely to be gradual.
Updated
The number of Americans claiming unemployment benefits increased by more than expected last week, as the US Federal Reserve decides when to cut interest rates.
Initial jobless claims rose to a seasonally adjusted 221,000 for the week ending on 30 March, according to government figures. A Reuters poll of economists showed an average forecast of 214,000 claims.
Reuters reported:
Labour market resilience is anchoring the economy, with gross domestic product increasing at a brisk 3.4% annualized rate in the fourth quarter. Growth estimates for the first quarter are as high as a 2.8% pace. That strength, combined with still-high inflation, could see the Federal Reserve delaying a much-anticipated interest rate cut this year.
Federal Reserve chair Jerome Powell on Wednesday made comments described by some economists as “dovish” – in line with cutting interest rates to support the economy. Powell said that recent data on job gains and inflation have come in stronger than expected, but this data “does not materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labour market and inflation moving down toward 2% on a sometime bumpy path”.
Lee Hardman, a senior currency analyst at MUFG, a Japanese bank, said:
The comments provide further reassurance to market participants that the Fed remains on course to deliver three rate cuts this year with the first cut most likely to be delivered in June. Ahead of the latest nonfarm payrolls report released on Friday, chair Powell emphasised that that the Fed is not concerned by strong growth and job gains.
The US trade deficit in February was slightly bigger than expected, at $68.9bn – $1.6bn more than economists had forecast.
International Paper says it will cut costs but keep DS Smith UK office in bid battle
American packaging company International Paper has said it would cut £93m in annual costs in a proposed takeover of British rival DS Smith – which suggests that job cuts may be considered.
International Paper’s £5.7bn bid is trying to gatecrash an agreed £5.1bn deal between DS Smith and British rival Mondi. It said it had made “significant progress […] in reciprocal due diligence”.
The company said that it would keep a “European headquarters” at DS Smith’s current offices in Paddington, London, but that the group would be headquartered in Memphis, Tennessee.
It would also pursue a secondary listing of International Paper shares in London, in a move to try to prevent objections from British investors.
It said those cuts would make “overhead synergies by reducing duplicative corporate and business overhead expenses”. However, it said that DS Smith’s North American manufacturing locations and International Paper’s European manufacturing locations “would continue their respective operations”. It did not mention any factory closures.
Businesses in mergers often cut shared services such as corporate functions like payroll or office supplies, although International Paper did not detail what would be cut. It said the rest of the £376m in savings would come from “operational efficiencies” as well as using its newfound size to get better deals from suppliers.
Mondi shares had fallen 2.8% in morning trading, but they have recovered since International Paper’s statement to top the FTSE 100 with a 4% gain. (Perhaps Mondi investors think they would be better off not getting into a bidding war with International Paper?)
DS Smith shares also rose by 2.4% as investors hope for a juicy premium.
Bet365, the betting exchange run by Britain’s best-paid woman, Denise Coates, will pay more than £580,000 for failures in anti-money laundering and social responsibility.
The UK Gambling Commission said that Bet365 had checks that were “ineffective at managing money laundering risk”, that it had failed to check new customers were not covered by financial sanctions, and failed to check identity documents.
The company also failed to check properly if early intervention were required to prevent customers losing more money than they could afford.
The regulator said that Hillside (UK Gaming) ENC, which holds a licence for Bet365’s bingo and casino products, will pay £343,035 and Hillside (UK Sports) ENC, which holds a licence to offer betting, will pay £239,085.
However, those amounts will be a drop in the ocean for the hugely profitable company, which is based in Stoke.
Coates’s company paid her a salary of £220m last year, plus dividends of at least £50m.
Kay Roberts, the commission’s executive director of operations, said:
The policy and procedural failings may not have been as severe as those at other gambling businesses in recent years but they were failings nonetheless.
We expect high standards from operators in terms of keeping gambling safe, fair and crime-free, and will always take action to correct any failings. This operator is very aware that a repeat of these failings will result is escalating regulatory action.
Chinese companies were already playing an important part in the Thames Water fiasco: China Investment Corporation owns 9% of the shares.
However, the equity owners are likely to take a back seat to the debt holders if the parent company defaults on its debt repayments.
A default – rated as likely by Fitch – would mean that the Chinese banks who are reportedly debt holders could lose money, but it could also give them ownership over Thames Water assets (if the terms of its debts are found to be enforceable).
That could add another layer of political controversy on top of a situation that already features rivers of excrement and cross-party disdain for a key utility. The Daily Telegraph reports that Tim Loughton, a Tory MP who is one of five politicians sanctioned by China in 2021, said:
This is another worrying aspect of the global reach of China’s financial institutions. It’s very unhealthy that a major British utility company could be beholden to a power like China, where we know that they pose a very serious threat to our security.
There are plenty of examples overseas where they have lent to infrastructure projects up to the eyeballs only for them to go bust.
Thames Water reportedly owes Chinese banks as Fitch downgrades rating
Another update on Thames Water’s lenders: two Chinese state-owned banks are among the companies that are owed £190m by the UK’s biggest water company, the Financial Times has reported.
The FT reported that Chinese state-owned Bank of China, and Industrial and Commercial Bank of China (ICBC) were lenders, as well as Allied Irish Banks and Dutch lender ING, citing people familiar with the matter.
The debts mean that the two Chinese state-owned companies could end up as shareholders of Thames Water if its parent company is unable to repay the loan.
Fitch Ratings, an influential debt rating agency, on Thursday said it had downgraded the debt of Thames Water’s parent company.
Fitch wrote that even if the lenders do agree to extend Kemble Water Finance Limited’s debts, it would probably still constitute a default. What happens after that would depend on the terms of the debt – and what security the lenders demanded in exchange for the money.
Fitch said:
With Kemble’s shareholders not injecting the £500m of equity into Thames Water Utilities Limited expected for end-March 2024, and Kemble considering it not possible currently to fulfil upcoming interest payments, we believe that a downgrade to [restricted default] has become highly likely. Even assuming that lenders will agree to amend and extend the £190m loan due on 30 April 2024, this agreement would probably constitute a distressed debt exchange under our criteria.
Google considering charging for AI-powered search - FT
An interesting story on the future of web search: Google is considering charging users for its AI search abilities, according to the Financial Times.
We may have all got used to having all of the world’s information available basically for free, but AI may change that calculation.
For one thing, AI answers are significantly more costly to run on servers than standard calculations. That means more energy: a financial and environmental cost.
But they could also be very attractive for certain “power users” – people with specific needs who might be willing to pay a premium to get enhanced abilities. The FT reported:
Google is looking at options including adding certain AI-powered search features to its premium subscription services, which already offer access to its new Gemini AI assistant in Gmail and Docs, according to three people with knowledge of its plans.
Of course, AI answers will need to address some of the (quite significant) teething problems such as “hallucinations” – not ideal for finding good information. And the FT report flags that if Google gives answers directly it could undermine click-throughs – the source of its hundreds of billions of dollars of ad revenues.
And companies in the information economy might well put up barriers to Google’s search crawlers if they fear their content is being relied upon without fair remuneration. The New York Times has already taken action against Google’s rival, Microsoft and ChatGPT maker OpenAI, for alleged copyright infringement.
A Google spokesperson told the FT:
For years, we’ve been reinventing search to help people access information in the way that’s most natural to them. With our generative AI experiments in search, we’ve already served billions of queries, and we’re seeing positive search query growth in all of our major markets. We’re continuing to rapidly improve the product to serve new user needs. We don’t have anything to announce right now.
Dutch bank ING is one of the lenders owed £190m by Thames Water’s parent company, Kemble Water Finance, Sky News has reported.
Sky News also said that an unidentified large Chinese bank is also said to have a significant position in the loan facility, citing banking sources.
Much of Thames Water’s capital structure is very opaque, giving millions of households in the south-east of England little clue as to who ultimately is due to receive a financial return if the regulator allows the water company to charge higher bills.
The £190m bond is due to be repaid in the next few weeks. A large chunk of the £500m previously promised by Thames Water’s shareholders was earmarked for that purpose, but the company is now scrambling to find new lenders or equity investors to help it fill the gap and avoid a default that could see it taken into temporary public ownership.
ING was approached for comment.
Thames Water chief executive Chris Weston will meet union leaders today amid concerns over the future of Britain’s biggest water company.
Last week, its shareholders refused to stump up £500m which had been expected by
the end of March. The company has said the industry regulator, Ofwat, is being too stringent, making the company “uninvestible”.
Thames has said it can draw on funds to last until the middle of next year, but there
are concerns it could ultimately fall into a government-handled administration.
Representatives from the GMB, Unison and Unite unions will meet at the company’s headquarters, Clearwater Court in Reading, this afternoon.
Ahead of the meeting, GMB national officer, Gary Carter, said he will “demand
there are no cuts to work force numbers – or terms and conditions”. He said:
Any cost cutting measures being considered by Thames will only be a sticking plaster and will not address the root cause of the company’s problems – a lack of investment by shareholders stretching back decades.
UK car sales in strongest March since 2019
The UK car industry recorded its strongest March sales since 2019, before the coronavirus pandemic, as companies kept replacing their fleets.
Sales of battery electric vehicle (BEV) registration volumes were at their highest ever recorded levels, but market share fell by one percentage point from the same month last year, down to 15.2%. Battery cars remain more expensive than petrol and diesel equivalents, although a wave of cheaper Chinese cars is expected to change that in the coming months.
March sales are particularly important because of the issuance of new number plates, which means that some buyers hold off for vehicles that will retain their residual prices slightly longer.
New car sales rose 10.4% in March compared with the same month last year, according to the Society of Motor Manufacturers and Traders, a lobby group. 317,786 new cars were sold with a ‘24 plate.
However, that was still 30.6% below pre-pandemic levels.
The SMMT said that fleet buyers were making up for lost time during the years of disrupted supply during the pandemic, but added that registrations by private buyers fell by 7.7%. The lobby group cited a “challenging economic backdrop of low growth, weak consumer confidence and high interest rates” for the decline.
Mike Hawes, the SMMT’s chief executive, said:
Market growth continues, fuelled by fleets investing after two tough years of constrained supply. A sluggish private market and shrinking EV market share, however, show the challenge ahead. Manufacturers are providing compelling offers, but they can’t single-handedly fund the transition indefinitely.
Government support for private consumers – not just business and fleets – would send a positive message and deliver a faster, fairer transition on time and on target.
Updated
Amazon cuts hundreds of jobs at cloud unit after ditching 'just walk out' stores
Amazon has announced it is cutting hundreds of jobs in its cloud unit, Amazon Web Services (AWS), some of them affected by a decision to ditch its “just walk out” shops.
The stores gave customers the uncanny experience of walking out of shops with their items without scanning them or approaching a cashier (whether human or computer). However, while it seemed to be completely automated, it actually relied on human reviewers in India watching video and manually tagging items.
Industry publication Geekwire reported that AWS’s cuts will include several hundred jobs in its sales, marketing, and global services organisation, and a few hundred jobs on its physical stores technology team, citing executives’ emails to staff. The technology had been offered to retailer clients, but no businesses outside Amazon had agreed to take the technology on.
An AWS spokesperson said, in a statement to news organisations:
These decisions are difficult but necessary as we continue to invest, hire, and optimize resources to deliver innovation for our customers.
The firm also said “it will continue to hire and grow, especially in core areas of our business”, adding that there are thousands of jobs available and it is working to find internal opportunities for employees whose roles are affected.
NatWest’s incoming chair Rick Haythornthwaite is stepping down from his chairmanship of Ocado next year, dodging potential criticism of over-boarding he prepares to lead one of the UK’s largest banks.
It was the last major commitment hanging over the former Centrica boss, given that he’d announced back in September that he was prepared to ditch all of his other positions to focus on his role at Natwest.
However, he’ll stay on as Ocado’s chair for another year, saying he will not seek re-election at the food retailer’s AGM in 2025 – which could leave the chairman relatively stretched as he tries to fill the shoes of longstanding NatWest chair Howard Davies.
Haythornthwaite explained his decision in a statement on Thursday:
Since the announcement of my appointment as Group Chair of NatWest I have given extensive thought to my workload, listened to all parties and reflected on how I ensure that I deliver effectively on all fronts.
With the benefit of time and greater visibility of the expected growth in requirements of the publicly listed portfolio, it has become evident that pressure on my time is likely to increase over the medium term.
Given that Ocado has a strong and stable board, a high-quality management team as well as good momentum in business performance, I have made public my intention to step down a year from now to ensure that the company has sufficient time for a measured chair succession.
Co-op grocery profits up despite sale of petrol chain
The Co-op’s grocery chain increased profits as it signed up 1 million new members last year after investing more than £70m in cutting prices last year including introducing special discounts for members.
Profits rose 11% year-on-year to £154m despite a 6.4% fall in sales to £7.3bn driven by the sale of the Co-op’s petrol forecourt chain to Asda. Underlying sales rose 4.3%, excluding the impact of that deal, although that was still well behind the pace of grocery inflation.
Shirine Khoury-Haq, the chief executive of the Co-operative Group, said the Co-op had faced “challenging trading conditions, volatile markets and ongoing financial headwinds” in the past year “but would now “continue to move our Co-op into a position of growth, with our member-owners firmly at the heart of all we do.”
Tim Moore, economics director at S&P Global Market Intelligence, which compiles the PMI survey, said:
The recovery in service sector output lost a little bit of momentum during March, and more so than suggested by the flash PMI results, but the overall picture remains reasonably positive.
Business activity has now expanded for five consecutive months, supported by sustained improvements in new order intakes. The solid growth rate achieved in March reinforces the view that a rebound in service sector performance is helping the UK economy to pull out of last year’s shallow recession.
UK on track to exit recession as services sector output grows
UK services sector output was slower than first thought in March, but still expanded, according to the purchasing managers’ index.
The final services PMI reading came in at 53.1 points, lower than the initial 53.4 reading, according to data company S&P Global. But anything above 50 points indicates an expansion.
The final composite PMI measure (combining services with manufacturing and construction) suggested that the UK’s economic recession is due to finish – a development that would be welcomed by Rishi Sunak’s government as he weighs when to call a general election.
The eurozone composite PMI reading – which combines today’s services data with those of construction and manufacturing – rose to 50.3 points. (The PMIs work by having 50 as the reading at which contraction turns to expansion.)
That was higher than the 49.9 points expected by economists.
In fact, the services PMI readings for Italy, France and Germany all beat economists’ average forecasts. That is a finding that will be carefully considered by the European Central Bank (ECB), as it weighs interest rate cuts in June.
In theory a stronger-than-expected recovery might make central bankers think twice about cutting interest rates too soon.
EU PMI. If you think this is bearish you need to immediately see a doctor. pic.twitter.com/4HSax3hIKG
— The Market Dog (@TheMarketDog) April 4, 2024
But in practice much will depend on wage growth, according to the ECB’s messaging.
Franziska Palmas, senior Europe economist at Capital Economics, a consultancy, said:
Both we and investors forecast that the ECB will start cutting rates at its meeting on 6 June. However, officials, including ECB President Christine Lagarde, have highlighted that further evidence of easing wage growth will be needed for rate cuts to start.
Labour compensation per employee (LCE) is the ECB’s preferred measure of wage growth, with some country-level data out before the central bank meeting. Palmas said:
It is likely that the LCE figures will make policymakers more confident that a cut in June is appropriate.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which sponsors the eurozone PMI surveys, said:
Finally some good news again. The service sector in the eurozone is gradually finding its footing, with activity stabilizing in February and showing signs of moderate growth in March.
It’s particularly encouraging to note that new business has resumed growth after an eight-month dry spell. This favourable trend is expected to persist, fuelled by wage growth outpacing inflation, thus bolstering the purchasing power of households. Consequently, individuals are more inclined to dine out, travel, and spend their money on other services. However, a full-fledged boom is not on the horizon.
Eurozone economy returns to growth thanks to strong services output
The eurozone economy returned to growth for the first time since May 2023 thanks to stronger-than-expected output from the services sector, according to the closely followed purchasing managers’ index (PMI).
The eurozone services PMI rose to 51.5 for March, up from 50.2 in February, and the highest in nine months, according to S&P Global, which runs the survey. That was higher than the 51.1 expected by economists polled by Reuters.
But it was not all good news by any means. The two largest euro economies – Germany and France – are still in contractionary territory. S&P Global said:
Spain and Italy provided the greatest boosts, with their growth rates accelerating to the strongest for nearly a year. Combined with a solid expansion in the Irish economy, these upturns more than offset sustained (but weaker) contractions in output across the two largest economies of the eurozone, Germany and France.
The imposition of costs of up to £145 per shipment of food from the EU to the UK has – as with everything to do with Brexit – provoked different views.
Julian Jessop, an economist affilliated with the Institute of Economic Affairs, a thinktank that generally aligns closely with the Conservatives, said that the £330m cost equates to a 0.2% increase in overall UK food costs.
"BBC News - Food price fears as Brexit import charges revealed"
— Julian Jessop (@julianHjessop) April 3, 2024
Reality: these charges are at the low end of what was expected / feared. The initial costings suggested that the new post-#Brexit checks on EU imports would add less than 0.2% to the cost of UK #food and drink over…
However, he added that the imposition of charges is “clearly a bad thing, and may be prohibitive for some small/niche importers”. He said:
It’s not even clear that the checks leading to theses costs are necessary. But claims that they will have significant impacts on either the overall price or availability of food in the UK are completely OTT [over the top].
But Stella Creasy, the Labour MP for London’s Walthamstow, said she fears that there may be “chaos” at border checkpoints at the end of the month when the checks come into force.
🚨 We have to talk about Brexit and the border tax this government about to introduce before it’s too late- I hope I am wrong, but fear it will cause chaos in just 28 days time. Please help sound the alarm and share this plea with your MP to join forces with us to stop it! 🚨 pic.twitter.com/93aGlwKtWH
— stellacreasy (@stellacreasy) April 3, 2024
Vodafone and Three UK merger faces in-depth competition investigation
Vodafone and Three UK face the prospect of an in-depth investigation by the UK’s Competition and Markets Authority (CMA) over their plan to merge UK operations after they offered no undertakings to the regulator.
The CMA had announced last month that an in-depth investigation was likely, unless the companies offered satisfactory undertakings to avert it.
The in-depth investigation will come as little surprise, given the controversy surrounding a plan that would reduce the number of UK telecoms networks from four to three.
The deal will bring 27 million customers under a single network provider, leapfrogging EE, owned by BT, and Virgin Media O2, owned by Spain’s Telefónica and the US-listed company Liberty Global.
The initial “Phase 1” investigation found concerns that the transaction could lead to higher prices for customers and lower investment in UK mobile networks. Phase 2 will look at this in more detail, and will try to work out if these concerns can be addressed.
The biggest faller on London’s FTSE 100 this morning is packaging company Mondi, down 2.8% as it extends takeover talks.
Mondi is courting its UK cardboard box rival, DS Smith, and the two companies agreed a £5.14bn deal on 7 March. However, US competitor International Paper has since gatecrashed with its own proposed takeover worth £5.7bn.
Under UK takeover rules Mondi had until 5pm today to make a firm offer – known as “put up or shut up” rules. However, DS Smith has asked for and received an extension until 5pm on 23 April.
DS Smith said:
DS Smith is continuing discussions with Mondi regarding the Combination. There can be no certainty that any firm offer will be made. A further announcement will be made if and when appropriate.
*This post has been corrected: an earlier typo said that the initial deal was worth £55bn.
Updated
There is relatively little movement on Europe’s main stock markets in the opening minutes of trading.
Here are the opening snaps from Reuters:
EUROPE’S STOXX 600 FLAT
BRITAIN’S FTSE 100 UP 0.1%
FRANCE’S CAC 40 FLAT, SPAIN’S IBEX UP 0.3%
EURO STOXX INDEX FLAT; EURO ZONE BLUE CHIPS FLAT
GERMANY’S DAX DOWN 0.1%
Brexit checks will mean 'higher food prices' - UK businesses
Good morning, and welcome to our live coverage of business, economics and financial markets.
Business groups have described the imposition of steep fees for individual food imports into the UK as a “hammer blow” for small restaurants, cafes and delis.
The UK government has revealed that importers of animal products from the EU will pay £29 per type of item – such as an individual pack of cheese or sausage. The charges will be capped at £145 per shipment, and will start on 30 April, with additional checks in October.
The government has repeatedly delayed the introduction of sanitary checks on meat, dairy and the majority of plants from the EU, fearing that businesses were not prepared for the changes.
Business groups are not at all happy with the newly announced fees.
William Bain, head of trade policy at the British Chambers of Commerce, called for the UK government to U-turn on imposing the fees, which he said would risk higher food prices. He said:
This is an extremely disappointing decision by Defra on the common usage charge. The level of import charges shows scant regard to the interests of both businesses and consumers.
A flat rate fee for bringing most animal and plant products into the UK is a hammer blow for small- and medium-sized importers. It’s also deeply concerning for retailers, cafes and restaurants.
Phil Pluck, leader of food logistics lobby group the Cold Chain Federation, said:
Ultimately, this will increase business costs and food prices and potentially lower choices for the shopper.
According to the government, the additional costs of the border checks and new certification requirements could add another £330m a year to business costs. Bigger businesses will be able to spread the costs over a lorry load, but it could make things much more difficult for smaller businesses such as restaurants or delis who tend to import some specialist products in small batches. (Individuals on the Dover ferry or Eurostar train will be exempt.)
You can read more about deli owners’ concerns here:
Oil prices near $90 a barrel
Oil prices have risen as traders weighed the Opec+ cartel’s decision to press member countries to cut production and the continuing strength of the US economy.
The price of a barrel of Brent crude oil for June delivery, the global benchmark, rose to a high of $89.71 on Thursday morning, after nearly touching $90 on Wednesday. West Texas Intermediate, the North American benchmark, hit a high of $85.79.
Prices have been sustained in recent months by concerns that the Israel-Hamas war could spill over into nearby countries and affect oil supply, while Russia’s full-scale invasion of Ukraine has also meant higher prices in some parts of the world because of sanctions.
Analysts at Deutsche Bank, led by Henry Allen, said that oil price increases could give central banks “signs of concern about inflation, as oil prices closed at their highest levels since October”. They wrote that oil price increases are “filtering through into consumer prices as well, and the AAA’s daily average of US gasoline prices was up to $3.549/gallon as of Tuesday, which is also its highest since October”.
The agenda
9am BST: Eurozone HCOB services purchasing managers’ index (PMI) (March; previous: 50.2 points; consensus: 51.1)
9:30am BST: UK S&P Global services PMI (March; prev.: 53.8 points; cons.: 53.4)
1:30pm BST: US balance of trade (February; prev.: -$67.4bn; cons.: -$67.3bn)
1:30pm BST: US initial jobless claims (30 March; prev.: 210,000; cons.: 214,000)
