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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Cost of living crisis hitting economic outlook as firms hike prices – as it happened

ING Russia Ukraine United Kingdom Peter Hebblethwaite Vladimir Putin Duncan Weldon PO Ferries Rishi Sunak Sunak (Organization)
UK five pound, ten pound, twenty pound and fifty pound notes with one pound coins.
UK five pound, ten pound, twenty pound and fifty pound notes with one pound coins. Photograph: Dominic Lipinski/PA

Closing post

Time to wrap up.... here are today’s main stories.

War in Ukraine could lead to food riots in poor countries, warns WTO boss

Rocketing global food prices as a result of the war in Ukraine could trigger riots from those going hungry in poor countries, the head of the World Trade Organization has said.

Ngozi Okonjo-Iweala warned food-producing countries against hoarding supplies and said it was vital to avoid a repeat of the Covid pandemic, when rich countries were able to secure for themselves the bulk of vaccines.

In an interview with the Guardian, the WTO director general expressed concern about the knock-on effects of Russia’s invasion – stressing the dependence of many African countries on food supplies from the Black Sea region.

“I think we should be very worried. The impact on food prices and hunger this year and next could be substantial. Food and energy are the two biggest items in the consumption baskets of poor people all over the world,” Okonjo-Iweala said.

“It is poor countries and poor people within poor countries that will suffer the most.”

Here’s the full story:

Updated

European stock market had a mixed session.

The FTSE 100 index has closed 7 points high at 7,467, while the pan-European Stoxx 600 dipped by 0.2%.

Retail group Next was the top faller on the FTSE 100, down 3.25%, after trimming its sales guidance this morning due to closing its websites in Ukraine and Russia, and slower growth expectations in other overseas markets.

Other retailers also dipped, along with airline group IAG (-2.2%), plumbing business Ferguson (-3.2% after going ex-dividend) and miner Glencore (-2.1%).

As things stand, the markets have largely recovered from their plunge in the early days of the Ukraine war began.

Danni Hewson, AJ Bell financial analyst, says:

“It’s hard to believe it’s been a month since Russia first began its invasion of Ukraine. Watching western leaders gather together in a show of strength today might have delivered a great photo opportunity but behind the picture is action. Sanctions have been imposed, business after business has cut ties with Russia and aid has flooded into the region. There is more that must be done and more that will be agreed in the hours and days that follow. Russia’s economy has been hobbled but there has been a price and one that already cash-strapped consumers across Europe and in the US will pay.

“But despite the surge in commodity prices and the volatility which has dogged financial markets over the last four weeks comparing markets today with where they were before the invasion, investors might well let out a sigh of relief. France’s CAC 40 and Germany’s DAX are down by 3.2 and 2.4% respectively but London’s FTSE 100 has only dipped by 0.3% and Wall Street’s fared even better. Distance is certainly a factor, but energy is the x-factor and once again Europe’s reliance on Russia for oil and gas has been right at the top of the list of talking points in Brussels.

BlackRock’s Fink says Ukraine war marks end of globalisation

Larry Fink,the chief executive of BlackRock, has warned that Russia’s invasion of Ukraine has put an end to the last 30 years of globalisation.

In his annual letter to shareholders, Fink explained that the conflict will drive up inflation (as we’ve seen already signs of today) and rehape the global economy as firms pull back from global supply chains.

Fink explained that such changes will ‘inherently’ be inflationary.

Russia’s aggression in Ukraine and its subsequent decoupling from the global economy is going to prompt companies and governments worldwide to re-evaluate their dependencies and re-analyze their manufacturing and assembly footprints – something that Covid had already spurred many to start doing.

And while dependence on Russian energy is in the spotlight, companies and governments will also be looking more broadly at their dependencies on other nations. This may lead companies to onshore or nearshore more of their operations, resulting in a faster pull back from some countries. Others – like Mexico, Brazil, the United States, or manufacturing hubs in Southeast Asia – could stand to benefit.

This decoupling will inevitably create challenges for companies, including higher costs and margin pressures. While companies’ and consumers’ balance sheets are strong today, giving them more of a cushion to weather these difficulties, a large-scale reorientation of supply chains will inherently be inflationary.

Here’s an excellent chart showing how different income groups have fared in each UK parliament since the 1960s, in real terms, from the Resolution Foundation.

As you can see -- the current parliament is going to be grim, with living standards heading for a historic fall.

But there’s some fascinating detail too, including how the rich really did so much better than the poor during the Thatcher years, and how incomes rose across the board in the first Blair term.

Economics writer Duncan Weldon explains:

Germany’s ruling coalition today agreed a package worth around €15bn to help businesses and households with soaring energy costs.

The package is meant to help individuals and companies handle skyrocketing prices following Russia’s invasion of Ukraine, including a temporary reduction in fuel prices.

Bloomberg has more details:

Chancellor Olaf Scholz’s government will cut the tax on fuel for three months by 30 euro cents (25p) for gasoline and 14 cents for diesel, Finance Minister Christian Lindner told reporters in Berlin. Officials from the three-party ruling alliance negotiated through the night to reach a deal after initially disagreeing on what measures to adopt.

Scholz’s Social Democrats, the Greens and Lindner’s pro-business FDP also agreed that taxpayers will receive a one-time payment of €300, as well as a one-off boost to child support of €100. To promote the use of public transport, the government will introduce a monthly ticket costing 9 euros.

The overall package is worth about the same as an initial set of measures agreed last month, Lindner said, without specifying the amount.

Scholz has indicated those could cost about €15bn, including subsidies for low-income households, an increase in an allowance for commuters and a cut in a levy to finance the expansion of renewables, bringing the total cost of both packages to around €30bn.

Rishi Sunak’s petrol duty cut was only worth 5p per litre, taking price back to last week’s levels, but it should last for a year.

Updated

Growth at eurozone companies is also being weakened by the Ukraine conflict.

This morning’s PMI survey found that business activity growth slowed this month as exports fell.

Business sentiment and optimism fell to their lowest since autumn 2020, as firms braced for weaker economic growth and grew more worried about the economic outlook.

Firms also reported a record surge in input prices, as the war worsened existing supply chain constraints and shortages. The prices they charged also rose at a record pace, which will add to inflation in the euro area.

The overall composite PMI dipped to 54.5 from 55.5, which only shows a slight slowdown. However, the manufacturing PMI hit a 14-month low.

Bert Colijn of ING says the underlying picture is worrying:

It is the underlying insights from the survey that show more concern about the health of the economy. Most importantly: businesses have clearly been impacted by the surge in energy prices seen since the war started. Both input and output prices surged at a record pace in March.

This suggests a broadening of inflation as even higher energy prices are causing passthrough effects to happen more quickly than expected. We already expect inflation to soar above 7% in March and think that prices are set to increase further in April.

IEA: Russia’s rouble demand for European gas payments raises security risks

Executive Director of the IEA Fatih Birol at a press conference in Paris, France, today
Executive Director of the IEA Fatih Birol at a press conference in Paris, France, today Photograph: Mohammed Badra/EPA

The International Energy Agency has said it would consider any attempts by Russia to make European countries pay for their gas supplies in roubles a “security threat”.

The IEA’s executive director Fatih Birol told journalists after the organisation’s annual meeting in Paris that:

“If this is true I would consider it another security threat made by Russia,”

Birol was speaking a day after Vladimir Putin said ‘unfriendly’ countries would have to pay for gas in roubles; comments which pushed up wholesale prices. The FT have more details.

Updated

Disruption to Ukraine’s sunflower oil shipments mean some food suppliers are turning to rapeseed oil instead.

The urgency of the move means some food products labelled as containing sunflower oil may instead contain refined rapeseed oil, the Food Standards Agency (FSA) and Food Standards Scotland (FSS) said today.

Ukraine and Russia are the world’s top two sunflower oil exporters. Disruption to supplies, and the planting of this year’s crops, have driven up sunflower oil prices.

Emily Miles, FSA chief executive, said the agency is working with the industry to make labels accurate, ASAP.

“FSA and FSS have been working hard to understand the recent pressures on our food supply chain and the interim measures needed to make sure certain foods – like crisps, breaded fish, frozen vegetables and chips – remain on sale here.

“We have looked at the immediate food safety risk of substituting sunflower oil with refined rapeseed oil - particularly to people with a food allergy - and it is very low. We know allergic reactions to rapeseed oil are very rare and - if they do occur - are mild.

Russia’s war in Ukraine has dented business optimism at companies in the United States.

Soaring input costs, and the Ukraine conflict, knocked business confidence to a five-month low this month, the latest flash survey of US purchasing managers found.

Services sector companies were less upbeat, worried about the impact of reduced disposable incomes as the cost of living rises.

The survey also found that US business activity increased to an eight-month high in March, fueled by strong demand for both goods and services. New orders rose, leading to a pick-up in employment.

But as in the UK, input costs soared, meaning firms continued to lift their own prices.

Russia’s stock market rallied by over 4% today, in its first trading session since being suspended almost a month ago.

The MOEX index of blue-chip shares initally surging 11% and closed higher, helped by a ban on short-selling, and restrictions on foreigners selling up.

Energy companies and commodity producers were among the risers. It was the first session since trading was halted on 25 February, the second day of the invasion, as stocks plummeted.

But.... investors have pointed out that various restrictions meant Moscow’s market is no longer functioning properly, while the US dismissed it as a ‘Potemkin’ opening.

Craig Erlam, senior market analyst at OANDA, said the market wasn’t normal, functional, or sustainable right now.

Authorities are going to great lengths to manipulate the market and prevent another devastating plunge and their efforts are working, for now.

Here’s the full story:

G7 leaders crack down on Russia's gold

G7 leaders are cracking down on Russia’s ability to sell its gold reserves to support its currency and fund the war in Ukraine.

The move will restrict Moscow’s ability to dodge Western sanctions, and was announced as leaders met at Nato headquarters in Brussels, Belgium, to discuss the Ukraine conflict.

The White House announced that

G7 leaders and the European Union will continue to work jointly to blunt Russia’s ability to deploy its international reserves to prop up Russia’s economy and fund Putin’s war, including by making clear that any transaction involving gold related to the Central Bank of the Russian Federation is covered by existing sanctions.

Last month, Western allies froze around half of Russia’s $630bn of foreign exchange reserves, which were held at other central banks.

Moscow reportedly holds around 21%, or $130bn, of its reserves in gold.

Phil Mattingly of CNN reports that US officials have picked up that Russia’s central bank was seeking to use those bullion reserves to “prop up” the rouble, and want to shut that ability down.

Boris Johnson suggested this morning that stopping Vladimir Putin using his gold reserves would apply more pressure, and help shorten the war.

The number of Americans applying for unemployment benefits last week fell to its lowest level in 52 years as the US job market continues to show strength in the midst of rising costs and the pandemic.

Jobless claims fell by 28,000 to 187,000 for the week ending 19 March, the lowest since September of 1969, the labor department reported on Thursday. First-time applications for jobless aid generally track the pace of layoffs.

The four-week average for claims, which compensates for weekly volatility, fell to 211,750 from the previous week’s 223,250.

In total, 1,350,000 Americans – a more than 50-year low – were collecting jobless aid the week that ended 12 March.

Bank of England warns Ukraine war puts pressure on borrowers and poorer households

The Bank of England has warned that the Ukraine invasion is increasing economic uncertainty and will increase pressure on UK borrowers.

Policymakers on the Bank’s Financial Policy Committee warned in a new report today that household incomes and business earnings will come under pressure from the sustained increases in energy prices since the war began.

They also point out that poorer families will struggle most from the cost of living squeeze.

It’s a timely reminder, as the spring statement pushes more people into poverty this year, and firms lifted prices at a record pace.

The FPC, which monitors risks to financial stability, says:

An increase in the cost of living, partly due to rising energy and other import prices, is likely to affect household resilience across the income distribution, with a larger impact on lower income households that spend a greater share of their income on energy and other essential items.

Although these price rises are unlikely to significantly affect the ability of mortgagors to make debt repayments, they will increase the pressure on household balance sheets, particularly if there is a larger than expected impact on growth.

In its latest report, the FPC also warned that the global economic outlook has deteriorated significantly since Russia invaded Ukraine, and that some financial markets have been volatile, with energy and some commodity prices rising sharply.

The impact is likely to be especially felt in Europe where, for example, some countries are particularly reliant on Russian energy. Disruptions to global supply chains could also affect a wide range of countries given the significant role of Russia and Ukraine in the production of commodities including metals and wheat.

Although risks remain, there has been little sign of financial market contagion to other emerging markets outside of Europe so far.

There is also a risk that global financial conditions could tighten further and that further volatility could affect core financial markets, the report warns.

But, UK banks remain resilient, they believe.

The UK banking sector is resilient to a wide range of severe scenarios. It remains highly capitalised and liquidity ratios are strong. UK banks also have low direct exposures to Russia.

Updated

Next says prices to rise by 8% in autumn amid ‘chronic’ staff shortages

UK retail chain Next has also sounded the alarm over price rises today, saying shortages of staff and disruption caused by the Ukraine war will push up prices by 8%. this autumn.

Next said its homeware prices were now expected to rise by up to 13% and fashion by 6.5% in the second half of this year, a significant step up from an overall 3.7% increase in prices in the first part of the year.

Simon Wolfson, its chief executive and a prominent pro-Brexit business voice, said it should be easier for workers to come to the UK, calling on the government to:

“reverse the self-defeating barriers it has placed on overseas workers supporting our economy and accelerate, simplify and reform the planning process to increase the supply of desperately needed housing”.

Here’s the full story:

Lloyd’s moves to cancel insurance cover of Russian firms hit by sanctions

Lloyd’s of London has said it is working with the UK government to implement sanctions imposed over the war in Ukraine as fast as possible, including cancelling Russian firms’ insurance cover.

Announcing a swing back to an annual profit as it recovers from the pandemic, the world’s biggest insurance market warned that the war will present a “major claim” for the insurance market this year, but said it was “manageable”.

It said aviation, marine, trade credit and political risk were the lines of business most affected.

Bruce Carnegie-Brown, the Lloyd’s chairman, said unrecoverable planes were likely to cause the biggest insurance losses. Moscow has passed laws to impound $10bn (£7.6bn) of jets leased to Aeroflot and other Russian airlines by western organisations.

He said the next biggest losses were expected from claims related to ships trapped in the Black Sea, and to disrupted exports of cereals and agricultural products from Ukraine and Russia. Some insurance policies also cover state-sponsored cyberterrorism.

Carnegie-Brown said it would take three to four weeks to work out the claims.

He told the Guardian.

“It’s reasonably complex because there are lots of different lines of insurance that operate here and in fact some lines of insurance get kicked out by war, there are war exclusions, and some get kicked in because there are war covers,”

“On top of that, you’ve got to overlay the sanctions regime so governments themselves are causing the cancellation of insurance as part of the sanctions package against the Russian state.”

Updated

Full story: P&O Ferries boss admits firm broke law over sackings

P&O Ferries chose to sack 800 workers without consultation because “no union could accept our proposals”, the firm’s boss has admitted.

Peter Hebblethwaite told a Commons hearing today into last week’s firings that the firm was halving its costs under a “new operating model”, where international seafarers would be paid less than minimum wage.

The P&O chief executive said:

“There is absolutely no doubt we were required to consult with the unions. We chose not to … and we will compensate every one in full for that.

“It was our assessment that the change was of such magnitude that no union could accept our proposals.”

Earlier, legal experts said P&O should have notified their ships’ flag states in Cyprus, Bermuda and the Bahamas between 30 and 45 days in advance – rather than on the day.

Hebblethwaite said the average sacked seafarer on the previous Jersey contracts was paid £36,000 per year. The replacement crew will receive an hourly rate starting at £5.15.

He insisted he was “saving the business”, adding: “I would make this decision again, I’m afraid.”

Here’s our news story on today’s warning that 1.3 million people will fall into poverty this year because Rishi Sunak isn’t giving struggling families more help:

UK retail sales hit by cost of living squeeze

British retailers suffered a fall in sales this month, as the cost of living squeeze forced customers to cut back.

A majority of retailers said sales were poor for the time of year in March, according to the latest poll by the Confederation of British Industry survey.

Taking are expected to remain below seasonal norms in April too, as retailers brace for a slide in spending.

Martin Sartorius, Principal Economist at the CBI, says government needs to further to support the economy:

“Retailers had a mediocre March, with sales reported as being below seasonal norms. The cost-of-living crisis is looming large across the sector, as households’ wallets are being hit by the fastest rate of inflation in decades.

“The Chancellor’s Spring Statement outlined new support for those on low incomes amid these financial challenges. But further action will be needed to galvanise consumer confidence, shore up incomes, and support spending on UK high streets in the tough months to come.”

The CBI’s sales-for-the-time-of-year sank to -23 from February’s +16, showing a deterioration in trading.

The overall retail sales balance fell to +9 from +14 in February, a little lower than forecast.

Internet sales, year-on-year, fell at the fastest rate since the survey began in 2009 -- but that comparison is distorted by the Covid-19 lockdown in 2021 when some shops were closed.

P&O’s Ferries CEO Peter Hebblethwaite also freely admitted to MPs that the company was required to consult with trade unions before sacking 800 staff, but chose not too.

The P&O Ferries boss told today’s committee grilling:

“There is absolutely no doubt we were required to consult with the unions.

We chose not to do that..... and we are, and will, compensate everybody in full for that.

The committee are aghast, and furious. Labour MP Andy McDonald compared Hebblethwaite’s attitude to driving down the motorway at 90 miles an hour because the speed limit doesn’t apply to him.

McDonald also questions how P&O can justify paying its new agency staff so little (a move that will halve its costs). More here.

‘Are you just a shameless criminal?’ - P&O boss grilled by MPs over mass sackings

In parliament, Peter Hebblethewaite, chief executive of P&O Ferries, is giving evidence to a Commons committee investigating his companies decision to sack 800 seafarers last week with no notice.

Darren Jones (Lab), chair of the Commons business committee, started by saying he had looked at Hebblethewaite’s CV. He asks if the company is in this mess because Hebblethewaite does not know what he is doing.

“Or are you just a shameless criminal?

Hebblethewaite starts with an apology. He says he wants to start with an apology to the seafarers affected by last week’s decision, to their families and to other employees.

He says the company was losing “an unsustainable amount of money”. If the firm had not acted, it would have had to close, he says.

He disputes claims heard by the committee earlier that the firm was in breach of its obligations to give sufficient notice of the sackings to the authorities where the ships are registered.

Hebblethewaite says he is paid £325,000.

Q: Would you take a performance related bonus if offered?

Hebblethewaite says that is not something he has considered.

He claims some of the dismissed staff could receive as much as £170,000 as a pay-off [P&O announced a £36.5m compensation package this week].

When pressed, Hebblethewaite admits that very few people are in this category. But he says 40 people could get more than £100,000.

Andy Sparrow’s Politics Liveblog has all the action:

Economists: Ukraine war hurting UK economy

The sharp drop in businesses optimism about the future, and the surge in prices charged by firms, are a clear sign that Russia’s invasion of Ukraine is hitting the UK economy.

Growth is likely to slow sharply over the next few months, explains Thomas Pugh, economist at RSM UK:

The biggest shock in the manufacturing PMI was the slump in the future output balance from 80.0 to 75.8, its lowest level in more than a year. This probably reflects concerns about the war in Ukraine dampening demand.

‘Overall, the PMI suggests the war in Ukraine hasn’t had a large impact on UK businesses yet, but the huge rise in prices will mean there is likely to be very little growth in GDP in the second half of the year.’

Rhys Herbert, senior economist at Lloyds Bank, agrees that inflationary pressures, exacerbated by the war in Ukraine, will hit growth.

“The economic outlook continues to be uncertain and mixed. While the reduction in pandemic-related restrictions is bolstering many sectors, inflationary pressures, exacerbated by the war in Ukraine, are causing a drag on the economy.

“The price of commodities such as oil, nickel, zinc, and wheat have soared since the beginning of the conflict and are now impacting some businesses’ balance sheets. This seems bound to push inflation higher, which will reduce the spending power of companies and consumers alike, potentially causing orders and output to falter in the near term.

“The ongoing crisis in Ukraine and apparent lack of progress in reaching a peaceful settlement will prolong the period of uncertainty that firms have to contend with.”

S&P Global’s Chris Williamson says the outlook darkened this month:

Concerns over Russia’s invasion exacerbated existing worries over soaring prices, supply chains and slowing economic growth.

Business expectations are now at their lowest for almost one and a half years, pointing to a marked slowing in the pace of economic growth in coming months.

The jump in prices charged by UK firms will intensify the squeeze on households’ real incomes, and paint a bleak picture of the months ahead.

So says Nicholas Farr, assistant economist at Capital Economics, who predicts it will prompt the Bank of England to raise interest rates again, in May:

Unsurprisingly given the surge in commodity prices since the war in Ukraine began, the input prices balance of the composite PMI rose a bit further, from 81.6 to 81.7, and firms reported passing these costs on, with the output price balance reaching its highest level since the series began in 1999.

Overall, the PMI survey offers some encouragement that the economy has been fairly resilient to the war in Ukraine so far. But this probably won’t last.

And, today’s survey will only fuel the Bank of England’s fears that high inflation is feeding through into rising price and wage expectations. We think the Bank will have to raise rates to 2.0% next year, with the next hike to 1.0% coming on 5th May.

UK firms hike prices at record pace as confidence slumps

UK businesses are raising their prices at the fastest rate in at least 20 years as the Ukraine invasion pushed up costs.

With business optimism hitting a near-18 month low, risks of ‘stagflation’ are rising, the latest survey of purchasing managers at UK companies shows.

Escalating fuel, energy and staff costs led companies to drive up their prices this month at the fastest rate since at least 1999, when the PMI report began.

These price rises will intensify the cost of living squeeze, as companies pass on an “unprecedented rises in their operating expenses” onto customers.

Chris Williamson, chief business economist at S&P Global, says risks of ‘stagflation’ are rising.

Prices pressures have spiked higher due to increased energy and commodity prices resulting from the invasion.

With March seeing by far the largest rise in selling prices for goods and services ever recorded by the survey, consumer price inflation is set to rise further in the months ahead.

The survey indicators point to potentially sharply slower growth in the coming months, accompanied by a further acceleration of inflation and a worsening cost of living crisis, which paints an unwelcome picture of ‘stagflation’ for the economy in the months ahead.

These escalating inflationary pressures, and worries about Russia’s invasion of Ukraine, hammered business optimism to its lowest since October 2020 (just before the first Covid-19 vaccine trial results).

Markit’s business confidence index dropped from 76.1 in February to 71.4 in March, which is the biggest monthly drop since the start of the pandemic. Both manufacturing and services companies expect much weaker growth in the year ahead.

Output across the manufacturing sector fell to a five-month low, but service sector growth hit a nine-month high, with the return to offices and customer events lifting activity this month.

Overall, the Composite PMI edged down from 59.9 to 59.7, showing a slight slowdown (although rising prices will push up the PMI...).

Updated

The media reaction to yesterday’s spring statement is notably negative, with many papers focusing on the historic slump in living standards looming this year.

UK announces more Russian sanctions

The UK has announced a new set of sanctions against Russian companies, banks, business people, and foreign minister Sergei Lavrov’s step daughter, Polina Kovaleva.

The 65 sanctions target key industries supporting Russia’s invasion of UKraine, including Russian Railways and defence company Kronshtadt, which produces Russian drones used in the conflict.

The Wagner Group – the organisation of Russian mercenaries reportedly ordered to assassinate President Zelenskyy - has also been sanctioned, as has Alfa Bank whose cofounders include oligarchs Mikhail Fridman, Petr Aven and German Khan who have already been sanctioned.

Billionaire oil tycoon Eugene Shvidler, a close friend of Roman Abramovich, is also on the list (a jet suspected to be linked to Shvidler was stopped at Farnborough airport earlier this month).

Tinkoff bank founder Oleg Tinkov, and Herman Gref, the CEO of Russia’s largest bank Sberbank, are on the list too, as is Galina Danilchenko, who was installed by Russia as the ‘mayor’ of Melitopol.

Foreign Secretary Liz Truss said:

These oligarchs, businesses and hired thugs are complicit in the murder of innocent civilians and it is right that they pay the price. Putin should be under no illusions – we are united with our allies and will keep tightening the screw on the Russian economy to help ensure he fails in Ukraine. There will be no let-up”.

All those sanctioned today will have their assets in the UK frozen which means no UK citizen or company can do business with them, and individuals subject to travel bans are also prohibited from travelling to or from the UK.

Today’s sanctions will bring the total global asset value of the banks the UK has sanctioned since the invasion to £500bn and the net worth of the oligarchs and family members in excess of £150bn.

On Kovelava, the UK says:

Polina Kovaleva, stepdaughter of Russian Foreign Minister, Sergey Lavrov...reportedly owns a c.£4m property in London.

This sends a strong signal that those benefiting from association of those responsible for Russian aggression are in scope of our sanctions.

MPs has called for action against Labrov’s ‘second family’ earlier this month:

A group of protesters gathered outside Kovaleva’s luxury flat in Kensington earlier this month, the Mirror reported.

Sunak hints at more help on energy bills

Rishi Sunak has indicated that the Government could intervene on energy bills before the autumn, if bill are set to rise sharply again in October:

Asked if the Government would take action in that case, he told BBC Radio 4’s Today programme:

“Yes, of course we’ll have to see where we are by the autumn and it’s right for people to recognise that they are protected between now and the autumn because of the price cap.”

Pressed on whether that meant yes, he will intervene before October, Sunak said:

“I always keep everything under review, and the Government, as it’s shown over the past two years, is always responsive to what’s happening.

“But I would say with energy prices, you know, they are very volatile, and I don’t think you, I or anyone else has any certainty about what will happen in October right now.”

Yesterday, the OBR warned that the energy price cap could rise by another 40% in October, given current wholesale prices. That would lift bills from £1,971 per year to £2,800 a year, and drive inflation towards 9%.

Reeves: Sunak should have lifted pensions and benefits to help with inflation

Back on the spring statement, shadow chancellor Rachel Reeves has said she is “absolutely gobsmacked” that Rishi Sunak didn’t choose to increases benefits and pensions yesterday to help with the cost of living crisis.

Universal credit and the state pensions are to rise 3.1% in April, in line with last September’s inflation rate.

Since then, inflation has doubled to 6.2%, and could hit almost 9% later this year, meaning recipients face a real terms cut this year (which will push absolute poverty up).

Reeves told the Today Programme that Labour would have brought forward some of the likely increase due in 2023 (because inflation will be high this coming September), to help people pay for their food and energy bills this year.

Next year, pensions and benefits will go up by more, because inflation is still so high.

The chancellor could have brought that forward, and it was wrong that he didn’t do that yesterday.

Reeves also slammed Sunak’s claim to be a tax-cutting chancellor, telling LBC:

The Chancellor can say as many times as he likes that he’s a tax-cutting chancellor but it’s a bit like a kid in his bedroom playing air guitar - he’s not a rockstar.

“The problem is for this Chancellor, is that by the end of this Parliament seven out of eight people will be paying more taxes - only one in eight will be paying less taxes.”

US: it's a Potemkin market opening in Moscow

Daleep Singh, deputy US national security adviser for international economics, has dismissed today’s Moscow stock market reopening as a ‘charade’, given the various restrictions in place.

Singh pledged that Russia will remain isolated from the international economic order as long as it continues the war in Ukraine, saying:

What we’re seeing is a charade: a Potemkin market opening.

After keeping its markets closed for nearly a month, Russia announced it will only allow 15% of listed shares to trade, foreigners are prohibited from selling their shares, and short selling in general has been banned. Meanwhile, Russia has made clear they are going to pour government resources into artificially propping up the shares of companies that are trading.

This is not a real market and not a sustainable model—which only underscores Russia’s isolation from the global financial system. The United States and our allies and partners will continue taking action to further isolate Russia from the international economic order as long it continues its brutal war against Ukraine.

Russia’s government has also tried to prop up its market by directing its wealth fund to buy shares.

Back on March 1, Moscow said would channel up to 1 trillion roubles (£7.7bn) from its rainy-day National Wealth Fund on buying Russian stocks, Reuters reported.

“Large bids to buy Russian shares have been seen since the market opening,” BCS Brokerage said in a note.

“The overall sentiment is supported by the confidence that the finance ministry will buy stocks.”

The recent recovery in the ailing rouble could be helping stocks in Moscow.

Russia’s currency rallied yesterday after President Vladimir Putin demanded that “unfriendly” nations should pay for natural gas purchases in roubles.

It’s now trading at around 91 roubles to the dollar, having slumped to 130/$1 after the invasion. But that’s still much weaker than the pre-invasion levels of around 75 roubles/$1.

Hasnain Malik, a strategist at Tellimer in Dubai, told Bloomberg that Moscow still isn’t a ‘functional market’, given the curbs on overseas investors selling shares.

“With restrictions on foreign selling and repatriation this is not a functional market in terms of efficient price discovery, given foreigners dominate the market’s free float.

“The one fundamental factor that has improved during the stock market’s suspension is the partial recovery in the currency as Russia tries to shift oil and gas trade to rubles.”

Despite this morning’s gains (in limited trading), the Moscow stock market is still down almost 30% this year.

The MOEX stock index
The MOEX stock index during 2022 Photograph: Refinitiv

Updated

Stocks rally in Moscow as trading resumes

The Moscow stock exchange has opened higher, as trading finally resumes after a near month-long suspension.

The MOEX index rallied as much as 11% in early trading, suggesting that measures put in place to prop up stocks are working. Its the first session since the exchange was shuttered on February 25th following the invasion of Ukraine.

Energy firms are leading the rally, with gas giant Gazprom surging 18% and oil group Rosneft gaining 20%.

Russian bank Sberbank is among the risers too, up over 10% despite having been targeted by Western sanctions; it quit almost all its European markets earlier this month

But airline group Aeroflot have fallen 10%, with its planes banned from much Western airspace.

However, it’s not a full trading session. Just 33 of the 50 stocks that make up the Russian equity benchmark are trading, short selling is banned and foreign investors aren’t yet able to sell stock.

Updated

Sir Ed Davey, leader of the Liberal Democrats, described Rishi Sunak’s spring statement as “a total swindle”, arguing “he’s giving a bit and taking a lot”.

He told BBC Breakfast:

If you look at the fine print that was published yesterday, it shows taxes overall going up by over £1,500 a year per household under this Conservative Government.

“And those tax rises from Conservatives are coming at the worst possible time - the squeeze on families and pensioners, again, set to be the worst for over 40 years, pump rises, food bills, energy bills, inflation the highest for over 40 years.

“People are drowning in these tax rises and these higher bills. The Chancellor needed to provide a lifeboat for people and he didn’t.”

Introduction: 1.3m people set to fall into absolute poverty next year

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

Around 1.3 million people will fall into absolute poverty over the next year because chancellor Rishi Sunak didn’t provide more help for low-income families yesterday, according to new analysis of Wednesday’s spring statement.

The Resolution Foundation has reported that Sunak delivered a “big but poorly targeted policy package” yesterday, which failed to support those families hit hardest by the cost of living crisis.

That means that absolute poverty is expected to rise by 1.3 million people next year - including 500,000 children – the first time Britain has seen such a rise outside of recessions, Resolution says.

In a sobering analysis, Resolution explains that household incomes are forecast to fall by 2 per cent across the parliament as a whole, making this parliament the worst on record for living standards.

Typical working-age household incomes are to set to fall by 4 per cent in real-terms next year (2022-23), a loss of £1,100.

The poorest quarter of households face the most pain - their incomes are set to tumble by 6 per cent, after the chancellor resisted calls to update benefit payments by more than the planned 3.1%, which means a fall in real terms.

Torsten Bell, chief executive of the Resolution Foundation, says the policies announced yesterday don’t match the Chancellor’s rhetoric.

The decision not to target support at those hardest hit by rising prices will leave low-and-middle income households painfully exposed, with 1.3 million people, including half a million children, set to fall below the poverty line this coming year.

“And despite the eye-catching 1p cut to income tax, the reality is that the Chancellor’s tax changes mean that seven-in-eight workers will see their tax bills rise. Those tax rises mean the Chancellor is able to point to a swift fiscal consolidation and significant headroom against his fiscal rules.

“The big picture is that Rishi Sunak has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead. Whether that will be sustainable in the face of huge income falls to come remains to be seen.”

Only one-in-eight workers will see actually see their tax bills fall by the end of the parliament, Resolution reports, despite Sunak’s decision to lift the National Insurance threshold by £3,000 in July:

Resolution says:

Considering all income tax changes to thresholds and rates announced by Rishi Sunak, only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25, and only those earning between £11,000 and £13,500 will pay less tax and National Insurance (NI). Of the 31 million people in work, around 27 million (seven-in-eight workers) will pay more in income tax and NI in 2024-25.

Yesterday, the Office for Budget Responsibility warned that UK living standards are heading for a historic fall, with the tax burden heading for a 70-year high and inflation likely to average over 7% this year.

Sunak banked most of a windfall in the public finances from higher tax receipts and lower-than-expected borrowing, a move that could create firepower for a pre-election giveaway in 2024.

But there are dark economic times ahead. Last night, Sunak was challenged on LBC Radio by a single mother who told the chancellor she cannot afford to heat her home and has had to take on two extra jobs,

Hezel, a single mother, said she had a good salary “on paper” but rising costs had put “an intense strain” on her ability to provide for her children.

Also coming up today

MPs on the Business and Transport committee are holding a hearing into P&O Ferries’s shock sacking of 800 workers last week. It starts at 9.30am, with Peter Hebblethwaite, chief executive, P&O Ferries, and Jesper Kristensen, Group COO, Maritime Services, DP World, up at 11am.

Yesterday, Boris Johnson has said it appears P&O Ferries broke the law when it suddenly sacked 800 workers, and that the government would take legal action.

Purchasing manager surveys from UK and eurozone companies are expected to show a slowdown this month, as soaring energy prices and the Ukraine war hits the economy.

Moscow’s stock market is to partially reopen today for a shortened session, after a near month-long shutdown after stocks plunged when the Ukraine invasion began.

Several measures will be in place to limit the pace of a new selloff, as Bloomberg explains:

When trading resumes at 9:50 a.m. in Moscow on Thursday for a shortened four-hour session, only 33 stocks will be active, including some of the nation’s biggest companies, such as Gazprom PJSC and Sberbank PJSC.

However, foreigners won’t be allowed to sell equities in a ban scheduled to last until April 1, and short selling won’t be permitted.

The agenda

  • 9am GMT: European Central Bank economic bulletin
  • 9am GMT: Eurozone flash PMI survey of manufacturing and services companies for March
  • 9.30am GMT: UK flash PMI survey of manufacturing and services companies for March
  • 9.30am GMT-12.30pm GMT: Transport and Business Committees hearing into P&O Ferries sackings
  • 10.15am GMT: IFS briefing on the spring statement
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