Surging debt interest forces Sunak to borrow £14bn as inflation crisis bites - live updates

  • In Business
  • 2022-06-23 08:56:48Z
  • By The Telegraph
Germany Putin Russia emergency gas plan Nord Stream energy crisis - Hannibal Hanschke/Getty Images
Germany Putin Russia emergency gas plan Nord Stream energy crisis - Hannibal Hanschke/Getty Images  
  • Britain 'definitely' entering recession as prices surge

  • British car battery champion seeks to woo Elon Musk's Tesla

  • FTSE 100 falls 0.5pc at the open

  • Ben Wright: The world's favourite money-making strategy is dead

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Germany has triggered the second phase of its emergency gas plan as it accused Putin of launching an "economic attack" over energy supplies.

The 'alarm' phase of the three-stage plan kicks in when the Government sees a high risk of long-term energy shortages.

Under the tougher measures, Berlin will provide a credit line of €15bn (£12.9bn) to fill gas storage facilities, while a gas auction model will be launched this summer to encourage industrial gas consumers to save energy.

However, Germany will not yet trigger a clause that lets utility companies pass on soaring gas costs to customers.

Economy minister Robert Habeck said: "We must not fool ourselves: The cut in gas supplies is an economic attack on us by Putin."

Russia has slashed supplies in what EU leaders have described as a political move. Flows through the Nord Stream pipeline to Germany are still at just 40pc of normal capacity.

09:56 AM

Reaction: Worst still to come for economy

Rhys Herbert, senior economist at Lloyds Bank, says businesses haven't yet seen the full effects of the cost-of-living squeeze.

09:37 AM

UK businesses brace for recession as economy 'runs on empty'

British businesses are bracing for a deeper economic slump in the third quarter as inflation dents profits and eats into consumers' spending power.

S&P Global's PMI held steady at 53.1 in June while a gauge of new order volumes fell at the sharpest pace since the pandemic recovery began in March last year.

Companies reported rising pay pressures and increasing worries about fuel and energy bills.

The services sector defied expectations of a slowdown to hold steady in June. But manufacturing recorded its slowest growth since February 2021, with new orders dropping for a fourth month and at a sharper pace than in May.

The data is the latest evidence of trouble for the economy, which is on track for a contraction in the second quarter. Markets are worried interest rate rises by the Bank of England will exacerbate the slowdown.

Chris Williamson, chief business economist at S&P Global, said:

S&P Global PMI - S&P Global
S&P Global PMI - S&P Global  

09:20 AM

Gambling firm 888 warns on revenue amid UK crackdown

William Hill 888 - Matthew Horwood/Getty Images
William Hill 888 - Matthew Horwood/Getty Images  

Gambling group 888 has warned its revenues are set to drop in the first half of the year due to the Government's crackdown on online betting and its temporary exit from the Netherlands.

The FTSE 250 company, which will soon complete its £2.1bn takeover of William Hill's non-US business, said revenue will come in between £330m and £335m. That's down from £528.4m last year.

888 said growth would be dented with "growth in certain European markets offset by the impact of additional safer gambling measures as well as the temporary exit from the Netherlands".

The William Hill UK and European business - which it expects to take over on July 1 - is set to see revenues of £620m to £630m.

Shares fell as much as 4pc to the bottom of the mid-cap index.

09:05 AM

Pound falls ahead of PMI figures

Sterling fell back against a stronger dollar this morning as a sell-off in global shares prompted investors to ditch riskier assets.

Traders are also looking ahead to UK PMI data, which is expected to show a drop in the manufacturing and services sectors - the latest sign that the economy is slowing.

The pound dropped 0.5pc against the dollar to $1.2202. Against the euro, it slipped 0.1pc to 86.3p.

08:59 AM

Heathrow raises passenger forecast despite travel chaos

Heathrow airport passenger forecast - REUTERS/Hannah McKay/File Photo
Heathrow airport passenger forecast - REUTERS/Hannah McKay/File Photo  

Heathrow has raised its passenger forecast for the full year as flight bookings continue to rise despite widespread travel chaos.

The London airport now expects to attract 54.4m passengers in 2022, up from previous estimates of 52.8m. This would equate to 67pc of passenger levels in 2019.

Heathrow, which was Europe's busiest airport prior to the pandemic, has been slower to recover from the pandemic than many smaller rivals due to its focus on long-haul travel.

It's now also grappling with industry-wide staff shortages that have forced airports to cancel hundreds of flights and led to long queues.

Heathrow said its profits are expected to jump to £1.4bn, while revenue is set to double to £2.6bn.

08:42 AM

FTSE risers and fallers

The FTSE 100 has dropped further this morning as commodity prices slide amid growing recession fears.

The blue-chip index is now down 0.8pc, extending losses racked up yesterday.

BP and Shell were once again the biggest drags on the index, while miners also lost ground as traders reacted to rising Covid cases in China and aggressive interest rate rises by the Federal Reserve.

The domestically-focused FTSE 250 slid 0.7pc, with biggest faller 888 down more than 4pc after it warned on lower revenue for the first half.

08:26 AM

Gas prices drop as Germany eyes next stage of emergency plan

Natural gas prices edged lower ahead of a statement from Germany that's expected to trigger the second stage of the country's emergency gas plan.

Economy minister Robert Habeck will speak at 10am local time on "energy and supply security".

Moving to stage two - the "alarm" phase - could mean a change in the law to allow energy companies to pass on cost increases to homes and businesses.

It may also involve firing up more coal-fired power plants to cut down gas consumption.

It comes as flows from Russia remain curtailed, with the Nord Stream pipeline to Germany operating at about 40pc capacity.

The reductions, which Germany has described as political, are fuelling fears of energy shortages this winter.

Benchmark European gas prices slipped 1.3pc in Amsterdam.

08:02 AM

FTSE 100 opens lower

The FTSE 100 has started the day on the back foot as recession fears continue to grip markets.

The blue-chip index fell 0.5pc to 7,055 points.

07:54 AM

Reaction: Sunak's headroom squeezed amid cost-of-living crisis

Paul Dales, chief UK economist at Capital Economics, warns the weak economy will limit Rishi Sunak's ability to help households.

07:43 AM

Reaction: Debt reduction this year is a 'long shot'

Michal Stelmach, economist at KPMG was debt reduction this year "remains a long shot".

07:36 AM

Sunak: I'm being responsible

Chancellor Rishi Sunak has issued a statement following the latest borrowing figures, insisting he's being "responsible" with the public finances.

07:35 AM

Tax rises help bring down borrowing

Here's some more on the borrowing figures from my colleague Tim Wallace:

07:33 AM

Inflation drives up UK debt costs

Good morning. 

The Government borrowed more than forecast in May, highlighting risks to the public finances as the cost-of-living crisis threatens to tip Britain into a recession.

Rishi Sunak borrowed another £14bn last month, which was £2bn higher than economists had forecasts.

Debt interest payments hit £7.6bn - the highest for any May on record, according to the ONS.

The surge in debt servicing costs reflects a jump in the retail price index measure of inflation, which hit 11.7pc last month.

5 things to start your day

1) Brussels 'holding the City to higher standard than communist China'  'Odd and wrong' to deny Square Mile firms access to the single market

2) British car battery champion seeks to woo Elon Musk's Tesla  Plus: Electric car charging to face 10-minute delays amid energy rationing

3) Unilever secretly fought ban on plastic sachets it branded 'evil'  Company privately lobbied against countries' efforts to get rid of soap packaging - despite pollution pledge

4) Crypto giant Tether targets UK investors with sterling 'stablecoin'  The launch of a sterling product should make it easier for British traders to access cryptocurrencies

5) Sir Jim Ratcliffe to bring gas to Europe as bloc scrambles for supplies  Chemicals giant Ineos will import as much as 1.4 million tonnes of gas a year

What happened overnight

Hong Kong stocks started with a gain this morning, following the previous day's hefty losses. The Hang Seng Index climbed 0.7pc.

The Shanghai Composite Index ticked up 0.06pc, while the Shenzhen Composite Index on China's second exchange added 0.2pc.

Tokyo shares opened higher, with the benchmark Nikkei 225 index rising 0.2pc.

Coming up today

  • Corporate: Naked Wines (full-year results); Serco (trading statement)

  • Economics: Services PMI (UK, US, EU), manufacturing PMI (UK, US, EU), composite PMI (US, EU), GfK consumer confidence (UK), economic bulletin (EU), jobless claims (US), bank stress test info (US)


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