Category: Economy

Bank of England Chief – “Sod you lot, I’m alright, Jack”

Bank of England Chief – “Sod you lot, I’m alright, Jack”

Okay, Andrew Bailey didn’t quite say that, but I think that is the essence of what he said.

In a nutshell, he’s gone on record warning about inflation; energy prices, food prices etc. And he’s also said again that workers shouldn’t request pay increases to help dampen the inflation increases. By this, he means you need to suck it up and suffer in silence.

I guess this is another one of those “We’re all in it together” moments. Except we’re not. We’ve already seen that.

MP’s received a 2.7% pay increase last month, this is approximately £2,200 per year and was done after the first time that the Bank of England asked workers to not request sizeable pay increases.

2.7% of the average wage as at February 2022 is £780. Quite a difference. So, Joe Average would get £1,420 less than an MP with the same percentage increase.

Oh, and Mr Bailey earns £570,000.

The Word On Everyone’s Lips; Inflation

The Word On Everyone’s Lips; Inflation

I’ve been meaning to put my two penneth in for a few months now, but events keep happening, things keep changing, I’ve been busy. It’s pretty dynamic out there, but the one thing that is certain, the price of everything is on the up, it’s just a matter of how much. Different things are increasing by different rates for different reasons; there’s the direct costs or input costs for the physical product, there’s distribution costs, there’s scarcity which pushes the cost up, and in the worst cases, a combination of all of the factors.

At work last week I tried to order a couple of boxes of plain copier paper, each box comprises of 5 reams, and a ream is 500 sheets. I’ve been buying these for the last decade for somewhere in the region of £10 plus VAT per box and the last time I purchased was December 2021. This time the cheapest I could get was £21.50 plus VAT, a jump of over 100% in five months. The supplier has largely attributed that increase to scarcity and a quick check with other suppliers revealed the same.

We’ve all seen the jump in the fuel prices in the UK with diesel in the £1.70-1.85 range on average, this is despite the government cutting fuel duty and the barrel price of crude dipping.

We’re being warned that domestic energy prices are likely to jump again by another 40% in October 2022 just in time for the cold weather and dark evenings. I’ve noticed that the wholesale gas price has decreased, so I cannot work that one out – further investigation required.

For those of you with mortgages and other debts, interest rates are on the up and show no sign of stopping; the rate of increase is currently around 0.25% per month and members of the Bank of England Monetary Policy Committee (MPC) that set the rates are starting to lean towards higher monthly increases. Only this month three of the nine members wanted to increase rates by 0.5%. To put this into perspective, if you had a £250,000 standard variable mortgage and the interest rate is currently 2%, your monthly interest payment for that debt is £417. Now, if that interest rate increases by 0.5%, the monthly interest is now £520 a month, an increase of over £100 per month, or £1200 per year. And that increase could take place in a month. And on several months in a row.

Regarding rented accommodation, I’m starting to hear a lot of anecdotal accounts of landlords increasing rents as their tenancy agreements allow. One local case that I’d heard of recently was of a mother with three children in a three bed house renting for £950 per month being told by the landlord that the market rate for the property was £1450 and that this would be the new rate of rent. That’s an increase of over 50%.

Food pricing is concerning too. Around 80% of the UK’s food is imported which makes us particularly susceptible to global price changes, supply chain disruption and scarcity. Farming UK is a consortium that represents many of the UK’s farmers. Its inflation index showed a 22% increase in input costs to September 2021, and 23% to March 2022. These increases have not yet fed through to the consumer, so that is yet to come.

I’ve been concerned for a while that we’re heading into a perfect storm, things are already horrible for so many currently and it looks like things are going to get far, far worse.

When peoples disposable income reduces or disappears completely because they cannot afford to meet the cost of living, whole industries will start to collapse – hospitality, entertainment. With this, unemployment will spike, there’s increased automation of jobs, it’s looking awful and I cannot comprehend that magnitude of what’s about to happen. There are too many variables and I just cannot process it.

And all the time that this has been unfolding (and if it’s been abundantly obvious to me and many others), our government has either been sleep walking into the situation, or wilfully ignorant of it. Or should that be criminally negligent? I don’t suppose it matters too much, whatever they do, whatever label we apply, they are wholly unaccountable and appear to more non-stick than Teflon Tony himself.

Be safe, be kind and look after one another. The government certainly won’t look after you and it’s going to be awful out there.

Will Tesco Put Their Money Where Their Mouth Is?

Will Tesco Put Their Money Where Their Mouth Is?

John Allan, Tesco Chairman was speaking today (10th May 2022) on Radio 4 regarding the cost-of-living impact on customers and how some customers were asking checkout staff to stop scanning items when the shop got to a particular value. Staff were being asked to stop at £40, for example as they didn’t want to spend any more than that.

He then went on to detail an “overwhelming need” for a windfall tax on the energy companies and for the money to be diverted to help the public. I couldn’t agree more.

Great sentiment and whilst that’s being worked on, let’s have a look at Tesco themselves;

To the year end of February 26th 2022, their pre-tax profits trebled from £636m to £2.03bn which is pretty impressive. In fact, they haven’t done bad at all during this COVID malarkey and out the other side.

When these profits were announced in April 2022, the Chief Executive Ken Murphy said, “Against a tough backdrop for our customers and with household budgets under pressure, we are laser-focused on keeping the cost of the weekly shop in check – working in close partnerships with our suppliers, as well as doing everything we can to reduce our own costs.”

He added that Tesco was keeping the rise in cost of living “a bit under the number for the overall market”.

Let’s break down his statement a little, he’s acknowledging the difficulties that his customers are experiencing, which is nice, he concedes that prices need to be kept low, good. Now, considering Tesco’s historical reputation of poor treatment of its suppliers, and its sharp practices the “working in close partnerships with our suppliers, as well as doing everything we can to reduce our own costs.” is a bit concerning. I wouldn’t want to be a supplier to Tesco, I think that I’d end up being squeezed and feel the pinch far more than they would. Somehow, I think they’ll (Tesco) find a way to maintain their margins.

And what if Tesco do this? Then just apply a windfall tax on their profits, John Allan is already on board with the concept for the energy companies, I’m sure that he won’t mind if it’s applied to his company for the greater good.

And for the other supermarkets? We’re watching you.

Bank of England Base Rate Increase?

Bank of England Base Rate Increase?

Wow, here I am in the first week of May 2022 and Boris Johnson is still our Prime Minister, just. I cannot believe that he’s still hanging on in there, he obviously doesn’t get embarrassed. I guess few of his ilk do and it reminds me of Shiv Roy and her unforgettable line “We don’t get embarrassed”. If you know, you know.

Anyway, moving onto business.

The Bank of England (BofE) Monetary Policy Committee (MPC) meet tomorrow, I think everyone is expecting there to be a change, and realistically, it’s only going one way, and that is up. I’d expect 0.25%, but we could see more, who knows.

One lender got a little over-excited and announced a “change” a day early. Yup, you, Halifax.

They then realised their mistake after a fair few hours;

However it goes, I hope that whatever the changes and how they affect you, that you you keep safe and solvent. The next year or two has the potential to be very ugly….. sending you my very best.

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