Category: Economy

NatWest Raking In Billions In Profit…..

NatWest Raking In Billions In Profit…..

Posted on by Mark

The older ones amongst you will remember the government bailing out NatWest Group (formerly RBS) using taxpayers money back in 2008 to the tune of £46 billion. Yup, more than the government spanked on the COVID Test and Trace contract with Serco a couple of years ago. At least with NatWest we have something on the government balance sheet to show for it, in the Serco debacle, most of the money appears to have found its way into the pockets of people linked with The Conservative Party.

Well, in the 6 months to June, NatWest posted a profit of just under £3.6 billion. Not bad for half year, no?

What I don’t understand is that our government still owns a touch over 38% of the group and is selling off chunks of it, bringing its holding down from 84% at the very start. NatWest is currently valued at £25 billion, so the government’s (when I say ‘the governments’ I really mean ‘we are’; it’s our money) in a position of negative equity. Why keep flogging it off on the cheap and not just keep the 38% share of profits to reduce the income tax burden on us?

And another thing, why doesn’t the government use its clout in NatWest to start paying the savers some decent rates? The company is incredibly quick to put up its mortgage rates, but drags its heels to put savings rates up.

I completely despair with this lot currently in power and I hold out little hope that the next lot will be even close to fit for purpose either. One thing’s for certain, whichever of the two parties are in power, neither have the voting public interest at heart, with Labour only being slightly the lesser of the two evils.

Rishi Sunak as Prime Minister

Rishi Sunak as Prime Minister

Posted on by Mark

Mr Sunak was yesterday named as the UK’s latest Prime Minister, for how long is anyones guess.

The thing I cannot work out is why a man who is purported to be worth in the region of £730 million wants a job that pays £164,080 per year. One that is pretty thankless, one that means you will always upset sections of the population, in some cases these sections will run into the millions of people. Baffles me.

In other news, Mr Sunak is an advocate of a Central Bank Digital Currency (CBDC) and has gone on the record regarding this.

His father in law is founder and former CEO of Infosys, a company with strong links to China that is a World Economic Forum (WEF) partner, and is involved with Digital ID’s and Social Credit systems.

The Mortgage Problem

The Mortgage Problem

Posted on by Mark

I’m really surprised that this isn’t getting far more political coverage considering the number of people it affects.

The cost of mortgages.

We’ve another two Bank of England Monetary Policy Committee (MPC) meetings before the end of the year, both of which will likely result in significant interest rate increases to counter inflation. This will mean the monthly mortgage payment for people on standard variable rate mortgages, or those coming out of an existing deal and securing a new one, will be considerably higher.

Repossessions are going to increase, without a doubt, but what I can’t understand is why this isn’t getting more political focus……. It’s an issue that is going to affect millions.

I’ve already said before that once these homes are taken back by the banks, they are likely to stay in corporate ownership and rented back to people.

The future certainly isn’t bright….

Don’t Pay UK Being Kerbed by Government

Don’t Pay UK Being Kerbed by Government

Posted on by Mark

As per usual, I’ve been meaning to post this for a fair while, but August has been a very busy month.

There’s a movement called Don’t Pay UK that are calling for a reduction in energy bills to an affordable level in anticipation of the price cap increase next month. They are trying to get 1mn people together to pledge not to pay their bills by the 1st October 2022. As of today’s date, they are up to 187,000 members.

This movement has been gaining ground over the last few months, and towards the end of July 2022, the government announced £400 of support from October payable in six monthly payments. How you get the money, depends upon how you pay your bill. Yeah, the operative word is pay. If you were to cancel your direct debit, you don’t get the help.

The £400 is a drop in the ocean when you consider the energy cap increase of £1600/year for the average family.

You can tell that the government is getting panicked by introducing this measure. The population is getting increasingly belligerent of late, and they (Government) are having to make lots of changes to keep everyone in line. I would imagine their biggest fear is that everyone starts pulling together and turn on them.

More evidence that they really don’t have our interests at heart, all they are doing is controlling by doing the bare minimum in order to keep everyone in line.

And The Consumer Rip Off Gathers Pace

And The Consumer Rip Off Gathers Pace

Posted on by Mark

Inflation is increasing, meaning that month on month, prices for everyday goods and services that we need to live are increasing. Many people are finding that the wage that they receive is buying them less goods and services, and that each month they have less money left over, if any. But why are prices increasing? What’s happening?

Here are couple of ideas;

The energy sectors profits have escalated due to their pricing, the first company that springs to mind is BP. Between April and June of this year, they made nearly £7bn of profit. That is their second highest profit on record. Pretty much, all of the other energy companies are doing the same. And they’re sending a lot of these billions of profit to their shareholders. In a nutshell, the price that you pay for petrol and diesel, gas and electricity are linked to companies like BP. That’s why your fuel, gas and electricity are getting so expensive.

An interesting statistic is that according to experts at the UCL (University College London) and LSE (London School of Economics), over the last 50 years, the oil and gas industry globally has delivered £2.3bn a day in pure profit. It was put that the industry could have the power to “buy every politician, every system”. It may give an idea as to why we are where we are financially, and environmentally.

The thing that is particularly sickening about BP is the fact that it used to be owned by the UK Government, but was sold off in 1979 for £7.25bn. Imagine how all of that profit since could have been retained by the UK Government and used to reduce the tax burden on us all. Or even reduce our energy bills. It was sold for a song.

The energy sector profits are so obscene, the UN Secretary General, Antonio Guterres referred to them as ‘immoral’ and stated that they were ‘being made on the back of the poorest people and communities and at a massive cost to the climate’.

That’s one big chunk of the inflation problem.

In UK, the majority of households use a supermarket for their day to day groceries. The big supermarkets have been doing particularly well, take the ubiquitous Tesco, for example. To the year end of February 26th 2022, their pre-tax profits trebled from £636m to £2.03bn. Every little helps, right? Well, a lot helps them. A lot. Another chunk of the inflation problem.

Still on the supermarkets, this time petrol prices. Last week, the RAC said said at the start of the week, the average petrol price at the big four supermarkets, Tesco, Asda, Sainsbury’s and Morrisons, was £1.74 per litre. Diesel was £1.86. Meanwhile the average for the delivered wholesale petrol price last week was £1.24, while diesel was £1.38.

After factoring in VAT, fuel duty and a “generous” retailer margin of 10p per litre, the RAC said “forecourts should soon be selling unleaded for no more than £1.62”. A couple of weeks later, here we are, it’s still not happening.

There’s a recurring theme here, prices are up, profits are up by record levels for the big companies. In fact, there was a brilliant segment on the Jeremy Vine Show in July where Eddie Dempsey from the RMT (you can watch it here) pointed out that the FTSE 350 top companies profits have gone up by 73% since 2019. To use his phrasing “The people at the top of the economy, they’re having a disco, and everyone else is being told that they’ve got to tighten their belts and carry the can. It’s not on”. Quite.

So, the main drivers of inflation are summarised above.

Back in February 2022, the Governor of the Bank of England Andrew Bailey said he wanted to see “quite clear restraint” in wage demands from employees to prevent an inflation spiral. I guess what he was saying was okay, prices are increasing, but hey, just suck it up and put up. In the meantime, UK households are taking an enormous financial hit, probably the biggest for almost four decades.

As I’ve blogged before, Andrew Bailey earns £570,000.

Any wage increase you’re going to receive is unlikely to make a difference to the inflation figures, only to your ability to be able to afford to live, or even exist.

Britain is broken.

Is British Manufacturing Making a Comeback?

Is British Manufacturing Making a Comeback?

Posted on by Mark

I work in an industry that uses metalworking machinery for cutting, folding and bending metal. Sometimes the machinery goes wrong…

One of the machines used is called a roller. Essentially, this is an electrically driven machine that has a set of three wheels, each wheel is on a shaft and rotates around lengths of metal fed into it. By clamping the wheels onto the length of metal, and applying pressure as the metal passes through, it bends it and the material comes out with a curve of desired radius. Unfortunately the material fed into the machine in this instance was too thick and caused the shaft of one the wheels to shear. Not good.

The machine in question is an AKYAPAK APK30 and the task of organising the repair of it landed on my desk. It needed to be fixed in a hurry as it was required to finish a project. So, no pressure then. I was given the broken component – it was a cylindrical shaft, about 50mm diameter and 300mm long, it had keyways (slots) machined into it and looked fairly intricate. It had snapped almost in half at one of the slots. Obviously a weak point, but this wouldn’t have happened if its maximum material thickness hadn’t been exceeded. Too late to do anything about that now.

I knew little to nothing about it and a quick search revealed that it was manufactured in Turkey and that there is a UK distributor. Phew. I contacted them on a Friday and explained my predicament and they said that they would check the UK stock and also check with the manufacturer. I was told that I wouldn’t probably hear anything until the Monday. Not good.

There’s a local machining company that I was aware of who have the facilities for making this sort of thing but I’d often discounted them because of the cost. Historically when a piece of machinery breaks, it’s always been cheaper to buy the replacement component from the manufacturer, even if it was imported. I’d seen this time and time again and have had things put on urgent delivery from places within the EU such as Italy and Germany. Considering the situation, I thought it was worth a punt, and took a 30 minute drive to the company in question and handed them the broken component and asked if they could copy it. They said for me to leave it with them and they would let me know.

They came back pretty quickly and said that they could do it in 2-3 days for £365 plus VAT. The reason why the could do this was that it wasn’t hardened; that means it didn’t require a heat treatment process which would add to the cost and time to complete.

I then got the price back from the Akyapak UK distributor which was £385 and approximately £90 carriage from Turkey and I would be waiting for 3-4 weeks.

I placed the order with the UK guys and had the component in my hand by the close of business on the Tuesday. They’d beaten their own time target, and the price of the imported component. I’m pleased and impressed with them.

Sterling is taking a bit of a battering at the moment and The Bank of America has likened it to an “emerging market” currency and word is that there is a flight from GBP into US Dollars and Euros. This means that the pound will weaken and imports become more expensive. Add into the mix the problems with goods coming through the trade barriers since Brexit and the delays are likely only going to worsen. This will probably go some way to explaining why it was cheaper and quicker for me to source locally, whether this becomes a continuing pattern will be interesting.

Inflation Again

Inflation Again

Posted on by Mark

Interesting fact from the last quarter of 2020 regarding the US Dollar, and Federal Reserve;

“The Federal Reserve has printed unprecedented amounts of money to support the coronavirus-stricken economy. It has sparked debates about inflation and helped asset prices soar.

Data from the Fed shows that a broad measure of the stock of dollars, known as M2, rose from $15.34 trillion (£11.87 trillion) at the start of the year to $18.72 trillion in September. 

The increase of $3.38 trillion equates to 18 per cent of the total supply of dollars. It means almost one in five dollars was created in 2020″

The UK Government has been on a money printing exercise too. The chickens have come home to roost.

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

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

Posted on by Mark

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

Posted on by Mark

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?

Posted on by Mark

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.

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