22. Weekly Newsletter
Supermarket Price Caps
The UK Government is at the “drawing board stage” of introducing a scheme that would aim to get retailers to charge the lowest possible amount for some basic products like bread and milk. This suggestion has been attributed to the resilient high levels of inflation for food and non-alcoholic drinks which remains above 10% (19.1% in data published in April). The supermarkets have attributed the increase in costs to rising energy costs, transport, labour and the prices demanded by suppliers (manufacturers and farmers).
However, supermarkets are expected to be required to select which items they will cap on a voluntary basis. This is expected to be modelled upon a similar agreement made in France and reduce the nationwide inflation rate of 8.7% (down from 10.1% in the previous month). In contrast, the British Retail Consortium has argued that the government should cut red tape so that resources could be “directed to keeping prices as low as possible” rather than returning to pricing controls last seen in the 1970s.
Newspapers & Interest Rate Outlook
The UK’s front page news cycle over the last seven days covered a wide range of topics with no single issue dominating headlines. The government suggestion to introduce supermarket price caps has renewed coverage of inflation. Additionally, the focus upon migration numbers has reintroduced the discussion on how Brexit has changed the migration controls. Some of the newspaper front pages over the last week were:
- The Guardian: Labour to let councils buy land cheaply to tackle housing crisis
- Financial Times: Labour plans land valuation reform to ease housing crisis
- The Telegraph: Price caps will create shortages, PM warned
- The Times: British police bid to stop migrants leaving Africa
- Daily Express: Supermarkets Warn ‘Price Cap’ Won’t Reduce Food Bills
- The Sunday Times: Starmer to ban new drilling in the North Sea
- The Sunday Telegraph: Sunak asks stores to cap basic food prices
- The Guardian: UK set for recession before next election
- The Times: Extra £10k to woo more teachers from abroad
- The Daily Telegraph: Mortgage rates shoot up amid bond chaos
- The Times: This is no time to cut taxes, IMF urges Hunt
- The Daily Telegraph: Millions on jobless benefits do not have to seek work
- Financial Times: BoE has ‘very big lessons to learn’ after failing to spot persistent high inflation
Mortgage products are being withdrawn from the market as the industry anticipates rates to rise higher than previous forecasts. The average 2 and 5-year mortgages are at 5.35% and 5.02% respectively- equalling levels last seen in 2008. Rates were previously believed to have peaked but markets now expect the Bank of England’s base rate to reach 5.5% in November. Chancellor Hunt has stated that he is “comfortable with the Bank of England doing whatever it takes to bring down inflation, even if that potentially would precipitate a recession”.
Official data published last week revealed that net migration increased to 606,000 in 2022 which marked the highest number on record. The UK is also set to become the second-largest population within Europe by 2025 due to the rapid expansion of the population- by comparison France’s net migration was 161,000 in 2022. Northern Ireland is seeing a ‘significant rise’ in migration with Indian nationals choosing the country as a destination as a result of post-Brexit migration changes.
In 2010 the Conservative Party committed to reducing net migration down to the “tens of thousands a year” but has since missed this objective every year. In 2019, PM Johnson removed this target but kept the strategy to reduce migration numbers. PM Sunak has, by comparison, not committed to a specific net migration goal but has labelled the current level “too high”. Finally, the opposition Labour leader this week refused to outline a “specific number” as “targets are routinely missed”.