Market Loop - Europe ramps up sanctions on Russia

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5th May 2022

Bite-sized business news from the UK and beyond

Good morning The saying goes, ‘better late than never’ and that’s certainly applicable to Crossrail. Yesterday the launch date of London’s new Elizabeth line was finally confirmed as 24 May, four years late and £4bn over budget.

Today's stories

Turning up the pressure – Europe ramps up sanctions on Russia
Boo-hoo for Boohoo – Fast fashion giant profits plunge 94%

RUSSIA
Europe ramps up sanctions on Russia

What happened
Yesterday the UK and EU announced further plans to cut ties with Russia following the country’s invasion of Ukraine.

The British government has banned Russia from accessing the UK’s management consulting, accounting and PR services.

The EU has proposed plans for an outright ban on Russian oil imports.

Sanctions, sanctions and more sanctions
Since the Ukraine war began, Russia has become the most sanctioned country in the world – surpassing North Korea and Iran - with the UK, US and EU using economic restrictions to punish Russia in lieu of putting troops on the ground.

Western countries have moved to target President Vladimir Putin, Russia's oligarchs, and cut off most of Russia's banks from the international financial system SWIFT.

The UK alone has now sanctioned over 1,600 individuals and businesses. Yesterday it took another step and announced that Russian firms will no longer be able to use British accountancy, management consultancy, and PR services, which account for 10% of Russian imports in these sectors.

Exporting oil is hugely lucrative for the Russian government and the UK and US have moved to stop importing their oil from Russia. Up until now the EU has been more reluctant to follow suit as it is more reliant on Russia - last year Russia supplied the EU with a quarter of its oil imports.

That could however change if the 27 EU members approve the proposal to ban Russian oil by the end of this year. But countries like Hungary and Slovakia who rely on Russia for 90% of their oil, could veto the plan. They could however be given a longer timeline to commit to get the vote through.

So will any of this work?
The Russian economy is expected to shrink by 10% this year and inflation is set to skyrocket as the raft of sanctions bite.

Over time, these sanctions will likely make it harder for Russia to produce everyday items like food and cars as well as equip its army and finance a war. But there remains a lot of doubt over whether this will be enough to change Putin’s mind.

Other stories to keep you in the loop

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Halifax apologises after interest rate email blunder
Airbnb sees jump in demand as travel rebounds in North America
Apple braces for exodus of workers as return-to-office order does not fly well
PwC offers UK staff shorter Friday work hours for summer
Just Eat senior executive steps down amid misconduct investigation
Uber’s ride-hailing business recovers as rival Lyft struggles

RETAIL
Fast fashion giant profits plunge 94%

What happened
Yesterday Boohoo reported that pre-tax profits for the 12 months to February dropped 94% to £7.8m despite sales rising 14% to £2bn. The share price fell 12% on the day and have dropped by almost 80% in the past year as investors worry that Boohoo is falling out of fashion with customers.

Has Boohoo gone out of fashion?
Boohoo was among the big winners of lockdown as the shutdown of the high street sent shoppers in search of digital retail therapy.

But it looks like consumers are returning to physical shopping now Covid restrictions have eased. Data for British retail showed that online shopping peaked at 37% of all spending in February 2021 but latest figures shows this is now 26% - the same as before the pandemic.

Growth at Boohoo is down more than 40% compared to the year before but it’s not just online shopping fatigue that’s to blame. Deliveries overseas were held up by disruption to international shipping. The cost of moving products from factories was up £22m, while the cost of posting them out to customers rose £38m, ultimately leading to a sharp drop in profits.

What’s the company expecting for the year ahead
In short, more headaches. Consumers facing a cost of living squeeze are going to be more careful when it comes to discretionary spend like clothing and as a result the company said it doesn’t expect revenue to grow for the next six months. Like other retailers Boohoo has also flagged that the price of its goods could increase to cope with the rising cost of manufacturing and distribution.

Stat of the day

The number of employment tribunal cases brought by workers suing their bosses over alleged discrimination or harassment dismissed as 'banter' rose by 44% last year

Interesting links from around the web

How to ask for a raise amid soaring inflation
Does 'dressing for success' still matter?
8 things you use every day but never knew their name

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Market Loop - Europe ramps up sanctions on Russia

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