UK economy shrinks as consumers cut back

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13th May 2022

Bite-sized business news from the UK and beyond
Good morning Due to soaring oil prices and the sell-off in tech shares, energy giant Saudi Aramco overtook Apple as the most valuable company in the world this week with a market value of $2.4tr.
In better news for Apple customers, the company is reportedly planning to replace its infamous lightning port with the more widely used USB-C next year. Consider this a win for your charger collection.
Today's stories
  • UK economy shrinks as consumers cut back
  • Deliveroo strikes landmark deal with trade union
ECONOMY
UK economy shrinks as consumers cut back


What happened
Latest data from the Office for National Statistics showed that the UK economy contracted by 0.1% between February and March, below expectations of a 0.1% growth. It’s another sign that the rising cost of living is starting to squeeze consumer spending, raising the risk of a recession - two consecutive quarters of negative growth – this year.

2022 has got off to a weak start
The UK economy grew by just 0.8% in the first three months of the year – down from 1.3% in the previous quarter - despite this period coinciding with the lifting of almost all Covid restrictions in February.

It means economic output is only 1.2% above its pre-pandemic level.

The underwhelming performance has mainly been driven by the services (which includes retail) and manufacturing sector and partially offset by growth in the construction industry. 

As expected, investors took a dim view of the data
Stock markets have been skittish in recent months as investors continued to fret about inflation and global economic growth. The FTSE 100 fell 1.6% yesterday and the pound slumped to its lowest level in two years against the dollar at one stage and a seven-month low against the euro.

Economists predict things will get worse before they get better
UK households are facing a number of headwinds this year that are likely to curb their spending, including: 30 year high inflation, increases in taxes and the cost of borrowing and record energy bills. 

Economists think that that these factors will continue to play out in the coming months meaning that January to March could be strongest quarterly growth of 2022.
Other stories to keep you in the loop
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  • Aviva chief responds to 'sexist' shareholder jibes
  • Disney's results below expectations but streaming provides a shining light
  • Japan's SoftBank sinks to $28bn loss as investments sour
  • Bloomberg launches UK arm to take on British press
  • JD Sports raises profit targets again despite footwear shortages
  • Zara starts charging for online returns
  • Tesco to open office space in supermarkets
FOOD
Deliveroo strikes landmark deal with trade union


What happened
Deliveroo and GMB Union have signed a deal covering the food delivery app’s 90,000 self-employed riders in the UK. The first of its kind agreement will allow riders rights to collective bargaining on pay, consultation rights on benefits and other health and safety issues, as well as representation from GMB in disputes. 

Background
The employment rights of gig economy workers has been a controversial issue since the emergence of delivery and taxi apps almost a decade ago.

Critics argue that working as a contractor i.e. being self-employed, limits the rights of riders whilst benefiting the company with flexible, cheap labour.

Workers who are classified as employed rather than self-employed are entitled to benefits such as minimum wage, sick pay and paid holiday. But Deliveroo and its peers have been reluctant to classify riders as employees as it would increase their costs which would either be borne by the business and therefore dent profitability or be passed onto consumers.

But the deal does not go so far as classifying riders as employees
It recognises Deliveroo riders as self-employed, following the UK Court of Appeal verdict last year, (the fourth court case to reach this verdict in the UK).

Which is why critics have said the agreement is a cop out. The IWGB union, which has been a vocal campaigner for improving gig economy worker rights, said the deal does not do enough to protect riders as they are still not legally entitled to sick or holiday pay.

Deliveroo argue that the deal gives riders flexibility, guaranteed earnings, representation and benefits. 

The announcement comes after a rocky first two years as a public company
Deliveroo shares have lost over 70% of their value since debuting in March 2021 and since then the company has been dogged by questions on how the business will grow in light of the easing of Covid restrictions and return of out-of-home dining. 
Stat of the day

China consumes 26% of the world's energy supply, the country's usage has tripled since 2000
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