Market Loop - Unexpected growth in UK economy

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14th July 2022

Bite-sized business news from the UK and beyond

Good morning In a case of twisted irony yesterday Twitter, a company that originally did not want to be bought by Elon Musk, officially announced it was suing Elon Musk, someone who originally wanted to buy Twitter but does not want to now, to force him to buy Twitter.

Today's stories

Unexpected growth in UK economy
Energy firms under fire over direct debits

ECONOMY
Unexpected growth in UK economy

What happened?
Official data released yesterday showed that, after two months of decline, the UK economy grew by 0.5% in May, better than the zero growth expected by economists.

Recent headlines on the state of the British economy have been gloomy
International bodies like the IMF and World Bank have downgraded the UK’s economic outlook citing soaring inflation, higher taxation and a cost of living crisis as the causes.

So yesterday’s economic data from the Office for National Statistics came as a surprise. Behind the growth was:

An increase in doctors’ visits which offset the continued scaling down of the NHS Covid Test and Trace programme.
A rebound in holiday bookings and rail travel with pent up demand for vacations.
A rise in the manufacturing and construction sectors as they returned to their pre-pandemic levels.

But not every area was in growth
Consumer-facing industries – think retail, hospitality and leisure – fell by 0.1% and is still almost 5% below its pre-Covid size. The decline signals the cost of living squeeze is starting to bite with households cutting back on discretionary spending.

The figures raise some hope of the economy avoiding a feared recession. But many economists forecast the economy to have fallen back again in June. The figures for the full second quarter are released next month.

Other stories to keep you in the loop

Rail strike: New walkout to take place on 27 July
Cost of living: More than 8m households get £326 in their account from today
Rishi Sunak wins first round of Tory leadership vote
Race for talent sees recruiter Page post record month
BMW criticised for putting heated seats behind a paywall
Sale process begins for Savile Row tailor brand Gieves and Hawkes
US inflation hits 9.1%
Bill Gates funnels $20bn to his foundation and plans to drop off rich list

ENERGY
Energy firms under fire over direct debits

What happened?
Yesterday the energy industry regulator Ofgem called out five suppliers for unfair direct debit payments from customers.

Ofgem singled out Ecotricity, Good Energy, Green Energy UK, Utilita Energy, TruEnergy and UK Energy Incubator Hub (which has now gone bust) for being the worst offenders.

How did we get here?
In April the annual cap on energy bills increased by 54% for about 18m UK households following the jump in gas prices sparked by the war in Ukraine.

In May Ofgem launched a review into how much energy firms were charging in regular payments after the government complained that "some" companies had been increasing direct debit payments "beyond what is required" as millions of consumers fell into fuel poverty.

For the most part suppliers are behaving
Ofgem’s review of 17 suppliers found that, on average, direct debit levels for customers on a standard variable tariff between February and April increased by 62% - mostly reflecting the increased cost of wholesale gas.

But 500,000 households saw direct debit payments increase by 100% despite the 54% price cap rise. Ofgem said issues like poor documentation and a lack of a structured approach to setting customer direct debits led to overcharging.

What next: The named and shamed suppliers have challenged the regulator’s assessment. But these firms have two weeks to submit action plans to ensure customer payments are fair.

Stat of the day

Heathrow Airport has put a daily cap on passengers of 100,000 to try to cope with fights delays and disruptions. This compares to 125,000 daily passengers in summer 2019

Interesting links from around the web

Why so many children of immigrants rise to the top
How to dress for the office during a heatwave
BBC pay 2021-2022: The full list of star salaries

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Market Loop - Unexpected growth in UK economy

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