Market Loop - Euro hits new low

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23rd August 2022

Bite-sized business news from the UK and beyond

Good morning Here’s a cautionary tale on the dangers of work socials. A 28-year-old employee at audit giant PwC is suing the company after he suffered a serious head injury during a work event involving a drinking game called “pub golf”.

Michael Brockie, from the Reading office, said PwC owed him a duty of care and that he drank so much alcohol that after 10pm he has no memory of events and was later found lying in the street after falling.

Today's stories

Euro hits new low
End of an era at John Lewis

EUROPE
Euro hits new low

What happened?
Yesterday the euro fell to its lowest level since 2002 against the US dollar and with one euro reaching $0.993.

How did we get here?
Since its creation in 1999 the euro has traded as high as $1.60 back in 2008. But in 2022, after peaking at $1.16 in February, it’s reached parity with the US dollar this summer. The downward spiral has mainly been driven by concerns over European energy supplies.

The fallout from the war in Ukraine has highlighted how dependent Europe is on Russian oil and gas. There are growing fears that reducing the reliance on Russia will mean Europe faces an energy crisis this winter that could hamper economic output and tip the region into a recession.

Over the weekend, Russia’s Gazprom – the world’s largest natural gas producer - announced it would halt all flow through the Nordstream 1 pipeline – the main pipe between Russia and Europe - from the 31st of August to the 2nd of September for maintenance work.

But there are worries that this could be a pretext for a longer shutdown in retaliation to Western sanctions on Russia.

The news sent gas prices up 20% yesterday and saw European electricity costs touch record highs.

Why does it matter?
A weaker euro is good news for American tourists visiting the eurozone this summer as it increases their spending power. On the flip side Europeans travelling to the US will feel more out of pocket.

However US businesses could find their exports are less competitive on the international market given the strength in the dollar.

Eventually, the energy crisis could cost European taxpayers billions through higher energy bills and higher taxes. Globally, a tighter gas market could trigger more inflation, hurt economic output and fuel a recession.

Zooming out: Higher energy prices will bring more pain for UK consumers. Yesterday analysts at Citigroup delivered a chilling inflation forecast. The bank expects UK consumer prices to jump to 18.6% in early 2023 due to soaring energy prices - outstripping the Bank of England’s forecasts of 13%.

Other stories to keep you in the loop

Average pay for FTSE 100 chiefs jumps by 39% to £3.4m
Key UK mortgage rate passes 4% for the first time since 2013
Barristers vote to escalate strike action over pay
British Airways to cancel thousands more flights
PlayStation sued for £5bn in the UK over ‘rip-off’ games
Adidas CEO steps down amid struggles in Asia
Apple employees fight back against return-to-office order
Elon Musk subpoenas former Twitter chief executive Jack Dorsey as he tries not to purchase company
Usain Bolt moves to trademark signature victory pose

RETAIL
End of an era at John Lewis

What happened?
Yesterday was the final day of John Lewis’s ‘Never Knowingly Undersold’ promise as the department store acknowledged that consumers have changed the way they shop. First introduced in 1925, the retailer pledged to refund customers the difference if they find the same item on sale elsewhere cheaper within 28 days.

What changed?
The promise didn’t apply to online shopping which, in an age of ecommerce, makes the slogan outdated. Almost a third of non-food sales are done online and high street retailers have been losing market share to the likes of Amazon for years.

What’s replacing it?
John Lewis says that instead it will invest £500m in keeping prices low, a 25% increase on 2021. It will also expand its ‘Anyday’ value range which was introduced last year and has clocked up sales of over £125m so far.

The company is expected to launch a new marketing campaign in the coming weeks. It’s already registered a string of potential slogans with the Intellectual Property Office, including “John Lewis: Life is beautiful”, “For the joy of life: John Lewis” and “John Lewis for all life’s moments”.

But how much will ‘Never Knowingly Undersold’ be missed?
In reality the pledge was rarely used by shoppers – less than 1% - with it being little more than a marketing ploy. MoneySavingExpert founder Martin Lewis says that it gives an arguably false impression that John Lewis is cheap as only a minority of consumers are price sensitive enough to care which allows John Lewis to charge what it likes to everyone else.

Stat of the day

Available office space in London has reached 31 million square feet, the highest level in 15 years

Interesting links from around the web

6 ways to cope with financial stress
The winner of the best joke award at Edinburgh festival fringe
The joys and challenges of switching to a four-day week

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Market Loop - Euro hits new low

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