UK economy receives another gloomy outlook

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23rd November 2022

Bite-sized business news from the UK and beyond

Good morning As the fallout of the FTX collapse continues, new details are emerging about what led to the spectacular downfall. According to court papers, the CEO of the failed crypto platform Sam Bankman-Fried ran the company as his own “personal fiefdom” with $300m spent on property in the Bahamas for the use of its executives.

Today's stories

UK economy receives another gloomy outlook
Eggs shortages as supply chains crack

ECONOMY
UK economy receives another gloomy outlook

What happened?
Yesterday the OECD, the Paris-based intergovernmental body, predicted the UK economy will shrink by 0.4% next year and rise only 0.2% in 2024, making it the worst performer among major developed economies.

How did we get here?
You’d be forgiven for having déjà vu over yet another set of bleak UK forecasts. In recent weeks the chancellor Jeremy Hunt, Bank of England and the government’s official forecaster have all delivered damning verdicts on the state of the economy predicting a recession that could last beyond 2023.

The OECD is slightly more optimistic and expects the recession to be shallower with the economy growing in 2024. But a toxic mix of high inflation fuelled by energy prices, rising interest rates and higher taxes relative to other rich countries means British consumer spending power, and therefore economic growth, will be put the UK behind France, Germany, Italy, Canada, Japan and the US in the G7 growth league table for two years.

The economic body was particularly critical of the government’s energy price guarantee - which caps the average household’s energy bill at £2,500 until April – saying that it would be better to be targeted at the most vulnerable and not for everyone. Helping all households will limit inflation in the short term but the OECD warns that it will add to overall demand in the economy, increasing inflation in the medium-term. That in turn will mean more interest rate rises from the Bank of England.

Zooming out: The invasion of Ukraine in February, along with shutdowns in major Chinese cities due to the zero-Covid policy in recent months have created even more headwinds for the global economy only just recovering from two years of pandemic restrictions. However some countries will feel the lasting impacts of these shocks more than others. The OECD expects global output will still grow next year driven by emerging economies like India and Indonesia offsetting sluggish growth in Europe.

Other stories to keep you in the loop

Train strikes: Rail workers to strike in run-up to Christmas
Black Friday: Shoppers warned most offers are not cheaper
Twitter to resume hiring after Elon Musk sacks more than 4,000 staff
AO World reports bigger losses amid living costs crisis
Starling Bank bans Bitcoin transactions as part of crypto clampdown
Manchester United owners to explore sale

FOOD
Eggs shortages as supply chains crack

What happened?
Tesco has become the latest supermarket to ration egg sales after supply chain issues created a national shortage. Customers will only be able to buy three cartons as the UK’s biggest grocer joins Aldi and Lidl in setting limits.

How did we get here?
Egg farmers are facing a range of issues impacting production:

The UK has been hit with the largest ever outbreak of avian flu with millions of birds killed and culled.
Like households, farmers have experienced soaring energy bills in the past year.
Chicken feed prices have soared since Russia invaded Ukraine, as both countries supply 30% of the world’s wheat – a key input in feed manufacturing.

Farming unions say despite the increased costs, most retailers have not raised their prices paid to poultry farmers for their eggs. As a result, many have chosen to reduce their bird numbers and egg production to manage their costs.

There are reports that supermarkets are resorting to importing eggs to fill in the gaps. The shortage has also impacted on pub chain JD Wetherspoon, which has been forced to take eggs off its breakfast menu at some locations.

Looking ahead: As the festive season kicks off issues in the poultry industry will impact the cost of Christmas dinner this year with turkey prices expected to jump by over 30%.

Stat of the day

Gamblers are expected to bet more than $160bn on the 2022 FIFA World Cup

Interesting links from around the web

The best way to improve relationships at work
What happens to your brain when you become a billionaire
How to recession-proof your finances

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