UK factories plan price hikes; job cuts at Unilever and Royal Mail – business live

UK factories are planning to raise their prices by the most since 1977, fuelling the cost of living squeeze, after being hit by surging costs and shortages of skilled labour.

The CBI’s latest industrial trends survey has found that UK manufacturing sector continues to face intense cost and price pressures.

Firms reported that their average costs in the quarter to January grew at their quickest rate since April 1980, and they don’t see any let-up soon — with costs expected to grow at a similar pace over the next three months.

As a result, the balance of firms expecting to hike domestic prices this quarter, rather than lower them, rose to 66% – the highest reading since April 1977.

The export prices expectations balance was the highest since January 1980.

Rain Newton-Smith, CBI chief economist, warns:

Manufacturers also raised prices sharply over the last three months, close to the previous quarter’s record pace.

Factories are also being hit by staff shortages — the share of firms saying skilled labour shortages will limit their output next quarter hit the highest level since October 1973.

Tom Crotty, group director at chemicals producer INEOS, says:

There was a small fall in the proportion of firms saying shortages of materials and components would limit growth, but it remained elevated by historical standards.

UK manufacturing output volumes in the quarter to January grew at a slower pace than in December, though growth remained firm compared with the long-run average.

Output increased in 10 out of 17 sub-sectors, with headline growth mostly driven by the food, drink & tobacco sub-sector. A majority of manufacturers expect output growth to increase in the next quarter.

After an extraordinary rebound yesterday, Wall Street stocks are on track to open lower in an hour’s time.

Union has vowed to fight Royal Mail’s plan to axe 700 managerial jobs.

Unite says its members were being made the scapegoat for the bosses’ failure to maintain deliveries during the pandemic. The threat of an industrial action ballot was now on the cards, it warns.

Mike Eatwell, Unite national lead officer for the CMA sector, says:

General Electric has missed Wall Street’s sales expectations, as supply chain problems hit the conglomerate which is splitting itself into three.

GE, which announced break-up plans last November, reported that revenues fell 3% year-on-year in the last quarter of 2021 to $20.303bn, below forecasts.

Although its Aviation division posted a 4% rise in revenues, healthcare revenues fell 4%.

Its renewable energy arm saw a 6% drop in revenues, and a 23% tumble in orders, which GE blames on “production tax credit uncertainty delaying investment in U.S. Onshore Wind equipment”.

GE made a pre-tax loss of almost $3.5bn in the last quarter, compared with a profit of $2.58bn a year ago. But on an adjusted basis, earnings were 92 cents a share in the period, more than the 84 cents predicted by analysts.

Chairman and CEO Lawrence Culp, who is splitting GE into separate jet engine, hospital equipment and power machinery businesses, says:

GE also forecast that organic revenues and adjusted earnings will growth this year, partly due to a commercial market recovery in aviation.

But it also predicts continued inflation challenges, with the most adverse impact expected in Onshore Wind.

Earnings news: credit card operator American Express has beaten expectations, after seeing record spending by its customers.

American Express has posted net income of $1.7bn, or $2.18 per share, for the last quarter, up from $1.4bn, or $1.76 per share, a year ago.

That exceeded expectations of $1.87 per share.

Stephen J. Squeri, Chairman and Chief Executive Officer, says:

UK factories are planning to raise their prices by the most since 1977, fuelling the cost of living squeeze, after being hit by surging costs and shortages of skilled labour.

The CBI’s latest industrial trends survey has found that UK manufacturing sector continues to face intense cost and price pressures.

Firms reported that their average costs in the quarter to January grew at their quickest rate since April 1980, and they don’t see any let-up soon — with costs expected to grow at a similar pace over the next three months.

As a result, the balance of firms expecting to hike domestic prices this quarter, rather than lower them, rose to 66% – the highest reading since April 1977.

The export prices expectations balance was the highest since January 1980.

Rain Newton-Smith, CBI chief economist, warns:

Manufacturers also raised prices sharply over the last three months, close to the previous quarter’s record pace.

Factories are also being hit by staff shortages — the share of firms saying skilled labour shortages will limit their output next quarter hit the highest level since October 1973.

Tom Crotty, group director at chemicals producer INEOS, says:

There was a small fall in the proportion of firms saying shortages of materials and components would limit growth, but it remained elevated by historical standards.

UK manufacturing output volumes in the quarter to January grew at a slower pace than in December, though growth remained firm compared with the long-run average.

Output increased in 10 out of 17 sub-sectors, with headline growth mostly driven by the food, drink & tobacco sub-sector. A majority of manufacturers expect output growth to increase in the next quarter.

Bloomberg are reporting that tech giant Nvidia is preparing to abandon its purchase of UK chip designer Arm, after struggling to win approval for the deal.

Here’s the story:

The deal for the Cambridge-based chip designer has also faced scrutiny in the UK. In November, the government ordered an in-depth investigation that could result in the deal being blocked.

The “phase 2” investigation was ordered on public interest grounds, due to competition and national security concerns.

European stock markets have pushed this morning, although anxiety over the Ukraine crisis and tomorrow’s Federal Reserve meeting are still high.

The FTSE 100 is now up 60 points, or 0.8%, recovering around a third of Monday’s fall.

Germany’s DAX (+1.2%) and France’s CAC (+1.4%) are also staging a moderate rebound.

The pan-European Stoxx 600 hits its lowest since October yesterday, meaning some stocks now look more attractive.

As Victoria Scholar, head of investment at interactive investor, puts it:

Japan’s Nikkei also had a tough session, hitting its lowest levels in over a year.

Wall Street is expected to open lower after first sliding then recovering yesterday.

Investors are anxious to hear from the Fed chair Jerome Powell tomorrow – for details on how it plans to unwind its stimulus programme, and whether interest rates will probably rise in March.

The European Union’s securities watchdog has warned that the “gamification” of the financial markets has introduced a new generation of retail investors who may not be aware there are few protections in assets like cryptocurrencies, Reuters reports:

More here: ‘Gamification’ in financial markets under scrutiny, says EU watchdog

[Payment for order flow is the controversial process where market makers pay a fee to receive retail investors’ orders. It gives them a better view of the market, and allows retail trading apps to offer zero-commission, but regulators fear it creates conflicts of interest.]

Royal Mail shares have jumped 5%, leading the FTSE 100 risers this morning.

But the company should be careful not to go too far with its cost-cutting programme, warns Russ Mould, investment director at AJ Bell.

Germany still risks falling into a recession, despite the pick-up in business confidence this month.

Germany’s economy is expected to have shrunk in the final three months of 2021, and could stagnate, or worse, in January-March too.

Carsten Brzeski, global head of macro at ING, says:

However, such a technical recession would be mild and short-lived and is unlikely to harm the labour market, he adds [although the Ukraine crisis does also threaten the recovery].

German business morale improved in January for the first time in seven months, in a sign that Europe’s largest economy could be turning the corner.

The IFO institute’s business climate index has risen to 95.7 this month from an upwardly revised 94.8 in December, with company bosses more upbeat about the outlook.

Ifo President Clemens Fuest said.

Yesterday’s survey of German purchasing managers showed that the supply chain problems that have hurt factories for many months have started to ease.