- Surging debt interest forces Sunak to borrow £14bn as inflation crisis bites
- Britain ‘definitely’ entering recession as prices surge
- FTSE 100 falls amid recession fears
- Ben Wright: The world’s favourite money-making strategy is dead
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Germany has triggered the second phase of its emergency gas plan as it accused Putin of launching an “economic attack” over energy supplies.
The ‘alarm’ phase of the three-stage plan kicks in when the Government sees a high risk of long-term energy shortages and takes the country one step closer to rationing.
Under the tougher measures, Berlin will provide a credit line of €15bn (£12.9bn) to fill gas storage facilities, while a gas auction model will be launched this summer to encourage industrial gas consumers to save energy.
However, Germany will not yet trigger a clause that lets utility companies pass on soaring gas costs to customers.
Economy minister Robert Habeck said: “We must not fool ourselves: The cut in gas supplies is an economic attack on us by Putin.”
Russia has slashed supplies in what EU leaders have described as a political move. Flows through the Nord Stream pipeline to Germany are still at just 40pc of normal capacity.
That's all from us today, we shall see you tomorrow for the last instalment of the week. But before you go, have a look at the latest stories from our reporters:
- Inside the sex scandal at the heart of the world’s dirtiest industry
- Surging debt interest forces Sunak to borrow £14bn as inflation crisis bites
- Giant US hedge fund raises bet against Europe to €10bn
- Amazon’s Alexa will mimic the voice of your dead relatives
- ‘Era of cheap Chinese manufacturing over,’ says Nat Rothschild
BAE buoyed by €2bn Spanish Typhoon fighter jet deal
BAE Systems has won a £500m deal to help deliver 20 Eurofighter Typhoon combat aircrafts to Spain. Howard Mustoe has the story:
The new Typhoons will replace Spain’s fleet of Boeing F-18 Hornets based on the Canary Islands, and will increase the country’s overall stock of Typhoons to 90. The order is valued at €2bn in total.
Eurofighter jets are made by a consortium of German, UK, Spanish and Italian companies, including BAE and Airbus, which represents Germany and Spain’s interests. The programme supports 5,000 jobs at BAE and 10,000 roles at suppliers.
About a third of the new work will go to BAE, Britain's biggest engineer by value, including making the front fuselage and tail. Much of the work will be done at BAE’s factories in Warton and Samlesbury, in the north-west of England.
FTSE 100 closes in the red
The FTSE 100 has ended the day in the red following a selloff in oil and mining majors due to tepid commodity prices on persisting concerns about a global recession.
The blue-chip index dropped 1pc to 7,020, with oil majors BP and Shell leading losses.
Shares of miners Anglo American, Rio Tinto and Glencore weakened as copper prices tumbled to a 16-month low.
"The fall in metals ... that's about worries over a slowdown in the global economy," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
Boohoo appoints new chief financial officer
Shaun McCabe is set to succeed Neil Catto as chief financial officer of online fashion retailer Boohoo later this year.
Mr Catto will transition to a role as an executive director as part of the leadership shuffle.
Mr McCabe has been with the company since 2020, when he joined the board as a non-executive director and currently serves as chair of the audit and risk committees. He also has previous experience working as an international director at ASOS and as CFO for Amazon Europe.
Pubs and restaurants cut opening hours or capacity as staff shortages bite
Almost half of pubs and restaurants are cutting their trading hours or capacity as labour shortages plague the hospitality industry.
A joint survey by UKHospitality, the British Institute of Innkeeping and the British Beer and Pub Association suggested that lack of staff is forcing one in three businesses to close at least one day per week.
Around 81pc of operators are looking for front of house employees, while 76pc are seeking chefs. Kitchen porters and assistant managers are also in strong demand as they are needed by 67pc and 53pc of businesses respectively.
The three trade unions estimated that reduced activity of pubs and restaurants is resulting in £21bn of lost revenue and £5bn in tax for the Exchequer.
Xi Jinping vows to achieve ambitious growth target despite disastrous zero Covid strategy
Xi Jinping has vowed to achieve China’s ambitious growth targets despite warnings the country’s disastrous Covid containment policy will leave it well short of hopes. Louis Ashworth writes:
The Chinese president said his country would “strengthen macro-policy adjustment and adopt more effective measures to strive to meet the social and economic development targets for 2022 and minimise the impacts of Covid-19”, in a speech reported by state press agency Xinhua.
It is the first time since comments by premier Li Keqiang in March that an official has addressed the 5.5pc goal for gross domestic product (GDP) growth, which analysts widely expect China to miss.
On average, economists expect the world’s second-largest economy to grow just 4.1pc over this year, following huge disruptions from lockdowns in Beijing, the capital, and Shanghai, the manufacturing hub city.
Mr Xi argued that China’s strict approach to fighting the pandemic had protected public health, while also stabilising its economy – despite it having caused widespread disruption as factories were shuttered with workers locked down.
Cristiano Ronaldo signs NFT partnership with Binance
Crypto platform Binance has unveiled an exclusive, multi-year NFT partnership with football superstar Cristiano Ronaldo.
Over the course of the agreement, Ronaldo and Binance will create a series of collections for sale exclusively on the Binance NFT platform. The first collection will be released later this year and will feature designs created in collaboration with the Manchester United player.
Binance founder and chief Changpeng Zhao said: “Cristiano Ronaldo is one of the world’s best footballers, and has transcended sport to become an icon in multiple industries. He has amassed one of the world’s most dedicated fan bases through his authenticity, talent, and charity work."
BA 'extremely disappointed' over strikes
British Airways has said it's "extremely disappointed" after staff at Heathrow voted to strike over pay.
A spokesman said:
We’re extremely disappointed with the result and that the unions have chosen to take this course of action.
We are fully committed to work together to find a solution, because to deliver for our customers and rebuild our business we have to work as a team.
Amazon’s Alexa will mimic the voice of your dead relatives
Amazon’s Alexa will be able to resurrect the voices of dead relatives, allowing users to feel as if they are speaking to lost ones beyond the grave.
James Titcomb has more:
The company revealed that it was working on technology that would allow its voice assistant to impersonate people with a recording of somebody’s voice less than a minute long.
It displayed the feature allowing the synthetic voice of a deceased grandmother to read to her grandson. In a video displaying the technology, a child asked “Alexa, can grandma finish reading me the Wizard of Oz?”.
The smart speaker acknowledged the request in its synthetic computer-generated voice before switching to a replica of the grandmother’s voice.
Amazon did not say when it expects to release the feature or whether it plans to restrict how it is used.
Improvements in voice recognition have allowed companies to create increasingly life-like digital voices, creating concerns that the technology could be used to impersonate public figures or to defraud people.
British Airways workers vote to strike
There's more summer travel misery ahead after British Airways voted in favour of strike action.
Around 700 employees at Heathrow balloted for industrial action, which will be timed for the start of the summer holidays to cause maximum chaos.
GMB, the union behind the strikes, said holidaymakers now face a “gruelling summer of travel chaos”.
GMB must give BA two week's notice, so the strikes could in theory start at the beginning of next month.
But it's understood the union will delay strikes until the third or fourth weekend in July to coincide with the start of the summer holiday getaway to maximise “leverage”.
Bank of England staff handed restrained 1.25pc pay rise
The Bank of England awarded staff a below-inflation pay rise of 1.25pc last year, according to its annual report.
Governor Andrew Bailey and the deputy governors were offered 1pc, which Mr Bailey declined to accept.
His deputies – Ben Broadbent, Jon Cunliffe, Dave Ramsden and Sam Woods – took the increase.
Bailey had already revealed he would not take a pay rise after telling the public they should exercise restraint in their wage demands this year to prevent the UK being dragged into a wage-price spiral.
The Governor, who took home just shy of £600,000 last year, was heavily criticised for his comments.
US jobless claims hold near five-month high
Applications for unemployment insurance in the US last week steadied near a five-month high, in a sign labour market troubles may be starting to ease.
Initial unemployment claims decreased by 2,000 to 229,000 in the week to June 18, according to Labor Department data, The prior week’s figure was revised up slightly.
While the labor market remains strong and unemployment low, there are some signs of softening, with several companies – including JPMorgan Chase and Coinbase – announcing layoffs in recent weeks.
Meanwhile, recession fears are growing after the Federal Reserve raised interest rates by the most since 1994 and signaled further tightening in an effort to tame inflation.
GSK to invest £1bn in infectious disease drugs
GSK is planning to invest £1bn over the next decade to speed up work on new medicines and vaccines to combat malaria, tuberculosis, HIV, neglected tropical diseases and antibiotic resistance.
The British pharmaceutical giant said it has also formed a global health unit focused on the prevention and treatment of infectious diseases that disproportionately affect lower-income nations – an area that’s not usually profitable.
Thomas Breuer, tGSK’s chief global health officer, said the unit will have a “ring-fenced” budget, with results measured by health impact rather than financial returns.
Pharma companies are coming under pressure to boost investment in tackling infectious diseases and widen access to drugs, vaccines and other tools in developing countries as they focus on lucrative areas such as cancer.
Swiss drugmaker Novartis today said it will invest $250m over five years to fight neglected diseases and malaria, while Covid vaccine-maker Moderna has said it plans to start human trials of vaccines against 15 viruses and other pathogens by 2025.
Nike makes full exit from Russia
Nike is making a full exit from the Russian market after suspending operations in the country in the wake of the Ukraine invasion.
The world's largest sports retailer halted sales in Russia in March, telling customers it couldn't guarantee product shipments.
Nike had more than 100 stores in Russia, although a handful owned and operated by independent partners remained open.
The company has now announced a full withdrawal, following similar moves by the likes of McDonald's and Google.
Nike has made the decision to leave the Russian marketplace. Our priority is to ensure we are fully supporting our employees while we responsibly scale down our operations over the coming months.
Food prices are soaring – but the worst is yet to come
Costs of essential travel, energy and food have already taken off — starting to cripple the wallets of millions. Just as cash-strapped consumers grapple with how to spend it, experts warn the worst is yet to come: food prices can climb far higher.
Louis Ashworth has more:
Overall consumer prices rose 9.1pc in the year to May, but food alone is hot on its heels at 8.6pc. It soared almost 30pc from 6.7pc the previous month.
Economists point to core inflation – which strips out the volatile food and energy inflation figures – declining to 5.9pc as a sign of receding underlying pressure. But that will be cold comfort to households as grocery bills shoot up.
Naked Wines shares crash on weak outlook
Shares in Naked Wines plummeted as the group warned over sales and profits for the year ahead.
The online wine retailer warned that sales could fall by up to 4pc over the next financial year, while it expects to only break even on an underlying earnings basis.
Shares plunged more than 40pc as the warning took the shine off its full-year figures.
Naked Wines recorded a pre-tax profit of £2.9m for the year to March 28 against a loss of £10.7m the year before. Total sales also increased 5pc to £350.3m.
But chief executive Nick Devlin said the group will not "pursue growth at any cost" in a more difficult year ahead.
Looking ahead, Naked Wines is well positioned to continue to grow amidst a changing consumer environment.
At the same time, we will not pursue growth at any cost, and our guidance is that we intend to trade the business at or around breakeven this year.
Germany unveils incentive plan for industry to cut gas use
Alongside the move into the 'alarm' phase of its emergency gas plan, Germany is also planning to encourage industry and energy providers to save energy by offering incentives for them to make surplus gas available to the market.
Under a new system set to begin this summer, major consumers and suppliers can offer their unused gas in an auction, with winning bidders getting paid for the fuel they provide.
The economy ministry said: "The model is intended to ensure that as many gas quantities as possible are available for any bottleneck situations in the coming winter."
US futures push higher
US futures have turned positive as markets continue to be rocked by volatility amid surging inflation and growing fears of a recession.
Fed chair Jay Powell yesterday accepted that steep interest rate increases could trigger a US recession, and said the task of engineering a soft economic landing was “very challenging”.
Futures tracking the S&P 500, Dow Jones and Nasdaq initially declined, before reversing course to push higher.
'Horrific' sexual abuses uncovered in Australia mining robe
A landmark inquiry into Australia's mining sector has uncovered dozens of shocking cases of sexual harassment and abuse of women at companies including BHP and Rio Tinto.
The report released by the Western Australia Government described "horrific" incidents at the workplaces, which it said was both a failure of the industry and an oversight by the Government.
Among the recommendations were the payments of compensation to the many workers who became victims of bosses and colleagues on remote projects.
Libby Mettan, chair of the inquiry, said:
I was shocked and appalled well beyond expectation by the size and depth of the problem.
To hear the lived reality of the taunts, attacks and targeted violence, the devastation and despair the victims experienced, the threats to or loss of their livelihood that resulted was shattering and completely inexcusable.
Rio Tinto said it will closely study the report's recommendations, while BHP said it's committed to creating a safe and including workplace and is taking action.
We're a very reliable energy supplier, insists Kremlin
The Kremlin has insisted that Russia is a very reliable energy supplier to Europe and "strictly fulfils all its obligations".
Spokesman Dmitry Peskov also said Germany had been informed about the "service cycles" of the Nord Stream 1 gas pipeline, which is due to undergo maintenance from July 11-21.
Gas flows through the Nord Steam pipeline are at just 40pc of normal capacity, and Germany is now preparing for a potential cut-off of all supplies ahead of winter.
Britain ‘definitely’ entering recession as prices surge
ICYMI – Britain is “definitely” tumbling into recession, the outgoing president of the CBI warned after inflation surged to a new 40-year high amid the worst industrial strife for decades.
Here's more from terrible trio Tim Wallace, Louis Ashworth and Tom Rees:
Lord Bilimoria said families are “tightening their belts” as the Office for National Statistics (ONS) reported inflation of 9.1pc in May, driven by a significant increase in food costs.
Unions have seized on higher prices to demand larger pay rises for their members, sparking the biggest rail strikes since the 1980s this week. The pound fell by nearly 1pc to as low as $1.2162.
The crunch is spreading across the globe with Jerome Powell, chairman of the US Federal Reserve, admitting that a recession is “a possibility” in the world’s largest economy.
Lord Bilimoria warned that the UK’s recovery has been wiped out by soaring prices and called for urgent tax cuts to redress the balance.
In an interview with The Telegraph, he said: “Demand was very much there, but now consumers are feeling the pinch."
Meanwhile for businesses in industries such as hospitality, “many of their costs have doubled, of certain ingredients. They cannot pass that on, the maximum they can try to put up their prices is say 10pc, but if they are absorbing input costs which are up 30pc, 40pc, 50pc, they are being squeezed.”
Germany warns of 'Lehman effect' amid Russian gas squeeze
Germany has warned that Russia's move to slash Europe's natural gas supplies risked sparking a collapse in energy markets, drawing a parallel to the role of Lehman Brothers in triggering the financial crisis.
Economy minister Robert Habeck said energy suppliers were piling up losses due to higher prices and warned of spillover effects for local utilities and their customers, including consumers and businesses.
He said: “If this minus gets so big that they can’t carry it anymore, the whole market is in danger of collapsing at some point. So a Lehman effect in the energy system.”
Germany has moved to the 'alarm' phase of its emergency gas plan after Putin cut supplies to Europe, pushing the country nearer to potential rationing.
The country has urged people to conserve gas, while the Government could pass new laws allowing energy companies to pass on higher costs to consumers and businesses.
Mr Habeck added: “It will be a rocky road that we have to travel as a country. Even if we don’t feel it yet, we are in a gas crisis.”
Pandemic response cost £376bn, says fiscal watchdog
The cost of the Government's Covid response since the start of the pandemic hit £376bn in June.
That's according to the National Audit Office, which said this would be the final estimate of its Covid-19 cost tracker.
The bulk of the expense came before September 2021, with only £6bn of further spending accounted for in the past nine months.
The latest increase was due largely to a further £4bn for train operators and an extra £3bn for the test and trace and vaccine programmes.
That was partly offset by a £4.7bn reduction in estimated write-offs on emergency loans and £2.8bn less spending on self-employed income support.
Meg Hillier, chair of the Public Accounts Committee, said:
While the human cost is incalculable, the cost of Government's Covid measures is close to £400bn. Many of these measures will have cost implications for years to come.
Russia just days away from debt default
Russia faces yet another bond payment test this week, with just days remaining before it potentially slides into its first debt default in a century.
Three interest transfers totalling almost $400m (£328m) are due today and tomorrow, but there's a more pressing deadline on Sunday night for previous missed payments from late May.
Russia has been unable to make those payments – around $100m of bond coupons – due to western sanctions.
The grace period to find a solution expires at the end of Sunday. If it can't make payments by then, Russia will effectively be in default.
Germans urged to reduce gas use
Germans have been urged to reduce their gas consumption in an effort to conserve energy supplies for the winter as the Government triggered phase two of its emergency plan.
Economy minister Robert Habeck said his country was in an "economic confrontation" with Russia.
Mr Habeck said he hoped gas rationing wouldn't be needed but said he couldn't rule out such a scenario.
Reaction: Bank of England has a lot more work to do
Nicholas Farr, assistant economist at Capital Economics, says the PMI figures show the Bank of England has more space to maneouvre.
The fact that the composite activity PMI didn’t fall in June suggests that the economy could be holding up a little better than we had feared. And beneath the headline numbers, the survey suggests that inflationary pressures are yet to fully abate. That supports our view that the Bank of England has a lot more work to do.
On the inflation front, the fall in the input and output prices balance of the composite PMI suggest that inflationary pressures didn’t intensify further this month. But both indices are still close to record highs and the latter is consistent with a further rise in CPI inflation from the 40-year high of 9.1pc it reached in May.
The news release noted that both manufacturers and services providers widely reported the need to pass on higher energy, fuel and labour costs.
Taken together with signs that economic activity is slowing rather than sinking, we think that the PMI survey bolsters the case for the Bank of England to deliver further interest rate hikes over the coming months.
We think interest rates will rise from 1.25pc now all the way to 3pc next year, higher than the peak of 2pc envisaged by the consensus of analysts.
Reaction: Worst still to come for economy
Rhys Herbert, senior economist at Lloyds Bank, says businesses haven't yet seen the full effects of the cost-of-living squeeze.
Even though today’s PMI index remained in growth territory the economic outlook remains cloudy. The one thing that is certain about the UK economy right now is the high degree of uncertainty.
High inflation remains a key concern, but as its drivers are still primarily international, using interest rates to combat it creates its own pressure on an economy still shrugging off the effects of the pandemic.
While there are now signs that blockages and delays in supply chains are easing, these are still well above normal and affecting prices. In particular, fuel and raw material costs remain very elevated, and while bigger businesses may be able to hedge these, that may be less of an option for smaller ones, which are left to explore other operational and financial options to ease pressures on their profit margins.
Meanwhile, consumer-facing businesses, particularly, are becoming more concerned that demand is slowing. The squeeze on real spending power from high inflation on essentials, such as energy and food, leaves little room for other, more discretionary items.
With further fuel cost rises to come and broader above-target inflation to remain for some time, businesses have almost certainly not yet seen the full effects of the squeeze on spending.
UK businesses brace for recession as economy 'runs on empty'
British businesses are bracing for a deeper economic slump in the third quarter as inflation dents profits and eats into consumers' spending power.
S&P Global's PMI held steady at 53.1 in June while a gauge of new order volumes fell at the sharpest pace since the pandemic recovery began in March last year.
Companies reported rising pay pressures and increasing worries about fuel and energy bills.
The services sector defied expectations of a slowdown to hold steady in June. But manufacturing recorded its slowest growth since February 2021, with new orders dropping for a fourth month and at a sharper pace than in May.
The data is the latest evidence of trouble for the economy, which is on track for a contraction in the second quarter. Markets are worried interest rate rises by the Bank of England will exacerbate the slowdown.
Chris Williamson, chief business economist at S&P Global, said:
The UK looks set for a troubling combination of recession and elevated inflation. The economy is starting to look like it's running on empty.
Gambling firm 888 warns on revenue amid UK crackdown
Gambling group 888 has warned its revenues are set to drop in the first half of the year due to the Government's crackdown on online betting and its temporary exit from the Netherlands.
The FTSE 250 company, which will soon complete its £2.1bn takeover of William Hill's non-US business, said revenue will come in between £330m and £335m. That's down from £528.4m last year.
888 said growth would be dented with "growth in certain European markets offset by the impact of additional safer gambling measures as well as the temporary exit from the Netherlands".
The William Hill UK and European business – which it expects to take over on July 1 – is set to see revenues of £620m to £630m.
Shares fell as much as 4pc to the bottom of the mid-cap index.
Pound falls ahead of PMI figures
Sterling fell back against a stronger dollar this morning as a sell-off in global shares prompted investors to ditch riskier assets.
Traders are also looking ahead to UK PMI data, which is expected to show a drop in the manufacturing and services sectors – the latest sign that the economy is slowing.
The pound dropped 0.5pc against the dollar to $1.2202. Against the euro, it slipped 0.1pc to 86.3p.
Heathrow raises passenger forecast despite travel chaos
Heathrow has raised its passenger forecast for the full year as flight bookings continue to rise despite widespread travel chaos.
The London airport now expects to attract 54.4m passengers in 2022, up from previous estimates of 52.8m. This would equate to 67pc of passenger levels in 2019.
Heathrow, which was Europe's busiest airport prior to the pandemic, has been slower to recover from the pandemic than many smaller rivals due to its focus on long-haul travel.
It's now also grappling with industry-wide staff shortages that have forced airports to cancel hundreds of flights and led to long queues.
Heathrow said its profits are expected to jump to £1.4bn, while revenue is set to double to £2.6bn.
FTSE risers and fallers
The FTSE 100 has dropped further this morning as commodity prices slide amid growing recession fears.
The blue-chip index is now down 0.8pc, extending losses racked up yesterday.
BP and Shell were once again the biggest drags on the index, while miners also lost ground as traders reacted to rising Covid cases in China and aggressive interest rate rises by the Federal Reserve.
The domestically-focused FTSE 250 slid 0.7pc, with biggest faller 888 down more than 4pc after it warned on lower revenue for the first half.
Gas prices drop as Germany eyes next stage of emergency plan
Natural gas prices edged lower ahead of a statement from Germany that's expected to trigger the second stage of the country's emergency gas plan.
Economy minister Robert Habeck will speak at 10am local time on "energy and supply security".
Moving to stage two – the "alarm" phase – could mean a change in the law to allow energy companies to pass on cost increases to homes and businesses.
It may also involve firing up more coal-fired power plants to cut down gas consumption.
It comes as flows from Russia remain curtailed, with the Nord Stream pipeline to Germany operating at about 40pc capacity.
The reductions, which Germany has described as political, are fuelling fears of energy shortages this winter.
Benchmark European gas prices slipped 1.3pc in Amsterdam.
Reaction: Sunak's headroom squeezed amid cost-of-living crisis
Paul Dales, chief UK economist at Capital Economics, warns the weak economy will limit Rishi Sunak's ability to help households.
The larger-than-expected £14.0bn rise in public borrowing in May is an early blow for the Government on a day when it is expected to lose two by-elections. What’s more, with the economy weakening and interest rates rising, the public finances will probably perform worse this year than the OBR forecast.
Borrowing is still declining relative to a year ago as the pandemic support unwinds, but it is now declining slower than the OBR forecast in March’s Spring Statement.
This means that after just two months of the 2022/23 financial year, borrowing is already £6.4bn higher than the OBR expected.
And that’s before taking into account the net £10.3bn handout by Chancellor last month to help households cope with the cost of living crisis as well as the full boost to borrowing from higher interest rates, higher inflation and weaker economic activity that’s down the line.
As such, we think borrowing this year will come in closer to £110bn rather than the £99bn the OBR is forecasting.
That would reduce the room for the Chancellor to cut taxes and/or provide more grants to households when a further rise in CPI inflation to 10-11pc in October worsens the cost of living crisis.
Reaction: Debt reduction this year is a 'long shot'
Michal Stelmach, economist at KPMG was debt reduction this year “remains a long shot”.
The pace of deficit reduction is set to slow over the coming months, with the government’s latest package of cost of living measures providing a net fiscal loosening worth 0.4pc of GDP in 2022-23.
We expect borrowing to overshoot the OBR’s March forecast by around £20bn this year, largely on account of higher spending and weaker economic growth.
Sunak: I'm being responsible
Chancellor Rishi Sunak has issued a statement following the latest borrowing figures, insisting he's being “responsible” with the public finances.
Rising inflation and increasing debt interest costs pose a challenge for the public finances, as they do for family budgets.
That is why we are taking a balanced approach – using our fiscal firepower to provide targeted help with the cost of living, while remaining on track to get debt down.
Tax rises help bring down borrowing
Here's some more on the borrowing figures from my colleague Tim Wallace:
So far the Government has borrowed £35.9bn over April and May, which is above the £29.5bn deficit the OBR expected for the opening months of the financial year.
However, monthly borrowing is still down on May 2021’s £18bn, as tax receipts increased by more than £3bn as the economy recovered, and spending on subsidies dropped by £4.9bn with the end of furlough and its equivalent support for the self-employed.
VAT raked in £14.2bn in the month, a jump of more than 10pc on the year. Stamp duty brought in £1.3bn for the exchequer, up almost 80pc compared with May 2021 when the tax holiday was still in place.
Pay as you earn income tax receipts rose £1.4bn to £16.3bn on the strong jobs market. Compulsory social contributions jumped by more than 15pcto £14.4bn, as the Chancellor increased the rate of national insurance charged to workers and their employers.
Inflation drives up UK debt costs
The Government borrowed more than forecast in May, highlighting risks to the public finances as the cost-of-living crisis threatens to tip Britain into a recession.
Rishi Sunak borrowed another £14bn last month, which was £2bn higher than economists had forecasts.
Debt interest payments hit £7.6bn – the highest for any May on record, according to the ONS.
The surge in debt servicing costs reflects a jump in the retail price index measure of inflation, which hit 11.7pc last month.
5 things to start your day
1) Brussels ‘holding the City to higher standard than communist China’ ‘Odd and wrong’ to deny Square Mile firms access to the single market
2) British car battery champion seeks to woo Elon Musk’s Tesla Plus: Electric car charging to face 10-minute delays amid energy rationing
3) Unilever secretly fought ban on plastic sachets it branded ‘evil’ Company privately lobbied against countries' efforts to get rid of soap packaging - despite pollution pledge
4) Crypto giant Tether targets UK investors with sterling ‘stablecoin’ The launch of a sterling product should make it easier for British traders to access cryptocurrencies
5) Sir Jim Ratcliffe to bring gas to Europe as bloc scrambles for supplies Chemicals giant Ineos will import as much as 1.4 million tonnes of gas a year
What happened overnight
Hong Kong stocks started with a gain this morning, following the previous day's hefty losses. The Hang Seng Index climbed 0.7pc.
The Shanghai Composite Index ticked up 0.06pc, while the Shenzhen Composite Index on China's second exchange added 0.2pc.
Tokyo shares opened higher, with the benchmark Nikkei 225 index rising 0.2pc.
Coming up today
- Corporate: Naked Wines (full-year results); Serco (trading statement)
- Economics: Services PMI (UK, US, EU), manufacturing PMI (UK, US, EU), composite PMI (US, EU), GfK consumer confidence (UK), economic bulletin (EU), jobless claims (US), bank stress test info (US)