It’s true to say the UK has become worse off. But some have felt the brunt more than others

Published

2 years ago

April 26, 2023

admin

When Huw Pill said, in a recent Columbia University podcast, that British people need “to accept that they’re worse off” the comments understandably hit a raw nerve.

With the country going through a once-in-a-generation cost of living crisis, it’s hardly palatable to be lectured by a very well-paid former Goldman Sachs banker that we all need to live a little less extravagantly.

But while Mr Pill’s comments were delivered with his foot firmly lodged in his mouth, there is an important truth lurking beneath them.

That truth is that the country as a whole is undoubtedly worse off as a result of the sharp increase in energy prices recently. Simply put, these days we import a lot of our energy, mostly in the form of natural gas.

And since those energy prices have risen so sharply, we are all having to pay more for our goods and services without earning more money in return. We – by which I mean the country as a whole – are all poorer.

You get a sense of this when you look at Britain’s national income – the amount of cash we’re generating here in the country – and subtract the amount of cash we consumers tend to spend each year.

The chart you end up with looks somewhat terrifying: a cliff-edge line of the likes we’ve never seen before. This is a pretty good illustration of how dramatically our collective net worth has fallen in the past year or so.

Yet saying the country as a whole is poorer is not the same as saying everyone is feeling the squeeze in quite the same way.

Indeed, look at the impact of this loss of collective worth and you see big differences. A few companies (and their employees and shareholders), notably energy producers, have done very well out of the price spike. Most have not.

In much the same way, the pain of higher prices is felt differently at different income levels. Inflation, remember, is the rate at which prices are going up each year.

But the extent to which different income groups have leeway, either through their earnings or their savings, to shoulder that increase, differs greatly.

Study after study has shown that lower income groups are feeling the impact of higher energy and food prices considerably more than higher income groups.

Broadly speaking, those in the upper end of the income distribution (which, for what it’s worth, includes pretty much all Bank of England economists) have seen significantly smaller falls in their spending potential than those at the lower end. The country has become worse off, but some have felt the brunt of it more than others.

These are what economists would tend to call “distributional” issues: how the benefits (or in this case pain) of an economic phenomenon are distributed out among the population.

Typically, the Bank of England tends to focus less on such issues than the big picture – that nationwide story about how we are, in aggregate, all worse off.

Not, it’s worth saying, because they’re heartless and don’t care, but because they view such challenges as something democratically elected politicians should be addressing rather than ivory tower academics in Threadneedle Street. Which is fair enough.

However, the cost of living crisis is two things at once: a big, macroeconomic phenomenon (the country has become poorer) and a distributional phenomenon (some people are feeling the pain more than others).

Mr Pill’s main mistake was not to be clearer that he was talking about the former issue, without being clearer that he wasn’t trying to pass judgement on the latter.

Still, it’s not the first time someone from the Bank of England has said something indelicate and insensitive at a time of nationwide economic insecurity – and it’s unlikely to be the last.

Business

Donald Trump says he will postpone 50% tariffs on EU until July

Published

4 hours ago

May 25, 2025

admin

Donald Trump says he will postpone 50% tariffs on EU until July

Donald Trump says he will delay the imposition of 50% tariffs on goods entering the United States from the European Union until July, as the two sides attempt to negotiate a trade deal.

It comes after the president of the European Commission, Ursula von der Leyen, said in a post on social media site X that she had spoken to Mr Trump and expressed that they needed until 9 July to “reach a good deal”.

The US president had last Friday threatened to bring in the 50% tariffs from 1 June, as European leaders said they were ready to respond with their own measures.

But Mr Trump has now said that date has been put back to 9 July to allow more time for negotiations with the 27-member bloc, with the phone call appearing to smooth over tensions for now at least.

Speaking on Sunday before boarding Air Force One for Washington DC, Mr Trump told reporters that he had spoken to Ms Von der Leyen and she “wants to get down to serious negotiations” and she vowed to “rapidly get together and see if we can work something out”.

The US president, in comments on his Truth Social platform, had reignited fears last Friday of a trade war between the two powers when he said talks were “going nowhere” and the bloc was “very difficult to deal with”.

Mr Trump told the media in Morristown, New Jersey, on Sunday that Ms Von der Leyen “just called me… and she asked for an extension in the June 1st date. And she said she wants to get down to serious negotiation”.

“We had a very nice call and I agreed to move it. I believe July 9th would be the date. That was the date she requested. She said we will rapidly get together and see if we can work something out,” the US president added.

Shortly after, he wrote on Truth Social: “I agreed to the extension – July 9, 2025 – It was my privilege to do so.”

On his so-called “liberation day” last month, Mr Trump unleashed tariffs on many of America’s trade partners. But since then he’s backed down in a spiralling tit-for-tat tariff face-off with China, and struck a deal with the UK.

Much of his most incendiary rhetoric on trade has been directed at Brussels, though, even going as far as to claim the EU was created to rip the US off.

Responding to his 50% tariff threat, EU trade chief Maros Sefcovic said: “EU-US trade is unmatched and must be guided by mutual respect, not threats.

“We stand ready to defend our interests.”

Business

Gail’s backer plots rare move with bid for steak chain Flat Iron

Published

20 hours ago

May 25, 2025

admin

Gail's backer plots rare move with bid for steak chain Flat Iron

A backer of Gail’s bakeries is in advanced talks to acquire Flat Iron, one of Britain’s fastest-growing steak restaurant chains.

Sky News has learnt that McWin Capital Partners, which specialises in investments across the “food ecosystem”, has teamed up with TriSpan, another private equity investor, to buy a large stake in Flat Iron.

Restaurant industry sources said McWin would probably take the largest economic interest in Flat Iron if the deal completes.

They added that the two buyers were in exclusive discussions, with a deal possible in approximately a month’s time.

The valuation attached to Flat Iron was unclear on Sunday.

Flat Iron launched in 2012 in London’s Shoreditch and now has roughly 20 sites open.

The chain is solidly profitable, with its latest accounts showing underlying profits of £5.7m in the year to the end of August.

It already has private equity backing in the form of Piper, a leading investor in consumer brands, which injected £10m into the business in 2017.

Flat Iron was founded by Charlie Carroll, who retains an interest in it, but the company is now run by former Byron restaurant boss Tom Byng.

Houlihan Lokey, the investment bank, has been advising Flat Iron on the process.

McWin has reportedly been in talks to take full control of Gail’s while TriSpan’s portfolio has included restaurant operators such as the Vietnamese chain Pho and Rosa’s, a Thai food chain.

A spokesman for McWin declined to comment.

Business

AA owners line up banks to steer path towards £4.5bn exit

Published

2 days ago

May 24, 2025

admin

AA owners line up banks to steer path towards £4.5bn exit

The owners of the AA, Britain’s biggest breakdown recovery service, are lining up bankers to steer a path towards a sale or stock market listing next year which could value the company at well over £4bn.

Sky News has learnt that JP Morgan and Rothschild are in pole position to be appointed to conduct a review of the AA’s strategic options following a recovery in its financial and operating performance.

The AA, which has more than 16 million customers, including 3.3 million individual members, is jointly owned by three private equity firms: Towerbrook Capital Partners, Warburg Pincus and Stonepeak.

Insiders said this weekend that any form of corporate transaction involving the AA was not imminent or likely to take place for at least 12 months.

They added that there was no fixed timetable and that a deal might not take place until after 2026.

Nevertheless, the impending appointment of advisers underlines the renewed confidence its shareholders now have in its prospects, with the business having recorded four consecutive years of customer, revenue and earnings growth.

A strategic review of the AA’s options is likely to encompass an outright sale, listing on the public markets or the disposal of a further minority stake.

Stonepeak invested £450m into the company in a combination of common and preferred equity, in a transaction which completed in July last year.

That deal was undertaken at an enterprise valuation – comprising the AA’s equity and debt – of approximately £4bn, the shareholders said at the time.

Given the company’s growth and the valuation at which Stonepeak invested, any future transaction would be unlikely to take place with a price of less than £4.5bn, according to bankers.

The AA, which has a large insurance division as well as its roadside recovery operations, remains weighed down by a substantial – albeit declining – debt burden.

Its most recent set of financial results disclosed that it had £1.9bn of net debt, which it is gradually paying down as profitability improves.

AA owners over the years

The company has been through a succession of owners during the last 25 years.

In 1999, it was bought by Centrica, the owner of British Gas, for £1.1bn.

It was then sold five years later to CVC Capital Partners and Permira, two buyout firms, for £1.75bn, and sat under the corporate umbrella Acromas alongside Saga for a decade.

The AA listed on the London Stock Exchange in 2014, but its shares endured a miserable run, being taken private nearly seven years later at little more than 15% of its value on flotation.

Under the ownership of Towerbrook and Warburg Pincus, the company embarked on a long-term transformation plan, recruiting a new leadership team in the form of chairman Rick Haythornthwaite – who also chairs NatWest Group – and chief executive Jakob Pfaudler.

For many years, the AA styled itself as “Britain’s fourth emergency service”, competing with fierce rival the RAC for market share in the breakdown recovery sector.

Founded in 1905 by a quartet of driving enthusiasts, the AA passed 100,000 members in 1934, before reaching the one million mark in 1950.

Last year, it attended 3.5 million breakdowns on Britain’s roads, with 2,700 patrols wearing its uniform.

The company also operates the largest driving school business in the UK under the AA and BSM brands.

In the past, it has explored a sale of its insurance arm, which also has millions of customers, at various points but is not actively doing so now.

By recruiting a third major shareholder last, the AA mirrored a deal struck in 2021 by the RAC.

The RAC’s then owners – CVC Capital Partners and the Singaporean state fund GIC – brought the technology-focused private equity firm, Silver Lake, in as another major investor.

A spokesman for the AA declined to comment on Saturday.