Britain’s car industry has insisted that an unprecedented 2,000% increase in vehicle exports to Azerbaijan has nothing to with Russia and is explained by the fact that the former Soviet state is a “flourishing market in its own right”.
Sky analysis has found that the British car sector sent another £40m worth of cars to Azerbaijan in the first month of this year, raising fresh questions about whether those cars were being sent there to circumvent sanctions on Russia.
New data from HM Revenue & Customs shows that while direct car exports to Russia remain at zero, where they have been since the imposition of sanctions in 2022, in January £43m worth of cars were sent to Azerbaijan, the former Soviet state neighbouring Russia.
That meant Azerbaijan, which hitherto had rarely made the top 75 export destinations for British cars, is now the 12th biggest foreign market, by value, for British-made cars: above Switzerland, Canada and Spain.
UK carmakers have pledged not to send cars to Russia, with sanctions formally banning the export of “dual use” items which could be repurposed as weapons in the Ukraine war. There are separate sanctions specifically banning the trade of cars worth over £42,000.
However, Sky News analysis found last week that over precisely the same period as British car exports to Azerbaijan rose sharply, there was a near-simultaneous rise in car exports from Azerbaijan to Russia.
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1:52
British-made luxury cars still being bought by rich Russians
The average value of cars sent from the UK to Azerbaijan in January was just over £115,000.
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Trade data shows that similar increases in British exports have been seen in other former Soviet Russian neighbours, including Kazakhstan, Armenia and Georgia.
A spokesman from Britain’s motoring lobby group, the Society of Motor Manufacturers and Traders (SMMT), said it had detected no evidence the vehicles being sent to Azerbaijan were destined for Russia – and that they were evidence that it was a “flourishing market in its own right”.
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“UK vehicle exports to Azerbaijan – as to many countries globally – have increased due to a number of factors, not least a flourishing economy, new model launches and pent-up demand,” it said.
Azerbaijan’s flatlining economy
However, the notion that the exports were evidence of a flourishing economy stands in stark contrast to the economic data, which show that Azerbaijan’s GDP per capita has been flat for a decade and a half at around $15,000 in purchasing power parity terms.
Since two years preceding the pandemic, the value of car exports to Azerbaijan has risen by more than 2,000%. No other sizeable car market in the world has come close, save for Kazakhstan, the other Russian neighbour, whose imports of British-made cars are up 800%.
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3:24
Carmakers told to act after Sky report
The SMMT said: “Wherever the UK automotive industry exports, it is committed to compliance with all trade and economic sanctions, and continues to work closely with government and the new Office For Sanctions to ensure the effective implementation of the regulations.
“There is no evidence available of that commitment being compromised, and it is right to monitor for any potential vulnerabilities in a fast-moving and evolving environment.
“The automotive industry remains in dialogue with government and other international partners enforcing co-ordinated trade restrictions, to ensure adherence to both the letter and the spirit of the sanctions, across all vulnerable sectors.”
While the sheer number of cars going to Azerbaijan is small, the value of those cars is consistently high, averaging well over £100,000 and suggesting they are mostly luxury cars.
There have been similar flows detected from other European nations, including Germany and Poland, to other former Soviet states neighbouring Russia.
Following the original Sky News story last week, Foreign Office Minister Anne-Marie Trevelyan said car companies should examine their orders to ensure they are complying with sanctions rules.
Sir Keir Starmer was at home in Downing Street, watching Arsenal lose in the Champions League, when he got a call from Donald Trump that he thought presented the chance to snatch victory from the jaws of trading defeat.
The president’s call was a characteristic last-minute flex intended to squeeze a little more out of the prime minister.
It was enough to persuade Sir Keir and his business secretary Jonathan Reynolds, dining with industry bosses across London at Mansion House, that they had to seize the opportunity.
The result, hurriedly announced via presidential conference call, is not the broad trade deal of Brexiteer dreams, and is certainly not a free-trade agreement.
It’s a narrow agreement that secures immediate relief for a handful of sectors most threatened by Mr Trump’s swingeing tariffs, with a promise of a broader renegotiation of “reciprocal” 10% tariffs to come.
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‘A fantastic, historic day’
Most pressing was the car industry, which Mr Reynolds said was facing imminent announcements of “very difficult news” at Britain’s biggest brands, including Jaguar Land Rover, which sounds like code for redundancies.
In place of the 25% tariffs imposed last month, a 10% tariff will apply to a quota of 100,000 vehicles a year, less than the 111,000 exported to the US in 2024, but close enough for a deal.
It still leaves the car sector far worse off than it was before “liberation day”, but, with one in four exports crossing the Atlantic, ministers reason it’s better than no deal, and crucially offers more favourable terms than any major US trading partner can claim.
For steel and aluminium zero tariffs were secured, along with what sounds like a commitment to work with the US to prevent Chinese dumping. That is a clear win and fundamental for the ailing industries in Britain, though modest in broad terms, with US exports worth only around £400m a year.
Image: US and UK announced trade deal
In exchange, the UK has had to open up access to food and agricultural products, starting with beef and ethanol, used for fuel and food production.
In place of tariff quotas on beef that applied on either side (12% in the UK and 20% in America) 13,000 tonnes of beef can flow tariff-free in either direction, around 1.5% of the UK market.
The biggest wins
Crucially, sanitary and phytosanitary (SPS) production standards that apply to food and animal products, and prevent the sale of hormone-treated meat, will remain. Mr Trump even suggested the US was moving towards “no chemical” European standards.
This may be among the biggest wins, as it leaves open the prospect of an easing of SPS checks on trade with the European Union, a valuable reduction in red tape that is the UK’s priority in reset negotiations with Brussels.
Farmers also believe the US offers an opportunity for their high-quality, grass-fed beef, though there is concern that the near-doubling of ethanol quotas is a threat to domestic production.
Technology deals to come?
There were broad commitments to do deals on technology, AI and an “economic security blanket”, and much hope rests on the US’s promise of “preferential terms” when it comes to pharmaceuticals and other sectors.
There was no mention of proposed film tariffs, still unclear even in the Oval Office.
Taken together, officials describe these moves as “banking sectoral wins” while they continue to try and negotiate down the remaining tariffs.
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The challenge from here is that Mr Trump’s “reciprocal” tariff is not reciprocal at all. As commerce secretary Howard Lutnick proudly pointed out in the Oval Office, tariffs on US trade have fallen to less than 2%, while the UK’s have risen to 10%.
As a consequence, UK exporters remain in a materially worse position than they were at the start of April, though better than it was before the president’s call, and for now, several British industries have secured concessions that no other country can claim.
From a protectionist, capricious president, this might well be the best deal on offer.
Quite what incentive Mr Trump will have to renegotiate the blanket tariff, and what the UK has left to give up by way of compromise, remains to be seen. Sir Keir will hope that, unlike the vanquished Arsenal, he can turn it round in the second leg.
Tens of thousands of household energy customers have secured payouts after a compliance review found they had been overcharged.
The industry regulator said that 10 suppliers had handed over compensation and goodwill payments to just over 34,000 customers. The total came to around £7m.
Ofgem said those affected, between January 2019 and September last year, had more than one electricity meter point at their property recording energy usage.
It explained that while suppliers were allowed to apply multiple standing charges for homes with multiple electricity meters, it meant that some were “erroneously charged more than is allowed under the price cap when combined with unit rates”.
The companies affected were revealed as E.ON Next, Ecotricity, EDF Energy, Octopus Energy, Outfox The Market, OVO Energy, Rebel Energy [no longer trading], So Energy, Tru Energy and Utility Warehouse.
Of those, Octopus Energy accounted for the majority of the customers hit.
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Ofgem said that the near-21,000 customers impacted had received compensation of £2.6m and goodwill payments of almost £550,000.
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Govt commits £300m to wind farms
The redress was revealed at a time when energy bills remain elevated and debts at record levels in the wake of the 2022 price shock caused by Russia’s invasion of Ukraine.
Higher wholesale natural gas prices over the winter months meant that the price cap actually rose in April when a decline would normally be seen.
The latest forecasts suggest, however, that bills should start to decline for the foreseeable future.
Charlotte Friel, director of retail pricing and systems at Ofgem, said of its compliance operation: “Our duty is to protect energy consumers, and we set the price cap for that very reason so customers don’t pay a higher amount for their energy than they should.
“We expect all suppliers to have robust processes in place so they can bill their customers accurately. While it’s clear that on this occasion errors were made, thankfully, the issues were promptly resolved, and customers are being refunded.”
The watchdog added that all ten suppliers had updated their systems and processes to prevent the error occurring in future.
The Bank of England has cut interest rates from 4.5% to 4.25%, citing Donald Trump’s trade war as one of the key reasons for the reduction in borrowing costs.
In a decision taken shortly before the official confirmation of a trade deal between Britain and the United States, the Bank’s monetary policy committee (MPC) voted to reduce borrowing costs in the UK, saying the economy would be slightly weaker and inflation lower in part as a result of higher tariffs.
However, it stopped short of predicting that the trade war would trigger a recession.
Further rate cuts are expected in the coming months, though there remains some uncertainty about how fast and how far the MPC will cut – since it was split three ways on this latest vote.
Two members of the nine-person MPC voted to reduce rates by even more today, taking them down to 4%. But another two on the committee voted not to cut them at all, leaving them instead at 4.5%.
In the event, five members voted for the quarter point cut – enough to tip the balance – with the accompanying minutes saying that while “the current impact of the global trade news should not be overstated, the news was sufficient for those members to judge that a reduction in Bank Rare was warranted.”
Even so, the Bank’s analysis suggests that while higher tariffs were likely to depress global and UK economic growth, and help push down inflation, the impact would be relatively minor, with growth only 0.3% lower and inflation only 0.2% lower.
Governor, Andrew Bailey, said: “Inflationary pressures have continued to ease, so we’ve been able to cut rates again today.
“The past few weeks have shown how unpredictable the global economy can be. That’s why we need to stick to a gradual and careful approach to further rate cuts. Ensuring low and stable inflation is our top priority.”
The Bank raised its forecast for UK economic growth this year from 0.75% to 1%, but said that was primarily because of unexpectedly strong output in the first quarter.
In fact, underlying economic growth remains weak at just 0.1% a quarter.
It said that while inflation was expected to rise further in the coming months, peaking at 3.5% in the third quarter, it would drop down thereafter, settling at just below 2% towards the end of next year.