Chancellor Jeremy Hunt insists UK’s economy has ‘turned corner’ – telling public to ‘stick to plan’ for ‘better times’
Chancellor Jeremy Hunt has said that “better times are ahead” but that the fundamentals of the UK economy are “very strong”.
Speaking to Sky News in Washington, Mr Hunt pointed to price rise data from today showing a drop in the rate of inflation as well as the latest jobs figures and IMF economic growth predictions.
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Mr Hunt said: “I think the economy, we are seeing, has turned the corner, people are beginning to feel that.”
“That will continue during the course of this year. But the fundamentals for the UK economy, yes, are very strong indeed,” he added.
The cost of living crisis, brought about by months of double-digit inflation last year, has been tough, Mr Hunt said.
But sticking to his economic plan, along with the Bank of England’s work to control interest rates, will bring about “better times”, he insisted – in a sign of the likely economic messaging from the Tories ahead of the coming general election.
Jeremy Hunt urged the public to ‘stick to the plan’
“If we stick to that plan we can see that we will have better times ahead,” he said.
He added: “We don’t pretend that it hasn’t been tough, it’s been very tough in the UK and in many other countries.
“We now have the biggest technology industry in Europe. That is a big positive for families up and down the country in the years ahead.”
A whiff of wishful thinking about Hunt’s declaration of economic ‘soft landing’
It’s not quite a Mission Accomplished moment – the equivalent of that day in 2003 when George W Bush stood on an aircraft carrier and prematurely declared the Iraq war was over.
But Jeremy Hunt’s declaration in our interview in Washington that he had achieved a “soft landing” in the economy certainly has a whiff of wishful thinking about it.
The chancellor was at pains to insist today that in fact the outlook is strikingly positive.
Of course, that confidence comes as he gears up for an election in which the economy is likely to be centre stage.
Yet the chancellor is not alone in clinging to optimism.
Here in Washington, most central bankers and finance ministers are quietly hoping that all the economic and military challenges facing them do not crystallise.
They, like Jeremy Hunt, would much rather keep on talking about soft landings.
Sanctions warning for Iran
When asked about sanctions on Iran, following its strikes on Israel last weekend, Mr Hunt said he will be pushing for more to be added in his meetings with leaders of the G7 group of nations and with US Treasury Secretary Janet Yellen.
“What I would say is this: The talk ten days ago was of the West drifting away from its support for Israel. But when Iran attacked Israel, Western support was rock solid.
“And if Iran takes action that destabilises the global economy through what it does in the Middle East then they will face a concerted response from Western countries,” he said.
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‘I don’t want to say anything negative about Liz Truss’
Mr Hunt declined to speak ill of former prime minister Liz Truss when asked if she was harming the Conservative Party.
“I think Liz will be the first to accept that during her time as prime minister, mistakes were made,” he said of her 49-day tenure.
During her premiership government borrowing costs soared; the pound hit a 37-year low against the dollar – making imports more expensive; mortgage rates soared and the Bank of England made an unprecedented intervention to stop pension funds collapsing.
“She appointed me as chancellor. And so, you know, I don’t want to say anything negative about Liz Truss,” Mr Hunt said.
Business
IMF upgrades UK growth forecast but issues fresh warning on national insurance cuts and debt
The International Monetary Fund (IMF) has said the UK economy is heading for a “soft landing” but reiterated its message to Jeremy Hunt that he should not have cut national insurance at the last two fiscal events.
In its annual check-up on the state of Britain’s economy, the Washington-based Fund also warned of a black hole in the public finances, with £30bn of spending cuts or tax rises needed to stabilise the national debt.
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The fund raised its forecast for gross domestic product growth this year from 0.5% to 0.7%, saying: “The UK economy is approaching a soft landing, with a recovery in growth expected in 2024, strengthening in 2025.”
It now expects inflation to come down to close to 2% in the coming months, and the Bank of England to cut interest rates by as much as three-quarters of a percent this year, and then another percentage point next year.
The chancellor welcomed the fund’s article IV report, saying: “Today’s report clearly shows that independent international economists agree that the UK economy has turned a corner and is on course for a soft landing.
“The IMF have upgraded our growth for this year and forecast we will grow faster than any other large European country over the next six years – so it is time to shake off some of the unjustified pessimism about our prospects.”
However, the IMF – which has warned the government explicitly in the past not to cut taxes too fast in the face of rising spending projections in future – said that the two 2p national insurance contribution (NIC) cuts at the last two fiscal events were a mistake.
“In light of the medium-term fiscal challenge,” the report said. “Staff would have recommended against the NIC rate cuts, given their significant cost.”
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The fund’s staff also believe that the government is not on track to meet its main fiscal rule, which commits it to cutting the national debt in five years time.
It believes net debt will carry on rising towards 97% of GDP in the following years, instead of falling back to 93% of GDP, as the Office for Budget Responsibility has forecast.
The fund’s double-edged report comes amid improving news for the UK.
Data released two weeks ago showed the country ended its short-lived recession with faster-than-expected growth in the first quarter of the year.
The Office for National Statistics is also expected to announce tomorrow that inflation dropped down close to the Bank of England’s 2% target in April.
That may enable the Bank to begin cutting interest rates from their 5.25% level in June or August.
The fund’s report contained a number of other recommendations for economic policy in the UK, including that the Bank of England should commit to more press conferences to explain its decisions, and that the government should consider imposing road charges to replace the revenue lost from fuel duty as electric cars become more predominant on UK roads.
Superdry is preparing to run an emergency four-week sale process if creditors block its founder’s plans to inject up to £10m of his own money into the fashion chain in a bid to stave off insolvency.
Sky News has learnt that the accelerated M&A process would be launched if a restructuring plan is not approved by creditors in the coming weeks.
Under the proposed survival plan, Julian Dunkerton would stump up either £8m in an open offer available to other shareholders or £10m in a placing that would only be accessible to him.
The share sale would precede Superdry’s delisting from the London Stock Exchange.
The restructuring plan would need to be approved by creditors, including landlords, in the coming weeks.
According to a document circulated to creditors in recent days and seen by Sky News, rejection of the restructuring plan would be followed by a four-week sale process for Superdry, with the likely outcome of a pre-pack administration deal.
Sources said that Mr Dunkerton’s willingness to inject such a substantial chunk of his own fortune into the company reflected his confidence in the company’s turnaround prospects.
Superdry’s shares have slumped to a series of record lows in recent months amid dire trading and a failed sale process.
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Last month, Sky News revealed that M&G, the asset manager which owns Superdry’s flagship store in central London, was weighing a challenge to its rescue plan.
M&G is believed to have been alarmed by the absence of their participation in a mechanism to allow creditors to benefit from any future recovery in the retailer’s performance.
The restructuring plan will not entail immediate shop closures but will impose sizeable rent cuts on landlords of dozens of Superdry outlets.
Sources said the firm is also planning to pull out of a number of overseas markets, including the US.
On Tuesday morning, shares in the company were trading at around 6.7p, giving the indebted company a market capitalisation of less than £7m.
It recently agreed an increased borrowing capacity with Hilco Capital, one of its existing lenders, while it also owes tens of millions of pounds to Bantry Bay.
Mr Dunkerton, who in 2019 returned to the company having previously been ousted, owns just under 30% of the shares.
In recent months, Superdry has raised cash by offloading its brand in regions including India and Asia-Pacific.
Superdry declined to comment.
Business
South West Water: Surge in profits for parent company of utility responsible for fixing contaminated supply in Devon
The parent company of South West Water has insisted it is focused on returning safe water supply to Brixham in Devon as it announced an 8.6% increase in underlying operating profits to £166.3m.
Around 17,000 households in the Brixham area have been told to boil their drinking water since last week following an outbreak of cryptosporidiosis which left hundreds of people ill.
The condition, which can lead to vomiting and diarrhoea, is caused by a water-born parasite, and South West Water has said it was most likely triggered by animal faeces entering a damaged pipe.
Pennon Group, the listed company which owns South West Water, Bournemouth Water and Bristol Water, said normal service had been returned to 85% of customers as it announced its annual financial results.
“Whilst the results we are announcing today are based on our performance for the last financial year, we are 100% focused on returning a safe water supply to the people and businesses in and around Brixham,” said Susan Davy, the group chief executive.
“Normal service has returned for 85% of customers, but we won’t stop until the local drinking water is returned to the quality all our customers expect and deserve. Our absolute priority continues to be the health and safety of our customers and our operational teams are working tirelessly around the clock to deliver this.”
The company also revealed it is paying out about £3.5m in compensation to customers affected by the parasite outbreak in Devon.
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‘Robust’ results – but firm defends money for shareholders
Describing financial results which include a 10% increase in revenues to more than £907m as “robust”, Ms Davy said dividend payments to shareholders, increasing by 3.8% to 44.37 pence per share, had been reduced to cover the cost of a £2.4m fine for multiple pollution incidents.
“At a time when media, public and regulatory scrutiny is high, it is important we do what is right for all. In the context of the wider group performance, we have carefully considered Ofwat’s new dividend guidance for water businesses. We have… adjusted the final dividend quantum by £2.4m, equivalent to the South West Water Court fine in 2023/24, signalling we are listening, clearing the way for long-term shareholder value.”
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Pennon Group’s net debt rose by 10% to £5.18bn, a debt ratio of more than 63%, and capital expenditure rose by almost 80% to £642.4m.
Water companies are currently negotiating with regulator Ofwat over their spending and revenue plans for the next five years, and South West Water has proposed a 20% increase in customer bills.
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