Rail strikes ‘key’ reason for slump in high street visits ahead of Christmas
Visits to highs streets slumped last week, according to industry data showing a “key” impact from rail strikes amid wider evidence of a hit to the economy from the industrial action.
Springboard reported that shopper numbers across Britain fell 4.6% last week versus the week before amid the disruption to public transport – also blamed for a big drop in office occupation last Tuesday, Wednesday and Friday.
The report said that while cold, snowy, weather also played a role it was high streets that suffered most – down by more than 10% – as people worked from home.
Visits to retail parks and shopping centres were not as badly affected.
It noted a larger drop on the strike days – with footfall on high streets dropping by an average of 15.7% from the week before on both Tuesday and Wednesday alone.
The major shopping day of Saturday was also hit by the RMT union-organised strike action across the network, involving Network Rail staff and workers at 14 operating companies.
The Night Time Industries Association hit out at the walkouts, warning its members including pubs and clubs were on course to lose £2bn in revenue over the festive season from lost trade and cancelled bookings.
Its chief executive, Michael Kill, said: “Feedback from members across the UK has suggested that strike action has had a deeper impact than expected, with businesses seeing over 50% downturn in trade on the busiest weekend of the year.”
“With an estimated £2bn in lost revenue, and costs due to increase in the new year, the current trading environment is untenable for businesses.”
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RMT leader: Rail strikes deal ‘achievable’
He warned a “huge swathe” of businesses would go to the wall early in the New Year unless the government intervened to support the night time economy and wider hospitality sectors.
Any firms which rely on discretionary consumer spending are struggling from weaker demand due to the cost of living crisis while also grappling rising costs of their own.
Official data published on Friday showed retail sales slid unexpectedly in November, despite the football World Cup and
Black Friday sales promotions, exacerbating fears the country is already in recession.
Diane Wehrle, insights director at Springboard, said: “Last week – the week prior to Christmas – should have been a peak trading week for retail destinations and stores, with footfall expected to rise from the week before as Christmas shopping moves towards its zenith.
“Instead, footfall across UK retail destinations took a tumble last week. Whilst the cold weather prevailed, which would undoubtedly have had some impact, the contrast with the results for the week before clearly demonstrate that it was the rail strikes that were the key impact on footfall.”
The report was released as retail frets over the impact of strikes at Royal Mail on online orders during the core Christmas season.
The business secretary will next week hold talks with dozens of private sector bosses as the government contends with a significant corporate backlash to Labour’s first fiscal event in nearly 15 years.
Sky News has learnt that executives have been invited to join a conference call on Monday with Jonathan Reynolds, in what will represent his first meaningful engagement with employers since Wednesday’s budget statement.
Rachel Reeves, the chancellor, unsettled financial markets with plans for billions of pounds in extra borrowing, and unnerved business leaders by saying she would raise an additional £25bn annually by hiking their national insurance contributions.
An increase in employer NICs had been trailed by officials in advance of the budget, but the lowering of the threshold to just £5,000 has triggered forecasts of a wave of redundancies and even insolvencies across labour-intensive industries.
Sectors such as retail and hospitality, which employ substantial numbers of part-time workers, have been particularly vocal in their condemnation of the move.
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On Friday, the Financial Times published comments made by the chief executive of Barclays in which he defended Ms Reeves.
“I think they’ve done an admirable job of balancing spending, borrowing and taxation in order to drive the fundamental objective of growth,” CS Venkatakrishnan said.
His was a rare voice among prominent business figures in backing the chancellor, however, with many questioning whether the government had a meaningful plan to grow the economy.
Mr Reynolds held a similar call with business leaders within days of general election victory, and over 100 bosses are understood to have been invited to Monday’s discussion.
A spokesman for the Department for Business and Trade declined to comment ahead of Monday’s call.
First things first: don’t panic.
What you need to know is this. The budget has not gone down well in financial markets. Indeed, it’s gone down about as badly as any budget in recent years, save for Liz Truss’s mini-budget.
The pound is weaker. Government bond yields (essentially, the interest rate the exchequer pays on its debt) have gone up.
That’s precisely the opposite market reaction to the one chancellors like to see after they commend their fiscal statements to the house.
In hindsight, perhaps we shouldn’t be surprised.
After all, the new government just committed itself to considerably more borrowing than its predecessors – about £140bn more borrowing in the coming years. And that money has to be borrowed from someone – namely, financial markets.
But those financial markets are now reassessing how keen they are to lend to the UK.
The upshot is that the pound has fallen quite sharply (the biggest two-day fall in trade-weighted sterling in 18 months) and gilt yields – the interest rate paid by the government – have risen quite sharply.
This was all beginning to crystallise shortly after the budget speech, with yields beginning to rise and the pound beginning to weaken, the moment investors and economists got their hands on the budget documentation.
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Chancellor challenged over gilt yield spike
But the falls in the pound and the rises in the bond yields accelerated today.
This is not, to be absolutely clear, the kind of response any chancellor wants to see after a budget – let alone their first budget in office.
Indeed, I can’t remember another budget which saw as hostile a market response as this one in many years – save for one.
That exception is, of course, the Liz Truss/Kwasi Kwarteng mini-budget of 2022. And here is where you’ll find the silver lining for Keir Starmer and Rachel Reeves.
The rises in gilt yields and falls in sterling in recent hours and days are still far shy of what took place in the run up and aftermath of the mini-budget. This does not yet feel like a crisis moment for UK markets.
But nor is it anything like good news for the government. In fact, it’s pretty awful. Because higher borrowing rates for UK debt mean it (well, us) will end up paying considerably more to service our debt in the coming years.
Rachel Reeves leaving 11 Downing Street before the budget. Pic: PA
And that debt is about to balloon dramatically because of the plans laid down by the chancellor this week.
And this is where things get particularly sticky for Ms Reeves.
In that budget documentation, the Office for Budget Responsibility said the chancellor could afford to see those gilt yields rise by about 1.3 percentage points, but then when they exceeded this level, the so-called “headroom” she had against her fiscal rules would evaporate.
Read more:
Chancellor defends £40bn tax rises
Hefty tax and spending plans a huge gamble – analysis
In other words, she’d break those rules – which, recall, are considerably less strict than the ones she inherited from Jeremy Hunt.
Which raises the question: where are those gilt yields right now? How close are they to the danger zone where the chancellor ends up breaking her rules?
Short answer: worryingly close. Because, right now, the yield on five-year government debt (which is the maturity the OBR focuses on most) is more than halfway towards that danger zone – only 56 basis points away from hitting the point where debt interest costs eat up any leeway the chancellor has to avoid breaking her rules.
Now, we are not in crisis territory yet. Nor can every move in currencies and bonds be attributed to this budget.
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Markets are volatile right now. There’s lots going on: a US election next week and a Bank of England decision on interest rates next week.
The chancellor could get lucky. Gilt yields could settle in the coming days. But, right now, the UK, with its high level of public and private debt, with its new government which has just pledged to borrow many billions more in the coming years, is being closely scrutinised by the “bond vigilantes”.
A Halloween nightmare for any chancellor.
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