Energy price cap cut by £20 a month

UK households will see their annual bill for gas and electricity fall by £238 a year from April.

Energy regulator Ofgem announced on Friday that the price cap — the maximum rate per unit that can be charged to customers for their energy use — will be 12.3% lower in April-June 2024, compared with January-March.

For an average household paying by direct debit for dual fuel, this represents a saving of around £20 a month.

At £1,690, the new average annual bill is the lowest since Russia’s invasion of Ukraine in February 2022 caused a spike in energy costs. However, bills are still well above pre-pandemic levels.

Ofgem also confirmed plans to maintain the equalisation of standing charges across payment methods. This means that customers with a prepayment meter will save around £49 per year while direct debit customers will pay £10 per year more.

The regulator said that affordability remains a significant issue and many people have struggled to pay their bills over the last two years, leading to record levels of energy debt.  

To help cover the cost of dealing with £3.1bn of debt that customers owe to suppliers, Ofgem will allow a temporary extra charge of £28 per year (equivalent to £2.33 per month) which will be added to the bills of customers who pay by direct debit or standard credit.

Stellantis to make electric vans in Luton from 2025

Automotive manufacturer Stellantis will start production of electric vans at its Luton plant from the first half of 2025.

The factory will become the second Stellantis site in UK to manufacture electric vehicles, after Ellesmere Port launched EV-only volume manufacturing last year.

Workers in Luton will produce the fully electric Vauxhall Vivaro Electric, Opel Vivaro Electric, Peugeot E-Expert, Citroën ë-Dispatch and Fiat Professional E-Scudo in both right and left-hand drive.

Production of the equivalent internal combustion engine-powered models will continue alongside the electric versions.

The Luton plant opened in 1905 and has been making vans since 1932.

Announcing its plans for Luton, Stellantis called for more government support to help drive the transition to electric vehicles.

“Whilst this decision demonstrates Stellantis’ confidence in the plant, this first step in its re-development towards a fully electric future requires the UK government to stimulate more demand in the electric vehicle market and support manufacturers that invest in the UK for a sustainable transition,” said Maria Grazia Davino, group managing director of Stellantis UK.

Stellantis aims for all of its vehicles to be electric-only by 2028.

Brands owned by Stellantis include Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS Automobiles, Fiat, Jeep, Lancia, Maserati, Opel, Peugeot, Ram, Vauxhall, Free2move and Leasys.

Market for formula milk investigated as prices remain ‘historically high’

The UK’s competition regulator has launched an investigation into the high prices charged for infant formula.

An earlier study found that average prices had gone up by 25% in just two years, increasing manufacturers’ profit margins during the cost-of-living crisis.

Buying cheaper infant formula options could save families more than £500 over the first year of a baby’s life.

With the formal launch of a market study, the Competition and Markets Authority (CMA) has legal powers to require companies to hand over information, rather than rely on them providing information voluntarily.

The regulator plans to gather evidence on consumer behaviour, the role of regulation in the market, and features of the formula market such as barriers to entry.

It will then consider what action could be taken to address any problems identified, such as new regulations on how formula can be marketed, or information given to parents about formula brands.

CMA chief executive Sarah Cardell said that although prices of some products have fallen in recent months, they remain at “historically high levels”.

“We’re concerned that parents don’t always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices.”

A final report is due to be published in September.

Lending to UK firms set to remain weak this year

Continued high interest rates are expected to limit banks’ lending to businesses in 2024, before a rebound in 2025.

Economic forecasting group the EY ITEM Club said on Monday that it expects bank-to-business lending to grow by just 0.8% net in 2024. Although this is an improvement on last year’s 2.1% contraction, many UK firms are holding back on borrowing while the economic environment remains uncertain at home and abroad, and while borrowing costs remain high.

A rebound to 3.5% net growth is forecast for 2025 as inflation comes down further and interest rates are cut, boosting business appetite and confidence. Growth in digitalisation, adoption of artificial intelligence (AI) technologies and the move towards green energy generation are also anticipated to boost borrowing.

The forecast increase of 3.5% in lending next year would be the highest growth since 2020 when the UK government announced loan support during the pandemic.

Despite entering into recession at the end of 2023, falling inflation and energy prices, alongside expected interest rate cuts, mean that the UK economy is expected to return to growth in 2024. EY ITEM Club predicts that gross domestic product (GDP) will increase by 0.9% this year, followed by a 1.8% rise in 2025 and 2% in 2026.

There are signs suggesting that momentum in the economy will build, said Anna Anthony, UK Financial Services managing partner at EY.

“If borrowing costs and interest rates fall as expected, by next year we expect market confidence to have lifted markedly,” Anthony said.

Retail sales bounced back in January

There was a 3.4% increase in the volume of goods bought by UK consumers in January 2024, following a record fall of 3.3% in December 2023.

This was the largest monthly rise since April 2021 and returned volumes to November 2023 levels, the Office for National Statistics (ONS) said.

However, continued high inflation meant that consumers spent more for less, with the value of sales growing by 3.9%.

Sales volumes grew in all retail sectors except clothing stores, with food stores such as supermarkets contributing most to the increase.

Household goods stores, sports shops and department stores were among those reporting robust trading due to January sales promotions, said Heather Bovill, deputy director for surveys and economic indicators at the ONS. Fuel sales also increased following a drop in prices at the pump.

Across the three months to January, sales volumes declined by 0.2% when compared with the previous three months — but this was the smallest fall since August 2023.

Sales volumes rose by 0.7% between January 2023 and January 2024, but were still 1.3% below the pre-pandemic level.

UK economy in recession at the end of 2023

The UK’s economic output declined for two consecutive quarters in the second half of 2023, pushing the country into recession.

Gross domestic product (GDP) fell by a steeper-than-expected 0.3% in October-December, following a 0.1% contraction from July to September, the Office for National Statistics (ONS) said.

Economists had anticipated a decline of 0.1% in the final three months of the year.

ONS director of economic statistics Liz McKeown said that manufacturing, construction and wholesale were the biggest drags on growth in the quarter, partially offset by increases in hotels and rentals of vehicles and machinery. Across 2023 as a whole, the economy was “broadly flat”.

A recent analysis by Goldman Sachs found that the decision to leave the European Union has left the UK economy around 5% worse off than it would otherwise have been.

The GDP figures come less than three weeks before Chancellor Jeremy Hunt delivers his next Budget.

Responding to the data, Hunt said: “High inflation is the single biggest barrier to growth which is why halving it has been our top priority. While interest rates are high — so the Bank of England can bring inflation down — low growth is not a surprise.

“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan — cutting taxes on work and business to build a stronger economy.”

Inflation unchanged at 4% in January

The UK’s annual rate of inflation showed no change from December to January, despite food prices falling for the first time since September 2021.

The consumer prices index (CPI) measure of inflation stood at 4% in the 12 months to January 2024, the same rate as in December 2023, the Office for National Statistics (ONS) said.

Higher gas and electricity charges contributed upward pressure following an increase in the energy price cap. The cost of second-hand cars also went up for the first time since May.

“Offsetting these, prices of furniture and household goods decreased by more than a year ago and food prices fell on the month for the first time in over two years,” said Grant Fitzner, chief economist at the ONS.

Food prices declined by 0.4% from December to January, and the annual rate of food inflation eased to 7% — the lowest since April 2022 — from 8% in December.

The fall to 7% means that food inflation has eased for the 10th consecutive month, from a recent high of 19.2% in March 2023, which was the highest annual rate seen for over 45 years.

January’s overall inflation figure is better than expected: the Bank of England had forecast 4.1%. However, it remains well above the central bank’s target rate of 2%.

In response to the data, Chancellor Jeremy Hunt said: “Inflation never falls in a perfect straight line, but the plan is working; we have made huge progress in bringing inflation down from 11%, and the Bank of England forecast that it will fall to around 2% in a matter of months.”

UK wages up 1.8% in real terms

Pay growth for UK employees has slowed again but is still outpacing inflation, new figures show.

In October to December 2023, annual growth in employees’ average regular earnings (excluding bonuses) was 6.2%. Including bonuses, earnings grew by 5.8%, the Office for National Statistics (ONS) said.

The increase in wages is smaller than in previous periods but remains above the rate of overall price rises, increasing households’ spending power.

When the figures are adjusted for inflation, regular pay rose on the year by 1.8% and total pay was up 1.4%.

Elsewhere, the monthly data showed a drop in the unemployment rate to 3.8% in the last three months of 2023, and growing employment.

But the figures also reveal that there are historically high numbers of people reporting they are long-term sick and unable to work.

The estimated number of job vacancies fell by 26,000 on the quarter to 932,000.

“Job vacancies fell again, for the 19th consecutive month,” said ONS director of economic statistics Liz McKeown. “However, there are signs this trend may now be slowing.”

Vacancies remain above pre-pandemic levels.

Siemens’ Yorkshire factory to build more Tube trains

Siemens will manufacture most of the new trains for the London Underground’s Piccadilly line in its new factory in Goole, East Yorkshire, the company announced on Monday.

The German engineering giant said that the facility would produce 80% of trains for the Piccadilly line — up from 50% previously announced.

Due to open this spring, the factory is part of a wider “rail village” where Siemens Mobility is investing up to £200m. It includes assembly and commissioning halls, a train components servicing facility, a materials and logistics warehouse, and the Rail Accelerator & Innovation Solutions Hub for Enterprise (Raise), a partnership between rail industry specialists, academics and local government.

Siemens Mobility said it would establish the site as a centre of excellence for rail technology in the UK, creating up to 700 jobs. A further 1,700 jobs are expected to be created in the supply chain.

Stuart Harvey, chief capital officer at Transport for London (TfL), said: “Producing more Piccadilly line trains in Goole will support local supply chains, clearly demonstrating how investment in transport in London benefits the whole of the UK.”

The new Tube trains are due to enter service in 2025.

Subject to confirmation of government funding, the Goole factory will also produce a replacement fleet for the Bakerloo line.

Storms delay wind farm construction

Construction work at the world’s largest offshore wind farm has been delayed due to stormy weather this winter.

In a quarterly update on Thursday, energy company SSE said that turbine installation on Dogger Bank A, off the North East coast of England, has been affected by “challenging weather conditions” as well as vessel availability and supply chain delays. As a result, full operations may not be achieved until 2025.

The HVDC transmission system, cabling and foundations have now been installed at Dogger Bank A, however, and the company reported good progress at two other projects, Viking in Shetland and Yellow River in Ireland.

In SSE Thermal, the group’s flexible generation, energy-from-waste and energy storage business, performance has been affected by lower margins between the cost to produce electricity and its market price. But the business is still expected to achieve its guidance of more than £750m adjusted operating profit, including more than £75m from gas storage, for the full year.

SSE also said that output across its renewable energy operations was 1.3TWh or around 15% behind plan for the nine months to 31 December 2023, due to “exceptionally still and dry weather conditions” in addition to short-term plant outages and rephasing of flexible hydro output into the fourth quarter.

The company reaffirmed its adjusted earnings per share guidance of more than 150 pence for FY24 but said that earnings for the full year remain subject to factors such as plant availability, supportive market conditions and normal weather across the remainder of the fourth quarter.

It remains on course for adjusted investment and capital expenditure of around £2.5bn.

“The strength of our balanced business mix and the growth opportunity it provides is aligned with a policy environment which increasingly recognises the essential role renewables, electricity networks and flexible power will play in the energy system of the future,” said Barry O’Regan, chief financial officer.