Good morning. The pound has fallen to its weakest levels since 1985, reflecting the daunting scale of the economic challenge new prime minister Liz Truss faces as she prepares to unveil an emergency energy package today.
Truss will outline details of the planned state intervention to shield households and companies from soaring energy bills. Government insiders said the total gross cost over two winters could hit £150bn, but ministers were still trying to finalise the details of business sector support yesterday.
The package will be funded by government borrowing, adding to demand in the economy at a time when inflation is above 10 per cent; bond markets are already nervous about rising interest rates.
Asked whether the level of government bond sales could become “indigestible”, Bank of England governor Andrew Bailey said the central bank did not intend to destabilise markets. “Our team keeps this under very close consideration,” he said.
Truss’s emergency package will cap average household power bills at about £2,500 a year at an estimated cost of £90bn over two years, with the business element costing perhaps £60bn. Higher wholesale gas prices would push the bill higher.
The pound sank as low as $1.1406, lower than the aftermath of the Brexit vote of 2016 and exceeding the depths of March 2020 in the midst of the Covid-19 crisis. Sterling has fallen 15 per cent against the dollar this year.
Thank you for reading FirstFT Europe/Africa. Here is the rest of the day’s news — Gary
Five more stories in the news
1. Poland against windfall levy on power producers Ahead of an emergency EU meeting on Friday, Poland’s prime minister has pushed back on a proposed windfall levy on power producers, saying it should not be a priority and backing a suspension of the bloc’s emissions trading scheme, in a sign of a possible rift over Brussels’ energy crisis plans.
2. Europe tops US on Chinese listings for first time Chinese companies have raised more than five times as much money through share sales in Europe than in the US this year, a fundraising haul for exchanges in London and Zurich that exceeded New York for the first time amid fraying geopolitical ties between the superpowers.
3. Sharp divide in European cancer treatment The European Cancer Organisation has calculated that about 100mn cancer screening tests were missed across Europe and 1mn cancers went undiagnosed during the first year of the coronavirus pandemic. But some countries maintained higher standards of treatment than others.
4. Melrose to spin off auto business in GKN break-up Melrose Industries plans to spin off GKN’s automotive division as a UK-listed company in a break-up of one of Britain’s oldest engineering businesses. The FTSE 100 turnround specialist acquired the car parts and aerospace components manufacturer in a bitter £8bn takeover in 2018.
5. India and China undercut Russia’s oil sanctions pain A Financial Times analysis shows India and China imported 11mn more tonnes of oil from Russia in the second quarter of 2022 compared with the first quarter, offsetting most of the fall in shipments to Europe and raising questions about the impact of sanctions on Moscow that have led to soaring energy bills for European consumers.
The day ahead
ECB rate decision Expectations are rising that the European Central Bank will announce a 0.75 percentage point increase in interest rates today. In July, the central bank raised borrowing costs for the first time in more than a decade, by a sharper than expected 0.5 percentage points to zero.
Economic data France releases July trade figures and the US publishes monthly motor vehicle sales. In the UK, the Royal Institution of Chartered Surveyors releases its monthly residential market survey. The OECD delivers its employment outlook, plus the Recruitment & Employment Confederation and KPMG release their monthly jobs report in the UK.
Corporate earnings British-American cyberdefence specialist Darktrace, commercial lender Funding Circle, manufacturer Melrose and F&B chain The Restaurant Group report earnings.
Correction: Earlier this week we incorrectly stated the date of the Lebanon presidential election. We apologise for the error.
What else we’re reading
How a tiny particle that can travel through concrete could save lives Engineers use X-rays, ultrasound and radar to hunt for signs of corrosion and potential failure in concrete. But all have limitations. Now, using particles from space, scientists are developing technology to safely and cheaply see through almost any structure on the planet. Believers say the muon revolution is only two or three years away.
Threat of hard landing for shipping industry In just three years, the container shipping industry will have made as much money as the previous six decades, propelled by soaring demand during the pandemic. But analysts believe the cycle may have peaked and after a “once in a lifetime’” profit surge, there is now the real risk of a crash.
‘They’re not treating us like human beings’ China’s frontline Covid workers, called “Big White” after their PPE, have been hailed as national heroes for their pivotal role in quashing outbreaks. But many complain of brutal conditions, pay cuts and long working hours as the pandemic drags into a third year.
Monsoon disaster piles misery on Pakistan The country’s climate change minister called it “the climate catastrophe of the decade” and “a super-flood to beat all”. Monsoons and flooding, following a spring of baking temperatures, have made Pakistan a case study for countries vulnerable to climate change, with interlinked humanitarian, economic and political crises.
What John Lewis gets right about British shoppers John Lewis has called the end of the “experience economy”. In its place, according to middle England’s preferred retailer, we now have the “moments economy”. Within this obvious marketing guff, writes Cat Rutter Pooley, there might be the kernel of a sensible strategy.
The 2022 Booker Prize shortlist, announced this week, showcases novels based on real-life events, from Robert Mugabe’s dictatorship to the Magdalene Laundry abuses.