Podcast announcement
...and a defining week for the UK economy
I am delighted to say that our Business Studies podcast will launch on Monday with an interview with Archie Norman, chairman of Marks & Spencer and one of the most influential figures in British business over the last 40 years.
Business Studies takes a second look at business stories from the past - asking those involved whether the stories happened the way we think they did and what we can learn from them today. The episodes will be free, weekly and available through Substack and other podcast platforms such as Apple and Spotify. Off to Lunch subscribers will be notified by email when the podcast is published and paying members will get access to bonus content such as extra questions and answers and further thoughts from me.
I am really excited to share the episodes with you. It starts with a bang, as you would expect from someone as interesting as Archie Norman. He talks about the rise, fall and rise again of M&S but also the dramatic changes in the retail industry, his turnaround of Asda, his spell in politics and much more…
A defining week…
Rarely are weeks as defining as this one for the UK economy. Most proper Budgets are less consequential than the mini-Budget that Kwasi Kwarteng will deliver on Friday. After a short break, this is quite a week for Off to Lunch to return. We have the government announcing today that wholesale electricity and gas costs for businesses will be capped at less than half the market rate from next month, £211 per megawatt hour for electricity and £75 per megawatt hour for gas. The estimated cost of that is around £42 billion for six months, on top of the £100 billion package for households. We also have a report from the high-class Times political reporters Steve Swinford and Henry Zeffman that Kwarteng will announce plans to cut stamp duty on Friday. The story says:
The prime minister and Kwasi Kwarteng, the chancellor, have been working on the plans for more than a month and will announce them on Friday.
Truss believes that cutting stamp duty will encourage economic growth by allowing more people to move and enabling first-time buyers to get on the property ladder
The share prices of the UK’s largest housebuilders have reacted to this report. These are the top risers in the FTSE 100 today, courtesy of Refinitiv. Persimmon, Barratt and Taylor Wimpey all feature…
There’s been lots of discussion among economists and tax experts this morning about stamp duty. Most agree that it is a bad tax but one that can’t just simply be cut or scrapped without a replacement. A reminder - stamp duty currently works on a tiered system. You pay nothing when you buy a house up to £125,000 but then 2 per cent on the next £125,000, 5 per cent on £250,001 to £925,000, 10 per cent on £925,001 or £1.5 million and 12 per cent on anything about £1.5 million. First-time buyers get a discounted rate and second-home buyers have to pay a higher rate…
We also had this interesting interview between Sky’s Beth Rigby and Liz Truss yesterday in which the prime minister said she was “prepared to be unpopular” over tax cuts that benefit the rich because she believes they can drive economic growth…
With rather remarkable timing, President Biden put this tweet out yesterday afternoon which reflects a rather different economic approach…
These are also significant days for levelling up. The government has written to about 40 councils inviting them to submit proposals to be investment zones that will benefit from tax breaks and looser planning rules. The Financial Times has the story here. This sort of policy has been tried under different names before - freeports, enterprise zones and others - but the Truss government seems to be briefing that it will be more powerful than before.
Amidst all this, the Federal Reserve will announce its latest interest rate decision this evening at 7pm UK time. A third consecutive 0.75 percentage point increase is the most likely, but there is a small change (just under one in five according to financial markets) that we get a “jumbo” rate rise of 1 percentage point. The Bank of England announces its latest decision, delayed from last week, at midday tomorrow. A 0.75 percentage point is also on the table for the UK, according to markets, which would push the base rate to 2.5 per cent. However, the Bank’s move is difficult to predict given the outlook for inflation is changing fast because of the policies being proposed by the Truss government, which should bring down the peak of inflation but could prolong it for longer…
Other stories that matter…
Interesting property deal that demonstrates the sort of thinking needed to boost the supply of housing in the UK: Lands Improvement is planning to build 4,000 new homes in the grounds of a manor house in Bedfordshire after buying the freehold of the Alington Estate (Bedfordshire Live)
Joachim Klement, an analyst at Liberum, has published a note that he does every four years and gets many more readers than anything else he writes - his predictions for the Fifa World Cup. He has correctly predicted the winners of the last two World Cups (Germany in 2014, France in 2018) and is predicting an Argentina win over England in the final this time (Klement on Investing)
One of the UK’s largest electric vehicle charging networks, Osprey, has put the price of using its rapid charging points up by 51 per cent to £1 per kWh, so about £48 per full charge. This means that charging an electric car at these charging points is not obviously cheaper - indeed it may be more expensive - than filling a petrol or diesel car (Fast Charge)
Baseball caps are back in fashion, including wearing them in your workplace….(Financial Times)
Useful summary from John Authers of Bloomberg of the significant news impacting the global economy and markets right now aside from rising inflation, the Federal Reserve and Bank of England putting up interest rates and the war in Ukraine. These are: the weak Chinese renminbi, elections in Italy this Sunday, a potentially precedent-setting 100 basis points rise in interest rates by Sweden’s central bank, and why a recovery in the copper/gold ratio suggests that confidence about the economic outlook is actually improving (Bloomberg)
And finally…
A few weeks ago I said I planned to watch The Rehearsal, a show that had attracted rave reviews in the US and got a lot of buzz when it launched in the UK at the end of August. Well, I have now watched episode one. It is probably the strangest 40 minutes of television I have ever watched…
The show (which is made by HBO, home of mega-hits such as Game of Thrones and Succession) involves real people getting actors to rehearse difficult and daunting conversations they want to face in their life. The first episode features a man who wants to tell his friend in his quiz team that he has lied about having a master’s degree, something he fears will provoke a fierce backlash and end their friendship.
What is strange/creepy is the amount of money and effort that goes into replicating (literally) the bar where he plans to have the conversation and the lengths that the show goes to find out more about the woman he will have the conversation with so that the actors can copy her mannerisms. I was left feeling that none of the show was real and it was all being acted, which other viewers have speculated on too.
Stuart Heritage in The Guardian has described The Rehearsal as “the docu-reality show that will break your brain” and pointed out that creator Nathan Fielder has worked with Sacha Baron Cohen and says he has been influenced by Derren Brown - the show feels like it is something in the middle of what Cohen and Brown would make. You can read The Guardian piece here. Future episodes sound like they get even stranger so I will be tapping out, but I recommend watching at least the first episode and seeing what you think - you won’t have watched 40 minutes of television like this before. The Rehearsal is on Sky Comedy and available on-demand in Sky and Now TV.
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