UK supply chains facing ‘perfect storm’; global food prices rise; US jobless claims drop – as it happened
6.23pm
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Closing summary
Time to wrap up.
Business groups have warned that the supply chain crisis in the UK is becoming increasingly challenging, with the Christmas rush ahead.
British Retail Consortium (BRC) director of food and sustainability Andrew Opie warned that “Christmas is going to be incredibly challenging in some areas.”, and that the sector is under heavy pressure.
Opie told the UK Trade and Business Commission, a group of MPs and business representatives, that the sector was on the edge of coping, and that extending temporary visas to overseas lorry drivers would help avert problems over Christmas.
Alex Veitch from Logistics UK said that there had been a chronic shortage of lorry drivers for several years, but this has now morphed into an “acute shortage”.
And Richard Harrow of the British Frozen Food Federation said the industry faced a ‘perfect storm’ of driver shortages, a shortfall of other skills including engineers, and price rises across the board.
The hearing also heard concerns about the possibility of future disruption when the UK introduces checks on food imports from the EU.
Exports of food and drink to the EU have suffered a “disastrous” decline in the first half of the year because of Brexit trade barriers, with sales of beef and cheese hit hardest.
Brexit: food and drink exports to EU suffer ‘disastrous’ decline
Read more
The supply chain crisis has also led to a “shortage of aluminium cans”, putting pressure on Coca-Cola’s British and continental bottling operation.
Consumers have taken to social media to discuss a lack of availability of Diet Coke and Coke Zero in various locations in recent weeks.
Coca-Cola Europacific Partners (CCEP), which is responsible for making, transporting and selling products including Fanta and Sprite across 29 countries in Europe and Asia, said it had been experiencing “a number of logistics challenges”.
The news came as the aluminium price hit a 10-year high, due to high demand and growing supply fears as China curbs producers’ energy use.
Coca-Cola’s supply chain under pressure due to shortage of cans
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Global food prices have jumped, with bad weather driving up prices of wheat and sugar sharply last month.
Food prices climbed back to near the highest in a decade on smaller crop prospects, reviving concerns about inflationary pressures.
After easing in the previous two months, a United Nations gauge of food costs rose 3.1% in August to near a peak set in May. The advance was driven by reduced grain production expectations, frosts that hurt sugar-cane crops in top grower Brazil and tightening oilseed supplies, the UN’s Food and Agriculture Organization reported.
Prices at the eurozone factory gate have risen too, hinting at more inflationary pressures.
US jobless claims have dropped to a pandemic low, as firms hold onto their staff in the face of record vacancies.
Just 340,000 Americans filed new claims for unemployment support last week, as the labor recovery held up despite the rise in Covid-19 cases.
Robert Frick, corporate economist at Navy Federal Credit Union.
Back in the UK, Barratt Developments has said strong demand for houses helped to boost annual profits by nearly two-thirds in its latest financial year, as it signalled continued strong demand for housing across the UK even as the government withdrew coronavirus pandemic support.
Barratt’s profits surge amid strong demand for new homes
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The pick-up in the airline industry has boosted Ryanair, which carried 11m passengers in August – its highest since early in the pandemic.
Air travel revival elicits recovery signs for aerospace and airlines
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The owner of the Drax power plant in North Yorkshire faces a criminal prosecution hearing after allegations that dust from wood pellets used to generate electricity could pose a risk to its employees’ health.
The company has earned hundreds of millions of pounds in subsidies by upgrading its generating units to burn biomass pellets instead of coal, but the Health and Safety Executive is taking it to court over concerns that the wood dust may have threatened employee health.
Drax will appear at Leeds magistrates court on 30 November to face the allegations as well as a separate charge that it breached risk assessment obligations before allowing employees to work with potentially “hazardous substances” at the plant.
Drax faces prosecution over health risk of dust from biomass pellets
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Shares in financial spread betting firm CMC Markets have tumbled by over a quarter, after it issued a profits warning as the pandemic boom in stock trading fades.
Rather than staying in playing the markets, people have been getting back to the shops. Footfall in UK high streets and retail parks last month hit its highest level since the start of the Covid-19 pandemic as increased domestic tourism boosted consumer activity.
Britons holidaying in UK give welcome boost to high street
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Britons are also heading back to the gym in big numbers as they look to get back into shape after the lockdowns of the past year and seek out the extra space to exercise away from home.
The Gym Group has said its membership numbers had increased by one-third to 730,000 in the four months to the end of June, as 183,000 new recruits made a beeline for its treadmills and weight benches. The clamour means the company now plans to open 40 more gyms in a push that could include a move into empty shops.
Gyms eye empty shops for extra space as UK returns to the treadmill
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And JD Sports could be forced to sell Footasylum after the UK’s competition regulator again ruled that the takeover would result in a worse deal for sportswear shoppers – even after the shift online during the pandemic.
JD Sports may have to sell Footasylum after new watchdog ruling
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Goodnight. GW
Updated
at 6.26pm BST
5.47pm
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17:47
In the City, the FTSE 100 index of blue-chip shares closed 0.2% higher tonight at 7163, up 14 points.
Engineering firm Melrose topped the risers, up 7% after returning to profit this morning and telling shareholders that trading that was ahead of expectations. Investors were cheered to hear that Melrose’s aerospace division was benefiting from the recovery in air travel, that cost cuts were paying off, and that the disruption to the chip supply chains could well improve over the coming months.
Oil companies also had a strong day, with BP and Royal Dutch Shell up 1.9% – tracking a rally in crude prices today, after Opec+ yesterday stuck to its plan to gradually increase production.
But the smaller FTSE 250 index dipped a little, dragged down by that profit warning from spread betting and online trading group CMC Markets. Its shares slumped 27% to a one-year low after reporting that clients’ enthusiasm for trading had waned during the summer.
Rival IG slid 11%, on concerns that the pandemic trading boom could be fading.
Updated
at 5.48pm BST
5.29pm
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17:29
Xi Jinping’s drive for economic equality comes at a delicate moment for China
Read more
4.57pm
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16:57
In the world of stock markets, China has announced plans for a new stock exchange in Beijing.
Xi Jinping, China’s president, told an international trade fair on Thursday that the new exchange in the capital would be the primary platform for serving “innovation-orientated” small and medium-sized businesses.
Currently, mainland China’s two major stock exchanges are in the financial hub of Shanghai and in the southern city of Shenzhen. A new SME-focused exchange in Beijing could help develop China’s onshore capital markets.
Xi’s announcement follows a swathe of regulatory moves against some of China’s tech companies, curbs on private tutoring, and on the computer gaming sector.
As my colleague Kalyeena Makortoff wrote last month:
Chinese ‘crackdown’ on tech IPOs could lead to US share delistings, experts warn
Read more
China cuts amount of time minors can spend playing online video games
Read more
China’s Tencent tightens games controls for children after state media attack
Read more
Reuters has more details of today’s announcement:
4.42pm
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Another encouraging sign – US factory orders have continued to rise, despite the economic drag of the global supply chain crisis.
New orders for US-made goods rose 0.4% in July, a little more than expected, although slower than June’s 1.5% jump.
The challenge, though, will be getting hold of enough raw materials and components to fulfill those orders….
4.34pm
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Here’s another sign that America’s jobs market is pretty strong:
4.20pm
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16:20
Meanwhile in the US, the number of Americans filing new unemployment claims has dropped to a pandemic low.
There were 340,000 new ‘initial claims’ for jobless support last week, on a seasonally adjusted basis, a drop of 14,000.
That’s the lowest since the first wave of Covid-19 hit the US, and shows that the job market continues to rebound.
But, it’s still higher than before the pandemic, when jobless claims were in the low 200,000s.
The number of ‘continuing claims’ (people on unemployment support for at least two weeks), fell to a pandemic low too, down 160,000 to 2.748m.
Stripping out seasonal adjustments, there were just 288,000 initial claims. Plus another 102,000 people sought help through the Pandemic Unemployment Assistance scheme (for self-employed workers and freelancers).
John Leiper, chief investment officer at Titan Asset Management, says:
3.53pm
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15:53
World food prices jumped in August on harvest woes
In another sign of inflation pressures, world food prices jumped in August as bad weather hits crops.
The United Nations food agency has reported that strong gains for sugar, vegetable oils and cereals drove food prices up by 3.1% last month, after two months of declines.
Over the last 12 months, world food prices have rallied about 33%, hurting consumers – particularly in poorer countries – and also increasing inflation risks for central banks.
Rising demand, disruption caused by the pandemic, worker shortages, unfavorable weather problems, and higher shipping costs have all pushed up costs.
Wheat prices surged by 8.8% month on month, driven by reduced harvest expectations in several major exporting countries, the Rome-based Food and Agriculture Organization (FAO) reported.
[Farmers in the northern U.S. Plains have been hit by a severe drought that means they could harvest the smallest spring wheat crop in 33 years.]
Vegetable oil prices rose 6.7% on the month, due to higher palm, rapeseed and sunflower seed oil prices. Rapeseed oil prices were pushed up by firm demand in the European Union, amid prospects of tightening global supplies.
Sugar prices jumped by 9.6%, the fifth rise in a row, to the highest level since February 2017. This was partly due concerns over frost damage to crops in Brazil – the world’s largest sugar exporter, adding to damage caused by prolonged dry weather conditions, the FAO said.
Bloomberg has more details:
3.01pm
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Aluminium cans caught up in supply chain shortages
The bottling business for Coca-Cola in the UK and Europe has become the latest to come under supply chain pressure as it reported a shortage of aluminium cans, Sky News reports.
Coca-Cola Europacific (CCEP) told the PA news agency that it had faced “a number of logistics challenges” recently that also included a squeeze on lorry driver numbers.
It came as the boss of drinks giant Diageo told Sky News that it was also battling global supply chain difficulties related to logistics and shipping, as well as the procurement of packaging materials.
Nik Jhangiani, chief financial officer of
CCEP
, said:
More here: Vodka and coke in peril: Can shortage at Coca-Cola as Smirnoff maker suffers logistics issues
The aluminium price has hit its highest in a decade this week, due to strong demand for the widely used metal, and fears of supply cuts as smelters in China faced tougher controls on their power usage.
2.07pm
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14:07
Government must ‘get a handle’ on supply chain problems
Aodhán Connolly, director of the Northern Ireland Retail Consortium, who chaired today’s hearing on the UK supply chain problems, says:
Naomi Smith, chief executive of Best for Britain which is Secretariat for the UK Trade and Business Commision, urges the government to listen to the industry:
1.44pm
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13:44
Brexit: food and drink exports to EU suffer ‘disastrous’ decline
Lisa O’Carroll
Exports of food and drink to the EU have suffered a “disastrous” decline in the first half of the year because of Brexit trade barriers, with sales of beef and cheese hit hardest.
Food and Drink Federation producers lost £2bn in sales, a dent in revenue that could not be compensated for by the increased sales in the same period to non-EU countries including China and Australia.
Dominic Goudie, head of international trade at the FDF, said:
He said the difficulties now facing British food and drinks manufacturers and farmers was compounded by the lorry driver and warehouse workers shortages, which were choking the supply chain.
“At the same time, we are seeing labour shortages across the UK’s farm-to-fork food and drink supply chain, resulting in empty spaces on UK shop shelves, disruptions to deliveries and decreased production,” Goudie said.
By product category, the biggest falls in sales to the EU have been in dairy and meat: beef exports were down 37%, cheese down 34% and milk and cream down 19% in the first half of 2021 compared with the equivalent six months in 2019.
Here’s the full story:
Brexit: food and drink exports to EU suffer ‘disastrous’ decline
Read more
1.38pm
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13:38
The supply chain crisis hearing wrapped up with fresh calls for the UK government to extend temporary visas to overseas workers with essential skills, such as lorry drivers.
Alex Veitch also argued that the support for vocational training in the Plan for Jobs should be widened, to provide funding for a wider range of qualifications.
Lowering the entry point to cover level 2 and 1 qualifications, rather than only level 3 (the equivalent of an advanced technical certificate or diploma, or A levels) would led more people benefit, he points.
The food industry should be given greater access to the apprenticeship levy, said Richard Harrow, to help train young people and tackle the shortage of workers.
And the BRC’s Andrew Opie also called for more collaboration with business over the looming border checks on EU imports (as well as repeating the call for more temporary visas for lorry drivers).