Today's business and finance round up 11th March 2022
💳Households need extra £12bn to cover cost of living crisis
11th March 2022
Bite-sized business news from the UK and beyond
Good morning Good news for anyone who has ever wanted to invest in Amazon but has been put off by the $3,000 share price – from June the shares will be 20 times cheaper. This week the online giant announced that its splitting each share into 20, making each one around $150.
Even though a stock split won’t change the value of the overall company, they do make it easier for DIY investors to invest and could create more demand for the company's stock.
- Black hole - Households need extra £12bn to cover cost of living crisis
- Two can play that game – Russia retaliates against sanctions
Households need extra £12bn to cover cost of living crisis
What’s going on?
Rising inflation fuelled by the war in Ukraine will mean the government will need an extra £12bn to protect households from a cost of living crisis. That’s according to the leading economic thinktank the Institute of Fiscal Studies.
Why is this important?
In less than two weeks the chancellor will deliver the Spring Statement, a traditionally light touch speech about the economic outlook with few new tax or spending policies compared to the full budget in October.
But the IFS thinks that this time round the government will have to make some substantial announcements on how it will support families facing 30-year-high inflation of 5.5%, that’s set to rise to over 7% soon.
The onset of the war in Ukraine has not only sent energy prices through the roof but it’s created general economic uncertainty that could dampen consumer confidence.
The thinktank warned that for public sector workers to get inflation-matching pay rises it would cost an extra £10bn, or around £1,750 per worker.
When it comes to household budgets, the IFS said the chancellor would need an additional £12bn on top of the £9bn already committed to in February to provide protection against higher prices.
Difficult decisions lie ahead for the government. It must balance the need of supporting vulnerable households from soaring inflation while managing public finances that have been bruised by two years of pandemic related support schemes.
It will either have to spend and borrow billions more, or allow a hit to household incomes bigger than at any time since at least the 2008 financial crisis and quite possibly since the 1970s.
Russia retaliates against sanctions
After receiving a barrage of Western sanctions following its invasion of Ukraine, Russia has hit back. It’s announced that it will stop exporting over 200 products including medical, vehicle, agricultural, and electrical equipment for the rest of the year.
The ban will effect nearly 50 countries including the UK, US and EU nations.
Since the conflict in Ukraine started, Western allies have imposed a suite of sanctions aimed at weakening the Russian economy. The latest developments include the plan to reduce the level of Russian oil and gas they import and freezing the assets of the wealthy people close to President Putin like Chelsea owner Roman Abramovich.
So how much economic damage could Russia inflict with these new actions? Many analysts think the export ban is more symbolic than significant. Russia isn’t a major supplier of cars and tractors so is unlikely to cause too much global disruption. Its main exports are commodities like oil, gas and metals, Russia hasn’t banned exporting these yet but if it were then that would push the prices even higher and have a more global impact.
Russia also warned it could seize the assets of multinational companies who exit the country in protest of the war. So far dozens of high profile brands including McDonalds, Apple and Ikea have suspended their Russian operations. If they did decide to permanently leave, the Russian government is prepared to takeover the local branches with new management teams.
The Russian economy has been crippled within the space of a few weeks following the introduction of sanctions. It remains defiant that it can weather the disruption but with the rouble at an all time low and a government debt default on the horizon, things could be about to get even worse.
Stat of the day
US inflation jumped to 40-year high of 7.9% last month
Other stories to keep you in the loop
- John Lewis restores staff bonus as losses narrow
- Sadiq Khan calls for rent control in London
- Netflix announces price increase for subscribers in UK and Ireland
- M&S boss to step down after close to 40 years with retailer
- Uniqlo pressured to halt Russia sales after CEO vows to stay
- Goldman Sachs becomes first Wall Street bank to leave Russia
- Purplebricks CEO to step down ‘due to personal reasons’
- Macron promises to axe France’s TV licence if he is re-elected
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