16th December 2021
Bite-sized business news from the UK and beyond
Good morning If you’re finding that all your in person social events are being cancelled then check out this list of virtual Christmas party ideas. Perhaps one that would have come in handy for the government last year.
Inflation nation – Consumer prices reach decade high
Nightmare movie – Cineworld shares tank after losing £700m lawsuit
ECONOMYConsumer prices reach decade high
What’s going on?UK inflation surged more than expected to its highest level in more than a decade in November as households faced an even greater squeeze on living costs.
Why is this important?
The consumer price index, which measures price changes across a basket of goods, rose to an annual rate of 5.1% last month, more than the 4.7% expected. CPI hasn’t reached this level since September 2011.Pricing pressure came from the cost of clothing (+4%), petrol (+30%) and second-hand cars (+27%) driven by kinks in global supply chains and rising energy demand post lockdown. A little bit of inflation is typically a good thing so long as payslips keep up. This unfortunately isn’t the case at the moment with wages only rising by 4%, meaning an increased strain on household incomes.To add to matters there doesn’t appear to be any let up coming. The cost of raw materials – a key indicator of future consumer prices - jumped 9.1% in November, the highest in more than 13 years. The news comes on the eve of the Bank of England’s final interest rate meeting of 2021.Policymakers the world over are facing a delicate balancing act of helping economies recover from Covid whilst keeping prices under control.The tough thing is, if price pressures just look high because of temporary influences like Covid-stricken supply chains, they could fix themselves eventually. So raising interest rates prematurely could end up damaging the economy in the long run.TakeawayThe rates decision is a tricky one as the combination of high inflation / cost of living at present, is also coming at a time when Omicron seems to be absolutely everywhere. The headlines on Covid are not helpful to consumer demand, nor investor confidence in general. So what will the Bank of England do? Well later today we’ll find out.
LEISURECineworld shares tank after losing £700m lawsuit
Cineworld shares plunged almost 40% yesterday after the British cinema group lost a legal dispute with its Canadian rival Cineplex over its aborted takeover. It now faces a £700m bill for damages. Cineworld had planned to buy Canada’s largest cinema chain in December 2019 for £1.6bn. However, Cineworld called off the deal in June 2020 just as the pandemic forced cinemas to close. Cineworld argues that it didn't drop the deal because of the pandemic, but because Cineplex breached terms of their contract which stipulated that Cineplex could not do anything that would damage the business before the deal closed. In this case, what Cineplex allegedly did that “damaged the business” was shutting down cinemas because of a global pandemic.Cineplex argues that Cineworld had “buyer’s remorse” because Covid suddenly made cinema-going less lucrative. Cineworld says it will appeal the decision. The prospect of hefty payout will not sit well with its investors or banks. The chain is currently facing a massive debt pile of £6bn.An ongoing legal battle may also make the business a harder sell to US investors, with Cineworld saying earlier in the year that it is considering a listing across the pond to access fresh funds.
Stat of the day
Instagram has just hit 2bn monthly active users, which means the app's user base has doubled since 2018
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