19th July 2021
Good morning Today marks so called ‘freedom day’ or ‘free-dumb day’ depending on which side of the debate you sit on. Either way today also sees the continuation of the heatwave with yesterday being the hottest day of the year across many parts of the UK.
- Oil beef quashed
- Brexit divorce bill difference
Friday's market moves
FTSE 100 -0.1% 7,008
FTSE 250 -0.2% 22,467
Markets ended the week on a subdued note as investors paused for thought, weighing up concerns about global economic recovery and growing inflation (or possibly they were enjoying a drink in the sun as trading volumes were light).
Oil beef quashed
What’s going on?
The world’s major oil producers finally reached an agreement to raise the oil production limits.
This comes after weeks of disputes which led oil prices to their highest level in six years earlier this month.
Why is this important?
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) is a cartel of 13 countries and their allies that regulate around a third of the world's total oil production and is led by Saudi Arabia.
The group meet throughout the year to decide how much oil to produce in order to control oil prices. During the pandemic it had agreed to curb production levels (when demand was low) to support the price.
However at the meeting last month a disagreement arose between neighbours Saudi Arabia and the UAE.
The UAE wanted to start dialling up production levels but Saudi Arabia wasn’t so sure. But yesterday OPEC+ announced they had settled the dispute and the UAE will be allowed to increase its oil output.
As fossil fuels go out of fashion in favour of green energy countries that are dependent on oil income know that they need to cash in now before oil is resigned to the history books.
The spat between these Gulf nations had repercussions closer to home with petrol prices in the UK reaching an 8 year high.
Oil prices should cool down now that the production squabble has been settled.
This will come as welcome news to many as higher oil prices tend to lead to higher inflation.
Brexit divorce bill difference
You know what it’s like, it’s the end of the night after a group dinner at a restaurant and you’re each trying to settle up what you owe. Now imagine the group is the UK and EU and the dinner is a 47 year political and economic relationship and you can see why this might be tricky.
This so-called divorce bill is made up of EU spending plans the UK signed up to when it was an EU member, as well as the pensions and healthcare costs of senior EU officials. Some of the money is funding EU programmes in the UK that are still going on.
Since the Brexit withdrawal agreement was agreed in 2019 both sides have been trying to determine how much the UK owes for leaving the EU. But the withdrawal agreement states the method for calculating the bill, rather than the exact figure.
Last week officials in Brussels released a set of accounts stating that the UK’s bill is £40.8bn - £3.5bn more than the British government think it is.
The UK is arguing that the main reason for their lower estimate is because the Treasury has removed money still owed to the UK after Brexit.
The bill is paid in annual instalments and payments are expected to continue into the 2060s, so the final Brexit bill will only be known long after today’s politicians have left office.
Stat of the day
Average PwC partner pay has reached a record high of £868k
Other stories to keep you in the loop