20th January 2022
Bite-sized business news from the UK and beyond
Good morning Yesterday 102 millionaires and billionaires published an open letter calling on governments around the world to tax them more. The group, called Patriotic Millionaires, say that current tax systems are unfair and increasing wealth tax would help address inequalities worsened by the pandemic.
- Inflation nation – Consumer prices reach 30 year high
- Spinning in the wrong direction – Peloton considers drastic turnaround plan
Consumer prices reach 30 year high
What’s going on?
Last month UK inflation rose to 5.4%, the highest rate since 1992 thanks to soaring grocery and energy bills as well as ongoing supply chain issues.
Why is this important?
The consumer price index, which measures price changes across a basket of goods, rose to an annual rate of 5.4% in December, from 5.1% in November. CPI hasn’t reached this level since March 1992 when it was 7.1%.
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.
Pricing pressure came from the cost of food, drink, energy bills and clothing driven by kinks in global supply chains and rising fuel demand post lockdown.
Unfortunately there are no signs of the trend reversing. The next energy price cap, in effect from April, is expected to almost double bills for millions of households. The Bank of England, which uses interest rates to control inflation, says that prices will soon climb to 6% and may not cool until 2023.
The Bank is well off its 2% target rate of inflation. Just before Christmas it took action to curb prices by raising interest rates from 0.1% to 0.25% and economists think another hike could come next month.
The UK is not alone, global inflation has reached the highest level since 2008 with the US and Eurozone are all reporting decades-high prices.
Up until recently central banks around the world were convinced that rising consumer prices would be temporary and sort itself out once the world returned to normal post- Covid.
However inflation has become more stubborn and now many policymakers including the Bank of England face the delicate balancing act of helping economies recover from Covid whilst keeping prices under control.
Peloton considers drastic turnaround plan
Fitness giant Peloton is bringing in consultants at McKinsey & Co to assess its operations and potentially slash jobs after a rough 2021, according to close sources.
The clothing division is especially under scrutiny due to weak sales. Employees at the company’s 123 physical stores in the US, UK, Canada and Germany may have to take customer service calls, and 10% of locations could close.
Peloton was one of the major lockdown winners in 2020 when millions bought its treadmills and stationary bikes to workout with whilst stuck at home.
The easing of pandemic-related restrictions last year has led to a steady decline in revenues and in November it reported a loss of $374m in the past quarter. To make matters worse it then announced that it will increase delivery and assembly fees because of historic levels of inflation and higher supply chain costs.
It’s also been dogged by product safety issues and in May it recalled 125,000 treadmills after a six-year-old died after being pulled under the back of the equipment.
The tale of Peloton’s demise can be seen in the share price which shot up 440% to $163 in 2020 but is now closer to $30, where it was pre-pandemic.
Stat of the day
Between 80k-100k British pupils are estimated to have not returned to the classroom since the first lockdown in 2020
Other stories to keep you in the loop
- Plan B Covid restrictions to end in England
- Unilever rules out raising £50bn Glaxo bid after 'torrent of criticism'
- British Airways grounds flights to US over 5G fears
- Aldi takes Lidl's crown of UK's cheapest supermarket
- Microsoft takeover of Call of Duty maker wipes $20bn off Sony shares
- Goldman Sachs bankers in £13bn pay bonanza after stellar year of deal-making
- CEO, who fired 900 staff on Zoom, is back
- Thousands of savers become ISA millionaires with pots averaging £1.4m
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