23rd February 2022
Bite-sized business news from the UK and beyond
Good morning In another tale of how fickle the internet can be, a viral app where teens post videos of themselves dancing and lip syncing to hit songs shut down yesterday. But it’s not TikTok, it’s Dubsmash. Launched in 2014 it was an early and ultimately much less successful version of TikTok.
After Dubsmash took off with teens and musicians alike in the mid-to-late 2010s, Reddit acquired the app in December 2020. Now, not much more than a year later, Reddit is shutting down Dubsmash after absorbing much of its functionality.
- West turns up the heat on Russia
- UK records first budget surplus since Covid began
West turns up the heat on Russia
What’s going on?
Yesterday the UK, US and EU announced new sanctions on Russia after President Putin ramped up aggression by ordering troops into two regions in eastern Ukraine which Boris Johnson said amounted to a "renewed invasion”.
Why is this important?
The aim of sanctions is to hit the wealthy and powerful in the targeted country where it hurts financially.
Earlier this month the UK government put in place new legislation enabling it to apply broader sanctions than it previously could on Russian people and businesses supporting the Russian government in a bid to deter further escalations.
But now the threats are being carried out after Russian soldiers entered two breakaway Ukrainian regions.
The UK assets of five Russian banks and three Russian billionaires linked to President Putin will be frozen. Critics noted that this was relatively tame compared to other countries but Boris Johnson added that this was just a "first tranche" of measures and more sanctions would be on the way if Russia launches a full-scale invasion.
The EU and the US are also imposing their own package of sanctions to put Russia off from invading. Most notably Germany is withdrawing its approval of the controversial Nord Stream 2 gas pipeline between itself and Russia, despite the damage that this could have on Germany’s own economy - 40% of German gas supplies come from Russia.
The growing tensions are unsettling the energy markets. Brent crude oil closed in on $100 a barrel for the first time since 2014.
As one of the biggest oil and gas producers Russia could retaliate by turning its back on the many European countries reliant on its supplies, which would raise already elevated energy prices.
If Russia continues to push into Ukraine, expect the West to respond with tougher sanctions that will drive up energy prices and increase inflationary pressures.
But in recent years Russia has been sanction-proofing its economy in a plan known as ‘Fortress Russia’. Measures include building up the world’s fourth largest reserves of foreign currencies (handy during times of economic turmoil) and creating its own system of international payments, in case it gets cut off from the global standard known as Swift.
It remains to be seen which will be more effective - the suite of Western sanctions or Fortress Russia.
UK records first budget surplus since Covid began
For the first time in two years UK public finances generated more income than it spent. The £3bn budget surplus last month was driven by stronger tax revenues as the economy reopened and lower spending on consumption and subsidies.
This was equivalent to £5.4bn less borrowing than in January 2021 but still a £7.0bn smaller surplus than in January 2020, before the pandemic.
The national debt – the total amount owed by the government accumulated over the years - stands at £2.3tr, the same as 95% of the UK economy and the highest proportion since the 1960s.
Inflation, which is running at a 30-year high and expected to reach 7% in April, pushed up the interest payments on the national debt to £6.1bn in January, an increase of £4.5bn from the same month last year. The highest for that month since records began in April 1997.
During the pandemic the government spent £400bn shoring up the economy with measures such as furlough and the universal free Covid testing.
Now that the final remaining Covid restrictions and support measures are being wound back, the government will hope it can cut spending and lessen the burden on public finances.
Stat of the day
Nearly 40% of all board positions at the UK’s top listed companies are now held by women, up from 12.5% a decade ago
Other stories to keep you in the loop
- National Portrait Gallery and BP to cut ties after 30 years
- HSBC profits surge as pandemic fallout less severe than feared
- Barclays freezes formed boss share awards amid Epstein probe
- Boots to sell lateral flow kits for £6 each as free tests scrapped
- THG hits back at supplier price dispute reports after share price tumbles again
- GlaxoSmithKline reveals name of £60bn consumer health spin-out
- ‘Revenge travel’ help Holiday Inn owner return to profit
- Easyjet to rejoin FTSE100
- Slack is down as outage hits for some users
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