4th November 2022
Bite-sized business news from the UK and beyond
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Today's stories
Bank of England hikes rates like its 1989
Tech giants cut workforce
ECONOMYBank of England hikes rates like its 1989
What happened?Yesterday, as expected, the Bank of England announced the biggest increase in interest rates since 1989. The base rate will rise 0.75% to 3% - the highest level since 2008 and the eighth increase since December.Rising rates will increase the cost borrowing for households and businesses which should cool the demand for goods and services and therefore cool inflation, currently at 10%. It should also increase the interest on saving accounts, making saving more attractive and dampening spending. The Bank anticipate rates will peak below the 5.25% investors are currently expected.That was pretty much it as far as good news was concerned, the overall message from the Bank was gloomy:
The main reason the Bank will be doing less is that policy makers reckon other hits to economic activity will be enough to bring inflation under control, with the country heading into recession (that could last up to two years and be the longest on record) and the government planning tax hikes and public spending cuts.
The economic hit from Russia’s war in Ukraine has been worse than the oil shock of the 1970s, and stamping out inflation will be painful.
The market turmoil triggered by former Prime Minister Liz Truss’s tax plans in September’s mini budget damaged UK credibility, and will have a lasting effect through a premium on borrowing costs.
Higher mortgage repayment costs and a prolonged recession could trigger a housing market crash.
Zooming out: Other major central banks are also committed to do whatever it takes to curb inflation. The European Central Bank said a mild recession in the eurozone wouldn’t stop it raising rates further to tame inflation. This week the US Federal Reserve approved its fourth consecutive 0.75% increase in interest rates, its most aggressive initiative since 1980.
Other stories to keep you in the loop
BT warns of more job losses as rising bills force bigger cost-cutting drive
Deloitte replaces half of its UK executive team in purge of older partners
Revolut edges one step closer to superapp status with Revolut Chat
Sainsbury's shields shoppers from some rising costs as profits dip
Trainline expects busy London Christmas season as tourist traffic helps it return to profit
Elon Musk to start Twitter layoffs within hours - and offices are closed
Jeff Bezos sued by former housekeeper alleging racial discrimination
TECHTech giants cut workforce
What happened?Yesterday payments processor Stripe and taxi app Lyft announced they would be slashing their workforces as US tech firms prepare for a recession.Stripe will lay off 14% of its 8,000 employees. CEO Patrick Collison said the company over hired during the pandemic to cope with the surge toward online shopping and were optimistic that this trend would continue into 2023. But now the company has to rightsize to deal with the current economic challenges of rising inflation and interest rates.Lyft said it would cut 13% of its 5,000 employees in its second round of redundancies this year. The ride-hailing company described the cuts as proactive step to ensure it "is set up to accelerate execution and deliver strong business results in Q4 of 2022 and in 2023." Stripe and Lyft are just the latest in a long list of tech firms tightening their belts in preparation for an economic slowdown.Netflix, Spotify and Coinbase have announced layoffs with Twitter's workforce set to be halved today. Amazon, Google parent Alphabet and Facebook owner Meta have also taken measures to bring their expenses down by reassessing their expansion plans.
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