FTSE 100 dips 0.1pc
Ambrose Evans-Pritchard: The Tories are doomed if they betray Thatcher and retreat from net zero
Almost 2,000 workers at Felixstowe port will strike for eight days later this month in a move that threatens to spark supply chain chaos ahead of Christmas.
Workers will walk out from August 21 to 29, the Unite union said. Talks broke down after the port’s owners did not improve an offer of a 7pc pay increase.
The strike at the Suffolk port threatens to cause major disruption in the early stages of ‘peak season’ – the period in the second half of the year when importers are gearing up for Christmas.
Felixstowe, which is the UK’s biggest container port, is a key hub for both exports and imports and accounts for nearly half the country’s container trade.
Unite said the strikes will have a “huge effect” on supply chains and cause “severe disruption” to international maritime trade.
That's all from us this week, we shall see you on Monday! Before you go, check out the latest stories from our reporters:
Taxpayer-backed events start-up Pollen hit with winding up petition
FTSE 100 ends in the red
The FTSE 100 has closed lower as Wall Street slipped after strong jobs data raised fears about faster interest rate hikes rises in the US. The index dipped 0.1pc to 7,439.
Still, it marked weekly gains as sterling came under pressure after the Bank of England on Thursday warned of a long UK recession even as it raised interest rates by the most in 27 years.
The index is home is several global companies that draw a large part of their revenue overseas, so a weakening sterling benefits the stocks.
"Central banks generally tend to soft soap when it comes to bad news, however the frankness behind the BoE's economic assessment was as dark as it could be," said Michael Hewson, chief market analyst at CMC Markets UK.
Amazon to buy Roomba maker iRobot for $1.7bn
Amazon has agreed to acquire Roomba maker iRobot for $1.7bn (£1.4bn), adding to its collection of smart home appliances amid broader concerns about its market power.
iRobot sells its products worldwide and is most famous for the circular-shaped Roomba vacuum, which would join voice assistant Alexa, the Astro robot and Ring security cameras and others in the list of smart home features offered by the Seattle-based e-commerce and tech giant.
The move is part of Amazon's bid to own part of the home space through services and accelerate its growth beyond retail, said Neil Saunders, managing director at GlobalData Retail. A slew of home-cleaning robots adds to the company's tech arsenal, making it more involved in consumer's lives beyond static things like voice control.
Taxpayer-backed events start-up Pollen hit with winding up petition
Taxpayer-backed events company Pollen is facing mounting pressure from creditors after being slapped with a winding up petition amid firesale talks. Matthew Field and Gareth Corfield write:
The order was issued by creditors 101 Ways Limited, according to the website of HM Tribunals. A spokesman for Pollen said the debt had been settled. A court official said the petition had been withdrawn on Thursday.
Africa to bear brunt of Ukraine crisis, says US ambassador to UN
The US ambassador to the United Nations Linda Thomas-Greenfield said Russia's invasion of Ukraine will cause 40m people to become food insecure and that sub-Saharan Africa will be hardest hit.
The US has secured $4.5bn (£3.7bn) for food security at the G7 summit, of which it has contributed $2.7bn.
There are also plans to contribute an extra $150m in new humanitarian development assistance to Africa pending congressional approval, she added.
While energy, climate change, the pandemic and conflict are the root causes of global food supply issues, Thomas-Greenfield noted that the "most insidious cause of hunger" is "that used as a weapon of war".
Half of Britain cuts power usage as energy prices soar
Soaring prices of gas and electricity have led tens of millions of Britons to slash their energy usage to preserve costs, official data has revealed. Louis Ashworth reports:
Out of the roughly nine in 10 people who have noticed increased prices since the end of March, 51pc, or 24m Britons, say they have used less gas or electricity in response, according to a survey by the Office for National Statistics (ONS).
Cutbacks on non-essential goods – often an early indicator of a demand-driven recession – are even more prevalent, with 57pc reducing such spending. Meanwhile, 42pc, equivalent to 19m people, are reducing non-essential car journeys because of rocketing prices at the pump.
That's all from me – thanks for following! Giulia Bottaro will see you through to the weekend.
Felixstowe port strike threatens Christmas chaos
Workers at Felixstowe port have confirmed strike action that could plunge Christmas present deliveries into chaos.
The eight-day walkout threatens to bring the UK's largest container port to a standstill, with implications for the busiest time of the year in supply chains.
Read more on this story: Christmas present chaos looms at UK’s biggest port
Banks cut mortgage offers amid economic panic
Home buyers will hit a bottleneck taking out new loans as lenders pull mortgages at the fastest rate since the pandemic-induced housing market shut down.
Melissa Lawford has more:
Banks have responded to intensifying fears of major house price falls by reducing options for homeowners. The number of deals fell by 17pc between May and the end of July, according to Twenty7tec, a mortgage website. This was the largest drop since spring 2020 when house moves were effectively banned.
Lenders removed even more offers after the Bank of England announced the largest rise in the Bank Rate for 27 years on Thursday, taking the rate to a 14-year high of 1.75pc. The number of deals is expected to shrink further in the coming weeks, Twenty7tec warned.
James Tucker, of the firm, said lenders were cutting deals with smaller margins and focusing on less risky homebuyers, because of the darkening economic outlook. This could include offering fewer lower deposit deals as lending to such buyers is less appealing if house prices fall.
He added: “Some products make less economic sense when rates are higher, some buyers will have seen their risk profile change due to inflation, the changing jobs market, mortgage defaults and other macroeconomic conditions.”
Snickers maker apologises for ad describing Taiwan as a country
Chocolate giant Mars Wrigley has apologised for a Snickers product launch which Chinese social media users said suggested that Taiwan was a country.
Videos and pictures showing a Snickers website promoting a limited edition Snickers bar and saying the product was only available in the "countries" of South Korea, Malaysia and Taiwan triggered an outpour of anger on Chinese site Weibo.
Mars Wrigley later published an apology on its Snickers China Weibo account and said the relevant content had been amended.
The company added: "Mars Wrigley respects China's national sovereignty and territorial integrity and conducts its business operations in strict compliance with local Chinese laws and regulations."
But the company then faced further criticism from Chinese social media users who complained it had not described Taiwan as a part of China.
Taiwan tycoon pledges $100m to defend island from ‘evil’ China
A Taiwanese microchip tycoon has pledged $100m (£82m) towards his country’s defences and urged citizens to stand up to the “evil” Chinese Communist Party.
Matt Oliver has the story:
In a spirited press conference, Robert Tsao said he was donating the money to Taiwan’s defence department to help safeguard “freedom, democracy, and human rights”.
The 75-year-old urged people to “stand up and fight” rather than give way to “unification with a gang of outlaws”.
His comments came hours after China sent ballistic missiles streaking over the Taiwanese mainland, including the capital Taipea, while fighter jets buzzed the island’s defences.
Beijing’s “unprecedented” show of force, which also includes four days of military exercises ending on Sunday, is meant as a punishment after Taiwan hosted a visit from Nancy Pelosi, speaker of the US House of Representatives, earlier this week.
Mr Tsao said the displays of military might showed why Taiwanese voters should not support parties that backed unification with China in upcoming local elections.
Felixstowe port workers to stage eight-day strike
More than 1,900 workers at Felixstowe – the UK's largest container port – will begin eight days of strikes on August 21 in a dispute over pay.
The Unite union said: "Workers at the port of Felixstowe will begin strike action later this month in a dispute over pay after peace talks at the conciliation service Acas failed to produce a reasonable offer."
Unite said negotiations will continue on Monday.
Wall Street falls as jobs data fuels rate hike fears
Wall Street's three main indices have opened lower as solid jobs growth fuelled fears about aggressive interest rate rises by the Federal Reserve.
The S&P 500 rose 0.9pc, while the Dow Jones was up 0.4pc. The tech-heavy Nasdaq jumped 1.4pc.
Hipgnosis launches bond offering backed by hit songs
Song rights firm Hipgnosis is counting on chart-topping hits from the likes of Justin Timberlake, Nelly Furtado and Leonard Cohen to entice investors to its first ever music royalty-backed bond offering.
The $221.65m programme will repackage royalty payments – including publishing and sound recording rights –from a catalogue of music by several high-profile singers and songwriters.
The collection spans over 950 songs and is valued at $341m, according to a Kroll Bond Rating Agency presale report.
KBRA has assigned the bonds a preliminary rating of A-, citing an experienced management team at Hipgnosis and the multiple administrators for the collection, such as Sony Music Publishing, Universal Music Publishing Group and Warner Music Group.
The top song in the catalogue is Cohen’s widely covered Hallelujah.
US jobs surge eases recession fears
US employers added more jobs than forecast in July, showing solid labour demand that will ease recession fears and encourage the Federal Reserve will push ahead with steep interest rate rises.
Non-farm payrolls jumped 528,000 last month, beating all estimates and the largest increase in five months, according to the Labor Department data showed Friday.
The unemployment rate fell to 3.5pc, matching a five-decade low. Wage growth accelerated and the labor force participation rate eased.
The report suggests a steady appetite for labour in a number of industries despite growing concerns about an economic downturn. Payrolls increased in accommodation and food services, health care and professional and business services.
The figures may give the Fed more reason to plough ahead with aggressive interest rate rises to tackle surging inflation.
🚨#JobsReport says we ain’t in a recession, yet.
US economy adds 528k jobs in July — twice consensus estimate!
Revisions to prior 2 mo: +28k#Unemployment rate falls to 3.5% — lowest in 50 yrs!
Participation rate disappointingly falls 0.1pt to 62.1% but EPOP up 0.1pt to 60% pic.twitter.com/WN9pNeHYMm
— Gregory Daco (@GregDaco) August 5, 2022
City tycoon raises $1bn for crypto fund
Hedge fund billionaire Alan Howard has raised $1bn (£820m) to invest in cryptocurrency, despite the sharp downturn in the digital coin market.
Matthew Field has more:
Mr Howard, co-founder of investment firm Brevan Howard and a large Conservative party donor, has successfully raised funds from institutional investors.
The billionaire made his name as the co-founder of Jersey-based Brevan Howard Asset Management, which manages over $20bn.
Brevan Howard launched its cryptocurrency division, BH Digital, last year. Its first fund has since secured $1bn from institutional investors, the website Blockworks reported. Brevan Howard did not respond to a request for comment.
Mr Howard has spearheaded his firm’s push into digital assets in recent years, hiring a team of 50 staff to oversee investments in the space. He has backed over 40 crypto companies in recent years.
Company filings for Brevan Howard Asset Management published earlier this year show Mr Howard earned over £55m thanks to a series of successful investments made during the pandemic.
The crypto fundraise comes despite prices in the market tumbling this year and the collapse of several digital coin focused investment firms.
Investec to spend £100,000 on security for South African bosses
Investec will spend as much as £100,000 a year on each of its executive directors' personal security amid soaring crime in South Africa.
A resolution on the cover was approved by shareholders at the lender's annual general meeting. Directors previously paid for security from their salaries.
Henrietta Baldock, chair of Investec's remuneration committee, said: "The personal security arrangements are something which we feel we need to put in place for the executives based in South Africa."
She said the measure was introduced "given that they are high profile, and given the number of other examples that are around of high-profile business people and other people being targeted".
Investec, which is dual listed in London at Johannesburg, focuses on high net worth individuals in South Africa.
Crime data from the country shows kidnappings more than doubled in the three months to the end of March to 3,306 incidents, while the number of sexual offences rose 14pc to 13,799.
US futures steady ahead of jobs data
US futures held steady this morning ahead of data that's expected to show a slowdown in job growth in July.
The Labor Department's employment report is likely to show nonfarm payrolls rose by 250,000 jobs last month after rising by 372,000 in June, while the unemployment rate remained unchanged at 3.6pc for a fifth straight month.
While the 19th straight month of payrolls expansion would add to a recent batch of data suggesting the US economy was not in a recession, the cooling in job growth would ease pressure on the Fed to deliver another super-sized interest rate hike to tame runaway inflation.
The S&P 500 was flat, while the Dow Jones edged up 0.09pc. The tech-heavy Nasdaq slipped 0.2pc.
Kevin Spacey told to pay $31m to House of Cards producer
Kevin Spacey has been ordered to pay $31m (£26m) to the production company behind House of Cards for alleged sexual misconduct that got him kicked off the hit series.
The American actor had starred in five series of the political drama in 2017 when allegations emerged that he had a history of sexually harassing and assaulting young men.
Production company MRC II Distribution fired Spacey and wrote him out of the final season, which was trimmed down from 13 episodes to eight.
It also did its own investigation, which added five House of Cards crew members to the list of men accusing Spacey of misconduct.
The company said the misconduct was a violation of his contract and sued him for damages. A Los Angeles judge ruled against Spacey and ordered him to pay MRC $29.5m in damages plus expenses and legal fees of $1.5m.
At a hearing at the Old Bailey last month, Spacey pleaded not guilty to sexual assault charges in the UK dating back up to 17 years. He will face trial next year.
Inflation drives up corporate distress
The number of British companies at risk of collapse rose by more than a third in the second quarter as surging inflation continued to erode margins.
Almost 2,000 companies were in critical financial distress as of the end of June, according to a report from Begbies Traynor. That's 37pc more than the same period last year.
Meanwhile, the number of companies filing for insolvency in England and Wales last quarter rose to the highest since 2009, according to separate data from the Insolvency Service.
Things are likely to get worse, too, after the Bank of England warned the UK is likely to enter its longest recession since the global financial crisis.
Global food prices post biggest fall since 2008
World food prices have posted their biggest fall since 2008 as the resumption of exports from Ukraine eases concerns over grain supplies.
A UN index of world food costs plunged almost 9pc in July. The index tumbled to its lowest since January, before Russia's blockade of ports in Ukraine pushed up food costs to a record high.
The index fell four a fourth month, offering some relief to consumers grappling with the cost-of-living crisis.
But prices remain elevated, putting pressure on households and raising the risk of famine.
Higher interest rates unlikely to spark house price crash, says BoE official
Higher interest rates may cool house prices in the UK but are unlikely to lead to a market crash, a top Bank of England official has said.
Huw Pill, the Bank's chief officials, said higher rates were "partially working through the housing market, which we would expect to cool".
But he added: "We think there is some resilience there, and we're not going to see the dramatic downturns we've seen in the past."
Figures released by Halifax this morning showed house prices dipped 0.1pc in July from the previous month – the first time prices have fallen in a year.
Watchdog fines former Vodafone boss for disclosing inside information
The City watchdog has fined the former chief executive of Vodafone £80,000 for unlawfully disclosing inside information.
The Financial Conduct Authority said Sir Christopher Gent, who was also non-executive chairman of ConvaTec, shared inside information with bosses at two of ConvaTec’s major shareholders before it was made public.
The disclosures concerned an expected announcement by ConvaTec relating to a revision of its financial guidance and the chief executive's plans for retirement.
The FCA said Sir Christopher had acted "negligently" in disclosing the infomation. There is no evidence that he traded on the information or that he intended to make personal gain, or avoid loss, from making the disclosures.
Mark Steward at the FCA said:
Private disclosure of inside information, especially by the chairman of a listed issuer, risks investor confidence and the integrity of financial markets. Sir Christopher failed to properly apply his mind to the question of what information he could properly disclose.
German power prices hit record amid heatwave
German power prices have surged to a record as utility companies across Europe slash electricity output due to the hot weather.
The next-year contract in Europe's biggest market rose as much as 2pc after Swiss utility Axpo announced cuts at one of its nuclear plants.
EDF is also reducing nuclear output due to high water temperatures, while Uniper in Germany is struggling to get enough coal up the river Rhine.
Europe is suffering its worst energy crisis in decades as Putin's gas cuts drive up prices. Extreme heat – led by the driest July on record in France – is exacerbating the problem.
Read more on this story: Rhine runs dry in new threat to German energy
Runaway inflation raises doubts over Bank's power to rescue the economy
For a man who's argued that we should look at the economy with a "glass half full mindset", Andrew Bailey presented a decidedly downbeat message as he told Britons they faced two years of financial pain.
The Governor of the Bank of England delivered its gloomiest forecasts since the pandemic, with none of the bounceback it predicted two years ago. A recession is coming: prices in the shops will keep on rising just as money in people’s pockets is being eroded by inflation. Meanwhile, pay won't keep up with price rises and close to a million more people will be out of work by the start of the next parliament.
But that may not be the worst of it. Despite the focus on the unprecedented income squeeze facing British families, the bigger problem is a lack of green shoots on the horizon.
Szu Ping Chan and Matt Oliver dissect yesterday's massive interest rate rise and the grim prospects for the UK economy.
Read their full analysis here
Pets at Home sales grow as lockdown boom keeps going
Pets At Home has reported a rise in revenues over the first quarter as it continued to cash in on the pandemic pet boom.
The pet specialist said its total revenue grew 7.1pc to £404.7m in the 16 weeks to July 21, while revenue for its vet arm increased by 11pc.
The company gained 1.1m new customers last year as the lockdown-driven boom in pet ownership created new opportunities for animal retailers.
Sign-ups to its puppy and kitten club – a subscription service for pet owners – averaged 25,000 a week, three times higher than before Covid.
It also reported a record number of loyalty club members, growing 10.7pc year on year to total 7.4m people paying for the service.
Earlier this year the outgoing chief executive of Pets at Home said cash-strapped households would rather cut back on eating out and buying a new car before spending less on their beloved pets.
Pendragon shares jump on failed takeover bid
Shares in Pendragon jumped this morning after the car dealer revealed it approved a takeover offer but talks ended as a major shareholder didn't engage.
The takeover offer was 29p per share, representing a 35pc premium to yesterday's closing price.
But the offer was contingent on support from the top five shareholders, and only four backed the deal, Pendragon said.
Shares jumped as much as 12pc in early trading, giving Pendragon a market value of £335m.
WPP slides as outlook falls short of rivals
WPP is the biggest FTSE faller this morning even after it upgraded its forecasts for the full year.
The advertising giant raised its sales outlook and beat estimates for organic growth. But analysts at Goldman Sachs said the figures "could be seen by the market as a slight disappointment".
Rivals Publicis and Omnicom both raised their guidance recently as large advertising agencies have proved resilient to inflation.
WPP said demand was still robust, particularly from clients in the tech and healthcare sectors, with the exception of China, where lockdowns have hurt sales.
Shares in WPP dropped 7.4pc to the bottom of the FTSE 100.
FTSE risers and fallers
The FTSE 100 has edged lower in early trading a day after the Bank of England delivered its biggest interest rate rise in 27 years.
The blue-chip index dipped 0.2pc, dragged lower by energy stocks.
Oil giants BP and Shell both fell more than 1pc each, weighing the most on the index. British Gas owner Centrica also fell into the red.
WPP was the biggest faller, tumbling more than 7pc after its upgrade to forecasts fell short of expectations.
London Stock Exchange Group bucked the trend, gaining 3.9pc after it announced a £750m share buyback.
The domestically-focused FTSE 250 was trading flat.
Bailey: High pay rises will make inflation worse
There's a warning from Andrew Bailey on the impact of raising wages and prices to counteract inflation:
If everybody tries to beat inflation, it doesn’t come down, it gets worse, that’s the problem.
There’s a second problem. I put this in terms of high pay rises and high price increases, because in that world it’s the people who are least well off who are worst affected, because they don’t have the bargaining power. I think that is something that broadly we all have to be very conscious of.
There are a lot of people out there who are very badly affected by this inflation… It's particularly bad because it’s concentrated in energy and food - those are the staples, those are the essentials.
Bailey: Inflation mustn't become embedded
Aside from the external factors, though, the Governor says it's vital that inflation doesn't set in.
The second thing is the more important thing, which is what happens domestically.
The risk that we’re responding to is that inflation becomes embedded and it doesn’t come down in the way we would otherwise expect.
My key point is: If inflation becomes embedded and persistent it gets worse and the effects get worse and that’s why we have to raise rates.
Bailey: We don't know what Putin will do next
Andrew Bailey points out the uncertainties around Russia and the war in Europe, saying the "vast majority" of inflation in the UK is externally driven.
The point of raising interest rates is what comes next. We have to get inflation back down to target - that’s our job.
We don’t know what Vladimir Putin will do next. He’s severely restricting the supply of gas to Europe and that is having a huge effect.
Andrew Bailey defends Bank's decisions
Andrew Bailey has launched a staunch defence of the Bank of England's approach to tackling inflation, pinning the blame for surging prices on external factors.
He told BBC Radio 4: "There has been a series of very big supply side shocks, most of which are coming from outside."
He also took aim at critics who've said the Bank should have acted sooner to raise rates.
"We don’t make policy with the benefit of hindsight," he said. "I would challenge anybody to have been sitting here a year ago to say: ‘There’s going to be a war in Ukraine and it’s going to have this effect on inflation’."
"If you go back two years, given the situation we were facing at that point in the context of Covid, in the context of the labour market, the idea that at that point we would have tightened monetary policy… I don’t remember there were many people saying that at that time."
London Stock Exchange launched £750m share buyback
The London Stock Exchange Group will hand £750m to shareholders over the next year after posting a surge in profits.
The financial markets and data group will return the cash to investors through a share buyback after reporting a 73pc jump in pre-tax profits to £803m over the first half of the year.
It said it was boosted by stronger revenue growth and cost management as it highlighted "good momentum" going into the second half of the year.
LSEG said profitability was also solid as it stayed on track with costs and savings targets from the almost £20bn takeover of Refinitiv it sealed in 2020.
David Schwimmer, chief executive officer of LSEG said:
LSEG has delivered a strong first-half performance with continued revenue growth across our businesses.
We are managing costs well and we continue to make progress on achievement of synergies.
Our cash generation is allowing us to actively deploy capital across organic and inorganic investments, grow our dividend and commence a share buy-back programme, driving further value for our shareholders.
We are successfully executing on our strategy, have good momentum going into the second half and our targets remain unchanged.
FTSE 100 opens flat
The FTSE 100 has opened flat after the Bank of England unveiled its biggest interest rate rise in 27 years.
The blue-chip index slipped marginally into the red to 7,445 points.
More reaction: Further house price falls to come
Tom Bill, head of UK residential research at Knight Frank, says the fall in house prices will deepen.
Negligible monthly declines in house price growth will get steeper. Mortgages have become noticeably more expensive in recent months, which will dampen demand as cheaper offers made earlier this year expire and people roll off fixed-rate deals.
At the same time, supply has built as the distortions of the pandemic and stamp duty holiday fade, which will put downwards pressure on prices.
The Bank of England’s latest set of economic predictions will impact sentiment, as they did in May, but the fundamentals of the property and labour market are strong and we would expect double-digit annual growth to become single-digit growth by the end of the year.
Reaction: Cheap debt is disappearing fast
Nicky Stevenson, managing director of estate agent group Fine & Country, warns of a 'dampening effect' as borrowing costs rise.
The supply crunch which underpinned the housing market boom has begun to ease in recent months and the pace of price growth has softened slightly as a result.
Meanwhile cheap debt is fast disappearing and against this backdrop, we can expect to see a dampening effect as purchasing power continues to be eroded.
While the housing market and broader economy do not always move in tandem, the recession predicted by the Bank of England is bound to have an effect on growth and consumer confidence.
Mitigating this will be a continued supply-demand imbalance and a loosening of affordability tests which will make thousands of buyers eligible for bigger loans.
The outlook for the market as a whole will depend in large part on the pace of monetary tightening in the months ahead.
Where have house prices risen fastest?
While house prices have finally turned negative, they're still much higher than a year ago. What's more, the Halifax figures show the disparity in price growth across the UK.
Wales has moved back to the top of the table for annual house price inflation, up by 14.7pc, with an average property price of £222,639.
It’s closely followed by the south west of England, which also continues to record a strong rate of annual growth, up by 14.3pc, with an average property cost of £310,846.
The rate of annual growth in Northern Ireland eased back slightly to 14.0pc, with a typical home now costing £187,102.
Scotland too saw a slight slowdown in the rate of annual house price inflation, to 9.6pc from 9.9pc. A Scottish home now costs an average of £203,677, another record high for the nation.
While London continues to record slower annual house price inflation than the other UK regions, the rate of 7.9pc is the highest in almost five years.
With an average property now costing £551,777 the capital’s already record average house price continues to push higher, up by £40,361 over the last year. It's still by far the most expensive place in the country to buy a home.
Reaction: Will the new PM try to rally the market?
Tomer Aboody, director of property lender MT Finance, asks if the new prime minister will step in to rally the housing market.
With the first price fall in over 12 months, the slowdown which was expected is seemingly coming to fruition.
Higher mortgage rates, increasing inflation and higher cost of development is affecting buyer demand. They are still there but at a more conservative level.
Although there is a monthly price fall, this is marginal and house prices are still at record levels, running away from buyers.
With fewer sellers and buyers, a continued slowdown is expected. Will the government try to rally the market again with a re structure of stamp duty or other measures, this could be an initiative for any new incoming prime minister?
Halifax: House prices to slow further
Russell Galley, managing director at Halifax, says house prices are likely to come under more pressure.
Following a year of exceptionally strong growth, UK house prices fell last month for the first time since June 2021, albeit marginally. This left the average house price at £293,221, down £365 from the previous month’s record high.
The rate of annual inflation eased slightly, although it’s important to note that house prices remain more than £30,000 higher than this time last year.
While we shouldn't read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time.
Leading indicators of the housing market have shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.
That said, some of the drivers of the buoyant market we’ve seen over recent years – such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand, still remain evident.
The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices.
Looking ahead, house prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold. Therefore a slowing of annual house price inflation still seems the most likely scenario.
House prices fall for first time in a year
After months of relentless growth, house prices have finally fallen.
The latest figures from Halifax show prices dipped 0.1pc in July – the first decline since June 2021. The average value of a home stood at £293,221, which is still 11.8pc higher than a year ago.
The fall reflects the impact of a deepening cost-of-living crisis, as inflation soars and the economy heads towards a recession.
It also comes amid rising borrowing costs, with the Bank of England delivering its biggest interest rate rise for 27 years yesterday as it warned inflation will top 13pc later in the year.
5 things to start your day
1) Runaway inflation raises doubts over Bank's power to rescue the economy Andrew Bailey risks collision with Downing Street as recovery is nowhere in sight
2) West bolsters grain storage across Ukraine border as war threatens harvest Neighbouring countries aim to stop vital supplies rotting amid Russia blockade
3) Gordon Ramsay’s restaurants slash 300 jobs after lockdowns push losses to £7m Celebrity chef's company saw losses climb as revenues dropped in 2021
4) Taxpayer takes stake in helium airship maker backed by Iron Maiden singer Hybrid Air Vehicles is said to have received £900,000 from the Future Fund
5) Three charts that show the economic disaster facing Britain Here are the factors behind the UK's bleak outlook as recession beckons
What happened overnight
Tokyo stocks traded higher this morning. The benchmark Nikkei 225 index opened flat, however it then climbed 0.2pc, while the broader Topix index was up 0.3pc.
Hong Kong stocks extended gains into a third day, with the Hang Seng Index adding 0.5pc.
The Shanghai Composite Index edged up 0.2pc, while the Shenzhen Composite Index on China's second exchange rose 0.3pc.
Coming up today
Corporate: Hargreaves Lansdown (full-year results); London Stock Exchange, WPP (interims); Pets at Home (trading update)
Economics: Halifax house price index (UK), nonfarm payrolls (US), unemployment rate (US), average hourly earnings (US)