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Hello. The pound fell to its weakest level since 1985, reflecting the scale of the economic challenge facing new Prime Minister Liz Truss as she prepares to unveil an emergency energy package today.
Truss will outline details of the state’s planned response to protect households and businesses from soaring energy bills. Government insiders have said the total gross cost over two winters could reach £150billion, but ministers were still trying to finalize details of support for the business sector yesterday.
The package will be financed by public borrowing, increasing demand in the economy at a time when inflation is above 10%; bond markets are already nervous about rising interest rates.
Asked if the level of government bond sales could become “indigestible”, Bank of England Governor Andrew Bailey said the central bank had no intention of destabilizing markets. “Our team is watching this very closely,” he said.
Truss’ emergency scheme will cap average household electricity bills at around £2,500 a year at an estimated cost of £90bn over two years, with the commercial element costing possibly £60bn. Higher wholesale gas prices would drive up the bill.
The pound fell to $1.1406, lower than the day after the 2016 Brexit vote and above March 2020 lows amid the Covid-19 crisis. The pound has fallen 15% against the dollar this year.
Thank you for reading FirstFT Europe/Africa. Here’s the rest of the news from the day — Gary
Five other stories in the news
1. Poland against the exceptional tax on electricity producers Ahead of an emergency EU meeting on Friday, Poland’s prime minister pushed back on a proposed windfall tax on power producers, saying it shouldn’t be a priority and backing a suspension of the trading scheme issue of the block, a sign of a possible break in the Brussels energy crisis plans.
2. Europe tops US on Chinese lists for first time Chinese companies have raised more than five times as much money from stock sales in Europe as in the United States this year, a fundraiser for exchanges in London and Zurich that has overtaken New York for the first time amid frayed geopolitical ties between the superpowers.
3. Strong divide in cancer treatment in Europe The European Cancer Organization has calculated that around 100 million cancer screening tests were missed in Europe and one million cancers went undiagnosed in the first year of the coronavirus pandemic. But some countries have maintained higher standards of treatment than others.
4. Melrose to spin off its automotive business as part of GKN breakup Melrose Industries plans to spin off the automotive division of GKN as a UK-listed company as part of a spin-off from one of Britain’s oldest engineering firms. The FTSE 100 turnaround specialist acquired the auto parts and aerospace component maker in a bitter £8billion takeover in 2018.
5. India and China undermine the pain of Russia’s oil sanctions Financial Times analysis shows India and China imported an additional 11 million tonnes of oil from Russia in the second quarter of 2022 compared to the first quarter, offsetting most of the drop in shipments to Europe and raising concerns. questions about the impact of the sanctions against Moscow which have led to soaring energy bills for European consumers.
The day ahead
ECB rate decision The European Central Bank is expected to announce a 0.75 percentage point interest rate hike today. In July, the central bank raised borrowing costs for the first time in more than a decade, from 0.5 percentage points to zero more than expected.
Economic data France releases July trade figures and the United States releases monthly motor vehicle sales. In the United Kingdom, the Royal Institution of Chartered Surveyors publishes its monthly residential market survey. The OECD publishes its employment outlook, as well as the Confederation of Recruitment and Employment and KPMG publish their monthly report on employment in the United Kingdom.
business profits British-American cyber defense specialist Darktrace, commercial lender Funding Circle, manufacturer Melrose and restaurant chain The Restaurant Group publish their results.
Correction: Earlier this week, we incorrectly indicated the date of the presidential election in Lebanon. We apologize for the error.
What else do we read
How tiny particle that can go through concrete could save lives Engineers use x-rays, ultrasound and radar to look for signs of corrosion and potential failure in concrete. But all have limits. Now, using particles from space, scientists are developing technology to safely and inexpensively see through almost any structure on the planet. Believers say the muon revolution is only two or three years away.
Threat of hard landing for the shipping industry In just three years, the container shipping industry will have made as much money as in the previous six decades, propelled by soaring demand during the pandemic. But analysts believe the cycle may have peaked and after a “once in a lifetime” profit surge, there is now a real risk of a crash.
“They don’t treat us like human beings” China’s frontline Covid workers, called ‘Big White’ after their PPE, have been hailed as national heroes for their pivotal role in stopping outbreaks. But many are complaining of brutal conditions, pay cuts and long working hours as the pandemic drags on into a third year.
Monsoon disaster sows misery in Pakistan The country’s climate change minister called it the “climate disaster of the decade” and “a super-flood to beat”. Monsoons and floods, following a scorching spring, have made Pakistan a textbook case for countries vulnerable to climate change, with interrelated humanitarian, economic and political crises.
What John Lewis is right about UK shoppers John Lewis called the end of the “experience economy”. In its place, according to the favorite Central England retailer, we now have ‘the economy of moments’. In this obvious marketing chasm, writes Cat Rutter Pooley, there could be the core of a sensible strategy.
The 2022 Booker Prize shortlist, announced this week, features novels based on real events, from the dictatorship of Robert Mugabe to the abuses of Magdalene Laundry.
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