Starmer says there is more to do on economy after inflation rises for second month in a row – business live

The discount chain Shoe Zone intends to shut a number of stores, and blamed additional costs from changes to wages and national insurance contributions (NICs) in the autumn budget along with weakening consumer confidence.

In a surprise profit warning, the retailer said it has experienced “very challenging trading conditions” between early October and the middle of December, because of worsening consumer confidence and unseasonal weather, which had led to falling sales and profits.

The shares plummeted by 44% on the news. They have lost nearly 67% of their value so far this.

Shoe Zone, which has 297 stores and about 2,250 employees in the UK, said confidence had fallen further after Rachel Reeves’ budget on 30 October.

It added that the increases in employers’ NICs and the national living wage will lead to “significant additional costs” for the company.

These additional costs have resulted in the planned closure of a number of stores that have now become unviable. The combination of the above will have a significant impact on our full year figures.

As a result, Shoe Zone now expects adjusted profit before tax for the year to 27 September 2025 to be come in at £5m, half its previous estimate of £10m. It ditched its final dividend for the year to 28 September 2024.

Amazon to settle dispute with delivery drivers over claims worth potential £140m

Rob Davies

Amazon is to settle a group claim from delivery drivers that it deprived them of thousands of pounds, the Guardian has learned, ending a suit that lawyers had said could cost the company £140m.

Drivers who deliver for the internet marketplace through its “delivery service partners” (DSPs) are classed as self-employed, meaning they are not entitled to benefits such as holiday pay and the minimum wage, while they also do not have an employment contract.

In 2021 the law firm Leigh Day brought a claim against Amazon and its DSPs arguing that at least 3,000 drivers were entitled to an average of £10,500 in compensation for each year they had worked for the online retailer.

It is not yet clear how many drivers have received settlement offers or how much the settlement will cost Amazon and its DSPs, the independent businesses that provide the drivers.

More comments from the chancellor, Rachel Reeves, who insists inflation is “broadly in line” with other major economies and says the government is addressing the “ongoing cost of living challenge”.

She told broadcasters:

The inflation numbers today show inflation at 2.6%, that is comparable to other countries around the world, in the United States it’s 2.7% – so slightly higher – in the euro area, it’s 2.3%, so broadly in line with our international peers.

I recognise that the cost of living crisis continues to bite. That’s why in the budget, we increased the national living wage, a pay rise for three million workers, and it’s why we froze fuel duty so that motorists are not paying more at the pumps.

So we recognise the challenges that families remain under, and are taking action to address that ongoing cost of living challenge.

Starmer says there is more to do on economy

Jessica Elgot

Keir Starmer has said that the economy is still a big concern, and he wants improvements “to be felt in the pockets of working people”. His comments came as UK inflation rose to an eight-month high of 2.6%.

Speaking in Estonia, Starmer told LBC:

We need to go further. We’ve stabilised the economy with the budget, but that’s not the limits of my ambition. I know we’ve got to do the tough stuff on planning, and we’re going to do the stuff, tough stuff on regulation. There’s more that we need to do.

But that growth, it can’t just be a line on a chart. It needs to be felt in the pockets of working people. I want people at the next election to say I feel better off, I know the health service is working properly now, and I can see a future for myself and my kids.

Asked how much his negative polling is worrying the prime minister, Starmer said:

What worries me and what gets me out of bed every day is how we deliver for those people who voted us in, in July to change the country for the better. How can we make them better off? How can I get those waiting lists down? How can we make sure that every young person has the chance to go as far as their talent will take them?

So, they’re the things that keep me awake. They’re the things I get up for in the morning. And look, I will be judged at the next general election, on whether I’ve delivered. I’m very clear about that.

Heather Stewart

Here’s some instant analysis of the inflation figures by our economics editor Heather Stewart.

News that inflation ticked up to 2.6% in November has extinguished any lingering expectations of a rate cut this week – and there were some worrying signs in the detail for policymakers.

Transport was a key contributor to the increase in consumer price inflation (CPI) – the Bank’s targeted measure – with the price of a litre of petrol up by 0.8p a litre to 134.8p.

But while they have little control over global energy prices, the Bank of England’s rate-setters are likely to be more concerned at the increase in core inflation.

This measure, which excludes volatile food and fuel prices, continues to rise – up 3.5%, from 3.3% in October.

The Office for National statistics (ONS) highlighted recreation and culture as a factor here: including “cultural services,” such as theatre and gig tickets, and “games, toys and hobbies,” including computer games – suggesting consumers are continuing to pay eyewatering prices for a night out – or in.

The monetary policy committee (MPC) will worry that this evidence that the strong wage growth evident in Monday’s labour market data, while great news for the UK’s workers, is helping to put a floor under prices.

Services prices overall were 5% higher than a year ago, the same growth rate as in October.

The wider measure of CPIH, which is not targeted by the Bank but includes housing costs, shows that these are rising fast – with rents up a painful 7.6% in a year.

Economists expect inflation to continue rising into the new year.

This picture will add to the fears of some policymakers that the “last mile” of the battle to tame runaway inflation can be especially difficult.

In other news, energy companies have promised to spend almost £70bn over five years to help rewire Britain’s electricity infrastructure in the global race to shift from fossil fuels to clean electricity.

The companies which own Britain’s high-voltage power system – National Grid, SSE and Scottish Power – have submitted spending plans totalling around £68bn to the industry regulator for the period from 2026 to 2031, which could support around 100,000 jobs.

The spending plans must still be approved by Ofgem which is expected to balance the need for costly investments in upgrading Britain’s power infrastructure to help meet its climate targets, which is paid for through energy bills, against the need to protect customers from rising energy costs.

National Grid set out plans to spend up to £35bn over the five years to March 2031, which could include investment of over £11bn to maintain and upgrade the UK’s existing networks, alongside building three major grid projects which have already been approved by the regulator through its fast-track process.

The FTSE 100 energy company has also proposed an investment pipeline of around £24bn; which includes around £15bn to increase network capacity, and a £9bn provision for any additional potential projects that the UK government may need to meet its 2030 clean power targets.

UK inflation rose to 2.6% in November, the highest in eight months.

It was up from 2.3% the previous month, according to figures from the Office for National Statistics, and in line with economists’ forecasts.

The core measure, which strips out volatile items like food and energy, increased to 3.5% from 3.3%, slightly less than expected.

The UK central bank is widely expected to keep interest rates unchanged at 4.75% at the end of its next meeting tomorrow.

Last night, it emerged that Japanese carmakers Honda and Nissan will begin negotiations over a potential merger, according to reports.

The Nikkei financial newspaper said on Tuesday that the two Japanese companies would start talks to help combat the increased global competition from bigger electric vehicle makers.

The firms, which are the second- and third-largest car manufacturers in Japan, had combined vehicle sales of 7.4m vehicles in 2023 but are having to compete with soaring sales from Chinese rivals such as BYD and Li Auto.

Nissan shares jumped by nearly 24% in early trade on Wednesday.

A Honda spokesperson said a potential merger was among the possibilities being discussed. “We are discussing possibilities for cooperation between Honda and Nissan in the future, in a wide range of fields and in various areas, and those possibilities include the latest reports, but there is nothing decided,” the spokesperson told AFP.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Inflation in the UK is expected to have climbed to an annual rate of 2.6% last month, rising further above the Bank of England’s 2% target.

Figures to be released at 7am by the Office for National Statistics are forecast to show a rise in inflation from 2.3% in October. The core measure, which strips out volatile items like food and energy, is expected to have climbed to 3.6% from 3.3%.

The central bank is also worried about stubbornly high inflation for services, of around 5%, which is higher than in the eurozone (4%) and the US (3.9%).

Investec economist Sandra Horsfeld said:

It is hard to isolate a single factor, but a number of categories ranging from cars to airfares to recreation & culture look to have faced unhelpful base effects of their own last month. The same applies on the non-core side, where a non-repeat of November 2023’s automotive fuel price fall almost certainly added to inflation. Similarly, food price inflation, which had already surprised visibly to the upside in October relative to the Bank of England’s baseline forecast in its latest Monetary Policy Report, may have done so again.

Berenberg economist Andrew Wishart said:

Despite disappointing economic growth, inflation probably exceeded the Bank of England’s forecast of 2.4% in November. The rise in household inflation expectations in November will raise concerns that inflation expectations are drifting higher. And the increase in the output prices balance of the PMI survey in December suggests some of the increase in taxation on employment will be passed on to customers in the form of higher prices.

Inflation in UK services prices of 5.0% year-on-year is already an outlier compared to that in the eurozone (4.0%) and US (3.9%), and rising labour costs will ensure future declines are slow. As the drag on inflation from falling energy prices fades away, we expect headline inflation to rise to an average of 3% in the second half of next year.

Later today, the US Federal Reserve is widely expected to cut interest rates by a quarter point, to 4.5%.

Markets are eagerly awaiting the Fed’s summary of economic projections and comments from chair Jerome Powell for any clues on how aggressive the US central bank will be in reducing rates next year.

US retail sales increased more than expected last month, boosted by motor vehicle purchases, reflecting strong underlying momentum in a resilient economy.

Richard Hunter, head of markets at the investment platform interactive investor, said:

The near certainty of a 0.25% cut has seen speculation moving on to the accompanying comments, where the Fed’s outlook next year could be market moving.

Previously, four small cuts had been expected, but the residue of a strong economy and some potentially inflationary actions by the new administration could lead to the central bank sitting on its hands as it surveys the new economic scene.

Stephen Innes, managing partner at SPI Asset Management, said:

A quarter-point rate cut by the Federal Reserve is widely anticipated, but the trajectory beyond that remains murky. The resilience of the US economy could be tested by the incoming administration’s proposed inflationary import tariffs, which may cause Federal Reserve officials to reconsider the pace of future adjustments.

The Agenda

• 9.30am GMT: UK house prices and rents

• 11am GMT: CBI Industrial trends survey

• 1.30pm GMT: US Building permits for November

• 7pm GMT: US Federal Reserve rate decision, followed by press conference