UK grocery inflation hits new high of 17.5%; MPs to grill Bank of England over SVB UK collapse – business live

Newsflash: British grocery inflation has risen again to a record high in March.

Market research firm Kantar reports that grocery prices surged by 17.5% over the last year, inflicting yet more pain on households who are battling a cost-of-living crisis.

This will have driven up average household bills by £837 unless shoppers shift their spending to cheaper outlets, or simply buy less.

Market researcher Kantar said prices were rising fastest in markets such as eggs, milk and cheese.

Fraser McKevitt, Kantar’s head of retail and consumer insight, says:

“It’s more bad news for the British public, who are experiencing the ninth month of double-digit grocery price inflation.”

Kantar also found that customers are shopping around for the best value, visiting more shops than usual, and buying more own brand goods.

McKevitt says:

The supermarkets are also tackling grocery price inflation, battling it out to demonstrate value and get customers through their doors. This is a fiercely competitive sector and if people don’t like the prices in one store they will go elsewhere, with consumers visiting three or more of the top 10 retailers in any given month on average.

Supermarket store cards have emerged as an important way to provide value, and for shops to both attract and retain customers.

McKevitt explains:

Store cards have emerged as an important way to provide value amid the high cost of living with the grocer offering cheaper prices, coupons and points for people who scan them at the till.

Our latest data shows that more than nine in 10 of us have at least one loyalty card in our wallets and usage is on the rise.

Early retirement has forced up inflation, says Andrew Bailey

Phillip Inman

Last night, Bank of England governor Andrew Bailey said the wave of early retirements could force up inflation, leading to higher interest rates.

Speaking at the London School of Economics, Bailey said the exit of older workers from the labour force had pushed up economic inactivity.

That trend, he warned, will drive up prices and mean borrowing costs may need to be higher.

Bailey says:

If those workers have accumulated enough savings to sustain a desired level of consumption much like the one they had before their early retirement, at least for a while, aggregate demand will not have fallen by as much as aggregate supply.

We should expect this to put upward pressure on inflation in a way that would call for a higher level of interest rates to dampen demand.

Last week, the BoE raised Bank rate to its highest level since 2008, to 4.25%.

Bailey signalled last night that a further rise in interest rates remains part of the Bank of England armoury to tackle inflation, despite concerns that steep increases in borrowing costs has undermined confidence in the global banking system.

Andrew Bailey said the UK banking system was “resilient” and had high levels of reserves, allowing the BoE’s monetary policy to concentrate on tackling rising prices.

Bailey said everyone had seen “some big strains on the global banking system emerge” but UK banks were in a strong position, saying:

“We believe the UK banking system is resilient, with robust capital and liquidity positions, and well placed to support the economy.”

Referring to the regulator that oversees banks and forces them to maintain high levels of reserves, he said:

“With the financial policy committee on the case of securing financial stability, the monetary policy committee can focus on its own important job of returning inflation to target.”

Betting firm William Hill has been hit by a record fine by the Gambling Commission.

Three gambling firms owned by William Hill are to pay penalties of £19.2m for failing to protect consumers and weak anti-money laundering controls.

The record penalty comes after the Gambling Commission found “widespread and alarming” issues at the company, which led the commission to give “serious consideration” to spending the firm’s licence.

Andrew Rhodes, the Gambling Commission’s chief executive, explains:

“When we launched this investigation the failings we uncovered were so widespread and alarming serious consideration was given to licence suspension.

However, because the operator immediately recognised their failings and worked with us to swiftly implement improvements, we instead opted for the largest enforcement payment in our history.”

The Commission found that customers were allowed to deposit large sums of money without the companies conducting any checks, the Commission said.

One customer was allowed to open a new account and spend £23,000 in 20 minutes without any checks. Another was allowed to open an account and spend £18,000 in 24 hours without any checks.

The firms also failed to identify certain customers at risk of experiencing gambling related harm, and didn’t carry out checks at an early stage in the customer’s journey. One customer lost £14,902 in 70 minutes.

Gambling harm is a serious issue in the UK; a study in January found that up to a million women are at risk of being harmed by gambling.

A second study, last week, found that gambling addiction rates may be nine times higher than the betting industry claims.

There were also some shocking failures to follow anti-money laundering rules, with customers allowed to deposit large amounts without conducting appropriate checks.

One customer was able to spend and lose £70,134 in a month, another to lose £38,000 in five weeks and another to lose £36,000 in four days

UK households continue to be hit hard by soaring food prices, with annual inflation in British shops reaching its highest in at least 18 years in March.

Food inflation accelerated to 15.0% in March, up from 14.5% in February, new figures from the British Retail Consortium this morning show.

That’s sharply higher than the official CPI inflation rate of 10.4% in February, as prices continue to soar in the shops.

Shortages of fruit and vegetables pushed up prices, the BRC reports, with fresh food inflation accelerating to 17.0% in March, up from 16.3% in February.

That is the highest inflation rate in the fresh food category on record (going back to 2005), illustrating that the cost of living squeeze has not eased.

Helen Dickinson OBE, chief executive of the British Retail Consortium, warned that shop price inflation has “yet to peak” – with rising sugar prices meaning Easter chocolate treats will be expensive.

Dickinson explains:

As Easter approaches, the rising cost of sugar coupled with high manufacturing costs left some customers with a sour taste, as price rises for chocolate, sweets and fizzy drinks increased in March.

Fruit and vegetable prices also rose as poor harvests in Europe and North Africa worsened availability, and imports became more expensive due to the weakening pound. Some sweeter deals were available in non-food, as retailers offered discounts on home entertainment goods and electrical appliances.

Prices of “Ambient food” – such as sauces, soups, preserves, confectionery and cereals – also continued to rise. Ambient Food inflation accelerated to 12.4% in March, up from 12.2% in February, a record high.

Food price inflation disproportionately affects low-income families (food makes up a greater share of their spending, as we all have to eat!), meaning that poorer households suffer a higher inflation rate than average.

Bank of England Governor Andrew Bailey warned last night that the age of social media and digital banking is causing lightening-quick bank runs.

It’s a hint of what he may tell the Treasury committee later this morning, on the sudden collapse of Silicon Valley Bank (whose customers had rushed to move their money to other accounts once problems emerged at the bank).

Bloomberg has the details:

Bailey said one of the lessons regulators need to learn from SVB is the “speed at which runs can take place” given the technological advances since the financial crisis.

“It is striking that that happened very quickly — word gets around,” he said Monday in response to questions after a speech at the London School of Economics.

“This is very different from the Northern Rock-style queue outside the branch type thing.”

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

Fears over the banking sector may have eased this week, but policymakers are keen to understand exactly why several banks collapsed in recent weeks.

This morning, top officials from the Bank of England will be quizzed by the Treasury Committee about the collapse of Silicon Valley Bank UK, and its rescue by HSBC two weeks ago for £1.

The Governor of the Bank of England, Andrew Bailey, will testify alongside Sam Woods, the chief executive of the Prudential Regulation Authority, and Sir Dave Ramsden, the Bank’s Deputy Governor for Markets.

The committee want to learn more about the Bank’s actions to resolve SVB UK, and how the lender – which provided support to many tech start-ups – was supervised before its collapse.

They’ll probably also discuss wider stresses in the banking sector, including the impact of the failure of Credit Suisse on the UK, and what lessons can be learnt about the regulation of the banking sector.

Last night, Bailey insisted in a speech that the UK banking system was resilient, with “robust capital and liquidity positions”, and in a good position to support the economy.

The BoE governor told the London School of Economics:

We have a strong macroprudential policy regime in this country. With the Financial Policy Committee on the case of securing financial stability, the Monetary Policy Committee can focus on its own important job of returning inflation to target.

In a letter to the cross-party Treasury select committee published last week,Bailey revealed the Bank of England had warned US regulators over the risks building at Silicon Valley Bank well before its collapse.

Last night, the White House insisted the US banking system was safe despite stress on some institutions, following the collapse of both Silicon Valley Bank and Signature Bank, and crypto-focused Silvergate, this month.

Asked whether the worst of the banking crisis was behind the country after failed Silicon Valley was purchased with the aid of a government backstop, the White House’s top spokesperson said Americans can be ‘confident’ in their banks.

White House press secretary Karine Jean-Pierre told reporters:

“Because of the decisive actions that we have seen … from our administration, the banking regulators and also the Treasury Department, the banking system is safe.”

European stock markets are set to open higher, adding to yesterday’s gains after First Citizens, a North Carolina lender, took over most of Silicon Valley’s loans and assets.

The agenda

• 8am BST: Grocery inflation report from Kantar

• 9.45am BST: Bank of England gives evidence to Treasury Committee on collapse and rescue of Silicon Valley Bank UK

• 1.30pm BST: US goods trade balance index for February

• 2pm BST: US house price index

• 3pm BST: US consumer confidence report for March