UK house prices ‘stable in January’; anger as BP profits soar to record – business live

Fears of a German recession are swirling again this morning after factory production in Europe’s largest economy fell by more than expected.

German industrial production dropped by 3.1% in December, new data this morning shows, and was 3.9% lower than a year ago.

Production at energy-intensive industries fell by 6.1% during December, month-on-month, as soaring gas and electricity prices continued to hit manufacturers.

This “terrible industrial production report” confirms that Germany’s economy’s came to a “sudden and hard halt in December”, says Carsten Brzeski, economist at ING.

Brzeski warns:

The former growth engine of the German economy is stuttering and no improvement is in sight.

Despite the recent return of optimism as illustrated by improving sentiment indicators, the sharp drop in new orders, the inventory build-up in recent months and the lagged impact of high energy prices all still bode ill for the short-term outlook.

Today’s industrial production was the last hard data for the month of December. It is a month to forget. Retail sales, exports and imports all fell sharply. Either this data will be strongly revised upwards in the coming months or the German economy entered hibernation in December.

Despite the latest optimism reflected in improving sentiment indicators, this economic hibernation is unlikely to end any time soon.

Danny Blanchflower, a former Bank of England policy maker, has predicted that “collapsing” house prices will push the UK central bank into a rapid pivot toward interest rate cuts.

Blanchflower, who is now a professor of economics at Dartmouth College, told Bloomberg Radio that economic data will deteriorate as the sharp increase in interest rates hit activity.

Blanchflower predicted:

“We are seeing house prices tumbling.

You’re going to start to see really bad stuff appearing as these economies slow fast and the central bank and the markets are then going to respond to that.

Blanchflower, who served on the Bank’s monetary policy committee between 2006 and 2009 (during the financial crisis), says policymakers should have cut rates last week, rather than raising them to 4%.

He explains:

As I sat at the Bank of England, my job was to think about what inflation was going to be at about 18 months to two years down the road. And you change rates now because it takes time to have an effect.

“What people should see is a collapsing housing market, a slowing economy and the reason is that these interest rate hikes that have been going crazily haven’t actually impacted the economy yet.”

Shares in BP have jumped to their highest level in over two months, after it reported profits doubled last year and lifted its dividend by 10%.

BP shares are up 4.1% at 498p, making it the top riser on the FTSE 100 index of blue-chip shares.

The company said this morning it hopes to “materially increase earnings through 2030”, and is aiming for profits of $51-56bn on an EBITDA basis in 2030.

BP also said it plans to invest up to $8bn more in renewable energy systems, such as bioenergy and electric car charging networks. But it will also spend an extra $8bn in oil and gas by 2030, despite pressure from environmental campaigners to shift away from fossil fuels faster.

CEO Bernard Looney says

We need continuing near-term investment into today’s energy system – which depends on oil and gas – to meet today’s demands and to make sure the transition is an orderly one. We have high-quality options throughout our portfolio, allowing us to choose only the best.

We will prioritise projects where we can deliver quickly, at low cost, using our existing infrastructure, allowing us to minimise additional emissions and maximise both value and our contribution to energy security and affordability.”

Ed Miliband MP, Labour’s Shadow Climate Change and Net Zero Secretary, says it is ‘outrageous’ that the UK hasn’t brought in a tougher windfall tax on energy companies.

Responding to BP reporting profits of $28bn (£23.2bn) for last year, Miliband says:

“It’s yet another day of enormous profits at an energy giant, the windfalls of war, coming directly out of the pockets of the British people.

“What is so outrageous is that as fossil fuel companies rake in these enormous sums, Rishi Sunak still refuses to bring in a proper windfall tax that would make them pay their fair share.

“This is why people are sick and tired of the way the country is run under the Tories.

In just eight weeks’ time, the Government plans to allow the energy price cap to rise to £3,000. Labour would use a proper windfall tax to stop prices going up in April.

The currrent ‘energy profits levy’, announced last year, allows energy firms to use new investment in the North Sea to offset their windfall tax bill. TUC General Secretary Paul Nowak insists it should be beefed up.

Nowak says:

“As millions struggle to heat their homes and put food on the table, BP are laughing all the way to the bank.

“Hard-pressed families will rightly feel furious – they are being treated like cash machines.

“This boils down to political choices.

“Ministers are letting big oil and gas companies pocket billions in excess profits. But they are refusing to give nurses, teachers and other key workers a decent pay rise.

“We need a government on the side of working people – not fat cat energy producers.

“That means imposing a higher windfall tax on the likes of BP and Shell. It means giving public servants fair pay. And it means giving households extra financial support as bills rise this April.”

Back in November 2021, before the full-scale invasion of Ukraine, BP’s boss Bernard Looney notoriously described the energy giant as a ‘cash machine’.

Nick Dearden, director at Global Justice Now, says BP’s earnings underline the need for a polluters tax.

“It should sicken people to their core that BP is responsible for more global historic emissions than most countries on earth, yet has no plans to stop polluting even in the face of a global climate crisis. With a newly established Loss and Damage fund, it’s high time governments mandated fossil fuel companies to start paying up for their role in the climate crisis, starting with these enormous profits announced today.

What’s even worse is that more than half of this ($14.7bn), made from the destruction of our planet, is leaving the pockets of struggling families and heading straight to super-rich shareholders, when millions of people can’t even afford to heat their homes.

Enough is enough. It’s time to bring in a polluters tax and hold BP truly accountable for the destruction they’ve wreaked across the planet.”

Oil giant BP has doubled its profits last year, as the surge in energy prices since Russia’s invasion of Ukraine boosted its earnings.

BP has reported underlying profits of $27.5bn for 2022 this morning, up from $12.8bn in 2021. Such bumper profits will surely lead to fresh calls for more stringent windfall taxes on the energy giants.

BP has also lifted its dividend by 10%, and announced a new $2.75bn share buyback programme this morning.

In the last quarter of 2022, BP’s fourth-quarter underlying replacement cost profit, the company’s definition of net income, came in at $4.8bn – up from $4bn a year earlier, but down on the $8.2bn made in the third quarter of 2022.

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

UK house prices stabilised in January, new figures from building society Halifax show, after falling in the final months of 2022.

Halifax’s latest healthcheck on the housing market, just released, shows that the typical UK property cost £281,684 in January, little changed on December’s £281,713.

That follows a 1.3% fall in December, and a 2.4% drop in November, as rising mortgage costs and the cost of living squeeze hit borrowers.

The annual rate of house price growth slowed to +1.9%, from +2.1% in December, with the market cooling across the UK. That’s the slowest rate of annual growth in three years.

The rise in mortgage rates last autumn and winter hit demand for mortgages, Bank of England data last month has showed.

The start of 2023 has brought some stability to UK house prices, says Kim Kinnaird, Director of Halifax Mortgages.

Kinnaird warns that rising borrowing costs could hit demand this year.

“We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years. As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.

For those looking to get on or up the housing ladder, confidence may improve beyond the near-term. Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.

Also coming up today

UK retailers suffered a disappointing January, new spending figures show, as consumers kept a tight rein on spending after Christmas.

Total UK retail sales increased by 4.2% in January – less than half the 11.9% rise seen a year earlier and below the three-month average growth of 5.2%, according to the British Retail Consortium (BRC)-KPMG retail sales monitor.

That rise in sales actually shows a significant drop in volumes, given inflation has been at double-digit levels in recent months.

Helen Dickinson OBE, chief executive at British Retail Consortium (BRC), says consumer confidence remains “stubbornly low” as consumers brace for bills to rise this spring.

She explained:

“With ongoing cost pressures and labour shortages increases in sales don’t convert into increases in profits or cash.”

The UK Treasury and Bank of England are designing a “digital pound” as an alternative to cash, and it could be here by the end of the decade

The government is speeding up its response to the rise of privately issued cryptocurrencies and stable coins with a four-month public consultation process – they insist the digital pound would be as safe as cash.

MPs on the UK’s Treasury committee will quiz the UK’s ‘big four’ largest banks over isseues including savings rates, the mortgage market, bank branch closures and reforms to financial services regulation this morning.

The agenda

• 9.45am GMT: UK Treasury Committee to question UK’s biggest banks on savings rates, bank branch closures and changes to financial regulations

• 1.30pm GMT: US trade balance for December