Sunak insists energy handouts will not stoke inflation – live updates

ICYMI – BP last night became the first major energy company to declare it would review investments in light of the Government’s new windfall tax. 

Rachel Millard has more:

The FTSE 100 oil and gas producer said the tax was a “multi-year” proposal and it would need to “look at the impact” on its North Sea investment plants. 

Chief executive Bernard Looney had previously indicated the company’s plans to invest £18bn in the UK would not be affected by an impending raid on profits. 

The measures were met with dismay in the sector, despite tax relief on investments. Offshore Energies UK, the trade group, said they were a “backward step” that would deter investment.

The Government bowed to months of pressure on Thursday to act to help households facing soaring energy bills with a raid on producers’ profits enjoying surging oil and gas prices.   

Energy firms have continued their decline this morning after Rishi Sunak unveiled a windfall tax on oil and gas profits.

Harbour Energy sank to the bottom of the FTSE 100 with a 5.9pc fall. British Gas owner Centrica dropped 4.3pc, while SSE and Drax were down 3.1pc and 2.4pc respectively.

While energy generators won’t be directly affected by the tax, there are fears further measures are to come after the Chancellor said a review into the market was needed.

BP shed 1pc after it said it’s reviewing all North Sea investment in light of the windfall tax. Shell was down 0.5pc.

Meanwhile, there were more gains for retailers as the £15bn package fuelled hopes of higher consumer spending. JD Sports rose as much as 2pc, while Frasers was up 1.9pc and Currys gained 0.5pc.

Here’s an interesting point from Sam Freedman at the Institute for Government.

He says the ONS needs to decide how to define the latest support measures – and its choice will directly impact the headline inflation rate.

In practice, it won’t change anything. But Rishi Sunak will no doubt be happy if that inflation figure starts coming down…

After treading ground at the open, the FTSE 100 has now dipped into the red.

The blue-chip index is down 0.2pc, but it could still be heading for its best weekly performance since mid-March.

Retailers including Next and Marks & Spencer led yesterday’s gains, as Rishi Sunak’s fresh support spurred hopes of increased consumer spending.

Energy firms SSE and Harbour Energy were the biggest fallers, shedding around 2.5pc each amid concerns they could be targeted with a windfall tax.

But losses were limited by gains for commodity stocks, with Glencore, Rio Tinto and Antofagasta all rising about 1pc as copper and iron ore prices were boosted by a weaker dollar.

The domestically-focused FTSE 250 was trading flat. Moonpig slumped 8pc after it placed shares at a discount.

China and India are buying up record amounts of oil from Russia as the West shuns Putin over the invasion of Ukraine.

Between 74m and 79m Russian barrels were in transit and floating storage over the past week – more than double the 27m barrels just before war started, according to data from Kpler.

Asia overtook Europe as the largest buyer for the first time last month and that gap is set to widen in May.

The figures highlight how the conflict has upended global energy trade, with the UK, US and many EU countries turning their back on Russia, forcing Moscow to look for new buyers in Asia.

China and India have been quick to capitalise on the situation, snapping up millions of barrels at a discount.

The EU is said to be drawing up plans to ration gas supplies in case the bloc is cut off completely by Putin.

Kadri Simson, the EU’s energy commissioner, said the region was racing to store as much gas as possible and could replace most of Russia’s deliveries this year, but would have to do more if there were any “full disruption” of supplies.

The plans being drawn up would include rationing gas to industry, but households would be spared, the Financial Times reports.

Russia has already cut supplies to Poland, Bulgaria and Finland for refusing to comply with Putin’s demand for payment in roubles.

Ms Simson warned that “any member state” could be next.

Profits at Chinese industrial firms dropped last month for the first time in two years as Beijing’s zero-Covid policy disrupted factory production, distribution and sales.

Industrial profits fell 8.5pc in April from a year earlier, marking the worst performance since the early days on the pandemic in April 2020.

Factories have struggled during the latest outbreak, largely due to strict lockdowns in Shanghai. Earlier this month, the government admitted output shrank 2.9pc in April – the worst performance for a single month since 1990.

The FTSE 100 is flat as a pancake at the opening bell, although it’s on track for its strongest week of gains since March.

The blue-chip index opened unchanged at 7,565 points.

It’s worth pointing out that it’s not all criticism from the IFS.

Paul Johnson describes the new measures as “extremely distributive” and “strikingly progressive”, as the support is targeted at the poorest and most vulnerable households.

Yesterday he was conjuring up images of Rishi Sunak as Robin Hood – “taking from high earners and giving to the poor”.

Rishi Sunak is already out the blocks with his response to inflation worries.

The Chancellor said his latest support package will have a “minimal” impact on price rises, pushing back against criticism that he could fuel inflation further.

Asked on Sky News whether than meant adding one percentage point to inflation, he said “no, much, much less than that”.

He said the support won’t push up prices because the measures were targeted and partially funded be raising new money.

Good morning. 

All eyes are on Rishi Sunak this morning as we digest the latest measures to help battle the cost-of-living crisis.

Paul Johnson, director of the IFS, has warned there’s a risk inflation could be driven even higher if the Chancellor gives in to the temptation of offering more and more handouts.

He told BBC Radio 4: “In general when you’ve got very high inflation you need to be very careful about putting more money into the economy. 

“I think the biggest risk here is that the Chancellor will be tempted to do this again and again and I think if that happens then we really could be in for a bit of trouble.”

It comes after the Chancellor unveiled a £15bn package of measures to help households cope with surging energy bills, which will be funded in part by a windfall tax on oil and gas profits.

5 things to start your day 

1) How midlife ‘peakers’ are resisting the return to the office  London has effectively become the home working capital of the world 

2) BP to review all North Sea investment in light of windfall tax  Oil giant previously said it would go ahead with its £18bn planned investment for the area regardless of an extra levy

3) Used car shortages to last until 2024, warns Auto Trader  Short supply of second-hand vehicles is driving up prices

4) Missguided on brink of collapse  Fashion chain accused of leaving suppliers millions of pounds out of pocket

5) Fears of French broadband takeover as billionaire’s BT stake sparks national security review  Business Secretary Kwasi Kwarteng orders review before a potential takeover

What happened overnight 

Hong Kong shares rallied more than 3pc on Friday morning thanks to a surge in tech firms after strong earnings from Alibaba and Baidu. Shanghai, Tokyo, Seoul, Sydney, Singapore, Taipei, Manila, Jakarta and Wellington were also sharply higher. 

Coming up today

• Corporate: Worldwide Healthcare Trust (full-year results)
• Economics: Core personal consumption expenditures (US), personal income (US), Michigan consumer sentiment index (US)