Weaker competition blamed for higher petrol and diesel prices; MPs blast ‘measly’ savings rates – as it happened

Time to wrap up…. here are today’s main stories:

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City AM, London’s business-focused free newspaper, has put itself up for sale.

City AM says it has held discussions over a proposed investment in the business, but while those talks continue it is also open to a sale, it says.

City AM, which is distributed at railway and underground stations in the capital, was hit by the lockdown, wiith many commuters stayed at home.

But with many workers now back in London, City AM managing director Lawson Muncaster, says there are new opportunities….

“As London continues to bounce-back from the pandemic, the time has come to think about the next chapter of City A.M.’s story.

As a local paper at the heart of the financial universe, the brand is perfectly positioned to expand into new areas and develop new revenue streams that take advantage of the new media landscape.”

Back in the global economy, America’s factory sector has contracted for the second month running.

US manufacturing firms recorded a second successive monthly decline in the health of the sector in June, according to the latest survey of purchasing managers, from S&P Global.

June’s US factory PMI report, just released, shows there was a renewed fall in output and a sharper downturn in new orders last month.

With new orders falling, factories kept running down their stocks, and cut their purchases of raw materials and components.

Chris Williamson, chief business economist at S&P Global Market Intelligence, says:

“The health of the US manufacturing sector took a sharp turn for the worse in June, adding to concerns over the economy potentially slipping into recession in the second half of the year.

“Leading the darkening picture was a severe drop in demand for goods, with new orders slumping at a rate among the steepest since the global financial crisis of 2009. Companies report that customers have become increasingly reticent to spend amid the rising cost of living, higher interest rates, growing concerns about the economic outlook and a switch in spending to services.

“Exacerbating the downturn has been a continued focus on inventory reduction as manufacturers, their suppliers and their customers all seek to cut warehouse stocks in the face of weakening demand.

The rival PMI survey from the Institute of Supply Management also shows the sector contracted last month:

Downing Street has weighted in too, saying it is “absolutely not right” that supermarkets have been putting profits ahead of protecting consumers.

The Prime Minister’s official spokesman told reporters:

“It is absolutely not right that drivers aren’t getting the right fair deal for fuel and have in some circumstances been overcharged by retailers.”

Sarah Cardell, chief executive of the CMA, has warned that competition at the pump is “not working as well as it should be”.

Presenting today’s report into the motor fuel market, Cardell explains that changes need to be made, swiftly, to protect drivers.

She says:

Drivers buying fuel at supermarkets in 2022 have paid around 6 pence per litre more than they would have done otherwise, due to the four major supermarkets increasing their margins. This will have had a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.

We need to reignite competition among fuel retailers and that means two things. It needs to be easier for drivers to compare up to date prices so retailers have to compete harder for their business. This is why we are recommending the UK government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time. This would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on satnavs and map apps.

The CMA’s report also shows that increased margins on diesel across all retailers have cost drivers an extra 13p per litre from January 2023 to the end of May 2023.

The Unite union have declared that supermarkets are just one piece of the “profiteering jigsaw”.

Responding to today’s CMA report into the motor fuel sector, Unite general secretary Sharon Graham said:

“Profiteering at the petrol pumps is more proof our economy is rigged. Drivers are paying the price and failed regulators like the CMA have been enabling it.

“But the supermarkets are just one piece of the jigsaw. Price gouging is happening right along the supply chain, in the refineries and the oil companies too. The six refineries that control the UK’s petrol supply saw their margins jump an unbelievable 366% last year.

“Giant multinationals have been raking in profit through the cost of living crisis. Profiteering is a systemic issue across our rigged economy. It’s high time something was done about it.”

The newest policymaker at the Bank of England has warned that interest rates, and inflation, will not automatically fall back to their pre-Covid-19 levels.

Megan Greene has written a column for the Financial Times, in which she analyses the economic concept of “r-star”, the so-called long-run neutral rate of interest which neither stimulates nor slows the economy.

She warns:

It would be a mistake for central bankers to take comfort in the notion that inflation and rates will automatically go back to the low levels we saw before the pandemic. This is their challenge for the future.

That’s a sign that Greene may not be as dovish as Silvana Tehrehro, who she replaces at the Bank’s Monetary Policy Committee this month. Tehrehro was one of two doves on the MPC who opposed recent interest rate increases.

R-star is an important concept for central bankers, as they try to judge where to set monetary policy to guide the economy. But the problem, as Greene points out, is that “it is a concept, not something that can be observed.”

Some economists believe that r-star has not been pushed up by the pandemic, which would imply that interest rates would fall back to pre-Covid lows once the current inflation shock has abated.

Greene, though, argues technologies such as artificial intelligence, and investment in green infrastructure, could mean that R-star will rise – even if it hasn’t yet….

Here’s Danni Hewson, head of financial analysis at AJ Bell, on the CMA’s road fuel market study:

“At a time consumers and businesses were already struggling with rising prices supermarkets were adding to the burden by increasing their profit margins on fuel.

“Almost one billion pounds was syphoned out of motorists’ pockets in 2022 as a result of the change in practice which the competition watchdog says began with Asda and Morrisons, both of which had recently changed ownership.

“Prior to being taken into the hands of private equity both supermarkets had been aggressive in their pricing policy, with Asda in particular setting the bar which other supermarkets and retailers used for their own pricing decisions.

“Sainsbury’s and Tesco could have made a different choice and cut prices in line with falling wholesale costs, but they chose to maintain their previous position which helped the average annual fuel margin jump from 4.4% in 2019 to 7.6% in 2022.

House of Commons leader Penny Mordaunt has welcomed the CMA’s two recommendations:

Here’s a video clip from the CMA outlining their review of the motor fuel market:

3 Jul 202308.36 EDT

Mark Sweney

Back in the City, nearly £10bn has been wiped off the stock market value of AstraZeneca over concerns that a new lung cancer drug may not be as successful as had been hoped.

Shares in the Anglo-Swedish pharmaceutical company fell by as much as 6% on Monday morning after it published the first results from its phase 3 trial for datopotamab deruxtecan, making it the biggest faller among FTSE 100 companies.

The company said the study showed that the drug, which it is developing with Daiichi Sankyo, could halt the progression of a patient’s cancer for longer than the drug currently considered the standard for chemotherapy, docetaxel, but that it was too soon to say with statistical significance if they would also live longer.

More here:

Motorists ended up spending an extra £900m on fuel at supermarkets last year alone, due to the higher profit margins which led to an extra 6p per litre on petrol and diesel, the CMA says.

The CMA point out, somewhat pointedly, that UK retailers managed to cut their prices once the regulator took a keen interest in the sector.

Today’s report says:

We have observed significant drops in the price of fuel shortly after our previous publications (urgent review in July 2022, initial update report in December 2022 and cost of living update in May 2023), indicating that there was room for retailers to reduce prices.

The GMB union are urging business secretary Kemi Badenoch to investigate the merger of Asda with petrol station operator EG Group, following today’s inquiry into the fuel retail sector.

Nadine Houghton, GMB national officer, said:

“Today’s investigation completely vindicates GMB’s call for a full CMA investigation into the merger between Asda and the EG group.

“This merger will reduce competition further and ultimately workers and consumers will pay the price.

“The Business Secretary must use her powers to order a full investigation without delay.”

Billionaire brothers Mohsin and Zuber Issa, who founded EG Group, completed the takeover of Asda from Walmart in 2021.

At the end of May, Asda Group announced it was buying EG Group’s UK and Ireland operations for £2.27bn, as part of its push to overtaking Sainsbury’s to become Britain’s second biggest grocer.