BUSINESS LIVE: Inflation steady at 2.2%; L&G to sell housebuilder CALA; M&C Saatchi

Just before close, the FTSE 100 was 0.73% down at 8,249.16.

Meanwhile, the FTSE 250 was 0.54% lower at 20,830.92.

The number of people expected to pay tax on their savings interest will have trebled in three years, new data shows.

Many more savers will be forced to pay savings tax as interest rates have risen and people hit their tax-free limit.

A number of energy providers have launched new one-year fixed-rate energy tariffs which undercut October’s rising energy price cap.

British Gas, EOn Next and Outfox The Market have unveiled deals which, on an annual basis, fall below £1,717.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, comments on Hostmore, the UK operator of TGI Fridays, collapsing into administration:

‘It’s a highly unwelcome Wednesday for the chain inspired by the expression Thank God It’s Friday. Its owner Hostmore has thrown in the towel and appointed administrators after plans to buy the chain collapsed last month.

TGI Fridays bounded onto the UK restaurant scene in the mid-eighties with its Americana inspired décor and menus sating the appetite for US cuisine dining.

UK consumers were in the middle of a love affair with all things American, with the brat-pack films top billing in cinemas, and Madonna and Whitney Houston top of the charts.

Almost 40 years on, plenty of other rivals have stolen a march on its menu, the once unique décor seems dated and Asian fusion food seems to be a bigger draw for younger diners.

Even though the chain had focused on reducing costs, and significantly reduce losses from unprofitable stores, it wasn’t enough to keep the business afloat. lure enough people through the doors.

Clearly there was still a certain level of loyal love for the chain from long-time fans with guest scores having risen to record levels, but the turnaround wasn’t sharp enough to lure enough people through the doors.

Angela Rayner will hold fresh talks with trade unions and business bosses today as she bids to push through Labour‘s controversial overhaul of workers’ rights.

The Deputy Prime Minister and Business Secretary Jonathan Reynolds will stage the latest in a series of meetings over the Government’s reforms.

A sinister voice cloning scam is on the rise and millions of people could be at risk of getting caught out.

Fraudsters are using AI technology to replicate the voices of their unassuming victim’s friends or family members and using them to extort money.

LADbible owner LBG Media returned to a first-half profit as its audience reached a new record high of almost half a billion users.

The digital publisher, which also runs the UniLad website, revealed a £7.1million pre-tax profit for the six months ending June, compared to a £1.2million loss during the same period last year.

Its turnover climbed by 55 per cent to £42.3million, largely thanks to direct revenues nearly doubling to £22million and making up over half of the firm’s sales for the first time.

The UK operator of TGI Fridays has gone into administration as the hospitality firm scrambles to sell its chain of 87 restaurants across the country.

Hostmore said it had appointed administrators from Teneo after plans to buy the US restaurant chain collapsed earlier this month.

The company is in the process of trying to sell the UK restaurants to new owners, which it hopes to complete by the end of September.

This would keep the TGI Fridays brand alive on British high streets, although it is not clear at this stage whether some or all of the restaurants are likely to find a buyer.

PZ Cussons has slashed its dividend after the consumer goods group’s profits were hammered by foreign exchange volatility.

Shares in PZ Cussons fell as much 18 per cent early on Wednesday after the soap maker forecast lower profits for the fiscal year 2025, pressured by currency headwinds in Nigeria, one of its biggest markets.

Asda co-owner Mohsin Issa will step down from running the supermarket and will hand over the reins to chairman Lord Stuart Rose and the management team.

The supermarket group said Mr Issa will leave his executive role this week to concentrate on his recently announced move to become sole chief executive of the petrol station forecourts business, EG Group.

M&C Saatchi scored stronger earnings in the first half of 2024 after closing loss-making divisions amid tough times for the advertising industry.

The London-listed advertising agency reported like-for-like operating profit growth of 40 per cent to £17.1million in the six months ending June.

On a statutory basis, the London-based company swung from a £3.6million loss to a £14.1million profit, primarily due to cutting employee costs by over £12million.

As Rachel Reeves is given the keys to ­Dorneywood, the 21-room grace-and-favour Buckinghamshire home that was occupied by Deputy Prime Minister John Prescott in the last Labour government, it is perhaps the strongest signal yet that the Exchequer’s ­responsibility surpasses that of Deputy Prime Minister, Angela Rayner.

Reeves is set to follow through with Sir Keir Starmer’s ­warning that those with the ‘broadest shoulders’ will bear the brunt of tax hikes in her first Budget next month.

Legal & General has agreed to sell its housebuilding subsidiary Cala back to its former owner in a £1.35billion deal.

L&G told investors on Wednesday the proceeds of the deal, which is part of a simplification drive, would be reinvested into the group, but some could be earmarked for share buybacks.

Investment firms Sixth Street Partners and Patron Capital have formed a joint venture to acquire Cala.

MJ Gleeson could see profitability ‘broadly triple’ as it looks to build 3,000 new homes per year, the housebuilder has said.

The group, which saw revenues tick 5.2 per cent higher to £345.3million in the 12 months to 30 June, is preparing an ambitious new build target driven by the Government’s affordable homes push. 

The FTSE 250 firm also told shareholders on Wednesday it was more optimistic about trading conditions in the year ahead, citing Bank of England base rate cuts and ‘a more stable economic outlook’.

Troubled THG failed to stave off a share sell-off yesterday despite announcing plans to spin off its technology arm.

The beauty and nutrition group, formerly known as The Hut Group, said it was ‘progressing options’ to demerge its Ingenuity business – a move that will help shore up its finances.

Superfans are expected to help deliver growth at Universal Music.

The world’s biggest record company predicts profits will grow by 10 per cent every year for the next four years, while revenues are set to jump 7per cent.

Robinhood UK lead analyst Dan Lane:

‘Inflation is still above target, economic growth is holding up and unemployment remains low so it’s likely we will see a halt in rate cuts tomorrow, with a second cut more likely in November.

‘A level reading is in line with expectations and appears positive against near-term predictions of a tick up. With household energy bills set to rise in October and the Bank of England itself saying a rate of 2.75% is likely by year end, we know inflation won’t go down in a straight line.

‘It’s now down to how comfortable the BoE is in looking through any short-term stagnation to the eventual effect of lower rates kicking in with a lag.

‘The concern is a sticky short-term reversal from 2% gives way to a drift higher into 2025.

‘Services inflation has been the fly in the ointment and will be key here; having regularly overshot the BoE’s predictions, a stream of lower readings should assuage policymakers’ unease at cutting rates later in the year. Any further stickiness in the measure will make that job a lot harder.’

ITV’s boss has warned the Government’s ban on junk food advertisements before 9pm could cost the broadcaster ‘millions of pounds’.

Carolyn McCall has hit out against the move as ministers pledged to press ahead with the policy, despite complaints about ‘nanny state’ curbs and their impact on broadcasters.

Susannah Streeter, head of money and markets at Hargreaves Lansdown:

‘The optimism which had been simmering on financial markets is coming off the boil ahead of crunch interest rate decisions.

‘While inflation in the UK is unchanged at 2.2%, a rise in services inflation mainly due to a big leap in airfare costs is likely to keep policymakers more reticent about reducing rates again on Thursday. The FTSE 100 has fallen back slightly in early trade as uncertainty surrounds central bank policy.

‘Although headline inflation in the UK remains unchanged, a creeping up in services inflation is causing niggles of concern.

‘Costs in restaurants and hotels have fallen back but transport prices have shot up, particularly air fares. It seems that consumers are still ring-fencing available budgets for holidays and are willing to shell out for higher ticket prices amid a bunfight for seats. After dipping 10.1% in July, airfares jumped 11.9% in August.

‘It means airfares rose by 22.2% on the month, the second biggest rise since records began in 2001. The increase came principally from European routes, an indication of people desperate for a quick escape from the rainy British weather for sunnier climes.

‘The rise in both services and core inflation may make Bank of England policymakers a bit more wary about voting for a back-to-back rate cut. It still seems likely that they will decide to keep interest rates paused this month, and instead wait to cut rates again in November and December.

‘That is the scenario being priced in by financial markets, which see more than a 73% likelihood that rates will be kept on hold but that more cuts will come later in the year.’

London was yesterday hailed as Europe’s favourite stock market as the FTSE 100 hit a two-week high.

The latest fund manager survey from Wall Street giant Bank of America (BofA) revealed that the UK was ‘the most preferred equity market in Europe’. Germany was ‘the most unloved’.

Rachel WInter, partner at Killik & Co:

‘While the headline rate of inflation has stayed the same, the Bank of England will be disappointed by the higher core inflation figure. Core inflation excludes the traditionally volatile components of food and energy, and the recent uptick suggests there is still too much demand in the UK economy.

‘“This could put a September interest rate cut out of reach, and it also makes the case for future rate cuts more difficult this side of Christmas.

‘For investors, as uncertainty around future rates lingers, the importance of maintaining a well-diversified portfolio across multiple asset classes remains.

‘Short-term volatility is a concern as we approach Labour’s first Budget, and diversification will help to protect against sector-specific shocks.’

Pret A Manger global sales jumped to above £1billion last year as it pursued international expansion.

The UK-based coffee and sandwich chain said £1 in every £4 spent by customers now came from outside the UK as sales shot up 22 per cent in 2023.

A total of 81 shops opened up abroad including in India and Canada, as well as in Greece and Spain.

Life insurer Legal & General has agreed to sell its UK housebuilder CALA Group for £1.35billion, including debt.

L&G said the sale to funds managed by Sixth Street Partners and Patron Capital reflects a ‘disciplined approach to capital allocation’ and follows the London-listed firm’s decision to create a Corporate Investments Unit.

It said: ‘Disposal proceeds from the sale will primarily be used, as they become available, to reinvest in the Group in line with our strategy and the capital allocation framework set out at the CME. 

‘The Board will also consider the proceeds as part of the Group’s announced intention to increase returns to shareholders through ongoing buybacks. As signalled, the sale of Cala reduces the Group’s Solvency Capital Requirement (SCR) by £100million after diversification.’

M&C Saatchi profits rocketed 26 per cent in the first half, aided by improved advertising spend from clients, cost-saving measures and asset sales.

Business from the existing client base remained strong with about 75 per cent of last year’s clients choosing to spend in the first half of the year, the company said, adding that it now has high-profile clients such as McDonald’s, Ford, IKEA and Sony Pictures to its blue-chip roster.

In response to pressure from tech clients’ marketing cutbacks last year, M&C Saatchi, under new CEO Zaid Al-Qassab, had been strategically divesting some businesses to enhance margins and profitability.

The advertising group, with clients such as Amazon and Japan’s Rakuten posted £14.2million in like-for-like profit before tax for the six months to 30 June, from £11.3million a year earlier.

Thomas Pugh, economist at RSM UK:

‘The rebound in services inflation in August makes an interest rate cut tomorrow even less likely, but this is just a bump in an otherwise downward path. Services inflation should continue to slow over the rest of the year, leaving the door wide open for one, or even two, more cuts towards the end of the year.

‘The good news is that accommodation inflation fell again from 3.9% to 3.7% and restaurant inflation dropped from 5.5% to 4.9%. Price pressures in this sector had been very sticky until July, so consecutive drops in inflation suggest that price pressures are now actually easing.

‘Elsewhere, almost all goods prices continued to decline, with goods inflation in aggregate dropping by 0.9%, which helped to offset the impact of higher services inflation.

‘Overall, we’re not worried about the rebound in services inflation, it was driven by erratic airfares. Most other sectors show that price pressures are continuing to ease. While there is little chance that the MPC will cut interest rates tomorrow, we think the chances of getting two cuts towards the end of the year are rising.’

Matthew Chapman, associate partner at McKinsey & Company:

‘Keeping inflation within a hair’s breadth of two percent is tricky. While goods inflation has been in negative territory since April, high levels of services inflation have caused the overall CPI to maintain above the 2% target.

‘Price increases in everyday essentials has remained slow. While food and non-alcoholic beverage price increases have declined to 1.3%, the cost of living is still top of mind for consumers.

‘Higher levels of service inflation (5.6%)- including hotels, package holidays and airfares – has contributed to the overall CPI flatlining at 2.2%. However, consumers are showing a lower intent to spend in these categories in the next 3 months, following the summer, which could impact services inflation in the next few months.

‘Consumer confidence is growing – across all age and income groups. If inflation continues its downward trajectory, shoppers may experience a modest increase in purchasing power, which could then translate into stable spending.’

Consumer price inflation came in at 2.2 per cent for August, unchanged on the previous month and in-line with economist forecasts, fresh data from the Office for National Statistics shows.

The Bank of England, which had predicted CPI would rise to 2.4 per cent last month before hitting almost 2.8 per cent by year-end, will make its latest decision on the direction of interest rates on Thursday.