Crypto bank Silvergate collapses; HS2 delayed; US jobless claims jump – as it happened

HS2 to be delayed by two more years due to soaring costs

Gwyn Topham

Afternoon summary

Delaying HS2’s rollout could be a “body blow” to the economic recovery, warns Stephen Marcos Jones, CEO of the Association for Consultancy and Engineering (ACE).

ACE represents the companies who design, deliver and manage our national infrastructure and built environment.

Marcos Jones argues that delays would push up the construction cost in the long run:

“Today’s news on HS2 is potentially a real body blow for the UK’s economic recovery.

I think every sensible person knows that global events have driven inflationary pressures to record highs.

“But we have already spent significant sums on the design and delivery of this transformational major project. Scaling back ambitions at this stage will mean the economic and social benefits of HS2 for communities across the UK is further watered down – and major delays like this are actually going to cost more in the longer term.

“In a nutshell, the delays announced today are, quite simply, an absolutely false economy.”

The boss of Shell has warned that the next few winters are a worry for energy supply in Europe and that the continent needed to move away from reliance on luck for energy security.

Shell CEO Wael Sawan told the CERAWeek energy conference in Houston that:

“We haven’t structurally resolved the issues on energy security in Europe.”

Morrisons slumps to £1.5bn pre-tax loss after private equity takeover

Joanna Partridge

Wall Street has opened higher, after the rise in US unemployment claims last week calmed some concerns about rising interest rates.

The Dow Jones industrial average is up 130 points, or 0.4%, at 32,928, while the broader S&P 500 index has gained 0.35%.

Bonds are recovering a little too:

EDF Energy has said today it will extend the lifetimes of its Hartlepool and Heysham 1 nuclear plants in Britain by two years to March 2026, Reuters reports.

They had been slated for closure in 2024.

Keeping them open for longer could help the UK’s energy security.

Matt Sykes, managing director of EDF’s generation business, says:

Supplying zero-carbon and affordable electricity, whatever the weather, has never been more important than right now.

Our ongoing investment and careful stewardship of the UK nuclear fleet since 2009 has allowed us to make today’s decision and helps support the UK’s energy security at this challenging time.

UK chancellor Jeremy Hunt could afford to raise public sector wages, and to provide targeted support for households with energy bills, the National Institute of Economic and Social Research says.

The thinktank has calculated that the chancellor has a large amount of fiscal space ahead of his budget on 15 March, thanks to higher revenue and lower spending, together with the more favourable outlook for GDP and interest rates.

These factors mean the budget deficit his year is £30bn less than expected last November.

NIESR says:

• At the macroeconomic level, some of this fiscal space should be used to reduce the planned rise in corporation tax, which would otherwise lower investment and GDP in both the short run and long run, and to increase the amount of public investment. Lower effective corporation tax and increased public investment are both growth-enhancing.

• The Chancellor should allow public-sector wages to rise to catch up with the private sector, given private-sector wages have been rising much faster than public-sector wages of late. We can expect some spillovers from public-sector wage growth to the private sector, but any adverse macroeconomic effects need to be assessed against potential output losses if the public sector lost skilled workers.

• A more targeted approach to provide support for households to deal with the high energy prices: specifically, a combination of an opt-in Social Tariff system and a Variable Price Cap. This is preferable in fiscal terms to a universal EPG [energy price guarantee], as this might cost as much as £29bn for 2023-24, and would provide both incentives to users of energy to limit demand, and also more support to those households who need it most.

The market reaction to the rise in US unemployment claims shows that Bad News is Good News again for investors.

Wall Street futures have pared their earlier losses (as a weak economy will mean interest rates won’t rise as high as feared).

US jobless claims highest since December

Layoffs by US companies in the first two months of this year have hit their highest level since 2009 after the financial crisis, a report has shown.

The tech sector accounting for more than a third of the more than 180,000 job cuts announced in January and February, the report from employment firm Challenger, Gray & Christmas shows.

In February alone, layoffs in the United States stood at 77,770, more than five times higher than the 15,245 job cuts announced a year ago.

The employers’ organisation BusinessLDN has criticised the expected delays to HS2.

John Dickie, chief executive at BusinessLDN, warns that the move could push up the cost of the project:

Delaying construction of HS2 to save money is a false economy. Failing to invest now will likely increase costs over the long-term while also delaying the benefits for people and businesses across England.

The country needs this project to remain on track through swift and efficient delivery to drive long-term growth and decarbonisation. Slowing down construction of sections will do little to help levelling-up, particularly in the North.

With shovels already in the ground, we cannot afford yet another delay. Ministers should not hit the brakes and instead seize this once-in-a-generation opportunity to create a world-class, high-speed, capacity-boosting rail line that will transform connectivity between England’s major cities.

Like other construction projects, HS2 has been hit by rising costs of energy, fuel, raw materials and labour.

European stock markets have dropped into the red this morning, amid anxiety about rising interest rates.

The blue-chip FTSE 100 index has dropped by 54 points, or 0.7%, to 7875 points, further away from the record highs set last month.

Endeavour Mining, which owns and operates gold mines in Côte d’Ivoire, Burkina Faso and Senega, are the top faller, down almost 5% after reporting a 26% drop in EBITDA earnings for last year.

Mining group Rio Tinto (-4.6%) is next, followed by packaging firm DS Smith (4.5%) which reported signs of weakness in the corrugated box market today.

Investors are anticipating that the US Federal Reserve could lift its key interest rates by half a percentage point this month, following warnings from Fed chair Jerome Powell this week that interest rates are ‘likely to be higher’ than previously anticipated.

The Fed’s challenge is to slow inflation without sinking the economy, as Neil Wilson of Markets.com explains:

Sticking with 25bps this month would risk further loosening of financial conditions, which will only make the job to tame inflation harder. Unless there is a stinker of a jobs report tomorrow, the Fed will either need to go with 50bps or do 25bps and stress a much higher terminal rate.

And this comes back to the central dilemma – once a structural inflationary dynamic is let loose, the only way to rein it back in is to crash the economy, Volcker style.

[Paul Volcker put the US economy into a recession in the 1980s to get inflation under control].

Responding to the report that the high-speed HS2 project will be delayed or cut, Prime Minister Rishi Sunak’s official spokesman has said:

“ou will know there’s work already under way on HS2.

Equally the rail minister has been clear we’re continuing to look at any cost pressures and ensure the project delivers value for money for taxpayers.

Supermarkets have started to drop customer limits on buying certain fresh fruit and vegetables as supply issues that led to widespread shortages begin to ease.

Asda confirmed it had removed limits of three on cucumbers, lettuce, salad bags, broccoli, cauliflower and raspberries, leaving restrictions of three on just tomatoes and peppers, PA Media reports.

The supermarket said availability overall had improved as expected, and supplies of tomatoes and peppers were also expected to be back to normal within a couple of weeks.