The Body Shop set to appoint administrators in UK; Biden tells snack companies to stop shrinkflation – business live

Newsflash: A major deal to create a $50bn US energy giant has just been announced.

Diamondback Energy, the Texas-based independent oil and natural gas company, is buying rival Endeavor Energy Resources for $26bn of cash and share.

Endeavor produces oil and gas from the Permian Basin, the largest US oil field, located in southeastern New Mexico and much of West Texas.

Diamondback, which is worth $27bn, has fought off competition from other interest parties including ConocoPhillips.

Endeavor was created by Texas oil engineer Autry Stephens, and is one of the largest private oil producers in the U.S., generating some 311,100 barrels of oil equivalent per day.

To lower his production costs, Stephens created and used his own fracking, construction, trucking and other services companies, Reuters explains (more here).

The average two-year fixed mortgage rate available to UK borrowers has fallen at the fastest monthly rate since the end of 2022, new data shows.

Moneyfacts reports that the average two-year fixed mortgage rate fell “significantly” in January, by 0.37%, its biggest monthly fall since December 2022.

This lowered the average two-year fixed mortgate rate down to 5.56%, down from 5.93% at the start of January.

Moneyfacts says:

• Average mortgage rates on the overall two- and five-year fixed rate deals fell for a sixth consecutive month.

• The overall average two- and five-year fixed rates fell between the start of January and the start of February, to 5.56% and 5.18% respectively. The average two-year fixed rate stands 0.38% higher than the average five-year equivalent.

• The average ‘revert to’ rate or Standard Variable Rate (SVR) fell slightly by 0.01%, to 8.17%.

• The average two-year tracker variable mortgage remained at 6.15%.

• Product choice overall fell month-on-month, for the first time since July 2023, to 5,787 options.

• The availability of deals at the 95% loan-to-value tier (274) has increased to the highest level since September 2022 (274).

• The average shelf-life of a mortgage product rose to 28 days, the highest figure since February 2023 (28 days).

This drop came despite the money markets trimming their forecasts for how many times the Bank of England will cut interest rates this year – to three, down from six expected at the end of last year.

Rachel Springall, finance expert at Moneyfacts, said:

“Borrowers searching for a new mortgage deal may be delighted to know fixed mortgage rates continued their downward trend, with the average two-year fixed rate dropping by its biggest margin (0.37%) since December 2022.

Those borrowers who have waited patiently in recent months to re-finance, or indeed are preparing for when their mortgage deal expires, would be wise to review rates, as lenders are closely monitoring the volatile swap rate market, which tends to influence fixed rate pricing.

There have been big expectations for fixed rates to fall further, and whether now is the right time to refinance will come down to an individual’s circumstances. Lenders are in constant review of their ranges, and it is likely rates will fluctuate in the coming weeks due to the noises surrounding future rate expectations.

The head of the International Monetary Fund has declared she is now “very confident” the world economy will see a soft landing.

IMF managing director Kristalina Georgieva told the World Government Summit in Dubai that:

“We are very confident that the world economy is now poised for this soft landing we have been dreaming for.”

Georgieva also predicted that interest rates would start coming down from the middle of this year in major economies, such as the US:

“I expect to see by mid year interest rates going in the direction inflation has been going on for the last year”.

Georgieva also spoke about the possibilities, and risks of artificial intelligence.

She warned it would be devastating if AI led to more inequality, either within countries or between countries, and added that there’s a risk that AI is used to create a “parallel universe” of lies and misinformation.

Last month, an IMF report predicted that AI will affect 40% of jobs around the world.

If The Body Shop appoints administrators it will prompt fresh concerns about the health of the British high street, says Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Administration will give its owner, Aurelius, the breathing space to restructure and close highly underperforming stores and refocus attention on e-commerce sales – making it likely that some shops will shut for good.

Streeter says:

While the plug will not be pulled on a brand that has lasted almost 50 years, it does still mark a disappointing development for what was a trailblazing venture.

In the 1980s, the Body Shop was the place to go for young shoppers to splash out on fresh scented bubbles and beauty ranges, with a deep environmental conscience and a focus on social justice and conserving nature.

But now stores like Lush hold the bigger pocket money draw for tweens and teens, lured in by fragrant bath bombs and innovative product ingredients. Rivals have stolen a march on what used to be the Body Shop’s unique eco-credentials.

The Body Shop’s sale to L’Oreal in 2006 was the start of a slow decline for the once unique bath and beauty store, Streeter adds:

Anita Roddick was a visionary, offering refills to cut down on plastic decades ago, but that policy was quietly shelved in the 90s to refocus on packaged gift baskets with refill stations only brought back a few years ago. It seems it was too little too late and the Body Shop brand has been struggling to stand out amid a crowded beauty market.

The news that The Body Shop could soon appoint administrators has prompted a torrent of nostalgia from the company’s customers.

Many have been reminiscing about favourite products such as body butter, bath pearls and white musk perfume.

It is highly unlikely that the Body Shop brand will completely disappear from Britain’s High Streets, reports the BBC.

They add:

But there will be a focus on reducing its costs, including on property and rents, as well as building up its online presence.

There are hopes it will be restructured to better compete with brands such as Lush, perhaps best-known for its bath bombs, which is popular with younger shoppers.

The Telegraph says The Body Shop’s trading in the UK was not as good as its new owners, Aurelius, had expected when they bought the retailer last November, adding:

The company’s most recent accounts show that The Body Shop posted a loss of £60m in its last financial year, which came while the business was still owned by the Brazilian cosmetics group Natura & Co.

The retailer said that it had been hit by a “challenging retail environment”, along with rising inflation and interest rates.

The Times says Aurelius hoped it could reverse the beauty retailer’s fortunes, however…

Retail sources said that after the deal had been completed at the start of this year, the new owner concluded that the company had insufficient working capital and was trading more weakly than it had anticipated. This week it emerged that Aurelius had sold parts of the beauty retailer’s Europe and Asia business.

The administration process for Body Shop’s UK operations will not affect the brand’s global franchise partners, according to the report.

UK workers have been warned to expect less generous salary settlements this year, as employers rein in hiring plans.

The latest Labour Market Outlook from the Chartered Institute of Personnel and Development found that UK employers expect to raise basic pay by 4% in the year ahead, down from 5% expected for the last year.

That is the first fall in pay expectations since the start of the pandemic.

Jon Boys, senior labour market economist for the CIPD, says:

“We’ve seen a sustained period of high wage growth in response to a tight labour market, and high inflation pushing up the cost-of-living. Pay growth has helped individuals but it leaves employers with a higher wage bill to cover.

Heathrow has managed to grow its passenger numbers close to pre-pandemic levels last month.

The UK’s largest airport reported this morning that it was used by 5.996m passengers last month, a 9.4% increase on last year, and not far below the 6.1m in January 2020.

The weight of cargo handled by the airport rose 20% year-on-year, to 122,000 tonnes.

Heathrow is also adding its weight to the campaign to reinstate tax free shopping for international tourists, something which then-chancellor Rishi Sunak abolished in 2020.

The airport says:

While exports are thriving, Britain has shut the door on home grown growth, turning away international shoppers through the tourist tax and tarnishing the UK’s reputation as a competitive country to spend and do business with.

Heathrow has joined forces with the British Chambers of Commerce and the Federation of Small Businesses to make the case for an internationally competitive tax-free shopping incentive at the Spring Budget.

The Office for Budget Responsibility (OBR) is conducting a review of the axeing of tax-free shopping for tourists, which could potentially lead to the decision being reversed.

Victoria Scholar, head of investment at interactive investor, says:

Heathrow has been enjoying strong passenger travel demand with January’s figures just shy of pre-covid levels, pointing to a significant recovery from the pandemic era doldrums. It also enjoyed a strong month in terms of cargo passing through the airport.

While cost-of-living pressures continue to hurt consumers amid the backdrop of elevated prices and higher interest rates, it looks like individuals and families continue to prioritize travel over other luxuries where possible, even in the face of higher air fares. February will be the next major test for Heathrow as a gauge of demand over the typically busy half term period following the seasonal post-Christmas lull.

Meanwhile Heathrow may enjoy a boost to airport spending if the Treasury U-turns on the axing of tax-free shopping for tourists. This has resulted in billions of pounds of lost sales and tax revenues for the UK economy and the public purse respectively so a reversal would no doubt be a welcome reprieve for the travel, luxury, and hospitality industries.”

The cost of living squeeze has made it harder for retailers such as The Body Shop to grow sales.

And new research today shows that one-in-three working age families have not managed to build up a basic “rainy day” savings of at least £1,000.

This highlights how the poorest households are struggling to build up financial resilience amid the cost of living crisis.

The Resolution Foundation said people across Britain faced a “triple savings challenge” of insufficient savings, an inability to cope financially with major life events such as family breakdown, and inadequate retirement incomes.

It said 11.2 million people lived in households that had savings of less than £1,000, accounting for about one in three working-age households. As many as half lived in the poorest third of households in Britain.

More here:

President Joe Biden has launched an attack on food and drink companies who are cutting the size of their products but not the cost.

In a video posted ahead of last night’s nail-biting Super Bowl LVIII, Biden pointed out that sports drinks bottles are smaller, while you get fewer crisps in a packet than you used to, and less ice-cream in a carton too.

As Biden puts it:

I’ve had enough of what they call shrinkflation. It’s a rip-off.

“Some companies are trying to pull a fast one by shrinking the products little by little and hoping you won’t notice.

“Give me a break. The American public is tired of being played for suckers. I’m calling on companies to put a stop to this. Let’s make sure businesses do the right thing now.”

Shrinkflation has helped consumer goods makers to grow profits despite inflationary pressures, and it isn’t only a US phenomenon.

Retailers in the UK have been cutting the size of their products for several years, and also changing their ingredients, as they try to absorb the impact of higher raw material, energy and staff costs….

…while in France, supermarket chain Carrefour has put labels on its shelves this week warning shoppers of “shrinkflation”, to shame retailers who have been cutting product sizes.

Biden also seems happy with the result from Las Vegas:

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

Thousands of jobs are at risk at The Body Shop, as the cosmetics retailer’s new owners line up administrators for its British arm.

The Body Shop could go into administration as early as this week, leading to store closures, having suffered disappointing trading over Christmas and in early January.

The retail chain, which has more than 200 shops, was bought by the pan-European private equity investor Aurelius last November.

Administrators at FRP Advisory are likely to be appointed as soon as this week to handle an insolvency process, Sky News reported on Saturday, citing sources who said they expected the closure of a significant number of the stores.

The Body Shop’s international businesses have already been sold to an unknown family office, according to Retail Week.

The Body Shop, known for its ethical trading ethos, dates back almost 50 years, as my colleaue Rob Davies explains:

Roddick, an environmental campaigner, activist and entrepreneur, founded the Body Shop in Brighton in 1976. The company remained under her ownership for three decades, until she sold it in 2006. Roddick died the following year.

By then, The Body Shop had become synonymous with its ethical positions, including a refusal to stock products tested on animals and a sourcing of ingredients from natural products that are traded ethically.

The agenda

• 10am GMT: European Commission winter forecasts

• Noon GMT: India’s industrial production data for December & inflation for January

• 1pm GMT: Russian balance of trade for December

• 6pm GMT: Bank of England governor Andrew Bailey gives lecture at Loughborough University