When credit card balances begin to rocket, analysts are usually convinced the trend indicates consumers are growing in confidence and the economy is bowling along in rude health. In more normal times, consumers feel less concerned about the possibility of paying a super-expensive rate of interest if it means they can buy what they want straight away.
These are not normal times. Britain’s economic recovery has ground to a standstill and a cost of living crisis means most things we buy are becoming less affordable by the day. So it was not surprising that City economists agreed that April’s £1.4bn rise in credit card balances was most probably an act of desperation by middle- and low-income households.
Those with money are also saving it rather than spending, according to figures covering March from the Bank of England. The total amount of liquid assets held by households in banks, building societies and National Savings & Investment accounts rose by £6.3bn to sit well above the 2017-19 average of £4.9bn. Meanwhile, there was a further drop in mortgage approvals for house purchases in April to below the 2015-19 average of 66,500. In April, there were 66,000 transactions, down from the 70,000 seen in March.
Taken together, it is clear households lack confidence. They are borrowing to live and, where they can, saving more because they don’t have faith that the current inflationary squeeze will end any time soon. As if that wasn’t bad enough, they are not buying houses in the usual numbers, often citing the risk of a recession that could push prices down.
There is a misguided hope inside No 10 that the negative trends can be reversed by Rishi Sunak’s £15bn bailout announced last week. Normality, or something like it, would supposedly be restored when June’s figures appear. But once the chancellor had delayed his generosity so long that consumer confidence had all but been destroyed, there was no way Britain could bounce back so easily.
His decision to spend some of the £15bn package on the better off could also persuade the Bank of England to put up interest rates at even faster pace, which will damage further the housing market and crucify those on low incomes with outstanding debts.
Sunak claims to be agile in his response to the crisis and someone who likes to use the latest data to make his decisions when it is clear he is wracked by doubt, and more importantly, trapped by countervailing forces in his own party.
It’s a sorry mess and not all of the government’s making. Yet ministers are, by their disconnected, haphazard actions, succeeding in making a bad situation worse.
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The investing ‘streetfighter’ taking on Unilever
Nelson Peltz, who has pitched himself on to Unilever’s board after buying just 1.5% of the company, is a minnow in the investment management business.
A cursory glance at the the website of his company, Trian, reveals only that it ranks as a “multibillion-dollar” business – further investigation shows it is worth around $8.5bn. It is obvious why he is a little furtive, when many of those operating in the same space have much more firepower.
For instance, Elliott Investment management, notorious for buying Argentina’s debt and then demanding the bankrupt country repay loans in full, has $51bn to throw around. The world’s largest fund manager, Blackrock, has $10tn under management.
Peltz, though, is not to be underestimated. He emerged victorious from his bloody and acrimonious fight with US consumer products company Proctor & Gamble in 2017, despite holding only a handful of shares.
He might have been born into money, inheriting his father’s food business, but he remains a streetfighter. After going 15 brutal rounds with Peltz, a cowed P&G boardroom gave him a role on the board and conceded to his demands to sit on the innovation committee and redraw its management structure.
After four years of Peltz’s involvement, P&G has been streamlined into six vertical businesses, bringing an end to firm’s complex matrix structure. If nothing else, it meant establishing greater accountability up and down the chain of management. Today P&G is worth twice what it was in 2017.
Unilever, bruised from last year’s failed £50bn takeover of GlaxoSmithkline’s consumer business, has wisely read the P&G script and capitulated without so much as a cross word to Peltz’s request for a place on the board.
Yet if the maker of Dove soap, Pot Noodle and Knorr stock cubes thinks playing nicely will put Peltz off his stride, it is probably misguided.
Peltz might be a little distracted by his daughter Nicola’s marriage to Brooklyn Beckham, and Unilever might claim it has ditched its matrix management structure, but even that is unlikely to stop him tearing into the business for good or ill.