UK Economic Changes From COVID-19
While the pandemic has seen an unprecedented level of fiscal and monetary stimulus from Government, it has also seen an unprecedent level of funds taken fraudulently from scammers. It is estimated that some £5.8bn have been stolen from the various emergency support measures including Eat Out to Help Out and the Job Retention Scheme. However, it has recently emerged that the government will only seek to recover some £1.5bn, effectively wiping off £4.3bn to fraud unable (or unwilling) to be recovered. This figure equates to around £65 for each person in the UK or £6.15m for each day since the PM first announced the nation-wide lockdown on 21st March 2020.

Concurrently, it emerged that close to 9% of furlough handouts were given either to frauds or in error as well as around 8.5% of those going to Eat out to Help Out. Hence, there have been calls from all sides of the political spectrum to invest and enhance HMRC’s anti-fraud taskforce (which currently consists of around 1,265 people).

While this revelation is concerning, it is somewhat unsurprising insofar as it reminds us that there will always be those willing and able to defraud the taxpayer and emergency hand out systems in times of national crisis. This dynamic is reminiscent of an article written in the Guardian which challenged the universality of a ‘blitz spirit’ during the Second World War. For instance, during the Blitz the government would pay £500 to those who had lost their homes, however it soon became a gold mine for racketeers with one individual even claiming that he had been “bombed out” 19 times.

The Guardian has the story:

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Cost of Living
The cost of living came into even sharper focus this morning, with December’s inflation figure printing higher than expected at 5.4%. It’s a huge print and coupled with the Chancellors plans for a 1.25% tax increase in April and the energy price cap rise in the same month is going to mean that even with the decent wage growth that we saw at the back end of last year, people are going to be worse off in real terms. It’s also prompted markets to consider the pace of rate rises coming out of the Bank of England, with February’s central bank meeting likely to be another ‘live’ event where a 25bps hike is all but nailed on. Although perhaps the bigger question is does 0.25% cut it, or should they be looking at a spikier rise in rates to try and shock the system? The Bank’s recent argument is that a rate rise isn’t going to fix global supply chains, or pump more gas through pipelines, so they may prefer to hold their nerve in the expectation that these issues may resolve themselves as the year goes on, though it’s a brave person that bets energy prices are going back to where they were pre-pandemic….
Oil
Oil hit its highest level in seven years yesterday, driven by geo-political fears and fading concerns over continued covid related economic slowdown: On Monday there was an attack on an Abu Dhabi oil facility which has been claimed by Houthi rebels from Yemen. Though the damage wasn’t significant, it raises concerns over future incidents. There was also an explosion at a pipeline between Iraq and Turkey yesterday, with the cause unknown, that spooked markets. Gas prices have fallen back from December’s highs but are still more than three times where they were pre-pandemic, which is also putting pressure across the energy sector. Uncertainties over Russia’s next move are keeping the gas market on its toes and arctic blasts are forecast to hit the US in the next couple of weeks that will keep global demand and prices high.
UK Government
Another Wednesday, another Prime Ministers Questions. Boris may have thought that he had ridden out most of the initial heat behind Sue Gray’s shield but claims from Dominic Cummings that Boris was warned about parties at Number 10 before they had happened will no doubt be picked up on by the opposition. You’d think in an integrity contest between Cummings and Johnson, MPs would back the PM all day long, but it emerged last night that up to 20 Tory MPs were meeting to discuss BoJo and apparently left with the majority set to write letters of no confidence after today’s PMQs. The BBC points out that up until now there have been a lot of individual voices of discontent, but now they’ve organised, it could be much more serious for the PM.
Unilever
Unilever might not be able to get a £50bn acquisition over the line, but Microsoft can. The tech giant has agreed to acquire video game developer Activision Blizzard for $70bn in cash to help them play their role in sculpting the metaverse. The deal was good news for all involved, but Sony saw their share price fall ten percent as their biggest hardware competitor just took a quantum leap forward in scale. This had a ripple effect with a number of other video games companies’ shares rising on the thought that Sony is now going to have to go any make its own acquisitions to keep up.

​​​​​Looking Ahead
Today’s calendar is now sparsely populated, with remaining highlights Canadian inflation, US housing starts and the bank of England’s Bailey and Cunliffe testifying on financial stability (riveting). This leaves us with the House of Commons to provide the entertainment over lunch and any action or developments from the Russian situation to move markets.

Have a great day.

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