Rolling coverage of the latest economic and financial news

It’s official, the £5bn sale of Boots the chemists has been abandoned, with its owner blaming ‘market instability’

Walgreens Boots Alliance has announced that it has decided to keep its Boots and No7 Beauty Company businesses under its existing ownership. after months of trying to agree a sale.

WBA blames the turmoil in the financial markets, which meant that interested parties couldn’t raise enough financing to make the deal fly.

WBA has been encouraged by productive discussions held with a range of parties, receiving significant interest from prospective buyers.

However, since launching the process, the global financial markets have suffered unexpected and dramatic change.

As a result of market instability severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots and No7 Beauty Company.

Consequently, WBA has decided that it is in the best interests of shareholders to keep focusing on the further growth and profitability of the two businesses.

The US owner of Boots has ditched plans for a sale of the high street chain. Walgreens Boots Alliance says "as a result of market instability ... no third party has been able to make an offer that adequately reflects the high potential value of Boots."

WBA’s chief executive officer, Rosalind Brewer, insists that Boots, and the No7 Beauty Company, still hold ‘strong fundamental value’, but also suggests a deal could be done in the ‘longer term’.

It is an exciting time for these businesses, which are uniquely positioned to continue to capture future opportunities presented by the growing healthcare and beauty markets.

The Board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximize shareholder value for these businesses and across our company.”

Britons are shifting to cheaper food alternatives in their supermarket shopping as they try to navigate a worsening cost of living crisis, market research group NielsenIQ has reported today.

NielsenIQ reported that sales of frozen poultry are up 12% year-on-year, while sales of rice and grains increased 11%, canned beans and pasta were up 10%, gravy/stock up 9%, canned meat up 9% and dry pasta up 31%.

Overall shopping volumes fell 5.5% year-on-year, in the four weeks to 18th June, as customers tried to economise due to the rising cost of living. But despite buying less, shoppers spent 1.5% more.

There was also a big drop in online shopping compared to a year ago, when the UK was emerging from lockdowns. Online sales fell 12% compared with last year, with almost half a million fewer online shoppers than in June 2021

#Nielsen reports grocery sales up 1.5% in 4 wks to 18 June, online #grocery sales fell a staggering 12% Shoppers are "shopping little and more often to help manage the weekly food budget." Not good for #online orders that usually have a minimum spend#CostOfLivingCrisis

Mike Watkins, NielsenIQ’s UK Head of Retailer and Business Insight, says people are shopping around more to save money:

“It is no surprise that with budgets squeezed some households are less willing or less able to spend on a large online shop.

Moreover, with no restrictions on visiting stores, this is encouraging shoppers to shop around for the best prices as well as shopping little and more often to help manage the weekly food budget. Shoppers are starting to make different choices in how to compensate for their rising cost of living.

For some households, the way to save money is to buy cheaper products and our analysis suggests that some of the increased cost of an overall basket can be mitigated in this way3.”

Sky News are reporting that the £5bn+ auction of Boots the Chemist is being abandoned, as rough conditions in the debt-financing markets scuppered the sale.

After a process lasting several months, Walgreens Boots Alliance (WBA) has decided to retain ownership of Boots, Sky says.

Earlier this month, Indian billionaire Mukesh Ambani’s Reliance Industries teamed up with US private equity fund Apollo Global Management to make a £5bn bid.

But it appears that bidders were having problems financing a deal, at a time when global markets were suffering turbulence as recession fears rose.

The move, which could be announced as soon as Thursday when WBA is due to announce financial results to the New York Stock Exchange, is likely to cast doubt over Boots’ long-term prosperity under WBA’s ownership.

Banking sources said on Tuesday that the £5.5bn auction had faltered badly in recent weeks, with the only bidder to make a binding offer for Boots - a consortium of Apollo Global Management and Reliance Industries - pinning its hopes on the steadfastness of a quartet of lenders.

Growing concerns about the global economy have triggered severe doubts among the big banks which help finance leveraged buyouts, with Boots among the biggest such deals in Europe.

EXCLUSIVE: Walgreens Boots Alliance is abandoning the £5.5bn auction of Boots the Chemist, Britain's biggest pharmacy chain, amid torrid conditions in debt-funding markets that were hampering bidders' ability to table firm offers. The decision, which is likely to be...

2/2...announced this week, will raise questions about Boots' long-term prosperity under the ownership of its New York-listed parent, and underlines the chill gripping parts of the global banking industry as economic conditions worsen. Full story to follow.

Our financial editor, Nils Pratley, wrote recently that the Boots auction lacked much buzz (rarely a good sign in the deal world...)

Roll up, roll up, who wants to buy Boots, a grand old name of UK retailing with 170 years of history under its belt? Not many people, it seems. Or rather, not many at a price the seller, the US group Walgreens, had hoped to achieve.

The reported joint bid of slightly more than £5bn from Reliance Industries of India and the US private equity fund Apollo is a long way short of where the rumour-mill had suggested the winning line would lie. Advisers had been trying to talk the price into £7bn-plus territory. There’s still time for the action to heat up (the ubiquitous Issa brothers of Asda and EG petrol forecourt fame are not formally out yet) but there’s an unmistakable lack of buzz around this transaction.

Chancellor Rishi Sunak has insisted he will carefully consider calls for a “more substantial” fuel duty cut, to help motorists with record costs.

Asked in parliament today whether he would “think again about the cut in fuel duty”, and consider a larger cut, Sunak replied:

“What I will say to him is of course I will take all his recommendations under advisement.

Sunak announced a 5p/litre cut to fuel duty in March, but the jump in wholesale prices since means it’s not being felt at the pumps.

Rising prices prompted the government to demand a review of the sector, by the competition watchdog.

I want to reassure him that the Energy Secretary is in dialogue with the CMA (Competition and Markets Authority) to make sure that fuel duty cut is being passed on as well.”

The AA has claimed that petrol and diesel prices are ‘pump fiction’, as motorists fail to see the benefits of falling wholesale costs.

Petrol crept up to a new alltime average of 191.10p per litre on Monday, the latest data shows, while diesel only fell slightly from last Saturday’s record high, to around 198.96p.

This means it costs over £105 to fill a 55-litre family car with petrol, up from around £72 a year ago.

Edmund King, AA president, says these prices don’t reflect the recent drop in wholesale petrol prices.

“The pump prices are now more like ‘pump fiction’ as they don’t reflect the general downward trends we have been seeing in wholesale prices. This is now an urgent situation. The Prime Minister has hinted at action but we need more than hints.

Pressure to force price transparency and a cut in duty would be a step in the right direction.”

RAC fuel spokesman Simon Williams hope that prices will start to fall:

“We strongly hope pump prices have peaked for the time being and will now start to decrease in line with wholesale prices which reduced last week. That, however, is the hands of retailers.”

A firefighters’ union leader is warning of strikes, after receiving an “utterly inadequate” 2% pay offer.

The Fire Brigades Union (FBU) is recommending rejection of the offer, which is well below the UK’s inflation rate of 9.1%.

Matt Wrack, FBU general secretary said the offer would mean “a further cut in real wages to firefighters in all roles” in the midst of the cost-of-living crisis.

The pay offer will now go for consideration by members, with the union’s executive council recommending rejection.

Wrack says the union will “consider all options, including strike action.”

“This latest insulting proposal follows 12 years of government-imposed reductions in real wages.

“This proposal will anger firefighters, those working in emergency fire controls, and those in all uniformed roles in fire services across the UK.

“It is galling to be insulted in this way, especially after our contribution to public safety during the pandemic.

“Firefighters will now inevitably begin to discuss reactions, including industrial action.

The FBU says firefighters’ real pay has been cut by 12% since 2009, or nearly £4,000.

"You've got to wonder what planet these people are on" - hear the latest from @MattWrack on the derisory 2% pay offer👇 Don't sit idly by, make your outrage heard, go to your branch consultation meetings https://t.co/1WHI3STHsd

Cash-strapped Britons are buying more cheap frozen food to help cut waste and cope with “unprecedented” soaring living costs, the boss of supermarket group Sainsbury’s has told Reuters.

Chief executive Simon Roberts said shoppers were “watching every penny and every pound”, visiting stores more often but buying less on each trip, and using technology to monitor their spending to avoid “till shock” at the check-out.

Roberts, a 30-year veteran of the UK retail sector who has run Britain’s second-biggest supermarket since 2020, addded

“In many ways there is no playbook for what we’re dealing with at the moment, these are unprecedented circumstances.”

Data from Kantar last week showed that supermarket inflation hit 8.3% per year in the past month, adding £380 to the annual cost.

In a pre-recorded video message, Chancellor Rishi Sunak told the SMMT’s audience of automotive leaders that the sector is “incredibly important to the UK economy” and “that’s why the Government is doing more to support you”.

He said this includes a commitment for £2.5bn of investment since 2020 to support the transition to zero emission vehicles.

That doesn’t really tackle the concerns we’ve heard from the SMMT; the FT’s global motor industry correspondent, Peter Campbell, for one, isn’t impressed:

Chancellor Rishi Sunak recorded a video "keynote" for #SMMTSummit, which lasted...er...less than 2 minutes. pic.twitter.com/f6Zw0wIZM9

As a rule of thumb, politicians who pre-record and don't take Qs *always* look worse than those that turn up/tune in and bother to take Qs. Even Chris Grayling getting mauled came across better than those (Rishi, Shapps) that pre-rec and then run.https://t.co/Oy3bhWhbDC

As if all that wasn’t enough to worry about, more than 22,000 UK jobs making engines or other traditional car parts are placed at risk by the shift to electric vehicles.

The SMMT has calcualted that at least 22,000 jobs and £11bn of turnover in the UK is currently reliant on internal combustion engine-based technologies.

Thost jobs, working on products such as engines, exhaust systems or fuel tanks, would be threatened once the sale of petrol or diesel models is phased out. So the SMMT is keen for the government to help the industry adapt to the zero emission future.

The timeframe to act is narrowing, however, with 2024 a looming milestone when EU-UK Rules of Origin get tougher and the Government’s Zero Emission Vehicle Mandate kicks in.

With the UK implementing one of the most ambitious road transport decarbonisation timelines in the world, phasing out the sale of new petrol and diesel cars and vans by 2030, the urgency of action required is self-evident.

NEW: @SMMT warns that 22,000 UK engine jobs are at risk from EV transition. "Many risk being left behind as the jobs and skills involved with internal combustion engine technology may not be transferable," warns @MikeHawesSMMT. Full story: https://t.co/xKzxeKqbC9

UK car makers are also calling for urgent action to cool their spiralling costs.

The SMMT has calculated that the sector’s energy bill will spiral by £90m this year, due to the surge in electricity prices.

UK electricity prices are the most expensive of any European automotive manufacturing country and 59% higher than the EU average, meaning that last year, UK manufacturers could have saved almost £50m on energy costs if they were buying in the EU rather than the UK.

SMMT chief executive Mike Hawes warns that addressing the UK’s high energy costs is “the industry’s number one ask”.

The UK’s car industry is worried that the UK’s push to scrap parts of the Northern Ireland Protocol could harm investment in the sector.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, warned this morning that Brexit has pushed up costs for car manufacturers, and that investment will suffer unless there is stability.

Speaking at the SMMT’s International Automotive Summit this morning, Hawes said there has been ‘little progress’ since the UK and EU agreed the Trade and Cooperation Agreement (TCA) at the end of 2020.

Brexit was a trauma; But it is not yet ‘done’ and the effects of it still being felt.

There was an immense sense of relief when the deal was finally made; it sought to protect this sector.

We viewed the TCA as a foundation, but there has been little progress since.

The promised working groups with the EU have not met. Critical UK-specific regulation has not been hammered out. Brexit costs are there and we cannot ‘kaizen’ them out. The progress promised has not materialised.

“Brexit was a trauma but it is not yet done, uncertainties remain and could impact investment in UK Automotive,” Mike Hawes, @SMMT chief executive pic.twitter.com/Je6YpHnMs3

Hawes also warned that uncertainty over the Northern Ireland Protocol could deter investment, just as the government presses businesses to commit more.

The Chancellor has recently been critical of business for a lack of investment.

But investment needs stability. It needs trust not uncertainty.

For years business, especially automotive, operated with the uncertainty of a referendum, stalling trade negotiations, the threat of no deal. There are now uncertainties around Protocols. Investors will take note. They will pause, but investments are made in a small window.

They will not and cannot wait forever.

The proposed legislation to allow the UK to unilaterally rip up Brexit arrangements for Northern Ireland passed its first hurdles in the House of Commons last night, despite the risk of a trade war with the EU.

But there was opposition from some Conservative MPs; including former prime minister Theresa May, who said the move is illegal and unnecessary.

Hawes adds that the TCA has been “critical” in releasing investment, once the threat of a no-deal Brexit was lifted.

In the year following the deal, £4.9bn was announced for Sunderland, Ellesmere Port, Halewood and elsewhere. Billions pledged for new technology, battery facilities, new zero emission models.

But we must unlock further investment, into new jobs, new skills, new businesses. To do this, Government must do all it can to create stability, to help keep us competitive, especially during this storm.

“Brexit was a trauma but it is not yet done, uncertainties remain and could impact investment in UK Automotive,” Mike Hawes, @SMMT chief executive pic.twitter.com/Je6YpHnMs3

London’s Heathrow airport has been ordered to reduce its landing charges over the next four years, a proposal that will please airlines while the airport said it would result in a worse experience for passengers.

The move by the Civil Aviation Authority (see opening post) deals a blow to the airport, which had argued for higher fees to help protect customer service, at a time when the travel industry is recovering from the pandemic.

The regulator said the average maximum price for each passenger that airlines will pay Heathrow will fall from £30.19 now to £26.31 in 2026. Excluding the effects of inflation, this is equal to a near-6% reduction every year until then.

The CAA said its final proposals would “be in the best interest of consumers”. It is undertaking a consultation and will announce its final decision later this year.

In a bitter dispute, airlines had pushed for a reduction in landing charges, while Heathrow argued that this would hit customer service. The CAA said the two sides had “starkly divergent views on the level of charges for the next five years”.

The airport’s chief executive, John Holland-Kaye, said:

“The CAA continues to underestimate what it takes to deliver a good passenger service, both in terms of the level of investment and operating costs required and the fair incentive needed for private investors to finance it.

“Uncorrected, these elements of the CAA’s proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up.”

Inflation in the euro area is undesirably high and it is projected to stay that way for some time to come, European Central Bank chief Christine Lagarde has warned this morning.

Speaking at the Forum on Central Banking in Sintra, Portugal, this morning, Lagarde says the ECB - which expects to raise interest rates from record lows in July - will “go as far as necessary” to get price rises back to its 2% target.

As Victor Hugo is said to have remarked, perseverance is the “secret of all triumphs”.

Lagarde blames “an extraordinary series of external shocks”, including global supply chain disruption and the Ukraine war, for driving eurozone inflation to a record 8.1% last month.

She vows to “act decisively”, if needed, to “stamp out the risk of a self-fulfilling spiral” if higher inflation threatens to de-anchor inflation expectations.

#BREAKING Inflation in the eurozone to remain 'undesirably high' for some time: ECB's Lagarde pic.twitter.com/Hl3daF6bRT

#BREAKING ECB to go 'as far as necessary' to hit 2% inflation target 'over the medium term': president Lagarde pic.twitter.com/ddKzQpdzdA

Lagarde warns that rising inflation will eat into people’s real incomes -- which could lead to a loss of demand and pressure on the jobs market. But she plays down speculation of a recession, saying:

In this setting, we have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum.

Fears of a new eurozone debt crisis flared up this month, as the gap between Italian and German borrowing costs widened.

Lagarde said that European Central Bank’s new crisis tools will prevent a disorderly widening of bond yield spreads while keeping pressure on eurozone governments to keep their budgets in order:

“The new instrument will have to be effective, while being proportionate and containing sufficient safeguards to preserve the impetus of Member States towards a sound fiscal policy.