The Times - UK (2021-12-18)

62 Saturday December 18 2021 | the times

Business

T

he global

economic

rebound is

propelling

power

generation from coal

to a record level this

year and overall

demand to a potential

record high next year,

the International

Energy Agency has

warned (Alex Ralph

writes).

Having dropped in

the past two years,

global power

generation from coal

is expected to rise by

9 per cent this year to

an all-time high of

10,350 terawatt-hours,

as the economic

recovery has pushed

up electricity demand

faster than low-carbon

supplies.

The sharp rise in

natural gas prices has

also increased demand

for coal power.

Overall global coal

demand, which also

includes uses such as

for steel production, is

forecast to grow by

6 per cent in 2021.

Although that

increase will not take

it above the record

levels hit in 2013 and

2014, depending on

weather patterns and

economic growth, it

could reach new

record highs as soon

as next year and stay

there for two years.

The energy agency

said it showed the

“need for fast and

strong policy action”.

Fatih Birol, its

executive director, said

that coal was the

single largest source of

global carbon

emissions.

“This year’s

historically high level

of coal power

generation is a

worrying sign of how

far off track the world

is in its efforts to put

emissions into decline

towards net zero.

“Without strong and

immediate actions by

governments to tackle

coal emissions, in a

way that is fair,

affordable and secure

for those affected, we

will have little chance,

if any at all, of limiting

global warming to

1.5C.”

Coal power is

expected to increase

by 9 per cent this year

in China, where more

than half of global

coal-fired electricity

generation occurs, and

by 12 per cent in India

— new highs in both

countries. In the US

and European Union it

is forecast to increase

by almost 20 per cent,

but below 2019 levels.

Coal power fired up

to hit record levels

KEVIN FRAYER/GETTY IMAGES

A coal-fired power

station in Huainan, in

China’s Anhui province

The Bank of England will need to

raise interest rates further if infla-

tion persists, its chief economist

has said.

Huw Pill warned of further rises

a day after the Bank increased bor-

rowing costs for the first time in

more than three years. He agreed

in an interview with CNBC that

there would be “a lot more rate

hikes to come” if inflation re-

mained at its present level.

He said that Thursday’s decision

“was the Bank’s response to a view

that... underlying, more domesti-

cally generated inflation here in

the UK, probably centred around

cost and wage pressures in a tight

and tightening labour market, are

going to prove more persistent

through time.”

The Bank’s monetary policy

committee (MPC) voted 8-1 in fa-

vour of raising the base rate by 15

basis points to 0.25 per cent from

its record low of 0.1 per cent.

Inflation figures published on

Wednesday showed that prices

have been rising at a faster rate

than the MPC had anticipated.

Black Friday and early Christmas

shopping drove an unexpected rise

in retail sales last month, official

figures show.

Households who were prompted

to do their Christmas shopping

early over fears of supply shortages

are thought to have contributed to

the 1.4 per cent rise in retail

volumes in November. The rise is

almost double the 0.8 point in-

crease predicted by economists.

Shops enjoyed a boost from

Black Friday sales on November

26, which were strong this year,

according to the Office for

National Statistics (ONS). There

was an increase of 2 per cent in the

sales of non-food items, the biggest

rise coming from computers,

jewellery and toys.

The recovery of retail sales vol-

umes, which are now 6.8 per cent

higher than they were in Novem-

ber 2019, is the latest in a series of

indicators that the economy

regained momentum last month.

It may, though, be short-lived.

“Earlier Christmas shopping prob-

ably means that some spending

has just been shifted forward from

December into November,” Betha-

ny Beckett, UK economist at the

Capital Economics consultancy,

said. “Second, Omicron appears to

be reducing economic activity.”

Despite robust trading on Black

Friday the proportion of online

sales fell to 26.9 per cent, which is

the lowest level since March 2020.

Overall year-on-year sales were

up 4.7 per cent because Covid-19

restrictions forced many retailers

to close their doors last November.

Footfall in the week ending

December 11 was only 1 per cent

lower than the previous week,

according to the retail research

company Springboard.

The consumer prices index was

at 5.1 per cent for the year to

November, a level that the Bank

predicted the economy would not

reach until April. The prices of fuel,

clothing and footwear rose the

fastest. Reduced supplies were one

cause, with a tenth of groceries ei-

ther unavailable or low in stock.

Ratesetters increased expecta-

tions for inflation to peak at 6 per

cent in April. The committee ex-

pects gas and electricity prices to

fuel the rise.

Pill said: “We need to move for-

ward now cautiously, in the sense

that we need to assess whether

Omicron is going to lead to some

reversal of the strength of the

dynamics in the economy — and

particularly in the labour market

— that we have seen over the last

six months-plus,” he said.

It was unclear whether the rap-

idly spreading Omicron variant

would increase or soften inflation-

ary pressures, he said.

“But I think it is also important

to keep in mind that Omicron-re-

lated uncertainty is two-sided, at

least as it is reflected in our core

objective: our ambition in terms of

the inflation outlook over the me-

dium term.”

Officials said in the minutes of

this week’s MPC meeting that

there was value in waiting to see

the extent to which Omicron

would impact the economy and es-

cape the protection of vaccines.

“There was, however, also a

strong case for tightening mone-

tary policy now, given the strength

of current underlying inflationary

pressures and in order to maintain

price stability in the medium

term,” they added.

All members of the nine-strong

committee voted to raise rates

apart from one dissenting voice

from Silvana Tenreyro, the dove-

ish external member of the com-

mittee and professor at the

London School of Economics.

She opted to hold rates at 0.1 per

cent because of the uncertain im-

pact Omicron would have on the

economy in the coming months.

‘More interest rate rises

needed to curb inflation’

Arthi Nachiappan

Economics Correspondent

Black Friday

brings early

festive cheer

for retailers

Arthi Nachiappan

Company insolvencies double in year

Company insolvencies in England

and Wales rose last month to their

highest level since January 2019,

surpassing pre-Covid levels for the

first time, according to new gov-

ernment figures.

The Insolvency Service, a gov-

ernment agency, registered 1,674

business insolvencies in Novem-

ber, up from 1,410 in October and

an increase of 87.9 per cent com-

pared with November 2020’s

figure of 891. The company failures

were mostly voluntary liquida-

tions of businesses, but also com-

panies falling into administration

and compulsory liquidations.

The volume of business closures

dropped sharply last year when

many businesses were only able to

survive with government Covid

support programmes. Court capa-

city was reduced and creditors

faced restrictions on taking legal

action until recently, slowing the

process of company dissolutions.

Christina Fitzgerald, vice-presi-

dent of insolvency and restructur-

ing at R3, the trade body, said:

“Times are tough for businesses in

England and Wales as the pan-

demic continues to take its toll on

the economy and the firms that

drive it. Over the last few weeks

businesses have been hit by the

triple whammy of increased costs,

supply chain issues and rising

Covid cases.”

Personal insolvencies fell by

3.2 per cent to 9,372 in November

compared with 9,678 in October,

and were 0.4 per cent higher than

November 2020’s figure of 9,339.

Times Business Reporter

8-1

MPC vote for raising interest rate

Source: Bank of England