38 2GM Wednesday May 25 2022 | the times
Business
An increase in tax revenue and a fall in
spending on fighting Covid have given
the government a boost, bringing down
national borrowing last month at a time
when inflation is approaching double
figures.
Government borrowing fell to
£18.6 billion in April, taking it down by
£5.6 billion on the same month in 2021
and undershooting forecasts. The
Office for Budget Responsibility had
predicted borrowing of £19.1 billion and
City economists had expected a figure
of £18.8 billion.
The government was helped by a
£5.5 billion rise in taxes to £50.2 billion,
including £1.4 billion from the increase
in national insurance last month. Total
receipts rose to £70.2 billion, £9.9 billion
more than in the same month last year,
figures from the Office for National
Statistics showed.
Weighed against that was the rise in
inflation to 40-year highs, which lifted
debt interest payments to £4.4 billion
over the month. Of this, £3.9 billion was
down to the rise in the retail prices
index, which determines payouts on
index-linked gilts, to 11.1 per cent last
month.
Michal Stelmach, senior economist
at KPMG, said: “Following the latest
spike in RPI inflation, we now expect
monthly interest spending to reach an
eye-watering £16 billion in June,
exceeding the annual day-to-day
budget of the Home Office.”
Rishi Sunak said: “While we are
doing what we can to help families to
deal with rising prices, inflation is also
pushing up spending on debt interest,
which is expected to reach £83 billion
this year. We must take a balanced and
responsible approach to support people
now, while also not burdening future
Almost a quarter of households are
struggling to make ends meet as gro-
cery prices rise at the fastest pace in
13 years, research shows.
Food prices in supermarkets have
risen by 7 per cent in the past four weeks
compared with the same time last year,
the highest rate since May 2009,
according to figures released by Kantar,
the data analytics company.
The figures come days after Andrew
Bailey, governor of the Bank of Eng-
land, warned that consumers were
facing “apocalyptic” food prices.
Fraser McKevitt, head of retail and
consumer insight at Kantar, said:
“People are really feeling the squeeze at
the supermarket tills and they’re
having to stretch their budgets further
to accommodate rising prices.”
The cost of a family fry-up compris-
ing toast, eggs, sausage, bacon and
beans now costs £6.83, 40p more than a
year ago.
Archie Norman, chairman of Marks
& Spencer since 2017, said last week that
food prices could go up by 10 per cent
this year. Other food industry sources
have suggested that they could reach
15 per cent. Norman tried to sound a
note of caution about shoppers being
“too panicked”, but he joined a growing
number of bosses warning that con-
sumers would feel the pinch in themist at the CBI, said: “Despite retail
sales returning to their average for the
time of year in May, the outlook has
worsened due to high inflation and
broader economic uncertainty.
“Government action to ensure the
economic security of the poorest
households and to support the invest-
ment ambitions of retailers will be
crucial to ensure the longer-term pros-
perity of the UK economy and society.”
Inflation is at a 40-year high, driven
by food and energy prices. The Office
for Budget Responsibility has warned
that people face the worst cost-of-living
squeeze since the end of the Second
World War, with real incomes set to fall
by 2.2 per cent this year as a result of
higher inflation and rising taxes.
Retail sales improved after a weak
April but are expected to fall below
seasonal norms again next month.
Internet sales in the year to May fell at
their fastest since the survey began in- The decline is expected to slow
slightly in June.
More tax money
eases pressure
from borrowing
and inflation
generations, and we’re on track to drive
public debt down by 2024-25.”
The chancellor has already an-
nounced £22 billion of temporary
support to ease the biggest squeeze in
the cost of living since the 1950s, but he
is under pressure to do more. He is said
to be looking at a windfall tax on
electricity companies and oil and gas
suppliers to help people to cope with
rising energy prices. Energy bills
jumped by 54 per cent last month for
the 22 million households whose bills
are determined by the energy price cap
and are set to go up sharply again in
October. Food prices are rising, too, as
a result of supply disruption caused by
the war in Ukraine.
Economists said that a downward
revision of borrowing in the past finan-
cial year could give the chancellor some
headroom to help households. The
statistics office cut its estimate for
borrowing for 2021-22 to £144.6 billion,
down £7.2 billion from its initial esti-
mate of £151 billion, although it is above
the OBR’s forecast of £127.8 billion.
Paul Dales, at Capital Economics,
the consultancy, said: “The lower-
than-expected public borrowing and
the downward revisions to borrowing
in 2021-22 will only add to the pressure
on the chancellor to go big when final-
ising the imminent support package
for households. We think any support
will be small and targeted rather than
big and widespread.”
Public sector net debt stood at
£2,347.7 billion at the end of April,
representing about 95.7 per cent of
GDP, 0.9 percentage points higher
year-on-year. The Bank of England
expects the economy to slow this year,
with the risk that it could slip into
recesssion next year.
There’s no painless way of solving
inflation, Daniel Finkelstein, page 27Martin Strydom
Continued robust trading at Wagamama and a strong recovery in airport concessions have helped The Restaurant GroupWagamama owner warns of rising food costs
The reverberations from the war in
Ukraine reached the Frankie & Benny’s
and Wagamama chains yesterday
when The Restaurant Group sounded a
warning over food and drink inflation.
In a trading update covering the
19 weeks to May 15, the company estim-
ated that food and drink inflation for
the full year would be about 9 per cent
to 10 per cent, up from a forecast of 5 per
cent in March, because of the impact of
the Ukraine conflict on food costs.
The group said: “We continue to
work with our supply chain partners tomitigate some of this increased impact,
but this remains a volatile inflationary
market.”
However, it said that its forecasts for
this year remained unchanged thanks
to “continued robust trading” in its
Wagamama noodle bars and its pubs
business, both of them well ahead of the
market, and a stronger-than -expected
recovery in its airport concessions.
Like-for-like sales in Wagamama
were up by 15 per cent in the 19-week
period compared with 2019 levels,
while its pubs unit was up by 10 per cent.
Its leisure division, mainly comprising
Frankie & Benny’s and Chiquitoeateries, rose by 6 per cent. Its conces-
sions business, which was hit badly by
Covid disruption in the travel industry,
reported an acceleration in the pace of
recovery. The fall in like-for-like sales
of 26 per cent in the first quarter was
followed by an 11 per cent decline in the
following six weeks. It predicted that
sales from the business this year would
be at least £100 million. Its shares fell by
1¼p, or 2.3 per cent, to 53¼p.
6 Restaurant Group suffered a big
shareholder revolt over pay at its
annual meeting with 32.3 per cent of
those who voted being against the
directors’ remuneration report.Dominic WalshBleak retail outlook forces
cut in planned investment
Louisa Clarence-SmithGrocery prices soar at fastest in 13 years
autumn, after many had spent their
lockdown savings on holidays and then
face a huge increase in energy bills.
A survey of households by Kantar
revealed that while 43 per cent said
they were “managing”, 22 per cent were
struggling to make ends meet. Ninety
per cent of people said they were con-
cerned about higher food bills.
Disruption to global supply chains
and higher energy prices have been
exacerbated by Russia’s invasion of
Ukraine, which has affected the prices
of wheat and sunflower oil. This is also
pushing up the prices of substitute oils,
such as palm oil and vegetable oil, as
food manufacturers switch recipes.
Despite fears about rising prices,
preparations for the Platinum Jubilee
celebrations are helping to lift sales,
with sales of sparkling wine doubling.
As a result supermarket sales over the
past four weeks dipped by only 1.7 per
cent, compared with a 4.4 per cent fall
over a 12-week period to May 15.
Aldi and Lidl were the only super-
markets to increase sales last month, up
6 per cent and 5.8 per cent, respectively,
as shoppers switched to budget options.Ashley Armstrong Retail Editor
Retailers have cut back their invest-
ment plans for the year ahead to the
lowest level since the start of the pan-
demic as the cost-of-living crisis knocks
consumer confidence.
Sentiment has deteriorated despite
sales returning to average levels this
month, according to a survey of 56
retailers by the CBI, the employers’
organisation.
The survey found that companies’
investment plans were at their lowest
since May 2020, when the pandemic
had just started and the country was in
lockdown. They are faced with supply
chain delays, higher wages, shipping
and raw material costs, as well as a fall
in consumer confidence.
Retailers expect the state of their
businesses to deteriorate over the next
year compared with the previous year.
The quarterly survey was conducted
between April 27 and May 13.
Martin Sartorius, principal econo-Food prices in supermarkets are up
7 per cent on a year agoALAMY