UK consumer confidence hit by budget gloom; Elon Musk ‘not invited to UK investment summit’ – business live

Confidence in Thames Water’s ability to repay its debts is also falling.

Two credit rating agencies have downgraded Thames Water overnight, concerned that Britain’s largest water provider is running out of money.

S&P lowered its ratings on Thames’s class A and class B debt to ‘CCC+’ and ‘CCC-’ respectively, close to default levels.

It blamed Thames’s announcement last week that it could run out of cash in December unless it can rewrite its loan terms.

S&P says this came as a surprise:

On Sept. 20, 2024, Thames Water Utilities Finance PLC (Thames Water) announced that its liquidity sources only cover its liquidity needs until December 2024, unless it obtains senior creditors’ approval to release £0.38 billion of cash reserved under its financing covenants and unless it can draw on its £0.42 billion revolving credit facility (RCF) line.

This announcement is contrary to our previous expectation in July, based on the company’s disclosure, that liquidity would last the company through May 2025.

Moody’s is also concerned that Thames Water is close to defaulting on its loans.

Moody’s cut Thames Water’s corporate family rating to Caa1 from Ba2, saying:

Today’s downgrade reflects a significantly tighter liquidity position than previously expected and our view that this will likely lead in the near term to a distressed exchange, where creditors agree to some form of amendment or extension of credit terms that results in a loss, or a loss is otherwise imposed on them, relative to the original promise to pay.

A distressed exchange of this type constitutes a default by Moody’s definition. In the medium term, inability to attract new equity funding may ultimately lead to a creditor-led debt restructuring or one that is imposed as part of a special administration process, should the company meet the criteria for special administration to be called.

UK consumer confidence has been hit by fears over the budget, and the government’s gloomy warnings, a new survey has found.

The British Retail Consortium has reported that households’ assessment of the general economic situation over the next three months has slumped this month.

People are also more worried about their personal financial situation, following heavy hints from Downing Street that October’s budget will include tax rises.

The BRC’s measure of households’ assessment of the general economic situation over the next three months sank to -21 in September from -8 in August.

Older people’s confidence in economic outlook has taken a particular blow, the BRC says – perhaps a sign of the damage caused by the cuts to winter fuel payments for pensioners.

Helen Dickinson, chief executive of the British Retail Consortium, says consumer confidence “fell significantly” in September, adding:

Negative publicity surrounding the state of the UK’s finances appears to have damaged confidence in the economic outlook, particularly among older generations.

Despite this, expectations for future retail spending, while negative, did not yet appear to have been adversely affected, with many consumers expecting to reduce the amount they save instead.

Here’s the details of the BRC’s Consumer Sentiment Monitor:

• Personal financial situation worsened to -6 in September, down from +1 in August.

• State of the economy worsened significantly to -21 in September, down from -8 in August.

• Personal spending on retail, improved slightly to -8 in September, up from -9 in August.

• Personal spending overall fell to +10 in September, down from +11 in August.

• Personal saving fell to -9 in September, down from -4 in August.

This is the second survey in less than a week to show a slide in consumer optimism this month.

Last Friday, market research group GfK reported that consumer confidence in the UK has fallen to its lowest since March, amid growing concerns over government plans for a “painful” budget.

Back in the UK, Elon Musk’s comments about this summer’s UK riots have cost him a place at next month’s International Investment Summit, the BBC reports.

The Summit is part of the Labour government’s push to stimulate economic growth, by attracting more spending to the UK, and is expected to take place at a central London location.

The goal is to show that the UK is “open for business” under a new government.

But, the BBC’s Faisal Islam reports that Musk, currently the world’s richest person, has not been invited to the International Investment Summit in response to his social media posts during last month’s riots, explaining:

During the August riots, Mr Musk shared, and later deleted, a conspiracy theory about the UK building “detainment camps” on the Falkland Islands for rioters, on X – the social media platform he owns.

At the time ministers said his comments were “totally unjustifiable” and “pretty deplorable”.

Last month, Downing Street criticised Musk after he posted on X that “civil war is inevitable” under a video of violent riots in Liverpool.

The Guardian reported earlier this week that business leaders have warned that the global investment summit risks falling flat, amid growing frustrations over high costs of involvement and its timing two weeks before the budget.

Stephen Phipson, the chief executive of Make UK, which represents 20,000 manufacturing firms across the country, said:

“It’s the wrong way round. There is a concern about the timing, coming two weeks before the budget.

People will want to know what the government’s priorities are before committing investment.”

The European Bank for Reconstruction and Development has also cut its growth forecast for Ukraine, warning that it is taking an economic hit from Russian attacks on its energy infrastructure.

The EBRD lowered its forecast for Ukraine’s economic growth to 4.7% next year from 6% in May due to the attacks, following an expected expansion of 3% this year.

Those attacks are forcing Ukraine to rely on more expensive imports as it builds alternative sources of energy, the EBRD points out/

Their chief economist, Beata Javorcik, told Bloomberg:

“More than half of electricity generation capacity was destroyed.

Now, some of the gap is being filled by imports of electricity from Europe, but this electricity comes at a higher cost. So that puts energy intensive industries at the disadvantage.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Europe is struggling to cope with much higher energy prices than the US and a lack of investment, putting the brakes on growth, the European Bank for Reconstruction and Development (EBRD) has warned.

The bank, which lends to countries across eastern Europe, central Asia and north Africa, revised down its expectations of growth this year and next year, saying many countries would be unable to grow more quickly following a resurgence in gas and electricity prices, my colleague Phillip Inman reports.

While oil prices have stabilised at around the average levels seen between 2017 and 2021, “gas in Europe remains relatively expensive, trading at almost five times the US price, and some economies in the EBRD regions are paying significantly higher average import prices for gas than Germany.” the bank said in its latest Regional Economic Prospects report.

Expected growth across the EBRD region this year was downgraded by 0.2 percentage points from a previous forecast in May to 2.8%.

In 2025, it expects growth of 3.5%, 0.1 percentage point below the previous projection.

“Our economies are steadily adjusting to evolving global dynamics,” said Beata Javorcik, the EBRD’s chief economist.

“The easing of inflation and recovery in real wages offer encouraging signs.”

However, “ongoing vigilance” would be required as economies adapt to renewed inflationary pressures, concerns about energy security following a flare-up in the middle east conflict, trade wars and high interest rates.

Javorcik said high energy prices and a lack of investment had brought Europe to a “crisis point”.

Earlier this month Mario Draghi, a former prime minister of Italy, told EU leaders they needed to club together and spend about 4.5% of the economic bloc’s annual income on investment to boost long term growth prospects.

Javorcik said the report, which was dismissed by German finance minister Christian Lindner, would provide the basis for a discussion about Europe’s competitiveness and the need for investment finance across all 27 EU nations.

The agenda

• 7am BST: German consumer sentiment report from GfK

• 8.30am BST: Switzerlan’s central bank sets interest rates

• 1.30pm BST: US GDP report for Q2 2024 (final reading)

• 2.30pm BST: ECB president Christine Lagarde speech at a conference on “New Frontiers in Macroprudential Policy” in Frankfurt.

• 2.20pm BST: Federal Reserve chair Jerome Powell to speak at the 2024 US Treasury Market Conference in New York