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Primark rules out further price increases ahead to protect sales in tough economy | Business News

Primark has ruled out further price increases “beyond those already actioned and planned”, in a bid to protect sales in the tough economy.

The discount retailer’s parent firm Associated British Foods (ABF) made the announcement as it warned of lower group profits for its next financial year, which begins later this month.

The company said that it expected Primark, which has implemented price hikes this year to reflect surging energy costs, to face a spending slowdown due to the cost of living crisis hitting customers in its core UK market.

It said that while recent UK sales had proved resilient in its current fourth quarter – outperforming those in wider European destinations – they remained at around pre-COVID levels.

ABF said energy bills, the weak pound and euro relative to the dollar and its decision to limit further price hikes would hurt Primark and its margins next year.

The price action will be seen as a bid to protect its market share as shopper demand is tested.

It was revealed hours before the new Liz Truss-led government prepared to reveal an energy price freeze to help shield consumers and businesses from future bill shocks.

“We expect sales growth to be driven by the increase in retail selling space and like-for-like growth resulting from both the price increases implemented for autumn/winter this year and those planned for spring/summer next year”, its statement read.

“Primark has already been managing the challenges of supply chain disruption, inflation in raw material and energy costs and in labour rates, alongside the higher purchasing costs which have resulted from the strengthening of the US dollar over this financial year against sterling and the euro.

“To mitigate these pressures, in addition to the price increases mentioned above, there are also plans to improve store labour efficiency and deliver lower operating costs.”

It added: “Against this current volatile backdrop and a context of likely much reduced disposable consumer income, we have decided not to implement further price increases next year beyond those already actioned and planned.

“We believe this decision is in the best interests of Primark and supports our core proposition of everyday affordability and price leadership.”

It expected Primark’s profit margin for next year to be lower than the operating profit margin of 8.0% expected for the second half of this current financial year, which ends on 17 September.

Shares fell 8% in early deals.

The group retained its outlook for 2021/22, with its food business – including Twinings and Allied Bakeries – seeing stronger revenue due to higher demand and prices of ingredients.

Day one: New Prime Minister Liz Truss to see Queen in Scotland and unveil energy price freeze that could last until 2024 | Politics News

Liz Truss is making a frantic 1,000-mile dash to see the Queen before launching her premiership with a £100bn energy price freeze that could last until the next election.

She is flying 500 miles each way to Balmoral to be handed the keys to No 10 by the monarch before addressing the nation from Downing Street with a pledge to slash household bills.

Politics Hub live updates: Older Tory voters ‘have gone off’ new PM

What’s happening today?

First up, we’ll be hearing from outgoing prime minister Boris Johnson at around 7.30am as he gives his farewell address outside Downing Street.

He and Ms Truss will then both fly to Aberdeen on separate planes for their meetings with the monarch.

Mr Johnson will get there first at 11.20am and will formally hand in his resignation to the Queen.

Once he has left, his successor will be invited in for her first private audience with the monarch. She will get to Balmoral for around 12.10pm, when she will be appointed Britain’s next prime minister and asked to form an administration.

After her half an hour with the Queen, Ms Truss is expected to fly back to London.

There she’ll give her first address as prime minister at about 4pm.

She will be greeted by the cabinet secretary at the door of Number 10 and will be clapped in by staff before heading into the Cabinet Room to receive security and intelligence briefings from civil servants.

The nuclear codes will be handed over to her and she will write “letters of last resort” to commanders of submarines carrying Trident nuclear missiles with orders on what to do if the government has been wiped out in a nuclear attack.

Her emergency package to tackle the cost of living crisis is expected to include freezing energy bills for homes and businesses until January next year at least – and possibly until 2024.

It would mean that for a typical household, energy bills would be frozen at just under £2,000. The initial cost to taxpayers would be £40bn – to be paid for by more government borrowing.

Over the past 24 hours, Truss allies have been locked in talks with energy bosses, thrashing out details of the price freeze, which if it lasts two years could eventually cost £100bn.

Government ministers are expected to claim the new PM’s plan is more generous than the price freeze proposed by Labour, but she is expected to reject their demand for a windfall tax.

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Backbench Boris: What will outgoing PM do now?

Who will be in the cabinet?

The big cabinet jobs have long been settled and will be filled by Ms Truss’s closest allies, including Kwasi Kwarteng as chancellor, James Cleverly as foreign secretary and Therese Coffey tipped for health secretary.

After Priti Patel quit as home secretary, she is expected to be replaced by Suella Braverman. Culture secretary and Boris Johnson cheerleader Nadine Dorries is expected to follow Ms Patel in resigning.

But on policy issues, dealing with the cost of living crisis is the new prime minister’s most urgent priority. In her speech after she was declared Tory leader, she vowed to deal with people’s energy bills.

At the moment, household energy bills are capped at £1,971 – rising to £3,549 in October. The price cap is due to rise again in January when bills are forecast to pass £5,000.

But under the new PM’s price freeze plan, the government would directly intervene in the wholesale energy market, subsidising the cost of gas bought by electricity generators and suppliers.

That would mean taxpayers taking on the risk of the surging wholesale gas prices while subsidising the cost of energy for hard-pressed households and businesses currently fearing bankruptcy.

Read more:
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What will be in the new PM’s in-tray?

Plan to be outlined as early as Thursday

After the new prime minister’s pledge of help on the steps of No 10, full details are expected from either Ms Truss or her new chancellor Mr Kwarteng as early as this Thursday.

Her Downing Street address on return from Balmoral will also include pledges on tax cuts and moves to tackle the crisis facing the NHS. Allies are describing her strategy as a “shock and awe” approach.

Besides her policy initiatives, the new PM faces the task of uniting her bitterly divided party. After her 57%-43% victory over Rishi Sunak, many Tory MPs are urging her to heal the wounds of the leadership contest.

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Sunak supporter and former cabinet minister Theresa Villiers told Sky News she would now support Ms Truss’s policies, such as the cut to National Insurance that was bitterly attacked by the former chancellor.

But Ms Villiers warned: “It will be really important to ensure that whatever decisions are taken on tax don’t impact on inflation or add excessively to borrowing.”

On energy bills, she said: “There is a case for some more broadly based support as well, targeting it towards those on low incomes.”

John Penrose, who resigned from his government job over Mr Johnson’s partygate conduct, said Ms Truss had a “clear win”, but added: “We’ll have to wait and see if she can deliver, but she said the right things.”

And on energy bills, 1922 Committee treasurer Sir Geoffrey Clifton-Brown told Sky News: “I wouldn’t give a very big package to everybody, because that’s simply racking up our already huge debt and is going to have to be paid back some time.”

Ofgem director Christine Farnish quits over way regulator calculates energy price cap | Politics News

An Ofgem director has quit over the electricity and gas regulator’s decision to change the way it calculates the energy price cap, which she said will lead to much higher bills.

The regulator confirmed to Sky News that Christine Farnish had stepped down from the board after disagreeing with the rest of its members over how long energy suppliers should have to recoup the current high energy prices.

She wanted suppliers to recoup those prices, which are a condition of the price cap, over 12 months to spread out the cost to customers.

However, the rest of the board, Ofgem said, wanted that to take place over six months as they said that would reduce the “very real risk of suppliers going bust”.

Ms Farnish, who has been a non-executive director since 2016, told The Times she resigned because she did not believe Ofgem had “struck the right balance between the interest of consumers and the interests of suppliers”.

This month, Ofgem announced it was changing the methodology of the cap to enable suppliers to recoup wholesale energy heading costs sooner.

Ms Farnish said she believed the move “would add several hundred pounds to everyone’s bill in order to support a number of suppliers in the coming months”.

Investec analysts estimated the change in method would add more than £400 to the level of the price cap in January – taking it to £4,200 a year compared to £1,971 at present.

Ofgem said: “We are thankful to Christine for her many years of devoted service to Ofgem.

“Due to this unprecedented energy crisis, Ofgem is having to make some incredibly difficult decisions where carefully balanced trade-offs are being weighed up all the time. But we always prioritise consumers’ needs both in the immediate and long term.

“The rest of the board decided a shorter recovery period for energy costs was in the best interest of consumers in the long term by reducing the very real risk of suppliers going bust, which would heap yet more costs onto bills and add unnecessary worry and concern at an already very difficult time.”