Published: 24 February 2022
Location: London, UK
By Suzanne Evans, Director, Political Insight
In a televised speech early this morning, Russian President Vladimir Putin said he had ordered a "special military operation" in eastern Ukraine, according to AP and BBC News. Various news reports confirm Russian forces fired missiles at several cities in Ukraine and landed troops on its coast overnight, and the Russian military admits it has targeted Ukrainian air basesand other military assets. The Ukrainian government says a “full-scale invasion” is underway, and President Volodymyr Zelenskyy has declared martial law in the country. US President Joe Biden said he "condemned this unprovoked and unjustified attack by Russian military forces" and would work with the G7 and allies to impose "severe sanctions."
Foreign Office Minister James Cleverly said this morning on Sky News that Russian President Vladimir Putin is trying to "recreate a Russian empire" and "absolutely has to be stopped". He called the Russian invasion of Ukraine an "appalling decision," saying "Ukraine is not part of Russia". “The UK will bring in an "unprecedented level of sanctions" against Russia to "punish this aggression", he insisted, saying "we stand shoulder to shoulder" with Ukraine.
Prime minister Boris Johnson delivered a statement to the House of Commons saying that Britain has imposed sanctions on five Russian banks and three individuals in response to Vladimir Putin’s incursion into two rebel-held regions of eastern Ukraine. These sanctions were a "first barrage" and could be extended, Johnson said.
Foreign secretary Liz Truss confirmed yesterday that the UK will introduce legislation to stop Russia selling sovereign debt in London, as part of an "unprecedented package of further sanctions ready to go" should there be more "aggressive acts" against Ukraine by Russia. Truss told Sky News: "We've been very clear that we're going to limit access to British markets…We're going to stop the Russian government raising sovereign debt in the United Kingdom." She added: “There will be even more tough sanctions on key oligarchs, on key organisations in Russia, limiting Russia's access to the financial markets, if there is a full-scale invasion of Ukraine."
However, Russia already has the world’s fourth-largest foreign exchange reserves of over $630bn, and its finances have been further bolstered after oil prices surged following the escalation of hostilities. Oil prices have surged past $100 (£74) a barrel since Russia’s incursion: the price of Brent crude hit $102.30 a barrel at one point, the highest level for more than seven years. Russia is the second biggest exporter of crude oil after Saudi Arabia and is also the world's largest natural gas exporter.
Average UK petrol and diesel prices have hit new highs because of the Ukraine crisis. The RAC said petrol prices rose to an average of 149.30p per litre yesterday and warned it could soon pass £1.50.
The FTSE plummeted this morning on the news coming out of Ukraine. The FTSE 100 index opened down more than 2.6% and remains subdued at around that level at the time of writing. Stocks in Asia fell sharply overnight, and the Moscow Exchange suspended trading shortly after the rouble plunged to its lowest since early 2016. However the price of gold, considered a haven asset in times of uncertainty, rose 2%.
Aircraft flying to or from UK airports have been ordered to avoid Ukraine's airspace by the Transport Secretary Grant Shapps. He tweeted: "I've instructed UK—CAA (the Civil Aviation Authority) to ensure airlines avoid Ukraine airspace to keep passengers and crew safe. "We continue to stand with the people of Ukraine and work with our international partners to respond to this act of aggression." The BBC says the only airlines that were still flying from the UK, Wizz Air and Ryanair, have now suspended all flights to Ukraine. British citizens were advised to leave the country on Tuesday.
Ukraine has closed its airspace to civilian flights, citing a high risk to flight safety due to the use of weapons and military equipment in the Donbas region. The European Union Aviation Safety Agency has also warned of additional safety risks in bordering airspace in Russia and Belarus. "There is a risk of both intentional targeting and misidentification of civil aircraft," the regulator said. "The presence and possible use of a wide range of ground and airborne warfare systems poses a high risk for civil flights operating at all altitudes and flight levels."
The geopolitical crisis between Ukraine and Russia could drive UK inflation higher, a Bank of England (BoE) policymaker has warned. Speaking to MPs at the Treasury Select Committee yesterday, Jonathan Haskel, external member of the BoE Monetary Policy Committee, said the escalating conflict could drive up energy prices even further, adding to inflationary risks. “If certain geopolitical events specifically affect the commodity supply chain, it could create substantial price volatility…there seems a material risk of further increases in global gas prices which would only add to the already considerable rises in CPI inflation we have seen so far," he said.
Lloyds bank, Britain's biggest domestic lender, said this morning it was on "heightened alert" for cyberattacks from Russia as the crisis in Ukraine has worsened. "We've been on heightened alert...internally around our cyber risk controls and we've been focused on this for quite a while," Lloyds CEO Charlie Nunn told reporters after the bank's full-year results. Preparation for potential cyberattacks was discussed in a meeting between the government and banking industry leaders about Russia on Wednesday, Nunn added.
Chancellor Rishi Sunak will today tell an audience at the Bayes Business School that he plans to "deliver a low tax, higher growth economy," but will only cut taxes "sustainably". "I firmly believe in lower taxes…and I am going to deliver a lower tax economy," Sunak will say in his speech, "but I am going to do so in a responsible way, and in a way that tackles our long-term challenges". The chancellor will also argue that taxes should not be cut if spending plans are unfunded. Shadow chancellor Rachel Reeves said the Conservative Partywas "now the party of high tax". National Insurance rates are set to rise from 1 April to help fund health and social care. The rise means employees, employers and the self-employed will all pay 1.25p more in the pound.
More than 14,000 'ghost flights' with no more than 10% of their seats filled left UK airports during the pandemic, Sky News says. The international flights departed from 32 airports between March 2020 and September 2021. Heathrow had the most with 4,910 flights, followed by Manchester and Gatwick. A total of 14,472 empty or nearly empty flights were recorded over the 19-month period, at an average of 25 every day. The figures include flights which were operated mainly to transport cargo or repatriate Britons stranded overseas. Airlines traditionally run ‘ghost flights’ when they need to hit an 80% threshold for using take-off and landing slots at congested airports, in order to retain the right to use them the following year.
British Gas’s retail unit has reported a big increase in profits despite a squeeze on the energy sector which has put many of its rivals out of business, PA Media reports. Parent company Centrica said British Gas Energy has seen a 44% jump in adjusted operating profit, which reached £118 million in 2021, helped by households using more gas in the first six months of the year due to unusually cold weather. Much warmer weather in the last three months of the year also allowed it to sell gas and electricity it had bought in advance, cashing in on high energy costs. Centrica also says it plans to pay back the £27 million that it claimed from the Government to furlough its staff, and CEO Chris O’Shea is waiving his £1.1 million bonus as gas and electricity prices are set to increase by more than 50% for 22 million households across the UK. Centrica chairman Scott Wheway said: “I’m proud of the way Chris O’Shea has led Centrica to deliver significant benefits for our customers and wider stakeholders”.
Lloyds has posted profits of £6.9bn for 2021, an increase from the £1.2bn achieved in 2020. Having to pay out compensation for fraud dented the bottom line: the lender had to pay £1.3bn in remediation, including an additional £600m for payouts and costs related to historic fraud at its HBOS Reading branch.
BMW has suspended production at its Mini plant in Oxford due to the global shortage of semiconductors. The company said the Cowley factory was forced to close on Monday and will remain shut for the rest of this week. The 3,500 workers at the plant - which normally produces about 5,000 cars per week - will all still be paid.
Aston Martin (AM) has reported rising sales and a strong forecast for increased revenues. The British luxury carmaker yesterday posted an 82% jump in sales to nearly 6,200 units, and its 2021 annual operating loss narrowed from £323m to £76.5m year-on-year. AM says it plans to launch a line of more profitable models and a full-electric car by 2025.
Shares in British cybersecurity group Darktrace surged yesterday after the company announced its first acquisition, buying Dutch rival Cybersprint for €47.5m (£39.6m). Cybersprint is an attack surface management firm that provides real-time insights to eliminate blind spots and detect risks, Yahoo Finance UK reports. The FTSE 250 company's acquisition, to be completed around 1 March, will see Darktrace gain an additional European research and development (R&D) centre in The Hague, Netherlands.
Anglo-Australian mining giant Rio Tinto has seen pre-tax profits doubled to $30.8bn (£22.7bn), and earnings before interest, taxes, depreciation and amortisation (EBITDA) - rise by 58% to $23.9bn (£17.6bn). This helped Rio Tinto generate some $25bn (£18.4bn) in cash, Sky News says, some $16.8bn (£12.4bn) of which will be handed to shareholders via a special dividend paid alongside its final dividend and the interim dividend already declared. Not only is this the highest dividend payment in Rio's history, but it is also the second highest on record for a FTSE 100 company. It is topped only by the thumping one-off £18bn doled out by Vodafone when, in 2014, it returned to shareholders some of the proceeds of the $130bn sale of its stake in the US mobile operator Verizon Wireless. To put the size of the dividend pay-out into context, it is roughly equal to the annual economic output of Albania, Sky notes.
The National Portrait Gallery has become the latest institution to end their partnership with BP, having sponsored the annual portrait of the year award since 1989. The Director of the National Portrait Gallery, Nicholas Cullinan, said: "The Gallery is hugely grateful to BP for its long-term support of the BP Portrait Award. "Its funding for the Award has fostered creativity, encouraged portrait painting for over 30 years and given a platform to artists from around the world, as well as providing inspiration and enjoyment for audiences across the UK”. Other arts institutions such as Tate and The Royal Shakespeare Company have previously severed ties with BP, following environmental campaigns launched by artists and employees, Sky News says.
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