Games theory

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By Sarah Vizard

Before we get into the big business news today, it's worth reflecting on the conclusion of the Olympics. An improved medal haul for Team GB (65 compared to Tokyo's 64, across 18 sports) couldn't mask a drop in the number of gold medals to the lowest level since Athens in 2004.

In sport, as in so many things, there were a number of near misses and pockets of bad luck that stopped silver or bronze medals being gold. The line between winning and coming second was sliver thin in many sports, which is always worth remembering when judging success and failure.

Elsewhere, the attention of business leaders is back on interest rates. Having seen the rate come down to the Bank of England's (BoE) target of 2 per cent over the past two months, economists expect to see a rise to 2.3 per cent in July when official figures are released this week. 

That would mark the first increase since December 2023, driven in part by rises in air fares, package holidays and hotels. This means inflation in services, the dominant sector of the UK economy, is on track to stay above 5 per cent. 

There are warnings that inflation is likely to climb back up to around 2.75 per cent in the second half of this year, fuelled by the services sector and resilience in the jobs market. The price of one-night hotel stays has seen a notable rise due to a shift in consumer habits after the pandemic and a move to surge pricing by hotels to deal with demand for events such Taylor Swift’s tour. 

On the jobs market, Catherine Mann, an external member of the BoE’s monetary policy committee (MPC), told the Financial Times that wage pressures in the economy could take years to disappear. Companies, she claims, are still expecting to increase both wages and prices over the next year and it could take “multiple years” for wages to catch up with workers’ expectations.  

“There is an upwards ratchet to both the wage setting process and the price process and... it may well be structural, having been created during this period of very high inflation over the last couple of years,” she says. “That ratchet up will take a long time to erode away.” 

That increase in headline inflation comes just a couple of weeks after the BoE cut interest rates for the first time since the start of the pandemic in early 2020. The 0.25 percentage point cut means interest rates are now at 5 per cent, easing some pressure on households but still some way above recent levels. Mann is one of the four on the MPC who voted to leave interest rates on hold. 

We can expect more data on the UK economy this week. Figures on jobs released tomorrow (Tuesday) are expected to show a slowdown in wage growth and a rise in unemployment, despite Mann’s comments over its resilience. And on Thursday, GDP numbers are predicted to show growth of 0.7 per cent in the second quarter – the same increase that was seen in the first quarter. 

That growth is some way below the level needed for the government to enact its investment plans without having to significantly raise taxes or cut back spending. The chancellor, Rachel Reeves, has, according to The Guardian, asked cabinet ministers to find ways to cut costs or be prepared for difficult spending decisions.  

She has previously described a £22bn black hole in the government budget that needs to be plugged if Labour is not to break its own fiscal rules. 

A Treasury spokesperson says: “The chief secretary has now written to departments, kicking off the spending review process to fix the foundations, so we can rebuild Britain and make every part of the country better off.”  

Business Agenda

A summary of the most important business news

By Josh Dornbrack

1. The pay of FTSE 100 bosses has hit the highest level on record, with median pay increasing from £4.1m in 2022 to £4.19m in 2023. Analysis by the High Pay Centre shows chief executives are now paid 120 times the average full-time UK worker. AstraZeneca’s Pascal Soriot was the best paid FTSE 100 boss, earning £16.85m. You can read more here.

2. Executives are flying less and cutting down on one-day work trips where they travel by plane, according to the boss of the Global Business Travel Association. Without adjusting for inflation, global corporate travel will hit a record $1.48tn this year, up from $1.34tn in 2023. But execs are making fewer trips due to concerns over disruption, the environmental impact and changing attitudes to work. You can read more here.

3. Mountain Warehouse is planning to open more UK stores amid a boom for its range of outdoor clothing. It has opened 20 stores in the past six months and has a “strong” pipeline of new locations. It comes as the company’s revenues increased 4 per cent to £386m, with profits hitting £26.2m. You can read more here.

4. UK business output has jumped to its highest level in two years, driven by manufacturing and services, according to data from the advisory group BDO. Its output index rose 2.67 points to 100.77 in July; any number above 95 signals growth. Manufacturing was at 100.03, while services was at 100. You can read more here.

5. Susan Wojcicki, the former boss of YouTube and one of the earliest employees at Google, has died aged 56 after two years of living with lung cancer. She was one of relatively few women to hold a senior role in the technology industry. Google’s chief executive Sundar Pichai described Wojcicki as “as core to the history of Google as anyone”. You can read more here.

Business Question

Who am I?

• I was born on this day in 1801
• I started as an apprentice to a tea dealer in Leeds
• I set up my eponymous company in 1824 in Birmingham
• I was a strong advocate against alcohol consumption and believed my product was better for you
• My sons took over the business and established the Bournville factory in 1879

The answer can be found at the bottom of the page.

Business Thinker

Deep dives on business and leadership

By Josh Dornbrack

?? How to grow a $100m brand: Reinforcing your foundation 

This is the third part of a series from the Business of Fashion that offers advice on growing a £100m brand. The first looked at how to scale a ‘buzzy’ brand, the second at the need for diversification. This final article examines the costs of expansion in a tough financing environment. Its ostensibly about fashion but there are lessons here for all businesses looking to scale. 

????? 5 ways to build innovation cultures at work 

Eight in 10 companies rank innovation among their top three priorities, but creating a culture that embraces risks, fosters collaboration and grants autonomy is hard. Hewlett Packard Enterprise's CTO offers her tips for how to make this work. 

?? The social media Olympics 

The rules around what athletes can post on social media at the Olympics have typically been very tight. But this year’s rules were more lenient. The New York Times explores how that is changing how we watch the Games. 

Business Quote

Inspiration from leaders

“The question isn’t who is going to let me; it’s who is going to stop me.”

– Ayn Rand

Business Leader

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