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Have you booked a hotel room in the UK recently? If so, you might have thought the price seemed a bit high. And you wouldn’t be imagining it. Rapidly rising hotel prices are causing problems not just for travellers but for inflation and the wider British economy.

New data from the Office for National Statistics shows the inflation rate was 2 per cent in the 12 months to June, bang on the Bank of England’s target for the second consecutive month and well below the double-digit highs seen in late 2022.

But that headline figure is masking some challenges. While grocery inflation is decreasing and the price of items such as clothing and footwear are falling, services inflation remains high. In restaurants and hotels, inflation was at 6.3 per cent in the year to June, almost entirely caused by an 8.8 per cent increase in the price of hotels.

That caused services inflation to hold at a high rate of 5.7 per cent, well ahead of economists’ expectations. And that is concerning rate setters at the Bank of England, who are keeping a watchful eye on services inflation in particular over fears it could become embedded.

The International Monetary Fund has already warned that high services inflation could result in interest rates having to stay higher for longer. And economists are doing the same. Ian Stewart, chief economist at Deloitte, suggests the BoE will have “limited scope to cut rates” if service sector inflation remains high.

Anna Leach, chief economist at the Institute of Directors, agrees: “Stickiness in services inflation – a key measure of domestic inflationary pressures – lowers the likelihood of an August rate reduction.”

All of this leaves the chances of a cut in interest rates in August on a knife edge. Financial markets have reduced their bets on a cut from 50 per cent before today’s data to 25 per cent after the figures were released, according to Bloomberg data. The pound has also risen by 0.5 per cent to a one-year high against the dollar. But wage data due to be released tomorrow could show a weakening of the jobs market. It will be keenly watched.

It leaves something of a headache for the new Labour government, which has made economic growth a key tenet of its strategy. In the King’s Speech later today, new laws will focus on improving living standards for working people through economic growth. 

Across an expected 35 bills and draft bills, there will be a focus on growing the economy through better transport, more jobs, more house building and infrastructure investment. 

This includes legislation to simplify the rail system by bringing it back into public ownership and establishing a public body, Great British Railways, that aims to improve services. Planning reform is also central to the government’s plans, with a bill aiming to speed up and streamline the planning process. The King’s Speech will also unveil an English devolution bill to transfer more powers to local communities.

For businesses, what is key is how these plans can help improve productivity. Business leaders are calling for better transport, housing and internet access to enable them to reach talented workers. This is particularly an issue for smaller businesses in more rural areas. The government will be judged on whether it can get the economy growing again. Today, we’ll see the first steps in its strategy.

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Business Question

Guess the year

• Q1 is characterised by a continuation of the previous year’s recession
• Unemployment hits 2.5 million for the first time in 50 years
• The Humber Bridge is opened
• The first London Marathon takes place
• A royal wedding gave the economy a much-needed boost

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

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Business in Brief

Everything you need to know

1. HSBC has named Georges Elhedery as its new CEO, replacing Noel Quinn who unexpectedly announced he was retiring earlier this year. Elhedery joined HSBC in 2005 and is currently its group CFO, a role he took up in January 2023. HSBC chair Sir Mark Tucker called Elhedery the “outstanding candidate”. He will take up the position on 2 September. You can read more here.

2. Sales of used electric cars are rising in the UK as the price comes down – making them almost as affordable as petrol cars. Data from the classified ad website Auto Trader shows that sales rose 63 per cent year on year in the first half of 2024. The price of a two-year-old Tesla Model 3 has dropped from around £47,000 in early 2022 to nearer £25,000 now. You can read more here.

3. The government is reportedly set to turn down a £200m loan guarantee request from the shipbuilder Harland & Wolff that it likely needs to secure funding. The company, which built the Titanic, has four shipyards in the UK that employ 1,500 workers. It has been in talks with Conservative ministers about the loan but the Financial Times reports that Labour doesn’t believe it would be an appropriate use of public funds. You can read more here.

4. Manchester City have been overtaken as the most valuable football brand in the world by Real Madrid, according to a report by brand valuation company Brand Finance. Real Madrid’s brand is valued at €1.685bn, ahead of Manchester City on €1.611bn and Barcelona on €1.542bn. Manchester United and Liverpool round out the top five, with Arsenal, Tottenham and Chelsea in the top 10. You can read more here.

5. Amazon workers at its Coventry warehouse have failed to achieve enough support for union recognition in the UK. More than 3,000 workers were asked if they wanted to be represented by the GMB union. Some 2,600 voted with 49.5 per cent voting in favour – just short of the majority needed. The GMB says it will continue to fight for union recognition for Amazon workers. Amazon says: “We place enormous value on engaging directly with our employees and having daily conversations with them. We value that direct relationship and so do our employees.” You can read more here.

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Business Quotes

Inspiration from leaders

“One important key to success is self-confidence. An important key to self-confidence is preparation.”

– Arthur Ashe

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Business Thinker

Ideas on the future of business and leadership

1. ?️ It’s the summer of the quiet vacation. Don’t tell the boss ?️

2. ? Should an aging leader step aside? ?

3. ⚖️ Six things every founder should do to scale effectively in 2024 ⚖️

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And finally…

For all the sports nuts missing the Euros and waiting for the Olympics to start, the Tour de France is still on and pedalling its way to its conclusion this Saturday. This year’s race includes a number of firsts, including the first Grand Départ in Italy, the first finish in Nice (due to the Olympics it won’t end in the French capital) and the first time in 35 years a time trial has taken place on the final stage.

There’s a lot of data surrounding the race, but the mathematician and author Kit Yates has recently highlighted some stats that don’t usually get so much notice: number of wins of the Tour by nation. France comes out on top with 36, followed by Belgium on 18, Spain on 12, Italy on 10 and Great Britain on 6. 

What is even more interesting is the smooth arc of the curve from most to least. As Yates highlights, it seemingly conforms to Zipf’s law, which states that the second-most-frequent thing in a series will occur roughly half as often as the most frequent, the third-most-frequent a third as often as the first and so on.

This is not the only sporting context in which Zipf’s law holds. It has been seen in Olympic medal tables and snooker prize money. And it’s seen in the frequency of the use of words in bodies of text.

The piece is fascinating. And you can read it here.

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The answer to today’s Business Question is 1981