WEF: Misinformation and disinformation are biggest short-term risks,
Newsflash: Misinformation and disinformation driven by artificial intelligence are the biggest short-term risks facing the global economy, the World Economic Forum is warning this morning.
But in the long term, extreme weather and critical change to Earth systems are the greatest concerns.
That’s the topline finding from WEF’s Global Risks Report 2024, which has just been released, ahead of its Annual Meeting in Davos next week.
The survey polled more than 1,400 global risks experts, policy-makers and industry leaders.
It found concerns over the persistent cost-of-living crisis and the intertwined risks of AI-driven misinformation and disinformation, which could lead to increased societal polarization.
And this misinformation threat comes in a year when more than 40 countries will hold national elections, where there will be an opportunity for bad actors to create false information or ‘deepfake’ videos.
WEF says:
The nexus between falsified information and societal unrest will take centre stage amid elections in several major economies that are set to take place in the next two year
Carolina Klint, Chief Commercial Officer for Europe at Marsh McLennan, which helped produce the report, explains:
“Artificial intelligence breakthroughs will radically disrupt the risk outlook for organizations with many struggling to react to threats arising from misinformation, disintermediation and strategic miscalculation.
At the same time, companies are having to negotiate supply chains made more complex by geopolitics and climate change and cyber threats from a growing number of malicious actors.
It will take a relentless focus to build resilience at organizational, country and international levels – and greater cooperation between the public and private sectors – to navigate this rapidly evolving risk landscape.”
Cyber insecurity and interstate armed conflict also appear high on the short-term risks identified by WEF’s experts.
But the longer-term threat table is dominated by environmental issues, including the risk of biodiversity loss and shortages of natural resources.
Key events
Sainsbury’s in contact with government over Red Sea disruption
The boss of Sainsbury’s has revealed his company is in regular contact with the UK government about the disruption to shipping in the Red Sea (see earlier post).
Simon Roberts said Sainsbury’s was working with the government to help reduce the impact of problems in the Red Sea caused by attacks by Houthi rebels on cargo ships.
He told reporters:
“Through the last three or four weeks our team have spent time working out how to get the impact to an absolute minimum,” he said.
“The vast majority of container ships are instead going around the Cape of Good Hope which is making journeys 10 to 14 days longer.
“We are working on our sequencing of orders to ensure we always have good availability in product areas which can travel through these routes, such as general merchandise and wine.
“Getting products from across the world is an important issue for the Government, so we are on regular calls to make sure we have the latest intel and understand the potential impacts.”
He said most shipments via the area were now taking at least 10 days longer, as they could not go via the Suez Canal, and Sainsbury’s was carefully planning shipments to try to maintain availability and keep costs down.
Tier and Dott to merge, forming Europe’s largest e-scooter rental firm
In other transport news, two e-scooter rental firms are merging.
Tier Mobility and Dott are combining to form the largest European operator.
The combined entity will operate e-scooter rental services in 20 countries with annual revenue of €250m, and keep operating both brands.
Tier and Dott offer rides in many cities including Berlin, Brussels, Dubai, London, Paris and Rome.
The merger may require some regulatory approval and the two companies said it was subject to several conditions being met.
Costs of a major building project also increase as constructors get into the detail of the design, HS2 Ltd executive chairman Sir Jon Thompson added, telling MPs:
“If you say to a builder, can you give me a quote for an extension, they walk around and say ‘it’s £50,000-something’.
“But then you get into the detailed design, you know exactly how big it is, what surfaces you want, how much concrete needs to be poured. Unsurprisingly you get a better number.
“That’s the situation here. The situation with HS2 in my opinion is the estimate was poor, the budget was set too early, and then when you get further into it, you get much better information.
“Then on that basis, you can cost it out with more accuracy and then you discover it’s higher.”
Why has the estimated cost of HS2 continued to climb, and climb, over the years, from a first estimate of £33bn for the full line in 2010?
According to HS2 Ltd executive chairman Sir Jon Thompson there are several reasons – inflation is clearly a factor, but also the original budgets were too low, there have been changes to the scope of the line, and poor delivery.
Thompson told MPs this morning:
“This is a systemic problem. It’s not just about HS2, it’s about large projects that the Government funds.
“The budget needs to be set early on in order for an outline business case to be approved by the Government, sometimes by Parliament.
“At that point, people think OK the original estimate for Phase 1 was £30 billion-something.
“That is based on very, very immature data. You don’t have a design, you haven’t procured anything, there is no detail on which you can cost anything.”
My colleague Gwyn Topham looked into this issue last year, showing how soaring prices of construction materials and labour shortages had driven up costs, while many tunnels had been build along the HS2 route as a concession to MPs in Conservative marginal seats.
Cost of HS2 from London-Birmingham jumps to £66bn
The estimated cost of building the HS2 rail link between London and Birmingham has soared by up to £10bn to as much as £66.6bn, MPs have heard this morning.
HS2 Ltd executive chairman Sir Jon Thompson told told the Transport Select Committee that the estimated cost for Phase 1 is between £49bn and £56.6bn at 2019 prices.
However, adjusting the range for current prices involves “adding somewhere between eight and 10 billion pounds”, Thompson explained (PA Media reports), reflecting the impact of inflation on the line’s cost.
He went on:
“It is the Government’s long-standing policy that infrastructure estimates are only updated at Spending Review points, that’s my understanding of it.
“So that’s why we’re still working to 2019 prices and the whole conversation about 2019, which is to be frank with you an administrative burden of some significance in the organisation.”
Back in October, Rishi Sunak cancelled the northern leg of HS2 from Birmingham to Manchester, but the government is pressing on with the London-Birmingham link, the first phase of the line.
Geopolitical tensions in the Middle East are another global risk.
Asked about this, Carolina Klint, chief commercial officer for Europe at Marsh, warns that we can expect the attacks on traffic in the Red Sea to continue, as there are no signs of the situation calming down.
Klint told reporters in London:
It is becoming almost impossible, taking container ships now through the Suez Canal without risking the lives of the crew, and without putting them in harm’s way.
Of course that is a critical point because it’s not only about protecting a big ship or protecting the containers but first and foremost, of course, it’s the human lives at risk.
Ealier today US and UK warships repelled a barrage of 20 Houthi rockets, drones and cruise missiles fired at ships in the Red Sea.
91% of risk experts are pessimistic about 10-year outlook
Around 17% of the experts surveyed for WEF’s Global Risks report fear the global outlook will be ‘stormy’ over the next decade, with global catastrophe risks rising.
Nearly half of the 1,400-strong panel predict turbulent times, bringing upheavals and an ‘elevated risk’ of global catastrophes.
Just 1% believe there’s a negligible risk of global catastrophes in the next 10 years, as this chart from today’s report shows:
John Scott, head of sustainability Risk at Zurich Insurance Group, says:
“The world is undergoing significant structural transformations with AI, climate change, geopolitical shifts and demographic transitions. Ninety-one per cent of risk experts surveyed express pessimism over the 10-year horizon.
Known risks are intensifying and new risks are emerging – but they also provide opportunities. Collective and coordinated cross-border actions play their part, but localized strategies are critical for reducing the impact of global risks. The individual actions of citizens, countries and companies can move the needle on global risk reduction, contributing to a brighter, safer world.”
Scott has also told reporters in London this morning that the rise of misinformation means we will need “some sort of arbiter of truth” so people can understand, both individually and collectively, what is real and what isn’t real.
Scott says:
And I think that’s where tech is going to go. And that means there’s going to be more governance in that space.
X (formerly Twitter), for example, has brought in ‘Community Notes’, to encourage its users to fact-check claims.
The World Economic Forum’s Global Risks report also warns that the coming years will be marked by “persistent economic uncertainty” and growing economic and technological divides.
Lack of economic opportunity is ranked as the sixth largest risk in the next two years, by the experts quizzed for its report.
And in the long term, WEF warns that barriers to economic mobility could build, locking out large segments of the population from economic opportunities.
The report adds:
Conflict-prone or climate-vulnerable countries may increasingly be isolated from investment, technologies and related job creation. In the absence of pathways to safe and secure livelihoods, individuals may be more prone to crime, militarization or radicalization.
Speaking to reporters in London now, Saadia Zahidi, managing director at WEF, says that concerns over slowing living standards has been rising for some time.
Inequality is on the rise and for some people, that means that their living standards have started to fall, Zahidi points out.
Longer term trends will depend, for example, on whether developing economies will receive the finance they need to be able to adapt to the effects of climate change.
Otherwise, she warns, some parts of the world could be asked to essentially freeze their outlook, even though there hasn’t even been basic electrification for 600 to 700 million people in Africa.
WEF: Misinformation and disinformation are biggest short-term risks,
Newsflash: Misinformation and disinformation driven by artificial intelligence are the biggest short-term risks facing the global economy, the World Economic Forum is warning this morning.
But in the long term, extreme weather and critical change to Earth systems are the greatest concerns.
That’s the topline finding from WEF’s Global Risks Report 2024, which has just been released, ahead of its Annual Meeting in Davos next week.
The survey polled more than 1,400 global risks experts, policy-makers and industry leaders.
It found concerns over the persistent cost-of-living crisis and the intertwined risks of AI-driven misinformation and disinformation, which could lead to increased societal polarization.
And this misinformation threat comes in a year when more than 40 countries will hold national elections, where there will be an opportunity for bad actors to create false information or ‘deepfake’ videos.
WEF says:
The nexus between falsified information and societal unrest will take centre stage amid elections in several major economies that are set to take place in the next two year
Carolina Klint, Chief Commercial Officer for Europe at Marsh McLennan, which helped produce the report, explains:
“Artificial intelligence breakthroughs will radically disrupt the risk outlook for organizations with many struggling to react to threats arising from misinformation, disintermediation and strategic miscalculation.
At the same time, companies are having to negotiate supply chains made more complex by geopolitics and climate change and cyber threats from a growing number of malicious actors.
It will take a relentless focus to build resilience at organizational, country and international levels – and greater cooperation between the public and private sectors – to navigate this rapidly evolving risk landscape.”
Cyber insecurity and interstate armed conflict also appear high on the short-term risks identified by WEF’s experts.
But the longer-term threat table is dominated by environmental issues, including the risk of biodiversity loss and shortages of natural resources.
Full story: Greggs enjoys bumper Christmas period as it hails easing inflation
Sarah Butler
Greggs has hailed easing inflationary pressures after the UK’s biggest bakery chain rang up bumper Christmas sales amid less travel disruption and enthusiasm for seasonal specialities such as festive bakes and chocolate orange muffins.
The company said sales at established stores had risen 9.4% in the three months to 30 December as it attracted more customers with extended opening hours and by offering online ordering.
Better weather and fewer transport strikes than in the same period in 2022 also contributed to growth, the chain said, as did higher prices on some items – although at a lower rate than earlier in the year.
It said extending its ranges had also helped sales, with its festive bakes, chocolate orange muffins and Christmas lunch baguettes “in high demand”, while pizza sales continued to perform strongly.
More here.
Greggs’ strong sales growth last year shows that the chain is resilient to the problems hitting the UK economy.
Victoria Scholar, head of investment at interactive investor, explains:
“Greggs reported like-for-like sales up 9.4% in the fourth quarter. Full-year total sales rose by 19.6% to £1.81 billion, ahead of forecasts for growth of 18.1%. Shares in Greggs are surging today, extending gains off the October lows, helping to reverse some of the declines from the highs at the start of May.
Investors are cheering its impressive period to wrap up the year with strong demand for its festive products such as the Christmas lunch baguette and the Festive Bake, partly thanks to fun marketing with the return of Greggs’ own novelty Christmas jumper. It is also benefitting from the recent disinflationary trajectory that has helped to reduce its cost pressures.
Its low price point makes Greggs resilient to the macroeconomic headwinds, cost-of-living pressures and the consumer slowdown. Its range of value hot and cold comfort food and drinks appeal to a wide customer base including a vast number of workers who are on the move throughout the day.”
Completed home sales at Persimmon drop by a third, but beat expectations
Jack Simpson
Persimmon is the first listed housebuilder to publish accounts this year, and this morning’s numbers reflect the difficult trading conditions for the housebuilding sector in 2023, my colleague Jack Simpson reports.
The number of new home sale completions for Persimmon fell to 9,922 for the year, down by a third on the 14,868 completed in 2022.
However, despite the sluggish numbers, this was actually ahead of Persimmon’s forecast from March last year, which predicted completed sales to be between 8,000 and 9,000 in 2023.
This was largely driven by a strong fourth quarter, when Persimmon completed 4,234 homes – nearly as many as the 4,249 homes completed in the first six months of the year.
Looking ahead, the housebuilder said that market conditions remained highly uncertain, particularly for first-time buyers.
Persimmon says:
We anticipate market conditions will remain highly uncertain during 2024, particularly for first-time buyers and with an election likely this year.
However, it said that there were positive signs with mortgage rates beginning to ease and build costs beginning to moderate both benefiting completion numbers.
Commenting on the results, Aarin Chiekrie, equity analyst at Hargreaves Lansdown, says:
“Market forecasts are suggesting a 35% fall in revenue for 2023. Coupled with the effect of lower volumes and build cost inflation remaining more stubborn than the group had anticipated, operating profit margins look set to roughly halve year-on-year to around 14%.
“While that’s not ideal, it’s a picture that’s largely being repeated across the sector.”
Greggs set to keep prices on hold as inflation eases
Greggs says it does not plan to hike prices over the year ahead, thanks to the easing inflationary pressures it reported this morning.
However, actual price cuts seem unlikely, with Greggs pointing out that rising wages are adding to its costs
Roisin Currie, chief executive of Greggs, told the PA news agency she has “no plans currently” to increase prices across it ranges as it expects a more stable cost base over the year ahead.
However, she said it would be “a long time before we see deflation” that would allow the group to start reducing prices, with retailers among those facing higher wage bills due to increases in the national living wage.
But she said rising wages was also “good news as it puts more money into consumers pockets”
Sainsbury’s shares have dropped by 5% to the bottom of the FTSE 100 leaderboard, to a one-month low of 290p.
Investors are unimpressed, even though the company reported sales growth over Christmas and is sticking with its profit forecasts.
Michael Hewson, analyst at CMC Markets, says Sainsbury’s numbers show “a solid performance”, but the City may have expecting a little bit more given “recent declines in the cost of living and the big jump in UK retail sales seen in November”.
Hewson says:
It is clear from today’s numbers from Sainsbury that consumers prioritised their spend over the Christmas period towards food and drink, eschewing more discretionary spending on bigger ticket items, even as the pressure on the cost-of-living continues to ease.
On a more positive note, Sainsbury did maintain its full year guidance for adjusted pre-tax profit of between £670m and £700m and free cash flow of £600m, however the shares have slipped back on disappointment that there was no upgrade to its full year guidance.
Greggs shares jump to five-month high
Shares in Greggs have jumped to a five-month high at the start of trading in London, as investors hail its sales growth.
Greggs shares have risen by 9% to £2,698, their highest level since 1 August.
That makes them the top riser on the FTSE 250 index of medium-sized companies listed in London.
Greggs shares on a roll today 👀
Like for like sales up 13.7%
Total sales for FY 23 +19.6% at £1.81bn— Michael Hewson 🇬🇧 (@mhewson_CMC) January 10, 2024
2023 was a year of “real progress” for Greggs, says Matt Britzman, equity analyst at Hargreaves Lansdown, after a “solid final quarter”
Britzman explains:
Double-digit growth in like-for-like sales was down to extended opening hours, more delivery options, improving supply chain capacity and a fresh new suite of tasty treats.
Festive Bakes and Chocolate Orange Muffins lead the way over Christmas but bears may point to sales growth slowing over the year, and the fourth quarter was the lowest of 2023. That’s largely because Greggs was able to limit price hikes as inflation cooled.
Longer-term, that’s a net positive. One of Greggs’ key strengths is offering a lower value treat and keeping that proposition intact is key, especially when consumer incomes are stretched. The most important thing is to see volumes trend higher, and that remains the case.
Greggs to open up to 160 new stores this year
Greggs says it plans to increase its store numbers by up to 160 this year.
The bakery chain says it ended last year with a cash position of £195m, which it will invest in growing its shop estate and also its supply chain capacity.
In today’s financial results, it says:
The pipeline of new shop opportunities remains strong, and we expect to open between 140 and 160 net new shops in 2024.
It currently has 2,473 shops trading, after opening 220 new shops in 2023, closing 33 and relocating 42 (giving a net increase of 145 last year).
Roisin Currie, chief executive of Greggs says:
“We enter 2024 with plans to continue to invest in our shops and expand supply chain capacity to deliver the growth strategy, supported by our strong balance sheet.
Introduction: Greggs sees inflation pressures reducing; Sainsbury’s sales rise
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK bakery chain Greggs has declared that inflation pressures are “reducing”, as it reports a strong rise in sales last year.
Greggs, which sells steak bakes, sausage rolls, doughnuts, wraps and breakfast rolls, has posted like-for-like sales of 13.7% for the last year.
Total sales jumped almost 20% to £1.8bn, boosted by a flurry of store openings – a net increase of 145 last year as Greggs targeted retail parks and travel hubs.
Inflation has pumped up retailers’ sales growth in the last couple of years. Greggs’ sales growth slowed in October-December, though, with like-for-like sales up 9.4% – due to a “reduced contribution from price inflation”.
That slowdown in price rises should continue, Greggs suggests, in a boost to consumers.
Greggs says:
As expected, inflationary pressures are reducing and with good forward cover on food, packaging and energy we anticipate a more stable cost base in the coming year.
Wage inflation remains, although higher rates of pay across the economy will also provide support to consumer incomes.
Official data has shown that consumer price pressures slowed last year, with inflation slowing to 3.9%.
Greggs also reports high sales of its Festive Bake, Chocolate Orange Muffin and Christmas Lunch Baguette in the fourth quarter of last year, while pizza sales continue to grow too.
We also have Christmas trading figures from supermarket chain J Sainsbury this morning. And they also point to easing inflation pressures.
Sainsbury’s has reported a jump in sales over the key Christmas period, with improved grocery sales volumes as food and drink inflation slowed.
Grocery sales in the last 16 weeks rose by 9.3%, while sales over Christmas were 8.6% higher. Sainsbury’s says stronger volume growth offset lower inflation, and is sticking with its existing profit forecasts.
Sainsbury’s says:
Our consistent focus on delivering great value, innovation, quality and service has driven sustained sales growth despite significantly lower inflation, with volume growth ahead of the market every week since March.
However, the firm witnessed a drop in trade for clothing and in its Argos business.
Sales at Argos, the catalogue business, fell by 4.2% in the six weeks over Christmas (to 6th January), suggesting consumers cut back in the cost of living squeeze.
Also coming up today
The World Economic Forum will release its latest Global Risks report this morning, highlighting the most serious threats which global leaders must tackle.
This afternoon, MPs on the Treasury Committee will question senior officials from the Bank of England, about the threat to financial stability posed by interest rate rises.
The committee is likely to examine the impact of recent UK interest rate rises on the UK’s economic resilience and financial stability.
The committee says:
The decision to increase and then hold the Bank Rate has seen UK households and businesses face rapidly increasing running costs while borrowing also becomes a more costly option.
Members of the Committee are likely to probe whether these pressures could have implications for the UK’s economic resilience.
