The UK will begin 2023 on the brink of recession as households and businesses come under intense pressure from the cost of living crisis, with inflation at the highest rates since the early 1980s.

Here’s a breakdown of the charts that show the country’s economic prospects next year:

Accountancy and consulting firm Deloitte has lowered temperatures in its UK offices by 2C, the Financial Times reports, as it becomes the latest large employer to take steps to reduce its heating bills and carbon emissions during the energy crisis.

Deloitte announced the plan to its 23,000 staff in the UK this month following similar measures by public and private sector organisations across Europe as the war in Ukraine hits energy supplies.

The FT explains:

The temperature in Deloitte’s 22 UK offices had been cut to between 19C and 22C, with thermostats set to the higher end of the range during colder months, said a person briefed on the plan.

The reduction, alongside the usual closure of its buildings over the Christmas period, was expected to result in savings of up to £75,000 in December, the person added.

Richard Houston, chief executive of Deloitte UK, said the savings in December would be donated to charity. The firm said it had also lowered temperatures in some of its other offices in Europe.

More here: Deloitte lowers temperatures in its UK offices by 2C to save energy

Earlier this month, John Lewis said it would turn down the temperature in its department stores, while its Waitrose supermarkets will dim their lights, in an attempt to bring runaway energy bills under control.

The staff-owned John Lewis Partnership, which includes Waitrose, said its energy bill was threatening to go nearly £20m over budget.

Back in Europe, bank lending to eurozone companies slowed in November, in a sign that rising interest rates and a looming recession are taking a toll on demand for loans.

European Central Bank data released today showed that lending to businesses in the 19-country euro area expanded by 8.4% in November, down from 8.9% in October, while household credit growth slowed to 4.1% from 4.2%.

Shares in Tesla have jumped 7% in early trading, up from their lowest level in around two years.

Overnight, CEO Elon Musk told employees that they should not be “bothered by stock market craziness” after the company’s shares fell nearly 70% this year.

Shares had weakened earlier this week, after a report that the automaker planned to run a reduced production schedule in January at its Shanghai plant. The news sparked worries of a drop in demand in the world’s biggest car market.

Rail passengers travelling in Scotland have been warned to expect significant disruption next week as rail workers take further strike action in a dispute over pay, jobs and conditions.

The RMT union has announced its members at Network Rail will take strike action on January 3, 4, 6 and 7.

The dispute does not involve ScotRail staff but will have a major impact on the train operator’s ability to provide services as many of the Network Rail workers walking out occupy safety-critical roles.

On strike days, and on the non-strike day of Thursday 5 January, ScotRail will run services on 12 routes across the central belt, Fife, and the Borders between 7.30am and 6.30pm.

China’s once firm grip on the London property market is loosening more than most nations, Bloomberg reports.

It says tight capital controls and a cooling of relations with the UK has stemmed the flow of money coming from China to buy property in the capital.

China accounted for less than 1.5% of all cross-border investment in London properties in 2022, or about £185 million, MSCI data show.

Bloomberg reports that:

That’s a stark drop from the nation’s 11% share in 2013 that totaled around £2.2 billion when Chinese investors were pouring cash into the capital city as then-Prime Minister David Cameron and then-Mayor Boris Johnson courted their investment.

Overall, cross-border investment flows to properties in London totaled £12.4bn in 2022, according to data compiled by MSCI.

That’s a big drop-off from the £30.5bn of foreign dealmaking in 2015, which preceded Brexit and the Covid-19 pandemic, which both hit the market.

More here: Foreign Grip on London Property Is Easing on a Cocktail of Risks

Some reaction to the uptick in US jobless claims last week:

Brad Bechtel of Jefferies says there was “a bit of a fright in the market yesterday on the Milan headlines” (that almost half of the passengers on two flights from China to Milan were found to have Covid-19).

This knocked China’s yuan lower against the US dollar, but the market has now calmed, Bechtel tells clients.

Bechtel says:

The market was a little excited yesterday and seemed to react to news that flights out of China were loaded with passengers containing covid.

Some 50% of arrivals in Milan from China were covid positive, which reminded us all the early days of the covid pandemic, especially given the involvement of Milan. CNH [the offshore yuan] weakened amid an already bid USD [the dollar].

Defence Secretary Ben Wallace has rejected the TUC’s call today for ministers to get around the negotiating table and hammer out pay deals to end the current industrial action.

Speaking during a visit to Manchester Airport, Wallace said the Government will not be “held to ransom” by striking public sector workers, PA Media reports.

Wallace said the Government was not prepared to ignore the pay review bodies’ recommendations and that it was now up to the unions to talk to their employers directly.

He said:

“We’re not going back to the 1970s where the trade union barons thought that they ran the government.

“They used to meet in Downing Street and tell the Labour government of the day what they’re going to do. We’re not going to go back to that. We’re not going to be held to ransom.

Wallace also insisted that the UK borders are safe despite the ongoing strike by Border Force staff, who are being covered by the armed forces.

The PCS union, whose Border Force members are on strike, has claimed that travellers have been “waved through” airports by armed forces staff, who don’t have the power to detain suspected criminals if they have valid travel documents

Wallace, though, insists that “Our borders are safe and secure,” adding:

“These individuals that members of the armed forces have come to help out, when the strikes are on, are carrying out a very straightforward function and of course backed up by computer systems and scans .... that allow us to identify people of worry coming into the country.”

“The lack of clarity over the virus situation in China has prompted some new travel rules from various countries, which could serve as some dampener for previous optimism,” said Jun Rong Yeap, market strategist at IG.

With this fall in optimism knocking the oil price today, he adds:

“Heading into 2023, there are chances for oil prices to rebound but it will still boil down to the pace of China’s reopening, and whether market participants have priced for the growth risks as a trade-off to tighter central bank policies.”

Former health minister Lord Bethell argues that the UK government should follow Italy in introducing Covid tests for visitors from China.

He told Radio 4’s Today programme this morning that this would allow genomic testing to be carried out, to understand whether any new variants are emerging.

Lord Bethell said:

“I think there are two different reasons to bring in testing – one is the American approach which is pre-testing to slow the spread.

“That is a difficult thing to do because containing a virus like Covid is like trying to stop the sea.

“But what the Italians are doing is post-flight surveillance of arrivals in Italy in order to understand whether there are any emerging variants and… the impact of the virus on the Italian health system.”

“That is a sensible thing to do and something the British Government should be seriously looking at.”

He added:

“You’ve got to appreciate that a lot of people who get on these flights, we know from experience, will be people who are poorly themselves and are coming to the West for medical help.

“That is quite a daunting prospect for our healthcare system and it’s important that we know which of them have got the virus and what kind of virus they’ve got.”

China’s decision to abandon quarantine requirements for travellers had boosted sentiment earlier this week as the country finally ditched its zero-Covid approach.

But the optimism faded fast and there is a sense that “authorities may have acted too hastily in removing all restrictions”, says Raffi Boyadjian, lead investment analyst at XM.

He explains:

Not only are investors now questioning how quickly the economy can fully recover when infections are seemingly soaring in many districts, but they are also worried that the reopening of borders will increase the risk of new variants spreading to other parts of the world. Even if the Chinese economy were to bounce back quickly, that would then bring its own problems such as the risk that it would magnify price pressures globally as demand for commodities and other goods increases.

Several countries including the United States, Japan and Italy have imposed mandatory Covid tests for Chinese visitors, adding to the alarm in the markets after Italian authorities said almost half of all passengers travelling to Milan from Beijing and Shanghai since Monday have tested positive.

European wholesale gas prices have risen this morning, up from the 10-month lows seen yesterday, with UK gas prices also higher.

Reuters attributes it to “lower Norwegian gas exports and French nuclear output”, but adds that strong wind and mild weather capped the gains.

Here’s the details:

The Dutch front-month contract was up 1.80 euros at 85.50 euros per megawatt hour (MWh) by 0934 GMT, while the contract for February delivery TRNLTTFMc2 rose by 3.73 euros to 87.73 euros/MWh, according to Refinitiv Eikon data.

“Key to the Europe energy puzzle is the availability of French nuclear,” said analysts at Jefferies. “French nuclear availability is down 13% vs last week to 35.3 gigawatts (GW) and remains below the 10-year range.”

London-listed iron pellet producer Ferrexpo told the City this morning that its controlling shareholder, billionaire oligarch Kostyantyn Zhevago, has been detained in France.

Ferrexpo, which operates iron-ore mines and an iron ore pellet production facility in Ukraine, said it believes the detention is not related to the company.

It told shareholders:

The Company is aware that Mr Zhevago has been detained in France by the French authorities, and the Company understand that this is in relation to matters unrelated to Ferrexpo.

The Board of Directors of Ferrexpo is seeking to clarify the situation and will update the market as appropriate.

Ukraine’s State Bureau of Investigation (DBR) announced yesterday that Zhevago, a former MP, had been arrested at the upmarket ski resort Courchevel.

Shares in Ferrexpo fell 5% yesterday when news of Zhevago’s arrest hit the wires (he owns 50.3% of the company’s shares) and are down another 1.2% this morning.

Victoria Scholar, head of investment at interactive investor, says:

“Ferrexpo’s owner Kostyantyn Zhevago has reportedly been arrested in Courchevel in the French Alps at the request of Ukraine. He will stand in front of the appeals court of Chambery in France on 5^th January. The billionaire is wanted on suspicion of financial crimes including money laundering linked to the bankrupt Finance & Credit Bank.

Ferrexpo has had a difficult year with shares down around 45% year-to-date as the war in Ukraine caused major interruptions and instability which have impacted its operations and production. In October a Russian missile hike nearby infrastructure leaving Ferrexpo with minimal power supply.”

Yesterday, US oil major Exxon Mobil launched legal action against the European Union’s windfall tax on oil groups, arguing Brussels exceeded its legal authority by imposing the levy.

Exxon claimed the windfall profits tax was “counter-productive,” and would discourages investments and undermines investor confidence.

My colleague Richard Partington explains:

Agreed in September as part of a package of measures to tackle the surge in oil, gas and electricity prices triggered by Russia’s war in Ukraine, the EU hopes the “solidarity contribution” could raise €25bn (£22bn) in public revenue for governments across the 27-nation bloc, while acting to curtail energy demand and bring down prices.

ExxonMobil, however, said the proposals were misleading and could discourage industry investment in the production of affordable energy.

Filed on Wednesday by its German and Dutch subsidiary companies at the European general court in Luxembourg, the company’s lawsuit challenges Brussels’ legal authority to impose the new tax.

The Financial Times points out that the fall in European whosesale gas prices came after warmer than usual temperatures across northwest Europe, which are expected to linger into the new year.

The FT says:

As the warm weather reduces heating demand, Europe has been able to build up its gas inventory again after drawdowns from mid-November, including during the cold snaps in the early weeks of December.

Since Christmas Eve, Europe has been sending more gas into its storage facilities than it has taken out of them, with storage levels increasing 0.28 per cent to Monday. Capacity stood at 83.2 per cent full as of December 26 — down from the mid-November high of 95.6 per cent, according to industry body Gas Infrastructure Europe.

US natural gas futures have also dropped this week.

They hit a nine-month low on Wednesday, amid forecasts of milder weather forecasts over the next two weeks that could hit heating demand.

Weaker demand from Europe is also a factor, as US exports of liquefied natural gas to Europe hit record levels this year, to make up for sharply lower pipelined natural gas supplies from Russia.

Milder winter weather has helped Europe preserve its gas storage reserves, which has pushed down prices.

Ole Hansen, head of commodity strategy at Saxo Bank, has tweeted the details: