Time to wrap up…. Here are today’s main stories:

More than 18% of Shell’s shareholders have voted in favour of a resolution calling the company to tighten its climate targets.

Climate activists descended on Shell’s annual shareholder meeting in London today as the oil giant’s board faced one of its biggest climate standoffs.

The investor resolution put forward by Dutch climate campaigners Follow This won 18.6% of the vote, according to preliminary results, after securing the support of 27 insitutional investors.

The board has called on investors to reject the resolution and back the company’s plan to hold its oil production steady until 2030 while growing its liquified natural gas (LNG) business. The company won the support of 78.2% of shareholders, according to preliminary results.

Shell’s chairman, Sir Andrew Mackenzie, said the world “needs more liquefied natural gas, or LNG, which will be a critical fuel throughout the energy transition” and that “oil will play a vital role for a long time to come”.

One protester interrupted his speech by calling out:

“This is greenwashing. Shell kills.”

Activists from Fossil Free London were forcibly removed from the venue after disrupting the AGM by singing “Shell kills” to the tune of Dolly Parton’s Jolene.

The group was joined outside the venue by activists from Greenpeace and other green groups.

Joanna Warrington, a spokeswoman for Fossil Free London, said:

“We peeled back these suits today to reveal the truth: Shell’s senseless oil and gas expansion is nothing short of murder on a mass scale. Behind this AGM and this board are human lives being trampled, from the Niger Delta, to all those babies born this year who will grow up in a dangerously overheating world hurtling towards collapse.”

Wael Sawan, Shell’s chief executive, said:

“The world needs a balanced energy transition, one that maintains secure and affordable energy supplies as the world moves to net zero.

Sawan added:

“This is why, mindful of our core beliefs around future energy demand, Shell is responsibly delivering the oil and gas people need today, while helping to build the clean energy system of the future as we transform our business in the coming decades, step by step, focusing on where our strengths lie.”

Worryingly, UK manufacturers have been hit by shrinking order books.

The CBI reports that order books weakened in the last quarter, with an increase in the number of companies reporting they were “below normal”.

The net balance of firms reporting order books as below normal, rather than above normal, increased to a net balance of -33% from -23%.

Both total and export order books weakened in May, the CBI reports.

More encouragingly, manufacturing output rose in the last three months, and is expected to keep doing so in the current quarter:

Anna Leach, CBI deputy chief economist, says:

“While it’s positive to see that manufacturers’ expectations for higher output volumes have finally been realised in the three months to May, this has been accompanied by a sharp deterioration in order books to close to their weakest since January 2021. Manufacturers expect to increase output through the summer months, but any recovery looks set to be fairly gradual, with order books soft and inventory levels relatively high.”

“As the economy is starting to show signs of recovery, now is the time to pursue reforms that will boost growth and investment for manufacturers as well as ensuring the UK’s competitive edge globally

Former Tory leader Ian Duncan Smith has pushed back against claims made by the City Minister, Bim Afolami, who said that the UK cannot afford to give the “cold shoulder” to China.

The original comments were made by Afolami at the City Week conference yesterday (as we covered in this blog), where he suggested that the UK needed to engage with Beijing, if there was any hope of being in control of its economic future.

But in response, Duncan Smith, speaking with the Tory think tank Bright Blue, said:

“I don’t agree with Bim Afolami on this statement, because I don’t quite know what he means by ‘cold shouldering China’.

China has already been ‘cold shouldering’ us, and called us a major threat to their project, and so our question is really going to be, when are we going to wake up to the fact that we are facing a problem in China which we have been building.”

Duncan Smith said China was breaking “every single WTO rule in the book” around government subsidies, and trying to flood western markets with electric vehicles. And he said the UK’s efforts to reach net zero should not be outsourced or rely on Beijing.

“One of the problems is that the Treasury and the business department and others will always focus on the short-term returns. That’s what happened on that ridiculous golden decade nonsense that was much-loved by George Osborne and co.

The main point really is that China has one objective, and this idea that can’t cold shoulder China no one’s asking us to ‘cold shoulder’ China, I’d actually rather like the government to be open-eyed to what is happening.”

Despite lifting its UK growth forecasts, the IMF has also poured cold water over the optimistic mood by warning that the government faces difficult choices.

So says Lindsay James, investment strategist at Quilter Investors, who explains:

“Whilst the IMF has on the one hand claimed a ‘soft landing’ is in sight and upgraded growth forecasts from 0.5% to 0.7% in 2024, it remains downbeat about longer term prospects, citing weak labour productivity and higher than expected sickness levels, as the number of economically inactive due to sickness has topped 2.8m. Labour markets are rightly a real focus of its attention, with persistently high wage inflation potentially acting as a barrier to faster and deeper interest rate cuts, amidst skills shortages, higher inactivity and an ageing population. The IMF rightly highlights that migrant numbers are offsetting this to some degree, even as current policies leave many well-qualified migrants unable to have their credentials recognised in the antiquated UK system.

“Encouraging the Treasury to expand the tax net to the tune of £30bn by re-working road taxation, broadening the VAT and inheritance tax base and reforming property taxation, the IMF want to see higher tax receipts to offset the challenge of a growing burden on the public purse, and one it does not believe the UK can currently afford. With taxation already at multi-decade highs at a time of crumbling service provision, news of potentially higher taxes simply to pay for departments at their existing service levels will be bleak reading to many. However, the writing has been on the wall for several years and should come as no surprise to the Treasury, which simply holds itself to fiscal rules that dictate it must bring down borrowing as a percentage of GDP over a rolling five-year basis, a D-day that continuously drifts away and leaves public finances in a permanent state of deniable distress.

“The question will be whether the government that takes the reins by early 2025 is ready to be honest with the public that the UK faces a difficult choice – either accept higher taxes are here to stay, for effectively no improvement in service levels, or expect an awful lot less from the state. The reality is of course that no politician is likely to be brave enough to admit this – meaning the UK economy is likely to struggle on with inadequate funding for over-ambitious services and leave voters in a perpetual state of frustration.”

IMF managing director Kristalina Georgieva then explains that Britain needs to do more to strengthen its public finances to prepare for future crises.

She points out to reporters in London that the UK, like other rich nations borrowed heavily during and after the Covid-19 pandemic

“We are genuinely concerned, not just for the UK, for all countries that have used fiscal buffers extensively, that they must do more to rebuild these buffers.

Georgieva adds that there is a simple reason why the IMF is pushing for fiscal prudence:

“In a world of more uncertainty, we do not know when there may be again a call on governments have to spend – to have to borrow more to spend more.”

IMF chief Kristalina Georgieva says the Fund has three main messages.

1) On monetary policy, she says the Bank of England has reached an inflection point on interest rates.

The IMF believes interest rate cuts of 50 basis points to 75 basis points in 2024 “would be appropriate”, she says. That means two, or three, quarter-point cuts to rates.

Currently, the City money markets are pricing in two cuts this year, which would bring Bank Rate down from 5.25% to 4.75% by December.

2) On fiscal policy, Georgieva welcomes the government’s measure to boost the labour supply and the permanent capital allowances which allow companies to reclaim tax relief on investment spending.

Looking ahead, though, the UK still needs to stabilise public debt and address investment needs in the public sector. Stronger medium-term growth will make that easier, she points out.

She suggests several ways to increase growth and productivity:

• ease planning restrictions to make housing more affordable

• ease labour mobility

• encourage business investments.

• help workers gain new skills

3) On health outcomes. Long-term illness and an aging population are starting to weigh on labour supply, she warns.

The International Monetary Fund are presenting their assessment of the UK now, over at the Treasury.

Chancellor Jeremy Hunt is introducing the Fund’’s top brass now, talking about how the last couple of years have been a “challenging time”.

Hunt says:

We are very interested to hear what the IMF says about the process we’ve been through.

Our big priority is not just stabilisation, but also growth, and increasing our long-term growth rate.

Hunt then hands over to IMF chief Kristalina Georgieva.

Georgieva starts by saying the IMF’s view is that the actions of the UK authorities – Rishi Sunak, Jeremy Hunt, and the Bank of England – combined with “favourable energy price developments” are “paying off”.

Georgieva adds:

The economy is growing, inflation is falling, and a soft landing is in sight.

BOOM! The International Monetary Fund has signalled its opposition to pre-election tax cuts from Jeremy Hunt as it warned the government of a looming £30bn hole in the UK’s public finances.

In its annual health check on the economy, the Washington-based IMF said current spending plans looked unrealistically low and that “difficult choices” lay ahead.

The IMF said it would have advised Hunt not to cut national insurance contributions (NICs) by two percentage points in last year’s autumn statement and March budget, and expressed strong doubts about the wisdom of the chancellor’s reported plans for a third cut in NICs before polling day.

It said that, in order to stop debt rising, the Treasury may need to consider a range of potentially unpopular revenue-raising measures including widening the scope of VAT, road pricing, scrapping the triple lock on the state pension and wider user charges for public services.

The IMF is also warning that the UK economy urgently needs reforms to boost growth, and raise the skills and health of the public.

Here’s the IMF’s verdict on the UK, following its regular Article IV visit to London:

“With growth recovering faster than expected, the UK economy is approaching a soft landing, following a mild technical recession in 2023. CPI inflation has fallen faster than was envisaged last year and is projected to return durably to target in early 2025.”

As monetary policy reaches an inflection point, the timing and pace of rate cuts must carefully balance the risks of premature and delayed easing. Fiscal policy has been appropriately tight, but difficult choices will need to be made over the medium term to stabilize public debt, given significant pressures on public services and critical investment needs. The banking system remains healthy, but continued vigilance of all banks is warranted. Maintaining progress on initiatives to better assess and mitigate risks stemming from non-bank financial institutions (NBFIs) is important.

Further, ambitious, structural reforms to boost economic potential and living standards are urgently needed, with a focus on easing planning restrictions, addressing skills shortages and improving health outcomes. The UK should also stay the course on climate policies to realize the UK’s ambitious emission reduction targets.”

The IMF also warns the Bank of England that it risks hurting the UK economy if it leaves interest rates on hold for too long.

Today’s Article IV report says:

“Keeping Bank Rate constant as inflation and inflation expectations fall would raise ex-post real rates, which could stall or even reverse the recovery, and lead to an extended undershooting of the inflation target.”

Chancellor Jeremy Hunt has welcomed the IMF’s decision to upgrade its growth forecast for the UK, saying:

“Today’s report clearly shows that independent international economists agree that the UK economy has turned a corner and is on course for a soft landing.

The IMF have upgraded our growth for this year and forecast we will grow faster than any other large European country over the next six years - so it is time to shake off some of the unjustified pessimism about our prospects.”

Newsflash: The International Monetary Fund has raised its forecast for UK growth this year, following its annual healthcheck on the economy.

The Fund also predicts inflation will be sustainably back at the UK’s 2% target next year, having concluded its latest in-depth look at the UK economy.

However, is also warns that difficult choices will need to be made over the medium term to stabilize public debt. That could include higher carbon taxes, new levies on road users, or “broadening the VAT and inheritance tax bases, and reforming capital gains and property taxation (more on that in a moment).

The IMF is now forecasting the UK will expand by 0.7% this year, up from the 0.5% forecast last month in its World Economic Outlook. It still expects growth of 1.5% next year, as “disinflation buoys real incomes and financial conditions ease.”

Following its regular Article IV visit to the UK, the IMF says:

“With growth recovering faster than expected, the UK economy is approaching a soft landing, following a mild technical recession in 2023. CPI inflation has fallen faster than was envisaged last year and is projected to return durably to target in early 2025.”

This upgrade means the UK is expected to grow as fast this year as France and Italy, who were both forecast to expand by 0.7% last month, and faster with Germany (0.2%), but slower than the US (+2.7%), Japan (+0.9%) and Canada (+1.2%).

A ‘soft landing’ means an economy has managed to bring down inflation without falling into a recession. The UK did shrink, slightly, in the second half of last year – but is now growing again.

US Treasury secretary Janet Yellen is urging European leaders to respond to China’s industrial policies in a “strategic and united way” alongside the US, to protect manufacturers on both sides of the Atlantic.

Speaking in Frankfurt today – a week after president Joe Biden announced new tariffs on some Chinese-made goods – Yellen argues that China’s excess industrial capacity is a threat to American and European firms.

Yellen warns:

“China’s industrial policy may seem remote as we sit here in this room, but if we do not respond strategically and in a united way, the viability of businesses in both our countries and around the world could be at risk.”

However, European Commission president Ursula von der Leyen has indicated she is opposed to the EU copying the US on tariffs against China.

Von der Leyen told the Financial Times that Brussels’ approach should be “different” from the US.

She said:

“Let’s say we share some of the concerns of our American counterparts. [But] our approach is different. The Americans have just applied blanket tariffs.

We want competition, we want to trade together, but we want it to be fair and by the rules.”

Pennon Group, the water compay behind the waterborne disease outbreak in Devon, has raised its dividend payout for the last year.

Pennon, which owns South West Water, Bristol Water and Bournemouth Water, is handing shareholders dividends worth £126.9m for the last financial year, or 135 more than the £111.7m paid out for 2022-2023.

This increase is despite Pennon trimming its final dividend payment by £2.4m, to deduct the cost of a court fine for a series of pollution offences.

Pennon also reported a 28% surge in statutory operating profits to £140m, although pre-tax profits were flat at £16.8m

Susan Davy, Pennon’s chief executive officer, also told the City that 85% of customers now have normal water service again, following the cryptosporidiosis outbreak which has made residents ill and forced schools to close.

Davy says:

“Whilst the results we are announcing today are based on our performance for the last financial year, we are 100% focused on returning a safe water supply to the people and businesses in and around Brixham. Normal service has returned for 85% of customers, but we won’t stop until the local drinking water is returned to the quality all our customers expect and deserve. Our absolute priority continues to be the health and safety of our customers and our operational teams are working tirelessly around the clock to deliver this.

Newsflash: Cazoo, the British online car retailer once-valued at well over £5bn, will reportedly fall into administration on Tuesday.

Sky News is reporting that insolvency practitioners from Teneo are expected to be formally appointed today, just over a week after Cazoo filed to seek temporary protection from creditors.

More than 700 people have already lost their jobs as a result of the crisis at Cazoo, with the administrators expected to retain a number of staff to operate the remaining marketplace model while they explore a sale. More here.

Shares in Cazoo have dropped by 95% in the last year, a painful blow to investors who took part in its flotation on the New York stock exchange in 2021. London investors may be relieved they missed out on this particular IPO….

This month’s slowdown in grocery price increases suggests the cost of living squeeze is easing.

But a poll just released by the TUC has found that just 1 in 7 think their living standards are improving this year.

The poll of 2,137 adults – carried out by YouGov – found:

• Nearly 6 in 10 say living standards have not got better this year – with nearly 4 in 10 saying they have got worse

• Over two-fifths report having to cut back on essentials

• More than a quarter having to borrow to cover unexpected bills

With a sharp drop in inflation expected tomorrow, the TUC argues that claims the economy “has turned the corner” show the government is out of touch with the struggles of ordinary people.

The latest growth data, released earlier this month, showed that GDP per head – a measure of living standards – rose by 0.4% in January-March but was 0.7% lower than a year before, having not risen for the previous seven quarters.

TUC General Secretary Paul Nowak said:

“UK households have been hammered by the highest price rises in the G7. So the idea that people should be feeling cheerful for inflation easing is for the birds.

“This polling shows how out of touch this Conservative government is with people’s struggles.

“The reason this cost of living crisis has hit families so hard is because wages have flatlined over the last 14 years.

“Pay packets are still worth less today than in 2008, and working people are on course to end this parliament poorer than at the start.

“This a damning indictment of the Tories’ economic record.

“We need a new approach – a proper plan to get wages rising by investing in UK industry. And we need a new deal for working people, so they get a fair share of the wealth they create.”

Kantar’s latest survey of the grocery sector also found that:

• Ocado was the fastest growing grocer over the 12 weeks to May 12, with sales up by 12.4% (well ahead of the total online market which grew by 5.4%).

• Lidl reached a new record-high market share of 8.1%, fuelled in part by its bakery counters, as well as its loyalty scheme, the Lidl Plus app

• Britain’s biggest grocer Tesco now takes 27.6% of the market, its 5.6% growth in sales matched by Sainsbury’s, which now claims 15.1%.

Visa has also responded to the Payment System Regulator’s report, insisting its fees are good value and reflect the cost of offering a secure digital payments system.

A Visa spokesperson said:

“Visa’s investments in reliable, safe and innovative digital payments mean that everyone in the UK can buy and sell with confidence. This powers economic growth.

“Visa’s fees reflect the immense value that we provide to financial institutions, merchants and consumers including extremely high levels of security, near-perfect operational resilience, and a wide range of consumer protections and high-quality products and services that serve consumer and merchant needs.”

Newsflash: UK grocery inflation has slowed to its lowest level in two and a half years.

Data provider Kantar reports that supermarket prices are 2.4% higher than a year ago this month, down from April’s 3.2%.

That’s the lowest level since October 2021, and means grocery inflation is less than a percentage point above its 10-year average of 1.6% between 2012 and 2021.

Fraser McKevitt, head of retail and consumer insight at Kantar, says grocery price inflation is gradually returning to more normal levels, after prices soared in the last couple of years.

McKevitt explains:

“Typically, an inflation rate of around 3% is when we start to see marked changes in consumers’ behaviour, with shoppers trading down to cheaper items when the rate goes above this line and vice versa when the rate drops.

“However, after nearly two-and-a-half years of rapidly rising prices, it could take a bit longer for shoppers to unwind the habits they have learnt to help them manage the cost of living crisis.

Tomorrow’s UK inflation report is expected to confirm that price rises are slowing, with the Consumer Prices Index expected to fall to 2.1% in April, from 3.2% in March.

Mastercard are disputing the Payment Systems Regulators’ findings.

A Mastercard spokesperson says:

“We disagree with the findings of the PSR’s interim review. The payments industry has never been more competitive, which is reflected in the wide choice of payment options available to British consumers and businesses.

“Building and investing in the latest technologies, we power a first-class payments network which consumers, merchants and financial institutions can rely on. In its analysis, the PSR has failed to account for the significant investment required to provide a secure network which prevents billions of pounds of fraud each year.

“We consistently deliver on our core promise to people and businesses: providing ways to pay and be paid that are hassle and worry-free, secure and convenient. We will continue to work transparently with the PSR and demonstrate the significant value Mastercard and electronic payments bring to the UK economy.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Mastercard and Visa do not face effective competition when dealing with merchants and banks in the UK, Britain’s payments watchdog warns today, leading to higher prices.

The Payment Systems Regulator says, in a new, provisional report, that the supply of scheme and processing services “is not working well” for “acquirers” – the financial institution, such a bank, that acts as an intermediary between merchants and card payment networks.

The PRS warns that there is currently no effective competition preventing Visa and Mastercard raising prices – indeed, the two card providers have raised fees by more than 30% in real terms over the last five years.

“There is little evidence that the quality of service has improved at the same rate,” says the PSR, sternly.

UK businesses have little choice but to pay increased fees, it adds, as Mastercard and Visa cards account for 95% of transactions using UK-issued cards.

The PRS says:

In respect of core scheme and processing services, there is currently no effective competition to Mastercard and Visa.

In some optional services, competition and choice is limited and alternative providers, when present, cannot match the schemes’ one-stop shop solution for core and optional services.

Faced with this seemingly failing market, the PSR is seeking views – and also proposes a number of potential remedies to help businesses v

They include:

• improved transparency so that businesses and acquirers can make informed decisions and are more able to switch to alternative suppliers of optional services

• obligations on Mastercard and Visa to explain, consult on and/or document the reasons for price changes and the pricing of new services

• greater reporting of financial information to the PSR on an on-going basis to improve scrutiny of Mastercard and Visa’s UK operations going forward.

Also coming up today

The International Monetary Fund is in town in London today, to give its annual assessment of the UK economy.

IMF staff have been conducting an Article 4 visit in the UK – collecting economic and financial information, and discussing economic developments and policies.

This will be the final healthcheck on the nation’s economy before the general election, and the Fund will have put chancellor Jeremy Hunt’s fiscal plans tax cuts under their microscope.

Last month, IMF officials said their team would look closely at whether tax increases or spending cuts would be needed after the general election…..

The agenda

• 8am BST: Kantar’s index of grocery inflation

• 9.20am BST: Bank of England policymaker Randall Kroszner gives keynote address at London City Week on ‘balancing the productivity opportunities of financial technology and AI against the potential risks’.

• 11am BST: CBI’s industrial trends survey of UK manufacturing

• 11.15am BST: IMF to conclude its Article 4 assessment of the UK economy

• 6pm BST: Bank of England governor Andrew Bailey to give a lecture on “The importance of central bank reserves”