Nearly a third of British companies that import goods from the EU are “not at all prepared” for full post-Brexit customs checks, according to a survey of business leaders, sparking fears of increased congestion at ports and worsening supply chain disruption.

From 1 January 2022, companies that import goods will no longer be able to take advantage of a temporary six-month grace period allowing them to delay making customs declarations to HMRC and paying any tariffs due. Instead, they will have to do so immediately.

Three in 10 of the leaders of firms that import from the EU polled by the Institute of Directors (IoD) said they were not at all prepared for the change, with 37% of small businesses and nearly a quarter of large ones saying they were not ready.

Kitty Ussher, chief economist at the IoD, said:

“In just three weeks’ time, significant changes to our customs arrangements are going to be introduced, for which a large portion of businesses are either unprepared or simply unaware.

“This will exacerbate existing supply chain problems, leading to further congestion at ports, as well as extra costs from accidental non-compliance for many businesses.

Here are today’s main stories:

Goodnight. GW

Some late news. The Bank of England is to consult about scrapping a requirement for mortgage borrowers to be able to afford a 3 percentage-point increase in interest rates.

The BoE said that it believed that a requirement for most mortgages to be limited to 4.5 times a borrower’s income, combined with separate affordability rules from Britain’s Financial Conduct Authority, would be sufficient.

The move could help home-buyers to win approval for a home loan from lenders, after the jump in prices since the pandemic began made it harder to get onto the property ladder.

The Bank of England’s latest financial stability report has also concluded that major UK banks are strong enough to keep supporting households and businesses, even in severe scenarios.

It says:

Banks’ capital and liquidity positions remain strong. The FPC continues to judge that banks are able to support UK businesses and households as we recover from Covid.

Our latest stress test shows that the banking sector is resilient to even very challenging economic scenarios. This tested the largest UK banks’ and building societies’ ability to cope with another severe economic shock, on top of the economic shock from the pandemic.

The BoE also singles out cryptoassets, saying its financial policy committee are vigilant to the financial stability risks they could pose:

Cryptoassets currently pose limited direct risks to UK financial stability.

However, they will present a number of financial stability risks if they continue to grow at their current rapid pace, and as they become more interconnected with the wider financial system.

Sir Richard Branson has given Virgin Atlantic a cash injection in a £400m funding round to support the airline, as the pandemic threatens further disruption.

Branson’s Virgin Group, which owns 51%, has invested £204m, while US carrier Delta Air Lines has committed £196m - keeping its 49% stake in the airline.

The new funding agreed on Monday is meant to help Virgin Atlantic as the outlook for the travel sector darkens, just weeks after the US reopened its borders.

Virgin had hoped that a rapid rebound in transatlantic demand would drive a recovery, but the omicron variant has caused people to delay booking flights, with governments imposing fresh restrictions.

In a statement, CEO Shai Weiss said:

“Virgin Group and Delta Air Lines, and our creditors, have been a source of unwavering support.”

Back in the City, travel and hospitality shares have dropped deeper into the red as concerns over Omicron ripple through the markets.

The FTSE 100 index of blue-chip share has now lost 55 points, or 0.75%, to 7236, the lowest in around a week.

IAG, the parent company of British Airway, has dropped by 5.2%, with Rolls-Royce (which makes and services jet engines) down 4.8%, hours after the UK airline industry appealed for more support.

Hotel groups Whitbread (-3.1%) and InterContinental (-2.8%), have also lost ground, on concerns that the hospitality sector will suffer from the latest Covid-19 restrictions.

Banking group Lloyds have dropped by 4%, on expectations that the Bank of England is less likely to raise interest rates as quickly as thought (higher interest rates are good for bank profit margins).

Oil stocks are also weaker, on concerns that demand for energy could be hit.

Michael Hewson of CMC Markets says:

European markets have undergone a subdued start to the week, initially opening higher, however as the day has progressed sentiment has gradually deteriorated, with the FTSE100 rolling over predominantly down to weakness in travel and leisure and the energy sector, as investors trim positions ahead of a big week for central bank meetings.

Later this week we get to hear from the Federal Reserve, European Central Bank, Bank of Japan, and the Bank of England, who are all set to make key policy decisions, though only the Federal Reserve is set to announce a significant alteration in its policy settings.

Some early week weakness in oil prices is weighing on the likes of BP and Shell, while the new restrictions that are due to start this week is prompting further weakness in the likes of airlines with IAG, easyJet, Ryanair and Wizz Air all sharply lower, after calling for further government support as they look to ride out the effects of the latest set of restrictions.

Rolls-Royce and Premier Inn owner Whitbread are also under pressure for the same reason.

The founder of Wetherspoons, Tim Martin, has criticised restrictions designed to curb the spread of the Omicron variant of Covid-19 as “arbitrary”, warning that the pub chain’s first half profits could be wiped out by what he called “lockdown by stealth”.

In an update to the stock market, JD Wetherspoon told investors that “uncertainty, and the introduction of radical changes of direction by the government, make predictions for sales and profits hazardous”.

The company, which consistently reported soaring sales before the pandemic, suffered a £105.4m loss in the year to July 2020 followed by a record £195m deficit the year after, as coronavirus restrictions took their toll.

It had been hoping to rebound from the impact of the pandemic this year but told investors that the government’s plan B for tackling Omicron, including guidance to work from home where possible, meant it was likely to be “loss-making or marginally profitable” for the first half of its financial year.

The vacuum cleaner maker Dyson has told many of its UK employees to continue working in the office, claiming that large portions of its business are impossible to carry out from home.

Dyson’s billionaire owner, Sir James Dyson, has consistently opposed working from home and the company has stuck to that line despite the rise of the Omicron coronavirus variant, stoking concern among some employees.

All Dyson offices should remain open, according to an internal message sent to all UK staff last week after the prime minister announced the new plan B guidance advising work from home.

Here’s the full story, by my colleagues Jasper Jolly and Rob Davies:

Goldman Sachs is asking its UK staff to return to working from home, Financial News reports, joining many of its banking rivals in rolling back its return to office programme.

FN say:

The US investment bank, which started a widespread return to office programme in September, has told its 6,000 staff in its Plumtree Court headquarters to work from home if they can, Goldman Sachs International chief executive Richard Gnodde told employees on 10 December, according to a person familiar with the matter.

Goldman has also just launched a programme to start training apprentices directly on its London trading floor for the first time next year.

It will combine paid on-the-job training with study over four years, offering students a chance to gain hands-on experience. The scheme could feed into wider efforts to boost social mobility across the UK’s financial sector, by helping candidates from less-affluent backgrounds. More here.

Major British airlines have called on the government to remove testing rules for vaccinated passengers and provide economic support for the battered sector.

In a letter to prime minister Boris Johnson, the leaders of UK airlines say they are deeply concerned about the “haphazard and disproportionate approach” to travel restrictions since the emergence of the Omicron variant.

All passengers arriving in the UK now have to take a pre-departure Covid test because of fears about the spread of the new variant, and must also take a PCR test after arriving.

The letter urges the government to remove “all emergency testing for fully vaccinated passengers” at the formal review on 20 December.

It also calls for “a package of bespoke economic support measures” to be provided immediately to help the sector through this crisis.

The letter, signed by the bosses of British Airways, easyJet, Ryanair, Loganair, Virgin Atlantic and Jet2.com, the managing director of TUI UK & Ireland, and the CEO of trade body Airlines UK, says:

Only the UK requires pre-departure and post-arrival PCR tests, irrespective of vaccination status. Whilst we have heard much talk of cracking down on the ‘rip-off’ testing regime – charging up to £399 for a PCR test – we’ve seen precious little action, despite repeated promises.

We have also seen immediate problems with red list arrivals, with many customers booking hotels which either were not ready or had been double booked, requiring them to rebook and pay again. Many people are stranded abroad through no fault of their own, due to a policy that cannot be executed properly.

We and our customers feel sincerely let down, having believed a more pragmatic, evidence-led approach to travel, in line with the rest of the world, had been achieved and agreed by all concerned just a few months ago. Instead, the layering of additional travel restrictions, introduced at short notice without consultation or discernible strategy, have disrupted Christmas plans and severely undermined customer sentiment just before the crucial Christmas and New Year booking season (up to 30% of tickets are sold).

Back in the UK, pub chain JD Wetherspoon has flagged that uncertainty over Covid-19 and the government’s new restrictions will hit its sales.

In a trading update, Wetherspoons says that it may be “loss-making or marginally profitable” in the first half of its financial year (which runs from late July to late January 2022).

The company says the restrictions announced last week will hit the hospitality sector, making it hard to predict sales and profits, with some customers, especially older patrons, “understandably cautious”.

Wetherspoons told the City:

Last week the Government announced the implementation of “Plan B”, which involves additional restrictions, including advice to work from home.

Many hospitality companies, trade organisations and economists have highlighted the negative implications for pubs and restaurants.

The uncertainty, and the introduction of radical changes of direction by the Government, make predictions for sales and profits hazardous.

Chairman Tim Martin adds that the government’s ‘arbitrary changes of direction’ are hurting trading, saying:

“In spite of reports of labour shortages and supply difficulties, Wetherspoon pubs, with few exceptions, are fully stocked and fully staffed.

However, the repeated warnings and calls for restrictions, mainly from SAGE members and academics, combined with arbitrary changes of direction from the Government, invariably at short notice, affect customer sentiment and trade.

“In effect, the country appears to be heading towards a lockdown by stealth.

Shares in JD Wetherspoon are down 2.6% so far today, with other hospitality firms also suffering from Covid-19 worries.

The Turkish lira has plunged to fresh record lows today, after ratings agency S&P cut its outlook on Turkey late last week.

The lira, already the worst performing emerging market economy, crumbled through 14 lira to the US dollar for the first time, down 2.8% at 14.2 lira/$.

The slide puts more pressure on Turkey’s central bank, which traders fear could cut interest rates again this week, despite the deepening currency crisis.

On Friday, S&P Global Ratings lowered its outlook on Turkey’s sovereign credit rating to negative, pointing to the lira’s recent weakening and the jump in inflation to 20%.

S&P warned:

“The negative outlook reflects what we view to be rising risks to Turkey’s externally leveraged economy over the next 12 months from extreme currency volatility and rising inflation, amid mixed policy signals.”

It added that Turkey could be downgraded if the currency crisis continues:

“We could lower the ratings if Turkey’s economic policy mix further undermined the exchange rate of the lira and worsened the inflation outlook, heightening the risk of banking system distress and thereby implying potential contingent liabilities for the government.”

Turkey’s central bank has cut interest rates several times in recent months, down to 15% (updated).

It has faced persistent prompting from president Recep Tayyip Erdoğan who insists high interest rates cause inflation (most economists argue they curb it).

The Central Bank of the Republic of Turkey meets on Thursday, and could lower rates again -- despite the slump in the lira which will push up import costs.

Meanwhile, Turkey’s treasury & finance Minister Nureddin Nebati has told Haberturk newspaper that the country’s economy will “rapidly improve”, without the need to raise interest rates.

New analysis from the New Economics Foundation shows the top 5% of families have gotten richer by £3,300 a year since the December 2019 election, while the poorest 50% have had their incomes squeezed by £110.

As a result, it says, there are 300,000 more families in poverty than two years ago, putting them in greatest risk from the cost of living squeeze.

And with incomes in London and the south-east rising six times faster than in red wall regions since Boris Johnson’s 2019 election victory, the government’s ‘levelling up’ agenda in doubt, it warns.

While measures such as the furlough scheme protected the earnings of workers, there was less support on average, for the poorest, leading to more inequality.

Alfie Stirling, director of research and chief economist at NEF, explains:

“These results show that the government’s handling of the pandemic has led to the richest families and regions getting richer, while the poorest families are even poorer. With prices expected to continue increasing, the threat of a rise in interest rates and ongoing effects of Brexit, things could get a lot tougher for families that have already suffered most.

“In the long run, any agenda to tackle these issues needs to grasp the fundamental drivers of regional inequalities for places, people, and industry. But in the short term, more should be done to help families through the social security system. NEF’s proposal for a Living Income would ensure an income floor that reflects the true cost of living for families.”

The report found that:

• Families in the top 50% of disposable incomes have seen their living standards improve across the board, though fastest in London and the south-east. Meanwhile families in the poorest 50% have seen incomes fall everywhere except for London and eastern England.
  
  
• Losses are concentrated to those outside of work but even within workless families there’s large variation across regions, with average losses of more than £200 per year in Yorkshire and the Humber and the north-west and Merseyside, compared with small gains in the south-east and south-west.
  
  
• Single parents were the worst affected families across all regions, with single parent families in Yorkshire and the Humber and the north-west and Merseyside seeing their incomes fall by around 15 times as much as in London.

NEF have tweeted some of the key points:

UK factories aren’t the only ones lifting their prices.

Over in Germany, manufacturers have hiked the cost of their wares by 16.6% in November, compared with a year ago.

That’s the biggest annual rise in wholesale prices since the survey began in 1962, and suggests consumers face paying more for German-built goods.

The Federal Statistics Office explained:

The high rates of change for wholesale prices in annual comparison derive from increased prices for raw materials and intermediate products.

Mineral oil producers hiked their prices by 62% year-on-year -- underlining how energy prices have soared.

A record number of UK manufacturers are raising their prices as inflation accelerates, which could intensify the cost of living squeeze facing families.

Make UK, which represents the UK manufacturing industry, reports that a balance of +52% of factories raised prices in the current quarter, with +58% expecting to hike them in Q1 2022.

These are the highest readings since the question was first asked back in the year 2000, and sharply higher than before Covid and Brexit.

Make UK says:

To give an indication of just how sharply inflation has bitten, and how manufacturers have responded, the equivalent balance in Q4 2019 before the onset of the pandemic and leaving the EU was just +5%.

[A balance of 0% would mean an equal number of factories planned to either raise or lower prices].

Factories have faced a surge in commodity costs, with some also raising wages to attract and retain staff.

James Brougham, Senior Economist at Make UK, says these costs are being passed on:

“While manufacturers will be able to enjoy some festive cheer this year, their spirits will be tempered by the eye watering impact of escalating cost pressures which are leading an increasing number to pass these on to the consumer.

Given the global nature of some of these pressures there is little sign that they will abate anytime soon. However, they will hope as we enter a fresh year that these will gradually unwind, with the compensation being that demand prospects among their major markets continues to look reasonably strong.”

Here are the main findings from the Make UK/BDO Q4 Manufacturing Outlook:

• Prices increased for the fourth quarter in a row, and expected to continue into 2022
• Output volumes and orders suggest a slowdown but growth remains strong
• Domestic market orders outpace export orders, but both slowing
• Employment growth stable, investment still positive but scaling back slightly
• Expectations for Q1 2021 remain positive, but manufacturers expect further slowing
• Manufacturing output growth forecast for 2021 at 6.9% and 3.3% for 2022

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

UK workers are facing their toughest Christmas wage squeeze in a decade, as wages fail to keep up with rising prices in the shops, trade unions warn today.

The Trades Union Congress (TUC) has warned that pay is lagging behind inflation, creating a cost of living storm.

It estimates that in the final quarter of this year, pay growth (+0.8%) will rise at just half the speed of inflation (+1.6%).

That means the largest fall in real wages since 2012 and the second worse since comparable records began 2000.

Families are being hit by surging energy costs and rising food bills, while manufacturers have been passing on their increased costs to customers. And with the economy barely growing in October, firms may struggle to lift wages even as they scramble to attract workers.

TUC general secretary Frances O’Grady is urging the government to intervene and work with unions to boost pay across the economy:

“People should be able to look forward to Christmas without having to worry about how they’ll pay for it.

“Millions are facing a cost of living storm as bills soar and real pay falls. After more than a decade of wage stagnation, this is the last thing working families need.

“The government can’t sit this crisis out. We need a proper plan to get pay packets rising across the economy, or the squeeze on household budgets will continue.

Ministers should get around the table with unions and employers now and work out fair pay agreements for every industry. That’s the best way to boost living standards and ease the pressure on households.”

In October, UK inflation surged to a 10-year high of 4.2%, and is expected to hit 5% next year.

Wage growth has slowed recently, though, with underling earnings growth estimated at 3.4%-4.9% for the July-September quarter.

Also coming up today

European markets are set to open higher, as investors await monetary policy decisions from the US Federal Reserve (on Wednesday) and the Bank of England and the European Central Bank (Thursday).

The Bank of England must assess whether to raise interest rates to tackle inflation, or resist until it knows more about the Omicron variant.

Sanjay Raja, chief UK economist for Deutsche Bank, predicts the BoE will raise borrowing costs - although other City voices predict no change.

Raja says:

Fundamentally, news of the Omicron variant has changed little on the medium-term economic outlook. The labour market remains as tight as it has been in recent memory, in spite of the furlough scheme ending on 30 September. And inflation continues to outpace staff forecasts, despite a sizeable upward revision in the November Monetary Policy Report.

Moreover, the potential disruption from Omicron may lead to even more inflationary pressures in the medium term, with supply chain bottlenecks and labour shortages/mismatches further exacerbated by rising restrictions, both domestically and globally.

It’s a finely balanced, decision, though, he adds.

Later today the Bank of England will release its assessment of the strength of the UK financial system, and the results of its annual stress tests on banks.

These are expected to show that banks have strong capital cushions, which could clear the way for more lending to support the economy through the pandemic.

According to the Mail on Sunday, the BoE is also preparing to dilute the UK’s mortgage rules, loosening affordability restrictions to make it easier for borrowers to take out larger home loans.

And millions of office workers could be working from their home offices, attics or kitchen tables again, as the government asks people in England to work remotely “if you can”.

The agenda

• 5pm BST: Bank of England publishes Financial Stability Report
• 5pm BST: Bank of England publishes results of its 2021 Solvency Stress Tests on the UK banking system