Search

(Edited 05 December 2024)

Interest rate cuts could be slower – or not happen at all next year – because of Chancellor Rachel Reeves’ Budget last month, the Governor of the Bank of England (BoE), Andrew Bailey, has hinted. The response of businesses to the increase in employer National Insurance contributions (NICs) increase in particular will be crucial for determining the pace of interest rate cuts next year, Bailey warned in an interview for the Financial Times’s Global Boardroom Conference. “How companies balance the mixture of priceswages, the level of employment, what is taken on margin, is an important judgement for us,” he said. The Budget increased the rate of employer NICs to 15%, and cut the threshold at which firms must start paying the levy to just £5,000, down from £9,000. Businesses have warned the change means they will be forced to raise prices and cut jobs as a result of the tax hike, and the BoE’s November forecast suggested the Budget will push up inflation by around half a percentage point. Bank officials have laid out a “range of options” for how the tax hike will impact the economy, Bailey said, “some of which would imply greater inflation and some of which would imply less inflation”. “You have to give companies a chance to sort out what their strategy is going to be. As we go into spring, we will have a better sense of where it is going,” he added.

The OECD, meanwhile, says the Chancellor’s £70bn-a-year increase in public spending is likely to keep inflation and interest rates higher for longer, because extra borrowing will push prices up. Although the OECD upgraded the UK’s growth prospects because of Rachel Reeves’ public spending spree – predicting growth of 0.9% this year and 1.7% in 2025, up from the 0.4% and 1% predictions made in May – the Paris-based international economic research and discussion organisation said this upgrade was driven by a “large increase in public expenditure” that would push debt up permanently.

Dutch bank ING says this morning that it believes Britian has not yet seen the end of big tax hikes, suggesting another “big top-up” of tax rises this parliament is “inevitable”. In its outlook for 2025, the lender said the October Budget “is likely just the beginning” of several more Budgets characterised by tax hikes. Although the Chancellor promised ‘no more tax rises’ a couple of weeks’ ago when speaking to the Confederation of British Industry (CBI) annual conference, neither she nor PM Sir Keir Starmer have confirmed or repeated that pledge, despite pressure from opposition MPs.

Entrepreneur and engineer Sir James Dyson, meanwhile, has labelled Reeves’ Budget “an egregious act of self-harm” on the economy, because it targeted family-owned businesses. In a letter to The Telegraph, Dyson said: “No wonder that in the run-up to the Budget, the number of directors closing their businesses more than doubled year-on-year. Despairing business owners are throwing in the towel”. “The scrapping of business property relief will be even more damaging than the attack on family farms,” he added. “This tax is extracted only from British family companies, not private equity or public companiesLabour’s National Insurance increases, and the imposition of impossible-to-pay inheritance tax for privately owned businesses, will kill entrepreneurship, snuff out wealth creation and stunt growth.” “It will be ordinary working people – through their jobs and their wages – and the Exchequer who will pay the price for the Chancellor’s ideologically driven attack on family businesses,” he concluded.

The Employment Lawyers Association (ELA), a group of 7,000 lawyers, has urged the Government to reconsider some of the changes contained within the Employment Rights BillCity AM said yesterday that the ELA told the parliamentary committee scrutinising the Bill that it needs “considerable thought” to avoid “swamping business” with costs or obligations that “confuse even senior and experienced lawyers.” In written evidence provided to the Committee, the ELA warned that the zero-hour contract changes “will grant workers’ rights that are so difficult to navigate that this may well impact their ability to be enforced” while placing difficult “recurring burdens on employers”. It further warned the committee: “It is fanciful to think that a non-unionised low paid zero hour worker will issue proceedings for breaches for small sums that will not reach Tribunals for many months or even years”. “If these regulations are to work, then the enforcement provisions should be opened up to the Fair Work Agency and not simply rely on low-paid workers to enforce their rights,” it added. The lawyers also argued that the wording of the so-called ‘fire and rehire’ ban “means that businesses that previously survived may now not be able to act until it is too late and then go under.” MPs were also warned that the Bill, if passed, is likely to lead to “further claims,” adding pressure to tribunals already struggling to deal with a backlog of cases.

British Steel may be nationalised, The Telegraph said yesterday, claiming ministers are considering taking the company back into state ownership if talks with Jingye Group - British Steel’s Chinese owners - over future funding for the company, break down. Negotiations are ongoing concerning plans to replace two blast furnaces running on fossil fuels with electric arc furnaces at the Scunthorpe steelworks, and who pays what of the estimated £1bn cost. Multiple sources close to the negotiations have told The Telegraph that there is frustration with Jingye for supposedly demanding that the Government largely pays for the construction, although Jingye says it wants to split the cost with the Government. A Business Department spokesman told the newspaper: “We have no plans to nationalise British Steel. We’re working across government in partnership with trade unions and businesses to secure a green steel transition that’s right for the workforce, represents a good investment for taxpayers and safeguards the future of the steel industry in Britain.” Former Prime Minister Margaret Thatcher privatised British Steel in 1988.

Former City minister John Glen has quit the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services after it released a damning report on the Financial Conduct Authority (FCA) he says he did not see before its publication. The report accuses the FCA of “incompetence;” of being “opaque” and “unaccountable; and “slow to act and even slower to admit it has got things wrong and to change”. Compiled through testimony from 175 whistleblowers, former employees and its own staff, the 350-page report “painted a scathing picture of the watchdog and suggested it had had been hamstrung by an overly close relationship with the firms it regulates,” City AM said yesterday. In a letter to the Financial Times, Glen, who served as City minister between 2018 and 2022, said he was “dismayed” by the report and the “sensationalist headlines it generated”. “I joined the APPG following the UK election in July but was not involved in its report, as much of the work for it was done prior to the vote,” he wrote. “After reading its contents, I resigned from the group.” Glen also criticised the compilation of the report for “fusing the gripes of anonymous embittered current and former employees” and said it will not “help move the focus of the organisation”. “For too long, the FCA has been the convenient whipping boy for the contradictory simultaneous criticisms of needing to deliver ‘less bureaucratic, growth-sapping regulatory burdens’ while giving guarantees of ever ‘higher standards of consumer protection’,” he said. “We cannot have both unless we agree the trade-offs.”

The number of new petrol cars sold in Britain has plunged to an all-time low, The Telegraph reports. Just 29% of new cars sold in November were petrol vehicles, according to analysis of registration data by New Automotive, down from 42% a year earlier. Electric vehicles (EVs) took a market share of 25%, up from 16%. According to Auto Trader meanwhile, the number of petrol cars on the road is expected to tumble from 18.7m today to 11.1m over the next decade, while the EV sales are forecast to jump from 1.25m to 13.7m. The Government is forcing manufacturers and drivers to go electric through its legally-enforced sales targets for EVs, known as the ZEV mandate. That stipulates that 22% of new car sales must be electric this year, rising to 28% next year and then increasing annually to 80% by 2030.

Speaking at the Financial Times’ Global Banking Summit yesterday, Lloyds Bank CEO Charlie Nunn said the court ruling in October over ‘secret’ car loan commissions “creates an investability problem” for Britain’s wider consumer finance sector. The Court of Appeal concluded that lenders had broken the law by receiving commissions on motor finance deals without obtaining their customer’s informed consent, potentially opening the door to multi-billion-pound compensation claims. “The level of uncertainty means we just don’t know what it’s going to mean yet,” Nunn said, adding: “We have a legal decision, a Court of Appeal decision, that is at odds with the last 30 years of regulation. And the uncertainity that creates in our environment is unique, it’s very different from other economies in the world.” Lloyds’ share price has dropped 14% since the ruling, City AM notes, as it is considered the most exposed to potential compensation claims. The bank has already set aside £450m to cover potential costs from an ongoing FCA probe, although analysts at RBC have estimated that it could take a total profit hit of up to £3.9bn. Given that 85% of motorists borrow money to buy a new car, and 60% to buy a second had car, Nunn argued that motor finance is “a really important part of the British economy. “The industry, both financial services and transport, the regulators, and the government are going to need to come together to provide that certainty for consumers, for the car industry and actually for investability in the UK economy,” he said.

Bob Diamond, the former CEO of Barclays, has blamed what he called Britain’s “get the f—--s” attitude for damaging the economy in the wake of the 2008 financial crisis. Diamond, who ran Barclays between just 2011 and 2012, said British banks had suffered “biblical justice” at the hands of politicians at the time, leaving British banks weaker and less able to support the economy than their US peers. Diamond, who was also speaking at the Financial Times’ Global Banking Summit, was branded the “unacceptable face of banking” by Lord Mandelson in 2010 after reports he made hundreds of millions of pounds in a single year. He now owns broker Panmure Liberum.

Vodafone and Three have won approval for their £15bn merger from The Competition and Markets Authority (CMA). The merger will create the UK’s largest mobile network with 27m customers and reduce the number of operators from four to three.

Airbus is planning to cut 477 jobs from its UK workforce because it is shrinking a space division that has been “haemorrhaging” satellite orders to Elon Musk’s SpaceXThe Telegraph says. The job losses, which are expected to hit the workforce in Stevenage and Portsmouth, and possibly Newport in south Wales, are part of a wider move to eliminate 2,043 positions in the Airbus Defence and Space division. Almost 700 jobs will go in Germany, where the division is based, together with 540 in France and 300 in Spain. Airbus aims to complete the cuts by mid-2026, without making compulsory redundancies.

Another London Stock Exchange-listed firm is leaving the bourse. AIM-listed Learning Technologies, has agreed to an £836m takeover from US private equity giant General Atlantic, making it one of 45 listed companies to sell-up or enter talks with a suitor this year. The total value of companies leaving the market is set to top £100bn this year, according to previous figures from investment bank Peel Hunt compiled for City AM.

Guinness is being rationed by maker Diageo in the UK because of “exceptional demand” in the run up to Christmas, the firm has told the BBC. It is understood the firm is working at 100% production capacity, but has still placed limits on orders to avoid shortages over the crucial final weeks through to Christmas and New Year. Guinness sales have recently been bucking market trends, according to data from food and drinks industry research firm CGA. While overall beer drinking was slightly down between July and October, the volume of Guinness consumed from kegs was up more than fifth.

And finally… The price of Bitcoin has hit $100,000 for the first time. The cryptocurrency was trading up to $103,900 earlier today, an all-time high, after US President Elect Donald Trump announced the appointment of Paul Atkins to lead the Securities and Exchange Commission (SEC). Trump hailed Atkins, a consultant who has worked previously for the SEC, as “a proven leader for common sense regulations”. He also said he “recognises that digital assets & other innovations are crucial to Making America Greater than Ever Before”. Bitcoin has risen almost 50% since Trump’s election victory and almost trebled in the last year.

Publish your content with us

  Google indexed

  No fee

  Free backlink inclusion

Image rights and content must be the property of the publisher.