Marketing Newscast

(Edited 12 February 2025)

Chancellor Rachel Reeves has wiped out the £9.9bn headroom she left herself to borrow and may be forced to raise income tax to cover the cost of any future shocks, the National Institute of Economic and Social Research (Niesr) says. A report from the think-tank said: “Our forecast indicates that zero fiscal headroom remains as the current Budget is exactly balanced at the end of the forecast period. Without changing taxation and spending plans, this means that there is no buffer through which to absorb cyclical economic shocks were they to materialise over the remainder of the parliament.” Reeves has pledged not to spend more than the tax HMRC takes in, and the Labour party manifesto promised not to increase income tax, VAT or National Insurance contributions (NICs), although Employer NICs were hiked by some £25bn in her maiden Budget. Niesr’s Ahmet Kaya warned that US President Donald Trump’s plans to increase trade tariffs on US imports could also cause further problems for the Chancellor, and knock up to 0.4% off UK GDP growth for the next two years, accounting for a $30bn (£24bn) loss.

Trump is likely to announce what “reciprocal tariffs” he will levy on US imports today, having said previously he will match the taxes other countries put on goods his country buys from overseas. If he forges ahead with this trade war, Britain is at risk of a £24bn blow to the economy, according to Deutsche Bank, which has crunched the numbers based on a 21% tariff on goods exports to the US that could be imposed under any trade tariff ‘reciprocity’ if that includes VAT. Stephen Miller, the White House deputy chief of staff, told Fox News on Sunday that “reciprocal” tariffs will include VAT policy. “I do want to explain a very important point the president feels very strongly about. Other nations all around the world use the VAT to get an unfair trade advantage against the United States,” he said, explaining that a US manufacturer exporting a car to Europe pays a charge of 30% when VAT and duties are added together, something Miller said was “massively unfair”. “The president’s making clear that we are going to pursue a policy of reciprocity. In other words, if we’re getting charged 30% by Europe, we need to charge them 30% in return,” he added. George Saravelos, the global head of FX Research at Deutsche Bank, said The European Union would be subject to 22% tariffs under the same scenario, while Sweden and Finland, which have higher VAT rates, would be hit with charges of 28% and 27% respectively.

Trump has already announced a 25% global tariff on steel and other metals, scrapping previous exemptions for the UK, a move described by Peter Navarro, head of the UK Steel trade group as having “taken a sledgehammer to free trade”. “UK steel poses no threat to US national security. Our high-quality products serve key US industries, many of which cannot source these domestically,” Navaarro said, arguing that Trump’s tariffs could have “devastating blow” on the British steel industry, and that “our countries should work together to tackle global steel overproduction, not to be at loggerheads.” Downing Street, however, has refused to comment on the rights or wrongs of Trump’s decision. The Prime Minister’s official spokesman told reporters: “We will take a considered approach to this. We will engage with the US on the detail, but the government is clear we will work in our national interest and this issue is no different to that.” When asked about possible retaliatory tariffs, he said he was not going to “get ahead of those conversations with industry”. Later, Trade minister Douglas Alexander said the UK would not have "a knee-jerk reaction" but "a cool and clear-headed" response. The UK’s newly installed ambassador to Washington DC, Lord Peter Mandelson, a former New Labour-era adviser and minister, said people must respect the president’s “strong and clear mandate”. The UK exports around 10% of the steel produced to the USA.

London Mayor Sadiq Khan has urged employers to think “very carefully” before reducing office space, saying London “cannot afford” to be a city where “the centre has been hollowed out”. The BBC reports his comments, made at an event last week hosted by consultancy firm Project Leaders, in which he also warned that working from home policies may mean young people struggle to form connections with colleagues or miss out on certain skills due to the lack of office work.

The Financial Conduct Authority (FCA) is intending to delete its emails after 12 months unless they are considered important enough, the Financial Times reports, with the new policy designed to reduce “the legal and reputational risk” faced. The plans has faced considerable criticism: Charlotte Hill, partner at Charles Russell Speechlys told City AM that it “is very much at odds with what it expects the industry to do”. “Imagine if a bank announced” this, she added, explaining that the watchdog has “strict rules on record keeping requirements for the firms it regulates, with at least five years for investment companies, three years for others and indefinitely for pension transfer firms”. Harvey Knight, partner at Withers said: “It appears to be one rule for the regulator and another for the regulated.”

Octopus Energy is said to have entered into an agreement that will see it manage Thames Water’s customers. According to Sky News, Octopus Energy Group's technology arm, Kraken, is to partner with Covalis Capital and Suez as part of a deal to inject £1bn of equity into the debt-riddled water supplier, and the consortium is thought to be among a number of parties that have expressed interest in helping the water supplier raise £3bn in fresh equity to fend off re-nationalisation. Thames is £19bn in debt, and is awaiting court approval of an emergency rescue plan to avoid running out of cash by the end of March. Octopus is Britain's largest residential gas and electricity provider.

Heathrow Airport says it had its busiest January on record, with more than 6.3m passengers travelling through. Meanwhile, CEO Thomas Woldbye will today confirm in a speech at British Steel's Scunthorpe plant a multi-billion pound investment plan to expand terminals two and five, reconfigure the airfield and improve bus connections. Woldbye will also sign a pact to use of the company's steel to build new infrastructure.

Capita has had its contract to provide training services for Marine Engineering within the Royal Navy at HMS Sultan expanded. The Government outsourcer said this was the tenth service transition under the contract awarded originally in 2021. The FTSE 250-listed group said it valued the additional term, for 7 years and 11 months, at £97. Capita's total Royal Navy training contract now adds up to roughly £1.3bn.

Goldman Sachs has ditched an internal diversity rule that meant it refused to advise all male, all white company boards about their stock market flotation plans, saying it is no longer needed. Previously, the investment bank had pledged to only help a business sell its shares on a stock exchange if it had two board members that satisfied diversity requirements, one of whom had to be a woman. Vice-chair Richard Gnodde told the BBC: "That policy was put in place to try and drive a change in behaviour and I think that's happened."

An advert by fashion brand Next has been banned because the model's looked "unhealthily thin" in that particular shot. The Advertising Standards Authority (ASA) said the image was "irresponsible" and breached the code for social responsibility. Next disagreed with the advertising watchdog's decision, saying the model, while slim, had a "healthy and toned physique" and that the photograph was created with a "strong sense of responsibility". "You do wonder how it got through," fashion journalist Victoria Moss told BBC Breakfast. "Next are usually very commercial, their models are very 'girl-next-door'. This model has 'the look' of a model," she said, adding however that it was "important not to stigmatise either way".

Pret A Manger has abandoned plans to double the price of its monthly coffee subscription service to £10 following a customer backlash. The currently deal, which will now be staying, gives Pret subscribers 50% off five drinks per day. Originally, Pret’s subscription service was introduced during Covid times and offered a monthly £30 deal that allowed customers five free drinks per day and 20% off food. The company admitted at the time that this was “too good to be true” as it meant subscribers could theoretically buy £400 worth of coffee each month for just £30. It was scrapped last year.

Entain CEO Gavin Isacs has quit “by mutual agreement” and with immediate effect after just five months in the job. The Ladbroke’s owner said its non-executive chair, Stella David, will take over the role until a permanent boss is found. David was previously interim CEO between December 2023 and September 2024. AJ Bell investment director Russ Mould told City AM: “Something must have gone seriously wrong for Entain’s chief executive Gavin Isaacs to leave after just 161 days in the job. The first thing an investor would study in this situation is the messaging on trading and the share price performance. Trading is in line with expectations and the stock is higher than when Isaacs started, which suggests something else is afoot”. “It’s worth noting that previous Entain boss Shay Segev only lasted 189 days in the top job in 2020-21, so the gambling group has form when it comes to short-lived leadership,” he added.