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Cuts, tax rises and doing nothing: Rachel Reeves’ options to tackle economic woe
The UK government has come under pressure from a bond market sell-off and the tumbling pound, heaping pressure on the chancellor, Rachel Reeves, to reassure investors about Britain’s economic and financial position.After a challenging first six months in power for the government, the chancellor’s options have been limited by Labour’s political promises. There are a range of measures, of varying severity, the Treasury and the Bank of England could still take, depending on how market conditions unfold.Reeves could yet catch a lucky break. Some City analysts believe financial markets have overreacted to the challenging economic and fiscal outlook
Big retail will cope – but Reeves’ NICs raid is too much, too soon for part-timers | Nils Pratley
If one looked solely at this week’s trading reports from the world of big retail – the likes of Marks & Spencer, Next and Tesco – you might wonder why Rachel Reeves’ increase in employers’ national insurance contributions (NICs) has caused such a fuss. It is obvious from the trio’s outlook statements that they will cope with the extra costs.At Tesco, which faces a £250m extra from NICs and other budget changes, the chief executive, Ken Murphy, did not rule out price rises but said the group would do its “very best” to mitigate them; and, given Tesco’s expertise in grinding out efficiency gains, you would bet on it to succeed. In similar style, Stuart Machin at M&S noted the cost headwinds but said “there is much within our control”.At Next, Simon Wolfson gave thanks for zero inflation in the cost of goods it buys, mainly from Asia, and reckoned the clothing group could off-set the wage pressures with price rises of only 1%, or half the Bank of England’s target rate of inflation
What the bond market turmoil means for your mortgage, pension and savings
The bond market sell-off has revived fears about rising borrowing costs after the crisis that followed Liz Truss’s disastrous mini budget in 2022. However, experts are suggesting there is no need to panic. Here is what it may mean for mortgages, pensions and savings.Rates on new fixed-rate mortgages could start to creep up as a result of the bond market turbulence as lenders get funding for loans from the money markets.Simon Gammon, the managing partner at Knight Frank Finance, says that so far only a few specialist and niche lenders have raised mortgage rates
Bond market turmoil eases as Treasury minister says ‘no need’ for government intervention – as it happened
Harriett Baldwin MP accuses Rachel Reeves of having ‘fled to China’ rather than face MPs over the rise in public borrowing costs, because she realises her budget means she is “the arsonist”.Baldwin says yesterday’s statement from the Treasury (which said the government has an iron grip on the public finances) was an “extraordinary emergency” effort to calm the markets.Darren Jones says these “inflammatory” comments are rather surprising, and don’t reflect reality.The trip to China has been in the diary for weeks, he points out.And he rejects claims that the Treasury has intervened in the markets, saying yesterday’s statement was simply a response to questions from the media
Shares in banknote printer De La Rue soar after it confirms takeover talks
Shares in De La Rue, the 200-year-old British firm that prints banknotes for the Bank of England, have surged after it confirmed it was in talks about a possible takeover offer from a well-known City financier.Investment funds controlled by the pensions and private equity entrepreneur Edi Truell have made a conditional offer for De La Rue worth 125p a share, valuing the company at £245m.The deal would be conditional on the completion of De La Rue’s planned £300m sale of its authentication division to Crane NXT, which was announced last October.De La Rue said in a statement to the stock market that its board was “considering its options”.The firm said in December that it had been approached by Truell and companies he founded about a partial takeover, of 40% of the business
Pound dips to 14-month low as bond sell-off piles pressure on Rachel Reeves
The pound briefly fell to a 14-month low against the US dollar on Thursday morning after the sell-off in the bond market fuelled investors’ anxiety about UK assets and piled further pressure on the chancellor, Rachel Reeves.Sterling extended recent losses against the US dollar, falling by a cent at one point, before recovering to trade half a cent down at $1.23.The sell-off in British government bonds – known as gilts – drove up the yield, or interest rate, paid to those holding them and therefore UK borrowing costs.However, comments by the chief secretary to the Treasury, Darren Jones, later on Thursday appeared to calm the market
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