Latest news with #Bank of England
Malay Mail
21 hours ago
- Business
- Malay Mail
‘Extremely stressed': Thames Water warns of collapse without overhaul of UK water rules
Proposed measures to fix sector expected on Monday Indebted Thames Water fighting for survival Regulation overhaul could be proposed LONDON, July 19 — Britain is expected to set out measures to fix its broken water sector on Monday as Thames Water teeters on the brink of failure, saying it needs a 'reset' of regulation to have any chance of avoiding nationalisation. The country's biggest water company has been fighting for its survival for the last 18 months. If it fails the government would have to step in, adding billions of pounds to already stretched public finances. Britain commissioned a review last year into the privatised water industry in England and Wales, which needs huge investments to fix aging infrastructure and stem sewage spills into rivers and lakes that have angered the public. Former Bank of England deputy governor Jon Cunliffe, who is leading the review, has recommended overhauling regulation to lower investment risk, merging regulators to give companies clearer direction and new rules on river bathing standards. 'Water companies must be made more attractive to stable, long-term investors,' he said in his interim report in June. 'To attract such long-term investors, willing to make the substantial future investment we need, risks also need to be lower than they are presently. In large part, this means restoring confidence in the stability and predictability of the regulatory system.' Thames Water's creditors have offered it a rescue deal worth about 5 billion pounds (RM28.5 billion), and they, along with the beleaguered company, are in talks with Ofwat, the water industry's financial regulator. But in return they want a regulatory reset, which could mean flexibility on pollution targets, clemency on penalties and more time to deliver improvements. Thames Water Chief Executive Chris Weston told lawmakers on Tuesday that the company was 'extremely stressed and operating in very difficult circumstances' after it reported a 1.65 billion pound annual loss. Thames Water suffered a major setback in June when US private equity firm KKR – its preferred bidder – pulled out of an earlier rescue plan. KKR told lawmakers in a letter published on Tuesday that regulatory risk played a part in its decision, and it would not have been 'able to manage and meet the understandable expectations on the timing of improvements, risking falling short in the eyes of the public and stakeholders'. Thames Water, which has 16 million customers in southern England, forecasts it will face 1.4 billion pounds in pollution fines and penalties over the next five years. While the government wants to cut water pollution, it can ill afford a Thames Water bankruptcy that would add the company's 17 billion pound debt onto government books, at a time when the finance minister Rachel Reeves is already close to breaking her fiscal rules. The government has repeatedly said it is keeping a close eye on Thames Water. Environment minister Steve Reed said in June that his department had 'stepped up' preparations for its special administration regime, a form of temporary nationalisation. — Reuters
Times
2 days ago
- Business
- Times
Why the surprise inflation rise is bad news for your mortgage
Cuts to mortgage rates over the past few weeks could be reversed after a higher-than-expected rise in inflation, experts have suggested. The rate of consumer price inflation was 3.6 per cent for the year to June, a surprise increase from 3.4 per cent for the year to May. Many economists had expected it to remain unchanged. The rise, which was mostly driven by an increase in petrol prices, takes inflation further away from the Bank of England's 2 per cent target. The Bank expects it to eventually fall to 2 per cent by 2027. The figures have cast doubts over how much further and how quickly the Bank will cut its base rate of interest, which is now 4.25 per cent having been cut four times since it hit a 15-year high of 5.25 per cent in August 2023. The Bank had been expected to cut the base rate by 0.25 percentage points when its monetary policy committee meets next month, but this may now not play out as predicted. This matters for mortgage holders because fixed rates are priced based on swap rates — the interest rates at which banks lend to each other, which are based on market expectations of future Bank rates. Dan Coatsworth from the investment platform AJ Bell said markets have put the chance of a rate cut in August at about 82 per cent. 'But there is a lot less confidence in future cuts. The latest inflation figures might encourage the Bank to sit on its hands and wait for more data to see if the spike in the cost of living is only temporary,' he said. Fixed mortgage rates had been falling over the past few weeks, which has been good news for buyers as well as the hundreds of thousands of homeowners whose deals are due to end this year. The lowest two-year fixed rate has fallen from 3.98 per cent on June 15 to 3.79 per cent today for someone buying a home. The deal, from Santander, has a £999 fee and is available at up to 60 per cent loan-to-value (LTV). The lowest rate for someone remortgaging is 3.83 per cent from HSBC with the same fee and maximum LTV. David Hollingworth from the mortgage broker L&C said: 'Mortgage rates have been reflecting the market's confidence in more cuts to come. Lenders have been locked in an attritional rate battle that has seen frequent, albeit small, reductions to fixed rates.' The lowest five-year fixed rate has fallen from 3.99 per cent in June to 3.86 per cent from HSBC, available with a £999 fee for someone remortgaging at up to 60 per cent LTV. Hollingworth said: 'Today's news could take a bit of momentum out of those reductions, although it may not be enough to spark a significant reversal.' • Mortgage rule changes could help 16,000 first-time buyers a year Higher inflation is usually bad for savers because it eats into the real value of their returns. However, there is a silver lining because it usually keeps interest rates higher, meaning that they can lock into a better deal. Now that the market doesn't expect rates to fall as quickly, the top-paying accounts may stick around for a little longer. although you will still need to move fast because the best deals are often from smaller banks that fill their cash quotas quickly. The highest one-year fixed savings rate is 4.58 per cent from GB Bank, while the top two-year rate is 4.44 per cent from DF Capital, which also has the highest five-year rate of 4.47 per cent. All three accounts require a minimum deposit of £1,000. The best interest rate on an easy-access accounts, where rates can usually be cut at short notice, is 5 per cent for a year from JP Morgan's digital bank Chase. It's a variable rate with a 2.25 percentage point bonus for the first 12 months, and you need to have a current account with the bank. Atom, another app-based bank, pays 4.75 per cent variable if you do not make a withdrawal — if you do, the rate drops to 2.5 per cent. Caitlyn Eastell from the data company Moneyfacts said: 'People should act quickly to avoid inflation eroding their hard-earned wealth by moving their money to the most competitive accounts. Savers earning less than the level of inflation should shop around for better returns immediately.'
The Independent
3 days ago
- Business
- The Independent
UK unemployment rises to highest in four years due to slowing wage growth
Britain's unemployment rate has reached its highest level since June 2021, while workers have also faced a significant slowdown in wage growth, official figures reveal. The Office for National Statistics (ONS) reported the UK jobless rate rose to 4.7% in the three months to May, an increase from 4.6% in the preceding three months to April. Concurrently, average earnings growth, excluding bonuses, decelerated to 5% in the period to May, marking its lowest level in almost three years. The figures point towards further pressure in the UK labour market, days after the governor of the Bank of England warned that the Bank is prepared to make larger interest rate cuts if it sees that the job market slowing. It also comes amid a backdrop of recent weakness in the economy, with UK GDP (gross domestic product) shrinking in both April and May. ONS director of economic statistics Liz McKeown said: 'The labour market continues to weaken, with the number of employees on payroll falling again, though revised tax data shows the decline in recent months is less pronounced than previously estimated. 'Pay growth fell again in both cash and real terms, but both measures remain relatively strong by historic standards. 'The number of job vacancies is still falling and has now been dropping continuously for three years.' The rise in unemployment is worse than economists had expected, having predicted that the jobless rate would remain at 4.6% for the month. Nevertheless, average wage growth was slightly higher than the 4.9% predicted by economists. But the rate of wage growth was still the weakest figure since the three months to June 2022 and represents a drop from a revised level of 5.3% in the three months to April. Wage growth continues to outstrip inflation, reflecting a rise of 1.8% after taking Consumer Prices Index inflation into account. Pressure in the labour market for the three months to May comes as firms swallowed significant increases in national insurance contributions and the national minimum wage in April. Firms have also been impacted by intensifying economic uncertainty after US President Donald Trump launched a new tariff regime in April, leading to heightened global trade tensions. The figures also showed job vacancies in the UK fell by 56,000 to 727,000 in the three months to June, compared with the previous quarter.
The Independent
3 days ago
- Business
- The Independent
UK unemployment jumps to highest since 2021 as wage growth slows
Britain's jobless rate has struck its highest level for four years as workers also faced another slowdown in wage growth, official figures have shown. The Office for National Statistics (ONS) said the rate of UK unemployment increased to 4.7% in the three months to May, from 4.6% in three months to April. It said this marked the highest level since June 2021. Meanwhile, average earnings growth, excluding bonuses, slowed to 5% in the period to May to its lowest level for almost three years. The figures point towards further pressure in the UK labour market, days after the governor of the Bank of England warned that the Bank is prepared to make larger interest rate cuts if it sees that the job market slowing. ONS director of economic statistics Liz McKeown said: 'The labour market continues to weaken, with the number of employees on payroll falling again, though revised tax data shows the decline in recent months is less pronounced than previously estimated. 'Pay growth fell again in both cash and real terms, but both measures remain relatively strong by historic standards.'
Yahoo
3 days ago
- Business
- Yahoo
Jobless rate hits four-year high- but makes interest rate cut more likely
The UK's unemployment rate has risen to a four-year high, in a surprise deterioration that boosts the case for a Bank of England interest rate cut. The Office for National Statistics (ONS) reported a rise in the jobless rate from 4.6% to 4.7% in the three months to May. No change had been expected after the 0.1 percentage point rise seen just last month. The ONS data, which still comes with a health warning due to poor participation rates, also showed a reduction in the pace of wage rises, with average weekly earnings rising by 5%. That was down from the 5.2% level reported a month ago. Money latest: ONS director of economic statistics, Liz McKeown, said of its findings: "The labour market continues to weaken, with the number of employees on payroll falling again, though revised tax data shows the decline in recent months is less pronounced than previously estimated. "Pay growth fell again in both cash and real terms, but both measures remain relatively strong by historic standards. "The number of job vacancies is still falling and has now been dropping continuously for three years." The data was released 24 hours after a surprise rise in the rate of , to 3.6%, was revealed by the ONS. It was seen as muddying the waters as the Bank considers the timing of its next interest rate cut. But a quarter point reduction, to 4%, is widely expected at the next meeting of the rate-setting committee in early August, The Bank, experts say, will be looking past the headline inflation numbers and see scope to introduce the third cut of the year due to the softening labour market seen in 2025 - a factor the Bank's governor Andrew Bailey had suggested would come more into focus in a recent interview with The Times. Weaker pay awards remain a compulsory element to bringing down borrowing costs as there are fears the UK's difficulties in bringing down inflation are partly linked to wage growth outpacing price hikes since August 2023. Add to that the slowdown in economic growth and you have a Bank seemingly grappling the effects of so-called stagflation - as scenario of weak growth with inflation persistently well above the Bank's 2% target. While there are conflicting forces at play for the Bank's interest rate deliberations, rising inflation, coupled with weakening growth and jobs data, are all unwelcome for a chancellor under growing pressure. Rachel Reeves was accused on Wednesday of contributing to inflation through taxes on employment deployed from April - with industry bodies in the grocery sector claiming an element of rising food price growth was down to businesses passing on those extra costs, alongside hikes to minimum pay requirements. At the same time, those budget measures have clearly held back hiring since the spring. One crumb of comfort for her is that the prospect of a rate cut next month remains on - with any reduction helping bring down the cost of servicing government debt as the headroom she has within the public finances remains under severe pressure. Government U-turns on winter fuel payment curbs and welfare reforms have squeezed her fiscal rules, leaving her to cover likely at the autumn budget to cover shortfalls either through further tax hikes or spending cuts. Yael Selfin, chief economist at KPMG UK, said of the rate cut prospects: "Slowing activity in the labour market, coupled with pay pressures easing, will likely prompt the Bank of England to lower interest rates next month. "The impact of April's tax and administrative changes has led to a marked slowdown in hiring activity among firms. With domestic activity remaining sluggish, the MPC will likely want to provide support via looser policy to prevent a more significant deterioration in the labour market."
