Latest news with #LindsayJames
Euronews
11-07-2025
- Business
- Euronews
UK economy contracts again in May despite government growth push
The UK economy contracted by 0.1% in May, following a drop of 0.3% in April, the Office for National Statistics said on Friday. The pound fell around 0.2% against the dollar to $1.35 after the announcement. The figures come as an unexpected blow to the UK's Labour government, which has made boosting growth a pillar of its political agenda. Economists had predicted a 0.1% expansion for May. Labour's move to increase payroll taxes earlier this year has been blamed for reduced hiring, while tariff threats from the US administration are also sowing uncertainty and dampening spending appetites. The UK saw an uptick in gross domestic product (GDP) in February and March, although the Bank of England warned that this was down to temporary factors, rather than strength in the underlying economy. For example, a hike in Stamp Duty, a tax on property or land purchased, meant that buyers rushed to make their purchases before the end of March. Exporters also rushed to ship goods in an attempt to prepare for upcoming US tariffs. May's contraction was largely driven by a 0.9% fall in production output. Construction was down 0.6%, while services grew by a meagre 0.1%. In April, production fell by 0.6%, construction grew 0.8%, and services dropped 0.3%. 'Growth is becoming incredibly difficult to achieve for the government, and the plans put in place so far are unlikely to move the needle in the absence of improving business and consumer sentiment in an environment of ongoing cost pressures,' said Lindsay James, investment strategist at Quilter. 'The choices are tough and stark, and until we see an end to the persistent tax rises, inflation returning to target and interest rates falling more meaningfully, improvements will be minimal.' The Bank of England held interest rates at 4.25% last month, although markets are predicting a 25-basis-point cut at its next meeting on 7 August.
Business Times
22-05-2025
- Business
- Business Times
UK budget strains deepen ahead of Reeves' spending review
[MANCHESTER] Britain's government kicked off the 2025/26 financial year in April by again borrowing more than expected, suggesting no let-up in the pressure on the public finances ahead of a major review of spending. Public sector net borrowing was £20.155 billion (S$34.9 billion) in April, according to official data. A Reuters poll of economists showed a median forecast of £17.9 billion for public sector net borrowing. Economists have routinely underestimated the extent of Britain's budget deficit each month over the past year. Finance minister Rachel Reeves is due to deliver her first multi-year spending review on June 11 to set the budgets for public services. She outlined her first annual tax and spending plans last October when she raised social security contributions paid by employers but held off from broader tax increases. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'The decision to hold off on tax rises in the Spring Budget increasingly looks like a temporary reprieve,' said Lindsay James, investor strategist at wealth management firm Quilter. 'As borrowing continues to outstrip forecasts and debt interest costs remain elevated, pressure is building on the Chancellor to make tougher choices.' With Reeves' budget plans hinging on a tiny buffer against the government's self-imposed fiscal rules – equivalent to less than 1 per cent of annual spending – investors are watching public sector finance data closely. The British government bond market has become increasingly volatile in recent years, reflecting unease among investors over Britain's mix of slow economic growth, high debt interest costs and persistent inflation. Thursday's figures from the Office for National Statistics (ONS) were the first to estimate the impact of the large hike in employer social security payments, known in Britain as National Insurance contributions (NICs), which came into effect in April. A major source of funding for the Labour government's spending plans, the ONS said compulsory social security contributions increased by 12.8 per cent compared with a year ago, on an accrued basis that relies heavily on projections. Separate HMRC tax data, which records what the government actually received, showed a 7.7 per cent annual increase in employer NICs contributions – the weakest such increase for the month of April since 2020. But as NICs contributions are paid a month in arrears, it will not be until next month that more concrete evidence of the NICs increase appears in the data. The ONS revised down its estimate of borrowing for the last financial year that ended in March to 148.3 billion pounds from 151.9 billion pounds previously, or 5.1 per cent of economist output compared to 5.3 per cent. In 2023/24, the deficit was 4.8 per cent of GDP. In its forecasts published in March, the Office for Budget Responsibility - which provides the fiscal and economic outlooks used by the government - projected a budget deficit for the financial year ending in March of 137.3 billion pounds. ($1 = 0.7447 pounds) (Reporting by Andy Bruce; Editing by William Schomberg and Hugh Lawson)
Yahoo
16-04-2025
- Business
- Yahoo
UK inflation falls as price of petrol comes down
Falling petrol prices drove UK inflation down by more than expected in the year to March. Inflation was 2.6%, down from a rate of 2.8% in February, according to official data. But the fall may only be temporary as analysts say it's expected to spike from April as rising bills and higher business costs take hold. "The only significant offset came from the price of clothes which rose strongly this month," said Grant Fitzner, chief economist at the Office for National Statistics (ONS). The inflation decrease was also driven by a drop in recreation and culture prices, with toys, games, and hobbies falling particularly sharply. Wages continue to outpace inflation with salary raises for public sector workers growing more than those in the private sector. The average rise in wages was 5.9%, data released by the ONS on Tuesday showed. The drop in inflation will be welcome news to the government, said Lindsay James, investment strategist at Quilter. "With the jobs market weakening somewhat, and very real and present tariff threats still in play, any downward pressure on inflation will be hailed," she said - She added the forecast for inflation "remains very uncertain" because of a "volatile" global economy, and rising National Insurance which she said will raise prices from April onwards. Chancellor Rachel Reeves said the drop was "encouraging" but that "there is more to be done. "I know many families are still struggling with the cost of living and this is an anxious time because of a changing world," she said. Why are prices rising in the UK? UK jobs market weakens as employment costs grow Clothes sales push inflation down more than expected When will interest rates go down again?
Yahoo
20-03-2025
- Business
- Yahoo
Will BoE slow down pace of interest rate cuts? Yahoo Finance readers have their say
The Bank of England (BoE) kept interest rates on hold on Thursday, as expected, but said it would continue to take a "gradual and careful" approach to monetary policy. The central bank decided to hold the base rate at 4.5%, which is its lowest level in 20 months, after having reduced it last month in the third cut of this current cycle. The BoE said in a statement announcing its latest decision that since the last monetary policy committee meeting "global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded. "Other geopolitical uncertainties have also increased and indicators of financial market volatility have risen globally. The German government has announced plans for significant reform to its fiscal rules." US president Donald Trump's volleying of trade tariffs has led to heightened volatility in stock markets, with investors concerned that the duties could stoke inflation, creating a further drag on the economy. Meanwhile, government bonds sold-off globally recently, following an announcement from the incoming German government of plans to revamp debt rules to boost defence and infrastructure investment in Europe's largest economy. European leaders have been pledging to boost their defence spending, amid concerns of reduced support from the US. Read more: UK pay growth stays above inflation ahead of Bank of England interest rate decision In terms of the UK's economic situation, the BoE said on Thursday that "business survey indicators generally continue to suggest weakness in growth and particularly in employment intentions. In recent quarters, subdued activity has been judged to reflect both demand and supply factors." The BoE said that based on the MPC's medium-term outlook for inflation, "a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate." Inflation remains above the central bank's 2% target, having risen to 3% in January. The BoE has previously said that it expected inflation to reach 3.7% later this year. In addition, data released by the Office for National Statistics (ONS) on Thursday, showed that while UK pay growth was steady at 5.9% in the three months to January on an annual basis, this was still ahead of inflation. Meanwhile, economic growth has slowed, with the UK's gross domestic product (GDP) unexpectedly shrinking 0.1% in January. Lindsay James, investment strategist at Quilter, said: "Market expectations are currently pricing in around two cuts for the remainder of the year, mirroring expectations for the US. The Bank of England will wish to avoid cutting rates too much too quickly for fear of causing further inflationary pressure, so for now this looks reasonable." Earlier this week, we asked Yahoo Finance UK readers if they believed that the BoE would slow down its pace of interest rate cuts. We received 368 votes, with 60% believing that the central bank take a slower approach to reducing rates, while 29% disagreed and 11% were undecided on the matter. Read more: Stocks to watch this week: Tencent, Micron, Nike, Prudential and JD Wetherspoon Eurozone inflation revised lower to 2.3% in February UK house prices climb £10,431 amid demand for bigger homes
Wall Street Journal
20-03-2025
- Business
- Wall Street Journal
Sterling Rises to 2-Week High Against Euro After BOE Holds Rates Steady
1215 GMT – Sterling rises to a two-week high against the euro and trims losses versus the dollar after the Bank of England voted 8-1 to leave interest rates at 4.5%. One policymaker preferred to cut rates by 25 basis points. While a decision to hold rates was widely expected, some analysts had anticipated more policymakers would favor a rate cut. The BOE reiterated a 'gradual and careful' approach to cutting rates is appropriate. 'The BOE will wish to avoid cutting rates too much too quickly for fear of causing further inflationary pressure,' Quilter strategist Lindsay James says in a note. The euro falls to a low of 0.8363 pounds after the decision, from 0.8377 beforehand. Sterling rises to $1.2979, from 1.2958 previously.( 1141 GMT – The U.K. budget on Wednesday presents a bigger risk to sterling compared to the Bank of England's decision at 1200 GMT, Convera strategist George Vessey says in a note. The BOE is unlikely to stoke a major market reaction as a decision to leave interest rates unchanged is fully priced in, he says. There also isn't enough in U.K. data to warrant a dramatic shift in the BOE's guidance, he says. The budget might have a larger impact as U.K. Treasury Chief Rachel Reeves could cut spending, raise taxes or risk unnerving the U.K. government bond market, he says. As such, sterling's short-term outlook is skewed to the downside, although global uncertainties 'make for a low conviction.' (
