Closing post
Time to recap.
The UK government borrowed more than expected in October as debt interest payments and public sector pay rises pushed the public finances deeper into the red.
Borrowing rose to £17.4bn last month, the second highest October figure since monthly records began in 1993 and despite a rise in inheritance tax receipts.
City economists had expected a smaller figure, of about £12.3bn for October, after the UK borrowed more than £16bn in September.
The increase piling pressure on Rachel Reeves as she attempts to grow the economy, with economists warning that more tax rises may be needed if the chancellor wants to lift spending in future years.
More here:
After making a run towards the $100,000 mark, bitcoin is now dipping back – it’s currently trading around $96,000, having hit a new all-time high over $98,000 this morning.
Shares in Alphabet, the parent company of Google, are down 6% after the DoJ ordered it to sell its Chrome browser.
After opening higher, shares in Nvidia are now down over 2% despite reporting strong results last night.
Investors at Thames Water, Yorkshire Water, and Dŵr Cymru Welsh Water will be forced to pick up the tab for executive bonuses after the regulator determined that the sector had awarded “undeserved” extra payments, worth £6.8m.
The company that owns Royal Mail is considering job cuts and price rises on stamps and parcels as it blamed the Labour government’s first budget in 14 years for adding £120m to its costs.
Three British mining executives who had been detained by the government of Mali have been released and are “safe and well”, days after agreeing to pay $160m to settle a tax dispute.
The City regulator plans to intervene in the car loan mis-selling scandal, in a move that could give lenders up to a year to respond to the rising number of customer complaints after a shock court ruling.
Mild weather and discounting by rivals hit sales at JD Sports in October, as the trainers and fashion retailer said profits will be at the lower end of expectations.
Alphabet shares drop 5% after DoJ proposes Chrome sale
Shares in Google’s parent company, Alphabet, have dropped over 5% in early New York trading after the US Department of Justice said it should sell Chrome, the world’s most popular web browser.
The DoJ made the call as part of a far-reaching overhaul of Google’s structure and business practices, in a bid to end its monopoly on internet search.
The proposal proposals follow a landmark court ruling in August in which a federal judge ruled that Google maintained an illegal monopoly over search services.
MPs demand answers about UK's job data woes
Parliament’s Treasury Committee have added their voice to the chorus of concerns over the quality of the UK’s employment data.
The committee have written to the UK’s national statistician, Sir Ian Diamond, today, to alert him that they have “major concerns” about the UK’s ability to set monetary and fiscal policy appropriately without reliable data about the labour market.
Earlier this week, top Bank of England officials told the committee that the monthly Labour Force Survey (LFS) produced by the Office for National Statistics may not give them a “good read” about what’s happening in the labour market.
The LFS has been hit by a sharp fall in the response rate from participants, which has made it hard for the ONS to deduce what is happening in the UK employment market.
The Committee now want to learn from Diamond…
An outline of the problems with the LFS, what steps the ONS is taking to fix them, and when the problems will be fully resolved.
Details on the progress made on the ONS’s new Transformed Labour Force Survey (TLFS) and the challenges associated with making it a suitable replacement for the LFS.
Why does the UK have a lower response rate to the LFS than other countries have to their equivalent surveys
What priority the ONS places on fixing the LFS and launching the TLFS, and how the work has been resourced
Earlier this week, the Resolution Foundation warned that the survey could have “lost” almost a million workers, leading to the ONS painting an “overly pessimistic” picture of the UK labour market since the pandemic.
Choppy trading on Wall Street, as Nvidia rises after results
Over in New York, there’s choppy trading on Wall Street as investors digest last night’s strong results from Nvidia.
After a positive open, the main stock indices have dipped into negative territory, with the Dow Jones industrial average (-0.03%) and the broader S&P 500 (-0.16%) both in the red.
The tech-focused Nasdaq Composite is down 0.35%.
Shares in Nvidia opened 4% higher, but are now up just 1%, after the chip giant beat sales expectations last night by reporting revenues of $35.08bn in the last quarter, up 94% year-on-year.
Profits more than doubled compared with a year ago, as Nvidia benefited from huge demand for its chips to use in AI systems. It also predicted its revenue would increase by 70% in the coming quarter.
Just in: The number of Americans filing new claims for unemployment benefit has fallen, suggesting the US jobs market remains healthy.
There were 213,000 new ‘initial claims’ for jobless support last week, a drop of 6,000 compared the previous week’s 219,000.
The initial claims total is seen as a proxy for the number of new layoffs in the US econony.
But…the the total number of jobless claimants rose to its highest in three years.
The estimated total for seasonally adjusted insured unemployment in the week to November 9 was 1,908,000, an increase of 36,000 from the previous week’s revised level. This is the highest level for insured unemployment since November 13, 2021 when it was 1,974,000.
Geopolitical tensions have helped to push the oil price up to a near two-week high today.
Brent crude has gained 2% today to trade at $74.32 per barrel, a gain of $1.5/barrel. That’s its highest level since 8 November.
Milad Azar, market analyst at XTB MENA, says:
Escalating geopolitical tensions continue to drive sentiment, with the Ukraine-Russia conflict intensifying.
oscow’s warnings have raised concerns about potential disruptions to energy flows, particularly from Russia, a key global supplier. While geopolitical risks typically lend support to crude, mixed U.S. inventory data is curbing more pronounced upward momentum. In the near to medium term, geopolitical risks could provide support on crude prices as markets remain sensitive to supply vulnerabilities.
Ukraine’s air force said this morning that Russia had fired an intercontinental ballistic missile (ICBM) at the city of Dnipro.
If confirmed would be the first time the long-range weapon has been used in any armed conflict, but some western officials have questioned the claim.
Britain’s City regulator plans to intervene in the car loan mis-selling scandal, in a move that could give lenders up to a year to respond to the rising number of customer complaints after a shock court ruling.
The Financial Conduct Authority has been under pressure to take action after a court of appeal ruling in October said it was unlawful for two lenders to have paid a “secret” commission to car dealers without borrowers’ knowledge.
The FCA is proposing to ease the pressure by scrapping an eight-week deadline for lenders to respond to customer complaints. It suggests an extension to 31 May 2025 – when it plans to set out the next steps in its narrower investigation – or 4 December 2025.
Bitcoin now over $98,000
Bitcoin is nudging closer to that $100,000 figure.
It has now traded above $98,000 for the first time, hitting a new alltime high of $98,367 a few minutes ago.
Raffi Boyadjian, lead market analyst at XM, says bitcoin’s post-election surge showed “no sign of abating”, adding:
Investors probably see the boost to Bitcoin from a friendlier regulatory environment by the incoming Trump administration as much more of a sure thing than for its rivals.
UK manufacturing output hit by political jitters
Manufacturing output volumes across UK factories has been hit by political uncertainty at home, and abroad.
The latest industrial trends survey from the CBI has found that manufacturing output volumes fell in the quarter to November, and at a faster pace than in the three months to October.
The drop is blamed on uncertainty over the UK budget last month, and the US elections, which both weighed on production in the last quarter.
Anxiety over the political situation in Europe, where France held national elections this summer and Germany’s coalition government collapsed earlier this month, also hurt factory orders.
The latest CBI Industrial Trends Survey found that manufacturing output fell in the three months to November, and at a faster pace than the quarter to October. Output is expected to return to growth over the quarter to February. #ITS pic.twitter.com/KjSXgUVYiX
— CBI Economics (@CBI_Economics) November 21, 2024
But more happily, manufacturers expecting output volumes to rise modestly in the next quarter, to February.
Ben Jones, CBI lead economist, said:
“Output has underperformed expectations in recent months, with manufacturers pointing to uncertainty around the UK Budget, the US elections and recent political instability in Europe as among the factors leading customers to pause or cancel orders.
“Many firms still need to work through the implications of the Budget for their own plans for pay, hiring and investment, but it’s an encouraging sign that output volumes are expected to return to growth in the quarter ahead, with order books also showing some improvement this month.
The survey, based on the responses of 317 manufacturers, found:
Output volumes fell in the three months to November, at a faster pace than in the quarter to October (weighted balance of -12%, from -6% in the three months to October). Output is expected to rise in the three months to February (+9%).
Output decreased in 14 out of 17 sub-sectors in the three months to November, with the fall driven by the chemicals, mechanical engineering and metal products sub-sectors.
Total order books were reported as below “normal” but improved relative to last month (-19% from -27%). The level of order books remained below the long run average (-13%).
Export order books were also seen as below “normal” in November to the same extent as last month (-27%). This was also below the long-run average (-18%).
Expectations for average selling price inflation rose in November (+11% from 0% in October) with the balance standing broadly in line with the long-run average (+7%).
Stocks of finished goods were seen as more than “adequate” in November (+21% from +17% in October), with the balance the highest since August 2020.
Back in UK retail, there’s more drama at fast fashion company Boohoo.
Boohoo has appointed a new chairman, Tim Morris, this morning, succeeding co-founder Mahmud Kamani.
Boohoo, which has just raised £39.3m from investors, says Morris’s appointment shows it will “continue to uphold high standards of corporate governance.”
Kamani will move to become executive vice chair, Boohoo says, explaining:
The Board has decided to divide the [Kamani’s] role between his executive capacity and his role as the Board’s chair, to enable the Company to have an independent Chair and allow Mahmud to continue his day to day executive role.
Mahmud is an integral part of the leadership team and is currently focussed on the Group’s young fashion businesses.
But Boohoo’s largest shareholder, Mike Ashley’s Frasers Group, demanded this morning that Kamani “must go”.
Frasers, which recently attempted to install Ashley as Boohoo’s CEO, has today requisitioned a further shareholder meeting of Boohoo to give shareholders the opportunity to remove Kamani as a director of Boohoo.
It told the City:
Frasers urges boohoo shareholders to vote to appoint Mr. Ashley and Mr. Lennon as directors of boohoo at the shareholder meeting which Frasers has requisitioned, with a meeting date set for Friday 20 December 2024. Frasers also urges shareholders to vote for the removal of Mr. Kamani when the Board convenes a separate shareholder meeting
With the threat of a new trade war with the US looming, China’s commerce ministry has announced a series of policy measures aimed at boosting the country’s foreign trade.
The measures include pledging to strengthen financing support to firms and expand exports of agricultural products.
Reuters has the details:
China will encourage financial institutions to provide more products to help firms improve their currency risk management, and to strengthen macro policy coordination to keep the yuan “reasonably stable”, the ministry said in a statement published online.
The country will also expand exports of agricultural products and support imports of core equipment and energy products, the statement said.
“(We will) guide and help firms to actively respond to unreasonable trade restrictions by other countries and create a good external environment for exports,” according to the statement..
Germany’s financial sector faces a danger of rising corporate insolvencies, and risks in the commercial real estate sector, its central bank has warned today.
The Bundesbank says Germany faces “elevated risk stemming from commercial real estate and owing to structural and climate change”, in its latest financial stability report.
It fears that Germany’s non-bank financial intermediaries continue to face liquidity risk, as “losses on commercial real estate loans have gone up considerably”.
Michael Theurer, member of the Executive Board of the Deutsche Bundesbank, says:
“The financial system is facing acute challenges due to geopolitical tensions and a weak economy. The economy is also undergoing transformation. This is making supervisors more vigilant, particularly with regard to the commercial real estate sector.
Our top priority must be a resilient financial system.”
Following the budget, more UK companies are worried about taxation.
The latest realtime data from the Office for National Statistics shows that the proportion of firms who say taxation is their main concern has risen to 14%, up from 10% last month.
That follows the increase in employers’ national insurance contributions, which has upset UK businesses.
But the most reported main concern was falling demand of goods and services, which was cirted by 16% of companies.
The ONS also found an increase in gloominess about trading prospects:
More than one in five (22%) trading businesses reported that they expect their turnover to decrease in December 2024, up 6 percentage points from expectations for November 2024; meanwhile 50% of businesses reported that they expect turnover to stay the same, down 7 percentage points over the same period.
According to the latest Business Insights and Conditions Survey (4 to 17 Nov 2024):
— Office for National Statistics (ONS) (@ONS) November 21, 2024
· 16 % of trading businesses said their turnover had increased in Oct 2024 compared with Sept 2024
· 22% said it had decreased
Read our release ➡️ https://t.co/n9HxNzXQcX pic.twitter.com/4fTG5zV09b
Updated
The jump in UK borrowing last month (see opening post) makes it hard for Rachel Reeves to reverse any of the unpopular tax decisions in last month’s budget, says Sandra Horsfield, economist at Investec:
Certainly, the pressure on public finances looks here to stay, unless the Chancellor receives unexpectedly good news on growth and therefore tax revenues in future.
Tempting though it may be politically to reverse some of the more unpopular decisions taken in the Budget, Labour’s hands to do so, without offsetting other unpalatable choices, look tied for now.
JD Sports shares slide after warning on profits
Shares in UK retailer JD Sports have tumbled to their lowest level in over two years, after it hit the City with a warning that profits will be lower than hoped this year.
JD Sports told shareholders that it has been hit by “much softer consumer demand and trading” in recent weeks, afer a strong back-to-school period.
The company blames elevated promotional activity, unseasonable weather and a cautious consumer, including suppressed demand in the US ahead of the election.
JD now expects pre-tax profits to only reach the lower end of its original guidance range of £955, to £1.035bn.
Régis Schultz, CEO of JD Sports Fashion, said:
“After a good start to the period, helped by strong back-to-school sales, we saw increased trading volatility in October, particularly in North America and the UK, reflecting elevated promotional activity and mild weather.
Against this backdrop, we maintained our commercial discipline, improving gross margin by 0.3%pts while still delivering 5.4% organic sales growth. In addition, we made further, strong progress on our long-term growth strategy including opening 79 new JD stores across the world.
We have performed well in the key trading events this year and we are well positioned for the upcoming peak season. The trading environment remains volatile though and, following October trading, we now anticipate full year profit to be at the lower end of our guidance range.”
Shares are down 16% at 94.5p, their lowest level since October 2022, at the bottom of the FTSE 100 leaderboard.
Updated
Investors forced to pay for 'undeserved' bonuses at three water suppliers
Shareholders at Thames Water, Yorkshire Water, and Dŵr Cymru Welsh Water will be forced to pick up the tab for executive bonuses after the water regulator determined that the sector had awarded “undeserved” extra payments worth £6.8m.
Ofwat said on Thursday that it had used new powers to ensure shareholders at the three companies paid for bonuses because they had not “adequately reflected overall company performance issues”.
Water companies have faced a wave of public anger and political backlash in recent years over leaks and sewage overflows as they have also come under increasing financial strain.
Nine water companies will not be allowed to use customer funds to pay bonuses worth £6.8m. Six voluntarily said that shareholders would pay, but Ofwat had to use its powers directly in the cases of bonuses worth £1.5m from Thames, Yorkshire and Welsh.
So far this financial year (since April) the UK has borrowed £96.6bn, £1.1bn more than at the same point in the last financial year.
That’s the third highest financial year-to-October borrowing since monthly records began in January 1993.
Alison Ring, ICAEW director of public sector and taxation, says this “emphasises the difficult financial situation” facing the UK government, adding:
“With the government’s growth agenda including planning reform and a fresh industrial strategy yet to be rolled out, let alone bear fruit, the Chancellor is almost entirely relying on her Autumn Budget tax rises to stabilise the fiscal situation from April 2025 onwards.
This is likely to stiffen her resolve against calls for her to reverse course on some of her tax decisions.”
Inheritance tax raises £5bn since April
Inheritance tax has brought in £5bn so far this financial year, even before the government hits farmers with the levy.
New figures from HMRC this morning show that inheritance tax receipts for April to October 2024 have risen by £500m year-on-year, to £5bn.
This increase is driven by “higher volumes of wealth transfers following recent IHT-liable deaths”, says HMRC, with the increase in values of assets such as homes and share portfolios meaning more estates are worth more than the IHT thresholds.
Fiscal drag is also pushing more estates into the IHT territory, as those thresholds have been frozen for several years.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says:
“Inheritance tax is on track for another record year with receipts so far hitting £5bn. With five months of the tax year yet to go it should easily outstrip last year’s £7.5bn.
It may be a tax that so far only hits a small proportion of the population but, after last month’s Budget, it’s about to be an issue for a lot more people, after the decision was taken to make pensions part of someone’s estate for inheritance tax purposes. This won’t kick in until 2027 but will be a major part of many people’s financial planning.
Updated
UK spent £9.1bn on debt servicing costs last month
Over half last month’s borrowing went on servicing the UK’s national debt!
The public finances report shows that the interest bill on UK government debt increased by £0.5bn to £9.1bn, last month.
The increase was mainly due to rises in the Retail Prices Index (RPI) measure of inflation, which sets the repayment rates on index-linked gilts.
So far this financial year, the UK has spent £53.6 billion on debt interest, a £2.2bn drop on a year ago.
Public sector pay rises lifted borrowing
Today’s UK public finances report shows that public sector pay rises helped to lift government spending faster than revenues last month.
Spending increased by £3.9bn, year-on-year, increase in spending, to £88.5bn.
That, and a hefty £9.1bn increase in debt servicing costs (see here) helped to push the UK’s monthly budget deficit up over £17bn in October.
The increase in spending included:
Spending on government goods and services increasing by £2.5bn to £36.9bn, as “pay rises and inflation increased running costs”
Net social benefits paid by central government increasing by £0.5bn to £25.3bn, due to inflation-linked increases in benefits
Pay awards for public sector workers in Britain are set to overtake the private sector for the first time in four years, after Rachel Reeves’s budget at the end of October confirmed above-inflation pay rises for public sector workers.
On the other side of the ledger, government revenues increase by £2.9bn last month, compared with October 2023.
Tax receipts jumped by £3.8bn, to £61.3bn, including a £1.5bn rise in Corporation Tax receipts and an extra £1.4bn from Income Tax.
But ‘compulsory social contributions’ fell by £1.1bn, mainly due to the reductions in the main rates of National Insurance in early 2024 made by former chancellor Jeremy Hunt.
Updated
Bitcoin closes in on $100,000
Bitcoin is heading close to the $100,000 mark for the first time, after hitting the latest in a series of record highs.
The world’s largest cryptocurrency has jumped to around $97,902 in early trading, meaning it has surged by 132% so far this year.
Bitcoin has rallied from below $70,000 since Donald Trump won the US presidential election two weeks ago, with traders calculating that the next administration will be more friendly towards crypto.
Trump recently pledged to make the United States the crypto capital of the world, and Bloomberg reported last night that the president-elect’s team is holding discussions with the digital asset industry about whether to create a new White House post solely dedicated to cryptocurrency policy.
Stephen Innes, managing partner at SPI Asset Management, says:
Meanwhile, Bitcoin is inching closer to a monumental $100,000 milestone, driven by mounting confidence that President-elect Donald Trump’s administration will usher in a crypto-friendly era.
Speculators rally behind the narrative, fueling a frenzy as the digital asset edges toward an unprecedented valuation.
Updated
'Disappointing' borrowing figures highlight Chancellor’s lack of wiggle room
October’s “disappointing” public finances figures underline the fiscal challenge that the Chancellor still faces, despite the big increases in spending and taxes announced in the Budget.
So says Alex Kerr, UK economist at Capital Economics, who warns that Reeves may need to make further tax rises in future years if she wants to increase spending.
Kerr tells clients this morning:
Overall, October’s borrowing figures underline the little wiggle room the Chancellor has to significantly increase day-to-day spending.
Despite raising day-to-day spending significantly this year and next, spending is set to rise by just 1.3% in real terms on average between 2026/27 and 2029/30.
And given that the Chancellor only had £9.9bn of fiscal ‘headroom’ against her fiscal mandate left over after October’s Budget, this suggests that if she does want to increase day-to-day spending further, taxes will probably need to rise too.
Introduction: UK borrowing jumps to £17.4bn in October
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK government borrowed billions of pounds more than expected last month, adding to the pressures on chancellor Rachel Reeves.
Government borrowing jumped to £17.4bn in October to cover the difference between public sector spending and income, according to the first assessment of the public finances since last month’s budget.
That’s £1.6bn more than in October 2023 and the second highest October borrowing since monthly records began in January 1993.
City economists had expected a rather smaller borrowing figure, of around £12.3bn for October, after the UK borrowed over £16bn in September.
ONS deputy director for public sector finances Jessica Barnaby says that government spending – on services, and also on debt repayments – rose faster than tax receipts:
“This month’s borrowing was the second highest October figure since monthly records began in January 1993.
Despite the cut in the main rates of National Insurance earlier in 2024, total receipts rose on last year. However, with spending on public services, benefits and debt interest costs all up on last year, expenditure rose faster than revenue overall.”
Public sector net borrowing excluding public sector banks was £17.4 billion in October 2024, £1.6 billion more than this time last year and the second highest October borrowing since monthly records began in January 1993.
— Office for National Statistics (ONS) (@ONS) November 21, 2024
Read more ➡️ https://t.co/t46AiAM8oT pic.twitter.com/E0n8pWIIFJ
The increase in borrowing lifts the UK’s public sector net debt to 97.5% of GDP, levels last seeen in the early 1960s.
But, if you use the new measure of public sector net financial liabilities (persnuffle), used by Reeves in her new fiscal rules, the national debt is smaller, at 83.7% of GDP.
Public sector net financial liabilities excluding public sector banks were £2,394.3 billion at the end of October 2024, equivalent to 83.7% of GDP, 2.5 percentage points more than a year earlier. pic.twitter.com/AIcVXem1Qr
— Office for National Statistics (ONS) (@ONS) November 21, 2024
The tax rises in Labour’s budget last month should help push down borrowing, except they are being resisted by UK retailers, and farmers.
Chief secretary to the Treasury Darren Jones says the government is committed to stabilising the public finances:
We inherited a £22bn black hole in our public finances from the previous government. At the budget we addressed this, fixing the foundations and putting public finances on a sustainable footing to rebuild the country.
This government will never play fast and loose with the public finances. Our new robust fiscal rules will deliver stability by getting debt down while prioritising investment to deliver growth.
The agenda
7am GMT: UK public finances for October
11am GMT: CBI industrial trends report for October
1.30pm GMT: US weekly jobless claims
1.30pm GMT: Philadelphia Fed manufacturing index
3pm GMT: eurozone consumer confidence report
Updated
