Closing post
Time to wrap up:
The number of people going financially insolvent across England and Wales jumped by 12% in January compared with the same month a year earlier, according to Insolvency Service figures.
More businesses also failed, with analysts warning that high taxes and a slow economy could lead to more insolvencies through this year.
Thames Water has avoided collapse, with a high court judge today giving approval for up to £3bn of high-cost borrowing.
But campaigners are vowing to fight the decision – arguing that Thames should be put into a special administration. A rival group of creditors who had pushed an alternative package are also planning to appeal.
Elsewhere in economics, UK wage growth accelerated at the end of last year – with total pay rising 6% in October-December.
Bank of England governor Andrew Bailey, though, has insisted that this doesn’t change the BoE’s view of the economy.
UK energy customers have been warned that bills are likely to jump by 5% in April, when the price cap is next adjusted.
Steel giant Tata hails planning approval for Port Talbot plans
Steel giant Tata has welcomed planning approval for its proposals for huge changes to steelmaking at its biggest plant.
Neath Port Talbot Council’s planning committee gave the go-ahead at a meeting on Tuesday to the way steel is produced at the South Wales site.
Tata has closed blast furnaces and is switching to an electric arc furnace-based steelmaking process which is greener, but needs fewer workers.
Almost 2,000 jobs will be lost, although the company and the Government have announced plans to help find new jobs for those affected and Tata says thousands of jobs will be preserved.
Rajesh Nair, chief executive of Tata Steel UK, said:
“We are very pleased to have secured approval to build sustainable steelmaking in Port Talbot.
“Amidst a challenging global market, this is a significant milestone for the project and we are committed to begin large-scale work on site this summer, ahead of the Electric Arc Furnace starting up from the end of 2027.
“This £1.25 billion investment is the most significant investment made in the UK steel industry in decades.
“The facility will secure high-quality steel production, preserve thousands of jobs, and safeguard steel making in Port Talbot for generations to come.”
The closure of the last blast furnace at Port Talbot last year has led to job losses and higher rates of mental illness, with unions warning that for every job that goes in the steel plant, about three or four jobs are supported in the wider community.
Ouch! Confidence among US homebuilders has dropped, on concerns over president Trump’s plans to impose tariffs on imports.
A gauge of housing market conditions produced by the National Association of Home Builders and Wells Fargo fell 5 points to 42, the lowest since September.
Worres about high mortgage rates are also weighing on the housing market, the survey shows, with the US Federal Reserve not expected to cut interest rates for several months yet.
NAHB Housing Survey with a decent miss, lower than anyone was expecting.
— Craig Shapiro (@ces921) February 18, 2025
Trump policy agenda uncertainty is going to slow down real activity in the economy while the Fed is going to sit on its hands before being in a position to provide any further accommodation at this time.… https://t.co/9hh84a4Zlu
Despite today’s High Court ruling, “the ongoing financial drama at Thames Water shows no sign of abating”, says. Mark Lloyd, chief executive of The Rivers Trust.
Indeed, Lloyd adds, it merely adds to “the public despair and lack of trust” in the water industry.
He says:
“The astounding level of debt and punitive interest rates agreed mean that a large proportion of customer bills will be spent on paying financiers rather than improving the environment, when we know that Thames Water are already not delivering many of their promised environmental improvements.
This is a reflection of poor regulation over decades, which has driven companies to debt rather than equity finance, and some very greedy owners who siphoned too much funding out of the company to make themselves rich rather than fix our creaking infrastructure.
Back in Germany, auto supplier Continental has announced plans to cut a further 3,000 jobs by the end of 2026.
The job reductions will be in research and development, it said, with less than half of the cuts will be in Germany.
Continental said the cuts would “to a large extent” take place via natural turnover, such as from retirement.
Philipp von Hirschheydt, head of the automotive division at Continental, says:
“We are continuously improving our competitive strengths in the interest of our sustainable market success.”
Continental had already announced plans last February to cut 7,150 jobs by 2025.
UK farmers disappointed and furious after inheritance tax meeting with ministers
Farmers have expressed their “disappointment” and “fury” following a meeting with the government over the planned changes to inheritance tax for agricultural properties.
Tom Bradshaw, the president of the National Farmers’ Union (NFU) which represents 40,000 farmers across England and Wales, said he had taken proposals to the Treasury to reduce the impact of the changes to agricultural and business property relief on family farms.
However he said the exchequer secretary James Murray, and farming minister Daniel Zeichner were not receptive to their proposals.
“Disappointment doesn’t describe how I feel at the moment,” said Bradshaw, adding:
“There is no movement, the government resolutely believes that they are correct in the decision they have made and that they are generous in the exemptions they are giving us. They don’t care about the human impact, they don’t care about the intergenerational impact.”
Farmers have been protesting against the planned changes to agricultural property relief and business property relief since they were announced in October’s budget, which would see farms and other business property fall within inheritance tax from April 2026. Inheritors would have to pay 20% of the value of agricultural and business property above, which the government said would raise money to help improve public services.
The NFU and farming groups have warned that the proposed changes would push up food prices, impact domestic food supply and force many family farms to sell up to pay their tax bill.
Bradshaw told reporters he and representatives from other farming and countryside groups - the Tenant Farmers’ Association (TFA), Country Land and Business Association (CLA), and Central Association of Agricultural Valuers (CAAV) - proposed a “clawback” mechanism.
The clawback would see those inheriting a farming business only eligible for paying tax if they decided to sell the business within a certain time period after inheritance, which the NFU says would be at a time when cash was available to pay the tax bill.
“We are offering them a solution which still raises the funds, but at the moment the door is shut from Treasury,” Bradshaw said. “The reaction from our members is going to be one of fury, one of real anger, one of desperation.”
He added:
“We recognise the fiscal hole that the country faces and we recognise the challenges that government are under”.
Bradshaw insisted the prime minister was “disingenuous” to suggest that there was a choice between inheritance tax and funding the NHS
The meeting came just days after Keir Starmer cut short a visit to a housing development in Bedfordshire after it was interrupted by a protest of tractor-driving farmers. That day, Stamer defended the introduction of inheritance tax for farms as necessary for the sustainability of public services such as the NHS.
Victoria Vyvyan, president of the CLA, said she left the meeting with “boiling blood”.
“They were adamant and deaf to what we trying to say,” she said.
The Treasury has been contacted for comment.
Thames Water Class B creditors granted permission to appeal ruling
Just in: Thames Water’s Class B creditors have been granted permission to appeal today’s court ruling in favour of their rival Class A creditors.
The Class B creditors are lower-ranked in the pecking order, meaning they would be repaid after the As.
The Bs had proposed a rival debt restructuring plan to the one approved today – which had a lower interest rate.
The judge, though, was withering in his assessment of the Class B’s offer.
He wrote in his judgment that “I am very far from satisfied that the Class B AHG have made a binding commitment” for their own £3bn plan. He also wrote that he was “less than impressed” by the evidence of one of the class B investors, an investor from hedge fund Polus Capital.
Updated
Energy bills in Great Britain forecast to rise by 5% from April
Newsflash: Millions of households acrss Britain face a greater than expected increase to their energy bills of £85 a year from April after Europe’s gas storage levels slumped, according to analysts.
The average gas and electricity bill for households across England, Scotland and Wales is expected to rise by nearly 5% from April to £1,823 a year for a typical household under the energy regulator’s price cap.
The forecast by the influential consulting firm Cornwall Insight is higher than its earlier prediction that prices would rise to £1,785 a year this spring after colder weather and limited renewables caused gas storage levels to fall across Europe.
The energy industry regulator for Great Britain, Ofgem, will confirm the figure for the energy price cap covering the three months from 1 April on 25 February. The regulator increased the cap in January by 1.2% to a rate equivalent to £1,738.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight, says:
“Households have been hit hard over the past few months, and with bills set to rise for a third consecutive time the pressure is not letting up. While we’re not seeing a return to the peak of the energy crisis, the market is more volatile than it has been in quite some time, and households are bearing the brunt of cold weather and low gas storage levels across Europe.
Over in Germany, investor morale has risen at the fastest rate in two years this month, on hopes that the economy will pick up under a new government after Sunday’s election.
The ZEW economic reseach institute has reported that investor morale improved this month; its economic sentiment index increased to 26.0 points from 10.3 points in January.
Analysts polled by Reuters had pointed to a reading of 20.0.
ZEW president Achim Wambach says:
“This rising optimism is probably due to hopes for a new German government capable of action.”
📈 #ZEWEconomicSentiment improves significantly in February 2025 and stands at 26.0 points. “This rising #optimism is probably due to hopes for a new German #government capable of action,” comments #ZEW President @AchimWambach.https://t.co/LVGlr5Ou5P pic.twitter.com/0CBNVkRmDQ
— ZEW_en (@zew_en) February 18, 2025
The centre-right CDU party are leading in the polls, followed by the far-right AfD, with current chancellor Olaf Scholz’s SPD party third.
Updated
Charlie Maynard MP vows to fight Thames Water restructuring
A Liberal Democrat MP is vowing to appeal against today’s High Court judge’s decision to approve plans for a £3bn rescue loan for Thames Water from some of its existing creditors.
Charlie Maynard, MP for Witney in Oxfordshire, has claimed that the restructuring approved today was “simply throwing good money after bad”.
Maynard had led a group of clean river campaigners arguing that Thames Water should be put into a government-handled administration, rather than getting a loan lifeline.
At a hearing in London earlier this month, lawyers for Maynard said that the company plan was a “poor short-term fix” and a “bridge to nowhere”, and that the company should be put into special administration (SAR) instead.
And today, Maynard says (via PA Media):
“I stand by my evidence to the court that allowing Thames Water to take on £3 billion more debt is not in the interests of their millions of customers.
“They will all be paying the price for this futile, expensive and extremely short-term bailout.
“This restructuring is simply throwing good money after bad. The money from our bills which is being spent on interest repayments is desperately needed to repair water infrastructure, improve customer service and clean up our rivers.
“I intend to keep fighting for Thames Water’s customers by appealing this judgment.
“The only way to get Thames out from under this mountain of debt and back onto a stable financial footing at this point is to put the company into special administration with a swift exit plan.”
Updated
Insolvencies rise in England and Wales
The number of companies and individuals falling into insolvency in England and Wales jumped, year-on-year, last month.
New data from the Insolvency Service shows there were 1,971 registered company insolvencies in England and Wales in January 2025, 6% higher than in December 2024. and 11% higher than in January 2024.
This included 269 compulsory liquidations, 1,546 creditors’ voluntary liquidations (CVLs), 142 administrations and 14 company voluntary arrangements (CVAs).
Company insolvencies over the past year have been slightly lower than in 2023, which saw a 30-year high annual number, but have remained high relative to historical levels, the Insolvency Service says.
Seperately, 9,706 individuals entered insolvency in England and Wales in January 2025 – that’s 12% more than a year ago, but 3% lower than in December 2024.
These year-on-year increases highlight the economic pressures on households and companies, as they juggle inflationary pressures, higher borrowing costs and higher taxes.
Sophie Burke, restructuring and insolvency partner at City law firm Fladgate, predicts we could see a further rise in corporate failures, saying:
‘’The latest insolvency statistics reflect weak consumer confidence and sustained economic pressure on businesses, in particular in consumer-facing sectors.
Administrations have increased from December 2024 to January 2025 and Fladgate LLP has witnessed this directly in a sharp increase in the number of administrations that Fladgate has advised on since the start of 2025. The operating landscape for businesses in 2025 has had a turbulent start and this may lead to further increases in insolvencies.’’
Gavin Kramer, senior associate at law firm Collyer Bristow, warns that any increases in taxes coud push more firms under:
“While the number of insolvencies has not reached the level of the 2008 recession, it’s nonetheless clear that businesses are still struggling, and that there remain very few signs of growth in the British economy.
Many major sectors, especially retail, are already operating on thin profit margins. If, as seems possible, the Spring Budget includes further tax rises on either businesses or consumers, this may result in an increase in businesses’ operating costs increase and lead consumers to rein in their spending.
When a business is in financial difficulties there are of course restructuring options which can keep the business afloat as a going concern and save as many jobs as possible. However, unless growth and consumer confidence pick up, it may be difficult for financially precarious businesses to successfully restructure and recover.”
Here’s a handy Q&A about the approval of Thames Water’s £3bn rescue loan deal by a high court judge today, from PA Media:
Q: What happened?
After weeks of hearings in the High Court, a £3 billion funding plan for Thames Water has been approved as part of a loan deal agreed internally last year.
The utility company supplies about 16 million households across London and the South East.But it has at least £16 billion of debt, and had previously warned it only had enough money to keep running until March 24.
The new financing is designed to stop it from going bust, albeit temporarily.
Q: Why are people angry about Thames Water?
Thames Water has been at the centre of a growing scandal in the wider water industry.
Bills will climb steeply over the coming years, while privately-run water firms are still pumping raw sewage into rivers and waterways.That is despite a succession of penalties from regulators Ofwat and the Environment Agency.
Meanwhile, many bosses, including those at Thames Water, have still been given large bonuses in the last year.
Thames Water also requested last week that Ofwat allows it to raise consumer bills over the next five years by more than the 35% it previously granted.
Q: Why does Thames Water need this emergency money?
The company’s debts are so high and its cash reserves are so low that it would have gone out of business in March.
The taps in people’s homes would still work - but it would be damaging for the big finance firms to which Thames owes billions of pounds.
Many of them would have seen those debts written off, resulting in hefty losses.
Thames Water would instead come under temporary government control until a new buyer is found.
Labour previously said it wants to avoid that scenario, citing extra costs to taxpayers of running the water company.
Q: So what happens next?
The £3 billion is thought to be enough to last Thames Water for about one year.
It buys bosses some more time to find a permanent source of funding, which will likely come by selling the company.Potential suitors are lining up, with four bidders understood to have thrown their hat in the ring to buy Thames.
One is Castle Water, a firm owned by the Conservative Party treasurer Graham Edwards.
Another is investment firm Covalis Capital, which would bring in French utility giant Suez to run Thames day-to-day.
Q: What’s the catch?
The new loan is being provided by Thames’ creditors - namely companies it already owes about £11.5 billion.
They are mostly made up of hedge funds and other big finance firms, including Abrdn, M&G and others.
They are charging an unusually high interest rate of 9.75%, plus fees.
Over the 2.5-year life of the loan, and including fees, that could mean about £800 million in interest payments, experts have said.
Earlier this year, a group of MPs said it would force households to pay an extra £250 over the next five years to cover the costs.
Currently, about 28% of Thames’ bills service its debts, a figure which is expected to rise to 31% this year.
Q: How did things get this bad?
When Thames Water was privatised in 1989, it had no debt.
It has had a succession of different owners since then, including an Australian investment bank called Macquarie.
In December 2005, before Macquarie bought the utility, Thames Water’s net debt was £2.4 billion.
When Macquarie sold it around a decade later, the debt pile had ballooned to more than £10 billion.
The other problem is that interest payments on much of its debts rise with inflation, which has been high in recent years, adding to the pressure.
Mr Justice Leech, who approved Thames Water’s £3bn rescue loan, has also hit out at the “eye-watering” costs of finance and adviser fees involved in the deal.
That includes £210m paid by Thames to its legal and other advisers, and a total of £800m for finance, debt servicing and professional and advisory fees, according to today’s ruling.
He says:
Customers and residents who are struggling with their bills will be horrified at these costs and mystified how the Thames Water Group has been able to fund them or why it has agreed to do so.
Indeed, Mr Justice Leech adds that he might have been tempted to block the plan, if he had believed Thames would actually incur those £800m of costs – but in reality, he suspects the Class A creditors who proposed the loan will end up taking ‘a substantial haircut’ on their loans in future…
We Own It: Thames should be put into special administration regime
Campaigners for a better water system are renewing calls for Thames Water to be put into public ownership, after the high court granted the company a £3bn debt lifeline this morning.
Matthew Topham, lead campaigner at campaign group We Own It, said:
“This judgment is nothing but a stay of execution for Thames Water. The privatised company will limp on for a few more months like a profit-thirsty zombie.
“This crisis loan will keep Thames afloat in the short-term, but their underlying business model is rotten and should be condemned.
“It relies on piling up debt and raising customer bills so they can pay huge bonuses and dividends – all whilst pumping raw sewage into our waterways.
“The reason they’re getting bailed out is because they ran out of other people’s money to line their pockets with. It’s only a matter of time before they end up on the edge of bankruptcy again.
“This is the ‘doom loop’ of privatised water and there is only one way to break the cycle – public ownership.
“The Environment Secretary, Steve Reed, has the power to put Thames into a special administration regime (SAR), effectively a form of temporary nationalisation.
“Under the SAR it’s possible to negotiate a significant reduction in the corporate debt, putting the company on a much better financial footing.
“Once the debt has been slashed, the only long-term solution is full public ownership. Handing it back to the private sector would be a betrayal of the customers and our environment. In that scenario we’d end up back here again in a year’s time, just with more sewage in our rivers and more money in the water bosses’ pockets.”
The governor of the Bank of England, Andrew Bailey, has downplayed concerns that this morning’s jump in UK wage growth might change its position on the economy.
Speaking in Brussels this morning, Bailey argued that the latest UK jobs market data does not change the Bank of England’s broad expectations for the economy
Bailey told an event in Brussels organised by the Bruegel think tank:
“I don’t think we saw anything this morning that fundamentally changes that.”
He was speaking after this morning’s labour market report showed total pay grew by 6% per year in October-December.
BANK OF ENGLAND'S BAILEY:
— PiQ (@PiQSuite) February 18, 2025
WE ARE IN A PERIOD OF HEIGHTENED UNCERTAINTY
BANK OF ENGLAND'S BAILEY:
— PiQ (@PiQSuite) February 18, 2025
WE ARE FACING A WEAK GROWTH ENVIRONMENT IN UK
Updated
The £3bn loan aproved for Thames Water today comes with a relatively high interest rate of 9.75%, and is structured in two parts.
First, the company gets an “initial tranche” of £1.5bn to give it liquidity until September 2025.
It could then receive two further tranches of £750m each, to further extend liquidity to May 2026 if required – depending on the success of Thames’s appeal to raise customer bills by more than Ofwat has allowed.
The loan comes from a group of creditors who own Thames’s class A debt, and was opposed by a second group who own class B debt (which is riskier and thus less protected than A).
The chief executive of Thames Water, Chris Weston, says the court’s decision to approve the £3bn emergency debt package will help the company push through its turnaround plan.
Weston says:
“We are pleased the Court sanctioned the Company Plan.
This is good news for our customers, puts our business on a firmer financial footing and enables us to continue to invest in our network and deliver critical infrastructure upgrades for our customers and the environment.
Importantly, this decision will support the delivery of our turnaround which is underway.”
Had the debt deal not been approved, Thames Water had warned it could run out of cash at the end of March.
Even so, it is still in a sticky situation. The court heard evidence this month that the indebted company may need as much as £10bn in debt and equity investment to repair its finances…
Thames Water debt package approved
Newsflash: Thames Water has won court approval for an emergency debt package worth up to £3bn that should stave off the collapse of Britain’s biggest water company for at least another few months.
The company has just told the stock market that London’s high court has decided that the deal could proceed, after hearing four days of complex arguments earlier this month over whether it should go ahead.
Thames, which has 16 million customers and 8,000 employees, has been on the verge of collapse for months, with debts of about £19bn. The financial difficulties have contributed to underinvestment in the pipes and drains needed to prevent sewage overflows into rivers and seas.
The deal will give Thames £1.5bn in upfront cash, plus up to £1.5bn more to see it through an appeal to try to increase bills by more than the 35% allowed by the industry regulator for England and Wales, Ofwat.
Thames had argued in court that it would run out of money on 24 March if the emergency debt deal did not go through. It will still have to raise billions of pounds more of equity to repair its finances over the longer term.
Sir Adrian Montague, Chairman of Thames Water, has welcomed the decision, saying:
“The Court’s approval of the Company Plan marks a significant milestone for Thames Water, enabling us to proceed with the implementation of the Liquidity Extension Transaction.
Its implementation is a key step in strengthening our long-term financial resilience and will allow us to continue progressing the equity raise process and a holistic recapitalisation transaction as well as complete the CMA appeal process in respect of Ofwat’s PR24 price review. Critically, it enables the management team to continue progressing the turnaround.”
Updated
South East Water and Anglian Water appeal to raise customer bills higher
Britain’s water quality at some sites is notoriously revolting, and now the water companies are revolting too!
South East Water and Anglian Water have both announced today they are appealing to be allowed to raise customers’ bills by more than regulator Ofwat approved last year.
Anglian Water says Ofwat’s decision to only allows its bills to rise by 29% in 225-2030 was unacceptable, as it plans an £11bn programme of infrastructure improvement. It is asking the Competition and Markets Authority to consider the issue.
Chief Executive Mark Thurston says:
“In the East of England, with four of the fastest growing cities in the UK, as well as the Cambridge-Oxford Arc, the levels of investment needed are significant. As a long term, purpose-driven business we are planning sustained investment over decades to build resilience against a changing climate, deliver essential investment in water and sewerage infrastructure, and protect and enhance the environment – all of which will create jobs and bolster the local economy, helping our region to thrive.
South East Water, which was allowed to raise bills by 24%, is also appealing.
Its chairman, Chris Train. says:
“Asking for the Final Determination to be referred to the Competition and Markets Authority for redetermination is not a decision we took lightly. We have scrutinised the Final Determination and agree unanimously that in its current format, it presents a risk to water security for our customers in the region.”
Last week, Thames Water announced it will also appeal against Ofwat’s decision:
Bank of England expected to take “gradual and careful” approach to rate cuts
The increase in UK wage growth in the last quarter is likely to deter the Bank of England from rapid cuts to interest rates this year.
Currently, the City expect two more quarter-point cuts to Bank rate by the end of the year, to 4%, following the reduction from 4.75% to 4.5% earlier this month.
But with total wages rising at 6% in the last quarter – three times as fast as the BoE’s inflation target – policymakers may be cautious.
Currently, the money markets say there’s a 78% chance that the Bank leaves rates on hold next month. A cut isn’t fully priced in until June – earlier this month it was May.
And the third cut of the year might not happen until September or even November’s meeting – rather than coming as early as August, as had been pencilled in recently.
Today’s data illustrates the challenge facing the Bank’s Monetary Policy Committee (MPC), says Matt Swannell, chief economic advisor to the EY ITEM Club, adding:
Having weakened over the course of 2024, there were no clear signs that the prospects for the jobs market are improving. At the same time, pay growth is still too high to get inflation back to the 2% target, and firms will soon face the extra cost burden of higher employer National Insurance Contributions (NICs).
Faced with this trade-off, we think the MPC will continue to lower Bank Rate gradually, with the next cut likely to come in May, and that the Bank of England will use this extra time to gauge just how sticky inflation will be.
But some experts argue that the Bank will cut rates four times this year – not just the three expected by the markets.
Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK, says:
“The further rise in pay growth, combined with signs of a gradual easing in employment rather than a collapse, will keep the Bank of England on its “gradual and careful” rate cutting path. We still expect the MPC to cut rates at every other meeting this year, which would leave interest rates at 3.75% by the end of the year.
ING: UK jobs market stable despite growing pessimism
The UK labour market looks better than some of the gloom swirling about the economy, argues James Smith, developed markets economist at ING.
He tells clients:
An air of pessimism is befalling the UK jobs market right now, ahead of a sizeable increase in employer’s National Insurance (social security) in April.
The surveys on hiring are turning increasingly sour and there’s growing talk of redundancies as firms grapple with the combined hit of tax hikes and a near-7% increase in the National Living Wage. Bank of England policymaker Catherine Mann, explaining her vote for a bumper rate cut this month, spoke of “non-linear” falls in employment.
Despite that gloomy backdrop, the hard numbers on the jobs market currently don’t look so bad. Unemployment is broadly stable, though remember this data is highly dubious right now. But even the supposedly more reliable payroll-based numbers were more stable in January. The steady 1% fall in those numbers across 2024, once government-heavy sectors are excluded, stalled last month. More importantly, there’s no discernible increase in redundancies. So-called HR1 notifications, which companies are required to submit to the government if they are planning layoffs, are bouncing around their lows. The major question is whether that changes as the tax and Living Wage changes come through in the second quarter.
That’s not to say the jobs market hasn’t cooled materially, though. Vacancies have fallen steadily over the past couple of years, back to pre-Covid levels. On a sector basis, vacancy rates in the likes of retail and hospitality are well below the levels seen in 2019. And that makes it all the more puzzling that wage growth is still up around 6%.
Work and Pensions Secretary Liz Kendall is pledging to bring down the UK’s economic inactivity levels, saying:
“Since July, wages have continued to grow at pace, putting vital money back in people’s pockets as we work to make work pay and improve living standards for all.
“But these figures also show that too many people are being locked out of work and denied that chance, including those sick and disabled.
“Instead of writing people off and labelling them, we must step up our support.”
Consultation on major overhaul of Britain’s railways launching today
A new rail watchdog will give passengers a voice and hold the railway to account, the government has promised, as it launched a public consultation ahead of legislation to create Great British Railways.
Ministers intend it to have a beefed-up role in the future nationalised railway, with train operators having an obligation to consult the watchdog – which will replace the current Transport Focus – ahead of major decisions affecting passengers.
The new body will be tasked with setting standards for passengers on journey information and assistance, publishing reports on poor service and potentially referring instances to the railway regulator for enforcement action.
The eight-week consultation will also lay out plans to unite train and track operations and give devolved leaders more of a say on services.
Transport secretary Heidi Alexander said it was a “landmark reform [to] sweep away decades of failure, adding:
“We’re giving passengers a powerful voice with a new watchdog dedicated to addressing their biggest concerns, building railways people can trust, improving our services and boosting the economy in the process.”
Laura Shoaf, chair of shadow GBR, said:
“GBR will fundamentally change our railways, delivering growth, connections and opportunities across the country. The plans set out today will mean a better railway for everyone that uses it, allowing industry to work closer together, putting passengers and customers first and providing better value for money for taxpayers.
Campaigners welcomed the consultation. “Giving the public a say in what rail reform should look like is key to making it a success,” said Paul Tuohy, chief executive of Campaign for Better Transport.
He said they backed the creation of a new watchdog, adding:
“We will need to see what this means in practice, and whether this new watchdog will have any teeth to hold GBR to account when it needs to.”.
IoD: Continued decline in job vacancies highlights need for government action
The latest drop in job vacancies (see earlier post) shows that businesses lack confidence to hire new staff, the Institute of Directors warns this morning.
Alex Hall-Chen, Principal Policy Advisor for Employment at the IoD, says:
“The cumulative impact of recent employment reforms, coupled with upcoming increases to employer National Insurance Contributions and the National Living Wage, is significantly weakening the business case for hiring. Our latest data indicates that firms’ headcount expectations remain at historically low levels, comparable to those seen during the early stages of the COVID-19 pandemic in 2020.
“Immediate action is needed to address the mounting pressures on businesses and to restore confidence in the labour market. As the Employment Rights Bill approaches its Report stage, we urge the government to introduce targeted changes that will support employers and stimulate job creation. Our data shows that 41% of business leaders believe that such changes would do most to boost business confidence in 2025.”
This morning’s UK labour market report shows “continued labour market fragility” as 2024 drew to a close, argues Michael Brown, senior research strategist at Pepperstone.
He alaso agrees that the Bank of England will not be pleased to see wages rising so much faster than inflation:
Unemployment, in the three months to December, unexpectedly held steady at 4.4%, marginally below the BoE’s 4.5% forecast. These figures, though, must once again be taken with a pinch of salt, due to the ONS’ ongoing data collection, survey, and quality issues.
Meanwhile, earnings pressures intensified over the same period. Regular pay rose 5.9% YoY at the tail end of last year, the fastest pace since last April, while overall pay (inc. bonuses) rose 6.0% on an annual basis, the fastest pace since November 2023.
Such a pace of earnings growth is, clearly, incompatible with a sustainable return to the Bank of England’s 2% inflation target over the medium term.
Pay is rising rather faster in the private sector than in the public sector.
Today’s labour market report shows that regular pay in the private sector rose by 6.2% in October-December, ahead of the 4.7% increase recorded in the public sector.
Total pay (including bonuses) was 0.1 percentage point higher on both measures.
Updated
Payrolls rose in January despite budget 'hit'
Today’s jobs report should give an insight into how the UK labour market fared after Rachel Reeves’s budget in October.
Many businesses have been griping about the chancellor’s decision to lift employers’ national insurance contributions – which could raise £22bn in extra tax – arguing it will lead to job cuts.
But today’s data estimates that the number of payrolled employees in January increased by 21,000, meaning there were 49,000 more people on company payrolls than a year ago.
That follows a 14,000 drop in December.
Vacancies fall again
Firms are continuing to cut back on vacancies, today’s jobs report shows, as the surge in job opportunities after Covid-19 lockdowns ended fades.
There were an estimated 819,000 vacancies in the UK in November 2024 to January 2025; a decrease of 9,000, or 1.1%, from August to October 2024.
ONS director of economic statistics Liz McKeown said:
“The number of employees on payroll was broadly unchanged in the last three months of the year, continuing a medium-term trend of slowing growth. The number of vacancies also continued to fall in the latest quarter, albeit more slowly, with the total number remaining a little above its pre-pandemic level.
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UK pay growth picks up
Good morning, and welcome to our rolling coverage of economics, the financial markets and the world economy.
UK pay growth has accelerated at the end of last year, bringing relief to workers and a headache for the Bank of England
The latest employment data, just released, shows that total pay rose by 6% per year in the October-December quarter – up from 4.4% in July-September, and a little faster than City economists expected.
Regular pay (excluding bonuses) rose by 5.9% in the Oct-Dec quarter, down from 4.9% in the previous three months.
These increases mean earnings continued to rise faster than inflation, meaning real wages rose. Adjusted for the CPI inflation rate, both real regular and total pay rose by 3.4% on the year.
That is likely to cause some concerns at the BoE – the Bank cut interest rates earlier this month, but some policymakers remain worried that inflationary pressures are still bubbling.
ONS director of economic statistics Liz McKeown says:
“Growth in pay, excluding bonuses, rose for a third consecutive time, with increases seen in both the private and public sector. After taking account of inflation, real pay growth also increased slightly.
Today’s jobs report also shows that both employment and unemployment rose in the quarter, while the number of people out of the labour market (economically inactive) dipped.
Here’s the details:
The UK employment rate for people aged 16 to 64 years was estimated at 74.9% in October to December 2024. This is above estimates of a year ago, and up in the latest quarter.
The UK unemployment rate for people aged 16 years and over was estimated at 4.4% in October to December 2024. This is above estimates of a year ago, and up in the latest quarter.
The UK economic inactivity rate for people aged 16 to 64 years was estimated at 21.5% in October to December 2024. This is below estimates of a year ago, and down in the latest quarter.
The UK Claimant Count for January 2025 increased on the month and is up on the year, at 1.750 million.
The agenda
7am GMT: UK labour market force report
9.30am GMT: ONS Productivity flash estimate and overview for the UK
Morning: Court ruling on Thames Water debt deal
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