“The price point will probably remain static but I do think there’ll be a reduction in customer choice as a result of this”
FLA chair John Phillipou said: “Access to credit is a real problem.
“There is a ‘poverty premium’ that vulnerable people with lower credit ratings have to pay to borrow.
“There’s a risk here as we get into consumers buying a £5,000 car and the percentage of what’s acceptable on commission, it could impact the access to credit for that cohort of business.
“There’s a piece of work for the government and the regulator here to contemplate – if the rules come down too harshly on this … and you put rules around hard percentages, it could be problematic for deploying for lenders’ money.”
The Court of Appeal last week ruled that car dealers owed a duty to their customers to tell them how much commission they earn – triggering chaos across the country as dealers scrambled to comply with the ruling.
Mr Phillipou said the FLA had told the Government that investors were “anxious”, and international investors “completely bemused” by the situation.
“This situation is at stark odds with the government’s growth agenda,” he said.
The FLA met with Treasury officials on Tuesday and the Financial Ombudsman and Financial Conduct Authority yesterday to discuss the matter.
Europe’s main stock index notched its biggest one-day gain in five weeks on Friday, fuelled by banking stocks.
The pan-European Stoxx 600 index closed 1.1pc higher, while national stock markets including those of Germany, France, Spain and Italy also closed around 1pc higher.
05:25 PM GMT
Bonds steady after market’s ‘allergic reaction’ to Budget
British markets have been choppy in the wake of Rachel Reeves’s Budget, with investors showing their concern by selling both government bonds and the pound.
Some analysts voiced worries about the potential inflationary impact of the Budget, which may prompt the Bank of England to cut interest rates more slowly than previously anticipated.
Although the central bank is widely expected to reduce its main interest rate next week by a further quarter-point to 4.75pc, the markets have moved to price in fewer reductions next year in the wake of the budget.
Other analysts said the public finances will likely need to be bolstered again in coming years if the UK’s economic growth doesn’t pick up.
Today, the yield, or interest rate, charged on the UK’s 10-year bonds was 4.461pc, slightly up from 4.431pc late on Thrusday. It followed increases since Treasury chief Rachel Reeves presented the Budget. The pound meanwhile was up 0.4pc to $1.295.
Andrew Goodwin, chief UK economist at Oxford Economics, said: “Though the market’s allergic reaction is unwelcome for the new Labour government, the response has been much more muted than after the Conservative’s mini-Budget of September 2022.”
05:01 PM GMT
Global stock markets rise after Amazon reveals record profits
Global stock indexes jumped on Friday with Amazon shares rallying after the company announced a record profit.
Amazon shares are up 6.5pc after the world’s biggest online retailer last night said quarterly revenues rose 11pc to $158.9bn (£123.2bn)
The share gain helped offset a 1.5pc decline in shares of Apple following the iPhone maker’s modest growth outlook.
Rick Meckler, partner at Cherry Lane Investments, said: “We’ve made it most of the way through the Big Tech names, and [results] were probably not as bad as people feared and, in some cases, were pretty good.”
The FTSE 100 closed up 0.9pc today as it recovered some of its Budget week losses.
The top riser was Reckitt Benckiser, which jumped 6.6pc after victory in a US legal case. It was followed by City firm Schroders, which rose 4.3pc.
At the other end of the index, housebuilder Vistry fell 1.7pc, while gambling group Entain dropped 1.4pc.
Meanwhile, the FTSE 250 gained 0.5pc. The top riser was Alfa Financial Software, which rose 4.5pc, followed by Domino’s Pizza, which gained 4.4pc.
Natural gas business Energean was the biggest faller, losing 3.1pc, followed by Foresight Environmental Infrastructure, which fell 3pc.
UK government bonds have risen again today, reaching 4.464pc, up from 4.431pc late on Thursday, after Rachel Reeves’s revealed a high tax, high expenditure Budget earlier in the week.
This came as Germany’s 10-year bond year rose slightly to 2.41pc from 2.390pc yesterday.
04:40 PM GMT
Wall Street jumps as Amazon’s gains offset weak jobs growth
Wall Street’s main indexes surged this afternoon as Amazon’s strong earnings countered Apple’s weaker China sales as well as a significant drop in US jobs growth in October.
Amazon soared nearly 7pc, on track for its best day since February, as strong retail sales lifted its profit above Wall Street estimates.
Meanwhile, Apple dropped 1.8pc, the only so-called Magnificent Seven member in the red, as investors worried about a decline in its China sales.
Cost warnings on AI-related infrastructure from Meta Platforms and Microsoft saw the Nasdaq log its worst day in nearly two months on Thursday.
Brad McMillan, chief investment officer at Commonwealth, said: “When you look at expectations for the Magnificent Seven megacaps, there’s been an expectation that the tree was going to grow to the sky – so far, earnings have been a mixed bag and when you look at valuations, there is some room to pull back.”
Stock markets broadly overlooked weak US October non-farm payrolls data, given disruptions from hurricanes and strikes. The data showed an increase of 12,000 jobs, much smaller than economists’ estimate of a 113,000 rise.
However, the unemployment rate held steady at 4.1pc, reassuring investors the labour market remained on solid ground ahead of the US presidential election.
“The unemployment number is holding steady, so I’m not worried about [the labour market] just yet,” Mr McMillan said.
After the data was released, investors largely stuck to bets that the central bank would cut rates by a quarter of a percentage point in November as well as December.
The Dow Jones Industrial Average rose 1.13pc, the S&P 500 rose 0.9pc and the tech-heavy Nasdaq rose 1.3pc.
04:16 PM GMT
Bank of England rate cut expected despite ‘fiscal loosening’ of Budget
The Bank of England is expected to cut interest rates next week, despite forecasts that Labour’s autumn Budget could lead to higher inflation over the coming year.
Policymakers will announce the result of their November meeting on Thursday, where most analysts think they will trim the base rate by a quarter of a percentage point to 4.75pc.
Last month, official figures showed that the headline rate of inflation dipped to 1.7pc, its lowest level since April 2021, while services sector inflation also fell, boosting hopes that rate-setters will vote to cut.
The Bank rate, which helps to dictate mortgage rates and borrowing costs, currently sits at 5pc, after it was hiked in recent years to bring inflation down to the Bank’s 2pc target.
Meanwhile, the most recent figures for wage growth show it also slowed to its lowest level in two years, with average regular earnings growth easing back to 4.9pc in the three months to July.
Thomas Pugh, an economist at the consultancy RSM, said the two factors mean a rate cut is “nailed on”.
The Monetary Policy Committee meets in the week after Chancellor Rachel Reeves announced almost £70bn of extra annual spending, funded by business-focused tax hikes and additional borrowing.
The Office for Budget Responsibility (OBR) said the sharp increase in spending will contribute to higher inflation, although it will also help drive stronger economic growth.
Inflation is forecast to average 2.5pc this year and 2.6pc next year before coming down, assuming “the Bank of England responds” to help bring it to the target rate, the OBR said.
It has prompted economists to reel in predictions for a rapid succession of rate cuts over the next year.
Mr Pugh added that after the fiscal loosening in the Budget, rates are “likely to fall more slowly over the course of the next year. Indeed, a sequential rate cut in December now looks unlikely.”
04:01 PM GMT
Budget tax hikes will be ‘devastating’ for charities
Charities which are “already in a dire situation” could be hit by a £1.4bn rise in tax following the Budget, a body representing the sector has warned.
The National Council for Voluntary Organisations (NCVO) said charities across the UK will be forced to make “difficult choices” in the coming months including reducing staff and cutting salaries.
It comes after changes announced by Chancellor Rachel Reeves which will see employers’ national insurance contributions increase.
Reeves announced in Wednesday’s Budget that the rate of employers’ national insurance (NI) will rise by 1.2 percentage points, from 13.8pc to 15pc from April next year.
The secondary threshold – meaning the level at which employers start paying the tax on each employee’s salary – will also be reduced from £9,100 a year to £5,000.
The NCVO said this will amount to around £1.4bn more tax paid by the charity sector.
Sarah Elliott, chief executive of NCVO, said: “Charities across the country are already in a dire situation, juggling a triple threat of rising demand, escalating costs, and falling funding.
“This additional cost, for which there is no headroom in budgets to cover, will be devastating.”
03:58 PM GMT
UK gilts face worst week in months as budget rattles investors
Shorter-term British government borrowing costs headed for their biggest weekly jump in over a year today, while the pound was set for its biggest weekly loss against the euro in three months as Labour’s tax-and-spend budget raised inflation expectations.
Two-year gilt yields, which led the sell-off as investors pared back rate cut expectations, have risen 0.26 percentage points over the week, set for their biggest weekly increase since June 2023.
Benchmark 10-year yields were up 0.21 percentage points, the biggest weekly move this year, having touched their highest in a year on Thursday at 4.526pc.
But they dropped on Friday and sterling rose, suggesting investor sentiment was calming, also helped by weak US jobs data.
While the surge in government borrowing costs and the drop in the pound are sizeable, the speed and scale are short of the crisis that rocked markets in Sept 2022 following then-Prime Minister Liz Truss’s budget .
“2022 was something really quite off the scale. But that doesn’t mean that what we saw this week wasn’t important,” City Index market strategist Fiona Cincotta said.
Yields have jumped as markets digest the government’s plans, which will add nearly £70bn a year to the public spending bill, according to Britain’s fiscal watchdog, with just over half covered by higher taxes and the rest by increased borrowing.
The UK’s Office for Budget Responsibility now expects inflation will average 2.6pc next year, compared with a previous 1.5pc forecast.
03:54 PM GMT
Reeves’s £25bn National Insurance raid hits foreign investment plans
American bosses are reconsidering their UK investment plans after Rachel Reeves launched a £25bn tax raid on employers, a transatlantic trade body has warned.
Duncan Edwards, the chief executive of British American Business, said the Chancellor’s move to increase National Insurance (NI) costs had made the UK “less attractive”.
As a result, he said his lobby group’s members were now looking to alter their plans amid the threat of higher costs.
“For the UK leaders of American-owned companies looking to get more investment from their head office, their task has definitely just become more difficult as the costs of doing business in the UK will rise,” said Mr Edwards, whose organisation represents more than 400 companies doing business in both the UK and the US.
“Coupled with the Employment Rights Bill, this will make the UK less attractive for big American employers.”
It comes just days after Ms Reeves unveiled her £40bn Budget tax raid, which includes a proposal to raise NI contributions from 13.8pc to 15pc in April.
Apple to invest $1.5bn in satellites in deal with Musk rival
Apple is to spend $1.5bn (£1.2bn) in a deal with a rival to Elon Musk’s Starlink as the iPhone giant seeks to expand its offering of text messages and emergency alerts from space.
The $3 trillion technology giant will pay $1.1bn to support the construction of a new satellite network for GlobalStar, which already provides satellite signals for Apple’s SOS feature for its smartphones. It will also invest $400m in the business, taking a 20pc stake in the space company.
The deal represents a major bet by Apple on the space industry as smartphone companies look to piggyback on satellite signals to provide users with connectivity in remote areas and black spots.
Advances in hardware and satellite technology have made linking up a consumer handset to a satellite, once dismissed as unrealistic, a reality. Previously, only bulky satellite phones were capable of receiving such signals.
Mr Musk’s Starlink, which has thousands of satellites, has already signed deals with networks including T-Mobile with a view to launching a “direct-to-device” service, providing signals straight to a consumer’s mobile phone from an orbiting satellite.
Shares in Globalstar climbed as much as 36pc in trading on Friday. Globalstar currently operates 31 satellites and is preparing to launch up to 26 more.
Germany’s finance minister is pushing for tax cuts and fiscal discipline in a position paper that challenges an investment plan by the economy minister, laying bare a deep divide in the governing coalition.
Christian Lindner of the Free Democrats (FDP), the free-market kingmaker in Chancellor Olaf Scholz’s three-way coalition, calls for “an economic turnaround with a partly fundamental revision of key political decisions” in an 18-page policy paper from the finance ministry seen by Reuters.
The finance ministry document comes over a week after Economy Minister Robert Habeck, seen as the Greens’ likely future candidate for chancellor, put forward his own multi-billion-euro investment plan to remedy weak growth in Europe’s largest economy.
He proposed the creation of a fund to stimulate massive investment and get around Germany’s strict fiscal spending rules, fiercely guarded by the FDP.
By contrast, Lindner advocates tax cuts to spur the economy, proposing in the paper, for example, an immediate end to the solidarity surcharge, paid on top of income and corporation tax and introduced following reunification to boost the country’s poorer eastern states.
He also proposes an immediate halt on all new regulation and criticises over-ambitious climate standards.
Lindner also proposes scrapping €10bn (£8.4bn) in subsidies from the budget completely after the semiconductor project they were intended for was put on ice by Intel.
03:15 PM GMT
Angry farmers urge Government to u-turn on tax on family farms
Angry farmers left reeling from Labour’s Budget are calling on the Government to quickly reverse what they are describing as an “awful” family farm tax.
The National Farmers’ Union (NFU) said Britain’s farmers and growers will take part in a mass lobby of their MPs following the plans outlined on Wednesday.
According to Budget papers, from April 2026 farmers will be able to claim a 100pc relief from inheritance tax on the first £1m of combined agricultural and business assets, falling to 50pc beyond that.
The Government is “restricting the generosity of agricultural relief” in a bid to make the inheritance tax system “fairer”.
It will also put almost £600m towards flood defences and farm schemes in 2024/25, but warned “it is necessary to review these plans” for future years.
NFU president Tom Bradshaw said: “Farmers and growers have been left reeling from the changes announced in the Budget which demonstrate a fundamental lack of understanding of how the British farming sector is shaped and managed.”
Mr Bradshaw, who is meeting Environment Secretary Steve Reed on Monday, said the current plans to change Agricultural Property Relief (APR) and Business Property Relief (BPR) “need to be overturned and fast”.
Mr Bradshaw added: “Farmers are rightly angry and concerned about their future and for the future of their family farms, having been reassured by minsters in the lead up to the budget that APR and BPR changes were not on the table.
“The Treasury’s figures which claim this will only affect one in four British farms are misleading.
“The £1 million cap to APR shows how little this Government understands the sector. Very few viable farms would be worth under £1m, but lots of smallholdings and houses with a few acres let for grazing might be.”
03:11 PM GMT
City watchdog criticises Crispin Odey’s ‘lack of integrity’ in warning
City tycoon Crispin Odey has been accused of a “lack of integrity” by the City watchdog, which said he took actions “deliberately designed to frustrate” an investigation into his conduct.
The Financial Conduct Authority (FCA) has published a warning notice saying that he took action “deliberately designed to frustrate” an investigation by Odey Asset Management, where he was the majority shareholder.
The regulator said that his behaviour both to his company and the FCA “lacked candour”.
Last June, the Financial Times published allegations about Mr Odey’s treatment of women over a 25-year period. The allegations concern 13 women who claimed to have been abused or harassed by Mr Odey. Lawyers for Mr Odey have “strenuously” denied the allegations.
The Telegraph has approached Mr Odey for further comment.
03:10 PM GMT
Budget announcement will increase the cost of mini-nukes, says think tank
A little-spotted announcement bundled in with the Budget means the cost of the next generation of nuclear energy will increase, a think tank has said.
It came after The Telegraph reported that a two-line announcement in Budget documents revealed a delay the competition to build Britain’s first mini-nuclear power plants, amid “tortuously slow” decision-making in Whitehall.
Maxwell Marlow, director of research at the Adam Smith Institute, said that mini-nukes “hold the power to transform Britain’s relationship with energy” but that the Government is “creating bankruptcies and increasing the cost of deployment for this technology”.
He added: “The Office for Nuclear Regulation’s punitive insistence on only approving one reactor at a time, rather than a whole fleet of designs, removes the capacity of us to grow large varieties of reactor. Likewise, our insistence on throwing away 99pc of good nuclear fuel, instead of recycling it, will drive up costs for energy production.
“The Government should allow for the mutual-recognition of advanced modular reactors, and establish Contracts for Difference (vital for the private finance of these reactors). Only then can we unleash the clean power revolution and energy abundance the government is calling for.”
02:41 PM GMT
Ryanair to cut flights after ‘idiotic’ Budget tax rise
Ryanair plans to cut flights to and from UK airports by 10pc next year following Labour’s decision to increase the tax on airline tickets in the autumn Budget.
Chief executive Michael O’Leary criticised the spending statement today, saying it has “damaged” UK growth prospects and “made air travel much more expensive”.
He said Ryanair would “review” its schedules and the planned reduction could lead to as many as five million fewer passengers at UK airports.
Chancellor Rachel Reeves said air passenger duty (APD) will rise from the 2026/27 financial year, adding up to £2 to the cost of an economy ticket for a short-haul flight.
Mr O’Leary said it is “vital” that the UK makes it cheaper to fly, but that Labour had instead “damaged tourism, and damaged air travel to and from the UK”.
“Chancellor Rachel Reeves idiotic decision to further raise the UK’s already high air travel taxes will deliver cuts, not growth.”
He added: “This short-sighted tax grab will make air travel much more expensive for ordinary UK families going on holidays abroad and will make the UK a less competitive destination compared to Ireland, Sweden, Hungary and Italy where these Governments are abolishing travel taxes to stimulate traffic, tourism, and jobs growth in their economies.”
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02:31 PM GMT
Reeves says Budget received ‘clean bill of health’
The Budget’s “clean bill of health” with fiscal watchdogs should give investors confidence in Labour’s plans, Rachel Reeves has said amid market fluctuations.
Asked about post-Budget market movements on a visit to Newcastle, the Chancellor told broadcasters: “I won’t comment on market moves, because markets move all the time.
“What I am confirming is that the International Monetary Fund has given our Budget a clean bill of health and the Office for Budget Responsibility have confirmed that we meet our fiscal rules two years early.
“That should give confidence to investors that we have a plan to secure our public finances after the instability and chaos of the last few years.”
The International Monetary Fund has been criticised for praising the Budget despite official forecasts showing it will drag on growth and hit living standards.
The FTSE 100 has gained 0.9pc today at the end of a difficult week for the index, but is on track for a weekly loss.
There are lingering fears in the market of the consequences of the Labour Government’s high-tax, high-spending budget unveiled this week.
The UK’s 10-year borrowing rate reached its highest level since November 2023 yesterday, on fears of a resurgence in inflation.
The yield is fairly flat currently at 4.442pc from 4.431pc last night.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Worries continue to swirl about the UK Budget stoking inflation and adding to the debt burden.
02:16 PM GMT
Budget ‘lacks morality’, says free-market think tank
The Budget lacks ‘any sense of a moral order’, the president of the free-market Adam Smith Institute has said.
Madsen Pirie told The Telegraph: “One of the key things about the budget is that discourages people from doing morally worthwhile things.
“It is good that people save into pension funds to allow them a decent retirement independent of the state, but it is taxed to discourage it.
“It is good for people to pay for their children’s education, but VAT is put on private schools.
“We want people to have jobs, especially starter jobs, but we make it uneconomic for businesses, especially small businesses, to employ them.
“We want investment to boost jobs and growth, but we raise Capital Gains Tax to discourage it.
“Lacking from the budget is any sense of a moral order, anything making it easier for people to live worthwhile lives that contribute to the wellbeing of their neighbours and the community.
“What the budget punishes is the common sense of decency that people feel and want to express. It is not only devoid of efficiency, it lacks morality.”
02:13 PM GMT
Downing Street hints at more money for GPs to offset National Insurance hike
Downing Street has hinted it that GPs will get more money to cope with the effects of hikes in National Insurance contributions.
No 10 pointed to the “annual GP contract process” when asked about the impact of the rise in employer National Insurance contributions on GPs.
A No 10 spokeswoman said contracted workers, including GPs, were not eligible for an exemption from the hike, which she said was consistent with the approach of previous governments.
“There is a general process whereby departments, the Department of Health for example, confirm their funding for general practices,” she said.
The spokeswoman added: “I think that’s part of the annual GP contract process. I believe that will take place later in the year.”
On social care, she said: “We are taking action to support the social care sector more generally.
“There is a real-terms increase in core local government spending power and I think at least £600 million of new grant funding provided to address pressures in the sector.”
02:08 PM GMT
Morgan Stanley favours investing in UK housebuilding despite Budget
Morgan Stanley has told clients that it still favours investing in UK housebuilders, despite the stocks falling in response to Rachel Reeves’s Budget.
Investors are worried that Ms Reeves’s tax-and-spend Budget will be inflationary and therefore prevent the Bank of England from cutting interest rates as quickly as had been hoped.
The housebuilder sector slumped in response to the Budget in an echo of the Liz Truss mini-Budget.
But Bloomberg has reported that Morgan Stanley analysts have said: “We would use this opportunity to add to our preferred names… While the budget may mean a delay in the declining rate path, ultimately we still think interest rates will move lower from here.”
Shares in Bovis Homes owner Vistry and Barratt Redrow are both down 5.1pc this week, while Persimmon is down 7.1pc. Taylor Wimpey dropped 5.5pc.
01:37 PM GMT
US jobs growth will ‘rebound’ in November, says Joe Biden
President Joe Biden said that US jobs growth will “rebound” in November after new figures show the slowest pace since he took office in 2021.
US job growth slowed drastically in October following hurricanes and industrial strikes, according to new figures from the Bureau of Labour Statistics.
The world’s biggest economy added 12,000 non-farming jobs last month, falling short of expectations and marking a significant decline on the 223,000 jobs added in September.
Commenting on the results, Mr Biden said: “Job growth is expected to rebound in November as our hurricane recovery and rebuilding efforts continue.
“America’s economy remains strong, with 16 million jobs created since I took office, including an average 180,000 jobs created each month over the last year – more than the year before the pandemic.”
01:04 PM GMT
Pound surges as US hiring hit by hurricanes and industrial strikes
The pound has surged against a weaker dollar after new figures showed that US hiring advanced at the slowest pace since 2020.
US job growth slowed drastically in October following hurricanes and industrial strikes, according to the Bureau of Labor Statistics’
The world’s biggest economy added 12,000 jobs last month, far below expectations and down from a revised 223,000 in September, said the Department of Labour. Unemployment rate was unchanged at 4.1pc.
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12:40 PM GMT
British households expect inflation surge in next 12 months, survey finds
British households are expecting inflation to get worse in the next 12 months, a new survey by Citi and YouGov has found.
The survey found that households in October predicted that inflation will rise to 3.3pc in the next 12 months, which is 0.7pc higher than expectations recorded in June. Inflation currently sits at 1.7pc in the UK.
The survey results will add further pressure on the Bank of England, which traders are now expecting to cut interest rates only once a quarter amid concerns about Rachel Reeves’s Budget.
Benjamin Nabarro, chief UK economist at Citi, said: “The increase in these data is a concern. These data still show inflation to be anchored overall, but they also speak to lingering risks.”
12:10 PM GMT
Bank of England could hold November’s rate cut because of Budget, says asset manager
The world’s second largest asset manager sees a 50pc chance that the Bank of England could keep interest rates on hold next week.
Vanguard Asset Management has said the central bank could surprise markets by keeping borrowing costs at 5pc in response to the sharp sell-off in UK bonds and stocks following the Budget.
The markets are currently expect that the Bank of England will lower interest rates at its meeting next week, but have reduced the chance of a December cut to less than 50pc.
Ales Koutny, head of international rates at Vanguard, said the Bank of England may need to keep interest rates steady while it updates its inflation forecasts.
He told Bloomberg: “We can’t discard the option that the BOE chooses to stay on hold after accounting for the changes in its forecasts.
“The markets still view a cut from the BoE next week as a given. I see it more as 50/50.”
11:32 AM GMT
Investors are increasing bets that pound will plunge, says Barclays
Traders are building up short positions against the pound following the Budget, according to Barclays.
Hedge funds and assets managers are increasing their bets that the value of the pound will decline in reaction to the Chancellor’s tax raising plans, according to Mimi Rushton, global head of currency distribution at Barclays.
Barclays said that investors are now holding more short bets than long positions against the currency, where traders buy sterling in anticipation of its value rising.
Investors now hold more short bets against the pound that long bets following the Budget, according to Barclays.
Ms Rushton told Bloomberg: “At the margin, we’ve seen people selling pounds.”
The pound has traded flat against the dollar since markets opened today, hovering around its lowest level since August.
11:07 AM GMT
Bank of England urged to ‘calm the market’ amid surging UK borrowing costs
The UK bond market sell-off could worsen if the Bank of England does not “calm the market”, an economist has warned.
Markets will be listening closely to what Andrew Bailey, governor of the Bank of England, has to say about Rachel Reeves’s tax-and-spend Budget when policymakers meet next week.
Markets are still expecting the UK central bank to reduce interest rates by a quarter of a percentage point at its November meeting, but are now pricing in fewer rate cuts between now and the end of 2025.
Pooja Kumra, head of European rates at Toronto Dominion Bank, said: “I’m a bit worried that if we do not see next week’s BOE meeting try to calm the market, you could see more non-domestic selling coming.”
10:52 AM GMT
Britain faces years of ‘muted’ growth after Reeves’ Budget, warns Moody’s
Britain faces years of “muted” growth and higher borrowing costs after Rachel Reeves’ maiden Budget, Moody’s has warned.
In a note to investors, the leading credit rating agency warned the Chancellor’s decisions will put government debt “on a slow upward trajectory” and cast doubt on the credibility of new debt rules meant to reassure financial markets.
Moody’s also warned that higher spending on infrastructure would only boost growth if ministers successfully tackled issues that have dogged the UK economy for years, such as the worklessness crisis and long planning delays.
The agency’s note, published on Friday morning, warned that Ms Reeves’ debt-fuelled spending binge was the “most aggressive” since furlough and other Covid-era support measures.
Standard and Poor’s and Fitch Ratings also gave a downbeat assessment of the Budget. Here’s what they had to say…
The pound is headed for its longest stretch of weekly losses in nearly six years, as investors dumped UK assets in rebuke to Rachel Reeves’s Budget.
Sterling stabilised this morning after several volatile trading sessions, increasing 1pc to $1.2915.
However, the value of the pound has fallen 0.4pc against the dollar in past week. This marks sterling’s fifth consecutive weekly decline, the longest such stretch since December 2018.
The decline comes despite traders betting on the Bank of England making fewer interest rate cuts next year.
Expectations of higher interest rates normally push up the value of the pound. However, the Chancellor’s plans to increase the UK’s tax burden by £40bn has sparked concern about inflation and growth.
“The market sees the heavy spending in the budget as possibly stagflationary, judging from the sharp rise in UK rates,” Saxo Bank analysts said.
10:02 AM GMT
Two thirds of business leaders feel ‘negatively’ towards Budget, says IoD
The Budget has likely worsened poor confidence levels among British business leaders, the Institute of Directors has said
The industry body said that two-thirds of 700 members surveyed in a snap poll felt negatively towards the Budget and does not support Labour’s growth mission.
Roger Barker, director of policy at the Institute of Directors, said: “Even before the Chancellor had risen to deliver her Budget speech, the confidence of business leaders had hit its lowest level since December 2022. Based on the results of our snap post-Budget poll, it seems likely that sentiment will have deteriorated even further.
“By imposing significant new tax burdens on business, the Government has taken a major risk with the economic recovery. The viability of its future spending plans will be compromised if growth is now snuffed out.”
09:44 AM GMT
Mortgage rates to rise following Budget, analysts warn
House price growth has ground to a halt as economists warn mortgage rates will rise in the wake of Rachel Reeves’ Budget.
Monthly house price growth cooled from 0.6pc in September to just 0.1pc in October, meaning the average home cost £265,738, according to Nationwide’s index.
Year-on-year house price growth slowed to 2.4pc, down from 3.2pc in the previous month.
Analysts said the figures show buyers were holding back ahead of the Chancellor’s first Budget on October 30, which Ms Reeves had warned would include major tax rises.
Elliott Jordan-Doak, Senior U.K. Economist at Pantheon Macroeconomics, said: “This shows that uncertainty around this week’s Budget likely contributed to buyers taking a ‘wait-and-see’ approach.”
Jonathan Hopper, chief executive of Garrington Property Finders, said: “The market spent much of October in the brace position and not everyone is ready to come out of it yet.”
The Office for Budget Responsibility (OBR) on Wednesday raised its forecast for mortgage rates by 0.3 percentage points over its forecast because Ms Reeves’ Budget measures mean the Bank of England will have to keep interest rates higher for longer.
The OBR said average interest rates across the existing stock of mortgages will rise from 3.7pc in 2024 to a peak of 4.5pc in 2027.
09:40 AM GMT
Liontrust boss felt ‘great deal of relief’ after Budget
Not all business leaders have been disheartened by Rachel Reeves’s budget.
John Ions, the chief executive of asset manager Liontrust, told Bloomberg News that he felt a “great deal of relief” after hearing mixed messages going into the Budget.
He said: “International investors probably look at the UK as a slightly better place to invest now,” he said, noting that UK equities look cheap versus other markets and provide a hedge against the US and Big Tech.
Meanwhile Andy Briggs, chief executive of Phoenix Group, welcomed the Government’s investment and said that it would be “critical” for boosting growth.
09:15 AM GMT
Traders suffer from ‘post-Truss stress disorder’, says economist
Britain’s bond market is still suffering from the fallout of Liz Truss’s mini-Budget, an economist has warned.
UK borrowing costs on Friday continue to surge as traders weigh the impact of Rachel Reeves’ spending plans on inflation and growth.
The yield on 10-year gilts climbed as much as six basis points to 4.5pc before pairing its gains.
The latest bond market sell-off has seen comparisons drawn with Liz Truss’s mini-Budget chaos in 2022, after the-then Conservative prime minister unveiled £45bn in unfunded tax cuts.
Stefan Koopman, senior macro strategist at Rabobank, said: “It seems the UK bond market is still caught in a case of ‘post-Truss stress disorder,'”
“The second it’s faced with a bit of uncertainty and unfamiliar territory, investors are playing it safe: de-risk first, ask questions later,” he added.
“It’s still small beer compared to what we’ve seen in 2022.”
09:03 AM GMT
Darren Jones admits Budget tax raid hits working people
Darren Jones has responded to criticism that Labour is giving “pretence” over taxes on working people.
The Chief Secretary to the Treasury this morning was asked about comments made by the Institute for Fiscal Studies chief Paul Johnson, who said yesterday that the “continued pretence” that the rise in employers’ National Insurance would not affect working people “risks further undermining trust”.
Speaking on Sky, Mr Jones replied: “I’m not giving any pretence about anything. All I’m telling you is the Treasury which sets tax rates is not increasing the tax on working people. That was the promise we’ve made and that’s the promise we delivered.”
Asked whether it hit working people, he said: “We completely respect the OBR’s assessment of that.”
When asked again, Mr Jones said:
“So we recognise that the OBR has predicted that in future years, wage growth may become lower as a consequence of employers having to pay more employer National Insurance.”
Asked “so it hits working people?”, he replied:
“Yes, but the question in the manifesto, the promise in the manifesto, was not to increase the rate of tax that employees pay in their payslip. It says that we make a promise to working people, that’s people who go to work and get a payslip, that we will not increase income tax or National Insurance.”
Borrowing costs jump despite Reeves’s efforts to reassure markets
Britain’s borrowing costs continue to climb despite Rachel Reeves’s efforts to reassure financial markets.
Benchmark ten-year gilt yields have risen by five basis points to 4.49pc this morning, nearing yesterday’s 12-month record of 4.53pc.
The UK bond sell-off comes despite Rachel Reeves yesterday claiming that the “No. 1 commitment” of the Labour government is “economic and fiscal stability.”
“We have more headroom than the previous government left us, and that is important,” Reeves told Bloomberg TV yesterday, referring to the margin by which she meets her self-imposed fiscal rules.
“We have now put our public finances on a stable and a solid trajectory.”
British stocks have made a slight as recovery after yesterday’s slump.
Britain’s blue-chip index opened 0.39pc higher at 8,139.48 after finishing yesterday in the red. However, the internationally focused index is still down 1.27pc on the week.
The FTSE 250 midcap index, which is made up of mainly domestic companies, has ticked 0.09pc higher to 20,406.88.
08:11 AM GMT
Britain’s borrowing costs continue to climb after Reeves’ Budget
Traders are warning that Britain’s borrowing costs could surpass levels seen in the wake of the mini-Budget as yields rose again on Friday morning.
Althea Spinozzi, head of fixed income strategy at Saxo Bank, warned that it is “very possible” that 10-year gilt yields will hit 4.75pc.
Benchmark 10-year borrowing costs rose as much as six basis points to 4.5pc this morning, nearing yesterday’s 12-month record of 4.53pc.
Meanwhile, two-year borrowing costs climbed five basis points to 4.48pc in its 10th consecutive day of increases, marking its longest streak since 2006.
The UK bond sell-off comes despite Rachel Reeves yesterday claiming that the “No. 1 commitment” of the Labour government is “economic and fiscal stability.”
However, Ms Spinozzi said the Chancellor’s comments were “not enough” to reassure markets that her plans are fiscally sustainable.
Bond investors want higher yields because they are worried inflation could rebound and these fears are likely to keep driving up long-term government borrowing costs, Ms Spinozzi said.
10-year borrowing costs neared 4.75pc in August 2023, setting a new record after gilt yields hit 4.5pc in September 2022 following the mini-Budget.
Darren Jones, chief secretary to the Treasury, on Friday told Sky News that “markets always respond to budgets in the normal way” and claimed that “we’ve all got PTSD from Liz Truss”.
07:54 AM GMT
Post-Budget market jitters are ‘normal’, says Darren Jones
Darren Jones has claimed that the financial markets fallout sparked by the Budget is “normal”.
Bonds, shares and the value of the pound dropped on Thursday as traders dumped UK assets over fears her tax-and-spend Budget will fail to boost growth.
Benchmark ten-year borrowing costs yesterday surged to their highest levels in a year, rising to 4.582pc as investors fretted about the Chancellor’s £32bn-a-year increase in borrowing.
Asked about the market response to the Budget, the Treasury minister told Sky News that “markets always respond to budgets in the normal way”.
“There’s a lot of new information about the economy and the nation’s finances presented to Parliament, and it’s normal for markets to respond,” he said.
He also claimed that the UK is still suffering from Liz Truss’s mini-Budget in 2022.
Mr Jones said: “I think we’ve all got PTSD from Liz Truss and just let’s compare the two different scenarios, because they’re very, very different: So, under Liz Truss, as we saw, they sacked permanent secretary, they ignored the independent Office for Budget Responsibility.
07:47 AM GMT
Budget was ‘bitter pill to swallow’, says Stonegate chief
The boss of Britain’s largest pub company has criticised the Budget as being a “bitter pill to swallow”.
David McDowall, chief executive of Stonegate, told the Financial Times that Labour’s tax rises come at a time when many businesses “are only just about coming up for air from the aftermath of a pandemic, energy crisis, rampant inflation, and cost of living pressures”.
The hospitality giant owns Slug and Lettuce and Be At One.
07:38 AM GMT
Cheaper pub pints are “drop in the ocean”, says Greene King boss
Labour’s plans to take a penny off the cost of a pint is a “drop in the ocean”, the boss of Greene King has warned.
The Chancellor on Wednesday announced she is cutting draught beer duty by 1.7pc, which will affect two-thirds of alcoholic drinks sold in pubs.
However, Nick Mackenzie, chief executive Greene King, said that the beer duty boost is undermined by Labour’s plans to raise employer National Insurance contributions.
Nick Mackenzie, chief executive Greene King, said:
“Despite a glimmer of hope on the horizon for business rates reform in 2026, the layering of substantial costs on pubs next year is going to leave businesses with difficult choices around investment, prices and hiring.
The Budget tax raid will harm wage growth and hiring, the Business Secretary has admitted.
Jonathan Reynolds accepted that the Chancellor’s plans to increase employer National Insurance contributions (NICs) and raise minimum wage will hamper businesses.
Speaking to Bloomberg Television, Mr Reynolds said that these tax hikes will “be something which affects how that
business operates, what they can do in terms of recruitment and pay.”
His comments come after Rachel Reeves on Wednesday unveiled plans to raise £25bn by increasing employer NICs to 1.2 percentage points to 15pc from April and lowering the level at which employers have to start paying it.
However, the Office for Budget Responsibility and independent think tank Institute for Fiscal Studies has since warned that raising NICs will raise only £10bn after accounting for lower pay awards and its decision to shield public sector workers.
The Chancellor also increased the the National Living Wage by 6.7pc to £12.21 an hour.
Mr Reynolds defended the Chancellor, who announced £40bn of tax rises in Labour’s first Budget in 14 years.
He said: “If you look at the overall tax position within the UK, if you benchmark some of these changes that we’ve had to introduce, there is no doubt the UK is still a globally competitive market.”
On Wall Street, the Dow Jones Industrial Average fell 0.9pc, to 41,763.19, the S&P 500 fell 1.9pc, to 5,705.37, and the tech-heavy Nasdaq Composite fell 2.8pc, to 18,095.15.
The yield on benchmark US 10-year Treasury notes rose 0.8 basis points to 4.272pc, from 4.264pc late on Wednesday. They reached a nearly four-month high of 4.339pc on Tuesday.
Asian markets started a likely momentous month on the cautious side, with MSCI’s broadest index of Asia-Pacific shares outside Japan slipping 0.3pc – down 1.9pc for the week.
Tokyo’s Nikkei fell 2.1pc as a stronger yen clouded the outlook for Japanese exporters. The yen held at 152.06 per dollar, having rallied about 1pc overnight.
China’s blue chips inched 0.1pc higher, while Hong Kong’s Hang Seng index rose 0.4pc.