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Friday’s mini-budget that promised billions in tax cuts and a multi-billion pound energy price cap has seen the value of the pound plummet against foreign currencies.

The new prime minister and her chancellor’s decision to cut various taxes by a combined £45bn, alongside a cap on energy prices that will cost taxpayers £60bn has resulted in a loss of market confidence.

Lenders withdraw mortgage profits; live pound updates

That loss of confidence in the government’s ability to pay back the billions they are spending means the Bank of England is likely to raise interest rates – in a desperate bid to bring down inflation.

This all has an effect on Britain’s day-to-day spending. Here, Sky News looks at who will suffer and who will benefit from the pound’s slump.

Petrol

Fuel is traded in dollars.

This means that a low pound will buy less fuel, forcing prices at UK forecourts to rise.

Drivers will have noticed a recent dip in prices at the pumps – compared with this summer when they approached £2 a litre for diesel.

But the slump in value of the pound will likely wipe out that fall, which was a welcome relief for many.

According to the AA, a pound that equals $1.08 will mean an extra 13.5p per litre of petrol.

That would add around £7.50 to the cost of filling up an average 55-litre car, when factoring in VAT.

An AA spokesman added that had it not been for former Chancellor Rishi Sunak’s decision to cut fuel duty by 5p in March, motorists would have likely seen an even bigger increase in the price per litre – of around 18.5p.

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Why did the pound fall to a record low?

Energy

Gas is also traded in dollars and therefore also suffers from a poor exchange rate.

As with oil, wholesale prices have dropped internationally since the start of the war in Ukraine, but with a weak pound, similarly the UK won’t experience the benefits.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, tells Sky News: “At this stage, this won’t affect bill payers directly, because the energy price cap is set below international energy prices, so we’ll be paying less anyway.

“Instead it will have an impact on how much the guarantee will cost the government.”

The more the price cap costs the government, the less confidence the market will have in the government’s capacity to pay it back, causing the original problem to spiral further.

Food

Any goods imported to the UK from abroad will cost more when the pound is weaker.

According to the government’s most recent food security report, the UK imports around 45% of its food.

This has proven a major problem during the Ukraine war, with grain exports unable to leave the country for several months this year.

Along with the dollar, the pound is also faring badly against the Euro, which will mean European-grown fruit and veg prices will increase.

Produce grown further afield, such as bananas, will also go up.

Not all retailers will pass all of that cost onto their customers, however.

Supermarkets are often the last to increase their prices off the back of rising costs, as they try to remain affordable, and often buy stocks in advance to mitigate sudden market shocks.

But Ms Coles cautions: “Supermarkets have warned that although they are already absorbing a great deal of the increased costs of supply, they have to pass some of it on.”

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Why does the weak pound matter?

Tech

Most of our tech gadgets, such as smartphones and tablets, are manufactured abroad.

Apple, for example, is based in California, but uses parts manufactured in China and Taiwan.

Again, a week pound will mean these foreign-made products cost more in the UK.

Apple has already increased the price of its latest iPhone range. The iPhone 13 started at £949 when it launched last year. The iPhone 14 range is retailing at £1,099 – a 16% increase.

Holidays abroad

The most obvious place consumers will experience the slump in the pound is at the bureau de change.

Holidaymakers bound for the US will get particularly less for their money than they used to – but with the pound also down against the Euro, holidays to Europe will also be more expensive.

With the cost of fuel also on the rise, airlines and package holiday providers may also increase their prices to mitigate costs.

Mortgages

A weak pound means inflation – which is already at 10% – getting even higher.

When inflation is high, the Bank of England tries to bring it down by increasing interest rates.

This higher price of borrowing is designed to encourage people to borrow less, spend less, and save more.

Currently forecasts predict interest rates hitting 6% by November, which will mean huge increases in people’s mortgage repayments.

Halifax, the country’s largest mortgage provider, is removing fee-paying mortgages from Wednesday. These allow people to pay a fee in exchange for a lower interest rates.

Virgin Money and Skipton Building Society have withdrawn all their mortgage products until they have more certainty.

The two million people in the UK already on tracker and variable mortgages will see far more of their monthly pay packet spent on repayments.

And those coming to the end of a fixed rate or hoping to buy for the first time will have fewer, more expensive deals to choose from.

“The issue is the fact that fixed rate mortgages don’t just depend on the rate today, they also depend on rate expectation,” Ms Coles explains.

“The dramatic overnight change in market expectations of future rates has ramped up the cost of doing business, and lenders are taking a break to reassess and reprice.”

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Why some mortgage providers are pulling products

Pensions

People approaching retirement could suffer from UK bonds – or gilts – being sold off in response to the pound’s fall.

Some investors automatically switch people’s pensions from stocks to government bonds as they get closer to retirement age, which will leave them with a smaller pot in the current climate.

Pensioners living abroad will also suffer notably – as their pensions are paid in pounds but their expenses are in stronger currencies.

UK exporters

British businesses that sell their products and services abroad will benefit from the pound’s slump as foreign buyers look to take advantage of cheaper prices.

This will see the FTSE 100 companies benefit, as much of their money is made overseas, Ms Coles says.

It could also provide much-needed help for smaller UK businesses struggling with the increased costs of Brexit.

Local tourism

More holidaymakers could be drawn to the UK from abroad by the promise of a cheaper holiday.

While Britons get less for their money at the bureau de change, inbound tourists will get more.

Read more:
The good and the bad news on the pound
Five reasons the pound ‘doom loop’ matters

For example, a London hotel room that cost $200 (£186) at the start of 2022 now only costs $150.

Britons could also return to the ‘staycation’ trend seen during the COVID pandemic and also help boost the economy by supporting tourism and hospitality businesses at home.

Hedge funds

Hedge funds employ a strategy called ‘short selling’ or ‘shorting’ to take advantage of falling market prices.

It involves borrowing shares in a firm and selling them with a view to buying them back at a profit when prices fall.

Ms Coles says: “Plenty of hedge funds were shorting the pound before the fall – based on the belief that the markets had underestimated how long inflation would stick around for.

“So these paid off when the pound tumbled.”

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More criminal charges being considered over baby deaths at Lucy Letby hospitals

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More criminal charges being considered over baby deaths at Lucy Letby hospitals

The Crown Prosecution Service has said it is considering whether to bring further criminal charges over the deaths of babies at hospitals where Lucy Letby worked.

The CPS said it had received “a full file of evidence from Cheshire Constabulary asking us to consider further allegations in relation to deaths and non-fatal collapses of babies at the Countess of Chester Hospital and Liverpool Women’s Hospital”.

“We will now carefully consider the evidence to determine whether any further criminal charges should be brought,” it added.

“As always, we will make that decision independently, based on the evidence and in line with our legal test.”

Letby, 35, was found guilty of murdering seven children and attempting to murder seven more between June 2015 and June 2016 while working in the neonatal unit of the Countess of Chester Hospital and is currently serving 15 whole-life orders.

She is understood to have carried out two work placements at Liverpool Women’s Hospital, where she trained as a student, between October and December 2012, and January and February 2015.

On Tuesday, it was confirmed that three managers at the Countess of Chester hospital had been arrested on suspicion of gross negligence manslaughter.

Police said the suspects, who occupied senior positions at the hospital between 2015 and 2016, have all been bailed pending further inquiries.

There is also an investigation into corporate manslaughter at the hospital, which began in October 2023.

A public inquiry has also been examining the hospital’s response to concerns raised about Letby before her arrest.

In May, it was announced the inquiry’s final report into how the former nurse was able to commit her crimes will now be published early next year.

Earlier this year, Letby’s lawyers called for the suspension of the inquiry, claiming there was “overwhelming and compelling evidence” that her convictions were unsafe.

In February, an international panel of neonatologists and paediatric specialists told reporters that poor medical care and natural causes were the reasons for the collapses and deaths.

Their evidence has been passed to the Criminal Cases Review Commission (CCRC), which investigates potential miscarriages of justice, and Letby’s legal team hopes her case will be referred back to the Court of Appeal.

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‘Catastrophic failure’ led to Heathrow power outage – with chances missed to prevent it

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'Catastrophic failure' led to Heathrow power outage - with chances missed to prevent it

A power outage that shut Heathrow Airport earlier this year, causing travel chaos for more than 270,000 passengers, was caused by a “catastrophic failure” of equipment in a nearby substation, according to a new report.

Experts say the fire at the North Hyde Substation, which supplies electricity to Heathrow, started following the failure of a high-voltage electrical insulator known as a bushing, before spreading.

The failure was “most likely” caused by moisture entering the equipment, according to the report.

Two chances were also missed that could have prevented the failure, experts found, the first in 2018 when a higher-than-expected level of moisture was found in oil samples.

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Moment Heathrow substation ignites

Such a reading meant “an imminent fault and that the bushing should be replaced”, according to guidance by the National Grid Electricity Transmission.

However, the report by National Energy System Operator (NESO) said the appropriate responses to such a serious issue were “not actioned”, including in 2022 when basic maintenance was postponed.

“The issue therefore went unaddressed,” the report added.

The design and configuration of the airport’s internal power network meant the loss of just one of its three supply points would “result in the loss of power to operationally critical systems, leading to a suspension of operations for a significant period”, the report added.

Heathrow – which is Europe’s biggest airport – closed for around 16 hours on 21 March following the fire, before reopening at about 6pm.

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Heathrow bosses were ‘warned about substation’

Around 1,300 flights were cancelled and more than 270,000 air passenger journeys were disrupted.

Tens of millions of pounds were lost, thousands of passengers were stranded, and questions were raised about the resilience of the UK’s infrastructure.

More than 71,000 domestic and commercial customers lost power as a result of the fire and the resulting power outage, the report said.

NEOS chief executive, Fintan Slye, said there “wasn’t the control within their [National Grid’s] asset management systems that identified that this [elevated moisture levels] got missed.

“They identified a fault, [but] for some reason the transformer didn’t immediately get pulled out of service and get repaired.

“There was no control within the system that looked back and said ‘oh, hang on a second, you forgot to do this thing over here’.”

Sky’s science and technology editor, Tom Clarke, pointed to the age of the substation’s equipment, saying “some of these things are getting really very old now, coming to the end of their natural lives, and this is an illustration of what can happen if they are not really well maintained”.

The report also highlights a lack of joined-up thinking, he said, as “grid operators don’t know who’s critical national infrastructure on the network, and they don’t have priority”.

Responding to the report’s findings, a Heathrow spokesperson said: “A combination of outdated regulation, inadequate safety mechanisms, and National Grid’s failure to maintain its infrastructure led to this catastrophic power outage.

“We expect National Grid to be carefully considering what steps they can take to ensure this isn’t repeated.

“Our own Review, led by former Cabinet Minister Ruth Kelly, identified key areas for improvement and work is already underway to implement all 28 recommendations.”

In May, Ms Kelly’s investigation revealed that the airport’s chief executive couldn’t be contacted as the crisis unfolded because his phone was on silent.

Energy Secretary Ed Miliband, who commissioned the NESO report, called it “deeply concerning”, because “known risks were not addressed by the National Grid Electricity Transmission”.

Read more on Sky News:
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Mr Miliband said energy regulator Ofgem, which opened an investigation on Wednesday after the report was published, is investigating “possible licence breaches relating to the development and maintenance of its electricity system at North Hyde.

“There are wider lessons to be learned from this incident. My department, working across government, will urgently consider the findings and recommendations set out by NESO and publish a response to the report in due course.”

The Metropolitan Police previously confirmed on 25 March that officers had “found no evidence to suggest that the incident was suspicious in nature”.

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The PM faced down his party on welfare and lost. I suspect things may only get worse

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The PM faced down his party on welfare and lost. I suspect things may only get worse

So much for an end to chaos and sticking plaster politics.

Yesterday, Sir Keir Starmer abandoned his flagship welfare reforms at the eleventh hour – hectic scenes in the House of Commons that left onlookers aghast.

Facing possible defeat on his welfare bill, the PM folded in a last-minute climbdown to save his skin.

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Welfare bill passes second reading

The decision was so rushed that some government insiders didn’t even know it was coming – as the deputy PM, deployed as a negotiator, scrambled to save the bill or how much it would cost.

“Too early to answer, it’s moved at a really fast pace,” said one.

The changes were enough to whittle back the rebellion to 49 MPs as the prime minister prevailed, but this was a pyrrhic victory.

Sir Keir lost the argument with his own backbenchers over his flagship welfare reforms, as they roundly rejected his proposed cuts to disability benefits for existing claimants or future ones, without a proper review of the entire personal independence payment (PIP) system first.

PM wins key welfare vote – follow latest

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Welfare bill blows ‘black hole’ in chancellor’s accounts

That in turn has blown a hole in the public finances, as billions of planned welfare savings are shelved.

Chancellor Rachel Reeves now faces the prospect of having to find £5bn.

As for the politics, the prime minister has – to use a war analogy – spilled an awful lot of blood for little reward.

He has faced down his MPs and he has lost.

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‘Lessons to learn’, says Kendall

They will be emboldened from this and – as some of those close to him admit – will find it even harder to govern.

After the vote, in central lobby, MPs were already saying that the government should regard this as a reset moment for relations between No 10 and the party.

The prime minister always said during the election that he would put country first and party second – and yet, less than a year into office, he finds himself pinned back by his party and blocked from making what he sees are necessary reforms.

I suspect it will only get worse. When I asked two of the rebel MPs how they expected the government to cover off the losses in welfare savings, Rachael Maskell, a leading rebel, suggested the government introduce welfare taxes.

Meanwhile, Work and Pensions Select Committee chair Debbie Abrahams told me “fiscal rules are not natural laws” – suggesting the chancellor could perhaps borrow more to fund public spending.

Read more:
How did your MP vote?
Welfare cuts branded ‘Dickensian’

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Should the govt slash the welfare budget?

These of course are both things that Ms Reeves has ruled out.

But the lesson MPs will take from this climbdown is that – if they push hard in enough and in big enough numbers – the government will give ground.

The fallout for now is that any serious cuts to welfare – something the PM says is absolutely necessary – are stalled for the time being, with the Stephen Timms review into PIP not reporting back until November 2026.

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Tearful MP urges govt to reconsider

Had the government done this differently and reviewed the system before trying to impose the cuts – a process only done ahead of the Spring Statement in order to help the chancellor fix her fiscal black hole – they may have had more success.

Those close to the PM say he wants to deliver on the mandate the country gave him in last year’s election, and point out that Sir Keir Starmer is often underestimated – first as party leader and now as prime minister.

But on this occasion, he underestimated his own MPs.

His job was already difficult enough – and after this it will be even harder still.

If he can’t govern his party, he can’t deliver change he promised.

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