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Jacob Rees-Mogg has declared his confidence in the governor of the Bank of England, but disputed that pension funds are at “systemic” risk.

Speaking to Sky News, the business secretary said “of course” he has confidence in Andrew Bailey, describing him as “respected”.

He questioned, however, whether there was a “systemic problem” with pensions after the Bank of England expanded its market intervention to help pension funds for the second time in two days on Tuesday by buying up index-linked gilts.

Bank confirms market support to end – politics latest

The Bank had warned of a “material risk to UK financial stability” with “fire sales” of assets if it did not act.

The business secretary said that on the whole, pension funds “aren’t at risk”, but added: “Some pension funds have taken some high risk investments.”

He told Sky News that the “rightly independent” Bank intervened to protect these “risky investments”.

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The Bank confirmed yesterday that its emergency support operation to protect pension funds would end this week.

Mr Rees-Mogg repeatedly refused to be drawn on whether the Bank was right to signal an end to its market intervention.

“I’m not going to criticise the Bank of England or the governor,” he said. “It is not for me to speculate on what the Bank of England is doing.”

He also insisted to Kay Burley that parts of the economy were in a “good state” as he admitted that after the economic turmoil of recent weeks his own mortgage payments have gone up.

“Mortgage rates have gone up for everyone who has a mortgage, and I have a mortgage,” he said.

“Any floating rate mortgages have gone up.”

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Kwarteng’s options for national debt

‘Be careful about forecasts’

Earlier this morning, new Office for National Statistics figures indicated that the economy shrank by 0.3% between July and August, a fall from downwardly revised growth of 0.1% the previous month.

Mr Rees-Mogg urged caution in interpreting them.

“The previous quarter’s figure showed a contraction [and] was then revised to show economic growth. So, be very careful about how you interpret figures immediately after they’re released,” he told Sky News.

“It’s a small amount of a very large economy, but these figures are notorious for being revised afterwards.”

The business secretary also refused to indicate his own view on whether benefits should rise in line with inflation, an issue that has split the Conservative Party.

“We haven’t yet had the inflation figure on which benefits will be set. So, that is something that will be decided once the figure is available,” he said.

“Most predictions, most economic forecasts, turn out to be inaccurate rather than spot on. So, one has got to be careful about forecasts.”

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Are we set for another era of austerity?

‘Routine decision-making’

Mr Rees-Mogg said the decision on benefits would be made once inflation figures come out.

“There is a process for making this decision,” he said.

“The statutory instrument has to be laid in November to put through the increase. That will be done in the normal way. This is completely routine governmental decision-making.”

In the Commons on Tuesday Julian Smith, a former cabinet minister, warned Kwasi Kwarteng, the chancellor, that the government must not balance tax cuts “on the back of the poorest people in our country”.

The government has already been forced to abandon plans to scrap the top 45p rate of tax in the face of a threatened revolt.

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Liz Truss, the prime minister, will face MPs in the Commons on Wednesday for the first time since Mr Kwarteng’s £43bn tax-cutting mini-budget caused economic turmoil.

On Tuesday, the International Monetary Fund warned that Mr Kwarteng’s package of unfunded tax cuts was making it harder for the Bank to get soaring inflation rates under control.

The Institute for Fiscal Studies has warned the chancellor he will have to find £60bn in public spending cuts if he persists with his tax plans.

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US and EU agree trade deal, says Donald Trump

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US and EU agree trade deal, says Donald Trump

The United States and European Union have agreed a trade deal, says Donald Trump.

The announcement was made as the US president met European Commission chief Ursula von der Leyen at one of his golf resorts in Scotland.

Speaking after talks in Turnberry, Mr Trump said the EU deal was the “biggest deal ever made” and it will be “great for cars”.

The US will impose 15% tariffs on EU goods into America, after Mr Trump had threatened a 30% levy.

He said there will be an EU investment of $600bn in the US, the bloc will buy $750bn in US energy and will also purchase US military equipment.

Mr Trump had earlier said the main sticking point was “fairness”, citing barriers to US exports of cars and agriculture.

He went into the talks demanding fairer trade with the 27-member EU and threatening steep tariffs to achieve that, while insisting the US will not go below 15% import taxes.

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For months, Mr Trump has threatened most of the world with large tariffs in the hope of shrinking major US trade deficits with many key trading partners, including the EU.

Ms von der Leyen said the agreement would include 15% tariffs across the board, saying it would help rebalance trade between the two large trading partners.

In case there was no deal and the US had imposed 30% tariffs from 1 August, the EU has prepared counter-tariffs on €93bn (£81bn) of US goods.

Ahead of their meeting on Sunday, Ms von der Leyen described Mr Trump as a “tough negotiator and dealmaker”.

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Bread producers Hovis and Kingsmill close in on historic merger

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Bread producers Hovis and Kingsmill close in on historic merger

The owners of Hovis and Kingsmill are closing in on a definitive agreement to merge two of Britain’s most famous grocery brands following months of talks.

Sky News has learnt Associated British Foods (ABF), the London-listed company which owns Kingsmill’s immediate parent, Allied Bakeries, has proposed paying roughly £75m to acquire Hovis from its long-term private equity backers.

Banking sources said a deal could be formally agreed to combine the businesses as early as the end of next week, although they cautioned the complexity of the transaction meant the timing could yet slip.

Confirmation of a tie-up would come nearly three months after Sky News revealed ABF and Endless – Hovis’s owner since 2020 – were in discussions.

Industry sources have estimated that a combined group could benefit from up to £50m of annual cost savings from a merger.

ABF has also been exploring options for the future of Allied Bakeries separate from its talks with Hovis in the event a deal could not be agreed or is prevented from completing by competition regulators.

If it does go ahead, the merger will unite two historic bread producers under common ownership, with Allied Bakeries having been founded in 1935 by Willard Garfield Weston, part of the family which continues to control ABF.

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Hovis traces its history back even further, having been created in 1890 when Herbert Grime scooped a £25 prize for coming up with the name Hovis, which was derived from the Latin ‘Hominis Vis’ – meaning “strength of man”.

Persistent inflation, competition from speciality bread producers and shifting consumer habits towards lower-carb diets have combined to impair breadmakers’ financial health in recent decades, however.

In accounts filed at Companies House earlier this month, Hovis said it had “achieved positive financial progress despite continued tough trading conditions”.

The company reported sales of £439.6m in the 52 weeks to 28 September last year, down from £477.6m in the 53 weeks to 30 September 2023.

Earnings before interest, tax, depreciation and amortisation fell from £20.9m to £18.7m, which Hovis said was the result of the revenue decline and higher distribution costs.

“Overall bread share remained stable, despite significant price inflation and the ongoing cost-of-living crisis, demonstrating the resilience of the Hovis brand and its iconic status as one of Britain’s most loved food brands,” the accounts said.

This week, the trade publication The Grocer reported that Britain’s big four supermarkets, including Asda and Sainsbury’s, had delisted a number of Hovis-branded products.

The publication quoted a Hovis spokeswoman as saying the company was “aware of some adjustments to Hovis product lines in certain stores”.

“We remain fully committed to working collaboratively with our retail partners to grow our mutual businesses.”

The overall UK bakery market is estimated to be worth about £5bn in annual sales, with the equivalent of 11m loaves being sold each day.

Critical to the prospects of a merger of Allied Bakeries, which also owns the Sunblest and Allinson’s bread brands, and Hovis taking place will be the view of the Competition and Markets Authority (CMA) at a time when economic regulators are under intense pressure from the government to support growth.

Warburtons, the family-owned business which is the largest bakery group in Britain, is estimated to have a 34% share of the branded wrapped sliced bread sector, with Hovis on 24% and Allied on 17%, according to industry insiders.

A merger of Hovis and Kingsmill would give the combined group the largest share of that segment of the market, although one source said Warburtons’ overall turnover would remain higher because of the breadth of its product range.

Responding to Sky News’ report in May of the talks, ABF said: “Allied Bakeries continues to face a very challenging market.

“We are evaluating strategic options for Allied Bakeries against this backdrop and we remain committed to increasing long-term shareholder value.”

In a separate presentation to analysts, ABF – which is also in the process of closing its Vivergo bioethanol plant in Hull after pleading for government support – described the losses at Allied, which also owns own-label bread manufacturer Speedibake, as unsustainable.

The company does not disclose details of Allied Bakeries’ financial performance.

Prior to its ownership by Endless, Hovis was owned by Mr Kipling-maker Premier Foods and the Gores family.

At the time of the most recent takeover, High Wycombe-based Hovis employed about 2,700 people and operated eight bakery sites, as well as its own flour mill.

Hovis’s current chief executive, Jon Jenkins, is a former boss of Allied Milling and Baking.

This weekend, ABF declined to comment, while Endless could not be reached for comment.

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Good economic news as sunny weather boosted retail sales

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Good economic news as sunny weather boosted retail sales

Retail sales grew in June as warm weather boosted spending and day trips, official figures show.

Spending on goods such as food, clothes and household items rose 0.9%, the Office for National Statistics (ONS) said.

It’s a bounce back from the 2.8% dip in May, but last month’s figure was below economists’ forecast 1.2% uplift as consumers dealt with higher prices from increased inflation.

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Also weighing on spending was reduced consumer confidence amid talk of higher taxes, according to a closely watched indicator from market research firm GfK.

Retail sales figures are significant as they measure household consumption, the largest expenditure in the UK economy.

Growing retail sales can mean economic growth, which the government has repeatedly said is its top priority.

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What does ‘inflation is rising’ mean?

Where have people been shopping?

June’s retail sales rise came as people bought more in supermarkets, and retailers said drinks sales were up.

While hot and sunny weather boosted some brick-and-mortar shops, the heat led some to head online.

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Non-store retailers, which include mainly online shops, but also market stalls, had sold the most in more than three years.

Not since February 2022 had sales been so high as the Met Office said England had its warmest ever June, and the second warmest for the UK as a whole.

The June increases suggest that the May drop was a bump in the road. When looked at as a whole, the first six months of the year saw retail sales up 1.7%.

Filling up the car for day trips to take advantage of the sun played an important role in the retail sales growth.

When fuel is excluded, the rise was smaller, just 0.6%.

Welcome news

Despite lower consumer sentiment and more expensive goods, consumers are benefitting from rising wages and are cutting back on savings.

The ONS lifestyle survey – backed up by hard data like the Bank of England’s money and credit figures – shows that households have rebuilt their rainy day savings and are cutting back on the amount of money they squirrel away each month.

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