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The pound and UK government bond yields have recovered in anticipation of a key statement from the new chancellor tasked with sorting out the fallout from the government’s disastrous mini-budget.

Sterling had fallen to a record low against the dollar at the end of September, after the short-lived then chancellor Kwasi Kwarteng unveiled the biggest programme of tax cuts for 50 years.

Mr Kwarteng, who was sacked on Friday after just 38 days in the job, paid the price for a giveaway that called into question the government’s economic credibility on financial markets.

The mini-budget led not just to a collapse in the value of the pound, but also prompted a surge in borrowing costs – forcing an unprecedented intervention by the Bank of England (BoE).

However, following the prime minister’s announcement on Friday that Mr Kwarteng had been sacked and that corporation tax would rise to 25% from April next year instead of being kept at 19%, there was a partial recovery for the UK currency and bond yields.

Mr Kwarteng’s replacement, former foreign and health secretary Jeremy Hunt, has since promised to win back the confidence of the financial markets by fully accounting for the government’s tax and spending plans.

Sterling gained 1.1% to hit $1.1294 on Monday at one stage and also made strides versus the euro when the Treasury revealed that Mr Hunt would deliver key parts of a medium-term plan later on Monday in support of “fiscal sustainability”.

The statement – released before UK financial markets opened – added that Mr Hunt met the BoE governor Andrew Bailey and the head of the Debt Management Office on Sunday night to brief them on the plans.

There would be a select few announcements brought forward from the medium-term fiscal plan that is due to be revealed on 31 October.

The bond markets also suggested an easing of the recent pressure, given additional concerns in some quarters after the BoE on Friday concluded its emergency gilt market support on Friday.

The Bank issued its own statement ahead of the open to say that its operations, aimed at helping pension funds battling higher collateral demands, had enabled a “significant increase in the resilience of the sector”.

It reiterated that other liquidity options remained available, if needed, to ensure smooth financing.

Any rises in government borrowing costs, through a gilt yield rise, would have reflected additional jitters.

‘Unruly pupils are still scheming to oust the beleaguered head’

But there was a downwards shift, with both the UK 20 and 30 year yields falling by more than 30 basis points in early trading.

CHANCELLOR SECURES SOME BREATHING SPACE


Paul Kelso - Health correspondent

Paul Kelso

Business correspondent

@pkelso

When markets closed on Friday, after a dramatic day that saw a chancellor sacked and a totemic economic policy junked, the verdict was troubling:

A sell off UK gilts had gathered pace before, during and after the Prime Minister’s press conference, and the closing bell could not come fast enough.

After Jeremy Hunt spent the weekend signalling a dramatic change in course to reassure the investors on whom confidence in the UK economy rests, the Treasury was plainly not going to take any chances on Monday morning.

That explains the pre-dawn announcement that the new chancellor would be bringing forward U-turns on Kwasi Kwarteng’s calamitous mini-budget.

The aim was to secure breathing space, a stay of execution from markets that could, had they continued to sense vulnerability, deepened the crisis and ended the fiscal repositioning before it began.

The need was all the more acute as this was the first Monday in a fortnight when the Bank of England was not acting as backstop to the gilt markets, its emergency intervention having been withdrawn on Friday, in part triggering the political meltdown that ended the week.

The response was precisely the one the Treasury and Downing Street wanted to see; the first move of UK gilt yields, a measure of the effective cost of Government borrowing, was down.

Yields on 10, 20 and 30-year bonds all moved down as trading began in London at 8am, a trend that if it lasts between now and 31st October, when the Office for Budget Responsibility delivers its calculation of the state of the public finances, has immense political and practical implications.

The gilt markets matter not just because they are an expression of confidence in a nation’s creditworthiness. Government bonds are the mechanism through which states borrow, and the less faith there is in your plan, the more it costs.

And those borrowing costs are central to the calculations the Treasury and the OBR are making. The UK has £2.4trn of debt and under the Truss plans was going to take on tens of billions more to fund tax cuts.

With market confidence evaporating (and gilt yields rising) the cost of that borrowing, old and new, rose. If yields can be brought down the cost of borrowing will fall, cutting billions from one side of the government’s balance sheet, which could in return reduce the need for cuts.

The next hours and days will be pivotal.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said other risk factors remained at play despite the initial recovery.

”New chancellor Jeremy Hunt has the air of a troubleshooting teacher brought in to turn around a failing school and faces his first big presentation test today with an emergency budget plan wheeled out to try and calm financial markets.

New Chancellor of the Exchequer Jeremy Hunt leaves 10 Downing Street

“This is all part of his charm offensive to instil confidence in the government’s ability to be fiscally responsible, but behind him unruly pupils are still scheming to oust the beleaguered head,” she wrote.

Can Truss remain PM?

It reflects a renewed focus on whether Ms Truss, the architect of the government’s initial economic strategy, can remain in the job.

A Tory MP told Sky News: “The idea that the prime minister can just scapegoat her chancellor and move on is deluded.

“This is her vision. She signed off on every detail and she defended it.”

The Conservative Party is now on its fifth chancellor in the past three years – Mr Hunt, Mr Kwarteng, Nadhim Zahawi, Rishi Sunak and Sajid Javid.

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Business confidence ‘at two-year low’ as tax hikes loom

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Business confidence 'at two-year low' as tax hikes loom

More than half of private sector firms are planning price hikes to help offset looming tax increases announced in the chancellor’s first budget , according to a corporate lobby group.

The British Chambers of Commerce (BCC) warned business confidence was at its lowest level since the market meltdown that followed the Conservatives’ mini budget of autumn 2022.

Its survey of almost 5,000 firms found worries about tax stood at levels not seen since 2017.

Money latest: ‘I work 80 hours a week and my starting salary was zero – but I’ll retire at 50’

Labour had fought a growth-focused election on the back of an improved working relationship with business but there was a widespread sense of shock when the 30 October budget put businesses on the hook for the bulk of £40bn of tax increases.

The new government argued the hikes were necessary to lock in long overdue investment in public services due to an alleged black hole in the public finances inherited from the Tories.

But companies widely warned the higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases from April, would be passed on to customers and hit wage growth, employment and investment.

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At a time when the Bank of England is struggling to cut interest rates due to stubborn cost pressures in the economy, there will be concern among policymakers over the threat posed by potential business price hikes ahead.

The BCC survey found 55% of companies were planning to raise their own sales costs.

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HMV owner slams budget ‘burden’

Such a move would threaten further upwards pressure on inflation while weak business confidence will also do little to lift the economy out of the doldrums witnessed during the second half of 2024 when government warnings of a “tough” budget ahead were widely blamed for hitting sentiment.

Financial markets currently see just a 60% chance of a Bank rate cut at the next meeting in a month’s time.

BCC director general Shevaun Haviland said: “The worrying reverberations of the budget are clear to see in our survey data. Businesses’ confidence has slumped in a pressure cooker of rising costs and taxes.

“Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.

“The government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.

“Business stands ready to work in partnership to make the proposed Employment Rights legislation work for all, but the current plans will add further costs on firms.”

The BCC said the government could help firms absorb the additional pressures in areas such as business rates reform and through infrastructure investment.

A Treasury spokesperson said in response: “We delivered a once in a parliament budget to wipe the slate clean and deliver the stability businesses so desperately need.

“We have ensured more than half of employers will either see a cut or no change in their National Insurance bills, and by capping the rate of corporation tax at the lowest level in the G7, creating pension megafunds and establishing a National Wealth Fund, we are bringing back political and financial stability, creating the conditions for economic growth through investment and reform.

“This is just the start of our Plan for Change which will unlock investment, get Britain building via planning reform, and employ a modern Industrial Strategy to deliver the certainty and stability businesses need to invest in the UK’s growing and high potential sectors. This will make all parts of the country better off.”

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Montgomery-backed Local TV swoops on Lebedev’s London Live licence

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Montgomery-backed Local TV swoops on Lebedev's London Live licence

A television network majority-owned by David Montgomery, the media entrepreneur, is to snap up the licence to operate a London-focused TV station from Lord Lebedev, owner of the capital’s weekly Standard newspaper.

Sky News has learnt that Local TV Ltd, which was acquired by Mr Montgomery in 2017, is close to announcing a deal to buy the London licence from London Live.

Lord Lebedev was said last month to be exploring a sale of the London Live station he launched in 2014, with The Sunday Times reporting that it had lost more than £20m since it was established.

One media industry source said the deal would take Local TV’s share of the locally broadcast television market to roughly 60%.

It already has channels focused on locations including Birmingham, Leeds and Cardiff.

The company’s eight existing channels are broadcast to more than five million UK households.

While owned by Mr Montgomery, Local TV is run by Lesley Mackenzie, its chief executive.

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Mr Montgomery, the former Mirror Group Newspapers executive, has also been involved in the auction of The Daily Telegraph, having tabled an offer for the right-leaning newspaper last year.

He was reported this weekend to have met Todd Boehly, the Chelsea Football Club co-owner, about collaborating on a bid.

Tim Kirkman, the London Live managing director, declined to comment when reached by Sky News on Sunday afternoon, while Local TV could not be reached for comment.

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Could this be the future of farming? Inside Europe’s biggest vertical farm

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Could this be the future of farming? Inside Europe's biggest vertical farm

Outside it is the bleak midwinter. We are smack bang in the middle of some of the country’s best agricultural land.

But inside the cavernous warehouse where we’ve come, you wouldn’t have a clue about any of that: there is no daylight; it feels like it could be any time of the day, any season of the year.

We are at Fischer Farms – Europe’s biggest vertical farm.

The whole point of a vertical farm is to create an environment where you can grow plants, stacked on top of each other (hence: vertical) in high density. The idea being that you can grow your salads or peas somewhere close to the cities where they’re consumed rather than hundreds of miles away. Location is not supposed to matter.

Image:
Farm 2 of Fischer Farms

So the fact that this particular one is to be found amid the fields a few miles outside Norwich is somewhat irrelevant. It could be anywhere. Indeed, unlike most farms, which are sometimes named after the family that owns them or a local landmark, this one is simply called “Farm 2”. “Farm 1” is to be found in Staffordshire, in case you were wondering.

Farm boss’s dizzying ambition

These futuristic farm units are the brainwave of Tristan Fischer, a serial entrepreneur who has spent much of his career working on renewable energy in its various guises. His ambition now is dizzying: to be able to grow not just basil and chives in a farm like this but to grow other, trickier and more competitive crops too – from strawberries to wheat and rice.

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Only then, he says, can vertical farming stand a chance of truly changing the world.

The idea behind vertical farming itself is more than a century old. Back in 1915, American geologist Gilbert Ellis Bailey described how it could be done in theory. In theory, one should be able to grow plants hydroponically – in other words with a mineral substrate instead of soil – in a controlled environment and thereby increase the yield dramatically.

In one sense this is what’s already being done in greenhouses across much of Northern Europe and the US, where tomatoes and other warm-weather-loving vegetables are grown in temperature-controlled environments. However, while most of these greenhouses still depend on natural light (if sometimes bolstered by electric bulbs) the point behind vertical farming was that by controlling the amount of light, one could grow more or less everything, any time of the year. And by stacking the crops together one could yield even more crops in each acre of land one was using.

Image:
The tunnels are 12 levels high and bathed in bright LED lights

Look at a long-term chart of agricultural yields in this country and you start to see why this might matter. The quantity of crops we grow in each acre of land jumped dramatically in the second half of the 20th century – a consequence in part of liberal use of artificial fertiliser and in part of new technologies and systems. But that productivity rate started to tail off towards the end of the century.

‘Changing the equation’

Vertical farming promises, if it can make the numbers add up, to change the equation, dramatically increasing agricultural productivity in the coming decades. The question is whether the technology is there yet.

And when it comes to the technology, one thing has certainly changed. Those early vertical farms (the first attempts actually date back to the 1950s) all had a big problem: the bulbs. Incandescent bulbs were both too hot and too energy intensive to work in these environments. But the latest generation of LED bulbs are both cool and cheap, and it’s these bulbs you need (in vast numbers) if you’re going to make vertical farming work.

Read more from Sky News:
In a time of change Sky News spent a critical year on a farm
How climate change could be jeopardising UK access to affordable food

Image:
The farm is growing basil but the ambition is to grow much more than simple herbs

Here at Farm 2, you encounter row after row of trays, each stacked on top of each other, each carrying increasingly leafy basil plants. They sit under thousands of little LED bulbs which are tuned to precisely the right spectral frequency to encourage the plant to grow rapidly.

Mr Fischer says: “We’re on this downward cost curve on LEDs. And then when you think about other main inputs, energy – renewable energy – is constantly coming down as well.

“So you think about all the big drivers of vertical farming, they’re going down, whereas compared to full-grown crops, everything’s going up – the fertilisers, rents, water is becoming more expensive too.”

Image:
Just over a month after the basil was seeded, it is now fully grown and trays of the crop are moved to the harvesting machine

This farm – which currently sells to restaurant chains rather than direct to consumers – is now cost-competitive with the basil shipped (or more often flown) in from the Mediterranean and North Africa. The carbon footprint is considerably lower too.

“And our long-term goal is that we can get a lot cheaper,” says Mr Fischer. “If you look at Farm 1, we spent about £2.5m on lights in 2018. Fast forward to Farm 2; it’s seven and a half times bigger and in those three years the lights were effectively half the price. We’re also probably using 60 to 70 percent less power.”

Farm boss Tristan Fischer speaks to Sky's Ed Conway
Image:
Farm boss Tristan Fischer speaks to Sky’s Ed Conway

It might seem odd to hear a farmer talk so much about energy and comparatively less about the kinds of things one associates with farmers – the soil or tractors or the weather – but vertical farming is in large part an energy business. If energy prices are low enough, it makes the crops here considerably cheaper.

But here in the UK, with power costs higher than anywhere else in the developed world, the prospects for this business are more challenged than elsewhere. Still, Mr Fischer’s objective is to prove the business case here before building bigger units elsewhere, in countries with much cheaper power.

In much the same way as Dutch growers came to dominate those greenhouses, he thinks the UK has a chance of dominating this new agricultural sector.

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