Why is Rishi Sunak casting such a sombre mood? It’s more about politics than economics

Published

3 years ago

October 25, 2022

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Rishi Sunak says we are facing a “profound economic crisis”. Big words, not to mention depressing. But do they really stack up?

Is the UK really facing something unique? Can he really blame much of it (as was implicit in his speech) on his predecessor? Or is something else going on?

Let’s start at the start.

There is no doubt that the UK is facing tough economic times right now. We are quite plausibly in the teeth of a recession. Look at measures like the purchasing manager’s index from S&P Global – a measure of how businesses are faring right now – and it is contraction territory. This is a recession warning, and no mistake.

And there are certainly some factors which will make this a grim year or two for households. For one thing, mortgage costs are rising, and rising fast. The average two-year fixed rate mortgage is currently up above 6%, a level which implies the highest repayments as a percentage of household incomes since the late 1980s or early 1990s. This is clearly not good news.

And it’s a similar story for energy bills. Even after you account for the energy price guarantee introduced by Liz Truss, the amount the average household spends on energy this winter will still be the highest we’ve seen since at least the 1950s. Again, not good news – and note that since the scheme has been shortened from two years to six months, it’s quite plausible the costs are even greater next year.

Put it all together and any measure of our collective standard of living suggests an astonishing fall this year. We are all going to be much poorer, relative to what we typically want to spend our money on. And that, in large part, is down to the impact of higher energy prices, which creep into every part of our lives.

But these are not the only issues facing the government.

The UK is not the only major economy facing a potential recession

One problem which no previous prime minister has been able to address successfully is Britain’s productivity malaise. Output per hour is perhaps the single most important yardstick of our economic wellbeing and it has essentially flatlined since the financial crisis, making (and this is not an exaggeration) everything worse: our incomes, our quality of life, the level of taxes and national debt.

And this is before you consider the deeper issues facing the global economy right now. Most glaringly we seem to be in the early stages of a new Cold War, which could result in the creation of trading blocs rather than a fully globalised world. And this prognosis is, frankly, more optimistic than many. This will have enormous economic implications.

But here’s the thing. None of these challenges are necessarily Britain’s alone. The UK is not the only major economy facing a potential recession: others in Europe will probably have even deeper contractions this winter. Disappointing productivity is something many developed economies struggle with. Interest rates are rising everywhere (even if the UK’s recent increase in borrowing costs outpaced other nations).

Many of the current problems pre-date Liz Truss

Nor is it especially fair to blame all these problems on Liz Truss: they pretty much all pre-date her. And here’s the really interesting thing: the spike in government bond yields which followed her and Kwasi Kwarteng’s mini-budget has now been almost completely erased.

Those gilt yields are now nearly back to where they were before. So too are expectations for Bank of England interest rates next year. This is an extraordinary turnaround – a consequence of the fact that the Truss government is no more.

But it means that actually much of the damage has now been erased. It’s worth pondering this for a moment. Remember: that rise in gilt yields as international investors looked askance at the UK pushed up the potential cost of borrowing both for households and for governments. It meant that if the government carried on having to issue debt at those kinds of interest rates then its debt interest bill would have been a lot higher. The IFS calculated the ongoing cost at about £10 billion a year. That’s a big deal.

‘Credibility premium’ on government debt is shrinking

But now that the “credibility premium” on government debt is shrinking, that problem is no longer, well, a problem. It may soon have disappeared altogether.

Which raises a question: why did Rishi Sunak try to cast such a sombre mood on the steps of Downing Street? My suspicion is that it’s about 60% politics and about 40% economics.

The politics first: if he can convince the public (and his MPs) that things are grim, it means less resistance for the inevitable cuts. Much as Covid united the party, perhaps, he thinks, the threat of economic contagion could do something similar.

If he can persuade the public that the bad news he’s meting out is down to Liz Truss rather than his own policies as chancellor (most of these problems were problems when he was in Downing Street and had responsibility for doing something about them) then, well, that would obviously suit him. Even if it’s not entirely accurate.

Sunak’s warnings are only 40% economics

The 40% economics is intriguing, because there’s a virtuous circle here. If he can deploy phrases like “profound economic crisis” and “difficult decisions” he can persuade markets that he’s really serious about cutting debt, which in turn should push down gilt yields even lower. Which means the hole in the public finances suddenly gets smaller too.

Talking tough could actually mean he doesn’t have to act quite so tough in the coming austerity mini-budget or whatever we’ll call it.

Not that much of this will be detectable when the fiscal statement lands. We are clearly in for some tough cuts for the economy. But most of the challenges they are intended to address were baked in long before Liz Truss ever reached Downing Street.

Business

WSL Football bosses hire Goldman to kick off financing review

Published

5 hours ago

October 4, 2025

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WSL Football bosses hire Goldman to kick off financing review

Football chiefs are to bring in Wall Street’s best-known investment bank to explore options for financing the growth of women’s football in England.

Sky News has learnt that the board of the WSL are close to hiring Goldman Sachs to evaluate opportunities for raising new funding.

The project is at a very early stage, with further details on the potential outcome unclear this weekend.

The possibility of selling a stake in the WSL and the rebranded Championship – now known as WSL2 – has been explored in the past, and could be reviewed again as executives seek to capitalise on the sport’s profile.

The England women’s team made history during the summer by retaining their European Championships title after a penalty shootout in the Final against Spain.

In the last few months, both Chelsea and West Ham United have sold stakes in their women’s teams to external investors, with the former striking a deal with the husband of former tennis superstar Serena Williams.

Deloitte, the accountancy firm which has been involved in a string of prominent recent sports deals, including the sale of stakes in the eight Hundred cricket franchises, is also said to be being lined up to work with the WSL Football board.

A WSL Football spokesman told Sky News: “Like any responsible business with ambition, WSL Football is working in collaboration with member clubs to explore long-term growth strategies that can accelerate the positive momentum within the women’s game.”

The spokesman declined to comment on the involvement of Goldman Sachs or Deloitte.

News of the review comes with the WSL and WSL2 seasons well underway.

On Friday night, Chelsea surrendered their 100% record at the top of the WSL when Manchester United came from behind to draw with the Londoners.

In the WSL2, Birmingham City and Charlton Athletic lead the race for promotion to the top tier.

The WSL Football board, which is chaired by media veteran Dawn Airey and run by chief executive Nikki Doucet, has secured a string of lucrative commercial and broadcast partnerships in the last 12 months.

These have included deals with British Gas and Nike, as well as a three-year title sponsorship extension with Barclays.

On the broadcast front, it struck a record £65m domestic TV rights agreement with Sky Sports – which shares a parent company with Sky News – and the BBC.

According to Deloitte’s annual review of football finance, the 12 WSL clubs generated aggregate revenue of £65m in 2023-24, a 34% increase on the prior season’s figure of £48m.

This rise was, according to the report, driven by revenue growth at Arsenal and Chelsea, although every top-flight club recorded double-digit increases in total revenue.

In attendance terms, WSL’s average and cumulative crowds in 2024-25 were slightly down, but this was offset by increases in attendances at second-tier matches, meaning that across the two divisions, last season was flat with an overall cumulative attendance of just over 1.1 million.

The impending appointment of Goldman comes four-and-a-half years after rival investment bank Rothschild was hired to undertake a similar review, with the sale of a stake to private equity investors under consideration for months before being abandoned.

Goldman Sachs declined to comment.

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Reeves seeks outsider to run Britain’s banking watchdog

Published

9 hours ago

October 4, 2025

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Reeves seeks outsider to run Britain's banking watchdog

Rachel Reeves, the chancellor, is seeking a heavyweight outsider to run Britain’s main banking watchdog, with a senior Barclays executive expected to be among the top contenders for the job.

Sky News has learnt that the Treasury is to advertise the post of chief executive of the Prudential Regulation Authority (PRA), which oversees financial services firms such as banks and insurers, within days.

One source said the recruitment process could kick off as early as next week.

The process, which will run for several months, will lead to the appointment of a successor to Sam Woods, a long-serving official who has served two terms in the role.

This weekend, it emerged that Katharine Braddick, a former senior Treasury civil servant who joined Barclays in 2022, is expected to be among the applicants for the role.

Whitehall insiders said Ms Braddick would be a strong contender for the post if she decided to apply.

A former director-general, financial services at the Treasury, Ms Braddick has been Barclays’ group head of strategic policy and advisor to the bank’s chief executive for three-and-a-half years.

Prior to the Treasury, she worked at the Financial Services Authority and was heavily involved in political negotiations on financial services legislation relating to Brexit.

Barclays declined to comment on Ms Braddick’s behalf on Saturday.

In response to an enquiry from Sky News, a Treasury spokesperson said: “Growing the economy is the Chancellor’s number one mission.

“Every regulator has a part to play by regulating for growth not just risk.”

The chancellor is said to be keen to identify candidates from outside Britain’s existing regulatory set-up to head the PRA.

A small number of internal candidates is thought to include David Bailey, the Bank of England’s executive director for prudential policy.

Ms Reeves’s apparent desire for an outsider comes amid a wider push for Britain’s economic watchdogs to remove red tape and reorient themselves towards growth-focused policies.

Earlier this year, Nikhil Rathi, chief executive of the Financial Conduct Authority, was appointed to a second term in charge following intensive discussions about the body’s five-year strategy.

Since then, both the FCA and PRA have removed rules relating to diversity and inclusion in the financial sector, while the former abandoned a plan to ‘name and shame’ companies which were the subject of enforcement investigations.

The Payment Systems Regulator (PSR) was abolished earlier this year as part of the government’s drive to reduce unnecessary regulation.

The search for the next PRA boss will get underway less than two months before the chancellor delivers an autumn Budget in which she is expected to have to raise tens of billions of pounds through additional tax rises.

Mr Woods’ next move will be closely watched in the City.

He has been seen as a potential candidate to succeed Andrew Bailey when the Bank of England governor’s term runs out in 2028, although it is unclear whether he covets the job.

As CEO of the PRA, Mr Woods is also a deputy governor of the Bank of England, a member of the Bank’s Court of Directors, and a director of the FCA.

The chancellor has shown a willingness to recruit from outside the Treasury, appointing Bank of America investment banking veteran Jim O’Neil as second permanent secretary to the Treasury earlier this year.

Mr O’Neil had also served as the head of UK Financial Investments, the agency set up to manage taxpayers’ stakes in Britain’s bailed-out banks.

Business

Baroness Mone: I have no wish to rejoin Lords as Conservative peer

Published

1 day ago

October 3, 2025

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Baroness Mone: I have no wish to rejoin Lords as Conservative peer

Baroness Michelle Mone has broadened her attack on her political critics, accusing Conservative leader Kemi Badenoch of using “inflammatory” and “reckless” language that could prejudice a police investigation into her role in the awarding of PPE contracts.

A day after she wrote to Sir Keir Starmer, accusing the government of pursuing a vendetta against her, the former Conservative peer responded to comments by Ms Badenoch following a High Court ruling that a company linked to Baroness Mone’s husband must repay £122m received for surgical gowns.

The court found that PPE Medpro, founded by her husband Doug Barrowman, was in breach of contract with the Department of Health and gave it two weeks to repay the sum.

While not a director of the company, Baroness Mone used her political contacts to introduce PPE Medpro to the government’s “VIP fast-lane” at the start of the pandemic, and a family trust of which her children are beneficiaries received £29m of the profits.

A separate criminal investigation by the National Crime Agency (NCA) is ongoing, and assets linked to the couple worth £75m have been frozen while it continues.

In a series of radio interviews, Ms Badenoch criticised Baroness Mone, accusing her of bringing shame on the Conservative Party and calling for her to step down from the House of Lords.

“Where people do wrong, they should be punished,” she said. “They should face the full force of the law and this is something that I very strongly believe in,” she said.

“And as the prosecution against her continues, they should throw the book at her for every single bit of wrongdoing that has taken place.”

In a letter from her private office, Baroness Mone accuses the Tory leader of being ignorant of the facts and calls out a series of other Conservative politicians who introduced companies to the VIP lane.

“I was shocked to the core to read about your inflammatory language on BBC Radio yesterday calling for me to resign from the House of Lords,” she writes.

“You are commenting on a live criminal investigation that could prejudice the outcome of any trial, and in so doing, you are reportable to the attorney general for breach of and contempt of court. Does no one ever tell you these things before you and your colleagues make reckless statements in the public domain?”

Baroness Mone goes on to say the NCA investigation has “nothing to do with PPE Medpro and the contracts”.

“The case theory of the NCA investigation is that I somehow misled the Conservative government about my alleged concealed involvement and ended up pocketing a lot of money,” she writes. “Well I’m sorry to disappoint you, but it isn’t true.”

She also says the Conservative government knew of her involvement and names former health secretary Matt Hancock, Lord Agnew, Lord Feldman and Lord Chadlington as being among 51 “mostly Conservative peers and MPs” who introduced providers to the VIP lane.

“So Kemi, my role was exactly the same as all other Conservative MPs and peers who were trying to help provide PPE… if I have done wrong, then so have all the others in the VIP lane. In which case, you should be calling out for them to resign as well. That’s if you manage to work out what it is they are supposed to have done wrong.”

She concludes by saying she has no wish to rejoin the Lords as a Conservative peer when her leave of absence ends, “that’s assuming there still is a Conservative Party before the next General Election”.

The letter comes as an online petition calling for Baroness Mone to step down from the Lords, launched by the Covid-19 Bereaved Families for Justice, attracted 60,000 signatures in 24 hours.

The Conservative Party has been approached for comment.