Bank of England head Andrew Bailey denies role in Liz Truss’s downfall

Published

3 years ago

November 14, 2022

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The Bank of England Governor has denied having any part in the downfall of Liz Truss.

In an interview with Sky News, Andrew Bailey said that he “vehemently disagrees” with allegations that the Bank‘s actions precipitated the departure of the former prime minister.

It followed claims from Narayana Kocherlakota, the former president of America’s Federal Reserve Bank of Minneapolis, in a Bloomberg article, that the critical decision that sealed Ms Truss’s fate was when the UK central bank ended its emergency support for the bond markets last month.

However, in an interview recorded alongside the publication of its forecasts earlier this month, Mr Bailey told Sky News: “I vehemently disagree with [that analysis]… it is based on a fallacy.

“The argument is that we should have continued our intervention. And that had we done so, the world would have turned out differently. But what that misses is that our intervention, as a central bank, as it should be, was to address a precise financial stability problem, particularly connected to parts of the pensions fund industry.

“I’m afraid had we gone on with that intervention, beyond the point of financial stability being suitably restored, we’d have been creating another problem, which is what economists tend to call a moral hazard problem, ie people would have said: ‘well the Bank of England’s always going to intervene’, and that’s wrong. We did the job we set out to do.”

Asked whether he bore responsibility for Liz Truss‘s departure, he said: “No, of course we didn’t depose Liz Truss. I would never do anything like that.”

Economic fallout

The comments come with the UK economy now officially shrinking, in what many economists – including the Bank of England – believe is the beginning of a potentially protracted recession.

The new chancellor, Jeremy Hunt, is due to unveil a package of spending cuts and tax rises later this week, in what the government is casting as a repair job following the mini-budget.

The governor said that while the interest rates on government bonds had fallen sharply since the period of chaos, among the main victims of the disruption were those who signed up to fixed rate mortgages during that period.

“I have a great deal of sympathy for [those people]… It is very unfortunate what has happened.”

Gerard Lyons, an economist who offered some advice to the Truss team, says he warned them about the risk of a market disturbance.

“We said markets are in the very febrile state,” he said. “If your policy actions are not clear, and not understood, there will be a market crisis. It was quite clear that markets were worried about inflation. Markets were in the febrile state. And they were concerned about any change in UK economic policy, therefore, it was vital.

“I said this publicly and privately that: ‘you needed to convince the markets that any fiscal action was necessary, not inflationary, and affordable’.”

A “maverick left-wing crazy”

Former Greek finance minister Yanis Varoufakis – often described as one of the most maverick people to have held such a role in recent history – said that Kwasi Kwarteng‘s mini-budget was considerably more radical than anything he ever proposed or implemented.

“I was not Maverick at all,” he said. “All I tried to do was to say that, you know, we are bankrupt, Greece is bankrupt – that I’m not going to take another credit card to pretend that I’m repaying my loans.

“I should have been celebrated by the most conservative economists and politicians in the world and instead I was demonised as a maverick left-wing crazy.

“Kwarteng, on the other hand, simply followed the strategy of assuming that just because the markets are calm today, they will remain calm tomorrow… and the markets called them out.”

However, many market insiders are worried that even now, markets remain in a febrile state.

“The problems haven’t haven’t gone away,” said Daniela Russell, head of UK rates strategy at HSBC bank.

“Perhaps this isn’t just an isolated incident, but it could be the sort of a trend. One thing that’s particularly concerning to me is that there’s an awful lot of debt in the system.”

Business

US-UK trade deal ‘done’, says Trump as he meets Starmer at G7

Published

2 hours ago

June 17, 2025

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US-UK trade deal 'done', says Trump as he meets Starmer at G7

The UK-US trade deal has been signed and is “done”, US President Donald Trump has said as he met Sir Keir Starmer at the G7 summit.

The US president told reporters: “We signed it, and it’s done. It’s a fair deal for both. It’ll produce a lot of jobs, a lot of income.”

As Mr Trump and his British counterpart exited a mountain lodge in the Canadian Rockies where the summit is being held, the US president held up a physical copy of the trade agreement to show reporters.

Several leaves of paper fell from the binding, and Mr Starmer quickly bent down to pick them up, saying: “A very important document.”

Sir Keir said the document “implements” the deal to cut tariffs on cars and aerospace, adding: “So this is a very good day for both of our countries – a real sign of strength.”

Mr Trump added that the UK was “very well protected” against any future tariffs, saying: “You know why? Because I like them”.

However, he did not say whether levies on British steel exports to the US would be set to 0%, saying “we’re gonna let you have that information in a little while”.

What exactly does trade deal being ‘done’ mean?

The government says the US “has committed” to removing tariffs (taxes on imported goods) on UK aerospace goods, such as engines and aircraft parts, which currently stand at 10%.

That is “expected to come into force by the end of the month”.

Tariffs on car imports will drop from 27.5% to 10%, the government says, which “saves car manufacturers hundreds of millions a year, and protects tens of thousands of jobs”.

The White House says there will be a quota of 100,000 cars eligible for import at that level each year.

But on steel, the story is a little more complicated.

The UK is the only country exempted from the global 50% tariff rate on steel – which means the UK rate remains at the original level of 25%.

That tariff was expected to be lifted entirely, but the government now says it will “continue to go further and make progress towards 0% tariffs on core steel products as agreed”.

The White House says the US will “promptly construct a quota at most-favoured-nation rates for steel and aluminium articles”.

Other key parts of the deal include import and export quotas for beef – and the government is keen to emphasise that “any US imports will need to meet UK food safety standards”.

There is no change to tariffs on pharmaceuticals for the moment, and the government says “work will continue to protect industry from any further tariffs imposed”.

The White House says they “committed to negotiate significantly preferential treatment outcomes”.

Mr Trump also praised Sir Keir as a “great” prime minister, adding: “We’ve been talking about this deal for six years, and he’s done what they haven’t been able to do.”

He added: “We’re very longtime partners and allies and friends and we’ve become friends in a short period of time.

“He’s slightly more liberal than me to put it mildly… but we get along.”

Sir Keir added that “we make it work”.

The US president appeared to mistakenly refer to a “trade agreement with the European Union” at one point as he stood alongside the British prime minister.

Mr Trump announced his “Liberation Day” tariffs on countries in April. At the time, he announced 10% “reciprocal” rates on all UK exports – as well as separately announced 25% levies on cars and steel.

In a joint televised phone call in May, Sir Keir and Mr Trump announced the UK and US had agreed on a trade deal – but added the details were being finalised.

Ahead of the G7 summit, the prime minister said he would meet Mr Trump for “one-on-one” talks, and added the agreement “really matters for the vital sectors that are safeguarded under our deal, and we’ve got to implement that”.

Business

Poundland to stop paying rent at hundreds of stores in rescue deal

Published

18 hours ago

June 16, 2025

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Poundland to stop paying rent at hundreds of stores in rescue deal

Poundland will halt rent payments at hundreds of its shops if a restructuring of the ailing discount retailer is approved by creditors later this summer.

Sky News has learnt that Poundland’s new owner, the investment firm Gordon Brothers, is proposing to halt all rent payments at so-called Category C shops across the country.

According to a letter sent to creditors in the last few days, roughly 250 shops have been classed as Category C sites, with rent payments “reduced to nil”.

Poundland will have the right to terminate leases with 30 days’ notice at roughly 70 of these loss-making stores – classed as C2 – after the restructuring plan is approved, and with 60 days’ notice at about 180 more C2 sites.

The plan also raises the prospect of landlords activating break clauses in their contracts at the earliest possible opportunity if they can secure alternative retail tenants.

In addition to the zero-rent proposal, hundreds of Poundland’s stores would see rent payments reduced by between 15% and 75% if the restructuring plan is approved.

The document leaves open the question of how many shops will ultimately close under its new owners.

A convening hearing has been scheduled for next month, while a sanction hearing, at which creditors will vote on the plan, is due to occur on or around August 26, according to one source.

The discounter was sold last week for a nominal sum to Gordon Brothers, the former owner of Laura Ashley, amid mounting losses suffered by its Warsaw-listed owner, Pepco Group.

Poundland declined to comment.

Business

Israel-Iran conflict poses new cost of living threat – here’s why

Published

23 hours ago

June 16, 2025

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Israel-Iran conflict poses new cost of living threat - here's why

The UK’s cost of living crisis hangover is facing fresh pressure from the Israel-Iran conflict and growing tensions across the Middle East.

Whenever the region, particularly a major oil-producing country, is embroiled in some kind of fracas, the potential consequences are first seen in global oil prices.

The Middle East accounts for a third of world output.

Money latest: ‘Unusual movement’ in house prices

Iran’s share of the total is only about 3%, but it is the second-largest supplier of natural gas.

Add to that its control of the key Strait of Hormuz shipping route, and you can understand why any military action involving Iran has huge implications for the global economy at a time when a US-inspired global trade war is already playing out.

What’s happened to oil prices?

Global oil prices jumped by up to 13% on Friday as the Israel-Iran conflict ramped up.

It was the biggest one-day leap seen since Russia invaded Ukraine in February 2022, which gave birth to the energy-driven cost-of-living crisis.

From lows of $64 (£47) a barrel for Brent crude, the international benchmark, earlier this month, the cost is currently 15% higher.

Iran ships all its oil to China because of Western sanctions, so the world’s second-largest economy would have the most to lose in the event of disruption.

Should that happen, China would need to replace that oil by buying elsewhere on the international market, threatening higher prices.

How are natural gas prices holding up?

UK day-ahead prices are 15% up over the past week alone.

Europe is more dependent on Middle East liquefied natural gas (LNG) these days because of sanctions against Russia.

The UK is particularly exposed due to the fact that we have low storage capacity and rely so much on gas-fired power to keep the lights on and for heating.

Israel-Iran latest: Tehran threatens to leave nuclear treaty

The day-ahead price, measured in pence per therm (I won’t go into that), is at 93p on Monday.

It sounds rather meaningless until you compare it with the price seen less than a week ago – 81p.

The higher sum was last seen over the winter – when demand is at its strongest.

What are the risks to these prices?

Market experts say Brent crude would easily exceed $100 (£74) a barrel in the event of any Iranian threats to supplies through the Strait of Hormuz – the 30-mile wide shipping lane controlled by both Iran and Oman.

While Iran has a history of disrupting trade, analysts believe it will not want to risk its oil and gas income through any blockade.

What do these price increases mean for the UK?

There are implications for the whole economy at a time when the chancellor can least afford it, as she bets big on public sector-led growth for the economy.

We can expect higher oil, gas and fuel costs to be passed on down supply chains – from the refinery and factory – to the end user, consumers. It could affect anything from foodstuffs to even fake tan.

Increases at the pumps are usually the first to appear – probably within the next 10 days. Prices are always quick to rise and slow to reflect easing wholesale costs.

Energy bills will also take in the gas spike, particularly if the wholesale price rises are sustained.

The energy price cap from September – and new fixed-term price deals – will first reflect these increases.

How does this all play out in the coming months?

So much depends on events ahead.

But energy price rises are an inflation risk and a potential threat to future interest rate cuts.

While LSEG data shows financial markets continuing to expect a further two interest rate cuts by the Bank of England this year, the rate-setting committee will be reluctant to cut if the pace of price growth is led higher than had been expected.

At a time when employers are grappling with higher taxes and minimum pay thresholds, and consumers a surge in bills following the ‘awful April’ hikes to council tax, water and other essentials, a fresh energy-linked inflation spike is the last thing anyone needs.