Next two years will be ‘challenging’, says Chancellor Jeremy Hunt – as disposable incomes are set to fall to record lowest level

Published

3 years ago

November 18, 2022

admin

The UK’s economic outlook will be “challenging” for the next two years, Jeremy Hunt says.

The chancellor presented his autumn statement to parliament on Thursday, littered with stealth taxes and curbs on government spending amounting to £55bn in an attempt to plug the black hole in the public finances.

But the independent Office for Budget Responsibility (OBR) warned the disposable incomes of UK households would fall by 7.1% over the next two years – the lowest level since records began in 1956/7, and taking incomes down to 2013 levels.

Politics live: Tax burden reaches highest level since WWII

Speaking to Sky News, Mr Hunt said it was “a difficult time for everyone” but tax hikes and spending cuts are needed to get the economy “on an even keel”.

“Over the next two years it is going to be challenging,” he said.

“But I think people want a government that is taking difficult decisions, has a plan that will bring down inflation, stop those big rises in the cost of energy bills and the weekly shop, and at the same time is taking measures to get through this difficult period.”

The chancellor insisted that his autumn statement is a “very Conservative package” following criticism from some Tory MPs.

“The Office for Budgetary Responsibility said yesterday that what we’re doing is actually recession shallow, it’s saving jobs,” he said.

“But what I would say to my Conservative colleagues is there is nothing Conservative about spending money that you haven’t got, there is nothing Conservative about not tackling inflation, there is nothing Conservative about ducking difficult decisions that put the economy on track.

“And we’ve done all of those things and that is why this is a very Conservative package to make sure we sort out the economy.

“None of this is easy, but it’s the right thing to do.”

Former business secretary Jacob Rees-Mogg accused the chancellor of taking the “easy option” in Thursday’s autumn statement rather than bearing down harder on public spending.

He said the country needed lower taxes to drive up growth.

Probed on how it can be fair that pensions will go up by inflation when public sector workers will not see pay increase alongside prices, Mr Hunt said the elderly do not have the ability to work more to improve their take home pay.

“Well, I think the truth is, first of all, pensioners have retired. They don’t have the ability to work more or work longer hours in the way that people of working age do,” the chancellor said.

“But I think it is wrong to say that only the poorest pensioners are feeling the squeeze at the moment.

“I think this is something that’s affecting everyone and I think it’s right.

“Having made that promise to pensioners in our manifesto that we would have this triple lock, I think this is exactly the kind of tough time that people want it to kick in.

“And so that’s why I think it’s the right thing to do.”

The chancellor added: “We’re not pretending that this isn’t going to be a difficult time for everyone. But what we have is a plan.”

In yesterday’s autumn statement, Mr Hunt announced economic policies which the government hopes will help to rebalance the nation’s finances after the economic turmoil which followed former chancellor Kwasi Kwarteng’s mini-budget.

These included:

• Income tax thresholds being frozen for two more years until April 2028

• Top level of income tax now being paid on earnings over £125,140 instead of £150,000

• Pensions triple lock will remain – with pensioners to see a 10.1% increase in weekly payments in line with inflation

• Benefits to also rise in line with inflation – by 10.1%

• Energy cap to rise from £3,000 a year to £2,500 a year beyond April

• UK minimum wage to rise from £9.50 to £10.42 an hour for those aged over 23

• Windfall tax on oil giants’ profits to rise from 25% to 35% and be extended by two years until March 2028

• Additional cost of living payments of £900 for those on benefits and £300 for pensioners

• Spending on public services in England to rise slower than planned

Click to subscribe to the Sky News Daily wherever you get your podcasts

As a result of Mr Hunt’s announcements, the tax burden in the UK will also now be at its highest since the Second World War, and there are stark warnings about increased bills and higher unemployment as the recession takes hold – as well as predictions the economy will still shrink 1.4% in 2023.

But most of the difficult decisions on spending have been postponed until after the next general election, due in 2024.

Treasury analysis suggests around 55% of households will be worse off as a result of the measures.

Labour has blamed “12 weeks of Conservative chaos” and “12 years of Conservative economic failure” for the bleak outlook.

Shadow chancellor Rachel Reeves accused the government of forcing the UK economy into a “doom loop where low growth leads to higher taxes, lower investments and squeezed wages, with the running down of public services”.

Ms Reeves told Sky News she is “really worried about what’s going to happen to people’s living standards next year from April” and said a Labour government would have done more “to alleviate some of that pressure on the ordinary working person”.

As Mr Hunt took part in the broadcast round Friday morning, economic think-tank the Resolution Foundation published analysis suggesting his autumn statement’s tax rises would deliver a 3.7% income hit to typical households.

The foundation said the statement had piled further pressure on the “squeezed middle” and that the focus on “stealthy” tax threshold freezes to raise revenue would extend far beyond high earners.

The think tank also found that the budget would reverse much of the government’s levelling up agenda.

“The £15 billion of cuts to capital investment announced yesterday will undo 80% of the remaining increases in public investment announced by previous chancellor Rishi Sunak, which underpinned the levelling-up agenda,” it said.

Business

Lloyds Banking Group in talks to buy digital wallet provider Curve

Published

13 hours ago

July 12, 2025

admin

Lloyds Banking Group in talks to buy digital wallet provider Curve

Britain’s biggest high street bank is in talks to buy Curve, the digital wallet provider, amid growing regulatory pressure on Apple to open its payment services to rivals.

Sky News has learnt that Lloyds Banking Group is in advanced discussions to acquire Curve for a price believed to be up to £120m.

City sources said this weekend that if the negotiations were successfully concluded, a deal could be announced by the end of September.

Curve was founded by Shachar Bialick, a former Israeli special forces soldier, in 2016.

Three years later, he told an interviewer: “In 10 years time we are going to be IPOed [listed on the public equity markets]… and hopefully worth around $50bn to $60bn.”

One insider said this weekend that Curve was being advised by KBW, part of the investment bank Stifel, on the discussions with Lloyds.

If a mooted price range of £100m-£120m turns out to be accurate, that would represent a lower valuation than the £133m Curve raised in its Series C funding round, which concluded in 2023.

That round included backing from Britannia, IDC Ventures, Cercano Management – the venture arm of Microsoft co-founder Paul Allen’s estate – and Outward VC.

It was also reported to have raised more than £40m last year, while reducing employee numbers and suspending its US expansion.

In total, the company has raised more than £200m in equity since it was founded.

Curve has been positioned as a rival to Apple Pay in recent years, having initially launched as an app enabling consumers to combine their debit and credit cards in a single wallet.

One source close to the prospective deal said that Lloyds had identified Curve as a strategically attractive bid target as it pushes deeper into payments infrastructure under chief executive Charlie Nunn.

Lloyds is also said to believe that Curve would be a financially rational asset to own because of the fees Apple charges consumers to use its Apple Pay service.

In March, the Financial Conduct Authority and Payment Systems Regulator began working with the Competition and Markets Authority to examine the implications of the growth of digital wallets owned by Apple and Google.

Lloyds owns stakes in a number of fintechs, including the banking-as-a-service platform ThoughtMachine, but has set expanding its tech capabilities as a key strategic objective.

The group employs more than 70,000 people and operates more than 750 branches across Britain.

Curve is chaired by Lord Fink, the former Man Group chief executive who has become a prolific investor in British technology start-ups.

When he was appointed to the role in January, he said: “Working alongside Curve as an investor, I have had a ringside seat to the company’s unassailable and well-earned rise.

“Beginning as a card which combines all your cards into one, to the all-encompassing digital wallet it has evolved into, Curve offers a transformative financial management experience to its users.

“I am proud to have been part of the journey so far, and welcome the chance to support the company through its next, very significant period of growth.”

IDC Ventures, one of the investors in Curve’s Series C funding round, said at the time of its last major fundraising: “Thanks to their unique technology…they have the capability to intercept the transaction and supercharge the customer experience, with its Double Dip Rewards, [and] eliminating nasty hidden fees.

“And they do it seamlessly, without any need for the customer to change the cards they pay with.”

News of the talks between Lloyds and Curve comes days before Rachel Reeves, the chancellor, is expected to outline plans to bolster Britain’s fintech sector by endorsing a concierge service to match start-ups with investors.

Lord Fink declined to comment when contacted by Sky News on Saturday morning, while Curve did not respond to an enquiry sent by email.

Lloyds also declined to comment, while Stifel KBW could not be reached for comment.

Business

UK economy figures not as bad as they look despite GDP fall, analysts say

Published

1 day ago

July 11, 2025

admin

UK economy figures not as bad as they look despite GDP fall, analysts say

The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.

A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).

Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.

It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.

A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.

This was borne out by other figures released by the ONS on Friday.

Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.

Overall, there was a “large rise in goods imports and a fall in goods exports”.

A ‘disappointing’ but mixed picture

It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.

“I am determined to kickstart economic growth and deliver on that promise”, she added.

But the picture was not all bad.

Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.

It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.

The expansion in March means the economy still grew when the three months are looked at together.

While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.

Such a cut would bring down the rate to 4% and make borrowing cheaper.

Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.

“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.

Why did the economy shrink?

The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.

The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.

It made up for a “very weak” month for retailers, the ONS said.

Business

UK economy remains fragile – and there are risks and traps lurking around the corner

Published

1 day ago

July 11, 2025

admin

UK economy remains fragile - and there are risks and traps lurking around the corner

Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.

However, the picture emerging a year since the election of the Labour government is not hugely comforting.

This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.

Output shrank in May by 0.1%. That followed a 0.3% drop in April.

Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.

Hangover from artificial growth

However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.

In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.

Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.

Signs of recovery

Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.

“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.

Meanwhile, the services sector eked out growth of 0.1%.

A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.

Struggles ahead

It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.

The economy remains fragile, and there are risks and traps lurking around the corner.

Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.

Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.