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Here’s a sentence which might sound a little odd: higher interest rates have been good news for the UK economy.

For the first time in many decades, the pain faced by borrowers from higher interest rates has been more than balanced out by the benefit experienced by savers from those interest rates.

If this sounds a little odd it’s partly because invariably, when people – the media, politicians and economists – talk about interest rates they focus unduly on one side of the equation: the plight of the borrower. And there’s an understandable reason for that: in previous “hiking cycles”, when the Bank of England raises interest rates, that pain has invariably outweighed the windfall.

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That was the case when borrowing rates were lifted in 1988; it was the case in 1996, in 2003 and in 2006.

In each case the overall impact, across the economy, on households’ balance sheets was negative.

Slide 1

But not so this time around.

According to the Resolution Foundation, the net income we’ve earned, across the economy, as a result of interest rates, has actually risen rather than fallen – up by a percentage point since rates started going up.

To put that into perspective, the “interest rate effect” on incomes in the late 1980s was -1.5 percentage points.

Slide 2

And what’s striking, when you compare the UK to the euro area and the US, is that we are a bit of an outlier: the interest rate effect, across the economy, was much more positive than it was in those two other areas.

This, says the Resolution Foundation, is at least part of the explanation for how the UK hasn’t yet slipped into the recession a lot of people anticipated this time last year.

Part of the explanation for this is that it so happened, in large part because of the pandemic lockdowns, that people began this hiking cycle with a lot of savings in their bank accounts – far more than usual.

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The upshot was that, across the economy, the benefit from those savings (and savings rates went up very quickly – albeit not to the levels of borrowing rates) was greater than the impact on mortgages and loans. Another part of the explanation is that so far only around half of those with fixed-rate mortgages have re-fixed their loans.

But there are a few very important provisos here. The first and perhaps most important is that while the above is certainly true across the whole economy, there’s a dramatic difference of experience for different categories of people.

Slide 3

Those whose debts outweigh their savings (which in this case mostly means younger people) will certainly see a negative impact from higher rates. Those with far more savings than debts – the older segments of the population – will see a benefit. In other words, the pain and the dividends are not being equally shared out. The old are doing much better; the young are doing worse.

And there are two other provisos. The first is that this positive impact will begin to wear off as more and more people re-fix their mortgages and go up from low-interest rates to higher rates. Even though the typical fixed-rate deal has been coming down recently, it’s still far higher than it was two or five years ago.

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The final proviso is that none of the above takes into account the broader impact of the cost of living crisis.

Everyone is having to pay higher prices for nearly everything. And while the annual rate at which those prices are increasing (inflation) has decelerated, the level of prices remains more than 15% above where it was a couple of years ago.

That’s a painful adjustment for everyone. The good news is that the impact of rates – across the economy as a whole – has actually been positive rather than negative. But not everyone will be seeing the benefits.

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M&S tells agency workers to stay at home after cyberattack

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M&S tells agency workers to stay at home after cyberattack

Marks & Spencer (M&S) has ordered hundreds of agency workers at its main distribution centre to stay at home as it grapples with the unfolding impact of a cyberattack on Britain’s best-known retailer.

Sky News has learnt that roughly 200 people who had been due to undertake shift work at M&S’s vast Castle Donington clothing and homewares logistics centre in the East Midlands have been told not to come in amid the escalating crisis.

Agency staff make up about 20% of Castle Donington’s workforce, according to a source close to M&S.

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The retailer’s own employees who work at the site have been told to come in as usual, the source added.

“There is work for them to do,” they said.

M&S disclosed last week that it was suspending online orders as a result of the cyberattack, but has provided few other details about the nature and extent of the incident.

In its latest update to investors, the company said on Friday that its product range was “available to browse online, and our stores remain open and ready to welcome and serve customers”.

“We continue to manage the incident proactively and the M&S team – supported by leading experts – is working extremely hard to restore online operations and continue to serve customers well,” it added.

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It was unclear on Monday how long the disruption to M&S’s e-commerce operations would last, although retail executives said the cyberattack was “extensive” and that it could take the company some time to fully resolve its impact.

Shares in M&S slid a further 2.4% on Monday morning, following a sharp fall last week, as investors reacted to the absence of positive news about the incident.

M&S declined to comment further.

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Deliveroo shares surge 17% as £2.7bn takeover looms

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Deliveroo shares surge 17% as £2.7bn takeover looms

Shares in meal delivery platform Deliveroo have surged by 17% as investors react to news of a £2.7bn takeover proposal.

The company revealed after the market had closed on Friday that it had been in talks since 5 April with US rival DoorDash.

Deliveroo suggested then it was likely the 180p per share offer would be recommended, though full terms were yet to be agreed.

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At that price, the company’s founder and chief executive, Will Shu, would be in line for a windfall of more than £170m.

Deliveroo further announced, before trading on Monday, that it had suspended its £100m share buyback programme.

The opening share price reaction took the value to 171p per share – still shy of the 180p on the table – and well under the 390p per share flotation price seen in 2021.

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Deliveroo’s shares have weakened nearly 50% since their market debut.

The deal is not expected to face regulatory hurdles as it provides DoorDash access to 10 new markets where it currently has no presence.

But a takeover would likely represent a blow to the City of London given the anticipated loss of a tech-focused player.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “If the deal is done at that price, the company will fail to shake off the ‘Floperoo’ tag it was saddled with after its disastrous IPO debut in 2021.

“Even though Deliveroo has finally broken through into profitable territory, the prolonged bout of indigestion around its share price has continued.

“The surge in demand for home deliveries during the pandemic waned just as competition heated up. Deliveroo’s foray into grocery deliveries has helped it turn a profit but it’s still facing fierce rivals.”

She added: “The DoorDash Deliveroo deal will be unappetising for the government which has been trying to boost the number of tech companies listed in London.

“If Deliveroo is purchased it would join a stream of companies leaving the London Stock Exchange, with too few IPOs [initial public offerings] in the pipeline to make up the numbers.”

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US trade deal ‘possible’ but not ‘certain’, says senior minister

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US trade deal 'possible' but not 'certain', says senior minister

A trade deal with the US is “possible” but not “certain”, a senior minister has said as he struck a cautious tone about negotiations with the White House.

Pat McFadden, the Chancellor of the Duchy of Lancaster, told Sunday Morning with Trevor Phillips there was “a serious level of engagement going on at high levels” to secure a UK-US trade deal.

However, Mr McFadden, a key ally of Sir Keir Starmer, struck a more cautious tone than Chancellor Rachel Reeves on the prospect of a US trade deal, saying: “I think an agreement is possible – I don’t think it’s certain, and I don’t want to say it’s certain, but I think it’s possible.”

He went on to say the government wanted an “agreement in the UK’s interests” and not a “hasty deal”, amid fears from critics that Number 10 could acquiesce a deal that lowers food standards, for example, or changes certain taxes in a bid to persuade Donald Trump to lower some of the tariffs that have been placed on British goods.

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And asked about the timing of the deal – following recent reports an agreement was imminent – Mr McFadden said: “We’ll keep working with the United States and keep trying to get to an agreement in the coming weeks.”

As well as talks with the US, the UK has also ramped up its efforts with the EU, with suggestions it could include a new EU youth mobility scheme that would allow under-30s from the bloc to live, work and study in the UK and vice versa.

Mr McFadden said he believed the government could “improve upon” the Brexit deal struck by Boris Johnson, saying it had caused “an awful lot of bureaucracy and costs here in the UK”.

He said “first and foremost” on the government’s agenda was securing a food and agriculture and a veterinary agreement, saying it was “such an important area for the UK and an area where we’ve had so much extra cost and bureaucracy because of Brexit”.

He added: “But again, as with the United States, there’s no point in calling the game before it’s done. We’ve still got work to do, and we’re doing that work with our partners in the EU.”

The Cabinet Office minister also rejected suggestions the UK would have to choose between pursuing a trade deal with the US and one with the EU – the latter of which has banned chlorinated chicken in its markets – as has the UK – but which the US has historically wanted.

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On the issue of chlorinated chicken, Mr McFadden said the government had “made clear we will not water down animal welfare standards with either party”.

“But I don’t agree that it’s some fundamental choice beyond where we have to pick one trading partner rather than another. I think that’s to misunderstand the nature of the UK economy, and I don’t think would be in our interests to put all our eggs in one basket.”

Also speaking to Trevor Phillips was Tory leader Kemi Badenoch, who said the government should be close to closing the deal with the US “because we got very close last time President Trump was in office”.

She also insisted food standards should not be watered down in order to get a deal, saying she did not reach an agreement with Canada when she was in government for that reason.

“What Labour needs to do now is show that they can get a deal that isn’t making concessions, so we can have what we had last month before the trade tariffs, and we need serious people doing this,” she said.

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