Budget: Hostile market response as chancellor suffers Halloween nightmare

Published

7 months ago

October 31, 2024

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First things first: don’t panic.

What you need to know is this. The budget has not gone down well in financial markets. Indeed, it’s gone down about as badly as any budget in recent years, save for Liz Truss’s mini-budget.

The pound is weaker. Government bond yields (essentially, the interest rate the exchequer pays on its debt) have gone up.

That’s precisely the opposite market reaction to the one chancellors like to see after they commend their fiscal statements to the house.

In hindsight, perhaps we shouldn’t be surprised.

After all, the new government just committed itself to considerably more borrowing than its predecessors – about £140bn more borrowing in the coming years. And that money has to be borrowed from someone – namely, financial markets.

But those financial markets are now reassessing how keen they are to lend to the UK.

The upshot is that the pound has fallen quite sharply (the biggest two-day fall in trade-weighted sterling in 18 months) and gilt yields – the interest rate paid by the government – have risen quite sharply.

This was all beginning to crystallise shortly after the budget speech, with yields beginning to rise and the pound beginning to weaken, the moment investors and economists got their hands on the budget documentation.

But the falls in the pound and the rises in the bond yields accelerated today.

This is not, to be absolutely clear, the kind of response any chancellor wants to see after a budget – let alone their first budget in office.

Indeed, I can’t remember another budget which saw as hostile a market response as this one in many years – save for one.

That exception is, of course, the Liz Truss/Kwasi Kwarteng mini-budget of 2022. And here is where you’ll find the silver lining for Keir Starmer and Rachel Reeves.

The rises in gilt yields and falls in sterling in recent hours and days are still far shy of what took place in the run up and aftermath of the mini-budget. This does not yet feel like a crisis moment for UK markets.

But nor is it anything like good news for the government. In fact, it’s pretty awful. Because higher borrowing rates for UK debt mean it (well, us) will end up paying considerably more to service our debt in the coming years.

And that debt is about to balloon dramatically because of the plans laid down by the chancellor this week.

And this is where things get particularly sticky for Ms Reeves.

In that budget documentation, the Office for Budget Responsibility said the chancellor could afford to see those gilt yields rise by about 1.3 percentage points, but then when they exceeded this level, the so-called “headroom” she had against her fiscal rules would evaporate.

In other words, she’d break those rules – which, recall, are considerably less strict than the ones she inherited from Jeremy Hunt.

Which raises the question: where are those gilt yields right now? How close are they to the danger zone where the chancellor ends up breaking her rules?

Short answer: worryingly close. Because, right now, the yield on five-year government debt (which is the maturity the OBR focuses on most) is more than halfway towards that danger zone – only 56 basis points away from hitting the point where debt interest costs eat up any leeway the chancellor has to avoid breaking her rules.

Now, we are not in crisis territory yet. Nor can every move in currencies and bonds be attributed to this budget.

Markets are volatile right now. There’s lots going on: a US election next week and a Bank of England decision on interest rates next week.

The chancellor could get lucky. Gilt yields could settle in the coming days. But, right now, the UK, with its high level of public and private debt, with its new government which has just pledged to borrow many billions more in the coming years, is being closely scrutinised by the “bond vigilantes”.

A Halloween nightmare for any chancellor.

Business

Ministers to kick off hunt for successor to Ofcom chair Lord Grade

Published

3 hours ago

May 31, 2025

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Ministers to kick off hunt for successor to Ofcom chair Lord Grade

Ministers are to kick off the hunt for a new chair of the communications regulator as Lord Grade of Yarmouth prepares to bow out after a single term at the helm.

Sky News has learnt that the Department for Science, Innovation and Technology (DSIT) – which now leads oversight of Ofcom in Whitehall – is drawing up proposals to launch a recruitment process in the coming months.

Lord Grade, the veteran broadcast executive who held senior posts at the BBC, ITV and Channel 4, has served as Ofcom chair since May 2022.

His four-year term is not due to end for another 11 months, and there was no suggestion this weekend that he would leave the role ahead of that point.

Insiders said, however, that there was little prospect of him seeking to be reappointed for a second term in the job.

The now non-affiliated peer’s appointment to the post in 2022 came after a controversial recruitment process and was signed off by Nadine Dorries, the then Tory culture secretary.

Responsibility for Ofcom board appointments has switched since then from the Department for Culture, Media and Sport.

Peter Kyle, the science secretary, authorised the recruitment of Tamara Ingram, an advertising industry stalwart, as Ofcom’s deputy chair, last November.

The search for a new Ofcom chair will come after a significant extension of its remit to encompass areas such as online harms.

Both DCMS, which has responsibility for the media industry, and the Department for Business and Trade also have substantial engagement with Ofcom.

As well as a role in appointing directors to the board of state-owned Channel 4, which is hunting both a chair and chief executive, Ofcom regulates companies such as Royal Mail, as well as the BBC.

This week, the watchdog said it was pursuing action against the formerly publicly owned postal services company over its failure to hit statutory delivery targets.

Ofcom also regulates the UK telecoms industry, making it one of the largest economic regulators in Britain.

Mr Kyle said this week that Ofcom should also prepare to be given regulatory oversight of the fast-growing data centre industry.

One of the tasks of Lord Grade’s successor is likely to be long-term executive leadership succession planning.

Dame Melanie Dawes, Ofcom’s chief executive, has held the role since 2020, although there is no indication that she intends to step down in the short term.

It was unclear this weekend whether any of Ofcom’s existing board members might seek to take over from Lord Grade.

Its slate of non-executive directors includes recently appointed Lord Allan of Hallam, a former MP, and Ben Verwaayen, the former BT Group chief executive.

Mr Verwaayen is due to step down from the Ofcom board at the end of the year.

The hunt for Ofcom’s next chair will come amid a push led by Sir Keir Starmer and Rachel Reeves to shake up Britain’s economic regulators as they seek ways to remove red tape from the private sector.

DSIT has been contacted for comment, while Ofcom declined to comment.

Business

‘Absolutely gutted’: £16,500 Glastonbury packages won’t be fulfilled after company goes bust

Published

22 hours ago

May 30, 2025

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'Absolutely gutted': £16,500 Glastonbury packages won't be fulfilled after company goes bust

Glastonbury ticket holders have been left thousands of pounds out of pocket after a luxury glamping company went bust.

Festival-goers who booked their tickets and accommodation with Yurtel have been told the company can no longer fulfil its orders and has ceased trading with immediate effect.

Money: Read all the latest news here

Some had spent more than £16,500 through Yurtel, with hospitality packages starting at £10,000.

In an email, Yurtel said it was unable to provide customers with any refunds, advising them to go through a third party to claim back the money once the liquidation process had started.

To add insult to injury, customers found out that Yurtel had failed to purchase the tickets for the 25 -29 June festival that they thought had been booked as part of their packages.

In a letter to customers, Yurtel’s founder Mickey Luke said: “I am deeply sorry that you have received this devastating news and am writing to apologise.

“Yurtel is a hospitality business who pride themselves on looking after our customers, delivering a unique product and striving to create a better client experience year on year. Due to a culmination of factors over the past years, we have failed to be able to continue to do so and are heartbroken.”

The Money blog has contacted Yurtel to see if the business has anything to add.

Several people have also reported that they were unable to pay by credit card at the time of booking, with the company instead asking for a bank transfer.

This means they are unable to use chargeback to get a refund. You can read more about that here…

‘I feel really ripped off’

One of those customers was Lydia, who told Money she was “absolutely gutted” after spending thousands.

This year’s festival was “really important” to her as she was forced to miss out last year despite having tickets due to a health issue that left her needing an operation.

“We tried to get Glastonbury tickets through the normal kind of route and couldn’t get them,” the accountant said.

She ended up booking with Yurtel in November, sending over all the funds a month later.

“It’s super expensive. It was really, really important to us. Last year was gutting with the surgery and the whole situation around that was very traumatic, so it was a very special thing to then get the opportunity to go this year. It’s really gutting,” she said.

“I feel really ripped off and I’m really disappointed in the festival, to be honest. I think that response is just pretty rubbish.”

Yurtel did not pay for festival tickets, Glastonbury says

Glastonbury said Yurtel was one of a small number of campsites local to the festival site – Worthy Farm – with limited access to purchase hospitality tickets for their guests in certain circumstances.

But, it had not paid for any tickets for the 2025 festival before going into liquidation, and so no tickets were secured for its guests, it added. Every year, Glastonbury’s website says that ticketing firm See Tickets is the only official source for buying tickets for the festival.

“As such we have no records of their bookings and are unable to take any responsibility for the services and the facilities they offer,” the festival said.

“Anyone who has paid Yurtel for a package including Glastonbury 2025 tickets will need to pursue any potential recompense available from them via the liquidation process as outlined in their communication to you.

“We are not able to incur the cost or responsibility of their loss or replacement.”

Instead, the festival has urged Yurtel customers to contact Yurtel@btguk.com to confirm their consent for personal data and details of their party to be shared with Glastonbury.

“We will then be able to provide details of alternative potential sources for those customers to purchase tickets and accommodation for this year’s festival,” the festival added.

‘Only option’ on offer is ‘pretty weak’

Lydia said she agreed for her details to be passed on to Glastonbury, and the festival has told her the only option is to pay for the tickets again from another provider.

“They are not giving us the opportunity to buy the tickets at face value. We would then have to go again and spend another stupidly unreasonable amount of money to be able to go. It’s pretty disappointing,” she added.

“It’s pretty weak that the only option they’re giving people who’ve already lost out on huge amounts of money is to go and spend huge amounts more money.”

It’s left her feeling like she won’t go to the festival this year – and she’s not hopeful about getting her money back.

She said: “To be honest, I just don’t think I can afford it.

“It’s already so much money wasted, and I’m not at all optimistic we’ll get anything back.”

Business

Federal judges rule Trump tariffs can stay in place for now – as president rages at trade court’s ‘country threatening decision’

Published

24 hours ago

May 30, 2025

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Federal judges rule Trump tariffs can stay in place for now - as president rages at trade court's 'country threatening decision'

A federal appeals court has ruled that Donald Trump’s sweeping international tariffs can remain in place for now, a day after three judges ruled the president exceeded his authority.

The Court of Appeals for the Federal Circuit (CAFC) has allowed the president to temporarily continue collecting tariffs under emergency legislation while it considers the government’s appeal.

It comes after the Court of International Trade blocked the additional taxes on foreign-made goods after its three-judge panel ruled that the Constitution gives Congress the power to levy taxes and tariffs – not the president.

The judges also ruled Mr Trump exceeded his authority by invoking the 1977 International Emergency Economic Powers Act.

The CAFC said the lower trade court and the Trump administration must respond by 5 June and 9 June, respectively.

Trump calls trade court ‘backroom hustlers’

Posting on Truth Social, Mr Trump said the trade court’s ruling was a “horrible, Country threatening decision,” and said he hopes the Supreme Court would reverse it “QUICKLY and DECISIVELY”.

After calling into question the appointment of the three judges, and suggesting the ruling was based on “purely a hatred of ‘TRUMP’,” he added: “Backroom ‘hustlers’ must not be allowed to destroy our Nation!

“The horrific decision stated that I would have to get the approval of Congress for these Tariffs. In other words, hundreds of politicians would sit around D.C. for weeks, and even months, trying to come to a conclusion as to what to charge other Countries that are treating us unfairly.

“If allowed to stand, this would completely destroy Presidential Power — The Presidency would never be the same!”

The US president unveiled the controversial measures on “Liberation Day” in April, which included a 10% tariff on UK imports and caused aggressive sell-offs in the stock market.

Mr Trump argued he invoked the decades-old law to collect international tariffs because it was a “national emergency”.

Tariffs ‘direct threat’ to business – Schwab

The trade court ruling marked the latest legal challenge to the tariffs, and related to a case brought on behalf of five small businesses that import goods from other countries.

Jeffrey Schwab, senior counsel for the Liberty Justice Center – a nonprofit representing the five firms – said the appeal court would ultimately agree that the tariffs posed “a direct threat to the very survival of these businesses”.

US treasury secretary Scott Bessent also told Fox News on Thursday that the initial ruling had not interfered with trade deal negotiations with partners.

He said that countries “are coming to us in good faith” and “we’ve seen no change in their attitude in the past 48 hours,” before saying he would meet with a Japanese delegation in Washington on Friday.