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An intervention by the chancellor to help shore up flagging financial market confidence in the UK economy has been ruled out by the government, amid further declines in the value of the pound.

Sterling fell to its lowest level against the dollar since November 2023 early on Thursday, building on recent losses.

A toxic cocktail of concerns include budget-linked flatlining growth, rising unemployment and the effects of elevated interest rates to help keep a lid on rising inflation.

They have also been borne out by a leap in UK long term borrowing costs, which hit levels not seen since 1998 earlier this week.

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It piles pressure on the chancellor because it signals that investors are demanding greater rewards in return for holding UK debt, adding unwelcome costs to Ms Reeves who is borrowing money to invest in public services in addition to the budget tax burden on business and the wealthy.

The Tories were granted an urgent question in the Commons this morning which urged her to account for the shift in the market reaction to her budget, which critics have warned will only harm investment, jobs, pay and lead to higher prices.

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Treasury minister Darren Jones, who was sent to reply on her behalf, told MPs there were no plans for further commentary beyond a Treasury statement issued on Wednesday which defended the government’s approach.

Shadow chancellor Mel Stride urged Ms Reeves to cancel her forthcoming, and long-planned, trade trip to China to allow for a change of course to recover market confidence.

He claimed Britons are having to “pay the price for yet another socialist government taxing and spending their way into trouble”.

Mr Jones responded that he would take no lessons on managing the economy from the Conservatives.

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Why is Rachel Reeves flying to China?

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Liberal Democrat leader Ed Davey demanded an emergency fiscal statement to parliament that cancelled the National Insurance hike planned for April to boost economic growth and bring interest rates down.

In addition to the strain on sterling over Mr Reeves’s tax and spending plans, the effect on the pound has been intensified by a strengthening dollar due to shifting market expectations of fewer US interest rate cuts this year.

Sterling is trading at $1.22 – a level last seen in November 2023.

The spot rate had stood as high as $1.34 in September.

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Investors ‘losing confidence’ in UK

It has also fallen sharply however against other countries’ currencies.

The pound is a cent down versus the euro at €1.19 on the start of the week, falling six tenths of a cent in today’s market moves.

Long-term bond yields, which reflect perceived risk, hit their highest level since 1998 this week and other benchmark gilt yields are heading north too.

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Cost of public borrowing at 26-year high

Additional borrowing costs make it more expensive for Rachel Reeves to service the debt she is taking on.

It may mean she faces a choice between more tax rises – something she had previously ruled out – or spending cuts as higher borrowing costs take their toll.

The Treasury said in its statement: “No one should be under any doubt that meeting the fiscal rules is non-negotiable and the Government will have an iron grip on the public finances,”

“UK debt is the second lowest in the G7 and only the OBR’s forecast can accurately predict how much headroom the government has – anything else is pure speculation.

“Kick-starting economic growth is the number one mission of this Government as we deliver on our Plan for Change. Over the coming weeks and months, the Chancellor will leave no stone unturned in her determination to deliver economic growth and fight for working people.”

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But Matthew Ryan, head of market strategy at global financial services firm Ebury, said of the market moves: “This is a damning indictment of Labour’s fiscal policies, particularly the hike to employer NI (National Insurance) contributions, which businesses have already warned will lead to higher prices and a worsening in labour market conditions.

“We see wide ranging repercussions of this bond market sell-off. On the one hand, weak demand for UK debt raises the risk of either government spending cuts or further tax hikes to balance the country’s finances, neither of which would be positive for growth.

“Elevated gilt yields are also likely to be reflected in higher mortgage rates, which would provide a further squeeze on household disposable incomes.

“These worries have placed a high premium on UK assets, and we would not rule out additional downside for sterling as a result.”

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BP raises prospect of more job losses as AI drives efficiency

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BP raises prospect of more job losses as AI drives efficiency

BP has signalled an accelerated effort to bring down costs ahead, refusing to rule out further job losses as artificial intelligence (AI) technology helps drive efficiencies.

The company, which revealed in January that it was to axe almost 8,000 workers and contractors globally as part of a cost-cutting plan, said alongside its second quarter results that it was to review its portfolio of businesses and examine its cost base again.

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BP is under pressure to grow profitability and investor value through a shareholder-driven refocus on oil and gas revenues.

Just 24 hours earlier, the company revealed progress through its largest oil and gas discovery, off Brazil’s east coast, this century.

BP said it was exploring the creation of production facilities at the site.

It has made nine other exploration discoveries this year.

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BP’s share price has lagged those of rivals for many years – a trend that investors have blamed on the now-abandoned shift to renewable energy that began under former boss Bernard Looney.

BP interim CEO Murray Auchincloss, takes part in a panel during the ADIPEC, Oil and Energy exhibition and conference in Abu Dhabi, United Arab Emirates, Monday Oct. 2, 2023. (AP Photo/Kamran Jebreili)
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BP boss Murray Auchincloss is facing shareholder pressure to grow profitability

His replacement, Murray Auchincloss, has reportedly come under shareholder pressure to slash costs further, with the Financial Times reporting on Monday that activist investor Elliott was leading that charge based on concerns over high contractor numbers.

Mr Auchincloss said on Tuesday that AI was playing a leading role in bolstering efficiency across the business.

In an interview with Sky’s US partner CNBC, he said: “We need to keep driving safely to be the very best in the sector we can be, and that’s why we’re focused on another review to try to drive us towards best in class… inside the sector, and technology plays a huge part in that.

“Just technology is moving so fast, we see tremendous opportunity in that space. So it’s good for all seasons to drive cost discipline and capital discipline into the business. And that’s what we’re focused on.”

When contacted by Sky News, a BP spokesperson suggested the company had no plans for further job losses this year and could not speculate beyond that ahead of the conclusions of the new cost review.

BP reported a second quarter underlying replacement cost profit of $2.4bn, down 14% on the same period last year but well ahead of analyst forecasts of $1.8bn. Much of the reduction was down to lower comparable oil and gas prices.

It moved to reward investors with a 4% dividend increase and maintained the pace of its share buyback programme at $750m for the quarter.

BP said it was making progress in driving shareholder value through both its operational return to oil and gas investment and cost reductions, which stood at $1.7bn over the six months.

Shares, up 3% over the year to date ahead of Tuesday’s open, were trading 2% higher in early dealing.

Derren Nathan, head of equity research at Hargreaves Lansdown, said of the company’s figures: “Production increases, strong results from trading activities, favourable tax rates, and better volumes and margins downstream all played their part.

“It’s also upping the ante when it comes to exploration and development, culminating in this week’s announcement of an oil find at the offshore Brazilian prospect Bumerangue.

“Its drilling rig intersected a staggering 500m of hydrocarbons. Taking into account the acreage of the block, it’s given BP the confidence to declare the largest discovery in 25 years.”

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British Land hires lawyers to scrutinise retail rescue deals

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British Land hires lawyers to scrutinise retail rescue deals

British Land, the FTSE 100 commercial property company, has hired lawyers to scrutinise rescue deals for the high street retailers Poundland and River Island.

Sky News has learnt that Hogan Lovells, the City law firm, has been instructed by British Land to seek further information on restructuring plans that the two chains say are necessary for their survival.

British Land owns 20 Poundland stores, 13 of which would see rents compromised under its restructuring plan, while it is River Island’s landlord at 22 shops – seven of which would be affected.

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Retail industry sources said that British Land had already struck deals to re-let some of the affected Poundland sites.

The company, which has a market capitalisation of ? and is one of Britain’s biggest commercial landlords, is understood to have abstained on the River Island restructuring plan vote.

The appointment of Hogan Lovells does not amount to a decision to formally challenge the restructurings, but that remains an option in both cases, according to industry sources.

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Hogan Lovells has been engaged on a string of previous challenges to retailers’ rescue deals on the basis that they unfairly compromised property-owners.

About 20,000 jobs would potentially be put at risk if Poundland and River Island were to collapse altogether.

Both face sanctions hearings in court this month which will determine whether their rescue deals can go ahead.

Even if the proposals are rubber-stamped, about 100 stores in aggregate across the two chains will be permanently closed.

British Land declined to comment.

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Former fund manager Woodford facing ban and £46m fine

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Former fund manager Woodford facing ban and £46m fine

The City watchdog has provisionally banned former star fund manager Neil Woodford and fined him and his former fund company almost £46m.

The Financial Conduct Authority (FCA) said it planned to prevent Mr Woodford from holding senior manager roles and managing funds.

The watchdog also aimed to fine him £5.89m and Woodford Investment Management (WIM) £40m related to its collapse in 2019.

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Mr Woodford’s flagship fund, Woodford Equity Income (WEI), was wound down after investors tried to withdraw cash faster than the fund could pay out, amid concerns over its high exposure to illiquid and unquoted shares.

The FCA determined that Mr Woodford and the fund “made unreasonable and inappropriate investment decisions” between July 2018 and June 2019.

The fund’s sale of liquid assets and acquisition of illiquid ones meant WEI was unable to meet rules in place at the time, whereby investors should have been able to access their funds within four days.

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“WIM and Mr Woodford did not react appropriately as the fund’s value declined, its liquidity worsened and more investors withdrew their money,” the FCA said.

“The FCA has concluded that Mr Woodford held a defective and unreasonably narrow understanding of his responsibilities.”

Steve Smart, its joint executive director of enforcement and market oversight, added: “Being a leader in financial services comes with responsibilities as well as profile. Mr Woodford simply doesn’t accept he had any role in managing the liquidity of the fund.

“The very minimum investors should expect is those managing their money make sensible decisions and take their senior role seriously.

“Neither Neil Woodford nor Woodford Investment Management did so, putting at risk the money people had entrusted them with.”

Both Mr Woodford and WIM have referred the case to the Upper Tribunal for appeal.

He was yet to comment.

Mr Woodford was once considered the star stock picker of his generation.

He launched his own investment business after building up a reputation for delivering stellar returns while at Invesco Perpetual.

At its height in 2017, the Woodford Equity Income Fund had a value of over £10bn, but by the time of its suspension in June 2019, this had sunk to as low as £3.7bn.

While a redress scheme enabled investors to get some cash back, around 300,000 people lost money through the fund’s collapse.

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