Bank of England holds interest rate at 4.5% amid trade war uncertainty

Published

5 months ago

March 20, 2025

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The Bank of England has kept interest rates on hold as it warned of growing economic uncertainty linked to Donald Trump’s trade war.

The central bank’s monetary policy committee, which meets every six weeks to set borrowing costs, voted 8-1 to keep the bank rate unchanged at 4.5%.

Although the decision was widely expected, the vote was more unified than many assumed.

Just one member of the committee, Swati Dhingra, voted to cut rates by 25 basis points. In what may come as a surprise to some, Catherine Mann, who voted for an outsized 50 basis points cut last month, opted to hold.

The Bank kept its guidance unchanged, pointing to “a gradual and careful approach” to rate cuts, but warned it was prepared to keep borrowing rates higher for longer if wage and price growth continues to persist.

Concerns about constrained supply in the economy – which limits the economy’s ability to grow without sparking inflation – have been playing on policymakers’ minds.

The Bank echoed these concerns again today, alongside warnings about “second-round effects” from higher wages and prices, which could cause inflation to spiral. “This would warrant a relatively tighter monetary path,” it said.

Trade war concerns

Central bankers said they were also contending with an increasingly uncertain global outlook.

In minutes of the meeting published alongside the announcement, the Bank said: “Since the MPC’s previous meeting, global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded.

“Other geopolitical uncertainties have also increased and indicators of financial market volatility have risen globally.”

The Bank was relatively sanguine about the impact of Trump’s tariff policy on the economic growth in the UK but said it could not be certain about the consequences for inflation.

Last night the US Federal Reserve kept its key borrowing rate on hold while downgrading growth forecasts and upgrading its inflation projections.

Central bankers in the UK are also contending with heightened policy uncertainty – both at home and abroad – which means they have been cautious in their approach.

The Bank started cutting rates in August but, since then, it has reduced the bank rate just three times as policymakers evaluate a mixed economic picture.

Along with fears about supply constraints in the economy, inflation has climbed back above the Bank of England’s 2% target and wage growth continues to outstrip inflation.

Average weekly earnings, including bonuses, did cool from 6.1 % to 5.8% in the three months to January but the figure is still considerably higher than the inflation rate of 3%.

Central bankers keep a close eye on wage growth as they fear wage pressures fuel price pressures in the economy.

Inflationary pressures still exist in the economy but the Bank is balancing that against signs of an economic slowdown.

The economy contracted by 0.1 % at the beginning of the year and the labour market is cooling. Recruiters are warning of a sharper slowdown when the chancellor’s national insurance contribution increases kick in next month.

The Bank of England reiterated this today, warning that business surveys “generally continue to suggest weakness in growth and particularly employment intentions”.

Where to for inflation?

There are also reasons to be sanguine on inflation.

While the headline rate jumped to 3% in January, the increase was driven by one-off factors and base effects, including VAT on private schools and a jump in airfares because of a shift in the timing of the Christmas holidays.

Food inflation also rose but food prices can be volatile.

The Bank is more interested in services inflation, which gives a better indication of domestically generated pressures. This came in at 5%, which was below the Bank’s forecast.

While the headline rate is expected to hit 3.7% by the summer, policymakers have indicated that this is likely to be a bump in the road – driven by a temporary jump in energy prices and rising water and council tax bills from April.

While these will eventually drop out of the inflation rate calculation, that will offer little relief to consumers who will still have to contend with a sustained rise in the price level.

Business

New Look owners pick bankers to fashion sale process

Published

2 days ago

August 24, 2025

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New Look owners pick bankers to fashion sale process

The owners of New Look, the high street fashion retailer, have picked bankers to oversee a strategic review which is expected to see the company change hands next year.

Sky News has learnt that Rothschild has been appointed in recent days to advise New Look and its shareholders on a potential exit.

The investment bank’s appointment follows a number of unsolicited approaches for the business from unidentified suitors.

New Look, which trades from almost 340 stores and employs about 10,000 people across the UK, is the country’s second-largest womenswear retailer in the 18-to-44 year-old age group.

It has been owned by its current shareholders – Alcentra and Brait – since October 2020.

In April, Sky News reported that the investors were injecting £30m of fresh equity into the business to aid its digital transformation.

Last year, the chain reported sales of £769m, with an improvement in gross margins and a statutory loss before tax of £21.7m – down from £88m the previous year.

Like most high street retailers, it endured a torrid Covid-19 and engaged in a formal financial restructuring through a company voluntary arrangement.

In the autumn of 2023, it completed a £100m refinancing deal with Blazehill Capital and Wells Fargo.

A spokesperson for New Look declined to comment specifically on the appointment of Rothschild, but said: “Management are focused on running the business and executing the strategy for long-term growth.

“The company is performing well, with strong momentum driven by a successful summer trading period and notable online market share gains.”

Roughly 40% of New Look’s sales are now generated through digital channels, while recent data from the market intelligence firm Kantar showed it had moved into second place in the online 18-44 category, overtaking Shein and ASOS.

Business

Coca-Cola brews up sale of high street coffee giant Costa

Published

3 days ago

August 23, 2025

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Coca-Cola brews up sale of high street coffee giant Costa

The Coca-Cola Company is brewing up a sale of Costa, Britain’s biggest high street coffee chain, more than six years after acquiring the business in a move aimed at helping it reduce its reliance on sugary soft drinks.

Sky News can exclusively reveal that Coca-Cola is working with bankers to hold exploratory talks about a sale of Costa.

Initial talks have already been held with a small number of potential bidders, including private equity firms, City sources said on Saturday.

Lazard, the investment bank, is understood to have been engaged by Coca-Cola to review options for the business and gauge interest from prospective buyers.

Indicative offers are said to be due in the early part of the autumn, although one source cautioned that Coca-Cola could yet decide not to proceed with a sale.

Costa trades from more than 2,000 stores in the UK, and well over 3,000 globally, according to the latest available figures.

It has been reported to have a global workforce numbering 35,000, although Coca-Cola did not respond to several attempts to establish the precise number of outlets currently in operation, or its employee numbers.

This weekend, analysts said that a sale could crystallise a multibillion pound loss on the £3.9bn sum Coca-Cola agreed to pay to buy Costa from Whitbread, the London-listed owner of the Premier Inn hotel chain, in 2018.

One suggested that Costa might now command a price tag of just £2bn in a sale process.

The disposal proceeds would, in any case, not be material to the Atlanta-based company, which had a market capitalisation at Friday’s closing share price of $304.2bn (£224.9bn).

At the time of the acquisition, Coca-Cola’s chief executive, James Quincey, said: “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.

“Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand.

“Costa gives us access to this market with a strong coffee platform.”

However, accounts filed at Companies House for Costa show that in 2023 – the last year for which standalone results are available – the coffee chain recorded revenues of £1.22bn.

While this represented a 9% increase on the previous year, it was below the £1.3bn recorded in 2018, the final year before Coca-Cola took control of the business.

Coca-Cola has been grappling with the weak performance of Costa for some time, with Mr Quincey saying on an earnings call last month: “We’re in the mode of reflecting on what we’ve learned, thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the Costa business successfully.”

“It’s still a lot of money we put down, and we wanted that money to work as hard as possible.”

Costa’s 2022 accounts referred to the financial pressures it faced from “the economic environment and inflationary pressures”, resulting in it launching “a restructuring programme to address the scale of overheads and invest for growth”.

Filings show that despite its lacklustre performance, Costa has paid more than £250m in dividends to its owner since the acquisition.

The deal was intended to provide Coca-Cola with a global platform in a growing area of the beverages market.

Costa trades in dozens of countries, including India, Japan, Mexico and Poland, and operates a network of thousands of coffee vending machines internationally under the Costa Express brand.

The chain was founded in 1971 by Italian brothers Sergio and Bruno Costa.

It was sold to Whitbread for £19m in 1995, when it traded from fewer than 40 stores.

The business is now one of Britain’s biggest private sector employers, and has become a ubiquitous presence on high streets across the country.

Its main rivals include Starbucks, Caffe Nero and Pret a Manger – the last of which is being prepared for a stake sale and possible public market flotation.

It has also faced growing competition from more upmarket chains such as Gail’s, the bakeries group, which has also been exploring a sale.

Coca-Cola communications executives in the US and UK did not respond to a series of emails and calls from Sky News seeking comment on its plans for Costa.

A Lazard spokesperson declined to comment.

Business

TikTok puts hundreds of UK jobs at risk

Published

4 days ago

August 22, 2025

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TikTok is putting hundreds of jobs at risk in the UK, as it turns to artificial intelligence to assess problematic content.

The video-sharing app said a global restructuring is taking place that means it is “concentrating operations in fewer locations”.

Layoffs are set to affect those working in its trust and safety departments, who focus on content moderation.

Unions have reacted angrily to the move – and claim “it will put TikTok’s millions of British users at risk”.

Figures from the tech giant, obtained by Sky News, suggest more than 85% of the videos removed for violating its community guidelines are now flagged by automated tools.

Meanwhile, it is claimed 99% of problematic content is proactively removed before being reported by users.

Executives also argue that AI systems can help reduce the amount of distressing content that moderation teams are exposed to – with the number of graphic videos viewed by staff falling 60% since this technology was implemented.

It comes weeks after the Online Safety Act came into force, which means social networks can face huge fines if they fail to stop the spread of harmful material.

The Communication Workers Union has claimed the redundancy announcement “looks likely to be a significant reduction of the platform’s vital moderation teams”.

In a statement, it warned: “Alongside concerns ranging from workplace stress to a lack of clarity over questions such as pay scales and office attendance policy, workers have also raised concerns over the quality of AI in content moderation, believing such ‘alternatives’ to human work to be too vulnerable and ineffective to maintain TikTok user safety.”

John Chadfield, the union’s national officer for tech, said many of its members believe the AI alternatives being used are “hastily developed and immature”.

He also alleged that the layoffs come a week before staff were due to vote on union recognition.

“That TikTok management have announced these cuts just as the company’s workers are about to vote on having their union recognised stinks of union-busting and putting corporate greed over the safety of workers and the public,” he added.

Under the proposed plans, affected employees would see their roles reallocated elsewhere in Europe or handled by third-party providers, with a smaller number of trust and safety roles remaining on British soil.

The tech giant currently employs more than 2,500 people in the UK, and is due to open a new office in central London next year

A TikTok spokesperson said: “We are continuing a reorganisation that we started last year to strengthen our global operating model for Trust and Safety, which includes concentrating our operations in fewer locations globally to ensure that we maximize effectiveness and speed as we evolve this critical function for the company with the benefit of technological advancements.”