The Post Office is proposing a big hike in the fees that banks pay to allow their customers to access its network as it attempts to secure additional funding to boost postmasters’ pay.

Sky News understands that more than two dozen banks and building societies are considering a proposal submitted to them recently by the Post Office that would see the next banking framework costing them between £350m and £400m annually – up from about £250m-a-year under the current deal.

Banking sources said the roughly 30 high street lenders were due to respond to the Post Office’s proposal in the early part of the spring.

A deal costing the banks at least £350m a year is expected to be finalised by the autumn, the sources added.

The additional proceeds from the next agreement, which expires at the end of this year, will be used in part to strengthen the new deal for sub-postmasters unveiled by Post Office chairman Nigel Railton in November.

Under the banking framework agreement, the 30 banks and mutuals’ customers can access the Post Office’s 11,500 branches for a range of services, including depositing and withdrawing cash.

The service is particularly valuable to those who still rely on physical cash after a decade in which 6,000 bank branches have been closed across Britain.

In 2023, more than £10bn worth of cash was withdrawn over the counter and £29bn in cash was deposited over the counter, the Post Office said last year.

A new agreement with the banks will come at a critical time for the Post Office, whose new leadership team is trying to place it on a sustainable long-term footing.

Reliant on an annual government subsidy, the reputation of the network’s previous management team was left in tatters by the Horizon IT scandal and the wrongful conviction of hundreds of sub-postmasters.

A Post Office spokesperson said: “Our partnership with 30 banks and building societies ensures that no one who relies on cash is left behind, made possible by our postmasters in almost every community of the country.

“We do not comment on ongoing negotiations.”

UK business goes into the new year in a surly mood.

New Chancellor Rachel Reeves‘s hike in employer’s National Insurance contributions (NICs) in her autumn budget will raise the cost of employing people and that is likely to have an impact on both hiring and investment.

For individual sectors, there are specific challenges: the car industry, for example, is still grappling with the threat of penalties where electric vehicles are too low a proportion of their overall sales.

Consumer-facing businesses are also under considerable pressure, not only from the rise in employer’s NICs but also the forthcoming rise in the national living wage, something which particularly hurts the hospitality sector.

That sector, along with retail, also faces a challenge in that consumer confidence remains subdued.

The plight of retailers was underlined by a spate of profit warnings just before Christmas, since when there has been evidence of weak footfall in the sales period.

It is not all doom and gloom though with, for example, conditions in the house building sector expected to gradually improve during 2025.

The new year will also pose other challenges.

Businesses of all shapes and sizes will spend an increasing amount of time trying to figure out how to incorporate generative artificial intelligence into their operations.

And, for some big multinationals and exporters, there may be a further headwind in the form of tariffs imposed by the incoming Trump administration in the US.

Multinationals doing business in or with France and Germany may also see their earnings hit by the tepid economic conditions in both countries – with activity in the latter put on hold until after the snap election in February.

Flatlining economy

The UK economy is flatlining, at best, as it enters the new year.

From being the fastest growing economy in the G7 during the first half of 2024, the UK stagnated during the third quarter of the year as the incoming government ladled on the doom and gloom in a bid to underline what it presented as its dire economic inheritance, hitting business and consumer confidence in the process.

Things may actually have worsened since then, as the latest figures from the Office for National Statistics suggest the economy contracted during October, while the Purchasing Managers Index survey data from S&P Global for November point to a contraction in activity in that month too.

The Bank of England expects the economy to have flatlined during the final three months of the year.

The forthcoming rise in employer’s NICs is likely to have a dampening effect on activity although, in all probability, this is more likely to show up in depressed hiring activity, rather than a significant rise in unemployment, since there remain more than 800,000 unfilled job vacancies in the economy.

The UK’s long-running skills shortages – a consistent factor during the first quarter of this century – continue to drag on growth.

Unfortunately, neither households or businesses can expect the Bank of England to ride to the rescue, with the Monetary Policy Committee (MPC) now likely to deliver fewer interest rate cuts during 2025 than had been expected even a few months ago.

The headline rate of inflation, which rose to 2.6% in November, is likely to remain stubbornly above the bank’s target rate throughout the year and that will continue to be a cause for concern for the MPC.

The biggest cause of economic uncertainty faced by the world in 2025, though, is whether Donald Trump will press ahead with the tariffs he promised US voters during the presidential election campaign and, if he does, whether other countries will respond in kind – sparking a damaging trade war that would hit global growth.

The UK, the EU and Japan have all indicated they would seek to avoid tit-for-tat retaliatory measures – but China is unlikely to take such an approach.

Mixed picture for household finances

Household finances will be mixed in the UK during 2025.

Consumer confidence began to fall in November, even as the Bank of England was cutting interest rates, while the latest political monitor from pollsters Ipsos Mori suggest that two-thirds of Britons expect the UK’s general economic condition will deteriorate over the next 12 months.

An increase in the household energy price cap in January and in water bills in April will also eat into disposable incomes.

More damaging still will be a rise in council tax bills in April after the government gave local authorities permission to raise council tax by up to 5%.

Most are expected to do so – saddling one household in every 10 with an annual council tax bill of more than £3,000.

Adding to the pressure will be higher shop prices.

Food inflation, which had been falling since early 2023, began to rise again in September 2024 and that will continue because all of the UK’s biggest grocery retailers, including Tesco, Sainsbury’s and Marks & Spencer – have warned that the hike in employer’s NICs will result in higher prices.

Weighed against that is the likelihood of at least two interest rate cuts from the Bank of England, benefiting households with mortgages, although would be first time buyers will still find housing affordability a challenge.

It must also be remembered that, with employment at record levels, the vast majority of UK households ought to be able to at least maintain their standard of living provided the main breadwinner remains in work.

Wages have tracked above the headline rate of inflation now for the best part of two years – although earnings growth is likely to slow in the second half of the year as employers grapple with their higher tax bill

A committee of MPs has called for the government to be fined if it fails to provide redress quickly enough to victims of the Horizon software scandal, as its report said the Post Office has spent at least £136m on legal fees.

New legally enforceable time limits for each stage of claim processing should be introduced, a report from the Business and Trade Committee (BTC) has said.

If a claim by a victim of the Post Office Horizon scandal does not move in line with the time limits they should receive the financial penalties paid by the government.

More than 700 sub-postmasters across the UK were wrongfully prosecuted by the Post Office for theft and false accounting using the Horizon software made by Fujitsu which incorrectly generated shortfalls in branches.

Read more
2024 review: Some of the year’s big moments in eight charts
In a time of change Sky News spent a critical year on a farm

Many more incurred large debts, lost homes, experienced relationship breakdown, became unwell in an effort to repay the imagined shortfalls and some took their own lives.

Four schemes have been launched as the state and the Post Office attempt to redress the wrongs.

Making redress less punishing

But the process of seeking compensation is “akin to a second trial for victims”, the committee chair Liam Byrne said.

It is “imperative” applicants receive upfront legal advice paid for by scheme operators rather than applicants, the committee’s report said, as evidence given by claimants’ solicitors said when they get legal advice, their financial redress offers double.

Applications place an “excessive burden” on claimants to “grapple complex legal concepts” on the amount of redress they’re owed and requests for information about the losses Horizon caused, despite no longer having access to Horizon data.

There have been delays in processing requests for disclosures from the Post Office, the report found.

It comes as the Post Office spent £136m on legal costs, meaning government legal representatives are “walking away with millions”, according to the committee.

Vast majority of redress not paid

Despite this, the BTC said the “vast majority” of redress has not been paid.

As many as 14% of those who applied to the Horizon Shortfall Scheme (HSS) to compensate for losses incurred via the faulty computer programme have still not settled their claims despite applying before the original 2020 deadline.

It cost £67m to administer the Horizon Shortfall Scheme, a bill equal to 27% of redress paid, amounting to £26,600 per claim.

Repeating calls

The topic of who operates the schemes has been revisited by the committee as it reiterated its call for the Post Office to have no involvement and for independent adjudicators to be appointed instead.

The government removed the Post Office from schemes involving convictions but the organisation still administers the HSS.

It also repeated its rebuffed demand for the appointment of an independent adjudicator for each scheme. The committee wants these adjudicators to manage cases and ensure claims move through the process swiftly.

In response, a spokesperson for the Labour-run Department for Business and Trade said: “Since entering government, we have worked tirelessly to speed up the process of providing the victims of the Horizon scandal with full and fair redress including by launching the Horizon Convictions Redress Scheme earlier this year.

“We are settling claims at a faster rate than ever before with the amount of redress paid doubling since July, with almost £500m being paid to over 3,300 claimants as of the end of November.”