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Rachel Reeves will this week announce plans to unlock tens of billions of pounds from corporate pension schemes as part of government plans to kickstart economic growth.

Sky News has learnt that the chancellor will use a crucial speech on Wednesday to disclose that she wants to use so-called surplus release to boost investment in the economy.

Government sources said it could unlock more than £60bn of pension surpluses held in defined benefit (DB) schemes, while other estimates suggested the figure could be in the region of £100bn.

The surplus release plan could be included in a pension schemes bill expected to be published in the coming months.

City sources said that a meeting had taken place earlier this month which was attended by Treasury officials, members of the Number 10 Policy Unit and representatives of the 100 Group of FTSE-100 company finance chiefs.

The meeting, which was hosted by Varun Chandra, Sir Keir Starmer’s top business adviser, discussed the surplus release plan in detail, according to one finance director briefed on the talks.

Ms Reeves’s move will form part of a wider set of pensions reforms initiated under the last government and now being accelerated by Labour.

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These include forcing the merger of local government pension schemes, which collectively hold about £400bn of assets.

In her maiden Mansion House speech in November, the chancellor said she would preside over “the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off”.

An overhaul of defined contribution (DC) schemes, which in aggregate manage £500bn in assets, is also on the cards, with consolidation there also anticipated in the coming years.

The Treasury has cited Australia and Canada as examples of the model Britain’s pensions system should seek to emulate, with both countries utilising pension scheme capital to invest more heavily in domestic infrastructure.

The surplus release plan has the potential to be a major catalyst for economic investment, although it was unclear this weekend how the deployment of this capital into UK growth initiatives would be guaranteed.

It was also unclear the extent to which pension trustees would play a role in any surplus release plans.

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The pensions industry has been pushing for surplus release to be adopted in Britain for years, with the Pensions and Lifetime Savings Association having endorsed such a move before last year’s election.

Edi Truell, the prominent financier and pensions entrepreneur, said on Sunday: “It is time to split DB pension funds from their employers.

“The employers should be focussing on their core business; and the pension funds be backed by capital from specialist pension superfund managers.”

“The Pensions Regulator needs to replace its misguided views of “risk” and recognise that investment in productive assets in the long term provides better pension outcomes.”

Ms Reeves’s speech on Wednesday will come at a critical time for her, with doubts having been raised about her grip on her job for the first time in recent weeks amid financial market volatility in the aftermath of her October Budget.

Speaking at the World Economic Forum in Davos last week, Ms Reeves indicated that she would row back from a number of Budget measures, including relating to the treatment of non-doms.

Having been repeatedly accused of talking down the economy in the wake of Labour’s landslide general election victory, she said this weekend that she wanted Britain to be less “polite” about championing its economic virtues.

The chancellor has also formed a pivotal part of the government’s move to shake up economic regulation, with the removal last week of the chairman of the Competition and Markets Authority.

Sky News revealed several weeks ago that Sir Keir had written to watchdogs to urge them to remove barriers to growth, with meetings between the chancellor and regulators set to continue in the coming weeks.

The chancellor’s speech this week is expected to confirm government support for major infrastructure projects, including – controversially – a third runway at London Heathrow Airport.

The Treasury declined to comment on Sunday on the contents of the chancellor’s growth speech.

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UK economy figures not as bad as they look despite GDP fall, analysts say

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UK economy figures not as bad as they look despite GDP fall, analysts say

The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.

A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).

Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.

It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.

A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.

This was borne out by other figures released by the ONS on Friday.

Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.

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Overall, there was a “large rise in goods imports and a fall in goods exports”.

A ‘disappointing’ but mixed picture

It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.

“I am determined to kickstart economic growth and deliver on that promise”, she added.

But the picture was not all bad.

Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.

It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.

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The expansion in March means the economy still grew when the three months are looked at together.

While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.

Such a cut would bring down the rate to 4% and make borrowing cheaper.

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Is Britain going bankrupt?

Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.

“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.

Why did the economy shrink?

The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.

The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.

It made up for a “very weak” month for retailers, the ONS said.

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UK economy remains fragile – and there are risks and traps lurking around the corner

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UK economy remains fragile - and there are risks and traps lurking around the corner

Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.

However, the picture emerging a year since the election of the Labour government is not hugely comforting.

This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.

Output shrank in May by 0.1%. That followed a 0.3% drop in April.

Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.

Hangover from artificial growth

However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.

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In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.

Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.

Signs of recovery

Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.

“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.

Meanwhile, the services sector eked out growth of 0.1%.

A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.

Struggles ahead

It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.

The economy remains fragile, and there are risks and traps lurking around the corner.

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Is Britain going bankrupt?

Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.

Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.

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Government to announce new scheme as it ramps up AI adoption with backing from Facebook owner Meta

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Government to announce new scheme as it ramps up AI adoption with backing from Facebook owner Meta

The government is speeding up its adoption of AI to try and encourage economic growth – with backing from Facebook parent Meta.

It will today announce a $1m (£740,000) scheme to hire up to 10 AI “experts” to help with the adoption of the technology.

Sir Keir Starmer has spoken repeatedly about wanting to use the developing technology as part of his “plan for change” to improve the UK – with claims it could produce tens of billions in savings and efficiencies.

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The government is hoping the new hires could help with problems like translating classified documents en masse, speeding up planning applications or help with emergency responses when power or internet outages occur.

The funding for the roles is coming from Meta, through the Alan Turing Institute. Adverts will go live next week, with the new fellowships expected to start at the beginning of 2026.

Technology Secretary Peter Kyle said: “This fellowship is the best of AI in action – open, practical, and built for public good. It’s about delivery, not just ideas – creating real tools that help government work better for people.”

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He added: “The fellowship will help scale that kind of impact across government, and develop sovereign capabilities where the UK must lead, like national security and critical infrastructure.”

The projects will all be based on open source models, meaning there will be a minimal cost for the government when it comes to licensing.

Meta describes its own AI model, Llama, as open source, although there are questions around whether it truly qualifies for that title due to parts of its code base not being published.

The owner of Facebook has also sponsored several studies into the benefits of government adopting more open source AI tools.

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Minister reveals how AI could improve public services

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Mr Kyle’s Department for Science and Technology has been working on its mission to increase the uptake of AI within government, including through the artificial intelligence “incubator”, under which these fellowships will fall.

The secretary of state has pointed to the success of Caddy – a tool that helps call centre workers search for answers in official documents faster – and its expanding use across government as an example of an AI success story.

He said the tool, developed with Citizens Advice, shows how AI can “boost productivity, improve decision-making, and support frontline staff”. A trial suggested it could cut waiting times for calls in half.

My Kyle also recently announced a deal with Google to provide tech support to government and assist with modernisation of data.

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Joel Kaplan, the chief global affairs officer from Meta, said: “Open-source AI models are helping researchers and developers make major scientific and medical breakthroughs, and they have the potential to transform the delivery of public services too.

“This partnership with ATI will help the government access some of the brightest minds and the technology they need to solve big challenges – and to do it openly and in the public interest.”

Jean Innes, the head of the Alan Turing Institute, said: “These fellowships will offer an innovative way to match AI experts with the real world challenges our public services are facing.”

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