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Friday’s mini-budget that promised billions in tax cuts and a multi-billion pound energy price cap has seen the value of the pound plummet against foreign currencies.

The new prime minister and her chancellor’s decision to cut various taxes by a combined £45bn, alongside a cap on energy prices that will cost taxpayers £60bn has resulted in a loss of market confidence.

Lenders withdraw mortgage profits; live pound updates

That loss of confidence in the government’s ability to pay back the billions they are spending means the Bank of England is likely to raise interest rates – in a desperate bid to bring down inflation.

This all has an effect on Britain’s day-to-day spending. Here, Sky News looks at who will suffer and who will benefit from the pound’s slump.

Petrol

Fuel is traded in dollars.

This means that a low pound will buy less fuel, forcing prices at UK forecourts to rise.

Drivers will have noticed a recent dip in prices at the pumps – compared with this summer when they approached £2 a litre for diesel.

But the slump in value of the pound will likely wipe out that fall, which was a welcome relief for many.

According to the AA, a pound that equals $1.08 will mean an extra 13.5p per litre of petrol.

That would add around £7.50 to the cost of filling up an average 55-litre car, when factoring in VAT.

An AA spokesman added that had it not been for former Chancellor Rishi Sunak’s decision to cut fuel duty by 5p in March, motorists would have likely seen an even bigger increase in the price per litre – of around 18.5p.

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Why did the pound fall to a record low?

Energy

Gas is also traded in dollars and therefore also suffers from a poor exchange rate.

As with oil, wholesale prices have dropped internationally since the start of the war in Ukraine, but with a weak pound, similarly the UK won’t experience the benefits.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, tells Sky News: “At this stage, this won’t affect bill payers directly, because the energy price cap is set below international energy prices, so we’ll be paying less anyway.

“Instead it will have an impact on how much the guarantee will cost the government.”

The more the price cap costs the government, the less confidence the market will have in the government’s capacity to pay it back, causing the original problem to spiral further.

Food

Any goods imported to the UK from abroad will cost more when the pound is weaker.

According to the government’s most recent food security report, the UK imports around 45% of its food.

This has proven a major problem during the Ukraine war, with grain exports unable to leave the country for several months this year.

Along with the dollar, the pound is also faring badly against the Euro, which will mean European-grown fruit and veg prices will increase.

Produce grown further afield, such as bananas, will also go up.

Not all retailers will pass all of that cost onto their customers, however.

Supermarkets are often the last to increase their prices off the back of rising costs, as they try to remain affordable, and often buy stocks in advance to mitigate sudden market shocks.

But Ms Coles cautions: “Supermarkets have warned that although they are already absorbing a great deal of the increased costs of supply, they have to pass some of it on.”

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Why does the weak pound matter?

Tech

Most of our tech gadgets, such as smartphones and tablets, are manufactured abroad.

Apple, for example, is based in California, but uses parts manufactured in China and Taiwan.

Again, a week pound will mean these foreign-made products cost more in the UK.

Apple has already increased the price of its latest iPhone range. The iPhone 13 started at £949 when it launched last year. The iPhone 14 range is retailing at £1,099 – a 16% increase.

Holidays abroad

The most obvious place consumers will experience the slump in the pound is at the bureau de change.

Holidaymakers bound for the US will get particularly less for their money than they used to – but with the pound also down against the Euro, holidays to Europe will also be more expensive.

With the cost of fuel also on the rise, airlines and package holiday providers may also increase their prices to mitigate costs.

Mortgages

A weak pound means inflation – which is already at 10% – getting even higher.

When inflation is high, the Bank of England tries to bring it down by increasing interest rates.

This higher price of borrowing is designed to encourage people to borrow less, spend less, and save more.

Currently forecasts predict interest rates hitting 6% by November, which will mean huge increases in people’s mortgage repayments.

Halifax, the country’s largest mortgage provider, is removing fee-paying mortgages from Wednesday. These allow people to pay a fee in exchange for a lower interest rates.

Virgin Money and Skipton Building Society have withdrawn all their mortgage products until they have more certainty.

The two million people in the UK already on tracker and variable mortgages will see far more of their monthly pay packet spent on repayments.

And those coming to the end of a fixed rate or hoping to buy for the first time will have fewer, more expensive deals to choose from.

“The issue is the fact that fixed rate mortgages don’t just depend on the rate today, they also depend on rate expectation,” Ms Coles explains.

“The dramatic overnight change in market expectations of future rates has ramped up the cost of doing business, and lenders are taking a break to reassess and reprice.”

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Why some mortgage providers are pulling products

Pensions

People approaching retirement could suffer from UK bonds – or gilts – being sold off in response to the pound’s fall.

Some investors automatically switch people’s pensions from stocks to government bonds as they get closer to retirement age, which will leave them with a smaller pot in the current climate.

Pensioners living abroad will also suffer notably – as their pensions are paid in pounds but their expenses are in stronger currencies.

UK exporters

British businesses that sell their products and services abroad will benefit from the pound’s slump as foreign buyers look to take advantage of cheaper prices.

This will see the FTSE 100 companies benefit, as much of their money is made overseas, Ms Coles says.

It could also provide much-needed help for smaller UK businesses struggling with the increased costs of Brexit.

Local tourism

More holidaymakers could be drawn to the UK from abroad by the promise of a cheaper holiday.

While Britons get less for their money at the bureau de change, inbound tourists will get more.

Read more:
The good and the bad news on the pound
Five reasons the pound ‘doom loop’ matters

For example, a London hotel room that cost $200 (£186) at the start of 2022 now only costs $150.

Britons could also return to the ‘staycation’ trend seen during the COVID pandemic and also help boost the economy by supporting tourism and hospitality businesses at home.

Hedge funds

Hedge funds employ a strategy called ‘short selling’ or ‘shorting’ to take advantage of falling market prices.

It involves borrowing shares in a firm and selling them with a view to buying them back at a profit when prices fall.

Ms Coles says: “Plenty of hedge funds were shorting the pound before the fall – based on the belief that the markets had underestimated how long inflation would stick around for.

“So these paid off when the pound tumbled.”

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UK weather: Weather warnings across the country with temperatures as low as -16C expected

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UK weather: Weather warnings across the country with temperatures as low as -16C expected

Warnings of widespread disruption caused by freezing weather have been issued, with temperatures expected to plummet to as low as -16C in some areas.

Snow, ice and fog warnings have been issued, following on from severe weather on Wednesday, with the South West and south of England particularly affected by heavy snow.

All of the warnings are yellow, meaning there is a danger of injury from slips and falls and some disruption to travel expected.

Devon and Cornwall saw roads closed and motorists stationary for “long periods of time”, a joint statement from Devon and Cornwall Police and Devon County Council Highways said.

Snow ploughs became stuck in queues of traffic caused by “minor incidents”, the statement added.

Ploughs have been fitted to gritters which will work into Thursday morning to clear routes in the area, police and highways officials said.

Temperatures are expected to fall as low as -16C on Thursday night both in the northeast of England and Scotland, the Met Office has said.

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Met office weather warnings for Thursday Pic: Met Office
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Met office weather warnings for Thursday Pic: Met Office

Huge waves smash against the sea front at Whitley Bay in North Tyneside Pic: PA
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Huge waves smash against the sea front at Whitley Bay in North Tyneside Pic: PA

A yellow warning for snow and ice is in place for northern Scotland until midnight on Thursday and another snow and ice warning is in force for Northern Ireland until 11am on Thursday as sleet and snow showers are set to continue.

Meanwhile, a yellow fog warning has been issued for Northern Ireland until 9am on Thursday.

A further yellow warning for snow and ice affecting Cornwall, much of Wales and parts of northwest England has been issued until 11am on Thursday.

And a yellow ice warning has been issued for parts of southern England and south-east Wales until 10.30am on Thursday.

Travel disruption to road and rail services are likely on Thursday in the warning areas, as well as the potential for accidents in icy places, the forecaster said.

As icy conditions persist, motorists are being urged to stick to major roads that are most likely to have been gritted.

Car insurer RAC said it has seen the highest levels of demand for rescues in a three-day period since December 2022.

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Obesity rates may start falling this year due to weight loss jabs, seller says

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Obesity rates may start falling this year due to weight loss jabs, seller says

The UK may have reached peak obesity and rates could start falling rapidly later this year, Sky News has been told.

Data collected by one of the biggest online sellers of weight loss jabs suggests that so many people are now taking effective medication that the inexorable rise in obesity could start to reverse.

According to Simple Online Pharmacy, which has access to wholesale figures, 500,000 people in the UK are currently taking either Mounjaro or Wegovy – and they can expect to lose 15% to 20% of their weight over a matter of months.

Rebecca Moore, the company’s chief operating officer, said: “Our projections are that around a million people will reverse their obesity in a year.

“We should be at the point now, we believe, where we’re starting to see rates decline.

“We would not be surprised if by the end of this year we’ve seen a really significant decline in obesity.”

Rebecca Moore, chief operating officer of Simple Online Pharmacy
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Rebecca Moore, chief operating officer of Simple Online Pharmacy

The company has supplied the drugs to 200,000 people, who have collectively lost 600 tonnes of their weight.

Demand for medication is growing by 10% to 40% month-on-month, and the company has had to build a walk-in fridge to store enough medication to supply 400 patients an hour.

“The narrative has really shifted in the last few months,” said Ms Moore.

“People are recognising that obesity is a lifelong chronic condition. They’re recognising that this medication is a once-in-a-generation revolutionary technology.

“People are much more open to it and I expect that next year there will be another huge surge in growth.”

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The weight-loss drug that’s ‘too good’

Latest NHS figures show 27% of adults in England are obese, up from 15% in 1993.

Rates have started to plateau in the last couple of years as public health measures such as the sugar tax take effect.

But there are indications that obesity jabs have already begun to reverse obesity in the US and the same is likely to happen in the UK.

Around 95% of all patients using the medication are buying it privately, at a cost of around £150 a month.

Access on the NHS is poor, with research by Sky News showing just 800 patients had been prescribed Wegovy in specialist clinics four months after the rollout started in December 2023. That’s just 6% of the expected number.

And last month the National Institute for Health and Care Excellence (NICE) bowed to demands from the NHS to restrict access to Mounjaro to just 200,000 of 3.4 million eligible patients over the first three years of the rollout.

Read more:
King Kong’ of weight loss jabs just too effective for NHS
Thousands denied jab due to slow NHS rollout

Wegovy injections

Sarah Le Brocq, founder of All About Obesity, sits as a patient representative on the NICE committee.

She said it was “hugely frustrating” that so many patients in need are being denied treatment.

“It’s not the NHS’s fault that they can’t fund these drugs,” she said.

“They need to have that money coming through [from government] because they can’t take it from cancer and put it into obesity.

“We are going to have tiered access. The wealthy can be healthy, but people who really need treatment can’t have it.”

Angela Chesworth had to do a ‘clinical trial’ of treatment on herself to prove to the NHS that the drugs could stop agonising abdominal pains that she suffered several times a week.

Angela Chesworth and her husband Paul
Image:
Angela Chesworth and her husband Paul

Her consultant had agreed that her extra pounds were pulling on scar tissue from previous stomach surgery, but he was powerless to prescribe the treatment.

But since the summer, when she started weekly injections of Mounjaro, she has only had a couple of abdominal cramps and the NHS has now agreed to fund treatment.

“When you know there’s something out there that can help you, but you can’t have that help because of money or somebody who makes the rules, you feel worthless,” she told Sky News.

“Come and live in my shoes and see how I am and see how it affects me and then tell me I’m not worth the money.

“You want me to be part of society, you want me to do a job, you want me to expand the economy?

“I needed help, so it was very frustrating to be told no. And especially by the medical professionals.”

Her husband, Paul, is still having to buy his supply privately, despite being on the cusp of type 2 diabetes. After three months of treatment, he has lost two stone and is now healthy.

“I want to be healthy as long as I possibly can,” he said.

“For the last 15 years of his life my dad did not have good health or a good quality of life. He wasn’t able to get up in the morning quickly and ended up on a mobility scooter because he couldn’t walk far.

“All those things I want to try and avoid.”

The Department of Health said new drugs recommended by NICE need to be funded from existing NHS budgets. A spokesperson added: “We are also acting to tackle [obesity’s] causes, shifting our focus from treatment to prevention as part of our 10 Year Health Plan.”

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Food prices will rise due to budget tax hikes, retail body warns

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Food prices will rise due to budget tax hikes, retail body warns

Grocery shoppers are being warned of more hikes to food costs in the months ahead due to retailers passing on the cost of budget tax rises.

The British Retail Consortium (BRC) warned that food prices will increase by an average of 4.2% in the latter half of the year – piling more pressure on households at a time when consumers are already facing leaps in unavoidable costs including water, council tax and energy bills.

It blamed the impact of budget measures announced by Chancellor Rachel Reeves in October, which businesses have widely denounced as an attack on investment, jobs, and pay.

The retail body spoke up as many top retail brands reported on their Christmas progress ahead of April’s looming surge in costs.

Money latest: Pound sinks to nine-month low

Tesco warned of a £250m annual impact from higher employer National Insurance contributions alone from the next financial year while maintaining its annual profit forecast for 2024/25.

It cheered winning considerable market share over the festive season, leaving the UK’s biggest retailer in its best position since 2016.

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M&S reported robust growth in food sales, by 8.9% on a comparable basis, while growth in clothing and home and beauty was up by almost 2%.

Industry data released earlier this week already revealed Tesco, Sainsbury’s, Lidl and M&S were the big sales winners over Christmas, as far as groceries were concerned. Asda and the Co-op were seen as the main strugglers.

Ocado, which has a retail partnership with M&S, saw the largest growth in the online sphere.

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Warning of price hikes ahead

Much of the focus, however, is on the future given the volume of complaints within the sector – one of the country’s biggest employers – about the budget measures.

The key message since the fiscal event has been that shoppers will pay a price.

The industry sales data, revealed by Kantar Worldpanel on Tuesday, showed the annual rate of grocery price inflation at 3.7% in the four-week December period, its highest level since March, and a jump on the 2.6% reported for the 12 months to November.

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HMV owner slams budget ‘burden’

Read more: Growing threat to finances from rising bills

The BRC’s chief executive, Helen Dickinson, said on Thursday: “As retailers battle the £7bn of increased costs in 2025 from the budget, including higher employer NI (National Insurance), National Living Wage, and new packaging levies, there is little hope of prices going anywhere but up.

“Modelling by the BRC and retail chief financial officers suggest food prices will rise by an average of 4.2% in the latter half of the year, while non-food will return firmly to inflation.

“Government can still take steps to mitigate these price pressures, and it must ensure that its proposed reforms to business rates do not result in any stores paying more in rates than they do already.”

Despite the looming pressure ahead on supermarket margins from the budget, it is clear that grocery chains had a robust Christmas season.

Tesco boss Ken Murphy said: “We delivered our biggest-ever Christmas, with continued market share growth and switching gains.

“Our strong performance reflects the investments we have made, positioning Tesco as the UK’s cheapest full-line grocer for over two years, improving quality across all our ranges, with more than half of this year’s Christmas range new or improved, and providing the best experience for our customers in-store and online.”

His counterpart at M&S, Stuart Machin, said: “The external environment remains challenging, with cost and economic headwinds to navigate, but there is much within our control.

“At M&S, we stay close to our customers and their needs, and with that in mind our investment in trusted value, along with great quality, style and innovation remains our priority.”

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