Top stories

  1. EU proposals for post-Brexit trade delayed
  2. Chancellor considers tax rises to fund NHS
  3. Retail sales fall in September

Stat of the day

3.7 per cent – the International Monetary Fund’s (IMF) latest forecast for global economic growth in 2018, a downgrade of 0.2 per cent on previous predictions (IMF World Economic Outlook).

EU proposals for post-Brexit trade delayed

The European Commission is to delay publishing a blueprint for the EU and UK’s future trading relationship that was previously due to be unveiled tomorrow, according to The Times (p6, £). This is reportedly due to concerns that setting out proposals on future trade at this stage could undermine the chances of securing a deal and embolden Conservative critics of the government’s Chequers plan. A text of the document is now expected tio be published immediately ahead of next week’s crucial European Council summit, with one EU diplomat suggesting it will be published alongside the Brexit withdrawal agreement (The Guardian). It comes as Downing Street plays down reports that a breakthrough in the talks is imminent, with the Prime Minister’s spokesperson insisting that “there can be no withdrawal agreement without a precise future framework (The Sun, p2)”.

DUP Leader Arlene Foster has hinted that her party may be willing to accept a compromise over checks for goods entering Northern Ireland from the rest of the UK, as she arrived in Brussels for three days of talks with EU leaders (Bloomberg, online only). However, former Conservative Chief Whip Mark Harper has urged the Prime Minister to “evolve” her Brexit proposals, saying she needed to “unite the party around a comprehensive free trade deal that she can actually get through Parliament (Daily Telegraph, p1, £)”.

Today the Bank of England published its latest Financial Policy Committee Statement which concluded that the UK banking system would be strong enough to serve households and businesses even through a disorderly, cliff-edge Brexit. However, the statement called on EU authorities to do more to ensure households and business can continue to access financial services provided by UK firms and mitigate risks to financial stability (BBC News, online only). Meanwhile, the Financial Times (online only, £) reports that European banks are increasingly concerned about losing access to crucial derivatives markets based in the UK in the event of a ‘no deal’ Brexit, putting pressure on EU and UK regulators to work out transitional arrangements.

Chancellor considers tax rises to fund NHS

The Chancellor Philip Hammond is considering a range of tax rises in next month’s Budget to help secure an extra £26 billion of funding for the NHS, telling officials that “nothing is off the table”, according to the Financial Times (p2, £). Hammond is reported to be looking at a range of options including cutting pensions tax relief for higher earners, delaying plans to raise income tax thresholds and reforming VAT rules for small companies. The Confederation of British Industry (CBI) has today written a letter to the Chancellor ahead of the Budget calling for an increase to the Annual Investment Allowance to boost the amount that firms can invest without being taxed (CityAM, p2). The CBI also called for the Treasury to review businesses rates to enable greater investment, including by giving a year’s relief for businesses that renovate a factory, office or store (The Guardian, online only). Meanwhile a group of leading hospitality firms have called for a new digital services tax, the proceeds of which could be used to freeze business rates for bricks and mortar companies (Daily Mail, p2).

Retail sales fall in September

Retail sales grew by 0.7 per cent in September compared to the same period last year, figures from the British Retail Consortium and KPMG, suggesting consumers were becoming more cautious after a summer of spending (The Guardian, online only). On a like-for-like basis, excluding new store openings, retail sales dropped by 0.2 per cent in the year to September (The Times, p40, £). The findings were echoed by data from Barclaycard which found a similar slowdown in retail sales (Reuters, online only). Nearly half of the consumers surveyed by Barclaycard were planning to spend less on Christmas this year than they did last year.

Latest from UK Finance

John Marr, Principal, Devolved Government & Social Housing, blogs on the key policy discussions at last week’s UK Finance Scotland Mortgages Dinner.

News in Brief

Italy could be on the brink of a banking crisis as rising tensions with the EU push the country’s borrowing costs to a five-year high, reports the Daily Telegraph (B1, £).

Council tax should be scrapped and replaced by an annual property tax worth 0.5 per cent of the current market price of a home, according to the Institute for Public Policy Research (Daily Mail, p4).

Property funds could be forced to suspend trading in their securities if there was uncertainty around the value of their assets, according to proposals set out by the Financial Conduct Authority yesterday  (Financial Times, online only, £).

The average rate for a two-year fixed mortgage has fallen for the first time in a year to 2.49 per cent, according to analysis by the website Moneyfacts (The Sun, online only).

Two tourist attractions in Scotland – a bust of Rabbie Burns and a replica of a 1766 portrait of Colonel William Gordon – have been equipped with contactless card terminals in an attempt to get more people to donate to the National Trust for Scotland (The Times Scotland, p16, £).

What the commentators say

Financial Editor Patrick Jenkins warns in the Financial Times (p14, £) that the world of lending in 2018 looks increasingly similar to a decade ago. Jenkins argues that the recent low interest environment has served not only to drive up global debt but to push up asset prices. He claims that well intentioned macroeconomic policies, designed as a response to a “debt addicted” world, are financing an unsustainable environment. Jenkins concludes that there is a ‘general consensus’ that there will be a market crash within two years.

Simon French, chief economist at Panmure Gordon, writes in the Times (p41, £) of trouble in the global debt market as investors demand higher interest rates in order to provide additional funds. French remarks that the world’s central banks are set to buy less debt than at any time in the last decade and private investors are coming to fill the gap. He adds that the health of the British government’s finances remain sensitive to what happens in the bond markets, and that an increase in the cost of serving debt would need to met through cuts to public spending.

Calendar

  • IMF publishes World Economic Outlook
  • British Retail Consortium and KPMG monthly publish retail sales report
  • EU Chief Brexit Negotiator Michel Barnier meets the DUP Leader Arlene Foster in Brussels
  • Scotland First Minister Nicola Sturgeon gives keynote speech at the SNP Conference

For a full list of upcoming UK Finance statistics releases, please click here.

News in brief – 9 October 2018