Labour’s mission to help grow the economy through construction and housebuilding is a slow burn.
But even big, long-term infrastructure plans can be sidelined by the loss of confidence in the aftermath of last year’s £40billion tax raising budget.
The biggest obstacle of all may prove to be sticky interest rates.
When in opposition, Keir Starmer’s team never missed an opportunity to accuse Liz Truss and the Tories of crashing the economy and penalising those homeowners seeking to renew fixed-term mortgages through high borrowing costs.
The bond markets, where the Government raises funds, remain unimpressed. It is not just short-term rates, as guided by the Bank of England, which remain sticky.
Disturbingly, longer rates are elevated, signalling the mountain of borrowing Britain faces. At the latest auction of £2.25billion of 30-year bonds, the yield hit 5.198 per cent.
Feeling the heat: Prime Minister Keir Starmer’s team never missed an opportunity to accuse Liz Truss and the Tories of crashing the economy
That is the highest level since 1998. In Germany, where the debt to output ratio stands at around 62 per cent, the 30-year yield currently is 2.69 per cent.
Berlin’s century-old struggle with inflation and borrowing means that it is probably the only G7 country where a government has fallen in recent months purely on breaching one of its own debt rules.
Gordon Brown’s intention was that the Bank of England, and by implication Britain’s credit, would be as good as the Bundesbank when he granted the Old Lady independence in May 1997. That is still a mighty distance away.
As far as most ordinary citizens are concerned, the more relevant UK rate – the one that helps to determine the cost of fixed-rate mortgages – is the ten-year gilt yield, which reached 4.64 per cent in latest trading.
That is a rise of 23.17 per cent over the past year and is now in Truss territory.
The noxious cost of borrowing, which has risen sharply since Labour took office in July 2024, is hurtful to consumers, borrowers, and the Government itself which faces a ballooning bill to service the national debt.
Not a terrific start to fix foundations.
Saba sevens
Sleepy investment trusts are in full combat gear in the wake of the pre-Christmas attack from Boaz Weinstein’s Saba Capital Management.
The first requisition meetings of the seven trusts being targeted will be at the end of this month, leaving little time to gear up defences.
The biggest challenge, as James Williams, chairman of the £704million European Smaller Companies tells me, is to galvanise retail investors into action.
Private shareholders at his trust hold around 30 per cent of the votes, about the same amount as Saba. Many are held through investment platforms so accessing them is less than straightforward.
A second line of defence ought to be the regulator, the Financial Services Authority, on the grounds that predator Saba is acting contrary to its duty towards consumers. Managers Janus Henderson are working on this front.
The CQS Natural Resources Growth Fund also joined the fray, pointing to 220 per cent in total return over the past decade.
It summarily dismisses Saba’s record in the US. Retail investors rarely have much of a say when big corporate actions are afoot.
They now have seven opportunities to exercise their democratic rights and see off Weinstein and his cohorts.
Knowingly undersold
Simon Wolfson delivers as usual at Next, lowering expectations then projecting a full-year profit of £1.01billion.
The significance is that the company breaks through the billion level for the first time, propelled by online growth of 6.1 per cent against a 2.1 per cent drop in shops. The big new driver is overseas sales, up a stonking 31.4 per cent.
That means just ahead of rival M&S, which is accelerating back towards the billion-pound mark last achieved in 2007.
Wolfson is renowned for providing forensic detail on the impact on performance of government policy, of all colours.
He forecasts that wage costs will rise by £67million because of the jump in employer National Insurance contributions.
Next plans to offset the impact by cost savings (that could mean lost jobs for working people) and a 1 per cent rise in prices.
Despite Wolfson’s expectation of slower UK growth in 2025-26, profits are forecast to climb again to £1.046billion.
If the past is any guide to the future, be ready for some cheering updates.
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