UK politics live: Inflation warning issued by experts as Reeves refuses to rule out new tax rises

Donald Trump’s threatened tariffs could hit UK trade with the US as badly as Brexit affected trade with the EU, a leading think tank has warned, as campaigners call for Sir Keir Starmer to protect the UK by urgently rebuilding ties with Europe.

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Tim Moore, economics director at S&P Global Market Intelligence, said: “UK service providers indicated that business activity was close to stalling in November, with growth easing to its slowest for over a year.

“Weaker sales pipelines, cutbacks to new projects and more caution among clients were all cited as having an adverse impact on service sector output.”

He added: “Worries about the impact of policies announced in the autumn Budget, in particular those pushing up employment costs, were widely reported as leading to a gloomier assessment of business investment prospects and the broader UK economic outlook.”

The services sector makes up the majority of the UK economy, and is closely watched by the Bank of England as a gauge of underlying inflation.

The Bank’s policymakers are widely expected to keep interest rates unchanged at 4.75% next month, following two cuts earlier this year.

Transport Secretary Heidi Alexander could not say what the cost of nationalising rail operators will be, but said it would be “a fraction” of what is currently paid in management fees to train companies.

She told LBC radio: “So it will be a fraction of the costs, for example – to bring them over and also sort of set up Great British Railways – a fraction of what we’re paying in terms of the management fees.

“At the moment, we pay roughly about £150 million pounds in management fees to the train operating companies.”

Ms Alexander said she did not have a specific figure but added the setup cost would be less than the £150 million current management figure.

The Transport Secretary would not commit to cheaper rail fares as a result of South Western Railway, c2c and Greater Anglia being brought into public ownership next year but signalled that she expected the move to reduce cancellations and late trains.

“The primary aim of this is to improve reliability and clamp down on the delays, the cancellation, the waste and the inefficiency that we’ve seen over the last 30 years,” Heidi Alexander told BBC Breakfast.

“We’ve had private train-operating companies running train services in this country over the last few decades, and it clearly hasn’t worked.”

She said bringing the operators into public ownership was a “first step” to a “more integrated and unified railway”, and pointed to the impact seen by bringing LNER and Southeastern into public ownership.

“So if you look at LNER for example, we have reduced the number of trains that are cancelled because of staff shortages to basically zero, and we reduced other cancellations to about 5%.

“Southeastern, which is also now in public ownership, is in the top five of train operators for punctuality.”

Growth in the UK’s services sector slowed to its lowest rate in more than a year in November as firms digested business tax rises in the autumn budget.

The closely watched S&P Global UK services PMI survey scored 50.8 in November, slowing from 52.0 in October.

It was slightly above the 50.0 reading forecast by a consensus of economists.

Any reading above 50 means a sector is in growth, while a score below this means it is shrinking.

Responding to the OECD Economic Outlook report, chancellor Rachel Reeves said: “Growth is our number one priority, and the OECD upgrade will mean the UK is the fastest growing European economy in the G7 over the next three years.

“That is only the start. Growth only matters if it’s matched by more money in people’s pockets.

“That is why we protected people’s payslips from higher taxes at the Budget and are determined to deliver growth that benefits households and improves living standards.

“This government will get our economy growing, with our National Wealth Fund, reforming the remits of our regulators and pension mega funds to attract better investment, as well as reforming our planning laws – all so that we can rebuild Britain for good.”

UK interest rates will fall by less than expected over the next two years after the autumn Budget’s significant spending and borrowing plans, according to an influential report.

In its annual economic survey, the Organisation for Economic Co-operation and Development (OECD) said UK inflation will also surpass previous forecasts next year, and upgraded growth projections for the economy, because of a budget boost.

The OECD said the global economy would “remain resilient” over the coming years but that “risks and uncertainties are high”.

The global economy is predicted to grow by 3.2 per cent this year and 3.3 per cent next year, the organisation said.

It reflects a slight improvement from its predictions of 3.1 per cent and 3.2 per cent respectively, from its September interim report.

The chancellor was pressed on the issue in the Commons by shadow chancellor Mel Stride, and again at a conference in the north of England, over her promise last week to the CBI conference.

With her next major fiscal statement expected in the spring, there is confusion over Labour’s economic policy amid a rumoured shift from delivering growth to raising living standards.

Sir Keir Starmer is set to outline the new focus in a speech on Thursday resetting the government’s agenda after just five months in office.

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