Commuters cross London Bridge in London, England.<\/p>\n
Peter Summers | Getty Images News | Getty Images<\/p>\n
This is the final edition of CNBC UK Exchange.\u00a0I want to say a sincere thank you to everyone who has read, subscribed, shared the newsletter or got in touch since it launched. While this may be the last newsletter, the stories, personalities and businesses that have filled these emails certainly aren’t going anywhere, and I hope you’ll continue to follow them through CNBC’s coverage.<\/p>\n
The dispatch<\/p>\n When we launched CNBC UK Exchange just over 15 months ago, the U.K. economy had just enjoyed its best quarter of GDP growth in a year.<\/p>\n It is no exaggeration to say that it has been a slow grind ever since.<\/p>\n From growth of 0.6% in the first three months of 2025, the\u00a0economy\u00a0<\/a>expanded<\/a>\u00a0by just 0.1%, 0.2% and 0.2% in the subsequent three quarters before, somewhat surprisingly, coming out of the blocks with a 0.6% gain for the first three months of 2026.<\/p>\n That, as the\u00a0then-Chancellor (or Finance Minister)\u00a0Rachel Reeves was quick to remind listeners, was the best performance of any G7 economy, although strictly speaking, it was the joint-best showing along with Japan.<\/p>\n Things have been less encouraging since: the economy actually contracted by 0.1% in April due to the shock of higher oil prices following the attacks on Iran, but still\u00a0eked out growth of 0.4% for the second quarter<\/a>\u00a0as a whole. Recent business surveys suggest the modest growth continued into July,<\/p>\n This is no longer Reeves’s problem since she was\u00a0replaced as chancellor last month by John Healey<\/a>, the former\u00a0defense\u00a0secretary, whose resignation over\u00a0defense\u00a0spending precipitated Keir Starmer’s\u00a0own resignation as prime minister<\/a>. His replacement, the former Greater Manchester\u00a0Mayor\u00a0Andy Burnham, faces an uphill battle in growing the economy.<\/p>\n Reeves’s biggest mistake in office was\u00a0the\u00a0decision in her first budget, in October 2024, to\u00a0increase employers’ national insurance<\/a>, a payroll tax, as well as to lower the threshold at which it became payable.<\/p>\n That dragged millions of part-time workers, particularly in sectors such as retail and hospitality, into the tax net and explains why, according to the latest figures<\/a>, the unemployment rate has risen during Starmer’s time in office, and the number of job vacancies has fallen to its lowest level \u2014 excluding the pandemic \u2014 since 2014.<\/p>\n It also curdled the relationship between business and the government.<\/p>\n That may improve, at least in the short term, under Burnham.<\/p>\n The experienced Healey was an astute appointment, as was that of his\u00a0No. 2,\u00a0Lucy Rigby, a former competition lawyer who trained at Slaughter and May, one of London’s genuinely world-class law firms.<\/p>\n Burnham has also shown signs of being more\u00a0pragmatic about North Sea oil and gas extraction<\/a>\u00a0than his predecessor, while his decision to appoint the well-regarded Kanishka Narayan as the first AI minister attending cabinet was also well-received, even if his appointment to scrap the Department for Science, Innovation and Technology, a creation of his predecessor-but-one Rishi Sunak, has caused alarm \u2014 not least because it is now being subsumed by the historically lethargic business department.<\/p>\n One bright spot for Labour<\/p>\n Apart from generating growth, Burnham and Healey must address other problems that Starmer and Reeves failed to tackle.<\/p>\n Just over \u00a31 in every\u00a0\u00a310\u00a0spent by the U.K. government now goes on servicing the national debt, which\u00a0currently\u00a0stands at\u00a094.9% of GDP<\/a>, a level last seen in the early 1960s.<\/p>\n Crucial to reducing U.K. borrowing will be cutting the country’s ballooning welfare spending, particularly for people of working age, something Starmer was prevented from doing by his own party.<\/p>\n Simon French, chief economist and head of research at investment bank Panmure Liberum, has written at length on how “government policy is effectively rationing supply \u2014 in land, energy and capital” and, in the process, impeded growth.<\/p>\n One would not know of this\u00a0lackluster\u00a0economic performance by looking at the FTSE 100<\/a>, the U.K.’s premier stock index, which is up by nearly\u00a0one-third\u00a0since\u00a0Labour returned to office<\/a>\u00a0in July 2024 and which hit a new record high in February this year.<\/p>\n Not that the government can take credit for that: the\u00a0Footsie\u00a0is a global index, with\u00a0three-quarters of its constituents’ earnings\u00a0derived from overseas.<\/p>\n The increase also reflects a spate of takeover activity: a clutch of\u00a0Footsie\u00a0constituents have\u00a0succumbed to takeovers<\/a>\u00a0during the last 15 months, including the Lloyd’s of London insurer Beazley, the asset manager Schroders, the laboratory testing group Intertek and the energy services group DCC.<\/p>\n The latest, the commercial real estate group Segro, accepted a \u00a314 billion\u00a0($19 billion)\u00a0offer from U.S. rival Prologis earlier this month.<\/p>\n Outside the\u00a0Footsie, there have also been\u00a0plenty of takeovers<\/a>, with the likes of ingredients maker Tate & Lyle, specialist engineer Rotork, outsourcing group Mitie and property group Assura all agreeing takeovers, and budget airline EasyJet<\/a>\u00a0now set to be bought by Apollo Global Management<\/a>.<\/p>\n All of that reflects the fact that U.K. stock market valuations have been more depressed than those of global peers for many years \u2014 something buyers have spotted.<\/p>\n Those depressed valuations, interestingly, have not shown up in the exchange rate. Sterling<\/a> is up by\u00a0around 6%\u00a0against the U.S. dollar and down by less than 1% against the euro since Labour came to power. Part of that is because the U.K. has higher interest rates than those of the U.S. or the\u00a0euro zone.<\/p>\n However, given the Labour Party’s unfortunate historic record of sterling crises, it is one positive for the country during the last 15 months \u2014 which it has been a pleasure to chronicle for subscribers.<\/p>\n \u2014 Ian King<\/p>\n Need to know<\/p>\n Prediction markets and sports betting: How this UK exchange is trying to do both in the U.S.<\/strong> Trump ally Nigel Farage wins special election to return to UK parliament<\/strong> The Iran war risks bringing the G7\u2032s fastest-growing economy to a halt<\/strong> \u2014 Katrina Bishop<\/p>\n
Smarkets, a UK-based betting exchange, is making its way into the U.S.<\/a> by pursuing two separate avenues.<\/p>\n
Nigel Farage, leader of Britain’s right-wing Reform UK party, has won re-election to parliament<\/a> in a vote he triggered himself last month by stepping down amid controversy over his finances.<\/p>\n
The U.K. economy is showing further signs of a long-awaited rebound, but the picture is complicated by the fallout from the Iran war and high energy prices<\/a>.<\/p>\n