Testifying to the Treasury Committee this morning (highlights start here<\/a>), Bailey insists that there isn\u2019t a trade-off between financial stability and growth in the economy.<\/p>\n He reminds MPs that Parliament created a great deal of detail when they legislated the ringfence rules after the financial crisis. Perhaps some of that detail could be improved, but he insists the ringfence mustn\u2019t be torn up.<\/p>\n Ringfencing protects UK retail banking from shocks originating elsewhere in the group and in global financial markets.<\/p>\n Last week, chancellor Rachel Reeves promised \u201cmeaningful\u201d reforms to the UK\u2019s ring-fencing rules, prompting warnings from some of the architects of the UK\u2019s post-2008 reforms.<\/p>\n Today, Bailey<\/strong> says the ringfence rules are an important part of the structure of the financial system. Crucially, he explains, they make it easier to resolve a failing bank.<\/p>\n He tells MPs:<\/p>\n \u201cIt has benefits, particularly, in terms of UK customers and UK consumers; businesses and households. I think that is a helpful feature of it. I don\u2019t think it hinders banks fundamentally in terms of their business models. <\/p>\n \u201cAgain, at the margins, I am sure there are things that can be improved and we will work constructively to go through that process.<\/p>\n \u201cIt has established itself as part of the system and to me it would not be sensible to take it away at this point.\u201d<\/p>\n<\/blockquote>\n Share<\/a><\/p>\n Updated at\u00a006.11 EDT<\/p>\n Key events<\/p>\n Show key events only<\/p>\n Please turn on JavaScript to use this feature<\/p>\n GM profits fall as after $1.1bn hit from trade war<\/p>\n Over in the US, carmaker General Motors has reported that its profits fell by a third in the last quarter, after Donald Trump\u2019s trade war cost it more than a billion dollars.<\/strong><\/p>\n GM<\/strong> made a profit of $3bn in the second quarter of this year, on an EBIT-adjusted basis, down from $4.4bn in April-June 2024.<\/p>\n GM<\/strong> told shareholders that tariffs had a net impact of $1.1bn on its earnings in Q2, \u201creflecting minimal mitigation offsets\u201d It also warned that it expects the net impact of tariffs to be higher in the third quarter of 2025, due to the \u201ctiming of indirect tariff costs\u201d.<\/p>\n A 25% import tax on engines, transmissions and other key car parts is now in force in the US, while manufactures also face new tariffs on steel and aluminium imports.<\/p>\n GM<\/strong> is sticking with its estimate that the gross impact of tariffs will be between $4bn and $5bn this year, adding that it is making \u201csolid progress to mitigate at least 30% of this impact through manufacturing adjustments, targeted cost initiatives, and consistent pricing\u201d.<\/p>\n CEO Mary Barra<\/strong> reminded investors that it is investing more in its US manufacturing, telling them:<\/p>\n For example, in June we announced $4 billion of new investment in our U.S. assembly plants to add 300,000 units of capacity for high margin light-duty pickups, full-size SUVs and crossovers. This will help us satisfy unmet customer demand, greatly reduce our tariff exposure, and capture upside opportunities as we launch new models.<\/p>\n The capacity begins coming online in just 18 months, after which we project building more than 2 million vehicles in the U.S. each year as we scale.<\/p>\n<\/blockquote>\n Share<\/a><\/p>\n Updated at\u00a007.19 EDT<\/p>\n BoE governor questions need for digital pound<\/p>\n The Bank of England governor has cast doubt on whether the UK\u2019s central bank will introduce a digital currency, having worked on the project for several years.<\/strong><\/p>\n Andrew<\/strong> Bailey<\/strong> told the Treasury committee that he would need \u201ca lot of convincing\u201d to push through the plan, if existing work to push digital technology into the commercial bank payment systems is a success.<\/p>\n He tells MPs that the BoE will work with banks and the market to develop digital technology in the commercial bank payments systems, particularly the faster ones, which are the main payment systems of the country.<\/p>\n Bailey<\/strong> explains:<\/p>\n That\u2019s a sensible place to do it because that\u2019s where most of our money is.<\/p>\n My view is, if that\u2019s a success I quesion why we need to introduce a new form of money.<\/p>\n<\/blockquote>\n Bailey <\/strong>says improving commercial banks\u2019 digital payments systems could lead to \u201chuge benefits\u201d, such as smart contracts, reducing fraud, reducing costs, and improving late payments to small firms.<\/p>\n This could be the best way to get digital technology into the payments system, he suggests, compared to the alternative of a retail central bank digital currency (CBDC, or digital pound) or the growth of stablecoins (eg non-bank money<\/a>).<\/p>\n Bailey insists he is \u201cnot saying no\u201d to a CBDC, but adds:<\/p>\n If the work with the commercial banks is successful, I would need a lot of convincing that the use case was made.<\/p>\n<\/blockquote>\n Bloomberg reported this morning <\/a>that Bank of England officials are mulling whether to set aside plans to create a digital pound for households amid growing skepticism about the project\u2019s benefits.<\/p>\n Bailey also reminded MPs that China has launched a CBDC, while the European Central Bank is pressing ahead with its plans for a digital euro.<\/p>\n Share<\/a><\/p>\n Updated at\u00a007.01 EDT<\/p>\n Bailey: Success in financial stability is when nothing happens<\/p>\n Q: Do you have red lines about the deregulation of UK financial rules, governor?<\/p>\n Andrew Bailey says he has two very strong red lines.<\/p>\n 1) he repeats that there isn\u2019t a trade-off between financial stability and growth<\/p>\n 2) he shows exasperation about people who say the financial crisis is deep in the past, and solved, so we can move on.<\/p>\n Summing up the challenge of protecting the UK financial system, Bailey says:<\/p>\n Success in financial stability is when nothing happens. The fact we\u2019ve had market volatility this year and we haven\u2019t had a financial stability problem, we\u2019re not worrying about banks failing or worrying about the markets, is of course a success.<\/p>\n<\/blockquote>\n Bailey<\/strong> then declines to back Rachel<\/strong> Reeves\u2019s<\/strong> comment that regulation is acting as a \u201cboot on the neck\u201d of financial firms, saying:<\/p>\n \u201cI don\u2019t use those terms, let me say that… It is not a term I use.\u201d<\/p>\n<\/blockquote>\n Q: But is there a problem with overregulation of financial services firms?<\/p>\n Bailey <\/strong>repeats that the Bank is open to looking at the rules, but insists:<\/p>\n We can\u2019t compromise on basic financial stability. That would be my overall message.<\/p>\n<\/blockquote>\n Share<\/a>BoE governor warns government against watering down bank ringfencing rules<\/p>\n Bank of England governor Andrew Bailey has warned MPs that watering down post-2008 financial crisis bank ringfencing rules would be bad for British households, and would not help banks either.<\/strong><\/p>\n Testifying to the Treasury Committee this morning (highlights start here<\/a>), Bailey insists that there isn\u2019t a trade-off between financial stability and growth in the economy.<\/p>\n He reminds MPs that Parliament created a great deal of detail when they legislated the ringfence rules after the financial crisis. Perhaps some of that detail could be improved, but he insists the ringfence mustn\u2019t be torn up.<\/p>\n Ringfencing protects UK retail banking from shocks originating elsewhere in the group and in global financial markets.<\/p>\n Last week, chancellor Rachel Reeves promised \u201cmeaningful\u201d reforms to the UK\u2019s ring-fencing rules, prompting warnings from some of the architects of the UK\u2019s post-2008 reforms.<\/p>\n Today, Bailey<\/strong> says the ringfence rules are an important part of the structure of the financial system. Crucially, he explains, they make it easier to resolve a failing bank.<\/p>\n He tells MPs:<\/p>\n \u201cIt has benefits, particularly, in terms of UK customers and UK consumers; businesses and households. I think that is a helpful feature of it. I don\u2019t think it hinders banks fundamentally in terms of their business models. <\/p>\n \u201cAgain, at the margins, I am sure there are things that can be improved and we will work constructively to go through that process.<\/p>\n \u201cIt has established itself as part of the system and to me it would not be sensible to take it away at this point.\u201d<\/p>\n<\/blockquote>\n Share<\/a><\/p>\n Updated at\u00a006.11 EDT<\/p>\n Bank<\/strong> of<\/strong> England<\/strong> governor Andrew<\/strong> Bailey<\/strong> then reminds MPs about the surge in certain tech stocks this year, to explain the rebound in markets since their April wobble.<\/p>\n He tells the Treasury committee:<\/p>\n Here\u2019s a striking fact. The market cap of Nvidia is now larger than the UK\u2019s GDP.<\/p>\n<\/blockquote>\n Nvidia\u2019s<\/strong> shares are up 27% so far this year, giving it a market capitalisation of $4.18tn (or \u00a33.1tn), thanks to strong demand for its high-powered chips to power artificial intelligence systems.<\/p>\n Share<\/a><\/p>\n Q: Why have US and global equities bounced back from the initial shock of Donald Trump\u2019s tariffs?<\/p>\n FPC committee member Professor Randall Kroszner <\/strong>replies that it is always \u201cvery difficult\u201d to assess market movements (indeed!).<\/p>\n One factor is that the markets weren\u2019t expecting the level and the breadth of the tariff proposals which Trump announced on 2 April, even though the president had talked about them before.<\/p>\n It was then \u201cvery helpful for the market\u201d that the president pushed back the date when tariffs will come in, and offered more flexibility for negotiations, Kroszner <\/strong>adds.<\/p>\n [that\u2019s a polite way of pointing to the TACO trade<\/a>]<\/p>\n Kroszner <\/strong>also points to the passing of the president\u2019s budget bill, which extends previous tax cuts to investment. That has supported investment in the US.<\/p>\n Share<\/a><\/p>\n Q: are there any elements in the Leeds reforms that make you nervous, in terms of financial stability?<\/p>\n FPC member Randall<\/strong> Kroszner<\/strong> says the committee will weighs up the costs and benefits of the measures, to assess the impact.<\/p>\n He doesn\u2019t see \u201ca necessary clash\u201d between the reforms and financial stability, but it will depend on the detail of what is changed.<\/p>\n Kroszner <\/strong>also points to risks from the non-bank financial sector.<\/p>\n Share<\/a><\/p>\n Updated at\u00a005.47 EDT<\/p>\n Undermining financial stability would hurt growth agenda, government warned<\/p>\n Two Bank of England policymakers have warned the government against undermining the financial system through its deregulation push.<\/strong><\/p>\n Professor Randall<\/strong> Kroszner<\/strong>, external member of the Bank\u2019s Financial Policy Committee, told the Treasury Committee that it is important to maintain resilience in the financial system.<\/p>\n Asked about the \u201cLeeds reforms\u201d announced by Rachel Reeves last week, Kroszner says that snything that challenged that stability would be a red line, (but he doesn\u2019t have any concrete examples of concerns).<\/p>\n Kroszner<\/strong> explains that undermining financial stability would hurt the government\u2019s growth agenda, saying:<\/p>\n \u201cIf you don\u2019t have financial stability it is going to be a major challenge to have economic growth\u201d.<\/p>\n<\/blockquote>\n Reeves\u2019s package of measures, unveiled in Yorkshire, include cutting out \u201cunnecessary\u201d red tape and encourage more financial risk-taking by companies and consumers.<\/p>\n Fellow FPC<\/strong> member Carolyn Wilkins <\/strong>points out to MPs that \u201ca lot of the reforms\u201d made since the great financial crisis of 2008 have worked out well, as illustrated by the stresses which the banking sector has experienced since without collapsing.<\/p>\n Wilkins <\/strong>adds:<\/p>\n \u201cThere are ways we can look at those regulations and maybe simplify them, maybe alter them in some way, and still achieve a very good financial stability outcome, with more efficiency\u201d.<\/p>\n<\/blockquote>\n Part of the FPC\u2019s work is looking at specifically how that can happen to help the growth agenda, Wilkins<\/strong> explains.<\/p>\n Share<\/a><\/p>\n Updated at\u00a005.43 EDT<\/p>\n BoE governor: Uncertainty pushing up long-term borrowing costs<\/p>\n Over in parliament, the Treasury Committee are starting to question members of the Bank of England\u2019s Financial Policy Committee (FPC) on financial stability.<\/strong><\/p>\n As well as governor Andrew<\/strong> Bailey<\/strong>, two external members of the FPC, Randy<\/strong> Kroszner<\/strong> and Carolyn<\/strong> Wilkins<\/strong>, will also give evidence to the Committee.<\/p>\n The committee asks Bailey<\/strong> about the rising cost of government borrowing\u2026.<\/p>\n Bailey<\/strong> replies that the cost of long-term borrowing has risen, globally. It\u2019s not unique to the UK, and there have been steeper rises elsewhere.<\/p>\n These moves are being driven by increased uncertainty, particularly around trade policy, Bailey<\/strong> explains, and also by global uncertainty around fiscal policy.<\/p>\n He says:<\/p>\n \u201cIt is greater uncertainty, clearly. On two fronts: one is uncertainty around what is going on in trade policy at the moment. The second thing is uncertainty globally around fiscal policy. That\u2019s again a global phenomenon.\u201d<\/p>\n<\/blockquote>\n If you look over the last decade, Bailey<\/strong> adds, there has been a shift towards greater government borrowing but a smaller increase in business and personal borrowing.<\/p>\n Q: Are you unconcerned?<\/p>\n Bailey says the moves reflect conditions, both in geopolitics and on pressure on fiscal policies.<\/p>\n Share<\/a><\/p>\n Updated at\u00a005.39 EDT<\/p>\n Britain\u2019s manufacturing sector contracted last year, new sales figures show.<\/strong><\/p>\n The total value of UK manufacturers\u2019 product sales fell byy 3.1% in 2024, to \u00a3452.2bn, the Office for National Statistics reported.<\/p>\n That included a 2.4% drop in motor vehicle sales.<\/p>\n The ONS reports that the manufacturing of fresh or chilled cuts of beef and veal showed the largest value increase, up by \u00a3964million or 18.6% to \u00a36.2 billion.<\/p>\n Other products showing noticeable increases were beer made from malt, which increased by \u00a3793m (17.1%) in 2024 to \u00a35.4bn, and \u2018aeroplanes, helicopters or unmanned aircraft\u2019, which rose by \u00a3527m (7.8%) to \u00a37.3bn.<\/p>\n Share<\/a>OBR: Borrowing since April is in line with our forecasts<\/p>\n Britain\u2019s fiscal watchdog isn\u2019t panicking about the jump in government borrowing in June<\/a>.<\/strong><\/p>\n The Office for Budget Responsibility points out that borrowing in the first three months of this financial year (April to June) is \u201cexactly in line\u201d with its forecast in March, at \u00a357.8bn.<\/p>\n Central government receipts and spending are both broadly in line with the forecast profile, the OBR point out, adding:<\/p>\n In the monthly profile consistent with the forecast in the March Economic and fiscal outlook we expect lower borrowing in the second half of 2025-26 relative to 2024-25.<\/p>\n This is based on a sharp expected rise in capital gains tax around the end-January due date, lower debt interest payments in the second half of the year, and lower central government net social benefits which were unusually backloaded last year.<\/p>\n<\/blockquote>\n Borrowing in line with forecast in first quarter of 2025-26 \u2013 our monthly commentary on the public finances will be published later this morning \ud83d\udcca pic.twitter.com\/d8h3FZVEey<\/a><\/p>\n \u2014 Office for Budget Responsibility (@OBR_UK) July 22, 2025<\/a><\/p><\/blockquote>\n Share<\/a><\/p>\n Neil Wilson, <\/strong>UK investor strategist at Saxo<\/strong>, fears UK government bonds could come under attack this summer, saying:<\/p>\n The British government\u2019s borrowing rose more than expected in June<\/a> \u2013 second-highest since records began in 1993 for the month…tax hikes are coming<\/a>.<\/p>\n Gilt yields rose with the 30-year jumping after sliding on Monday \u2013 we\u2019re not yet back to yesterday\u2019s highs so nothing to get jumpy about. But I do worry that we could see bond vigilantes hit gilts this autumn.<\/p>\n<\/blockquote>\n Share<\/a>FTSE 100 hits new intraday high<\/p>\n Despite the gloomy UK borrowing data, the London stock market has hit a new record peak this morning.<\/strong><\/p>\n The blue-chip FTSE<\/a> 100 index jumped to 9025 points in early trading, a day after closing above the 9,000 point mark for the first time.<\/p>\n The rally was led by food services group Compass<\/strong>, which raised its profit forecast for this year and announced the acquisition of European premium food services business Vermaat Groep<\/strong>. Compass\u2019s<\/strong> shares are up 4.2%.<\/p>\n They\u2019re followed by Centrica<\/strong> (+4%), following this morning\u2019s confirmation that it is taking a 15% stake in the Sizewell C nuclear power station.<\/p>\n Mining stocks are rallying too, lifted by higher commodity prices.<\/p>\n Share<\/a>FCA warns insurers to stop poor practices Insurers need to improve the way they handle home and travel claims, the financial regulator said this morning<\/strong>.<\/p>\n The Financial<\/strong> Conduct<\/strong> Authority<\/strong> has uncovered \u201cconcerning evidence\u201d of poor practice among some home and travel insurers, which has led to delays in settling claims and high numbers of complaints. There has been a \u201clack of oversight of outsourced services\u201d in some cases, the regulator said, as well as \u201cinsufficient management information\u201d.<\/p>\n The FCA also found high rejection rates for storm damage claims, with only 32% of claims in its sample receiving a payment in 2024. The regulator also found cases of cash settlements being used \u201cwithout sufficient consideration of whether they are most suitable\u201d.<\/p>\n The watchdog is also reviewing high premiums in the car insurance industry, although it found the rise in costs has been driven by factors largely outside insurers\u2019 control, such as higher prices for cars, parts, labour and energy. The cost of hire vehicles, as well as the number and cost of theft claims and uninsured drivers, have also risen significantly, it said.<\/p>\n However, it found evidence in the car insurance market that referral fees from credit hire firms and claims management companies were \u201cassociated\u201d with slower claims processing and higher costs.<\/p>\n Sarah Pritchard<\/strong>, deputy chief executive of the FCA,<\/strong> said:<\/p>\n \u201cExternal cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling, particularly in home and travel.<\/p>\n That\u2019s why we\u2019re stepping up – making sure claims are handled promptly and fairly and pushing for a coordinated effort to tackle the root causes of rising motor premiums.<\/p>\n A well-functioning insurance market helps consumers navigate their financial lives and supports growth by building people\u2019s resilience to financial and personal shocks.\u201d<\/p>\n<\/blockquote>\n Share<\/a>UK bond yields rise after jump in borrowing<\/p>\n UK bond prices are weakening, which pushes up the cost of borrowing, as traders digest this morning\u2019s public finances report.<\/strong><\/p>\n The yield, or interest rate, on 10-year UK bonds has risen by two basis points (0.02 percentage points) to 4.634%.<\/p>\n Longer-dated, 30-year, bond yields have risen by almost three basis points to 5.463%, towards the 27-year highs above 5.5% reached in April<\/a>.<\/p>\n Yields rise when bond prices fall. Although these are small moves, they add to the pressures on the UK public finances, as higher borrowing costs eat into Rachel Reeves\u2019s limited headroom against her fiscal targets.<\/p>\n Share<\/a>UK grocery inflation jumps to 5.2%<\/p>\n More bad news: UK grocery inflation has jumped to its highest level since January 2024, as the cost of living squeeze intensifies.<\/strong><\/p>\n Data provider Worldpanel <\/strong>by Numerator,<\/strong> has reported that grocery inflation accelerated in the last four weeks, to 5.2% year-on-year. That\u2019s up from 4.7% in the previous month.<\/p>\n Fraser<\/strong> McKevitt<\/strong>, head of retail and consumer insight at Worldpanel<\/strong>, says the annual cost of household shopping is rising sharply:<\/p>\n With the average household spending \u00a35,283 each year at the grocers, this latest rise could add \u00a3275 to bills if people\u2019s shopping habits stay the same.<\/p>\n Just under two thirds of households say they are very concerned about the cost of their grocery shopping, and people are adapting their habits to avoid the full impact of price rises. Own label products, which are often cheaper, continue to be some of the big winners and, in fact, sales of these ranges are again outpacing brands, growing by 5.6% versus 4.9%.<\/p>\n<\/blockquote>\n Share<\/a><\/p>\n Updated at\u00a004.03 EDT<\/p>\n What the experts say: Higher taxes likely<\/p>\n\n
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![\"Lauren](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/07\/Lauren_Almeida.png\")
Lauren Almeida<\/p>\n\n
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