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You may have missed it in the avalanche of Andrew news, but Rachel Reeves has had a great week.
The chancellor got a boost from a trio of economist-defying data points today.
First, her tax hikes on the wealthy and working professionals — although very unpopular — have reaped rich dividends.
The UK swung to a record budget surplus in January, boosted by higher tax receipts, according to the Office for National Statistics. Retail sales had a great start to the year as well, recording the fastest growth in 20 months.
Reeves’s attempts to invigorate the economy also got a boost from a survey showing British firms raised output at the fastest pace in almost two years last month. The closely watched S&P Global purchasing managers’ index rose above economist estimates to 53.9, with the services sector driving a recovery.
Still, some pain points persist. Unemployment is now at a five-year high and forecast to rise. And the drip feed of wealthy residents leaving the country continues, with the government’s tally of total tax hikes since it came to power in 2024 standing at a whopping £60 billion.
I was in Paris this week and struck by the difference in city narratives. Bankers over there were complaining about the problems of plenty — the numbers of their employees on the ground has ballooned since Brexit, plus a slew of financial firms have in recent years set up bases in the city, competing to advise companies and some of the continent’s wealthiest families.
One PR adviser half-jokingly told me the Netflix series Emily in Paris had cemented the city’s status as a global destination to relocate to. Meanwhile in the UK, the series everyone’s talking about is Dirty Business, which explores the country’s water pollution crisis in grimy depth. “Don’t watch it while eating,” Lara Williams writes.
The other UK story that continues to capture global headlines is the fate of the former prince Andrew Mountbatten-Windsor. He was released from police custody yesterday evening — but the investigation into the extent of his ties to the deceased paedophile financier Jeffrey Epstein continues.
“It’s the lowest point for the royal family in hundreds of years,” India McTaggart, royal correspondent at The Telegraph, told my colleague Joe Mayes. “To have Queen Elizabeth II’s beloved son sitting in police custody, on his 66th birthday no less, and the king’s younger brother. It’s unthinkable.”
The royal family is so far showing all signs of the famous “keep calm and carry on” motto. But Brits are not impressed, according to latest polling data.
The focus on Andrew has, briefly, taken the spotlight away from Keir Starmer, who faced his own time in the hot seat after the latest release of files revealed the extent of Peter Mandelson’s ties to Epstein. Bloomberg Opinion’s Marten Ivens argues that the flaws of both Mandelson and Andrew were “hiding in plain sight for many years” and ignored by those who had the power to hold them to account.
Still, the fact that the reckoning has come for both men (even if many other powerful men elsewhere in the world escaped it), is possibly a sign that despite the narratives around the slow demise of Great Britain, some systems are working as they should.
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What just happened
The stories you need to know about this evening
* Primark’s Fast-Fashion Crown Slips With Shoppers Lured to Shein
Decision looms on mooted spinoff against backdrop of mounting competition.
* Anglo Takes Another De Beers Writedown With $2.3 Billion Hit
Anglo American Plc took yet another writedown on its struggling De Beers unit as one of the diamond industry’s deepest ever crises continued to weigh on the miner’s profits.
* Aston Martin Warns on Profit Again as Tariffs Take a Toll
Aston Martin Lagonda Global Holdings Plc issued another profit warning, underscoring the challenge facing Canadian billionaire Lawrence Stroll as he tries to turn around the ailing luxury-car maker.
* The Fire at Chiltern Firehouse: When Bad Things Happen to Good Restaurants
On Valentine’s Day afternoon last year, the Chiltern Firehouse, one of London’s most famous celebrity haunts, suffered massive damage after “burning wood falling from a pizza oven [ignited] the void between the basement and ground floor.” The flames spread via airducts up to the third floor, which was completely destroyed along with the building’s roof. As 125 firefighters battled the eight-hour blaze, more than 100 guests were evacuated from the hotel-and-restaurant that’s occupied the 135-year
* Can London’s Korean Cafes Ride the K-Pop Wave?
The hottest place for a caffeine buzz are high-design cafes with specialties like green tea lattes, salt bread and corn dogs.
Markets Today: Inflation in focus
It was a pretty sunny week for UK data, with inflation at the fore.
The big shift came with Tuesday’s labour data, which showed the pace of wage increases having slowed more than expected and prompting markets to raise their bets on the prospects of a rate cut from the Bank of England as soon as next month. Wednesday’s largely inline and benign CPI reading confirmed the disinflationary picture.
That helped lower gilt yields too — good news for the Treasury as they service the government’s debt. As it turns out, that’s been going pretty well, with lower interest rate payments at the start of the year, combined with higher tax receipts in January allowing the government to report its biggest surplus on record.
Still, rising unemployment, particularly for the country’s youngest workers, is becoming an increasing concern, with government policies such as the higher minimum wage and employers’ National Insurance partly to blame.
These were among the topics I discussed with John Stepek and Marcus Ashworth on this week’s Markets Weekly podcast, which you can listen to here.
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All the deflation and rate cut talk have put sterling on course for its worst week since October, despite this afternoon’s boost from disappointing US data and Supreme Court ruling, And gilt yields are heading for a third weekly decline. The FTSE 100 meanwhile is poised for its best weekly gain of the year, with banks and consumer-facing stocks benefiting from signs of an improving economy. — Morwenna Coniam
Check Bloomberg UK’s Markets Today blog for updates all day.
The big number
Around 120
The number of staff due to lose their jobs as Global Counsel, the strategic advisory firm founded by Peter Mandelson, has gone into administration after an exodus of clients over concerns about its links to Jeffrey Epstein.
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