Chancellor Kwasi Kwarteng has called a meeting with high street bank chiefs

By Suzanne Evans, Director, Political Insight

Chancellor Kwasi Kwarteng has called a meeting with high street bank chiefs for today following turmoil in the mortgage market, Sky News has learnt. Hundreds of mortgage deals have been pulled or frozen by banks as a result of volatility in how banks price home loans. City sources said executives from Barclays, Lloyds Banking Group and NatWest Group were among those expected to attend, however their offices have all declined to comment. The Financial Conduct Authority has already told banks they must justify the withdrawal of fixed-rate mortgage products. The Treasury did not immediately respond to Reuters' request for comment on the Sky report. Kwasi Kwarteng has already held a series of meetings with senior financiers, including executives from investment banks, asset managers and insurers, and said he will set out plans for a deregulatory drive dubbed Big Bang 2.0 in the coming weeks, with a particular focus on scrapping rules imposed during Britain's membership of the EU.

Financial services provider Moneyfacts, which last week estimated that a record 935 mortgage products were pulled overnight, said yesterday that an average two-year fixed rate mortgage was now up to 6.07% (the highest rate for 14 years), compared to 2.25% a year ago, while the five year rate rose to 5.97% from 2.55%.

The Fitch ratings agency has downgraded the UK’s government debt rating to “negative” from “stable” following the mini-budget, warning that the “large and unfunded fiscal package” could lead to a significant increase in the government’s deficits over the medium term. The ratings agency said the lack of independent budget forecasts, as well as an apparent clash with the Bank of England’s strategy to curb inflation had “negatively impacted financial markets’ confidence and the credibility of the policy framework, a key long-standing rating strength”. Fitch maintained its "AA-" credit rating for the UK.

The UK services sector activity stalled in September as soaring inflation hit household budgets and discretionary spending. According to S&P Global it was the weakest service sector performance since the national Covid lockdown in March 2021, with the UK services purchasing managers index (PMI) coming in at 50.0 during the month, down from 50.9 in August. The reading meant that there has been no expansion but equally no contraction. “Service providers often noted spending cutbacks among UK households, especially in relation to discretionary services such as hospitality and leisure,” S&P said. There were also reports that rising business expenses and heightened economic uncertainty had added to demand headwinds. “This is by no means a positive economic reading, ”Joshua Raymond, director at financial brokerage XTB told Yahoo Finance UK. “The immediate market reaction was some small gains in the [pound] as in reality the market had expected a faster deterioration in services activity. Given that the majority of UK GDP is reliant on UK services activity, we are now starting to see the UK recession become entrenched in UK data sets.”

Taxpayer support for household energy bills could cost up to £140bn in an "extreme" scenario, Cornwall Insight has warned. The energy market expert recently became a prominent voice in predicting levels for energy price cap before it was replaced by the government's energy price guarantee (EPG) this month, which limits the amount charged per unit of gas or electricity, with the taxpayer paying the difference between the set unit cost and any higher unit cost. Cornwall Insight put the range of the total cost of the EPG at between £70bn and £140bn for the two years - equivalent, at the lower end, to the cost of the Covid furlough scheme.

A price cap on Russian oil sales has been agreed in principle by the EU as part of a wider package of sanctions against Russia, both Politico and theFinancial Times say, citing unnamed EU officials. However, in a speech at the European Parliament plenary on the war in Ukraine, European Commission President Ursula von der Leyen urged the European parliament to back a temporary cap on gas prices, while acknowledging that not all member states backed the concept. EU countries have so far failed to reach agreement, with some concerned a price cap could lead to difficulty securing supplies in competitive international markets during winter. She told MEPs that the situation had "critically evolved" since the price cap idea was first proposed, adding: "Today, compared to March, more member states are open for it, and we are better prepared. Such as a cap on gas prices must be designed properly to ensure security of supply." The G7 approved plans for a price cap on purchases of Russian oil last month, with the aim of cutting revenue for the Kremlin.

BT workers across Britain are on strike again today, with 30,000Openreach engineers and 10,000 BT call centre workers among those taking industrial action. Today’s strike action includes walkouts by staff who answer 999 calls. The Communication Workers Union (CWU) had previously agreed to exempt 999 staff from the strike action, but changed its position after "widespread outrage at the company's refusal to negotiate". Most of the staff who answer 999 calls at Northern Ireland’s only emergency services centre have joined the strike. CWU NI Regional Secretary Erin Massey said: "We have to show the company we are serious. They are ignoring our demands to come to the table."  Workers "want a decent pay rise, not the pay rise of 2% imposed by the company" which represented "a pay cut when measured against the cost of living increases," she said. "We have 999 operators in the UK relying on foodbanks - it is shameful," she added. BT Group said that while it respected the right of colleagues to take industrial action, it was "profoundly disappointed that the CWU is prepared to take this reckless course of action by including 999 services in strikes". "We will do whatever it takes to protect 999 services - redeploying our people to the most important priority is a normal part of BT Group operations," BT added.

More than 300 offshore drilling and contract maintenance workers employed by Archer, Maersk, Transocean and Odfjell have backed strike action after rejecting a pay offer, the Unite union has announced. Members rejected a 5% pay offer, with 95% supporting strike action in a ballot turnout of 86%. Unite said the strike action will involve a series of 48-hour stoppages every second week for the first eight weeks, with initial action planned for 20th and 21st October. Unite general secretary Sharon Graham said: "Unite's offshore drillers and contractors are ready to take their employers head on. The offer on the table is a substantial real terms pay cut."

British airline Virgin Atlantic announced yesterday that it will not resume its Heathrow-Hong Kong services as planned, and will close its Hong Kong office. The decision has been made due to ongoing issues related to the closure of Russian airspace. "Significant operational complexities due to the ongoing Russian airspace closure have contributed to the commercial decision not to resume flights in March 2023 as planned," the airline founded by billionaire Richard Branson said. Virgin has not flown to Hong Kong since December last year.  Bloomberg says around 46 Virgin Atlantic jobs will be impacted, including office staff and cabin crew, because of to the decision.

Meanwhile, Hong Kong has said it will give away 500,000 airline tickets, worth HK$2bn (£224.3m), in an attempt to boost its Covid-hit tourism industry. The city has rolled back several of its coronavirus rules in recent weeks removing the requirement for new arrivals to go into hotel quarantine, or show a negative Covid test before boarding flights to Hong Kong. "The airport authority will finalise the arrangement with airline companies. Once the government announces it will remove all Covid-19 restrictions for inbound travellers, we'll roll out the advertising campaigns for the free air tickets, "Dane Cheng, executive director of the Hong Kong Tourism Board said. Cheng added that the free tickets, which were bought to support Hong Kong airlines during the pandemic, will be distributed next year to inbound and outbound travellers by the city's airport authority.

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