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The government may need to pay the Bank of England (BoE) more than £30bn next year

   News / 23 Nov 2022

Published: 23 November 2022

By Suzanne Evans, Director, Political Insight

The government may need to pay the Bank of England (BoE) more than £30bn next year and in 2024 to cover losses on its quantitative easing (QE) programme, a report released by the central bank yesterday showed. The BoE began buying government bonds in 2009 and the size of the QE programme peaked at £895bn in December 2021, including £20bn in corporate bonds. Under terms agreed at the start, the Treasury receives any profits from QE - but must compensate the BoE for any losses. Hence, since 2009, the BoE has paid the government £123bn, which represents the difference between the interest the BoE received on its bond holdings and the near-zero interest it paid to banks that deposited cash with the BoE. Now the BoE is raising the interest rate it pays to banks, these flows have begun to reverse, and last month, the treasury paid the BoE £828m to cover QE losses.

75% of respondent to a Reuters poll of economists said they expect the Bank of England (BoE) to press on with interest rate rises to battle inflation even though Britain is heading into a long recession, with an extended cost of living crisis. They anticipate the BoE’s Monetary Policy Committee adding 50 basis points at its next meeting on 15th December, taking the base rate to 3.50%.

The government has delayed a parliamentary vote on the Levelling-up and Regeneration Bill after 47 Conservative MPs filed amendments proposing changes to it. The legislation, aimed at boosting housing and infrastructure, faces opposition in the main because the MPs want to end mandatory housebuilding targets for local authorities and give councils more powers over housebuilding. The vote as due to be held on Monday next week.

Housing Secretary Michael Gove has written to a group of social landlords saying their behaviour was “unacceptable”. Clarion, Southern Housing Group, Onward Homes, Catalyst, PA Housing and Johnnie Johnson Housing have all been ‘named and shamed’ by the Department for Levelling Up, Housing and Communities (DLUHC) as they had all recently been hit with severe maladministration judgements by the Housing Ombudsman. “The secretary is absolutely clear: he will not stand for poor housing conditions in 21st century Britain,” DLUHC added. The intervention follows outcry over the death of two-year-old Awaab Ishak, who died after prolonged exposure to mould in a housing association one-bed flat in Rochdale, Greater Manchester. In the wake of the coroner’s verdict, Mr Gove’s letter to housing associations and local councils warns they are “on notice” and that they must “go further than the letter” of the Decent Homes Standard.

Following Prime Minister Rishi Sunak’s appearance on Monday, yesterday Labour leader Keir Starmer spoke to the Confederation of British Industry (CBI) annual conference, and said Britain must end its economic dependence on immigration. The days of “low pay and cheap labour” are over,” he said, in a speech taken to be an attempt to target voters in so-called ‘Red Wall’ parliamentary constituencies who voted en-masse for Brexit. “I want to be clear here: with my Labour government, any movement in our point-based migration system, whether via the skilled occupation route, or the shortage worker list, will come with new conditions for business,” he said. “We will expect you to bring forward a clear plan for higher skills and more training, for better pay and conditions, for investment in new technology…our common goal must be to help the British economy off its immigration dependency. To start investing more in training up workers who are already here.” “Migration is part of our national story – always has been, always will be. And the Labour Party will never diminish the contribution it makes to the economy, to public services, to your businesses and our communities,” he added. “But let me tell you, the days when low pay and cheap labour are part of the British way on growth must end.”

Two weeks of talks between rail bosses and the RMT union have failed to make headway, leading RMT General Secretary Mick Lynch to announce more strikes, this time over Christmas. Some 40,000 staff from Network Rail and 14 train companies are expected to walk out on the 13th and 14th December; the 16th and 17th December; the 3rd and 4th January; and the 6th and 7th January. There could also be disruption to rail services on other days because of an overtime ban between 18th December and 2nd January. “I'm not the Grinch, I'm a trade union official, and I'm determined to get a deal," Lynch told reporters, referring to Dr Seuss’ mean-spirited children's storybook character who famously "stole Christmas". Train drivers who belong to the Aslef union are staging a separate strike this Saturday, hitting services run by 11 operators, including Great Western and Southeastern.

Britain's 'highly concentrated' consumer credit ratings market used for obtaining loans is not working well, and a new industry body to help improve the quality of scores is needed, the Financial Conduct Authority (FCA) said yesterday. Experian, Equifax and TransUnion make up almost all of the UK £800m credit reference agencies (CRAs) sector, and switching between them is difficult, the FCA said in an interim report. An industry committee, known as SCOR for lenders and raters to share credit information on consumers is too narrow, with no representatives from consumers or 'challenger' companies, the FCA said. There are also significant differences in credit information held by the three big companies, which are "very likely" to affect lending decisions by banks, the atchdog added. Equifax said it was reviewing the FCA report, and Experian said it supported a recommendation to improve coverage of credit information. A TransUnion UK spokesperson said the company will work with the FCA and wider industry to sustain a fair and robust credit ecosystem. SCOR had no immediate comment when asked by Yahoo Finance. A public consultation on the FCA's proposals ends in February, with a final report expected in the third quarter of next year.  

The average cost a five-year fixed-rate mortgage has dropped below 6% for the first time in seven weeks, Moneyfacts reports. Mortgage lenders are now offering 5.95% on average for a five-year fixed-rate deal, it said, although the average two-year fixed-rate mortgage remains above 6%, at 6.13%. On 23rd September, the average five-year fixed mortgage rate was 4.75%, and the two-year fix was 4.74%. By October 20, the average five-year deal was 6.51% and a two-year product was 6.65%.

The Office for National Statistics (ONS) has said that spending on research and development (R&D) by UK businesses was £46.9bn in 2021. This was up by £2.9bn since 2020, and by £5.9bn since 2018, the earliest period available using an improved data gathering and analysis methodology.

The Competition and Markets Authority (CMA) has launched an investigation in cloud gaming and mobile browsers, it confirmed yesterday. The competition watchdog said an initial consultation had shown "substantial support" for a fuller probe into the way that Apple and Alphabet's Google dominate the mobile browser market, and how Apple restricts cloud gaming through its App Store.  A number of browser vendors, web developers and cloud gaming service providers had responded to the consultation, arguing that the status quo was harming business, holding back innovation and ramping up costs. The investigation is scheduled to conclude within 18 months.

Consumer magazine Which? has warned shoppers looking for a ‘Black Friday’ bargain that only one in seven deals offer a genuine discount, following its analysis of 214 Black Friday deals last year across seven major retailers. A review of products from Amazon, AO, Argos, Currys, John Lewis, Richer Sounds and Very revealed that 183 (86%) were cheaper or the same as their Black Friday price in the six months before the event and 209 (98%) were cheaper or the same price at other times in the year. None were cheaper on Black Friday alone. Which? retail editor Reena Sewraz said: “Our research shows that finding a good deal on Black Friday is like looking for a needle in a haystack...Our advice is to take the time to do some research if you want to find a genuine bargain”.

Which? has also named Leeds Bradford airport as the worst in the country for the time it takes to pass through security lines. The average hold-up there between February and August was 35 minutes, the consumer outfit said. Which? asked almost 1,300 people who travelled from a UK airport over the six-month period how long they queued at security. Travellers reported security queues in excess of an hour at nine airports, including Bristol (17% of respondents), Birmingham (11%) and Manchester (8%). More than a quarter of people facing wait times in excess of an hour nationally, Which? said.

Manchester United Football Club's American owners, the Glazer family, have confirmed they are considering selling the club after 17 years in charge, Sky News reports. A statement said the board of directors was "commencing a process to explore strategic alternatives for the club" which will include "new investment into the club, a sale, or other transactions". Avram and Joel Galzer have for many years been accused of not investing in the club and saddling it with too much debt, and yesterday star player Cristiano Ronaldo announced he was leaving mutual consent following an interview with broadcaster Piers Morgan in which he said: "The Glazers, they don't care about the club. I mean, professional sport, as you know, Manchester is a marketing club".  Previously, another former United star, Gary Neville, called the Glazers "scavengers" who "need booting out of this football club and booting out of this country," after it was revealed they were among those looking to form a breakaway European Super League - an idea lambasted by most of the footballing world.

Gene and cell therapy specialist Oxford Biomedica has appointed Dr Frank Mathias as its new CEO, effective from March. The London-listed company, which collaborated with AstraZeneca to develop its covid vaccine, said Mathias would bring "world-class innovation and contract development and manufacturing experience" to the firm. Since 2016, he has served as CEO of Rentschler Biopharma, which he developed into a full-service contract development and manufacturing organisation. During his tenure, Rentschler was the first contract development and manufacturing organisation (CDMO) in Europe to support the commercial production of the mRNA Covid-19 vaccine for BioNTech, and also transferred the commercial production process for Curevac's mRNA vaccine. In 2019 he was awarded the title of 'EY Entrepreneur of the Year' in Germany.

The cryptocurrency market cap has fallen below $800bn for the first time since December 2020, as the scandal surrounding the FTX exchange ruptures confidence in the industry, Yahoo Finance reports. The global crypto market cap is now $782.46bn (£658.84bn), a 1.72% decrease over the last day.

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