UK inflation accelerates more than expected to 3.8%, highest since early 2024Some economists now expect interest rates to be on hold this year, while the EY Item Club forecasting group says November is a close call'.Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said:All told, July's consumer prices report showed headline inflation matching the monetary policy committee's (MPC) forecasts, as outlined in the August monetary policy report (MPR).Services inflation exceeded the MPC's expectations, but that jump in services consumer prices index (CPI) was partly driven by a sharp move in the erratic airfares component, which could unwind in August's data. That said, the doves on the MPC have taken a battering over the past week. July's figures show sticky underlying services inflation and are another blow to those on the MPC that argued hard at the August meeting about the disinflationary process being underway.Base effects mean CPI inflation is likely to edge up further over the next couple of months and peak in September. Subsequently, inflation should cool gradually. The positive contribution from the energy category is expected to fade towards the end of this year and into next. Meanwhile, food price inflation should slowly cool, as the impact of stronger sterling gradually feeds through. Though services inflation is likely to remain sticky in the near-term, it will start to soften next year, as pay growth continues to cool and the impact of businesses passing on this year's increase in employers' National Insurance Contributions (NICs) fades.In the minutes of its August meeting, the MPC sent a clear message that inflation was its priority again. However, there wasn't much in today's release that should add to the committee's concerns, with headline inflation in line with the Bank of England's staff projections and its measure of underlying services inflation softening. November's meeting will be a close call, with the hawkish shift at the August meeting leaving much greater uncertainty around the timing of the MPC's next cut.We have taken the decisions needed to stabilise the public finances, and we're a long way from the double-digit inflation we saw under the previous government, but there's more to do to ease the cost of living.That's why we've raised the minimum wage, extended the 3 bus fare cap, expanded free school meals to over half a million more children, and are rolling out free breakfast clubs for every child in the country. Through our plan for change we're going further and faster to put more money in people's pockets.Once again, the soaring cost of basic essentials like food and water is pushing families to the brink. Workers and their families are struggling to pay excessive bills. Pressure needs to be taken off family budgets by giving workers a pay rise. The time for action is now. Continue reading...

Decision on neighbourhood health centres expected in autumn but approach divides policy expertsLabour is preparing to kick off a new wave of public-private partnerships (PPPs) in England to build the neighbourhood health centres at the heart of its NHS 10-year plan.Ministers will make a final decision in the autumn budget about whether to use the funding approach, which was put on pause eight years ago. Continue reading...

Fuel and air fares also pushed up annual July rate, making interest rate cuts less likely this year

In today's newsletter: The local tax remains based on property values from 1991. Now, with services stretched, ministers face the near-impossible task of rewriting the rulesGood morning. Britain's fiscal outlook is bleak. The chancellor, Rachel Reeves, faces the daunting task of closing a 40bn black hole in the public finances.There is intense speculation over how she intends to, as runs that oft-used phrase, balance the books. This week, my colleagues have reported that the chancellor is considering a new proportional" property tax. It would mark a radical overhaul of stamp duty and council tax.Ukraine | Donald Trump ruled out the deployment of American troops in Ukraine in his first interview after yesterday's White House meeting with the Ukrainian president, Volodymyr Zelenskyy, and European leaders.UK news | Keir Starmer's asylum plans have been plunged into turmoil after a high court ruling blocked people seeking refuge from being housed in an Essex hotel.Gaza | Israel has said it will deliver its response to international mediators by Friday over a new Gaza ceasefire plan accepted by Hamas amid mounting pressure for a truce.UK politics | A Reform UK-led county council has served its residents a plate of chaos" from the start of its leadership, according to its Conservative opposition.Work | Older employees who are disturbed by younger, more boisterous colleagues in the workplace are not victims of age harassment, an employment tribunal has ruled. Continue reading...

Experts say undermining green protections and research funding is against the principles of economicsThree leading US economists are urging their peers around the world to push back against Donald Trump's attack on environmental laws.In what amounts to a call to action to economists, the trio say rollback of environmental regulations is inconsistent or antithetical" to fundamental principles of economics over how to allocate the world's limited resources for the greatest possible value to society.Withdrawal from the Paris climate agreement.Eliminating consideration in federal policy of the well-established effects of climate breakdown on public welfare.Executive orders to drill baby drill" giving priority to fossil fuel energy production.Ending research funding on environment and climate and the collection of environmental data.Reducing investments and regulations designed to tackle lead and forever chemicals in drinking water. Continue reading...

Communities feel powerless because the law gives betting firms the upper hand. But a simple change could transfer power to the people Dawn Butler is MP for Brent EastWalking down their local high streets, people in Britain are increasingly unlikely to come across a local butcher, baker or grocery shop, and more likely to find betting shops, casinos, adult gaming centres (AGC) and so-called bingo venues, where traditional bingo is muscled out by money-sapping slot machines. These establishments are taking over our town centres at an alarming rate. From talking to my constituents in Brent, west London, and residents across the capital, I know that people have had enough.That's why this summer I have launched a campaign for urgent reform of our gambling laws. Ministers must give local authorities and people greater power to tackle this issue and reclaim our high streets. Currently, billionaire-owned overseas corporations have too much power, and local people have none. That needs to change. And it's time to raise the gambling tax. As Gordon Brown, a former Labour chancellor and prime minister, recently pointed out, it is now an under-taxed industry. With a modest increase we could raise 3bn a year.Dawn Butler is MP for Brent East Continue reading...

Looks like some ideas didn't make it

The UK's plans seem to outsource sovereignty for phantom efficiency. Public services provide the data and power while US tech giants reap the rewardsThere was a time when Britain aspired to be a leader in technology. These days, it seems content to be a willing supplicant - handing over its data, infrastructure and public services to US tech giants in exchange for the promise of a few percentage points of efficiency gains. Worryingly, the artificial intelligence strategy of SirKeir Starmer's government appears long on rhetoric, short on sovereignty and built on techno-utopian assumptions. Last week Peter Kyle, the technology secretary, was promoting the use of AI-generated discharge letters in the NHS. The tech, he said, will process complex conversations between doctors and patients, slashing paperwork and streamlining services. Ministers say that by applying AI across the public sector, the government can save 45bn.But step back and a more familiar pattern emerges. As Cecilia Rikap, a researcher at University College London, told the Politics Theory Other podcast, Britain risks becoming a satellite of the US tech industry - a nation whose public infrastructure serves primarily as a testing ground and data source for American AI models hosted on US-owned cloud computing networks. She warned that the UK should not become a site of extractivism", in which value - whether in the form of knowledge, labour or electricity - is supplied by Britain but monetised in the US.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Exclusive: Treasury examines options including tax on homes sold for more than 500,000 as well as overhaul of council taxThe Treasury is considering a new tax on the sale of homes worth more than 500,000 as a step towards a radical overhaul of stamp duty and council tax, the Guardian has been told.As the chancellor, Rachel Reeves, prepares the ground for tax rises in this autumn's budget, senior ministers have tasked officials to study how a new proportional" property tax could be implemented and model its impact before reporting back to ministers, who have been briefed on the proposals. Continue reading...

Companies send letter to business secretary complaining new rules were imposed with 24 hours' noticeUK metals companies have threatened to take legal action against the government over tariffs on raw steel imports from Asia which they claim have caused a tsunami" of problems for the industry.Earlier this summer, the business secretary, Jonathan Reynolds, reduced the amount of raw steel from Vietnam and South Korea that can be imported tariff-free in a move designed to protect UK raw steel makers, which face competition from cheap imports. Continue reading...

Economists doubt US duties will bring about a resurgence of US factory jobs, notably due to Trump's erratic tariff rolloutDonald Trump's hugely disruptive trade war is setting the stage for a manufacturing renaissance in the US, administration officials say. Outside the White House, many economists are skeptical.Global trade experts point to many reasons they believe the president's tariffs will fail to bring about a major resurgence of manufacturing, among them: Trump's erratic, constantly changing policies, his unfocused, across-the-board tariffs, and his replacing Joe Biden's carrot-and-stick approach to brandish sticks at the world. Continue reading...

Manchester is closing the gap on London, with public money having helped to crowd in' a lot of private investmentOver the summer Rachel Reeves has been on a road trip around Britain. From Cornwall and Kent, to Aberdeen, south Wales and Belfast, in search of the solutions for a national economy that is stuck in a rut.Inspired by this tour, the chancellor used a Guardian article last week to set her autumn budget priority: boosting productivity. Tax and spending may dominate news headlines, but this is the real problem facing the country, and no politician of the past two decades has managed to fix it. Continue reading...

Amid party divisions and issues with data, pulling existing tax levers could be a more politically palatable option

Rachel Reeves is under pressure to consider a new levy to help balance the books. We look at her options

Even Republican economists have criticized president's pick of EJ Antoni to lead the Bureau of Labor StatisticsDonald Trump fired Bureau of Labor Statistics (BLS) commissioner Erika McEntarfer, a veteran economist with decades of experience inside the federal government, after claiming without evidence that official jobs data had been rigged" against him.In her place, the US president has lined up an ardent supporter of his agenda accused of regularly misrepresenting and exaggerating statistics, who previously urged Trump's officials to take a chainsaw" to the agency he has been tapped to oversee. Continue reading...

Live, rolling coverage as surprise GDP acceleration in June helps quarterly output beat expectations, while eurozone industrial production slumpsThe second-quarter UK GDP figures count as a major beat", according to Andrew Wishart, senior UK economist at Berenberg, an investment bank. That is economist-speak for data that will prompt a rethink of the narrative around the economy - and he added there may be good news on productivity as well.Wishart wrote in a note to clients:It now looks like the UK economy weathered US tariffs and domestic tax hikes remarkably well in the second quarter.With the economy benefitting from fiscal support and showing little sign of interest rates slowing it down, the strong data support our view that the Bank of England will wait until next year before cutting bank rate again.Improving growth at the same time as the sector cuts staff numbers implies that operators have been able to make significant improvements in productivity. While the hotel and restaurant sector is an extreme example, an economy-wide decline in employment alongside reasonable GDP growth suggests that productivity growth is improving. At the margin, that will give the government's official forecaster, the Office of Budget Responsibility, some confidence that it is right to assume a recovery in productivity growth after a dismal three years. If so, the government will not need to raise taxes by anywhere near as much this autumn as the most pessimistic analysts claim in the press.The optics of a resilient" economy allow for BoE patience as headline inflation bobs around between 3.5% and 4% in the coming months. That said, we think softer underlying details and the likely softening of the growth momentum from here keep a November cut in play.Interest rates are too high for a sustained and broad-based growth uptick. If the government ensures that the autumn budget does not repeat the 2024 slew of inflation-boosting policies, and measured inflation falls through 2026, we think the [Bank's rate-setting monetary policy committee] will acknowledge the need to cut rates amid the ongoing build-up of slack. If that is not the case, we will see more of the same stagflationary dynamics, we think. Continue reading...

GDP figure slower than previous quarter but beats expectations thanks to 0.4% expansion in June

Growth of 0.3% is a positive sign but the chancellor still has major difficulties to confront

Exclusive: Chancellor focuses on investment and planning rules as she dismisses talk of tax rises as speculation'

Labour is reversing a decade of stagnation and we're making progress on wages, jobs and trade. But there is more to do

Rachel Reeves would do well to drop her boot on the neck' inflammatory language and err on the side of cautionOne reason to worry about the chancellor's plan for deregulation in the financial services sector is the dramatic language in which she pitched it. Rachel Reeves's metaphor in her Mansion House speech last month about regulation in too many areas acting as a boot on the neck of business" felt wildly over the top when you remember why tougher financial rules were needed in the banking sector in the first place. It was because the light-touch regulatory era caused the whole economy to be clobbered in the collapses of 2008-09.In the event, it took until 2019 to implement fully the centrepiece of the clean-up operation: bank ringfencing, which requires UK banks of a certain size to separate their retail and investment banking activities. Now, six years later - no time at all in the grand scheme - the Treasury, lobbied by most of the big banks, is contemplating meaningful" changes to ringfencing in the interests of economic growth. It feels far too soon to try anything radical. Continue reading...

Ministers boast of rising wages. But for low earners, the cost of living crisis endures - with food and rent inflation erasing any pay gainsWhen Sir Keir Starmer told reporters last week that his government's upcoming budget would build on what we've done" by focusing on living standards" and making sure that people feel better off", it was clear that he was trying to shift the political narrative from soulless statistics to lived experience.But if the prime minister is serious, he should look at the latest forecast from the National Institute of Economic and Social Research (NIESR). The thinktank warns that while some households may indeed feel better off", many - particularly the poorest - will not. NIESR says real disposable income for the bottom tenth of households will fall this year. Living standards for the poorest fifth of Britain are well below their pre-pandemic level.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Bourses in Australia and Japan hit record highs as hopes grow of trade deal within latest 90-day pause

Exclusive: Chancellor also looking at tweaks to capital gains tax to try to bridge 40bn-plus spending gap before budget

Unemployment remains steady but vacancy rates drop and pay growth slows

US and China extend 90-day tariff truce; UK labour market slows as employers hold off hiringInvestor morale in Germany has worsened markedly, as financial market experts were disappointed by the recent trade deal between the EU and the US, according to a closely watched survey.After increasing for several months, the Centre for European economic research (ZEW)s indicator of economic sentiment in Germany fell by 18 points to 34.7 points. The assessment of the current economic situation also declined, by 9.1 points.The ZEW indicator experiences a substantial decline, also due to the poor performance of the German economy in the second quarter of 2025. The outlook has worsened in particular for the chemical and pharmaceutical industries. The mechanical engineering and metal sectors as well as the automotive industry are also severely affected. Continue reading...

Prices were 2.7% higher last month compared with a year ago, and core inflation went up at a higher pace than what was seen in JuneUS prices continued to rise in July, according to key economic data released on Tuesday, as Donald Trump's international tariffs shakeup started to impact consumer costs.Prices were 2.7% higher last month compared with a year ago, according to the consumer price index (CPI), which measures the prices of a basket of goods and services. Though inflation dipped down in the spring, the annualized inflation rate jumped up 0.4% since April. Continue reading...

The NICs hike, tariffs and weak consumer spending have hit firms but there are crumbs of comfort for the chancellor

President signs executive order extending deadline for higher tariffs hours before agreement was due to expireDonald Trump has once again delayed implementing sweeping tariffs on China, announcing another 90-day pause just hours before the last agreement between the world's two largest economies was due to expire.On Monday, the US president signed an executive order extending the deadline for higher tariffs on China until 10 November, officials confirmed to Reuters. Continue reading...

The technological and strategic brilliance of its world-class companies are being swamped by macroeconomic troublesProclamations about the inevitability of China's dominance of the global economic system, or the so-called Chinese century, were made long before Donald Trump's attempts to stymie its trade with the US.Common concerns about coercive politics and human rights aside, some notions of China as an unstoppable economic, technological and military behemoth sit alongside others focused more on an increasingly sclerotic, over- centralised political economy, that depends on wasteful economic stimulus, and features poor governance and institutions. The fusion of these notions suggests that we may already have reached peak China". Continue reading...

Harry Melbourne's froggy treat that cost 10p in its 1990s heyday sells for about 30p or even up to 1 nowThe creator of the Freddo chocolate bar would be rolling in his grave if he could see the prices being charged for a treat that cost 10p back in its 1990s heyday, his daughter has said.Leonie Wadin said she once waited impatiently for her father, Harry Melbourne, to come home with boxes of Freddos, but has now vowed never to buy another one. Continue reading...

Economic uncertainty also a factor as bosses stuck in limbo' and drop in recruitment hits young people hardestHiring intentions among Britain's businesses remain at a record low as they grapple with rising employment costs and worry about the economic outlook, with young people hit hardest by the drop in recruitment.Three separate surveys issued on Monday painted a gloomy picture on hiring activity, pay and business confidence, with claims that bosses were stuck in limbo" and waiting for greater clarity in the autumn budget. Continue reading...

Autumn budget must address pain of high inflation on hard-pressed UK households as food prices riseThese prices are disgusting" is the common retort from shoppers browsing the supermarket shelves. To say that the cost of everything from a pint of milk to a loaf of bread has changed beyond recognition in only a few years is an understatement. But it could still get worse.The warning from the Bank of England last week that food prices are stirring the inflation beast that has stalked Britain for the past four years shows that the cost of living crisis is far from over. The headline rate of inflation is expected to hit 4% by September, in a reawakening fed by the soaring cost of things such as butter, chocolate and beef. Continue reading...

Industry experts hope the new subsidy will boost Britain's EV market - but not all models will be eligibleIs it time to go electric? The UK car industry certainly thinks so and is readying for a surge in demand as a new subsidy scheme cuts the price of some electric cars by up to 3,750.With purchase prices - not to mention range anxiety - contributing to weak consumer uptake, the government grants are designed to bring the upfront cost closer to a petrol car. Making them cheaper will also give thousands more drivers access to savings of up to 1,500 a year in fuel and running costs compared to a petrol car", officials say. Continue reading...

Erica Groshen says she's worried about US president bending bureau to his will, but hopes he won't go that far'Donald Trump will need to take more radical action than simply firing the head of the Bureau of Labor Statistics (BLS) if he is determined to cook the books" on jobs figures, the federal agency's former commissioner has said.Erica Groshen, who ran the BLS during Barack Obama's presidency, said meddling with how government statisticians calculate unemployment and labour market trends would require a whole new cadre" of people to be brought in by a new commissioner. It would also provoke upheaval and a likely rash of whistle-blowing among the existing workforce. Continue reading...

Those who insist on spending cuts are those who are never hurt by them. Time to be brave - and take a new tackBritain is in danger of going bankrupt. It may happen slowly or quickly, but since Labour took office this possibility has increasingly been promoted and discussed in the press, by opposition parties and in the City of London.What exact form will this bankruptcy take? The prophets of doom tend to be vague about the timescale, but more certain about the cause of the coming meltdown: the state spending too much, generally on people who have little.Andy Beckett is a Guardian columnist Continue reading...

Exclusive: The Guardian has been told that discussions about increases include a near-certain gambling levyThe chancellor and prime minister will begin to prepare the ground for tax rises and reforms from September as part of a strategy to prepare the country for a difficult budget that could be held in November, the Guardian has been told.Although Treasury sources have insisted Rachel Reeves will stick to her pledge not to raise income tax, national insurance or VAT, senior Whitehall sources said that she and Keir Starmer had begun a series of meetings to thrash out the shape of the budget. Continue reading...

The rate setters made clear that above-inflation pay claims would be likely to bring credit loosening to a halt

Monetary Policy Committee has cut UK interest rates today, in a deeply split decision, but City pricing suggests another cut in 2025 is no longer fully priced in

Policymakers cut base rate by quarter-point to 4% amid concern about strength of UK economy

Base rate reduction to 4% will hit some savers, but people with tracker home loans will see immediate benefit Bank cuts interest rate for fifth time in a year

Japanese carmaker cuts operating profit guidance by 16% day after rival Honda reported 50% drop in profits

Quarter-point reduction expected, with City investors predicting a three-way split among rate setters Business live - latest updatesThe Bank of England is poised to cut interest rates on Thursday despite a growing divide between its policymakers over the dangers to the economy from high inflation and rising unemployment.In a development that will ease pressure on households and businesses, City forecasters expect the central bank to announce a quarter-point cut, its fifth rate reduction in a year. Continue reading...

Donald Trump's latest wave of reciprocal' rates were in place as of a minute past midnight Washington time on Thursday

The US president's increased reciprocal' tariffs on dozens of countries came into effect at a minute past midnight Washington time on Thursday

The chancellor and the CBI have plans for reviving the institution. Neither will tackle Britain's pitifully low levels of business investmentWe are, it is admitted, the financial centre of the world," said the chairman of the Union Bank of London in 1903. Back then, the City of London was the world's banker, and its stock exchange was worth as much as the New York and Paris exchanges combined. Today, the stock market is shrinking at its fastest rate since 2010. While the mining company Glencore's recent decision to retain its London listing provided a temporary boost, it won't stem the tide. Companies are increasingly ditching London and moving to Europe and the US.Rachel Reeves hopes to revive the exchange by pushing stock ownership, encouraging people to become their own portfolio managers. The Confederation of British Industry (CBI) has its own proposals, including tax breaks and looser bonus rules. Both of these plans are based on deregulation, and neither addresses the underlying problem: Britain's ailing stock market is both a cause and consequence of stubbornly low business investment and a broken growth model.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Prime minister defends government's handling of economy but will not give assurances over not raising income tax, employee NI or VATEd Davey, the Liberal Democrat leader, has urged Keir Starmer to call Donald Trump to encourage him to use his influence to block Israel's plans for a full occupation" of Gaza.In a statement, Davey said:[Israeli PM Benjamin] Netanyahu's latest proposals for the occupation of all of Gaza are utterly horrifying.If realised, they will only wreak yet more destruction on Gazans - while gravely endangering the lives of the hostages still held in Hamas' captivity.I see NIESR is talking today about a 41.2bn hole in the UK public financesTwo things are newsworthy: Continue reading...

Britain's building sector records biggest drop in activity since early in Covid-19 pandemic

Overcapacity - from electric vehicles to high-speed rail to housing - is destroying profits as well as GDPChina's astounding technological success in mass-producing quality electric vehicles (EVs) sits alongside a serious flaw in its industrial model: overcapacity.It has the capacity to produce about three times as many units as it can sell at home. The consequences so far have included widespread price cutting, large losses, misallocation of capital, and surging low-cost EV exports leading to trade conflict. Continue reading...

Collapse in housebuilding underscores challenge for government in meeting its target of building 1.5m new homes