Key occasions
Grocery inflation eases to 2.6%, lowest fee since 2024
More on the price of residing: new figures present that UK grocery inflation eased in the 4 weeks to twelfth July to 2.6%, its lowest fee since December 2024.
It marks the fifth consecutive month of slowing price rises, Worldpanel by Numerator discovered.
Fraser McKevitt, head of retail and shopper perception at Worldpanel, mentioned:
Easing price rises will come as welcome information to customers, however the annual invoice tells a fuller story. The common family spent £5,530 on groceries over the previous twelve months to July, up £156 on the identical interval final yr – a reminder that even as the speed of inflation cools, the cumulative value of the weekly store retains climbing.
The analysis additionally discovered that sunny climate and the World Cup has helped increase grocery gross sales this summer time: British customers made 497 million journeys over the 4 weeks, a mean of 17 per family and the very best determine recorded since March 2020.
Trips together with beer or cider purchases rose 8% yr-on-yr, and no/low alcohol journeys have been up 10%. Spending on burgers rose 25%, frozen lollies up 17%, and bottled water was up 23%. Wimbledon added its common increase, with £77m spent on strawberries and £21m on cream.
Thames Water traders supply ‘golden share’ in bid to go off nationalisation
Mark Sweney
The group of traders pursuing a rescue bid for Thames Water have supplied the federal government a “golden share” in a final-ditch try and persuade Andy Burnham to not nationalise Britain’s greatest water firm.
London & Valley Water (L&VW), a consortium of 100 institutional traders that maintain £17bn of the corporate’s £21bn debt, mentioned it recognised that the brand new prime minister desires higher public management and to strengthen accountability of the water firm.
The collectors mentioned on Tuesday they have been engaged on a revised rescue bundle for Thames, together with the “golden share”, which might give the federal government a veto over essential selections and hostile takeovers.
It mentioned:
L&VW agrees that there’s a chance to reinforce the way in which native authorities, regulators and Thames Water work collectively, granting higher public controls on essential enterprise points to enhance supply of advanced, important infrastructure initiatives, and display shared accountability.
The consortium is prepared to make important new commitments to grant higher controls and oversight to ministers, applied via a ‘golden share’.
And in case you missed it in a single day: Donald Trump has mentioned he’ll impose 50% tariffs on most Canadian items in response to the nation retaliating in opposition to earlier US tariffs.
The tariffs will hit a variety of merchandise, the White House mentioned, together with wine, hockey sticks and cement. They additionally embrace items beforehand protected against import taxes below the United States-Mexico-Canada (USMCA) settlement.
The new tariffs will exclude vitality merchandise, fish, essential minerals and potash. They additionally exclude merchandise already topic to tariffs aimed toward defending nationwide safety, such as metal and aluminium.
Read the total story by Mollie Reilly right here:
Mitie agrees to £3.1bn takeover deal
Elsewhere on the company entrance – the outsourcer Mitie has agreed to a £3.1bn takeover by its non-public-fairness owned rival OCS Group, making it the newest London-listed firm to be acquired this yr.
Its board has beneficial that shareholders settle for a money supply of 221.6p a share, a 46.8% premium to Monday’s closing price.
Mitie, which was based in 1987 and employs 84,000 workers, specialises in services administration, such as engineering upkeep and different providers such as hygiene and safety.
The information comes after its chief govt Phil Bentley introduced final month that he would go away in March 2027 after greater than 10 years in the highest job.
Rob Legge, OCS chief govt, mentioned:
This is a vital milestone for each organisations and an thrilling alternative to deliver collectively two extremely complementary companies with a shared dedication to delivering the perfect outcomes for colleagues and prospects.
Subject to completion, we’d construct a British services administration group that’s higher positioned to help the organisations that maintain the nation working. Together, we are able to higher help present and new prospects, assist extra individuals into work and strengthen our contribution to getting Britain shifting.
While there’s a lengthy course of forward, each companies stay targeted on supporting prospects and delivering the excessive requirements they anticipate daily. Together, we are able to construct one thing exceptional for our colleagues, our prospects and the nation.
OCS is owned by the non-public fairness agency Clayton, Dubilier & Rice.
The deal, which is predicted to finish in the primary quarter of 2027, is the newest in a protracted string of takeovers on London’s inventory market – Intertek, easyJet, Beazley and Schroders have all agreed to takeovers this yr, whereas the US property group Prologis has made repeated makes an attempt to purchase its FTSE 100 rival Segro.
Mitie shares have shot up 41% this morning to a report excessive of 213.6p.
UK defence shares rally as former defence secretary appointed chancellor
The UK’s blue chip FTSE 100 index has opened barely decrease this morning, down 0.3% – however a few of its greatest defence shares are rallying amid pleasure {that a} former defence secretary now occupies No 11.
Babcock International is up 4%, whereas BAE Systems is up 2.4%. Over in the FTSE 250, Qinetiq is up 3.5%.
Investors are hoping that chancellor John Healey will use his new place to extend defence spending – probably although issuing “defence bonds”, a type of borrowing allotted just for the navy which he has beforehand advocated for in authorities.
But Chris Beauchamp, chief market analyst on the dealer IG, warns that Healey’s appointment doesn’t essentially result in a direct windfall for defence.
As chancellor, he can have many competing calls for, and received’t simply be the MoD’s man in No 11. His expertise made him an apparent candidate for the position, and he represents a center means between Miliband and Mahmood, however it won’t be straightforward to seek out tons additional cash for defence, particularly when the brand new PM is so busy making broad spending commitments in different areas.
Gilt yields edge decrease as traders assess new PM and chancellor
Gilt yields are down barely this morning, after rising late yesterday following feedback from Andy Burnham that he’ll use “flexibility” in the fiscal guidelines to bolster public funding.
The yield on the ten-yr gilt is about 1 foundation level decrease, although crucially nonetheless above the 5% stage at 5.03%.
Bond markets are extremely delicate to feedback from Burnham, amid expectations he might run a looser strategy to public funds than Keir Starmer and Rachel Reeves. However traders could have taken consolation this morning from official figures which confirmed that the federal government borrowed lower than anticipated in June.
But Burnham has additionally promised extra value of residing help, which won’t be low cost. The VAT lower on family electrical energy payments introduced immediately is predicted to value £850m and Healey is predicted to stipulate extra lengthy-time period motion to deliver down residing prices on the finances later this yr. There has been hypothesis round lowering the cap on bus fares and quickly freezing rents in the non-public sector.
Sterling remains to be standing agency in opposition to the US greenback, up by 0.13% to round $1.34.
Burnham proper to prioritise value of residing and ought to hike taxes on banks, TUC says
Paul Nowak, common secretary of the TUC, says that the financial knowledge launched immediately present that Burnham is “doing the right thing by pledging action on the cost of living”.
Working individuals are up in opposition to it with stagnant actual pay, over 1,000,000 individuals caught on insecure zero-hour contracts, and 1,000,000 younger individuals not in employment, schooling, or coaching.
Cutting VAT on vitality payments will present some welcome aid. But with Donald Trump’s unlawful warfare in Iran persevering with to drive up payments, the federal government might want to go additional. The new prime minister might increase as much as £60bn over 4 years by mountain climbing taxes on banks – and use it to deliver down payments additional for households throughout the nation.
Andy Burnham is sending the proper indicators by pledging to assist younger individuals into work. In the months forward, he might want to broaden the youth jobs assure and double down on his pledge to reindustrialise Britain and ship good development in each postcode.
Meanwhile the boss of JP Morgan, Jamie Dimon, has warned Burnham in opposition to elevating tax expenses on banks, suggesting it might threaten plans to construct its £3bn headquarters in London and drive funding away from Britain.
The chief govt of the world’s greatest financial institution, who has a track record of criticising the UK’s bank tax surcharge, doesn’t need to see the UK’s new prime minister concentrating on the banking business to lift further income. Read extra right here:
UK unemployment at 4.9% in May in ‘stale’ labour market
New figures from the ONS present that unemployment remained on the similar stage as in April, at 4.9% – highlighting one of many many robust duties forward for Andy Burnham.
Employers lower the variety of job vacancies right down to 712,000, virtually half the extent in 2022, as employers delay hiring new workers in the three months to May.
The new prime minister has promised to lift residing requirements throughout all areas as a part of a ten-yr financial plan, however the newest pay knowledge confirmed non-public sector earnings development dropped to 2.9% to depart the typical rise in earnings, together with bonuses, at 4.3%.
Economists had forecast an increase in common pay with bonuses in the three months to May of 4.5%, up from 4.4% for the three months to the tip of April.
Thomas Pugh, chief economist on the consulting agency RSM UK mentioned the figures pointed to “a labour market with a whiff of staleness about it, but it’s still loosening gradually”.
That offers the MPC good cowl to maintain charges unchanged subsequent week as it waits to see the affect of the newest escalation in preventing in Iran on inflation.
Meanwhile, stagnant, and even unfavorable, actual wage development in the second half of this yr will intensify the strain on Burnham and Healey to provide you with a bundle to help the price of residing. However, doing something substantial with out breaching both the fiscal guidelines or the manifesto commitments seems to be more and more troublesome, given the deterioration in headroom.
…Looking forward, the unemployment fee will more than likely proceed to climb progressively via the summer time as the total affect of the surge in enter prices, tighter financing and increased uncertainty weighs on hiring urge for food.
What’s extra, wage development in the three.0%–3.5% vary signifies that even with decrease oil costs, actual wages are prone to stagnate in the second half of this yr, regardless of the discount in VAT on electrical energy, which can shave 0.1 proportion factors off inflation. That presents a significant problem for the brand new authorities, which has made tackling the price of residing a precedence.
VAT lower on electrical energy payments is optimistic however ‘not a treatment’, vitality campaigner says
The elimination of VAT from electrical energy payments is optimistic however it doesn’t handle the dimensions of the issue that British households are going through, campaigners on the End Fuel Poverty Coalition have mentioned.
Simon Francis, coordinator of the group, mentioned:
Removing VAT from electrical energy payments is a optimistic assertion of intent by the brand new administration. But it doesn’t handle the dimensions of what households are going through, with tens of millions nonetheless left paying an unaffordable share of their revenue on vitality and report ranges of vitality debt constructed up over successive winters of excessive payments.
The prime minister’s subsequent transfer have to be to go even additional on bringing down the price of vitality and bringing in elevated ranges of focused help for many who want it most: an enhanced heat dwelling low cost, reformed chilly climate funds and an vitality debt aid scheme.
This respiratory area can be not a treatment. The solely technique to deliver payments down for good is to alter how they’re set. That means breaking the hyperlink between gasoline and electrical energy costs, tackling extra earnings in the vitality business and ending our publicity to risky fossil gasoline markets via homegrown renewables and extra vitality environment friendly houses.
But many in the vitality business are welcoming Burnham’s transfer immediately, together with Martin Pibworth, chief govt of SSE,:
Cutting VAT offers instant aid to houses and companies and is a really welcome first step to creating electrical energy as low cost as potential. Electrifying our economic system is the way in which we make the most of low cost, homegrown renewable energy to chop payments, scale back vitality dependence and increase financial development.
SSE added that its evaluation discovered that 70% of the rise in home vitality payments since 2017 has been pushed by world commodity costs and inflation.
Richard Neudegg, director of regulation at Uswitch.com, added that the elimination of VAT on electrical energy payments in October might assist households cope with world rises in vitality costs triggered by the battle in the Middle East.
There is sustained strain on wholesale costs, pushed by the scenario in the Middle East, that means it is probably going that the October 1 price cap will improve.
Some provider predictions recommend the following price cap might rise 5% from October for a family with each gasoline and electrical energy, so this tax change might take the sting out of a possible improve.
There’s nonetheless time for patrons to lock in important financial savings earlier than winter by switching to an excellent-priced fastened tariff.
The most cost-effective offers are at the moment undercutting normal charges by £210 for the typical family. Doing so on prime of this VAT change might depart households significantly higher off over the winter.
Introduction: Burnham cuts VAT on family electrical energy payments
Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world economic system.
New prime minister Andy Burnham has introduced this morning that VAT will likely be lower from family electrical energy payments, as a part of his plan to assist with the price of residing.
The PM has mentioned he’ll take away the levy from 1 October, in a transfer that’s anticipated to take round £45 off the yearly price cap set by the vitality regulator.
The authorities mentioned the choice can be funded by financial savings from the cancellation of its digital ID programme, which was anticipated to value £1.8bn over the following three years. The VAT lower is estimated to value round £850m in 2026/27 primarily based on forecasts for electrical energy costs, ministers mentioned.
Burnham mentioned in a press release:
Westminster has not been working for individuals for too lengthy, with households fighting the price of residing.
That wants to alter. I mentioned I needed to provide individuals respiratory area, and that’s what I’m asserting on my second day as prime minister.
We’re taking instant motion to chop taxes on vitality payments, put more cash in individuals’s pockets and deliver again hope.
It comes only a day after Burnham formally grew to become prime minister with a pledge for a “new economic model” for the nation.
But the federal government added this morning that “any further action, including on funding for longer-term measures, will be taken at the budget, and all decisions at that point will be funded and also consistent with the government’s fiscal rules.”
Investors will likely be watching the bond market rigorously immediately as it weighs the appointment of Burnham’s new cupboard, together with the shock appointment of former defence secretary John Healey as chancellor.
Public sector finance figures launched this morning ought to present a lift – borrowing for June got here in at £15.989bn, beneath expectations of £18bn and down from £23.94bn a yr earlier.
The distinction between whole public sector spending and revenue was £16bn in June 2026, in accordance with knowledge from the Office for National Statistics. This was £7.9bn (33.1%) lower than in June 2025.
It was £300m decrease than the Office for Budget Responsibility (OBR) forecast, largely due to decrease inflation-linked debt curiosity prices.
This ought to supply some consolation to bond traders immediately, alongside Healey’s feedback final evening:
Fiscal management is the primary obligation of any chancellor. It is mine. And fiscal credibility is the bedrock for financial stability and for nationwide safety, and you heard the prime minister this afternoon say, in this extra harmful world, we’ll meet our commitments on defence to our worldwide allies…
