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Companies are cutting jobs at the fastest pace since the global financial crisis, barring the pandemic, after Rachel Reeves announced £40bn of tax rises in the Budget, according to a closely watched survey.
Employment levels among private sector businesses fell for the fourth month in a row in January, according to the S&P Global Flash UK purchasing managers index (PMI).
Bosses said the Chancellor’s impending £25bn hike in National Insurance had prompted companies to cut back their recruitment plans.
It comes a day after Sainsbury’s announced it will slash 3,000 jobs just weeks after its chief executive warned over the impact of the Chancellor’s tax raid.
Chris Williamson, chief business economist at S&P Global, said: “The loss of confidence, combined with widespread concerns over higher staff costs associated with the Budget, pushed employment sharply lower again.
“Barring the job cutting seen during the pandemic, the rate of job losses signalled by the PMI over the past two months has been the highest since the global financial crisis in 2009.”
Elliott Jordan-Doak of Pantheon Macroeconomics warned the PMI figures show the Bank of England “cannot fully react to slowing growth because price pressures are surging, as firms pass on payroll tax hikes aggressively into prices as well as cutting employment”.
Traders have reduced the strength of their bets on interest rate reductions later this year by the Monetary Policy Committee (MPC), although a reduction from 4.75pc to 4.5pc next month is still expected.
Mr Jordan-Doak said: “The MPC has to plot a middle ground, keeping growth weak enough to bring inflation back to target in a reasonable time but without cratering the economy and undershooting the inflation target.”
Read the latest updates below.
06:00 PM GMT
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05:41 PM GMT
Road back to growth will be ‘long and hard’, warns think tank
Rachel Reeves’s route to faster growth will be arduous, a think tank has warned.
Maxwell Marlow, research director of the Adam Smith Institute, said that the triple whammy of higher job losses, economic growth and high energy costs “shows that the route to growth will be long and hard”.
He added that a u-turn from the Chancellor is now needed. He said: “The government must reverse its National Insurance rise, slash red-tape on British businesses, and get Britain building again to reverse this trend.”
05:15 PM GMT
FTSE 100 slides as stronger pound hits export-focused firms
The main London stock market index fell today, as a jump in sterling hurt export-oriented firms.
The blue-chip FTSE 100 dropped 0.7pc, but still looked on course for its fifth straight week of gains.
The benchmark hit a record high this week, as global stocks surged on signs that US president Donald Trump was taking a softer stance towards tariffs against China. Stock markets also gained because of expectations Mr Trump would boost the US economy by lowering taxes and making big AI investments.
The pound hit a two-week high against the dollar today as a lack of concrete tariff policies during Trump’s first week in office hurt the dollar, and in turn weighed on shares of global companies such as Shell and HSBC.
But UK-listed global miners such as Antofagasta, Glencore and Rio Tinto climbed as copper prices jumped to their highest in more than two months on hopes of a U.S. trade deal with China.
The FTSE 250 mid-cap index ended about flat.
04:58 PM GMT
Reeves’s ‘mega-funds’ pensions shake-up risks leaving savers worse off, warn banks
Senior bank bosses have warned Rachel Reeves that her “mega-funds” pension shake-up risks leaving savers worse off.
Industry chiefs from Barclays, NatWest, Lloyds Bank and Nationwide have criticised the Chancellor’s proposal, saying it lacks clarity and puts too much focus on creating large funds that will not prioritise traditional savers.
The criticism has emerged in response to Ms Reeves’s attempts to force dozens of defined contribution (DC) pension funds to combine in a bid to increase the scale of investments across the City.
She has launched a consultation to gauge industry views on the plan, which she previously called a “big bang” to help pensions grow the economy.
However, in a response published last week, a panel of bankers from across Britain’s largest lenders said that creating mega-funds risked harming innovation and leading to a “one-size-fits-all that does not meet the needs of individuals”.
04:38 PM GMT
Trump repeats call for Opec to drop oil prices
US president Donald Trump on Friday reiterated his call for Opec to cut oil prices to hurt oil-rich Russia’s finances and help bring an end to the war in Ukraine.
“One way to stop it quickly is for Opec to stop making so much money and drop the price of oil.... That war will stop right away,” Mr Trump said as he landed in North Carolina to view storm damage.
The price of Brent crude, the global benchmark gave up gains it had made this morning.
04:34 PM GMT
Minister claims global bosses ‘enthusiastic’ about UK growth plans
A government minister has said that business leaders at the World Economic Forum in Davos this week had been positive about investing the UK.
Sarah Jones, an industry minister, said: “People are enthusiastic with the message that they’re getting from the Government ... what people want to see is evidence that we mean it.”
Official data has shown Britain’s economy stagnated in the three months to September and the Bank of England has forecast that it flatlined again in the last three months of 2024.
“Of course businesses are interested in what’s happening with interest rates, what’s happening with taxation, all of these things,” Ms Jones said “Regulation ... just knowing what the rules of the game are, and understanding who to talk to as well, and how to navigate your way through investing in the UK.”
Although Britain’s high-profile mission to Davos to rally support for its economic plans gave investors and financiers some encouragement, several told Reuters they needed to see the Government deliver on growth rather than just talk about it.
Senior bankers and executives, who spoke on condition of anonymity, said there was a worried mood in the business community and one way to make investment in Britain more attractive was by making it more appealing to entrepreneurs.
04:29 PM GMT
UK firms could be blocked from EU contracts under Brussels procurement plan
UK and American businesses could be blocked from winning “critical” public contracts in the EU, according to a draft proposal seen by the Financial Times.
The European Commission will reportedly “propose the introduction of a European preference in public procurement for critical sectors and technologies”, according to the draft plan.
The proposal said: “The loss of European-based production capacities and know-how in critical sectors could leave the EU dangerously dependent on imports in key segments of the economy.
“In a context where other major players impose access restrictions to their markets and seek to boost manufacturing capacity in critical technologies, Europe must safeguard its own capacities.”
It added: “In a global system where geopolitical tensions, competition for technological supremacy and the scramble for control over resources are on the rise, Europe’s freedom, security and autonomy depend more than ever on its ability to innovate, compete and grow.”
The Telegraph has approached the European Commission for comment
04:17 PM GMT
Lakeland put up for sale in wake of tax raid
The family behind the cookware retailer Lakeland has put it up for sale amid rising cost pressures from Rachel Reeves’s Budget tax raid.
The Rayner family, which founded the group 60 years ago, has hired financial advisers to handle an auction of the 60-store chain after a surge in costs left it reeling.
Lakeland, based in the Lake District, employs 1,000 people and is best known for selling thousands of home, cookery and electrical products online and in store. It is a favourite of cooks across Britain because of its extensive range of pots, pans and baking utensils.
The sale, first reported by Sky, comes amid soaring cost pressures for retailers like Lakeland after the Chancellor’s Budget lowered the threshold for employer National Insurance contributions.
04:05 PM GMT
Pound gains on the dollar as Trump tariff threat diminishes
The pound has gained 1.1pc against the dollar today after the US currency headed for its worst week in more than a year
The move occurred amid expectations that tariffs enacted by US president Donald Trump will be lower than previously feared and unlikely to spur an international trade war.
The prospect of high US tariffs have raised concerns about a renewed bout of inflation, which has helped to send US Treasury yields and the US dollar higher in recent months.
But that move partially reversed this week as traders bet that tariffs may not be as large or as widespread as previously feared.
Mr Trump said yesterday that his conversation with Chinese President Xi Jinping last week was friendly and he thought he could reach a trade deal with China.
Adam Button, chief currency analyst at ForexLive in Toronto, said: “People are less and less convinced that the tariffs are coming.”
03:53 PM GMT
Wall Street flat as traders pause at end of Trump inauguration week
Wall Street has struggled for direction this afternoon, as investors avoided big bets at the end of a strong week for the US stocks.
An S&P Global survey showed that US business activity slowed to a ninth-month low in January amid rising price pressures. However, firms reported higher hiring, supporting the Federal Reserve’s cautious approach to monetary policy this year.
The Fed is expected to meet next week and traders expect no change to borrowing costs. However, they now see the central bank delivering its first rate cut in June.
Ross Mayfield, investment strategist at Baird, said “our view has been from the beginning that the concern about Trump inflation was overstated.”
“There could be a slight upward pull on inflation from certain tariffs and maybe from immigration policies leading to higher wages, but there’s also a downward pull from deregulation and more pro energy policies.”
In a speech via video link at the World Economic Forum in Davos yesterday, Mr Trump pushed for lower interest rates and said he would cut taxes for companies investing in the United States while imposing tariffs on those who do not.
He also said in a separate interview that he would “rather not” impose tariffs on China and signalled openness at negotiating a trade deal with Beijing.
The S&P 500 and Nasdaq are down around 0.1pc. The Dow Jones is down 0.2pc.
03:44 PM GMT
Resurgent inflation puts rate cuts at risk, warns economist
A resurgence in inflationary pressures means that the Bank of England will only “loosen policy cautiously”, an economist has warned.
Today’s purchasing managers’ index (PMI) figures showed that input costs rose in January at the fastest rate for 20 months.
Ariane Curtis, of Capital Economics said: “Perhaps most worrying for central banks is that price pressures seem to be intensifying.”
She said: “Input price inflation rose particularly sharply in the UK, US and euro-zone, with firms reporting stronger wage cost pressures in all three. But it’s possible that higher oil and gas prices also played a role. And firms seem to be passing on these higher costs to consumers.”
03:32 PM GMT
Oil prices fall as Trump pushes for increased production
One thing that could help ease inflation in Britain is a fall in oil prices - which will happen this year if Donald Trump gets his way.
Brent crude has dropped 3.3pc so far this week amid a decline in the value of the dollar, which was pushed lower after the US President’s cooling attitude to tariffs and speech in Davos this week.
At the World Economic Forum, Mr Trump also urged oil-producing nations to cut oil prices, adding Saudi Arabia should increase production.
Nadia Martin Wiggen, a director at Svelland Capital, told Bloomberg TV: “He just wants the price lower.
“He wants gasoline prices lower for the consumer and he wants oil prices just to be lower, at least than what the Biden administration had.
“On the flip side, he wants producers to keep producing and especially American ones, and that’s where we see him in a tough situation.”
Brent crude was last down 0.3pc today to nearly $78 a barrel.
Thanks for following the live updates on the markets and UK economy so far. Alex Singleton will take over the reins from here.
02:57 PM GMT
Gold nears record amid economic uncertainty
Gold has risen close to a record high as investors turn to safe haven assets amid uncertainty about inflation, government debt and Donald Trump’s trade plans.
Bullion traded near $2,781 an ounce, the highest since October when it posted the previous all-time high.
It comes despite a recent surge in the value of the dollar after Mr Trump’s election last year amid concerns that tariffs would fuel inflation and encourage the Federal Reserve to keep interest rates high.
The US currency has slumped in value against global currencies today after the US President signalled he wanted to take a less aggressive stance on China.
The pound was last up 0.7pc against the dollar to $1.244 as traders cut bets on the Bank of England reducing interest rates this year after industry figures showed businesses are cutting jobs at the fastest pace since 2009 over cost inflation worries.
Joni Teves, a strategist for UBS, said: “We expect [gold] investors to be willing to look through dollar strength.”
02:37 PM GMT
US stocks mixed amid Trump caution
Wall Street stock indexes lacked direction at the opening bell amid confusion over Donald Trump’s address at Davos this week.
The Dow Jones Industrial Average was down 0.2pc to 44,498.41 as the value of the dollar slumped after the US President told business leaders he wanted to lower global oil prices, interest rates and taxes.
Meanwhile, the broad-based S&P 500 was little changed at 6,120.79 and the tech-heavy Nasdaq Composite edged up 0.1pc to 20,069.26 amid hopes that the Federal Reserve may keep cutting interest rates this year.
The drop in the dollar has sent the FTSE 100 tumbling in London, down 0.5pc to 8,521.40.
Worries about the state of Britain’s economy has also limited gains on the domestically-focused FTSE 250, which is up 0.2pc to 20,551.55.
02:17 PM GMT
Labour MP calls for Reeves to impose wealth tax
Rachel Reeves is under pressure to reconsider a wealth tax on Britain’s richest households amid a growing public spending crisis, writes Noah Eastwood.
Brian Leishman, a newly elected Labour MP for the Scottish seat of Alloa and Grangemouth, has renewed the calls for a 2pc levy to avoid spending cuts as borrowing costs soar.
Ahead of the Budget in October, a handful of parliamentarians, including Labour MP, Zara Sultana, and former members of Jeremy Corbyn’s shadow cabinet, put their name to an open letter urging the Chancellor to impose a tax on individuals with assets of more than £10m.
Read how the idea remains popular on Labour’s fringes and with its union paymasters.
01:48 PM GMT
Defence can be ‘part of the engine for economic growth’, say ministers
The defence sector can be “part of the engine for economic growth” in Britain, ministers have said, after Rolls-Royce was awarded a £9bn nuclear contract.
The engineering giant has been handed an eight-year deal to design, make and provide support services to nuclear reactors.
Defence Secretary John Healey, who met Rolls-Royce apprentices during a visit to its Nuclear Skills Academy in Derby today, said the deal would save Britain £400m by combining multiple contracts into one.
He told Sky News: “It’s a boost to British jobs, British business. It’s a boost to our nuclear deterrent.
“It really shows the way that defence is part of the engine for economic growth in this country.”
The Government has come under pressure from both Donald Trump and Nato to increase defence spending to 2.5pc of gross domestic product (GDP).
The new contract, called Unity, will also support work on the Dreadnought class of nuclear submarines which are currently being built, and is expected to create 1,000 jobs and safeguard 4,000 others, the Government said.
01:25 PM GMT
Nearly 47,000 businesses in ‘critical financial distress’
The number of businesses on the brink of collapse jumped at the fastest pace on record in the final three months of 2024, in the wake of a Budget which shattered companies’ confidence.
Recession fears are mounting as almost 47,000 businesses are now in “critical financial distress,” according to insolvency practitioners at Begbies Traynor.
That is a jump of 50pc from just over 31,000 in the previous quarter, before Rachel Reeves’s shock tax raid announced at the end of October.
Companies in almost every industry are struggling, according to the group’s Red Flag Alert report, with consumer-facing businesses in particularly dire straits.
The number of hotels and accommodation businesses in critical distress jumped by more than 80pc, with leisure and cultural businesses up more than three-quarters, as well as an almost 50pc increase among general retailers.
Julie Palmer, partner at Begbies Traynor, said “the situation feels very precarious” amid tumbling consumer confidence and high borrowing costs.
“This has only been exacerbated by the tax rises and increase in national minimum wage levied on businesses during the October 2024 UK Budget which means the financial strain on businesses will only increase later this year,” she said, referring to the £25bn raid on employers’ National Insurance contributions.
“Even at this very early stage, the outlook for the rest of 2025 is uncertain, at best. Many companies are clearly struggling to adapt to the compounding challenges they face and there is no easy fix which will be very unsettling for businesses who are struggling to tread water already.
“So, in the absence of a reduced tax burden and a strong economic recovery, I expect the number of insolvencies to continue to rise in 2025 as firms struggle to cope with a perfect storm of rising costs, financial instability and fluctuating market conditions.”
01:02 PM GMT
‘Survive 2025’: Small businesses scramble to avoid collapse under Labour
When a group of pub owners went on a skiing trip to Mayrhofen in Austria earlier this month, the holiday chat didn’t centre on the slopes or the schnapps but on the headaches back home.
Rachel Reeves’s £25bn National Insurance raid on employers has triggered so much anxiety that even the adrenaline of speeding down the Austrian alps on skis couldn’t distract them.
“All the talk is ‘This is the worst Budget for hospitality ever,’” says Brian Whiting, who runs WH Pubs in Kent and employs 150 people.
“The Government seems to have forgotten that we [the hospitality industry] are one of the biggest employers in the country, often giving people their first job.”
Read why hospitality and retail sector employers say they ‘can’t magic money out of thin air’.
12:45 PM GMT
Pound rises as companies warn of cost inflation
The pound has rallied against the dollar amid worries about inflation in Britain’s economy.
Sterling rose as much as 0.8pc to $1.245 following PMI figures showing companies complaining of rising cost pressures, which is forcing them to cut jobs.
The pound on track to end the week more than 2pc higher as the dollar was hit by Donald Trump’s suggestion that he could reach a trade deal with China and that he would rather not use tariffs against the world’s second largest economy, calling them a “tremendous power”.
Uncertainty surrounding Trump’s tariff policies have pushed the dollar higher since his election in November, amid concerns that it will make it more difficult for the Federal Reserve to cut interest rates.
Mohit Kumar, chief Europe economist at Jefferies, said: “The threat of tariffs will be used to gain favourable terms for US businesses, but eventually tariffs will not be as bad a feared.”
The pound was down 0.1pc against the euro, which is worth 84.4p.
12:01 PM GMT
Reeves ‘totally naive and useless’ as jobs lost amid Budget tax raid
Chancellor Rachel Reeves’s Budget tax rises have left consumers and businesses “fearing the future”, according to Telegraph readers, as industry figures showed jobs are being lost at the fastest pace since the global financial crisis.
Here is a selection of views from the comment section below and you can join the debate here:
11:43 AM GMT
FTSE 100 falls amid rapid job losses
The FTSE 100 has fallen in the wake of data showing jobs have been cut in Britain at the fastest pace since the global financial crisis.
The blue-chip index was down 0.3pc as it was also weighed down by comments from Donald Trump.
In a virtual speech at Davos on Thursday, the President urged Saudi Arabia and other oil producing nations to cut oil prices, dealing a blow to the share price of crude producers like Shell and BP, which were down 1.2pc and 0.4pc respectively.
Mr Trump also suggested he did not want to impose heavy tariffs on China, sending the value of the dollar lower amid hopes that the Fed will be able to cut interest rates.
The FTSE 100 has a large proportion of companies which measure their profits in dollars, meaning their finances are impacted by a weakening of the US currency.
11:17 AM GMT
Companies to be pushed ‘over the edge’ by surging Budget wage costs
An insolvency expert has raised fears that British businesses will be pushed “over the edge” after new figures showed a record-breaking rise in the number of firms at serious risk of collapse.
Consumer-facing sectors such as hotels, leisure and retailers have particularly been under pressure, advisory firm Begbies Traynor said.
Its latest Red Flag Alert report showed that about 46,850 businesses were in “critical” financial distress over the final three months of 2024.
This was a 50pc increase on the number of firms on the brink of collapse over the previous three-month period.
It comes after Rachel Reeves decided in the Budget to hike National Insurance by £25bn for employers from April, along with an increase in the minimum wage.
Julie Parmer, a partner at Begbies, said this increase, across nearly every sector, represented an “unprecedented level of growth in the number of firms who are at serious risk of entering insolvency in the next 12 months”.
The growth in distress was particularly sharp among hotels and accommodation businesses, which jumped by nearly 84pc, leisure firms, up by 76pc, and retailers, up by nearly 50pc.
“After a disappointing Christmas, consumer-facing industries, in particular, are feeling the strain, with rising operational costs and higher wages adding to an already difficult situation,” Ms Palmer said.
“With many such businesses already operating on thin margins, I fear the current situation will undoubtedly push some over the edge.”
10:36 AM GMT
Bank of England will have to plot ‘middle course’ on interest rates
The swift pace of job losses and rising inflation will mean the Bank of England “will have to plot a middle course of cautious cuts” to interest rates, economists have said.
Traders have reduced the strength of their bets on interest rate reductions later this year by the Monetary Policy Committee (MPC) after the latest PMI figures show companies are cutting jobs at the fastest pace since 2009.
This comes amid rising costs after the Chancellor’s decision in the Budget to increase National Insurance and the minimum wage from April.
Elliott Jordan-Doak of Pantheon Macroeconomics said the recent downward revisions to UK GDP and weak growth in October and November has put its forecast for a rise in growth at the start of the year at risk.
He warned the Bank of England “cannot fully react to slowing growth because price pressures are surging, as firms pass on payroll tax hikes aggressively into prices as well as cutting employment”.
He said: “All business surveys illustrate the same conundrum for the MPC. Payroll tax hikes, global uncertainty and tariff threats are driving inflation and output in opposite directions.
“Growth is weak enough to warrant faster rate cuts, but inflation is strong enough to warrant caution.
“The MPC has to plot a middle ground, keeping growth weak enough to bring inflation back to target in a reasonable time but without cratering the economy and undershooting the inflation target.”
10:12 AM GMT
Drop in employment shows Britain ‘stagnating’, say economists
Britain’s economy is “stagnating” after losing “all momentum at the end of last year”, economists have said after figures showing a sharp drop in employment.
The latest PMI data showed businesses cut jobs at the fastest pace since the global financial crisis over the last two months.
Elias Hilmer of Capital Economics said: “Overall, today’s data release won’t alleviate the Bank of England’s concerns about the weakness of activity.
“As a result, we still think the Bank will cut interest rates from 4.75pc now to 4.5pc in February, but the further strengthening in price pressures suggest it will cut rates only gradually thereafter.”
09:57 AM GMT
Job cuts ‘add to the gloom about the UK economy’
Businesses said employment levels were falling as a result of surging cost pressures, the PMI survey showed, ahead of the Chancellor’s £25bn National Insurance hike.
Input price inflation accelerated at the fastest pace since May 2023 just as new work fell at the fastest pace since October 2023.
Overall, private sector output expanded marginally in January but business expectations for activity weakened for the sixth month in a row.
It comes as companies prepare for increases to National Insurance and the minimum wage coming into force in April, which were announced in Rachel Reeves’s Budget.
Economist Chris Williamson said: “The first indicators of business conditions in 2025 add to the gloom about the UK economy, with companies cutting employment amid falling sales and concerns about business prospects.
“Inflation pressures have meanwhile reignited, pointing to a stagflationary environment which poses a growing quandry for the Bank of England.
“While output growth ticked higher, the improvement does little to move the dial on the speedometer which points to an economy that is broadly flatlining.”
He added: “While the stalled economy and deteriorating jobs market suggest there’s an increased need for rate cuts to stimulate growth, the rise in price pressures hints that the inflation genie is by no means back in the bottle.”
09:42 AM GMT
Britain cutting jobs at fastest pace since financial crisis as confidence plunges
Companies are cutting jobs at the fastest pace since the global financial crisis after Rachel Reeves announced £40bn of tax rises in the Budget, according to a closely watched survey.
Employment levels among private sector businesses fell for the fourth month in a row in January, according to the S&P Global Flash UK purchasing managers index (PMI).
Bosses said the Chancellor’s impending £25bn hike in National Insurance had prompted companies to cut back their recruitment plans.
Chris Williamson, chief business economist at S&P Global, said: “The loss of confidence, combined with widespread concerns over higher staff costs associated with the Budget, pushed employment sharply lower again.
“Barring the job cutting seen during the pandemic, the rate of job losses signalled by the PMI over the past two months has been the highest since the global financial crisis in 2009.”
09:24 AM GMT
Eurozone ‘stagnating’, say economists
Britain’s economy is not alone in its economic woes, with a closely watched survey indicating the eurozone is “stagnating”.
Private sector output in the eurozone expanded slightly in January after five months of contraction, according to the HCOB Flash Eurozone Composite PMI.
But Jack Allen-Reynolds of Capital Economics said “it’s hard to argue that this was anything than another weak survey as it is consistent with the economy stagnating”.
He said the eurozone industrial sector “remained in a deep downturn” as manufacturing remained in contraction, although it delivered its best reading in eight months.
Looking ahead, Mr Allen-Reynolds said: “With the employment PMI remaining a touch below 50 in January, we still expect the labour market to loosen and wage growth to slow significantly this year, helping to bring services inflation down.”
08:59 AM GMT
Pound gains as Trump hints at lower interest rates
The pound has gained against the dollar after Donald Trump suggested a potentially softer stance on tariffs against China while separately saying he wants the Federal Reserve to cut interest rates.
Sterling was up 0.4pc to more than $1.24 as the dollar was lower across the board. It was down 0.3pc against the euro, which is worth 84.6p.
In an interview with Fox News that aired on Thursday evening, Mr Trump said he would rather not have to use tariffs over China and that he thought he could reach a trade deal with the world’s second-largest economy.
The pound is poised for a rise of 1.9pc for the week, snapping three straight weeks of losses.
Mr Trump’s latest comments on China tariffs and inflation kept the dollar on track for its worst weekly fall in over a year.
Elsewhere on currency markets, the yen rose after the Bank of Japan hiked interest rates overnight and revised up its inflation forecasts.
The Bank raised rates to “around 0.5pc” which is the highest since 2008.
08:32 AM GMT
Consumers ‘squirrelling away some extra cash for a rainy day’
The rise in stock markets “is doing little to bring hope to the UK consumer”, according to analysts, who think households are “squirrelling away some extra cash”.
The FTSE 100 was up 0.2pc close to a new record high while the FTSE 250 gianed 0.6pc in early trading, helped by a 15pc surge in Burberry after sales were better than expected.
Derren Nathan of Hargreaves Lansdown said: “GfK’s consumer confidence survey for January came in 22 points lower than December levels and a touch lower on an annual basis.
“Concerns about the outlook for the UK economy and personal finances drove the savings index up points to 30 as respondents looked to put major purchases on hold in favour of squirrelling away some extra cash for a rainy day.”
08:07 AM GMT
UK markets open higher amid Trump tariff hopes
The FTSE 100 opened higher following Donald Trump suggested he did not want to impose tariffs heavily on China.
The UK’s internationally-focused index rose 0.2pc to 8,580.83 after the US President said he would rather not have to use tariffs against the world’s second-largest economy.
The domestically-focused FTSE 250 was up 0.4pc to 20,606.37 despite data showing consumer confidence in Britain fell to its lowest level in a year.
07:50 AM GMT
Consumers showing ‘more Budget angst’
Economist Julian Jessop suggested there were some signs of optimism in the Gfk confidence survey as personal finances “held up well”.
However, he admitted the data showed “more Budget angst” about the economy after the Chancellor put up taxes and increased spending in October:
07:48 AM GMT
Confidence hit by ‘barrage of bad headlines’
The latest drop in consumer confidence is a result of households reacting to a “barrage of bad headlines”, according to economists.
The drop in the GfK measure of confidence follows weak growth, rising prices, deteriorating job prospects, the threat of a global trade war, and the possibility of tax hikes, according to Pantheon Macroeconomics.
Economist Elliott Jordan-Doak suggested some of “the chorus of surveys” reporting weakening consumer and corporate sentiment had exaggerated the downturn.
However, he acknowledged the weight of survey evidence had to be taken seriously, increasing the “downside risks” to its forecasts for UK growth.
He said: “Weaker confidence poses downside risks to our forecast that consumer spending will help GDP growth recover in the New Year.”
07:32 AM GMT
Reynolds opens door to joining EU trade group
The Business Secretary has left the door open to joining a tariff-free trading scheme with Europe following a meeting with the EU trade commissioner in Davos.
Jonathan Reynolds’s meeting with Maroš Šefčovič on Thursday came after the trade commissioner suggested Britain could join the Pan-Euro-Mediterranean Convention (PEM), which allows for tariff-free trade of goods across Europe, as well as some North African and Levantine nations.
Speaking to the BBC, Mr Reynolds described Mr Sefcovic’s comments as “incredibly positive” and “helpful”, and suggested joining the PEM could be acceptable as it “is not a customs union”.
It comes as Chancellor Rachel Reeves comes under pressure to secure growth in Britain’s economy following a surge in government borrowing costs this year which raised questions about the Chancellor’s ability to meet her self-imposed fiscal rules.
Mr Reynolds travelled with the Chancellor to the World Economic Forum in Davos this week, a huge gathering of business and political leaders from across the globe.
He said: “We can improve the terms of trade with the EU in a way which doesn’t revisit customs unions or single markets or the arguments of Brexit, and we can do that whilst pursuing closer trade links around the world.”
The Business Secretary also declined to rule out a deal on food and farm products that would involve mirroring EU rules, known as “dynamic alignment”, saying it too did not cross any of the Government’s “red lines” on rejoining the customs union or single market.
Labour’s 2024 manifesto committed it to seeking a deal on such products with the EU, while some business groups have backed joining the PEM as it would help maintain complex supply chains.
Ministers said on Thursday the Government did not “currently” have plans to join the PEM and would not “provide a running commentary”.
07:23 AM GMT
Burberry sales slump as boss says ‘much to do’ in turnaround
Burberry revealed a fresh slump in sales at the end of last year as its boss acknowledged “there remains much to do” under his transformation plans.
The British fashion brand, which has been hit by a slowdown in demand for luxury goods globally, said comparable store sales fell 4pc in the final quarter of 2024, although this was better than analyst expectations of a 12.8pc drop.
The sharpest drop in sales came from Asia, with mainland China down 7pc, the South Asia Pacific down 19pc and South Korea down 12pc. Japan was up 4pc.
The company expects its second-half results to broadly offset an adjusted operating loss of £41m reported in the first half of its financial year.
Chief executive Joshua Schulman, who joined in July last year, said the company had “moved at pace to advance our strategy to reignite brand desire” with new ad campaigns targeted in New York after it refurbished its store on 57th St.
The former Coach and Jimmy Choo boss said: “The acceleration of our core categories reinforces our belief that Burberry has the most opportunity where we have the most authenticity and that our strategic plan will deliver sustainable, profitable growth over time.
“However, we recognise that it is still very early in our transformation and there remains much to do.”
07:21 AM GMT
Confidence falls to one-year low as recession fears mount
Consumer confidence has fallen to more than a year-low, as fears over Britain slipping into recession are growing.
Families are increasingly worried over the state of the economy and their own finances, figures from GfK show.
Sentiment fell by five points to a 13-month low of -22 in January, with concerns over how the economy will fare over the next year driving the plunge.
Neil Bellamy from GfK said: “These figures underline that consumers are losing confidence in the UK’s economic prospects.”
It comes as economists warn of a greater risk of recession after rising borrowing costs, weak growth and heightened anxiety among businesses following a £26bn tax raid on employers.
Recruiters are already talking of a “hiring recession” amid falling vacancies, while other surveys point to a slowdown across big parts of the private sector.
The research also found that a sharp rise in people saving more, spelling further trouble for retailers struggling to overcome sluggish sales.
Mr Bellamy said: “This sharp increase is unwelcome because it’s another sign that people see dark days ahead and are therefore thinking of putting money aside for safety.”
Every underlying measure of confidence tracked by GfK worsened in January. Families felt worse about the wider economy, their own situation and more anxious about major purchases.
06:50 AM GMT
Good morning
Thanks for joining us. Consumer confidence has suffered a steep drop to its lowest level in more than a year amid signs that households see “dark days ahead” for the economy, according to a long-running survey.
GfK’s Consumer Confidence Index fell by five points to minus 22 in January, with all measures that make up the overall score down on last month.
The index shows particularly steep falls in consumer views on the wider UK economy, both looking back a year - down seven points to minus 46, and five points lower than last January - and for what is in store for the next 12 months - dropping eight points to minus 34 and 13 points down on a year ago.
Neil Bellamy, consumer insights director at GfK, said: “These figures underline that consumers are losing confidence in the UK’s economic prospects.
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What happened overnight
Asian shares mostly advanced after the Bank of Japan raised its key lending rate and Donald Trump hinted at a softer stance towards China.
Tokyo’s Nikkei 225 index edged down 39,930.79 after the central bank raised its benchmark rate to about 0.5pc from 0.25pc, as widely expected.
It is the highest level for the rate since 2008, as the Bank of Japan shifts out of a long spell of extreme low interest rates meant to spur more borrowing and spending.
Just before the decision, statistics from the government showed the core inflation rate increased to 3pc year-on-year in December, reaching the highest level in 16 months and was above the central bank’s 2pc target.
The dollar dropped against the Japanese yen, trading at 155.24 yen, down from 156.06 yen.
Oil prices fell after the US President called on oil-producing countries to reduce the price of crude, which would ease worries about inflation.
Meanwhile, China stocks rose after Mr Trump said he would rather not have to use tariffs against the world’s second-largest economy.
The Hang Seng in Hong Kong added 2pc to 20,100.60 and the Shanghai Composite index rose 0.8pc to 3,255.28. In South Korea, the Kospi gained 0.9pc to 2,537.61. Australia’s S&P/ASX 200 advanced 0.4pc to 8,408.90.
On Wall Street, the S&P 500 hit a record high after Mr Trump said he would push for lower interest rates, providing a fillip to stock markets amid investor caution about his next moves on trade.
The S&P 500 finished up 0.5pc, at 6,118.71, after hitting an all-time high of 6,118.73 points. The Dow Jones Industrial Average climbed 0.9pc, to 44,565.07, and the Nasdaq Composite added 0.2pc, to 44,565.07.
The yield on benchmark 10-year US Treasury notes climbed to 4.646pc, from 4.612pc late on Wednesday.