In This Article:
A US hedge fund that declared war on seven British investment trusts has failed to oust the board of one of its targets.
Boaz Weinstein’s Saba Capital is waging a campaign to overhaul the trusts over performances it has said ranged from “underwhelming” to “disastrous”.
The trusts have publicly hit back in recent weeks, dubbing Saba’s campaign opportunistic and not in the interests of broader shareholders.
Shareholders of Herald investment trust overwhelmingly voted against a proposal by the New York-based hedge fund to axe the board. More than 65pc of the votes backed the current board.
The trust, the largest being targeted by Saba with a market capitalisation of around £1.2bn, said it welcomed the outcome of a vote.
Herald chairman Andrew Joy told investors: “Today non-Saba shareholders have almost unanimously rejected Saba’s self-interested proposals.
“The fact that 99.78pc of all votes cast by non-Saba shareholders were voted against Saba’s resolutions and in favour of the existing Board provides a clear, complete and incontrovertible rebuttal of Saba’s attempt to take control of your company and change its strategy against the wishes and interests of its non-Saba shareholders.”
Saba’s proposals were opposed by Glass Lewis and ISS, two independent proxy advisers who give advice to shareholders on how to vote.
A Saba spokesman said: “We appreciate the thoughtful engagement from fellow [Herald] shareholders in recent weeks, which only reinforces the dire state of the UK investment trust industry and need for Saba’s presence in the market...
“As told in countless UK financial press articles over the past three years, the industry’s failure to protect shareholders from losses due to poor performance and widening discounts cannot remain unaddressed ...
“Saba remains committed to putting shareholders’ interests first, delivering returns for UK trust investors and ultimately rehabilitating this broken sector. We urge shareholders of the six other trusts at which we have requisitioned general meetings to support Saba’s resolutions in order to set these trusts on the path to meaningful value creation.”
Read the latest updates below.
06:18 PM GMT
Signing off...
That’s all for today on this live blog.
You can join us for our latest business and economics stories here.
05:57 PM GMT
Reeves attacks Nimbys in quest for growth
Rachel Reeves has signalled that planning applications and infrastructure projects should be approved more easily as she scrambles to find ways to boost growth.
The Chancellor told Bloomberg “the answer can’t always be no” on major projects.
“This was the problem in the last government,” she said. “There was always someone that said, oh yes of course we want to grow the economy but we don’t like investment, we don’t like that wind farm, we don’t like those pylons, we don’t like that airport, we don’t want that housing near us.”
05:30 PM GMT
Reeves plays down likelihood of fresh US tariffs
Rachel Reeves, the Chancellor, has played down the threat of fresh US tariffs on UK goods. She told Sky News: “The UK has a trade deficit with the United States. President Trump is concerned about the trade surpluses that countries around the world are running with the United States. That’s not the case for the UK.”
She added: “I believe in free and open trade, and I’ll be making that case to my counterparts in the United States. I’m excited about the opportunity to work with the new Trump administration.
“Trade between the UK and the US is worth £300bn a year, a million Brits work for American firms, a million Americans work for British firms, so our economies are closely intertwined, and I look forward to enhancing and strengthening that relationship.”
05:06 PM GMT
Stock markets mostly rise in aftermath of Trump inauguration
US and European stock markets mostly pushed higher today as investors tracked Donald Trump’s policy announcements and company results.
The latest batch of corporate earnings helped boost sentiment on Wall Street, with the S&P 500 flirting with a record high.
Shares in Netflix soared more than 11pc after it reported adding almost 19m subscribers during the holiday season to finish last year with more than 300m globally.
And while the inflationary impact of Trump’s tariff plans gave investors cold sweats in December, they are proving more sanguine this week.
Patrick O’Hare, an analyst at Briefing.com, said: “Thus far, the stock market has not found reason to fear the tariff approach for a variety of reasons: it isn’t as onerous as expected at this stage; there hasn’t been a retaliatory tit-for-tat; and there is a belief it is more of a negotiating tactic than an official policy.”
A retreat in US government bond yields after last week’s spike has also reassured stock market investors.
In Europe, the London and Frankfurt stock markets continued to hit record highs, helped by currency movements.
London’s FTSE 100 index was supported by “a weak pound that allows investors to buy UK companies with international businesses at cheaper prices”, said Swissquote Bank analyst Ipek Ozkardeskaya.
The FTSE 100 ended the day slightly lower, however, while Germany’s Dax set a new record closing high.
“European stocks are rising on the coattails of the America’s changed economic policy, which has allowed European stocks to play catch up for now,” said Kathleen Brooks, research director at XTB.
04:43 PM GMT
US hedge fund fails in battle with UK investment trust
A US hedge fund that declared war on seven British investment trusts has failed to oust the board of one of its targets.
Boaz Weinstein’s Saba Capital is waging a campaign to overhaul the trusts over performances it has said ranged from “underwhelming” to “disastrous”.
The trusts have publicly hit back in recent weeks, dubbing Saba’s campaign opportunistic and not in the interests of broader shareholders.
Shareholders of Herald investment trust overwhelmingly voted against a proposal by New York-based fund to axe the board. More than 65pc of the votes backed the current board.
The trust, the largest being targeted by Saba with a market capitalisation of around £1.2m, said it welcomed the outcome of a vote and would be taking advice from advisers on next steps.
Herald chairman Andrew Joy told investors: “Today non-Saba shareholders have almost unanimously rejected Saba’s self-interested proposals.
“The fact that 99.78pc of all votes cast by non-Saba shareholders were voted against Saba’s resolutions and in favour of the existing Board provides a clear, complete and incontrovertible rebuttal of Saba’s attempt to take control of your company and change its strategy against the wishes and interests of its non-Saba shareholders.”
Saba’s proposals were opposed by Glass Lewis and ISS, two independent proxy advisers who give advice to shareholders on how to vote.
A Saba spokesman said: “We appreciate the thoughtful engagement from fellow [Herald] shareholders in recent weeks, which only reinforces the dire state of the UK investment trust industry and need for Saba’s presence in the market... As told in countless UK financial press articles over the past three years, the industry’s failure to protect shareholders from losses due to poor performance and widening discounts cannot remain unaddressed ...
“Saba remains committed to putting shareholders’ interests first, delivering returns for UK trust investors and ultimately rehabilitating this broken sector. We urge shareholders of the six other trusts at which we have requisitioned general meetings to support Saba’s resolutions in order to set these trusts on the path to meaningful value creation.”
04:07 PM GMT
Farm tax raid has put Britain’s food security at risk, says Tesco
Rachel Reeves’s tax raid on farmers is putting Britain’s food security at risk and must be paused, Tesco has warned.
Britain’s biggest supermarket said the Government should halt the introduction of inheritance tax on farms worth more than £1m in order to safeguard British agriculture.
Ashwin Prasad, Tesco’s chief commercial officer, wrote in a blog: “This is not just a debate about individual policies – the UK’s future food security is at stake.”
Tesco was one of three major supermarkets to call for a rethink of the policy on Wednesday, with similar warnings issued by Aldi and Lidl in an unusual show of unity by major grocers.
03:47 PM GMT
Worst time ever to start a British business, says Brewdog founder
BrewDog founder James Watt has said there “has never been a more difficult time to start a business in the UK”, blaming the Chancellor’s Budget for making it tougher for entrepreneurs.
He said: “There are still an amazing batch of entrepreneurs and opportunities in the UK, but I think the environment at the minute does mean that some need that extra support to really grow to their full potential.
“I don’t think the autumn Budget was helpful, and we are seeing founders leaving to run businesses overseas, so I really hope we see the momentum shift soon.”
It came as the Scottish businessman, whose comments about work-life balance stoked controversy earlier this month, announced plans for a new reality show with the largest cash prize in UK TV history.
Mr Watt is seeking entrepreneurs to take part in House Of Unicorns, in which they will have a chance of winning £2m to help grow their businesses.
The entrepreneur, who co-founded craft beer giant BrewDog in Aberdeenshire in 2007, will invest £1m of his own cash into the winning business, with another £1m from Founders Capital, Europe’s largest founder investor community.
03:42 PM GMT
FTSE 100 gives up gains after hitting fresh record
The FTSE 100 is down by 0.1pc today, despite hitting an all-time record during trading earlier.
The blue-chip index was this morning up by more than 0.4pc. It initially benefitted from a rise in global shares, powered by a rise in technology stocks after Donald Trump announced mammoth spending plans for artificial intelligence infrastructure.
European shares are higher despite threats of US import tariffs, with Trump again vowing to hit the European Union with fresh levies.
But the Continent was breathing a sigh of relief as many investors and foreign capitals had expected tariffs to be implemented on Trump’s first day in office, as promised during his campaign.
“Trump seems more focused at home and Europe’s got a stay of execution,” said Eddie Kennedy, head of bespoke discretionary fund management at Marlborough.
France’s Cac 40 is up by 0.8pc, while Germany’s Dax is up by 1.1pc.
03:28 PM GMT
Santander exiting UK risks hit to mortgage market
Santander’s potential exit from the UK could have a major ripple effect on the mortgage market, experts have warned, despite the bank signalling to consumers and staff that it will be staying in Britain.
Executive chairman Ana Botin insisted “we love the UK” following reports that the Spanish lender is reconsidering its presence in the UK.
“It is a core market and will remain a core market for Santander,” she told a panel at the World Economic Forum in Davos, Switzerland.
News of the potential review raised concerns about how consumers could be affected should a major player decide to leave Britain’s high streets.
Santander UK, the international banking group’s UK subsidiary, is a prominent mortgage lender and recently cut rates on more than 70 mortgage products.
Douglas Grant, group chief executive of financial services group Manx Financial Group, said it would “deal a significant blow to competition within the banking sector, particularly in the mortgage market”.
“For a Government striving to ensure financial stability and address the housing shortage, such a move could prove highly detrimental,” he said.
Thanks for following the live updates so far. Alex Singleton will keep you informed on further developments from the markets.
02:51 PM GMT
US markets jump amid Trump AI push
Wall Street’s main indexes opened higher after Donald Trump pledged multi-billion dollar support to bolster AI infrastructure, just as the FTSE 100 turned lower on the day.
The benchmark S&P 500 rose 32.2 points, or 0.5pc, at the open to 6,081.39​, just shy of a record high, as investors cheered streaming giant Netflix’s strong quarterly performance.
The Dow Jones Industrial Average rose 152.3 points, or 0.34pc, at the open to 44,178.06​, while the Nasdaq Composite rose 146.3 points, or 0.7pc, to 19,903.046.
President Trump announced a $500bn AI investment partnership called Stargate on Tuesday, which includes OpenAI, Oracle and SoftBank.
In Britain, the FTSE 100 gave up its gains to be flat on the day, while the midcap FTSE 250 was 0.2pc higher.
02:40 PM GMT
Competition watchdog will remain independent in growth mission, says minister
The Competition and Markets Authority’s independence will remain intact, business minister Justin Madders said, after the regulator’s chairman stepped down earlier this week.
In the Commons, Conservative MP Bob Blackman (Harrow East) said: “The clear issue here is why did the previous chairman resign, and indeed what remit has the minister given to the interim chair to change that policy and direction of the CMA?
“So, can he outline that - he says he’s going to do it later this year, but he’s manoeuvred a position where the previous chair has resigned, so we need to know the answer of what the CMA are going to be doing now to regulate the market?”
Mr Madders replied: “The CMA’s operational independence is going to remain intact. We’ve obviously very clearly set out there will be a new strategic steer, which will be about boosting growth, and we’ve decided, after conversations, that actually new leadership is needed to actually deliver on that.”
Conservative former minister Sir Julian Smith said: “Changing personnel is one thing, but when you speak to business, resolving disputes in the way that the CMA resolved dispute is key. Could I urge the minister to look at how disputes are resolved and whether litigation and an antagonistic approach to business is the best way for the CMA to proceed?”
Mr Madders replied: “We need to give businesses certainty and clarity that things will be resolved quickly, and that they will have confidence moving forward that investment decisions will be made.”
02:23 PM GMT
Ministers ‘begging regulators for ideas to fix growth’, says Griffith
The shadow business secretary said “asking regulators to boost growth is a bit like asking the village speedwatch to organise the next British Grand Prix”.
Andrew Griffith criticised the Government after Rachel Reeves told an audience in Davos today that she wants regulators “to be part of that growth mission”.
Marcus Bokkerink stepped down as chairman of the Competition and Markets Authority this week as the Chancellor pushes for “a different strategic approach when it comes to regulation”.
It comes as official figures showed Treasury borrowing has surged by more than forecasts by the Office for Budget Responsibility so far this financial year, raising questions about the Chancellor’s ability to meet his fiscal rules.
Mr Griffith told the Commons: “What a desperate state we are in when the Business Secretary (Jonathan Reynolds) has to phone up the regulators to beg them for ideas to fix the lack of growth his own Government policies have created.
“I hope that when the regulators attended that roundtable last week, including the chairman of the CMA, they had the courage to put at the top of their list scrapping his 150-page job-destroying trade union-inspired Employment Bill, or to point out the jobs tax in the Chancellor’s budget, or their socialist attack on inheritance, non-doms and the family business death tax that’s causing one wealth creator to leave this country every 45 minutes.
“Or even to point out that one of the best opportunities this country has for growth is to get on our plane to our closest trading partner the United States and secure a trade deal, rather than lob juvenile insults at president (Donald) Trump, or fail to invite Elon Musk to the Government’s UK investment summit.”
Markets minister Justin Madders replied that his comment was “a little bit rich for a man who was in the Treasury when the last government crashed the economy”.
He added: “Only this week, PwC announced that we were the second-most attractive country in the world to invest, and last week the IMF (International Monetary Fund) upgraded our growth predictions for this year.”
02:00 PM GMT
Minister says regulators must ‘focus on growth’ as watchdog boss departs
Every UK regulator must “focus on growth”, the markets minister has said, after the departure of the chairman of the Competition and Markets Authority this week.
Marcus Bokkerink stepped down as head of the watchdog and will be replaced by Douglas Gurr, the former UK boss of technology giant Amazon.
Chancellor Rachel Reeves told an audience in Davos today that she wants regulators “to be part of that growth mission”, saying Mr Bokkerink had “a different strategic approach when it comes to regulation and he recognised that it was time for him to move on”.
Business minister Justin Madders told the Commons: “The Secretary of State (Jonathan Reynolds) has expressed his gratitude for Marcus’s leadership of the board of the CMA since his appointment in September 2022 and the work of the CMA in that time, particularly in response to cost-of-living pressures.”
Turning to the appointment of former Amazon UK country manager Doug Gurr as CMA interim chairman for up to 18 months, Mr Madders continued: “This Government will make sure that every regulator in the UK focuses on growth.
“With his background and experience as an entrepreneur and business leader, along with a clear understanding of the importance of new and developing technologies such as AI (artificial intelligence), Doug Gurr will bring the necessary strategic leadership to the CMA to enable it to promote growth for the benefit of businesses and consumers.”
Mr Madders said the Government would consult on a “growth-focused strategic steer” for the watchdog.
01:37 PM GMT
Government spending to promote growth ‘never works’
Rachel Reeves cannot close the gap in the public finances with tax increases, Telegraph readers have said after official figures showed Treasury borrowing has overshot forecasts so far this year.
Here is a selection of views from the comment section below and you can join the debate here:
12:44 PM GMT
FTSE 100 poised for sixth straight day of gains
The FTSE 100 has risen for a sixth consecutive day despite surging Treasury borrowing and the threat of tariffs from Donald Trump.
Britain’s flagship stock index was up 0.3pc and hit another intraday record high even as official figures showed the budget deficit swelled faster than expected last month.
Analysts have pointed to the FTSE 100’s defensive qualities at times of uncertainty in global markets.
City Index analyst Fiona Cincotta said: “While the mood in the markets has been supported by the fact Trump has refrained from implementing universal trade tariffs on goods entering the US, a level of caution is also apparent as daily comments from Trump influence the market.”
Among individual stocks, easyJet dropped 3.2pc as analysts pointing to a slightly weaker-than-expected revenue forecast for the second quarter.
Aviva jumped 3.5pc after JP Morgan upgraded its rating of the insurer to “overweight” from “neutral”.
Hochschild Mining tumbled 16.2pc after the miner issued gold production forecasts for 2025.
12:01 PM GMT
Pound hits two-week high despite rise in Treasury borrowing
The pound rose for a third day to hit a two-week high against the dollar as questions remain about Donald Trump’s plans for tariffs.
Sterling was last up 0.1pc at $1.237, its highest since January 8, having initially fallen more than 0.3pc in early trading after official data showed the Treasury borrowed more than expected last month.
Uncertainty around the US president’s tariff policies has put pressure on the dollar since Monday, with the pound gaining 1.6pc so far this week.
Mr Trump did not immediately impose tariffs on US imports on his first day back in the White House, but has said he is considering tariffs of around 25pc on Canada and Mexico and around 10pc on China from Feb 1.
He has also vowed duties on European Union imports, without providing further details.
The euro rose 0.1pc against the pound to 84.5p, having hit its highest since August on Monday at 84.7p.
Doubts about Rachel Reeves’s ability to meet her fiscal rules have sent sterling around 2pc lower against the single currency since the start of the year.
11:16 AM GMT
Treasury borrowing surges after £6bn deal to buy military homes
Public sector borrowing surged last month after the Ministry of Defence agreed to spend £6bn buying back military homes from a private equity tycoon, reversing what has been described as a “rotten deal” for British taxpayers.
The Treasury borrowed £17.8bn in December - £3.2bn more than the OBR forecast - after an agreement to take more than 36,000 military homes back into public ownership.
The MoD deal to buy the properties from Annington Homes ended a bitter battle between the Government and billionaire Guy Hands over control of the homes. It is also the latest twist in a long-running saga over the privatisation of army homes.
Alison Ring of the Institute of Chartered Accountants in England and Wales said the Chancellor would be “disappointed” at the worst than expected public borrowing figures “as they reflect that the economy remains fragile amid challenges including rising unemployment and the high level of national debt”.
She said: “The £6bn repurchase of Ministry of Defence housing has pushed up the deficit this month by £2bn, but this will benefit the public finances in the long term.
“The real test will come next month, when self assessment receipts come in. Depending on how these affect the OBR’s updated projections in the Spring forecast, the Chancellor may find it difficult to hold the line on not making any major tax or spending decisions until the Autumn Budget later this year as she attempts to balance the books.”
10:52 AM GMT
Economic growth must ‘trump’ net zero, signals Reeves in split with Miliband
Net zero is less important than economic growth, Rachel Reeves has suggested, as she prepares for a potential clash with Ed Miliband over a third runway at Heathrow.
Speaking at the World Economic Forum in Davos, the Chancellor said that boosting growth had to “trump other things” amid a looming split in the Labour Party as the Treasury pushes for airport expansion.
It suggests that Ms Reeves will prioritise the economy over cutting carbon emissions in future decisions.
Senior Labour figures have previously sought to suggest that going green was not in opposition to increasing GDP.
Read why the comments point to a possible disagreement with Mr Miliband, the Energy Secretary.
10:35 AM GMT
Budget tax rises ‘a good bet’ warn economists
Rachel Reeves is likely to raise taxes in her next Budget amid surging government borrowing costs, economists have warned.
Government borrowing will increase by about £7.8bn by the end of the OBR forecast period as a result of rising bond yields, “consuming most of the Chancellor’s headroom” according to Pantheon Macroeconomics.
Gilt yields were little changed today despite official figures showing Treasury borrowing is running £4.1bn ahead of projections so far this financial year.
Economists said yields - a measure of government borrowing costs - have risen about 55 basis points since the Budget forecasts were made, placing “significant” risks to the OBR’s borrowing forecast.
Elliott Jordan-Doak of Pantheon Macroeconomics said:
The Chancellor is already under pressure to clarify how the Government will meet its new fiscal rules.
10:07 AM GMT
Cut pub food taxes to ease Budget pain, says Wetherspoons boss
The boss of JD Wetherspoon has called on Sir Keir Starmer to cut pub food taxes ahead of a jump in costs linked to the Budget.
It came as the hospitality giant revealed stronger sales for the half-year so far despite selling off more pub venues.
Chairman Tim Martin said the company is set to face a £60m jump in labour-related costs in April, amid increases in employers’ national insurance contributions and the minimum wage announced by Rachel Reeves in October.
He said the business is in a “reasonable” position but that forecasting is “difficult” in the face of impending tax and wage increases.
As a result, he renewed calls to equalise the VAT paid on food by pub and restaurant businesses with that of supermarkets.
Most food and drink in shops has zero VAT whereas restaurants and pubs have a standard rate of 20pc.
Mr Martin said: “This tax advantage allows supermarkets to subsidise the price of beer they sell.
“The VAT distortions that exist today will inevitably create more supermarkets and less pubs.
“Wetherspoon therefore calls upon Sir Keir Starmer to redress this imbalance, thereby striking a blow for tax equality and ending discrimination in favour of dull dinner parties.”
09:46 AM GMT
Revolution Bar owner braces for ‘very damaging’ Budget hit
Revolution Bar owner The Revel Collective has warned it also faces a “very damaging” hit from recent Budget measures.
The group, which changed its name from Revolution Bars Group last October, revealed that it is set for annual profits to be knocked by £4m from Rachel Reeves’s move to increase National Insurance contributions and the minimum wage.
Shares plunged 33pc as it added that ongoing “uncertainty” over its restructuring plan has continued to have an impact on trading, while an expected recovery in bar sales has been slower than hoped.
“Although there has been some gradual improvement in sales in our Revolution brand, the late night market continues to be challenging, and sales have not yet recovered as quickly as we had anticipated,” it said.
Given the cost and trading pressures, it said it now expects underlying earnings of between £2m to £4m for the year to the end of June. It reported underlying earnings of £3m for 2023-24.
Rob Pitcher, chief executive of Revolution Bars Group, said: “The newly elected Labour Government’s recent budget announcements, especially the reduction in the national insurance thresholds for employers, will have a very damaging impact on the group.
“These measures are regressive and offer no clear pathway for economic growth within the hospitality sector. They also pose risks to the employment market.
“We strongly urge the Government to reconsider this policy in particular and explore more balanced alternatives.”
09:30 AM GMT
FTSE 100 hits fresh record
The FTSE 100 rose to a fresh record high as investors gave a cautious welcome to Donald Trump’s first full day in office.
Britain’s blue-chip stock index climbed 0.3pc to a peak of 8,575.82 amid hopes the President will take a more cautious approach on trade than initially feared.
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The make up of the FTSE 100 also offers resilience in an uncertain world, with pharma, consumer staples, and utility stocks offering the prospect of stable returns whatever the economic weather.”
The domestically-focused FTSE 250 was up 0.5pc to 20,694.33 as Chancellor Rachel Reeves told Davos that growth “trumps other things” amid speculation she may back the expansion of Heathrow and other airports.
British Airways owner IAG was up as much as 1.3pc on the FTSE 100.
Quilter rose as much as 6.7pc to lead gains on the FTSE 250 index after the wealth manager reported a “blockbuster” fourth quarter, according to Panmure Liberum.
09:10 AM GMT
EasyJet boss welcomes Reeves growth push amid Heathrow expansion speculation
EasyJet chief executive Kenton Jarvis welcomed reports that Rachel Reeves plans to back the expansion of Heathrow.
The Chancellor said today at Davos that economic growth must “trump other things” in the wake of figures showing public sector borrowing was rising faster than forecast.
Mr Jarvis told reporters: “We welcome the decisive action by the Government to grow the economy.
“We’ve always said that aviation, the industry, is an enabler of economic growth.
“When it comes to Heathrow, I’ve always thought Heathrow would fit our network of primary airports with great catchment areas.
“It would be a unique opportunity to operate from Heathrow at scale - because obviously right now it’s slot-constrained - and give us an opportunity to provide lower fares for UK consumers that currently at Heathrow just have the option of flag carriers.
“It fits with our network, we’re present at all the other major European airports like Schiphol, Charles de Gaulle, Orly, Geneva etc.”
08:52 AM GMT
National debt stands at £2.8 trillion
The Office for National Statistics said the national debt reached more than £2.825 trillion at the end of December, which is estimated to be around 97.2pc of gross domestic product (GDP) .
This was 0.3 percentage points more than at the end of December 2023, and remains at levels last seen in the early 1960s.
The ONS also increased its estimate of debt at the end of November by £1.3bn to £2.819 trillion.
08:35 AM GMT
‘Poor economic data’ yet to feed through to borrowing figures, warns think tank
The Chancellor has “plenty to worry about” after Treasury borrowing overshot official projections last month, according to a left-leaning think tank.
Cara Pacitti, senior economist at the Resolution Foundation, said the UK’s “recent run of poor economic data hasn’t yet fed through into the public finances” following a decline in retail sales in the run-up to Christmas and the fastest drop in payroll jobs since the pandemic.
Public sector net borrowing excluding banks rose to £17.8bn last month, which was £3.2bn above the OBR forecast for December.
Tax receipts were slightly stronger than expected in December but remain £2bn below the OBR forecast in the fiscal year to date.
Ms Pacitti said: “While high spending in December put the borrowing figures in a worrying light, tax receipts remain strong. Crucially, cash measures suggest borrowing was in line with the OBR forecast nine months into the fiscal year.
“However, with tax returns due at the end of this month, and market jitters adding further uncertainty around UK debt servicing costs, there is still plenty for the Chancellor to worry about ahead of the OBR’s March forecast and the Spending Review expected later in the spring.”
08:24 AM GMT
Borrowing costs edge up as Treasury overshoots projections
The cost of government borrowing edged higher in early trading on bond markets as official figures showed the Treasury was overshooting projections.
The yield on the 10-year UK gilt - a benchmark for government borrowing - edged up to 4.59pc, having risen since the Budget amid concerns over the Chancellor’s ability to meet her fiscal rules.
However, it remains down from the 17-year high of 4.92pc hit earlier this month during a bond market sell-off, before an unexpected drop in inflation helped calm traders.
08:18 AM GMT
UK markets open higher as Reeves signals growth push
Stock markets in London opened higher as Rachel Reeves recommitted to her growth plans following a surge in Treasury borrowing.
The FTSE 100 was up 0.1pc to 8,558.04 while the midcap FTSE 250 was little changed at 20,598.20 after a brief spike higher at the open.
08:12 AM GMT
Reeves says ‘growth trumps other things’ amid Heathrow speculation
Rachel Reeves has said she would face down opposition to pro-growth policies amid speculation she will back the expansion of Heathrow despite Labour allies’ reservations about the scheme.
The Chancellor said she wanted to ensure any pro-growth measure “trumps other things”.
Ms Reeves has come under pressure to pursue growth to balance the nation’s finances after a surge in government borrowing costs raised questions about her ability to meet her fiscal rules without either raising taxes or cutting public spending.
She would not comment on speculation about a Heathrow decision, which could trigger a row with critics of the scheme including London Mayor Sir Sadiq Khan and Energy Secretary Ed Miliband.
Speaking at a Bloomberg event at the World Economic Forum in Davos, the Chancellor said: “This was the problem with the last government, that there was always somebody that said ‘Oh yes, of course we want to grow the economy, but we don’t like that investment, we don’t like that wind farm, we don’t like those pylons, we don’t like that airport, we don’t want that housing near us’.
“But the answer can’t always be ‘no’ and that’s been the problem in Britain for a long time, that when there was a choice between something that would grow the economy and anything else, anything else always won.
“Now, of course, there are other things that matter, but when we say that growth is the number one mission of this government, we mean it, and that means it trumps other things.
“And so we’re making pro-growth decisions in the national interest.”
08:01 AM GMT
Reeves insists public finances ‘in order’ as borrowing surges
Rachel Reeves said Britain’s public finances “are now in order” as official figures showed Treasury borrowing has overshot OBR forecasts so far this financial year.
Speaking in front of business leaders at the World Economic Forum in Davos, the Chancellor said she will continue to make decisions to meet her fiscal rules, after questions were raised about her ability to do so following a surge in government borrowing costs.
Ms Reeves said her “instinct is to have lower taxes and less regulation” but she said she would not make any decisions that jeopardise the public finances.
07:42 AM GMT
Reeves may need to raise taxes or cut spending amid rising budget deficit
Rachel Reeves will likely have to put up taxes or cut spending in March as the budget deficit is on track to overshoot official forecasts, according to economists.
The OBR forecast the budget deficit - the difference between what the government spends and what it receives - would hit £55.5bn this financial year.
However, the consultancy Capital Economics said the latest borrowing figures indicate the Chancellor will miss this by about £1.5bn.
It comes after the Treasury borrowed £17.8bn in December, which was more than the £14.2bn forecast by analysts and the £14.6bn predicted by the OBR.
UK economist Alex Kerr said much of the overshoot was because of a one-off £1.7bn payment to the private sector to repurchase military accommodation, which will be counted as investment rather than borrowing under the Chancellor’s revised fiscal mandate.
However, since the latest data, upheaval in bond markets has sent government borrowing costs higher.
Mr Kerr said: “Today’s release underlines the challenges that face the Chancellor.
“And although market interest rate expectations and gilt yields have fallen in the last week, they are still higher than at the time of the Budget and suggest that the Chancellor’s headroom against her fiscal rules has been whittled down from £9.9bn in October to £2bn.
“That combined with a weakening economy suggest that, in order to meet her fiscal rules, the Chancellor may need to raise taxes and/or cut spending in the next fiscal statement on March 26.”
07:27 AM GMT
Debt interest payments third highest on record for December
The Treasury’s debt interest payments were already rising before the recent spike in borrowing costs.
The Office for National Statistics said the interest payable on government debt was £8.3bn in December, which was £3.8bn more than the same month the previous year.
It was the third-highest December figure since monthly records began in January 1997.
Government borrowing costs surged higher this month amid a sell-off in bond markets over concerns that the Chancellor will not be able to meet her fiscal rules.
Dennis Tatarkov, senior economist at KPMG UK, said that so far this year, lower than expected interest costs have partly offset the Treasury’s increase in borrowing, as interest costs have been around £2bn below the OBR’s forecast.
He said: “However, as the market volatility of the past week shows, uncertainty about the future path of interest rates could risk higher borrowing in the future.”
07:18 AM GMT
Spending review will ‘root out waste’, says Treasury minister
As public sector borrowing overshot official forecasts, Treasury chief secretary Darren Jones said: “Economic stability is vital for our number one mission of delivering growth, that’s why our fiscal rules are non-negotiable and why we will have an iron grip on the public finances.
“Through our spending review, we will interrogate every line of government spending for the first time in 17 years.
“We’ll root out waste to ensure every penny of taxpayers’ money is spent productively and helps deliver our plan for change.”
07:14 AM GMT
Highest December borrowing in four years
The £17.9bn borrowed by the Treasury was the highest in December for four years.
It was £10.1bn more than was borrowed in the same month a year ago.
Jessica Barnaby of the ONS, said: “At almost £18bn, borrowing last month was the third highest in any December on record.
“Compared with December 2023, spending on public services, benefits, debt interest and capital transfers were all up, while an increase in tax receipts was partially offset by a reduction in national insurance contributions, following the rate cuts earlier in 2024.”
07:12 AM GMT
Treasury borrows more than expected in blow to Reeves’s spending plans
Treasury borrowing has already shot past official forecasts made in the Budget in a blow to Rachel Reeves’s plans to ramp up spending.
Britain has already borrowed £4.1bn more so far this financial year than was projected by the Office for Budget Responsibility (OBR) in its updated estimates in October, official figures show.
Public sector net borrowing excluding banks climbed to £129.9bn in the nine months to December, compared to the OBR’s forecast that the figure would stand at £125.9bn.
It comes after the Treasury borrowed £17.8bn last month, according to the Office for National Statistics, which was higher than the £14.2bn analysts had expected.
The rise in debt is unwelcome for the Chancellor, who faced questions about her ability to meet her fiscal rules following a surge in borrowing costs at the start of the year amid a sell-off in bond markets.
Ms Reeves outlined plans in the Budget to increase public spending by £70bn a year over the next five years, paid for by higher taxes and borrowing.
07:08 AM GMT
Good morning
Thanks for joining me. The Treasury is already borrowing more than forecast this year despite the Office for Budget Responsibility updating its forecast in the Budget.
Public sector net borrowing excluding banks climbed to £129.9bn in the eight months to December, which was £4.1bn higher than official estimates made in October.
5 things to start your day
-
Trump threatens to double taxes on foreign companies as he declares war on EU deal | President attacks ‘discriminatory’ agreement on global minimum corporation tax
-
Ed Miliband warns Trump that net zero is ‘unstoppable’ | The Energy Secretary said going green is vital to reduce Britain’s reliance on ‘rollercoaster’ fossil fuel markets
-
Britain faces bidding war with Europe to keep lights on amid wind power slump | ‘Dunkelflaute’ to expose UK’s over-reliance on the Continent’s energy exports
-
Reeves faces battle with Khan over Heathrow expansion | Chancellor’s plan to back third runway risks splitting the Cabinet over net zero opposition
-
Netflix smashes growth forecast after push into live sport | Subscriber numbers have surged, propelling profits to more than $10bn
What happened overnight
US stocks rose yesterday after more companies said they made bigger profits at the end of last year than analysts expected.
The S&P 500 climbed 0.9pc, closing at 6,049.24. The Dow Jones Industrial Average rose 1.2pc, to 44,025.81, and the Nasdaq Composite added 0.6pc, to 19,756.78.
The yield on benchmark 10-year US Treasury notes fell to 4.56pc from 4.62pc late on Friday. Like the US stock market, bond trading had been closed on Monday in observance of Martin Luther King Jr Day.
Most Asian markets extended a global rally as investors gave a cautious welcome to Donald Trump’s first full day in office amid hopes he will take a more cautious approach on trade than initially feared.
Software investment giant SoftBank soared more than 9pc - leading Tokyo-listed chipmakers higher - after the American president said it was included in a new $500bn (£405bn) venture to build infrastructure for artificial intelligence in the United States.
However, Hong Kong and Shanghai fell after the tycoon warned China could be included in a list of countries to be hit with tariffs on February 1 “based on the fact that they’re sending fentanyl to Mexico and Canada”.
Tokyo’s Nikkei 225 was the standout performer.
Taipei also enjoyed a big jump, with chip titan and market heavyweight TSMC up more than 2pc, while Seoul was also helped by big gains in SK hynix and LS Electric.
There were also gains in Sydney, Singapore, Wellington and Manila.
But Hong Kong lost more than one percent after a six-day run-up as concerns China will be hit with fresh tariffs dealt a blow to confidence. Shanghai also took a hefty hit.