The UK economy is expected to have flatlined or contracted again in May as higher energy costs and weak service-sector activity weigh on growth. Stronger retail sales and positive three-month figures, however, suggest a fragile slowdown rather than a clear economic downturn.
City traders have reportedly built short positions of about £7 billion against sterling as markets assess the prospect of an Andy Burnham premiership. The move reflects concern over Britain’s fiscal outlook, borrowing costs and uncertainty around future tax and spending plans. But the reaction is not a simple verdict on Burnham: the pound has also recovered when he has committed to existing fiscal rules, showing that markets are watching for credible detail rather than rejecting political change outright.
The Office for National Statistics has admitted an operational error affecting UK labour market data collection, reducing the quality of the July jobs figures. The mistake comes as policymakers, businesses and the Bank of England are already trying to interpret mixed signals on employment, vacancies and wage growth.
UK inflation held steady at 2.8% in May, giving the Bank of England more room to keep interest rates on hold. The figures offer some relief for households and businesses, but higher transport costs, services inflation and global energy risks mean borrowing costs are unlikely to fall quickly.
The FTSE 100 edged higher as investors weighed hopes of a US-Iran agreement against uncertainty over oil supplies, inflation and central bank policy. Falling crude prices have eased fears of another energy shock, but markets remain cautious as traders await more detail on the deal, the Bank of England’s next move and the wider impact on UK businesses.
Inflation concerns are mounting ahead of the Bank of England’s June rate decision, with policymakers expected to hold Bank Rate at 3.75% despite renewed pressure from energy prices and rising public inflation expectations. For businesses and households, the likely pause offers stability, but not the lower borrowing costs many had hoped for.
The US Federal Reserve and Bank of England are expected to keep interest rates on hold this week as markets assess whether the US-Iran peace deal will ease energy-driven inflation. For businesses, the decision may bring short-term relief, but borrowing costs, wage pressure and fuel-linked price rises remain key risks.
UK energy prices are back at the centre of the economic debate as households face a 13% price cap rise, manufacturers warn of job losses and relocation, and the Bank of England prepares for a difficult interest rate decision later this week.
