Five-year mortgage rates drop below 6%; UK lagging G7 rivals; European stocks at three-month high – as it happened

Last modified: 04: 13 PM GMT+0

Average five-year fixed mortgage rate has dropped below 6% for the first time in seven weeks, as OECD cuts growth forecasts

National Grid issues power supply alert as wind generation drops

Some late energy news…

The UK’s electricity network operator issued a warning that its buffer of spare capacity will narrow this evening, flagging that the grid is struggling to match demand with enough supply.

While National Grid said it was confident that power margins would be sufficient, the measure was narrow enough to trigger the automatic alert for 7 p.m. to the market.

The warning was later canceled but it shows the impact a decline in wind generation will have as temperatures plunge this winter.

GB : Capacity Mechanism Notice Issued for 19:00 this evening. Unlikely to become true as NG ESO will use interconnector trading to increase imports this evening over the coming hours ^PH

— EnAppSys (@enappsys) November 22, 2022

UK rail workers plan further strikes in December and January

British railway workers will carry out fresh 48-hour strikes in December and January, the RMT trade union have said.

The latest industrial action have been announced after talks with employers collapsed without reaching a resolution to a long dispute over pay that has already disrupted services for months.


- RMT announces another *eight* days of rail strikes before and after Christmas:

- fresh strike action on December 13, 14, 16 & 17 as well as January 3, 4, 6 & 7

— Jim Pickard (@PickardJE) November 22, 2022

Another significant point from the Treasury committee hearing:

Andy King explains why debt interest costs have risen.

The rise in interest rates since March means that the cost of servicing that debt doubles in cash terms to over £100bn and jumps as a % of government revenue from under 5% pre-pandemic to 8.5% by 2027-28.#AutumnStatement

— Office for Budget Responsibility (@OBR_UK) November 22, 2022


Here’s a neat chart showing how the UK will lag behind other G20 countries, with the exception of heavily-sanctioned Russia, next year:


European stock markets have hit a three-month high this afternoon, as energy stocks continue to rally.

The Stoxx 600 index is up 0.8%, to levels not seen since August.

Nationwide cuts fixed-rate mortgages

Back on the drop in mortgage rates (see earlier) Nationwide Building Society announced rate cuts to some of the mortgages it is offering.

The cuts, of up to 0.3 percentage points, will be made tomorrow.

The Society said the new rates will include a two-tear tracker rate for people with a 15% deposit, reduced by 0.3 percentage points to 3.94%, with a 999 fee.

They also include a five-year fixed rate re-mortgage deal for people with a 40% deposit, reduced by 0.26 percentage points to 4.93%, with a 999 fee.

Henry Jordan, director of mortgages at Nationwide Building Society, said:

“Continued market stability and the downward trend in swap rates have meant we’ve been able to make further rate reductions on a large number of products across our mortgage range.”

David Miles explains the impact of higher global energy and food prices on our economic forecasts. They’re expected to push inflation up to 11% this year, but inflation would have peaked 2½ ppts higher without the Government’s energy price guarantee.#AutumnStatement

— Office for Budget Responsibility (@OBR_UK) November 22, 2022

The rise in economic inactivity, with more people leaving the labour force, has also left the UK economy in a weak position, OBR chief Richard Hughes points out.

The causes of this are complex, he says, but include a combination of early retirement, and rising ill-health following the pandemic.

OBR: Borrowing rates and energy costs making UK poorer

Q: How does the UK escape its ‘doom loop’ of weak growth?

The OBR are reluctant to provide policy advice to ministers.

Professor David Miles says that several shocks have hit the UK since March, including a much higher increase in interest rates than forecast, and the surge in energy costs.

Miles says UK borrowing costs (measured by bond yields) surged ahead of other advanced Western countries after the mini-budget. They’ve now dropped back in line, but are still much higher than expected in March.

And market expectations for gas prices in the global market for 2023 are around 80% higher than forecast in March.

Those are the two reasons why the UK has got ‘a lot poorer’, as Paul Johnson of the IFS warned last week.

OBR has told the Treasury select committee the Treasury told them they were fine to factor in the 23% fuel duty increase in April into their forecast

This is at odds with what ministers have been saying, who said it was the OBR assuming the increase would go ahead - not them...

— Nadine Batchelor-Hunt (@nadinebh_) November 22, 2022

OBR: "Our forecast is based on govt policy which was announced back in March... it was a policy as confirmed by the Treasury when they gave us the policy assumptions to use when we produced [the report] this month..."

— Nadine Batchelor-Hunt (@nadinebh_) November 22, 2022


OBR: Not raising fuel duty would cost £6bn

The Treasury committee turns to the OBR’s assumption that fuel duty won’t be frozen next March, and will rise by 23%.

OBR chief Richard Hughes says the watchdog’s work is based on government policy. Back in March, then-chancellor Rishi Sunak announced a 5p per litre cut to duty, which would be reversed after a year.

That remained part of the ‘policy assumptions’ which the Treasury gave the OBR to use for this month’s forecasts.

Lifting fuel duty as planned would add 12p per litre to petrol and diesel.

If the government doesn’t go ahead, it would cost £6bn, he explains.

That being said, no chancellor since 2010 has actually gone ahead with the planned indexation of fuel duty, Hughes grins – but many leave the decision until late in the day, becauase it flatters the forecasts.


Q: Did you tell Liz Truss and Kwasi Kwarteng how dangerous it would be not to commission a forecast from the OBR?

OBR chief Richard Hughes says there were no discussions with the chancellor or PM prior to the 23rd September (the day of the mini-budget).

Q: Do we need a better definition of a fiscal event?

Hughes agrees there have been five fiscal events since March (including last week’s autumn statement, which did come with an OBR forecast).

Good practice, as defined by anyone… would say you shouldn’t make fiscal decisions without an updated economic outlook.

On the Government’s new rules, Richard Hughes explains that they are met by margins that are small relative to March and to the risks around this forecast.#AutumnStatement

— Office for Budget Responsibility (@OBR_UK) November 22, 2022

OBR chief Richard Hughes tells MPs that business investment has been ‘pretty disappointing’ for a while in the UK.

With a consumption-driven recession facing us, it’s hard to see many firms lifting investment – especially as rising interest rates make borrowing more expensive.

OBR committee member David Miles weighs in, saying people are likely to dip into their savings as household incomes are hit by the recession (rather than hunkering down and saving more).

OBR defends forecasts

Over in parliament, the Treasury committee are questioning top officials from the Office for Budget Responsibility about last week’s autumn statement.

There’s a live-feed at the top of this blog.

OBR chair Richard Hughes has been explaining that it’s a ‘good principle’ that fiscal changes produced alongside economic forecasts.

The fiscal watchdog had been told in early September that Kwasi Kwarteng wouldn’t want a formal forecast for the mini-budget (an omission that contributed to the market panic).

Q: Why are the OBR’s forecasts so different than the Bank of England’s forecasts?

Hughes replies that the OBR’s growth projections are more optimistic – showing a shorter UK recession and a recovery to a higher level.

But he insists the OBR’s view is in line with othe forecastses, while the Bank is ‘a bit of an outlier’ in being so pessimisic.

The difference is partly due to a different view on whether the savings rate will fall (OBR) or rise (BoE), but also because the OBR drew up its forecasts more recently, so captures falls in energy costs and interest rate probabilities.


House sales steady, but slowdown ahead

House sales held steady in October in the face of turmoil in the City and Westminster.

The volume of transactions increased by 2% month-on-month, on a seasonally-adjusted basis, according to HM Revenue and Customs figures.

An estimated 108,480 sales took place, which was also 38% higher than in October 2021 - when a stamp duty holiday in England and Northern Ireland ended.

UK house transactions

Those deals will have been agreed a few months earlier, before the mini-budget mayhem.

So with the economy weak, and interest rates due to keep rising until next summer, the market may cool.

Lucian Cook, Savills head of residential research, says:

“Sales have also continued to be supported by people looking to lock into existing mortgage deals, that look cheap in the context of current interest rates.

However, a number of lead indicators - including the increased cost of borrowing and rising cost-of-living - are pointing towards falls in transactions over coming months, as buyers and lenders become more cautious.

These numbers also continue to show the distortive impact of last year’s stamp duty holiday.

We predict transactions volumes will slow to 870 000 in 2023, with equity-driven prime markets holding up stronger than first-time buyers and mortgaged landlords, who rely more heavily on debt.”

Key event

This morning’s UK public finances report shows that the government’s tax take has risen this year.

  • Income tax, national insurance and capital gains tax receipts for April to October rose by £28.1bn to £235.6bn.

  • Stamp duty receipts came in at £12.4 billion, up by £2.2bn on last year

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“HMRC’s tax take continues to soar with the amounts of income tax, capital gains, inheritance tax and stamp duty heading skywards as a combination of threshold freezes and strong demand for property continue to play out.

The squeeze looks set to continue with these taxes taking centre stage in the Chancellor’s Autumn Statement with income tax and inheritance tax frozen for a further two years and the threshold for additional tax rate payers slashed. Capital gains tax changes will penalise those holding investments outside ISAs and pensions and stamp duty changes may force one last stampede to purchase that dream home before the threshold goes back down in 2025.

Stamp duty land tax receipts* hit another record high with £17.7 billion raised in the year to October 2022
But could this be the peak?
(*residential & commercial property)

— Neal Hudson (@resi_analyst) November 22, 2022

Legal & General’s top bosses have roasted Liz Truss and Kwasi Kwarteng’s mini-budget for causing the financial chaos that led to the liquidity crisis in UK pension funds, the FT reports.

Here’s the details:

The chief executive and chair of one of the UK’s biggest providers of liability-driven investment strategies defended their risk management and the use of leverage within these products.

They conceded however that the FTSE 100 insurer should be on a closer lookout for such “black swan” events.

“No one involved in this, the regulators, the central bank, the government, the advisers, the funds, the sponsors, or us, believed that it was a plausible scenario that the government would do something that would create such extraordinary instability in the market in two trading days,” said Sir John Kingman, L&G’s chair.

“That’s what really happened here.”

Baroness McGregor-Smith seems surprised that L&G's stress testing didn't foresee the autumn market turmoil, given the apparent extent to which the government signposted its direction of travel in the lead up to the mini-Budget

— Alex Janiaud (@alex_janiaud) November 22, 2022

L&G making the point, repeatedly, that nobody could have foreseen that the government would blow up its own debt market

— Alex Janiaud (@alex_janiaud) November 22, 2022

The Bank of England stopped the panic selling in the gilts market last month, when pension funds who had used LDI strategies were caught in a fire sale of assets.

The Bank later confirmed that “a large number of funds” came close to collapsing.

Today’s figures from the OECD are yet more evidence of the Tories’ 12 years of economic failure, argues Pat McFadden MP, Labour’s Shadow Chief Secretary.

McFadden says:

“Next year we will have the lowest growth in the G20 bar Russia. And we are forecast to be the only OECD economy that will be smaller in 2024 than it was in 2019.

“This is the Tory doom loop. A low growth spiral leading to higher taxes, lower investment, squeezed wages and poor public services. And they have no plan to get us out of it.

“Labour has a plan to grow the economy, with a modern industrial strategy that works in partnership with businesses, and a Green Prosperity Plan creating good jobs across the country in the world-leading industries of the future.”

FTSE 100 hits two-month high

In the City, the UK’s blue-chip FTSE 100 index has reached its highest level since mid-September.

The Footsie is up 47 points today at 7,424 points, lifted by oil giants BP (+5.8%) and Shell (+3.6%) and smaller producer Harbour Energy (+7)after reports that Opec+ might lift oil production were denied.


In other strike news, a long-running dispute on the West Midlands Metro has ended after workers agreed an improved pay offer.

Under the pay deal, existing tram crew with 12 months service or longer will see their pay increase by 20.1% by April 2023. The offer was made after workers voted to take all-out industrial action from the end of November.

A strike at a food manufacturing facility that supplies Tesco, Sainsbury’s, Morrisons and Marks and Spencer has been suspended, following a revised pay offer.

The strike action was due to begin on 25 November, involving more than 700 workers at food manufacturer Bakkavor’s factory in Spalding. It is now on hold, so staff can vote on the new proposal.

Workers on the production line at the factory in Spalding, Lincolnshire, make own-brand salads, dips, sauces and deli produce for the UK’s major supermarkets.

They had turned down a 6.5% offer, and were due to walk out until 2 January.

Here’s some reaction to the drop in UK fixed-rate mortgages, from John Stepek of Bloomberg…

Average 5-year fixed-rate mortgage in UK drops back below 6%, according to Moneyfacts (do remember that this is an average, and that you can get lower rates than this, depending on ltv, product type, etc)

— John Stepek (@John_Stepek) November 22, 2022

…and finance journalist James Andrews:

Peak expected at 4.5%, so that still feels high, but given I'm remortgaging in the next few months I'll take any drop I can

— James Andrews (@FinanceJames) November 22, 2022

Gas prices rise as temperatures fall

Wholesale gas prices are rising in Europe today, as cold weather lifts demand.

The UK day-ahead gas price is up almost 6% at 118p per therm, having dropped below 40p in mid-October

European gas price edges higher as colder weather boosts demand and on Gazprom's Ukraine transit threat. Gazprom may cut Ukraine gas transit from Nov 28, the company said in a statement. (via BBG)

— Holger Zschaepitz (@Schuldensuehner) November 22, 2022

Key event

The OECD has criticised the UK’s energy price cap, in its new assessment of Britain’s economy (online here).

It warns that the ‘untargeted’ pledge will force the Bank of England to tighten monetary policy to tighten more and raising debt service costs, saying:

Better targeting of measures to cushion the impact of high energy prices would lower the budgetary cost, better-preserve incentives to save energy, and reduce the pressure on demand at a time of high inflation.

It also fears that a particularly cold winter could risk supply disruptions, exposing the economy to rolling power cuts.

Further progress in trade deals could also support growth, the OECD adds

OECD growth forecasts
OECD growth forecasts Photograph: OECD

Central banks must keep hiking rates as economy slows, OECD says

Despite mounting economic gloom, the OECD is urging central banks to keep raising interest rates.

It argues that it is important to keep fighting soaring and pervasive inflation, despite the clear slowdown in growth, saying:

The higher price of energy has helped trigger increasing prices across a broad basket of goods and services. Tighter monetary policy and decelerating growth will help to eventually moderate inflation.

The world’s central banks must keep raising interest rates to fight inflation, even as the global economy sinks into a significant slowdown, the OECD says

— Bloomberg Economics (@economics) November 22, 2022

Europe faces hardest hit from global slowdown

Europe will suffer the most from the global slowdown next year, the OECD says, even though the world economy should avoid a recession.

World economic growth is set to slow from 3.1% this year to 2.2% next year before accelerating to 2.7% in 2024, today’s new forecasts show.

And European countries will bear the brunt of the energy shock, and the disruption to business activity from Russia’s war in Ukraine.

Acting OECD chief economist Alvaro Santos Pereira says:

“Our central scenario is not a global recession, but a significant growth slowdown for the world economy in 2023, as well as still high, albeit declining, inflation in many countries.”

The global economy should avoid a recession next year but the worst energy crisis since the 1970s will trigger a sharp slowdown with Europe hit hardest, the OECD said on Tuesday, urging central banks to keep hiking interest rates.

— Intl. Business Times (@IBTimes) November 22, 2022

New: @OECD forecasts UK economy will contract by 0.4% next year (biggest fall in GDP in G7) and will grow by only 0.2% in 2024 (weakest growth in G7).

Covid+war in Ukraine+Brexit = slow growth - a serious problem. Governments which can’t raise living standards come unstuck.

— Joel Hills (@ITVJoel) November 22, 2022

OECD: World paying high price for Ukraine war

The OECD also warns that the global economy is reeling from the Ukraine war, suffering slowing growth and high inflation.

Introducing its latest economic forecasts, the Paris-based organisation says:

The world economy is paying a high price for Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine.

With the impacts of the COVID-19 pandemic still lingering, the war is dragging down growth and putting additional upward pressure on prices, above all for food and energy. Global GDP stagnated in the second quarter of 2022 and output declined in the G20 economies.

High inflation is persisting for longer than expected. In many economies, inflation in the first half of 2022 was at its highest since the 1980s. With recent indicators taking a turn for the worse, the global economic outlook has darkened.

UK to be weakest G7 member next year

The UK economy will contract more than any of the world’s other seven most advanced nations next year, the Organisation for Economic Co-operation and Development (OECD) warns.

The OECD has slashed its forecasts for UK growth, as high inflation and worker shortages hit the economy, in its latest economic outlook.

The UK economy is expected to shrink by 0.4% in 2023 – down from a previous forecast of flatlining – and grow by just 0.2% in 2024.

Germany is the only other G7 country expected to contract next year, with a 0.3% drop in GDP expected.

Italyis set to grow by 0.2%, with the US expected to expand by 0.5%, France by 0.6%, Canada by 1%, with Japan leading the pack with 1.8%


— Christophe Barraud🛢🐳 (@C_Barraud) November 22, 2022

The UK is likely to be the second weakest performer of the world’s big economies next year, behind only Russia.

Our economic editor Larry Elliott reports:

Although most countries have had their growth forecasts cut by the OECD since June, only Russia’s 5.6% contraction is forecast to be more severe than Britain’s. The poor performance is forecast to continue in 2024 with expansion of 0.2% – the joint weakest alongside Russia.

The OECD’s acting chief economist, Álvaro Pereira, said he was expecting a less severe downturn next year than the 1.4% decline pencilled in by the Office for Budget Responsibility in last week’s autumn statement, but a more subdued recovery in 2024 than the OBR had pencilled in.

Pereira said the OECD thought interest rates would peak at a lower level than the OBR was anticipating, and that the UK would suffer a four-quarter recession ending in the middle of 2023.


The surge in mortgage rates in September and early October has already left some people unable to buy a home, or forced to take on a second job to pay for their loan


UK five-year fixed mortgage rates finally drop below 6%

The average five-year fixed mortgage rate has dropped below 6% for the first time since the market turmoil created by the disastrous mini-budget two months ago.

Moneyfacts reports that the typical five-year fixed deal now costs 5.95% per year, the lowest in seven weeks.

That’s down 6.5% a month ago, but still higher than before the mini-budget, when average 5-year and 2-year rates were both around 4.75%.

Mortgage rates have been dropping since Jeremy Hunt tore up his predecessor Kwasi Kwarteng’s plans in mid-October. The Bank of England has also helped, by saying that market expectations of rate rises were too high.

Bank rates is expected to peak over 4.5% next summer, down from 6% expected when the pound slumped to a record low and UK government borrowing costs spiked.

Two-year fixed mortgages costs have also dropped; they now average 6.13%, down from 6.65% a month ago.

Rachel Springall, finance expert at, says this fall will be a relief to those looking to borrow:

“Borrowers may well breathe a sigh of relief to see that fixed mortgage rates are starting to fall, but there may be much more room for improvement. As the average five-year fixed mortgage rate falls below 6% for the first time in seven weeks, borrowers who paused their home ownership plans, or indeed parked the idea of refinancing, may now be tempted to scrutinise the latest deals on offer.

But… rates could fall further still, Springall adds:

Indeed, it’s been around two months since both the average two and five-year fixed mortgage rate breached 5% (30 September 2022), but today only a handful of lenders are offering sub-5% fixed deals.

Borrowers may feel they have to be patient for a little while longer yet before they commit to a new fixed mortgage, or even wait until next year to see how the market recovers from the recent interest rate uncertainty.”

What is happening with UK mortgage rates? Are they going up or down?

— Zoe Schneeweiss (@ZSchneeweiss) November 21, 2022


2023 will be a tough year for German businesses, according to their industry association.

The BDI predicts that German industrial production will rise slightly this year, despite the economic headwinds from the Ukraine war.

But next year will be a challenge, BDI adds:

“The outlook for 2023 is gloomy. More and more companies in the manufacturing sector are exposed to high energy prices and geopolitical uncertainties.”

An AO World delivery truck

Online electricals retailer AO World has been hammered by the cost of living crisis, but the future may be brighter after it shut loss-making divisions.

AO has reported that revenues fell 17% in the six months to 30 September, while its pre-tax loss swelled to £12m from £4m in “a tough environment”.

AO insists, though, that its sales are on track, while profits for this year are expected to hit the top of current guidance.

The company, which sells electrical items and kitchen equipment for home delivery, has conducting a ‘strategic pivot’ towards cash generation and profitability, having been hurt by supply chain problems and the economic slowdown.

It warns, though, that it expects more damage from the cost of living crisis affecting consumer spending, and ongoing supply chain issues.

AO’s founder and chief executive, John Roberts, explained:

“We’ve now closed the loss making and cash consumptive parts of our operations meaning the remaining UK business is cash generative, and are successfully closing our German business with a minimal cash impact to the wider Group.

Shares have jumped 15% this morning as investors welcome its higher forecasts, but are still down 45% so far this year.

AO World - of course it still has lower sales, a continuation of losses and net debt, apparently though "made good progress with our strategic realignment as we focus on profitability and cash generation, all of which is yielding the results we expected". Whatever... call 8.30 am

— Chris Bailey (@Financial_Orbit) November 22, 2022


Oil shares jump after Opec production boost denial

The oil price, and shares in oil companies, are both rebounding today after Saudi Arabia denied it was discussing an increase in Opec production.

Brent crude has gained 1.5% to $88.80 per barrel this morning, having slumped by $5 per barrel to around $83/barrel yesterday to a 10-month low.

BP’s shares have jumped over 5%, followed by North Sea producer Harbour Energy (+4.7%) and Shell (+3.2%).

They fell on Monday, after reports that Opec and its allies could increase output by 500,000 per day.

It’s been a dramatic time in the oil market, as Stephen Innes, managing partner at SPI Asset Management, says:

Saudi Arabia’s denial of the output increase contributed to a 12% round-trip in front-month Brent prices over the past 24 hours.

It is possible that the suggestions to expand Opec+ production were floated to gauge the price reaction. The initial negative follow-through implies that demand concerns warrant a relatively modest increase in output if Opec+ is looking to stabilize prices once the EU embargo kicks in.

Dramatic moves in #OIL
Brent crude oil traded to a low of $82.31/bbl overnight
But then recovered to $87.45/bbl

As Saudi Arabia issued a statement denying WSJ report that OPEC+ producers were considering a production increase

— Harshada Sawant हर्षदा सावंत 🇮🇳 (@AEHarshada) November 22, 2022

G4S strike prompts fears of festive cash shortages at banks and shops

A G4S security van parked outside a bank in Loughborough
A G4S security van parked outside a bank in Loughborough Photograph: Darren Staples/Reuters

There are fears of cash shortages in the run-up to Christmas, after more than 1,000 security workers who deliver cash and coins to some of the UK’s biggest banks and supermarkets voted to strike in December.

The strike by 1,200 members of the GMB union who work for the security company G4S is due to take place from 3am on 5 December, after 97% of workers voted for industrial action in a row over pay.

G4S Cash Solutions clients include Barclays, Lloyds and HSBC as well as retailers including Tesco, Asda, Aldi, Morrisons and Boots, and the pub chains Wetherspoon’s and Greene King.

G4S Cash, part of Allied International, initially offered members a part-pay freeze, and then proposed a 4.5% pay rise and a lump-sum bonus based on contracted hours, the GMB said.


Although UK borrowing was £4.4bn higher than last October, it was lower than September’s £17.7bn bill, points out Victoria Scholar, head of investment at interactive investor:

While central government expenditure was £6.5bn higher than October last year, tax receipts increased by £2.5bn year-on-year, meaning that less borrowing was required allowing PSNB (public sector net borrowing) to come in better or less than expected, despite spending pressures from energy support measures.

In the Autumn Statement, Jeremy Hunt underscored his commitment to being part of a Treasury that relies far less than his predecessor Kwasi Kwarteng on borrowing from the gilt market. In fact. his fiscal plans mean the government will be issuing £31bn fewer gilts after the fiscal fiasco of the mini-budget in September.”

"Cost of energy price support will be greater in future months." @samueltombs on U.K. Public Finances, October #PantheonMacro

— Pantheon Macro (@PantheonMacro) November 22, 2022

Martin Beck, chief economic advisor to the EY ITEM Club, points out that today’s public finances don’t include the cost of protecting businesses from energy costs.

Once that support for non-domestic users is factored in, borrowing will be even higher.

Beck says:

The cost of energy support programmes is becoming increasingly apparent in the UK public finances data, with October’s borrowing outturn including the first costs of the energy price guarantee and the energy bills support scheme.

The cost of the scheme for businesses has still to be added, so large year-on-year increases in borrowing are likely for the rest of fiscal year 2023-2024.

Hunt: It's right to borrow to support firm and families

Here’s chancellor of the exchequer, Jeremy Hunt, on October’s jump in borrowing:

“It is right that the government increased borrowing to support millions of business and families throughout the pandemic, and the aftershocks of Putin’s illegal invasion of Ukraine.

“But to tackle inflation and ensure the economic stability needed for long-term growth, it is vital that we put the public finances back on a more sustainable path.

“There is no easy path to balancing the nation’s books, but we have taken the necessary decisions to get debt falling while actively taking steps to protect jobs, public services and the most vulnerable.”

Energy price support has put UK borrowing back on an upward trend, says Paul Dales of Capital Economics:

October’s public finances figures showed that government borrowing is no longer coming in below last year’s monthly totals.

And the combination of the government’s energy price support and pressures from the weakening economy implies that borrowing will come in at £175bn (6.9% of GDP) in 2022/23, a huge £42bn above the 2021/22 total.

But there is some good news in October’s public finances release too:

The full-year estimate for the 2021/22 fiscal year was revised down a fraction from £133.3bn to £132.7bn. And borrowing for the previous six months of the 2022/23 fiscal year was revised down by £1.6bn.

Here’s a breakdown of the UK public finances, from ONS public sector finance statistician Fraser Munro:

In October, the public sector spent more than it received in taxes and other income, requiring it to borrow £13.5 billion, the fourth-highest October borrowing on record.

— Fraser Munro (@Fraser_ONS_PSF) November 22, 2022

This month the public sector spent £91.2 billion, a rise of £8.8 billion compared to October 2021 and its income rose £4.5 billion to £77.6 billion.

— Fraser Munro (@Fraser_ONS_PSF) November 22, 2022

Central government, the largest part of the public sector spent £84.5 billion in October 2022, a rise of £8.8 billion compared to a year earlier, while its income fell by £1.0 billion to £70.2 billion.

— Fraser Munro (@Fraser_ONS_PSF) November 22, 2022

Central government current or day-to-day expenditure was £76.8 billion, £6.5 billion more than in October 2021 and includes the first payments under the government’s energy support schemes to households and to domestic energy suppliers.

— Fraser Munro (@Fraser_ONS_PSF) November 22, 2022

Introduction: Energy support pushes up UK borrowing

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK government borrowing jumped last month, lifted by support with household energy bills, and soaring inflation which drove up interest payments.

Britain’s public sector net borrowing came in at £13.5bn in October, more than £4bn more than the £9.2bn which was borrowed in October 2021 to balance the books.

It’s the fourth highest October borrowing since monthly records began in 1993.

Public sector net borrowing, excluding public sector banks, was £13.5 billion in October 2022.

This was £4.4 billion more than in October 2021 and the fourth highest October borrowing since monthly records began in 1993.


— Office for National Statistics (ONS) (@ONS) November 22, 2022

Government spending was lifted by £1.9bn by the cost of helping households with energy bills. That £400 payment is being paid in six monthly installments, starting in October.

Former PM Liz Truss’s pledge to cap household bills at an average of £2,500 per year also added over £1bn to government spending.

Michal Stelmach, senior economist at KPMG UK, says:

“The public finances continue to face a tug of war between demand for energy support and the overarching need to balance the books.

As things stand, the headroom against meeting the new fiscal targets is hanging by a thread, and we expect that they could easily be missed thanks to a less favourable economic outlook compared to the OBR’s forecast.”

Public sector net debt, excluding public sector banks, was £2,459.9 billion at the end of October 2022, or around 97.5% of GDP.

An increase of £148.3 billion but a decrease of 0.5 percentage points of GDP compared with October 2021.

— Office for National Statistics (ONS) (@ONS) November 22, 2022

Chancellor Jeremy Hunt, who outlined a £55bn package of spending cuts and tax increases last week, has warned that “There is no easy path to balancing the nation’s books” (more from the chancellor shortly).

Hunt also announced more support for energy bills last week, beyond April, which will push borrowing higher still.

October’s borrowing figure was actually lower than City economists expected.

But the UK spent £6.1bn on interest payments on the national debt. Over half that bill (£3.3bn) was due to the surge in the retail price index, which sets the interest payment on index-linked gilts.

Last week, the Office for Budget Responsibility predicted that the national debt will peak at almost 100% of national output in three years, driven up by higher debt interest, inflation-linked welfare spending, and a weaker economy.

Underlying public sector net debt (excluding the Bank of England) rises to a 63-year peak of 98% of GDP in 2025-26 and then falls slightly to 97% of GDP in 2027-28. Medium-term debt is 18% of GDP – over £400bn – higher than forecast in March.#AutumnStatement

— Office for Budget Responsibility (@OBR_UK) November 17, 2022

Debt interest costs peak this year at close to a post-war high of 12% of public sector revenues and 5% of GDP, due to higher RPI inflation, Bank Rate and gilt yields.#AutumnStatement

— Office for Budget Responsibility (@OBR_UK) November 17, 2022

Also coming up today

Labour leader Sir Keir Starmer is to tell business leaders at Britain’s ‘immigration dependency’ must end.

Bosses have been pushing Westminster to use immigration to solve worker shortages and boost economic growth. But the Labour leader will tell the CBI conference this morning that UK businesses must wean themselves off “cheap labour” and that a low-pay model for growth is no longer working for the British people.

My colleague Jessica Elgot reports:

The Labour leader is expected to say to the Confederation of British Industry conference that his party will be “pragmatic” about the shortage of workers and not ignore the need for skilled migrants – but stressed that any changes “will come with new conditions for business”.

Starmer will say Labour expects to keep a points-based immigration system and to train up more workers, especially in high-skilled jobs and the NHS. But he stopped short of pledging that overall migration should come down – a promise that Rishi Sunak renewed last week.

Energy regulator Ofgem is warning that suppliers have been failing vulnerable customers, as people face a cold and costly winter, with 5 particularly weak.

For example, some suppliers are setting debt repayments so high that customers felt they couldn’t top-up their pre-payment meters.

The OECD is publishing its twice-yearly analysis of the major global economic trends and prospects for the next two year. It’ll show how advanced economies, including the UK, are expected to fare….

And the Treasury committee will question top officials from the Office for National Statistics, about last week’s autumn statement

The agenda

  • 7am GMT: UK public finances for October

  • 10am GMT: OECD publishes its economic outlook

  • 2.15pm GMT: Treasury committee hearing on the autumn statement, with the OBR

  • 3pm GMT: Eurozone consumer confidence estimate for November



Graeme Wearden

The GuardianTramp

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