UK’s total government debt hits £3tn for first time
The UK’s fiscal position is also not exactly rosy, as the latest public finance figures show.
The Treasury ran a higher than expected budget deficit of £24.5bn last month as rising inflation pushed up the interest paid on government debt, increasing pressure on John Healey before his budget next week.
Official figures show the government paid £10.9bn in debt interest: the highest September figure since records began, and only the eighth time the monthly number has been above £10bn.
Some government bonds are directly linked to the retail prices index measure of inflation, with payments rising in line with it. RPI has increased in recent months as the Iran war has pushed up energy costs. The Office for National Statistics said this had added £4bn to debt interest costs in September alone.
Total government debt is estimated to have hit £3tn for the first time – although as a share of the size of the economy it has dipped to 94%, from 95% a year ago.
The £24.5bn monthly deficit on the public finances was up from £17bn in August, and £1.9bn higher than the independent Office for Budget Responsibility had forecast.
In the financial year so far, public sector net borrowing is £97.8bn, the ONS said – £4.4bn lower than last year but still £6bn higher than the OBR expected. The data underlines the impact of the Iran war on the public finances.
Healey has been keen to stress his determination to stay within the fiscal rules set out by his predecessor as chancellor, Rachel Reeves.
However, he is widely expected to accept a slimmer financial buffer, or “headroom”, against those rules than the £24bn Reeves had built up at the time of her spring forecast.
Henning Diederichs, director for public sector at the Institute of Chartered Accountants in England and Wales, said:
The rising cost of borrowing and inflation mean that servicing the debt is a significant concern for the chancellor as he prepares for his first Budget next week.
Pressures are mounting to provide additional support for rising energy bills, but the fiscal challenges to balance spending are becoming more acute, particularly as John Healey has less headroom than in the spring forecast.
This is why the government needs to clarify the definition of current budget balance in the fiscal stability rule, given it is changing from a current budget surplus at this Budget. Ambiguity about what the new definition means for headroom could create a negative inflationary loop meaning further increases in borrowing costs and reduced investor confidence.
Key events
Ambani’s Jio IPO oversubscribed within hours in record Indian sale
Jio Platforms, the Mumbai-based telecoms company backed by Meta Platforms and Google, has seen huge demand for its shares as it launched its $3.2bn initial public offering (IPO), the biggest-ever in India.
India’s second-richest man, Mukesh Ambani, launched the IPO despite a stock market downturn. It drew bids for more than double the shares available and was oversubscribed in less than two hours, according to Reuters.
The IPO values Jio at up to $108.3bn, and is expected to turn it into one of India’s biggest companies by market value when the shares start trading next Wednesday. Around a third of the shares were reserved for retail investors, and the company encouraged is 400,000 staff to buy shares at a discount.
Set up a decade ago as a subsidiary of Ambani’s conglomerate Reliance Industries, and led by Akash Ambani, the oldest son of patriarch Mukesh, Jio offers low-cost broadband to millions of Indians. It has grown into India’s biggest telecoms company with more than 500 million subscribers.
GSK’s chronic hepatitis B drug approved in US; experts talk of ‘new era’
Also on the medical front, GSK, the UK’s second-biggest pharmaceutical company, said its drug Hibsago, or bepirovirsen, has been approved in the US for the treatment of chronic hepatitis B (CHB).
It offers “functional cure” after just six months treatment, leading experts to talk of a “new era in treating people living with CHB”.
Data from late-stage clinical trials showed unprecedented rates of functional cure compared to the current standard of care. GSK expets the drug to generate annual sales of more than £2bn at its peak.
CHB affects about 1.7 million people in the US. The US regulator FDA gave the medication the green light after a priority review and breakthrough therapy designation, which speeded up the process.
Functional cure occurs when HBV DNA and viral protein – HBsAg – are undetectable for at least 24 weeks after stopping all treatment, indicating the disease is controlled by the immune system without medication, GSK said.
It’s a six-month treatment and can be injected by patients themselves after the first dose.
The medication has been submitted for regulatory approval in Europe.
Tony Wood, chief scientific officer at GSK, said:
Despite current therapies, many people living with chronic hepatitis B remain on treatment indefinitely and continue to face the risk of serious liver complications. For the first time, with Hibsago, US patients have the potential to achieve functional cure after a six-month treatment course, with the added convenience of the option of self-administration after the first dose.
Hepatitis B is a viral infection that can cause both acute and chronic liver disease. Chronic hepatitis B occurs when the immune system is unable to clear the virus, resulting in long-lasting infection that affects more than 240 million people worldwide.
The disease leads t 1.1 million deaths each year and is the main cause of liver cancer cases globally. At the moment, many patients often require lifelong antiviral therapy for viral suppression.
Dr. Norah Terrault, chief of gastroenterology & hepatology, at the USC Keck Medical Centre in Los Angeles, said:
This is the start of a new era in treating people living with CHB. Bepirovirsen offers patients the potential to achieve functional cure after a short period of treatment, a long-standing goal for patients and physicians alike.
GSK executive appointed CEO of Australian biotech CSL
On the corporate front, GSK executive Deborah Waterhouse has been appointed chief executive of the struggling Australian biotechnology company CSL.
Waterhouse, currently the chief executive of UK drugmaker GSK’s HIV drugs venture ViiV Healthcare, will be the first woman to lead Melbourne-based CSL since it was set up more than three decades ago. She will replace interim CEO Gordon Naylor and be based in Britain.
Her appointment follows a months-long search after the abrupt departure of former boss Paul McKenzie in February, who had come under pressure from investors over CSL’s falling share price.
Once Australia’s most valuable listed company, CSL has had a series of profit and revenue downgrades and announced plans to slash 3,000 jobs.
Investor sentiment has improved after CSL forecast growth for fiscal 2027, with its shares more than doubling from a decade low reached in June.
The company’s chair Brian McNamee said Waterhouse had the experience needed to build on the company’s recent improvement.
In February this year we said CSL’s next chief executive would need the ability to continue the momentum of our commercial performance, renew our pipeline and simplify our operations without losing the science and purpose that built this great company.
Deborah has done all those things on multiple occasions.
As well as running ViiV Healthcare, Waterhouse serves as president of GSK Global Health. She previously ran its US vaccines and primary care businesses and held several other senior roles at the British drugmaker, including general manager for Australia and New Zealand from 2008 to 2012.
Analysts at the investment bank Citi said her tenure at ViiV showed an ability to run a global business in a highly competitive market.
Ms. Waterhouse has been thorough and consistent, and demonstrated sound commercial acumen.
I interviewed her in 2022:
CSL reported a net loss after tax of $2.6 for the most recent year, its first annual loss since listing on the Australian stock exchange in 1994, driven by $7.1bn in write-offs mostly due to its 2022 acquisition of the Swiss drugmaker Vifor.
CSL shares closed 0.1% lower at A$196.08 on Wednesday, while the broader stock market rose 0.2%.
With inflation across the UK heading higher again (to 3.5% in September) and just two paydays remaining before Christmas, many consumers are already thinking about how to balance festive spending with everyday costs.
Dave Jones, head of UK consumer at PayPal UK, said:
With only two paydays left before Christmas, many households will be starting to think carefully about how they manage their money in the weeks ahead. While people understandably want to make the festive season special, it’s also a period when spending can add up. With the Consumer Price Index rising by again this month, consumers are looking at how to best manage their budget.
Planning ahead can make a real difference; we know nine in ten Brits are taking steps to control holiday costs. By thinking about Christmas purchases early, setting a realistic budget and spreading costs over the coming weeks, consumers can help avoid a financial squeeze later in the year.
We’re seeing shoppers increasingly look for flexibility and control at checkout, particularly for larger planned purchases. Consumers want payment options that fit their budget and help them manage spending in a way that works for them. Over half of Brits say that knowing how a payment will be split in advance matters.
For those making bigger seasonal purchases, responsible lending options can offer additional flexibility when used appropriately. Solutions such as PayPal Pay in 3 allow eligible customers to spread the cost of purchases over time with no interest or late fees, helping them manage cash flow while staying in control of their finances. One in three Brits have used, or are planning to use Buy Now, Pay Later this festive season.
Ultimately, the run-up to Christmas is less about spending more and more about planning ahead. Taking a considered approach to budgeting, prioritising essential costs and choosing payment options that suit individual circumstances can help consumers enjoy the festive season with greater confidence and peace of mind.
Roger Lee, head of equity strategy at investment bank Cavendish, said the higher UK borrowing figures, with total debt exceeding £3tn in September for the first time, will “intensify scrutiny of the government’s deficit reduction plans”.
The combination of stronger-than-expected inflation, a resilient labour market, and firmer wage growth has materially increased the likelihood of an ‘insurance’ rate rise in November, especially given that the oil price remains elevated above $110/bbl. and there is no obvious reason why it will fall in the near future.
Higher interest rates, alongside rising government debt, will further complicate the UK’s fiscal outlook ahead of next week’s Budget.
Italy: Two airports run out of jet fuel, food and medicine shortages in the south
Lorenzo Tondo
As far as protests go, Lorenzo Tondo in Palermo has sent us this report.
Two airports have run out of jet fuel, supermarket shelves across southern Italy are empty and pharmacies are running short of medicines as lorry drivers continue to blockade roads in protest against soaring fuel prices caused by the war in Iran.
Italy’s air traffic management agency, ENAV, said on Wednesday that airports in Crotone and Reggio Calabria had run out of aviation fuel because of disruptions to supplies caused by the protests. It warned that pilots would have to refuel at their departure airports or earlier stops, carrying enough fuel for subsequent flights.
The protests began last week, with lorry drivers blocking roads and slowing traffic across the country, particularly in the south, following strikes and sit-ins by farmers and fishers. The disruption has left supermarket shelves empty in several regions, with photographs showing entire aisles stripped of goods.
A video of a lorry driver’s teenage daughter breaking down in tears has gone viral after she said her family could no longer afford to go out at weekends because they were struggling to pay their bills.
Italy’s infrastructure minister, Matteo Salvini, has proposed €430m in financial support, but the motorway blockades and lengthy traffic jams continue, putting the government under growing pressure as anger over the cost of living mounts.
The protests have also sparked criticism of Italy’s public broadcaster, Rai, which has been accused of giving greater prominence to violent student demonstrations in Milan than to the economic hardship facing families and lorry drivers in the south. Critics say the coverage plays into the government’s increasingly hardline approach to protests while diverting attention from the growing cost-of-living crisis.
Domino’s Pizza reveals slower sales growth despite new thinner pizzas and fried chicken
Domino’s Pizza shares fell after the company revealed slower sales growth for the latest quarter, despite a boost from new ranges of thinner pizzas and fried chicken.
The London-listed shares fell 4.5% at one stage, and are now down 3%, making Domino’s one of the biggest fallers on the FTSE 250 index.
The company, a UK-based master franchise of the international fast food pizza delivery chain Domino’s, stressed that it continued to grow in August and September following a boost during the football World Cup in June and July.
Nicola Frampton, the chief executive, told investors that it was a “strong performance”, but recognised there is “a lot of work still to be done”. The company has seen sales bounce back this year after weaker orders during a “difficult” 2025.
Like-for-like sales grew by 4% year on year in the first nine months of 2026. However, like-for-like sales growth more than halved to 2.3% in the three months to the end of September, from a 5.2% increase in the previous quarter.
Total sales, which include new stores, rose by 3.5% in the latest quarter, with total order growth of 2.6%. Like-for-like orders increased by 1.4% for the quarter, slowing from 2.2%. Domino’s still expects to meet its profit guidance for this year.
Frampton flagged “strong sales” from Domino’s Italianos range of thinner pizzas, which was launched earlier this year.
The Chick ‘N’ Dip fried chicken brand, which was launched last year to tap into the popularity of chicken among younger consumers, has also done well.
Frampton said:
Whilst there is a lot of work still to be done, this gives us confidence in achieving our expectations for the full year, while building the foundations for further growth in 2027 and beyond.
In financial markets, the price of crude oil has risen 2% today, while gold prices fell to the lowest levels in nearly a week.
Brent crude, the global benchmark, is trading $2.18 higher at $110.96 a barrel.
The rally revived fears of higher inflation and interest rate hikes. Spot gold prices fell for a fourth day, dipping 0.1% to $4,121 an ounce.
Han Tan, chief market analyst at Bybit, a Dubai-based cryptocurrency exchange that was originally founded in China, said:
Gold has adhered to the downtrend that began two months ago on persistent expectations that more Fed rate hikes are in store.
Gold is traditionally seen as a safe-haven hedge against inflation, but loses appeal as a non-yielding asset in a high-interest rate environment.
Following the UK government’s decision to give the Jackdaw gasfield in the North Sea the green light, there have been new protests outside the energy department in London.
Jackdaw is one of the biggest undeveloped gas fields in the North Sea, and the approval was met with outrage from climate campaigners – but welcomed by the declining British North Sea fossil fuel industry, which has also called on the government to approve the Rosebank oilfield.
UK’s total government debt hits £3tn for first time
The UK’s fiscal position is also not exactly rosy, as the latest public finance figures show.
The Treasury ran a higher than expected budget deficit of £24.5bn last month as rising inflation pushed up the interest paid on government debt, increasing pressure on John Healey before his budget next week.
Official figures show the government paid £10.9bn in debt interest: the highest September figure since records began, and only the eighth time the monthly number has been above £10bn.
Some government bonds are directly linked to the retail prices index measure of inflation, with payments rising in line with it. RPI has increased in recent months as the Iran war has pushed up energy costs. The Office for National Statistics said this had added £4bn to debt interest costs in September alone.
Total government debt is estimated to have hit £3tn for the first time – although as a share of the size of the economy it has dipped to 94%, from 95% a year ago.
The £24.5bn monthly deficit on the public finances was up from £17bn in August, and £1.9bn higher than the independent Office for Budget Responsibility had forecast.
In the financial year so far, public sector net borrowing is £97.8bn, the ONS said – £4.4bn lower than last year but still £6bn higher than the OBR expected. The data underlines the impact of the Iran war on the public finances.
Healey has been keen to stress his determination to stay within the fiscal rules set out by his predecessor as chancellor, Rachel Reeves.
However, he is widely expected to accept a slimmer financial buffer, or “headroom”, against those rules than the £24bn Reeves had built up at the time of her spring forecast.
Henning Diederichs, director for public sector at the Institute of Chartered Accountants in England and Wales, said:
The rising cost of borrowing and inflation mean that servicing the debt is a significant concern for the chancellor as he prepares for his first Budget next week.
Pressures are mounting to provide additional support for rising energy bills, but the fiscal challenges to balance spending are becoming more acute, particularly as John Healey has less headroom than in the spring forecast.
This is why the government needs to clarify the definition of current budget balance in the fiscal stability rule, given it is changing from a current budget surplus at this Budget. Ambiguity about what the new definition means for headroom could create a negative inflationary loop meaning further increases in borrowing costs and reduced investor confidence.
Gap between French and ultra-safe German bonds near 15-year high
Revived diplomatic efforts around the Middle East have lifted market sentiment, with stock markets pushing cautiously higher.
The UK’s FTSE 100 index is up 22 points, or 0.2%, at 10,755 while Germany’s Dax rose 0.3%, France’s CAC 400 advanced 0.4%, Italy’s FTSE MiB climbed 0.5% and Spain’s is nearly 0.3% ahead.
But the gap between French and German government bonds has still widened beyond 150 basis points, to 157bps, nearing levels last seen in 2011, indicating the premium investors pay for French debt over ultra-safe German debt.
Fiscal concerns and public unrest clearly weigh on French government bonds (OATs), but more is at play, according to ING’s senior rates strategist Benjamin Schroder.
Within the European government bond space, a tentative stabilisation of spreads over Bunds mirrored the improved sentiment. However, France continues to be singled out, with the 10-year spread pushing past 150bp. We had cautioned that the public unrest was adding to concerns around France’s ability to consolidate its finances. The unrest also adds very direct costs in terms of lost GDP.
Back during the days of the sovereign debt crisis, the French spread versus Germany peaked at just below 200bp. But bear in mind, this was when Italian spreads pushed past 500bp and markets were contemplating the tail risk of a collapsing monetary union, i.e. redenomination risk.
To add some perspective, a 10-year spread of close to 200bp in late 2011 meant that French bonds yielded more than twice as much as German Bunds. The 10-year Bund yield stood at around 1.9%. Nowadays, French 10-year bonds, at just below 5%, yield less than 1.5 times as much as their German counterpart. And that 5% mark in outright yields appears to remain a hurdle for OATs for now.
This is not to say that spreads cannot push further, especially in the absence of any good news and with a long way to go until the presidential elections. But it is important to highlight that there are other factors pushing spreads wider that do not directly reflect pure credit concerns. Overall, rates volatility has increased and weighs on spreads more generally. Especially when market liquidity is subdued, this can exacerbate widening pressures across European government bonds. The French CDS [credit default swap] spread, for that matter, while wider, is still 160bp away from its 2011 peaks rather than a bit over 40bp when looking at the bond spread.
French 10-year bond yield hits 5%, highest since 2002
Meanwhile, in financial markets government borrowing costs are still climbing, with the yield on the French 10-year bond rising beyond 5% at one stage, a new 24-year high.
The yield, or interest rate, on the benchmark 10-year bond – known as obligation assimilables du Trésor, issued by the French Treasury – rose more than 8 basis points to 5% a little while ago, before easing a tad to 4.99%.
The French government has yet to pass its budget for next year, while the country has been rocked by increasingly violent street protests in recent weeks. They started in September with students protesting over mould- and rat-infested schools, a lack of teachers and big class sizes, and have evolved into wider demonstrations about the rising cost of living.
Initially calm protests have often been met with aggressive police tactics, and the country has descended into chaos. There has been looting of shops such as Louis Vuitton, while protesters also set fire to the town hall in Limoges.
Meanwhile, the yield on the UK’s 10-year gilt was up a tad at 5.4%.
Your First Home swaps a deposit problem for a borrowing problem, a report says
New analysis has found that the government’s Your First Home programme, targeted at first-time buyers, would cut the time to save a deposit from almost three years to 18 months.
But, despite the 2.5% deposit offered to buy a new-build home plus a 20%. government equity loan, the scheme could be out of reach for lower earners.
They would still need to borrow more than 4.5 times their income in three quarters of the 17 English cities analysed, and as high as 9.9 times in London, according to the UK mortgage broker Tembo, which was set up during the pandemic.
In Leeds the figure is 8.7 times, in Newcastle 8.4 times and in Leicester 8.2 times. Only four cities – Birmingham, Stoke-on-Trent, Liverpool and Southampton – keep lower earners below the 4.5x threshold.
Tembo’s third-quarter First-Time Buyer Index also found the average first-time buyer is now aged 34, up from 31 a year ago.
Glasgow topped its city index for the third quarter running, while London remains the hardest place to buy.
And buyers in Bristol are almost £111,000 better off after five years than if they had kept renting, while in London they are £4,514 worse off, according to the analysis.
The scheme would make saving a deposit significantly quicker. Across the 17 cities, the typical time to save falls from 34 months for a standard 5% deposit to 18 months under Your First Home, cutting more than a year off the wait. The biggest reductions would be for buyers in London (40 months) and Brighton (32 months).
Richard Dana, the founder and chief executive of Tembo, said:
We would encourage the government to build on the ambition behind Your First Home, and address the affordability challenge faced by the very people the scheme is targeting. In addition, to consider how small changes to first-time buyer Stamp Duty relief and the existing Lifetime ISA could make existing support more equitable, helping average buyers in the most challenging cities in the UK to become a homeowner.
Paige Tao, economist at PwC UK, says:
The UK housing market remains in wait-and-see mode ahead of the autumn budget. Annual house price growth slowed for a fourth consecutive month to just 0.9% in August, while buyer activity remains subdued despite ample supply and greater scope to negotiate on price. Higher borrowing costs and uncertainty over the global and domestic outlook continue to keep households cautious. Mortgage approvals have fallen to their lowest level since 2023, while transactions are down both on the month and on the year.
Affordability remains the immediate constraint. Mortgage rates have climbed to a three-year high, squeezing purchasing power and making buyers more sensitive to price. First-time buyers have had some welcome news, with the Government expected to set out further details of its new Your First Home scheme at the Budget. The scheme is designed to lower barriers to getting onto the ladder and support demand. Its impact is uncertain when the issue is increasingly a lack of buyers willing or able to transact at current financing costs.
That makes the autumn budget important for the housing market even if there are no major changes to property taxes. Fiscal credibility matters because gilt yields directly feed into the cost of mortgage finance. A budget that unsettles markets could push borrowing costs higher and further delay transactions; one that restores confidence could do the opposite. For a housing market already waiting for a reason to move, greater policy certainty may prove even more important than tax relief.
UK rents rise 3.8% in September while August house price growth eases
Rents in the UK were up nearly 4% year on year in September, according to the latest official figures, while house price growth eased in August, ahead of next Wednesday’s budget.
The average private rent increased by 3.8% to £1,406, in the 12 months to September, the same annual rate as in August, the statistics office said.
Average rents increased to £1,466 (4.0%) in England, £848 (4.1%) in Wales, and £1,011 (0.7%) in Scotland in September. In Northern Ireland, average rents increased to £879 (1.7%) in July.
In England, private rent annual inflation was highest in the North West (5.7%), and lowest in London and the South East (both 3.5%) last month.
Turning to for-sale data, the average price of a UK home rose by 0.9%, to £273,000, in the 12 months to August, down from July’s annual rate of 1.2%.
Average house prices increased to £294,000 (0.4%) in England, £216,000 (3.1%) in Wales, and £198,000 (2.9%) in Scotland.
The lowest annual inflation of English regions was in London, where prices fell 2.2% year on year, driven by large falls in the average price of flats, which account for approximately half of sales in London.
Prices for cakes, tarts and sweet pies; tomatoes; and potato crisps pushed UK inflation higher, while beef, chocolate assortments, and fizzy drinks had downward effects, according to the official figures released this morning.
The Office for National Statistics said:
Although the annual rate of inflation for food and non-alcoholic beverage prices has remained the same for the last three months, organisations like the Food and Drink Federation expects food inflation to arrive later and persist for longer. This is partly because pressure on household budgets, competition and retailer resistance to price increases have limited manufacturers’ ability to pass on higher costs.
The FDF said:
-
Prices rose the fastest for fish (11.4%), water (10.8%), frozen seafood (10.0%), and preserved fruit (6.2%).
-
Prices fell for 16 out of the 49 reported categories, with the largest drops for butter (-6.2%), pizza (-5.6%), fruit and vegetable juices (-3.0%), and cheese (-2.3%).
-
Diesel prices have increased 41% and petrol 32% since February
-
UK gas futures (with delivery in December) have increased 166% since February
-
Electricity prices for most UK producers – excluding the smallest businesses – are roughly double the European average, around three times prices in France, and twice prices in Spain.
Liliana Danila, the federation’s chief economist, said:
There’s no doubt that the cost of producing food in the UK is rising. On top of mounting regulatory pressures, input costs are rising across the board. Diesel prices are up two fifths and petrol around a third, while gas prices have more than doubled since February and the UK’s industrial electricity prices remain the highest in Europe. Packaging and ingredient costs are also rising. We expect that these increases will start to appear in consumer prices into next year.
As manufacturers and retailers strive to keep prices as low as possible for consumers, especially in the lead up to Christmas, the pressure is building for the sector, undermining investment in the long-term resilience of the UK food system. Government should be doing what it can now to take the heat out of any later inflationary period and safeguard the UK’s food and drink sector. To start, with the budget fast approaching, they should prioritise extending targeted energy relief to the food and drink sector. Food and drink has a direct impact on household budgets, so offering our sector the same support that is enjoyed by other manufacturing sectors would show a clear commitment to tackling the cost of living.
UK inflation highest in nearly a year but food prices fall on the month
Turning back to UK inflation, which accelerated to an annual rate of 3.5% last month from 3.1% in August, the highest rate since last October.
This has added to expectations that the Bank of England will raise its base rate by a quarter point to 4%. at its meeting next month.
Services price inflation, closely watched by the Bank of England as a guide to underlying price pressures, rose to 3.7% from 3.4%, also higher than expected.
The core rate of inflation that strips out volatile items like energy and food. also rose, to 2.8% from 2.6%.
Transport prices were up 6.6% in the 12 months to September, compared with 4.6% the previous month, according to the Office for National Statistics.
The average price of petrol rose by 8.2 pence a litre between August and September, to 169.5p, the highest since August 2022.
Diesel prices rose by 10.7, taking the average price to 192.5p – the highest price recorded since July 2022.
Overall motor fuel prices leapt 29.8% in the 12 months to September, up from 23% in August.
Within transport, there were smaller upward effects from air fares and sea fares, and partially offsetting small downward effects from roadside recovery, and second-hand cars, the ONS said.
In better news for hard-pressed households, food prices fell 0.2% between August and September, leaving the annual food inflation rate unchanged at 1.3%.
However, James Smith, developed markets economist at ING, said:
Seven months on from the start of the Iran War, and there’s still zero sign that the UK’s inflation shock is broadening out beyond energy. Second round effects are so far non-existent.
Headline inflation was admittedly a tad above consensus at 3.5% in September, though inline with our forecast. What’s particularly eye-catching though is the month-on-month fall in food prices. This caps a remarkably benign period for food inflation. No doubt it will pick up into the winter, not least given the recent rise in natural gas prices. But all the models tell us we should be seeing some effect of the energy shock in food – and so far we aren’t.
Partly because of that, our calculation of ‘energy intensive’ inflation is actually down this year and shows little-to-no sign of picking up. That’s even when you strip out the effect of last year’s water and car tax increases which otherwise distort the picture. This gauge tracks inflation categories that are classed as having either ‘very high’ or ‘high’ energy intensity by the Office for National Statistics – and range from food to cafes.
Carla Denyer, MP for Bristol and the former co-leader of the Green Party of England and Wales, said:
Jackdaw will not bring down bills or protect jobs. This is an irresponsible decision from a government that seems to care more about the profits of fossil fuel companies than the money in your pocket or the safety of our planet.
There is no future in fossil fuels. Pretending otherwise fails workers, billpayers, and the next generation who deserve to inherit a planet safe from climate catastrophe.
It is now more important than ever that politicians, campaigners, scientists, and lawyers continue to work together to stop any more climate vandalism at the hands of this government. We must implore them to say no to Rosebank and to halt any plans to allow new oil and gas extraction through tie-backs to existing production facilities.
What the government should be doing is making large-scale investments in cheap and reliable renewables to safeguard our energy security. They must also offer a package of support to future-proof jobs in the energy sector so that workers in oil and gas can transition to good-quality green jobs, alongside a nationwide home insulation programme and making polluters pay.
Industry groups in north-east Scotland have said the decision on the Jackdaw gas field is “hugely welcome”, but the pending decision on the Rosebank oil field is “every bit as vital”.
The Scottish government has called for the Treasury’s income from oil and gas to be placed in a “future generations fund”.
The approval came after months of speculation about the Jackdaw offshore development, which is in the North Sea 150 miles to the east of Aberdeen.
Groups representing the offshore industry had urged the UK government to approve the new development, stressing the economic and energy security benefits. However, environmental groups are dismayed by the move.
Russell Borthwick, chief executive of Aberdeen + Grampian Chamber of Commerce, said:
This is a hugely welcome decision, and exactly the sort of pragmatic call the North Sea has been crying out for. Jackdaw is 99.9% complete and, with approval now secured, gas from this field will be flowing into homes up and down the country within weeks.
This is a direct, tangible boost to the UK’s energy security at a time when it matters most. Every molecule of gas we produce in the North Sea, under some of the world’s highest environmental standards, is a molecule we don’t have to import on a tanker from overseas.
But Jackdaw cannot be the end of the story. Rosebank is every bit as vital to our energy security and every bit as ready to deliver for the UK supply chain anchored here in the north east of Scotland. Government must now move with the same urgency and pragmatism and get Rosebank over the line without further delay.
The Scottish government’s energy minister Stephen Gethins said the economic benefits of the Jackdaw field must be felt in Scotland.
He said:
Perhaps the most significant failure of the past half-century of Westminster energy policy has been the failure to establish a futures fund. The UK has been almost the only country to discover oil and gas but not deliver a long-term benefit from a finite resource. That must change today.
It is crucial that all further income from oil and gas resources taken by the UK Treasury is placed in a future generations fund. That would deliver a long-term benefit from a limited resource.”
I am sure that the prime minister will agree that it is absolutely critical that if any new production goes ahead, then the economic benefits should be felt in Scotland and should be used to bring energy bills down, rather than flowing to plug more short-term spending gaps by the Treasury.
The UK government must also replace the Energy Profits Levy with a fair system that protects jobs, energy security and investment in our energy sector.
Angela Hepworth, chief executive of Scottish Renewables, said global events have brought the need for domestic energy into “sharper focus”.
Today’s decision must now be matched by a renewed drive to deliver our long-standing clean energy ambitions.
The UK needs a pragmatic approach to its energy future that secures investment, jobs and energy supplies in a volatile world. As the global shift towards electrification continues, the case for homegrown clean energy is stronger than ever.
