26. Weekly Newsletter

Bank of England Raises Interest Rates

The Bank of England (BoE) has increased interest rates to 5.0% following a widely unexpected 50bps raise. Andrew Bailey, the BoE governor, outlined his commitment to using monetary policy to reduce inflation and stated that “We’re not expecting, we’re not desiring a recession, but we will do what is necessary to bring inflation down to target”. This now represents the UK’s highest interest rate since 2008 with full support from the PM and chancellor. However, swaps markets imply that interest rates will reach higher to 6.25% by February.

Inflation in the UK remains stubbornly high with data from May showing 8.7% (published 21 June) despite BoE forecasts of 8.4%. This was the fourth month in a row that inflation beat forecasts. Some analysts believe that “the market is saying that the [BoE] will have to push the UK economy into recession to get on top of this problem”. By comparison the Eurozone average for May was 6.1%, the EU was 7.1%, Sweden was 9.7% and the US was 4.0%. PM Sunak has committed to halving inflation by the end of the year (down to 5.0%) and the long-standing UK inflation target remains at 2.0%.

Newspapers & UK-Ukraine Relations

The UK’s front page news cycle over the last seven days covered a wide range of topics with the five missing individuals on a tour of the Titanic dominating the headlines. The nautical tragedy led to the death of all those onboard. Some of the newspaper front pages over the last week were:

• The Guardian: Wagner uprising reveals cracks in Putin’s authority, says US
• The Daily Telegraph: Ending homelessness is my life’s work, says Prince (William)
• The Sunday Times: Putin humiliated by mutiny
• The Guardian: ‘Tsunami’ of dangerous vapes flooding into UK
• Financial Times Weekend: Banks to delay repossessions for 12 months
• The Daily Telegraph: US accused of turning against UK over NATO
• Financial Times: Bank of England takes interest rates to 5% in effort to put a lid on inflation
• The Times: Triggering recession ‘could tame inflation’
• The Daily Telegraph: Lockdown damaged a generation, says ex-CMO
• The Guardian: Tories round on Johnson as MPs vote to approve Partygate report
• The Daily Telegraph: British billionaire missing on Titanic tour

PM Sunak has announced $3bn in World Bank loan guarantees for Ukraine as part of a global effort to contribute to rebuilding the nation (estimated at $411bn). The PM stated that “As we’ve seen in Bakhmut and Mariupol, what Russia cannot take it will seek to destroy. They want to do the same to Ukraine’s economy”. Multinationals, such as Britain’s Unilever, have  committed to rebuilding their facilities in Ukraine; meanwhile, US financial firms Blackrock and JP Morgan are helping Ukraine’s government secure private sector investment.

HSBC Move Global HQ

HSBC, the world’s 6th most valuable bank, has decided to relocate its global headquarters in Canary Wharf to the City of London. The bank has operated at its iconic 42 floor Canary Wharf tower since 2002 following a £900m investment to move retail, business, corporate and investment bankers into one single office. However, the £121bn bank now aims to cut its global real estate costs by 40% following changes in working patterns since COVID.

The global HQ was bought by the Qatar Investment Authority for £1.1bn in 2014 and will be vacated in late 2026.  HSBC will eventually move to a smaller, more central office near St Paul’s Cathedral in the City. The City of London corporation chair described the plan as “a huge vote of confidence for the City”. The relocation has also been attributed to the opportunity to reduce their carbon footprint and adapt to hybrid working. HSBC last year also cut 110 support staff in Switzerland and relocated its US head office.