Bank of England governor Andrew Bailey warns UK interest rate decisions will be ‘tight’ – business live

Bank of England governor Andrew Bailey has pointed out that economic conditions in the UK look better than they did 12 months ago, when the markets had been rocked by the mini-budget.

Speaking at the International Monetary Fund (IMF)’s annual meeting in Marrakech, Morocco, Andrew Bailey said he was one of the few people there who could point to things being better now.

Bailey says:

“From an economic point of view, if we look back over the last year I would say I’m probably the one person that can come in here and say things really do look better today than they did on this day last year.

“I can say that with some confidence.”

The UK on track for the highest number of insolvencies since 2009, analysts at PwC predict.

David Kelly, head of insolvency at PwC, points out that company failures in England and Wales fell on a monthly basis in September – but were 17% higher year-on-year.

Kelly says:

“Today’s data shows there were 1,967 corporate insolvencies in September – a 17% increase on the same month last year and down from the 2,308 insolvencies in August. While this dip is welcome, we expect the respite to be short-lived, with the UK remaining on track for the highest number of insolvencies since 2009.

“The challenging economic climate continues to impact companies across a range of sectors. Construction is being particularly hard hit, suffering more insolvencies than any other sector, while retail and hospitality and leisure continue to struggle. Indeed, restaurant closures have sadly reached the highest level in a decade.

“Although the recent pause in interest rates is welcome news for businesses needing to refinance their loans, it will still be more expensive to do so and the process is likely to be more difficult, which will have an impact on both cash flow and profits. Unfortunately, it’s therefore likely that the number of companies falling into insolvency will remain high over the coming months.”

Insolvency specialists are warning that company insolvencies will continue to rise, following the increase in September (see earlier post).

Linton Bloomberg, partner at international law firm Reed Smith, says firms are operating in “a really difficult environment”, adding:

The significant challenge presented by the combination of high interest rates and reduced disposable income is likely behind the increase in the number of insolvencies compared to this time last year.

It seems pretty clear that things will get worse before they get better as there are further challenges looming large on the horizon that are yet to show themselves in the figures. The recent IMF warning of poor growth in the UK may well oblige the Bank of England to raise interest rates again.

Other ‘new clouds’ from spreading geopolitical uncertainty, meanwhile, have created the potential for further economic instability, though it should be noted it is too early to determine just how significant this will be.

Nick O’Reilly, director of restructuring and recovery at MHA, fears business insolvencies will remain high in the near term without government intervention:

“The latest insolvency statistics reveal a grim economic landscape for many businesses. Low consumer confidence, elevated interest rates and high inflation have created a very difficult operating landscape, pushing more businesses to the brink. Insolvencies will stay at an elevated level while these conditions persist.

“The unwinding of Covid-19 support schemes is prompting increased creditor recovery actions, including HMRC’s efforts to liquidate companies. Sectors such as retail, leisure, and the licensed trade are particularly hard-hit, with these industries struggling to recruit skilled individuals.

“The biggest complaints struggling businesses have are the current Business Rate Regime, export-related red tape and the level of inflation. The government could help considerably with the first two and need to do so now – businesses have been asking for help for years.

“Greater business support in the upcoming Autumn Statement will be vital to facilitate a sustainable recovery. Inflation is moving in the right direction and once it stabilises long-term interest rates should fall.”

The number of companies falling into insolvency across England and Wales has jumped 17% year-on-year, official data just released shows.

There were 1,967 registered company insolvencies in September, which is 17% higher than the 1,688 recorded in September 2022.

It shows that firms are strugging, in the face of slow economic growth, inflationary pressures and high interest rates.

There were 255 compulsory liquidations in September, and 1,576 creditors’ voluntary liquidations (CVLs) – where directors choose to shut a failed business. In addition there were 125 administrations and 11 company voluntary arrangements (CVAs).

The Insolvency Service says:

The increase in company insolvencies has been driven mostly by CVLs, while compulsory liquidation and administration numbers have increased from historically low numbers seen during and immediately after the pandemic, returning to close to 2019 levels.

Newsflash: The governor of the Bank of England has warned that future interest rates decisions will be “tight”.

Andrew Bailey told an audience in Marrakech that there has been solid progress in the fight against inflation, but there is still work left to do (UK inflation fell to 6.7% in August, still above the BoE’s target of 2%).

Speaking at a meeting organised by the Institute of International Finance, on the sidelines of the IMF/World Bank’s gathering in Morocco, Bailey also points out that the Bank’s latest decision – to leave rates on hold at 5.25% – was a tight one.

Last month, policymakers split 5-4, with a minority wanting another rate rise, despite concerns over the health of the UK economy.

But the majority favoured a pause, after 14 rate rises in a row had lifted borrowing costs to a 15-year high.

Going forwards, Bailey declares, decisions will continue to be tight.

That fits with comments from BoE chief economist Huw Pill, who said this week that rate decisions are becoming “finely balanced”.

Bailey endorses Pill’s comments, saying:

Our last meeting was such a tight one. And as my colleague Huw Pill said this week, they’re going to go on being tight ones.”

Sarah Cardell, the head of the Competition and Markets Authority, has defended the CMA’s decision to drop its opposition to Microsoft’s takeover of Activision.

Cardell insists the CMA was prepared to defend its initial decision in court, before Microsoft made a “major concession” and “fundamentally restructured the deal” by licensing Activision’s cloud streaming rights outside of the European Economic Area to Ubisoft.

Otherwise, Cardell tells the Today programme, the combination of Microsoft and Activision would have led to “real problems in cloud gaming”, given Microsoft’s strong position in cloud gaming through its Xbos and Windows platforms.

Cardell adds that other businesss should not emulate Microsoft’s approach, saying:

My very clear advice to businesses looking at this, is that that is not the best way to engage with the CMA.

There is nothing about this restructured deal that Microsoft couldn’t have brought forwards months ago.

That would have saved Microsoft, frankly, a lot of time and a lot of money, and led to the same outcome that we have now a lot sooner in the process.

The world’s largest ever video games deal has moved close to completion this morning, as the UK competition regulator approves Microsoft’s $69bn (£54bn) acquisition of Activision Blizzard.

The UK’s Competition and Markets Authority has announced that it will now allow the deal, after Microsoft adjusted it following the CMA’s initial decision to block it.

The tech giant will now sell Activision Blizzard’s cloud gaming rights outside Europe to Activision’s French rival Ubisoft, which addresses the CMA’s concerns that takeover would hurt competition.

The CMA says:

The new deal will stop Microsoft from locking up competition in cloud gaming as this market takes off, preserving competitive prices and services for UK cloud gaming customers. It will allow Ubisoft to offer Activision’s content under any business model, including through multigame subscription services.

It will also help to ensure that cloud gaming providers will be able to use non-Windows operating systems for Activision content, reducing costs and increasing efficiency.

Here’s the full story:

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European gas prices have climbed to their highest level since March as geopolitical risks, shortage fears, and colder weather grips the market.

The Israel-Hamas war and damage to the pipeline between Finland and Estonia are both causing disruption to the gas sector.

And with the first Arctic cold blast into Western and Central Europe forecast for this weekend, more households will be flicking on the thermostat as temperatures drop.

The benchmark month-ahead European gas price has climbed to its highest level since late February, closing at €53.29 per megawatt hour – up from €25 per megawatt hour in July.

UK gas prices have also gained this week, with the day-ahead price the highest since early April at 121p per therm, and the month-ahead contract the highest since mid-March at 133p per therm.

Gas climbed at the start of this week, as Israel suspended production at the Tamar gas field in the Eastern Mediterranean due to security fears.

The mysterious damage to the Balticconnector pipeline and parallel Estlink telecommunications cable between Estonia and Finland this week has also shaken the market, with Helsinki saying last night that the involvement of a state actor in this job cannot be ruled out.

Rising gas prices will squeeze consumers and businesses this winter, and could also undermine central bank efforts to bring inflation down to target.

Jim Reid of Deutsche Bank says:

The latest moves follow several concerns about global supply over recent days, as well as forecasts showing much cooler weather in Europe over next week.

Fortunately, gas prices are still some way beneath their levels from this time last year, and European gas storage is also fuller than at this point in 2021 and 2022, but this is still a concerning trend at a time when recent CPI prints have already been returning the focus back to inflationary pressures.

Europe is now facing its second winter without much of the gas it used to receive from Russia, before the Ukraine war.

Bloomberg says:

Some forecasts suggest Europe will have a relatively warm winter, which should reduce gas needs. But the energy crisis is still far from over, and a cold snap is set to hit in the coming days.

The agenda

• 7.45am BST: French inflation report for September

• 8.45am BST: IMF/World Bank hold plenary session of their annual meeting in Marrakech

• 10am BST: Eurozone industrial production for August