UK News
UK long-term borrowing costs dip from 28-year high after Starmer allies back PM – business live | Business
UK bond yields off the highs as cabinet ministers offer support
UK government borrowing costs are still elevated as noon approaches, but not quite as high as they were.
Bond yields have dipped back after Keir Starmer told the cabinet he was not resigning.
After that meeting, several cabinet ministers including Peter Kyle, the business secretary, Liz Kendall, the technology secretary, and housing secretary Steve Reed told reporters they were supporting Starmer.
The 30-year bond yield is now up 9 basis points at 5.76%, having hit a new 28-year high of 5.81% this morning (see earlier post).
Ten-year bond yields are off their earlier highs too – up almost 10bps at just below 5.1%, having hit 5.13% earlier today.
Key events
Stock market flotations ‘could be derailed’ by Labour leadership fight
Kalyeena Makortoff
A source at a second City bank has said everyone in the business and banking community wanted predictability.
They added that there had been “quite positive signals from the City” about chancellor Rachel Reeves’ plans to generate growth, “so for anything to be derailed at this point would be damaging”.
“The worst thing at the moment would be going through another messy leadership race,” they said, adding “we don’t want to see what we experienced with the previous [Tory] government” referring to the party’s rotating cast of prime ministers.
They added:
“If you’re planning for an IPO, for example, you need stability in the markets…There’s been talk of a number of IPOs coming down the track in the UK, and that gets derailed in situations like this.”
[an IPO, or ‘initial public offering’ is a way of floating on the stock market.]
US inflation jumps to 3.8% annually
Newsflash: inflation in the US has jumped, as the Iran war drives up costs.
US consumer prices rose by 3.8% in the year to April, and by 0.6% during last month alone, new data from the US Bureau of Labor Statistics shows.
Energy prices jumped by 3.8% in April alone, the report shows, and were up 17.9% on an annual basis, as Americans were hit by surging gasoline prices.
Food prices rose by 0.5% in the month, and by 3.2% over the year.
These price rises may drive up the economic impact of the Middle East conflict triggered by Donald Trump at the end of February, and could also make it harder for US central bankers to cut interest rates soon.
The UK’s share index of medium-sized companies has also had a bad day, so far.
The FTSE 250 index, which contains firms too small for the FTSE 100, is down 1.2% so far today, or -270 points at 22,536 points.
The FTSE 100, which has more of an international focus, is down 0.5%.
Jason Hollands, managing director at investing platform Bestinvest, says “domestically focused mid-cap stocks” are particularly exposed today, from fears over the Iran war and the UK’s political crisis.
Hollands explains:
“President Trump’s warning that the Iran ceasefire is on ‘massive life support’ has reignited inflation fears by sending Brent crude oil surging to $107 a barrel, raising concerns that energy-driven price pressures could persist for longer. The UK is particularly vulnerable to higher energy prices because it remains heavily reliant on imported energy, meaning any sustained rise in oil and gas costs quickly feeds through into inflation and economic growth concerns.
“At the same time, markets are becoming increasingly uneasy about instability within the Labour government, with Sir Keir Starmer’s position appearing increasingly precarious following the rout at last week’s local elections. The bond vigilantes are out in force, clearly worried that any leadership change within the governing party could herald a shift towards more radical economic policies, with greater borrowing or even higher taxes becoming more probable at a time when the public finances are already under intense scrutiny, growth is anaemic, and productivity is weak.
City consultancy Oxford Economics fears 5% 10-year gilt yields are here to stay.
Their chief UK economist Andrew Goodwin explains:
“The increase in UK government bond yields since the start of the Iran war has been greater than in most other advanced economies.”
“Markets clearly perceive the UK has a bigger inflation problem and that tighter monetary policy will be needed to limit second-round effects from the energy shock, while political uncertainty has added to pressures at the long end.”
Kalyeena Makortoff
Bank sources are playing down the impact of uncertainty over Starmer’s future, saying that while they wanted stability, they were agnostic about how Labour would get there.
A City source at a UK investment bank told the Guardian that while it was an “unwelcome distraction”, traders seemed “sanguine” about the Labour government turmoil, adding that this kind of instability was not unique to the UK and something they were increasingly used across Europe.
They said bankers believed Labour policies were “unlikely to be that radical” even with a change in leadership.
We are likely to see further gilt and sterling weakness in the coming days, predicts Kit Juckes, foreign exchange expert at French bank Société Générale.
One fear is that the shift of power from PM Starmer to any successor could play out slowly. The PM is resisting internal pressure to resign, for starters.
Greater Manchester Mayor Andy Burnham is the bookmakers’ favourite to replace him but confidence that he could win a by-election (in order to stand for PM) has been damaged by Labour’s poor performance in Local election. Angela Rayner, former Deputy Prime Minister, is still in Parliament but hasn‘t got as wide support as Burnham.
However it plays out, we are in for a period of uncertainty about future Labour policies. Increased spending is a given, and so are higher taxes, almost certainly including higher taxes on wealth and housing.
Layer that on top of geopolitical uncertainty, rising energy costs, and UK 2026 consensus GDP growth forecasts which have fallen from 1.1% at Christmas to 0.8% now, and there isn’t much to make anyone feel good about the pound.
UK bond yields off the highs as cabinet ministers offer support
UK government borrowing costs are still elevated as noon approaches, but not quite as high as they were.
Bond yields have dipped back after Keir Starmer told the cabinet he was not resigning.
After that meeting, several cabinet ministers including Peter Kyle, the business secretary, Liz Kendall, the technology secretary, and housing secretary Steve Reed told reporters they were supporting Starmer.
The 30-year bond yield is now up 9 basis points at 5.76%, having hit a new 28-year high of 5.81% this morning (see earlier post).
Ten-year bond yields are off their earlier highs too – up almost 10bps at just below 5.1%, having hit 5.13% earlier today.
Starmer isn’t the only world leader facing a growth slowdown either.
Over in Moscow, the economy ministry has lowered its estimates for gross domestic product (GDP) growth in 2026 to 0.4% from 1.3% and halved estimated growth in 2027 to 1.4% from 2.8%.
Kremlin spokesman Dmitry Peskov told reporters that president Vladimir Putin was closely involved in economic issues and that Russia could “talk confidently” of macroeconomic stability despite volatility in global markets driven by the conflict in the Middle East.
Peskov added (via Reuters):
“Thanks to the measures being implemented by our government, we can confidently speak about macroeconomic stability and promising plans to modestly, but steadily, increase economic growth rates year after year.”
EY: Global energy supply disruption to slow UK GDP growth
Whether or not Keir Starmer is replaced, the UK faces a major energy shock from the Iran war.
A new economic outlook released by consultancy EY predicts that UK growth will be hit hard by higher oil and gas prices this year.
EY’s modelling suggests that before the Middle East conflict, UK GDP was on track for 1.3% growth in 2026. However, that has now been lowered to 0.8%, in a scenario where the strait of Hormuz reopens by the middle of 2026
But if there is an escalation and the Strait remains closed until the end of 2026, UK GDP growth could fall to 0.3% this year, EY warns.
EY also predicts the UK unemployment rate will increase slightly to 5.8% by the end of 2026 as weaker growth impacts hiring levels, before falling back to 5.2% in 2028.
Lucy Smith, senior investment manager at Killik & Co, warns that UK bond yields could rise higher, as investors fear political change and a burst of extra government spending:
“Gilt yields continue to creep up as Starmer’s premiership appears to weaken. Right now, it is hard to say whether a swift and decisive swap to a new leader or a longer-term contest will generate more uncertainty, and by extension, higher borrowing costs. Either way, the mere prospect of change, in part driven by an underlying fear that we could return to an era of successive leadership changes, is enough for investors to lose confidence.
A change in Labour leadership will mean six prime ministers in seven years, a clear signal of political instability, which is precisely what bond investors seek to avoid. Expectations of a drift to the left wing of the Labour party, which could result in a tax-and-spend strategy, could well drive yields up further as the market questions the Government’s ability to pay back the debt in the long-term.”
Labour must offer more than ‘better managed decline’ on economy, MPs urge
Richard Partington
An influential group of MPs has said that Labour needs an urgent renewal of economic strategy to offer voters “more than better management of decline” before the next general election.
With Keir Starmer fighting to ward off a leadership challenge, the leading backbenchers from the soft-left Tribune group published a series of essays calling for bolder action to salvage its remaining time in power.
In a foreword by the former cabinet minister Louise Haigh, and Yuan Yang, a prominent figure from Labour’s 2024 intake, the MPs issued a thinly disguised attack on Starmer amid pressure on him to set out a timeline for his departure.
The MPs wrote:
“We do not present this as the final word. They are an invitation – to challenge assumptions, test ideas, and help build a broader coalition for economic renewal. Because the economic status quo is no longer defensible.”
“And if politics is to regain trust, it must offer more than better management of decline.”
30-year bond yield now over 5.8%, as Starmer says he’s not resigning
UK borrowing costs are hitting new highs during morning bond market trading.
The 30-year UK gilt yield has now nudged 5.81%, and is still trading above the 5.8% mark after Keir Starmer told his cabinet colleagues he is not leaving.
Our political editor Pippa Crerar reported a few minutes ago, on X:
BREAKING: Keir Starmer tells his cabinet this morning that he’s staying put.
“As I said yesterday, I take responsibility for these election results and I take responsibility for delivering the change we promised.
“The past 48 hours have been destabilising for government and that has a real economic cost for our country and for families.
“The Labour Party has a process for challenging a leader and that has not been triggered.
“The country expects us to get on with governing. That is what I am doing and what we must do as a Cabinet.”
Those economic costs are continuing to mount, with the 30-year bond yield now up 13bps (0.13 of a percentage point) at 5.803%.
That indicates investors remain deeply concerned about UK political turmoil.
XTB: Risk of UK bond market meltdown
The political turmoil in the UK has hit at a bad time for the bond market, points out Kathleen Brooks, research director at XTB.
That’s because the jump in oil prices is creating inflation risks, which pushes up government bond yields.
Brooks explains:
There is an upward bias for bond yields anyway, and the UK yields are facing a double whammy of an energy price spike and a political crisis. The risk is that we get a bond market meltdown in the UK in the coming days. If that happens, will it quiet the factions of the Labour party who have threatened to ignore the bond market, ditch fiscal rules and boost public spending even more?
In the past, Rachel Reeves has been seen as vital to the stability of the UK’s bond market because she introduced the ‘iron clad fiscal rules’ to bring down the UK’s debt levels and finance day-to-day spending with tax take.
If this is a drawn-out leadership battle, or if Starmer lays out a timetable to leave in the coming months, both Starmer and Reeves will be seen as lame ducks who have no control over the public purse. This would be a bad position for the UK to find itself in, especially since our last election was less than 2 years ago. Right now, it’s hard to see how the bond market can stabilize, and there could be further downside ahead.
Financial markets are pricing in a move to left under a new prime minister, reports Ruth Gregory, deputy chief UK economist at Capital Economics:
In short, a shift to the political left is likely to lead to looser fiscal policy, higher gilt yields and a lower pound than otherwise, but we doubt a new Prime Minister would be any more successful at boosting the economy’s medium-term growth rate.
With 10-year gilt yields up by 10bps this morning and the pound down by 0.4% against the euro, which comes after similar moves yesterday, this is already playing out in the financial markets.
The pound’s sell-off is gathering pace.
Sterling is now down almost one cent against the US dollar at $1.3511 (a one-week low).
The pound has also dropped against the euro, down half a eurocent to below €1.15 (a near three-week low).
UK News
Trump to head to China for high-stakes talks with Xi – US politics live | Trump administration
Trump heads to China for high-stakes talks with Xi
Hello and welcome to our live coverage of US politics.
Donald Trump is heading to Beijing for high-stakes talks with Chinese leader Xi Jinping, as they seek to maintain a tentative trade truce while navigating Iran, Taiwan and dominance over global supply chains.
The Iran conflict could serve as a potential source of tension during talks. The US president has sought help from China, a close ally of Iran and the world’s biggest buyer of Iranian oil, to convince Tehran to reopen the strait of Hormuz and end the war. Trump’s first visit to China in nearly nine years had been delayed in the hopes that the US-Israeli war against Iran would be over, and it comes a week after Beijing flaunted its close ties with Tehran by hosting the Iranian foreign minister, Abbas Araghchi.
For China’s assistance, Xi will probably want something in return, and on top of his list is Taiwan, a self-governing island that Beijing claims as part of its territory. Analysts say China wants the US to declare opposition to Taiwanese sovereignty and delay, or ultimately limit, arms sales to the island. Trump said yesterday that Washington’s longstanding support for Taiwan’s defence would be on his agenda for the Beijing summit. “President Xi would like us not to, and I’ll have that discussion,” he told reporters. “That’s one of the many things I’ll be talking about.”
The two leaders’ last meeting in October paused a flurry of tit-for-tat trade tariffs in 2025. In February last year, Trump imposed 20% tariffs on China after accusing it of allowing the influx of the drug fentanyl into the US. China responded in kind, slapping tariffs of 15% on coals and liquefied natural gas imported from the US and 10% on oil and agricultural machines.
Trump is scheduled to land in the Chinese capital tomorrow night for the two-day summit. Alongside bilateral meetings, his schedule includes a tour of the Temple of Heaven, a state dinner on Thursday night and tea between the two leaders on Friday before he departs, according to reports.
Key events
Backlash grows after GOP congresswoman agrees with radio host’s comments about Hakeem Jeffries
Backlash continues to grow after Representative Jen Kiggans, a Republican, agreed with a conservative talkshow host’s offensive comments on air.
During Monday’s episode of “Richmond’s Morning News”, Rich Herrera said that House minority speaker Hakeem Jeffries, the first Black American to lead a party in Congress, should “get your cotton-picking hands off of Virginia”.
In response, Kiggans said: “That’s right, ditto”.
Following a deluge of calls to resign from national and state Democrats, the lawmaker, who represents Virginia’s second district, distanced herself from Herrera’s comments. “The radio host should not have used that language and I do not – and did not – condone it. It was obvious to anyone listening that I was agreeing Hakeem Jeffries should stay out of Virginia,” Kiggans later said in a statement.
Christie Stephenson, a spokesperson for Hakeem Jeffries, said that Kiggans had her chance “to disavow the vile, racist and dehumanizing comments” but instead “she doubled down”.
“It was a stunning failure of judgment and leadership for a so-called moderate Member of Congress representing a large, vibrant African American community in Virginia,” Stephenson added.
Virginia Democrats on Monday asked the US supreme court to revive the congressional map designed to boost their party’s chances in November’s midterm elections. This comes after the state supreme court last week rejected the voter-approved measure to amend the state’s constitution and redraw the map.
While his defense secretary testified on Capitol Hill, Donald Trump posted a stream of AI generated images on Truth Social.
The latest showed a mock-up of a fighter jet striking Iranian warships with the caption “BYE BYE, ‘Fast Boats’” while another fake image shows a US naval ship shooting down an Iranian drone and reads “Lasers: Bing, Bing GONE!!!”
Earlier the president shared more doctored pictures of his Democratic foes. One AI image showed Trump’s long-time adversary, Illinois governor JB Pritzker shovelling fast food into his mouth with a caption “JB is too busy to keep Chicago safe”. Another fake picture showed Barack Obama, Joe Biden and Nancy Pelosi steeping in a sewage filled reflecting pool in Washington DC – a likely push back against the criticism of the president’s multi million-dollar renovation of the landmark. “Dumacrats Love Sewage” the caption reads.
Yohannes Lowe
The Pentagon revealed on 29 April that the US war on Iran had cost about $25bn for roughly two months of spending. Today, when asked if there are any updated costs associated with the war, Jules Hurst III, chief financial official for the Pentagon, said:
“At the time of testimony … it was $25bn dollars. But the joint staff team and the comptroller are constantly looking at estimates and now we think it is closer to 29.”
He noted that this update is due to “repair and replacement of equipment costs and also just general operational costs to keep people in theatre”.
Hegseth then said “we will share what we can” when it is “relevant and required” after being pressed on when more “formal accounting” on the costs of the war will be shared with Congress and the defence committee.
US inflation jumps to 3.8% amid ongoing war in Iran
Gaya Gupta
US inflation jumped to 3.8% in April as conflict in the Middle East continued to drive energy prices and everyday costs for Americans.
Prices rose 3.8% over the last year, according to the data from the Bureau of Labor Statistics, the highest jump since 2023.
This is the second official measure of the consumer price index, which measures the price of a basket of goods and services, since the start of the war with Iran. In March, prices rose 3.3%, up from 2.4% in February.
Energy prices rose 3.8% in April, accounting for over 40% of the overall monthly increase. Gas prices were up 28.4%, an increase many Americans have already noticed at the pump. The national average price for a gallon of gas has been steadily increasing in the months since the US-Israel war with Iran began, and stands at more than a dollar higher than a year ago, according to data from AAA.
Representative Betty McCollum, the top Democrat on the defense appropriations committee, asked Hegseth to provide the panel with a “plan B” should Congress not authorise continuing military operations against Iran – which was required beyond 2 May (as outlined under the War Powers Act).
“We have a plan for all of that. We have a plan to escalate if necessary we have a plan to retrograde if necessary we have a plan to shift assets,” Hegseth replied. “We wouldn’t reveal what the next step may be, considering the gravity of the mission that the President undertaking to ensure that Iran never has a nuclear bomb.”
Nonetheless, McCollum asked the the defense secretary to provide the committee with plans for a potential draw down of troops by 11 June, when lawmakers markup the Pentagon spending bill.
Taz Ali
Pete Hegseth begins his speech to the House appropriations’ defence subcommittee by justifying Trump’s defence budget request of $1.5tn.
“President Trump inherited a defence industrial base that had been hollowed out by years of America last policies,” the defense secretary said.
“We are reversing this systemic decay and putting our defence industrial base back on a wartime footing.”
He added: “The $1.5tn budget will ensure the United States continues to maintain the world’s most powerful and capable military.”
Pete Hegseth testifies on Capitol Hill
Defense secretary Pete Hegseth is on Capitol Hill today, answering questions from lawmakers on the House appropriations subcommittee for defense. He’ll face a grilling from members on the White House budget request for the Pentagon, which includes an increase of more than $400bn for the fiscal year 2027 – bringing the total amount to $1.5tn.
Alongside Hegseth is Chair of the Joint Chiefs of Staff Dan Caine, who is leading the military operation in Iran.
Later, the pair will then face questions from members of the subcommittee’s Senate counterpart.
Trump will begin his day in Washington in meetings, and sitting for an interview. He’ll then start his travel to China for three days of meetings. The president will first fly to Anchorage, Alaska at 2pm ET before finishing his flight to Beijing. We’ll bring you the latest lines as his journey gets under way, particularly if he stops to speak with the press.
Donald Trump has announced on Truth Social that Cuba was asking for help and “we are going to talk”, without elaborating further.
He wrote: “No Republican has ever spoken to me about Cuba, which is a failed country and only heading in one direction – down! Cuba is asking for help, and we are going to talk!!! In the meantime, I’m off to China!”
On the Iran war, Donald Trump said the ongoing fragile ceasefire was “on life support” after dismissing Tehran’s peace proposal as “totally unacceptable”.
“I would call it the weakest, right now, after reading that piece of garbage they sent us – I didn’t even finish reading it,” he told reporters in the Oval Office yesterday.
“I would say the ceasefire is on massive life support, where the doctor walks in and says: ‘Sir, your loved one has approximately a 1% chance of living.’”
Follow our Middle East live blog here for the latest updates:
Donald Trump is heading to China this week. If his guest list is any clue, he wants to discuss technology with Xi Jinping, Blake Montgomery reports.
On Monday, news broke that outgoing Apple CEO, Tim Cook, as well as SpaceX and Tesla CEO, Elon Musk, would join the US president. Other guests from the tech sphere include Meta’s recently appointed president, Dina Powell McCormick; Sanjay Mehrotra, CEO of computer memory maker Micron; Chuck Robbins, CEO of longtime telecom giant Cisco; and Cristiano Amon, CEO of semiconductor maker Qualcomm, according to a White House official.
Whether Trump’s trip will foster a flurry of tech deals, as his Middle East visit did in May 2025, will have to be seen. But while Trump trots out the US’s best and brightest business people – products of his hands-free policy for fostering technological innovation – his administration is taking cues from China’s more stringent approach to AI. China’s laws require AI companies to submit their models to Beijing for review on both security and political sensitivity grounds. The stringent policies prohibit not only threats to national security but also the generation of content that Beijing finds objectionable.
Read more of Blake’s analysis here:
Trump heads to China for high-stakes talks with Xi
Hello and welcome to our live coverage of US politics.
Donald Trump is heading to Beijing for high-stakes talks with Chinese leader Xi Jinping, as they seek to maintain a tentative trade truce while navigating Iran, Taiwan and dominance over global supply chains.
The Iran conflict could serve as a potential source of tension during talks. The US president has sought help from China, a close ally of Iran and the world’s biggest buyer of Iranian oil, to convince Tehran to reopen the strait of Hormuz and end the war. Trump’s first visit to China in nearly nine years had been delayed in the hopes that the US-Israeli war against Iran would be over, and it comes a week after Beijing flaunted its close ties with Tehran by hosting the Iranian foreign minister, Abbas Araghchi.
For China’s assistance, Xi will probably want something in return, and on top of his list is Taiwan, a self-governing island that Beijing claims as part of its territory. Analysts say China wants the US to declare opposition to Taiwanese sovereignty and delay, or ultimately limit, arms sales to the island. Trump said yesterday that Washington’s longstanding support for Taiwan’s defence would be on his agenda for the Beijing summit. “President Xi would like us not to, and I’ll have that discussion,” he told reporters. “That’s one of the many things I’ll be talking about.”
The two leaders’ last meeting in October paused a flurry of tit-for-tat trade tariffs in 2025. In February last year, Trump imposed 20% tariffs on China after accusing it of allowing the influx of the drug fentanyl into the US. China responded in kind, slapping tariffs of 15% on coals and liquefied natural gas imported from the US and 10% on oil and agricultural machines.
Trump is scheduled to land in the Chinese capital tomorrow night for the two-day summit. Alongside bilateral meetings, his schedule includes a tour of the Temple of Heaven, a state dinner on Thursday night and tea between the two leaders on Friday before he departs, according to reports.
The prime minister is fighting to stay on in No 10 as heavy election losses trigger a Labour revolt.
Source link
Passengers self-isolating in Merseyside remain “healthy and asymptomatic”, the UK’s health security agency has said.
Source link
-
Crime & Safety3 weeks agoBicester man denies sexually assaulting two young girls
-
Oxford News3 weeks agoBanbury cake company with 400 year history shut down
-
Crime & Safety3 weeks agoBicester crash: Motorcyclist ‘seriously injured’ in hospital
-
UK News3 weeks agoTV tonight: Shetland meets CSI in a new drama about a disgraced cop | Television
-
UK News3 weeks agoStarmer says it ‘beggars belief’ he wasn’t told about Mandelson vetting failure as he faces Commons – UK politics live | Politics
-
Crime & Safety4 weeks agoLorry overturns on Oxfordshire A43 roundabout with driver trapped
-
Crime & Safety3 weeks agoOxfordshire ‘hidden trap’ pothole leads to compensation payout
-
Crime & Safety2 weeks agoYoung farmers club hosts fun farm competitions in Bicester