Labour’s woes continue as UK borrowing costs pile up: ALEX BRUMMER

Labour’s mission to help grow the economy through housing and construction is a slow process.

But even big long-term infrastructure plans may be sidelined by loss of confidence following last year’s £40bn budget tax rise.

The biggest hurdle of all may prove to be sticky interest rates.

When in opposition, Keir Starmer’s team never missed an opportunity to accuse Liz Truss and the Conservatives of crashing the economy and penalizing homeowners who sought to renew fixed-term mortgages through high borrowing costs.

Bond markets, where the government raises funds, are unimpressed. It is not just short-term interest rates, such as those guided by the Bank of England, that remain sticky.

Disturbingly, long-term rates are high, indicating the mountain of debt Britain faces. In the last auction of 2.25 billion pounds of 30-year bonds, the yield reached 5.198 percent.

This is the highest level since 1998. In Germany, where the debt-to-output ratio is around 62 percent, the 30-year yield is currently 2.69 percent.

Berlin’s centuries-old fight against inflation and debt means it is probably the only G7 country where a government has fallen in recent months simply for violating one of its own debt rules.

Gordon Brown’s intention was for the Bank of England, and therefore Britain’s credit, to be as good as the Bundesbank when he granted independence to the Old Lady in May 1997. That is still a long way off.

As far as most ordinary citizens are concerned, the most relevant rate in the UK – the one that helps determine the cost of fixed rate mortgages – is the ten-year gilt yield, which reached 4.64 per cent. cent in the latest operations.

This is a 23.17 per cent increase on last year and is now in Truss territory.

The harmful cost of borrowing, which has risen sharply since Labor came to power in July 2024, is detrimental to consumers, borrowers and the government itself, which faces a growing bill to service the national debt.

Not a good start to fixing the foundation.

knew sevens

Sleepy hedge funds are in full combat following the pre-Christmas attack on Boaz Weinstein’s Saba Capital Management.

The first application meetings of the seven trusts targeted will take place later this month, leaving little time to prepare defences.

The biggest challenge, as James Williams, chairman of the £704m European Smaller Companies, tells me, is getting retail investors to act.

Private shareholders of his trust own about 30 percent of the votes, about the same amount as Saba. Many are maintained through investment platforms, so accessing them is not easy.

A second line of defense should be the regulator, the Financial Services Authority, arguing that predatory Saba is acting contrary to its duty to consumers. Managers Janus Henderson are working on this front.

The CQS Natural Resources Growth Fund also joined the fray, targeting a total return of 220 per cent over the past decade.

Summarily dismisses Saba’s record in the United States. Retail investors rarely have much say when big corporate actions are underway.

They now have seven opportunities to exercise their democratic rights and fire Weinstein and his henchmen.

knowingly underestimated

Simon Wolfson delivers as usual at Next, lowering expectations and projecting a full-year profit of £1.01bn.

Importantly, the company surpasses the billion mark for the first time, driven by 6.1 percent online growth versus a 2.1 percent drop in stores. The big new driver is overseas sales, which increased by an astonishing 31.4 percent.

That means just ahead of rival M&S, which is accelerating back towards the £1 billion mark last reached in 2007.

Wolfson is known for providing forensic details on the performance impact of government policy, of all stripes.

It forecasts that wage costs will rise by £67 million due to an increase in employers’ National Insurance contributions.

Next plans to offset the impact with cost savings (which could mean job losses for workers) and a 1 percent price increase.

Despite Wolfson’s expectation of slower UK growth in 2025-26, profits are forecast to rise again to £1.046bn.

If the past is any guide to the future, prepare for some encouraging updates.