United Kingdom

The British government said that the post-Brexit trade rules it negotiated with the European Union “cannot go on” and need a major rewrite, straining already-tense U.K./E.U. relations and drawing a message of concern from the U.S. government, the Associated Press reported. The government said Britain would be justified in unilaterally suspending the legally binding Brexit agreement but had decided not to do so just yet. Since the U.K. left the EU’s economic embrace at the end of 2020, relations have soured over trade arrangements for Northern Ireland, the only part of the U.K.

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Britain's supermarkets, wholesalers and hauliers were struggling to ensure stable food and fuel supplies after an official health app told hundreds of thousands of workers to isolate after contact with someone with COVID-19, Reuters reported. Coronavirus cases in Britain have been broadly rising for a month, with more than 44,000 recorded on Wednesday. "We're very concerned about the situation," Business Secretary Kwasi Kwarteng said.

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British public borrowing last month was almost a fifth lower than a year earlier, when the economy was feeling the full force of the coronavirus pandemic, but rising inflation put upward pressure on debt costs, Reuters reported. Public sector net borrowing, excluding public sector banks, fell to 22.8 billion pounds ($31.0 billion) in June, still the second-highest June figure on record. Economists had forecast a drop to 21.6 billion pounds.

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An unexpected surge in U.K. inflation and a record hiring spree are starting to convince some Bank of England policy makers that the time to step off the stimulus pedal is fast approaching -- potentially as soon as next month, Bloomberg News reported. In the past two days, data showed consumer prices accelerating beyond the BOE’s 2% target for the second month and companies hiring at the fastest pace on record, driving up wages. Two members of the central bank’s rate-setting committee said stimulus measures may have to be trimmed back.
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Britain’s financial watchdog will not formally oppose Provident’s compensation plan for its doorstep lending unit in court even as it voiced concerns on Wednesday that consumers were being short-changed, Reuters reported. The Financial Conduct Authority (FCA), which successfully argued for a similar proposal by guarantor lender Amigo to be rejected in London’s High Court in May, said in a statement its decision to not oppose Provident’s plan was because the only likely alternative was the insolvency of the business.
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U.K. inflation unexpectedly accelerated to the highest level in three years in June, driven by widespread price increases that challenge the Bank of England’s argument that the surge will be temporary, Bloomberg News reported. Consumer prices climbed 2.5% from a year earlier, exceeding all but two estimates in a Bloomberg survey of 35 economists. Prices rose from May in the vast majority of 12 broad divisions, the Office for National Statistics said Wednesday. The pound advanced.
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Britain's fisheries have been sold out by the post-Brexit trade deal agreed with the European Union, the head of an industry body said on Wednesday, urging the government to do more for the sector when a so-called adjustment period ends in 2026, Reuters reported. Winning back "control" of Britain's fishing waters was one of the main drivers for Brexit, with the industry becoming the poster child for many supporters of the country's departure from the EU during the 2016 referendum and beyond.
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Increased risk taking in global financial markets, particularly in leveraged debt, could worsen future downturns, according to U.K. monetary authorities, Bloomberg News reported. As borrowing in global junk-rated debt markets continues to climb, valuations are vulnerable to changes in growth prospects and the path of interest rates, officials wrote in the Bank of England’s Financial Stability Report. “Elevated asset valuations and compressed risk premia imply a vulnerability to a sharp correction in asset prices,” according to the report.
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The Bank of England signaled it’s not overly worried that the U.K.’s current housing boom, fueled by a temporary tax cut, will lead to an unsustainable buildup in mortgage debt, Bloomberg News reported. In its twice-yearly assessment of financial stability, the central bank said while the share of households struggling with debt increased “slightly” during the the pandemic, it “remains significantly below its pre-global financial crisis level.” The sanguine assessment comes amid a surge in U.K. house prices as buyers race to take advantage of a cut in stamp duty, a levy on transactions.

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The U.S. private equity group in talks with Sanjeev Gupta over refinancing his Australian operations, White Oak Global Advisors, is moving deeper into the trade credit business after snapping up one of Greensill Capital’s subsidiaries, the Australian Financial Review reported. White Oak Global Advisors CEO Andre Hakkak, who is in refinancing talks with Sanjeev Gupta, has bought Greensill Capital subsidiary Finacity. White Oak has been named the successful bidder of Finacity, a US firm which helps companies raise cash by acquiring their invoices.
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