News

By William James

LONDON (Reuters) -Britain’s spending on foreign aid should return to 0.7% of economic output by 2024/25, finance minister Rishi Sunak said on Wednesday, having temporarily ditched that target last year to help pay for the government’s pandemic response.

Prime Minister Boris Johnson has faced heavy criticism of the decision to cut aid spending to 0.5% of GDP, including from some within his own Conservative Party who said it undermined Britain’s global image at a time when it was trying to build new post-Brexit alliances.

Official budget forecasts on Wednesday showed the British economy bouncing back from COVID-19 more strongly than expected, allowing Sunak to announce billions of pounds of tax cuts and new public spending.

That more upbeat assessment also allowed the government to predict it would be able to restore aid spending in 2024/2025 because the fiscal tests it had set for doing so would be met by then – earlier than previously forecast.

The test for returning to 0.7% is that “on a sustainable basis the government is not borrowing for day-to-day spending and underlying debt is falling.”

The government’s spending plans set aside 5.2 billion pounds ($7.1 billion) in 2024/25 to pay for the increase, but that remains conditional on the tests continuing to be met until that time.

Campaigners raised concerns about a lack of detail around how the money would be spent – fearing Britain would try to broaden the classification of what counts as aid, resulting in less money going to where they say it is needed.

“Having already shrunk the UK’s support for development, implementing further cuts by stealth would exacerbate the challenges of climate and COVID already faced by developing countries,” said Amy Dodd, Director of Development Finance Policy at campaign group ONE.

The budget documents set out in broad terms a shift in British aid spending towards bilateral aid programmes – part of recently-appointed foreign minister Liz Truss’s stated aim to tie her foreign policy more closely with Britain’s commercial, defence and security interests.

It did not set out details of any reduction in funding to multilateral agencies.

($1 = 0.7272 pounds)

(Reporting by David Milliken, Writing by William James Editing by Costas Pitas and Mark Potter)

LONDON (Reuters) – UK finance minister Rishi Sunak promised higher public spending and tax cuts as Britain’s economy rebounded more strongly from the COVID-19 pandemic than previously expected, and he vowed to protect households from rising inflation.

He announced multibillion-pound investments to help Prime Minister Boris Johnson meet his “levelling up” promises to voters and ease a cost-of-living squeeze for low-earners. But the plan has a cost: budget forecasters said the state tax take following previously announced increases was on course to be its biggest since the 1950s.

Here is a selection of comments from analysts and investors:

OLIVER BLACKBOURN, MULTI-ASSET PORTFOLIO MANAGER AT JANUS HENDERSON INVESTORS:

“The gilt market was clearly not impressed by the Chancellor’s speech with yields seeing another leg lower during his delivery, suggesting a less positive outlook for the UK economy.

“Investors remain concerned about both rising inflation and the future fiscal drag on growth as spending from the pandemic era rolls off. They received little comfort as Rishi Sunak pointed to a level of inflation far above the Bank of England’s target over the next year and his new fiscal rules are a concern for those worried about the impact of the sharp contraction in government spending.”

VIVEK PAUL, CHIEF UK INVESTMENT STRATEGIST, BLACKROCK INVESTMENT INSTITUTE:

“Despite headline spending increases – some relative to pre-Covid levels – Covid-era fiscal support for the economy is still being reduced just as the Bank of England appears set to raise interest rates.

“Time will tell whether the Chancellor’s decision to end pandemic support measures … has come too early. Yet while there are risks in fiscal tightening too early, there are also risks in doing it too late. Faced with higher debt levels and a lower long-run sustainable deficit – due in part to a weaker long-run trend growth rate than other economies – the UK’s public finances are at greater risk from a rise in interest rates, which could push up debt interest costs rapidly.

“This fragile equilibrium of low interest rates and subdued debt costs shows why the Chancellor is so keen to convince markets that the path is sustainable.”

SAM MAHTANI, STRATEGIST AT NINETY ONE ASSET MANAGEMENT:

“Despite the energy and supply disruptions, the economy is clearly going to be healthier than expected in the coming years with the OBR having reduced its “persistent economic damage” estimates from 3% last March to 2% now.

“We are now the fastest growing country in the G7 this year, with the OBR projecting growth of 6.5% and a further 6% in 2022. We have a fighting chance to bring down the eye-watering budget deficits.

“In this regard, the Chancellor’s new fiscal rules are welcome. They are a cornerstone of the need to bring down net debt levels, and the OBR’s projections see a budget deficit of just 1.5% of GDP at the end of the forecast horizon. Falling debt projections will be a sign the UK economy is recovering and prospering.”

He added however:

1) Health and social care spending will continue to leave little room for anything else.

2) The Treasury is not allocating enough money for the looming Green transition.

NEIL BIRRELL, CHIEF INVESTMENT OFFICER AT PREMIER MITON:

“Rising prices will squeeze the consumer at the same time as the tax take has to rise and the hospitality industry, albeit with giveaways on fuel and alcohol, will be caught in the middle as discretionary spend comes under pressure. Discount retailers could do well on the back of this, whilst the housing and infrastructure sectors will get a boost from the spending plans, but that’s long term.”

CHARLES HEPWORTH, INVESTMENT DIRECTOR, GAM INVESTMENTS:

“It was hoped that the banking surcharge was going to be cut but Sunak has retained the 3% levy, so banking stocks are the biggest loser from today’s budget. The biggest winners are pub stocks with the planned changes in alcohol duty.”

“While the UK is now enjoying its fastest growth rate since 1973 at an OBR forecasted 6.5% clip as it bounces back from the near 10% contraction last year, UK equities still remain a pretty unloved regional play for global investors. The scarring of Brexit is still a haunting concern for many and sterling still firmly reflects that.”

KALLUM PICKERING, SENIOR ECONOMIST, BERENBERG:

The budget did not involve any big announcements that materially change the economic outlook for the UK. Instead, the chancellor offered a smorgasbord of modest but mostly sensible giveaways. These included reforms to welfare to ease the cost of living crisis from higher energy prices, cuts to business rates for the retail, hospitality and leisure sectors and increased R&D expenditure.

NICK RITCHIE, DIRECTOR WEALTH PLANNING AT RBC WEALTH MANAGEMENT:

“Private investors will breathe a sigh of relief that feared increases to capital gains tax and a reduction in pension tax relief haven’t materialised.

“But while paying less for sparkling wine will be welcome news for many, the freezing of income tax thresholds and increase in national insurance announced earlier this year means household incomes continue to be eroded in real terms.

SARAH PENNELLS, CONSUMER FINANCE SPECIALIST, ROYAL LONDON:

As expected, the Chancellor announced a rise in the minimum wage from £8.91 to £9.50 from April 2022, giving full-time workers over the age of 23 a boost of £1,074 a year before tax. On the face of it the 6.6% increase is generous. However, any comfort for low earners is likely to be short lived. By the time the rise comes into force next year, it could effectively be wiped out by the rising cost of living.

“Inflation, already ahead of the Bank of England’s 2% target, threatens to bite even harder, with the OBR predicting that the CPI rate of inflation will average 4% next year.

“On top of that there’s concern about rising energy costs with the jump in the energy price cap at the start of this month and another possible rise in April, just as the rise in the minimum wage takes effect.”

(Compiled by Sujata Rao; Editing by Mark Potter)

By David Milliken, Andy Bruce and William Schomberg

LONDON (Reuters) -Finance minister Rishi Sunak used an upgrade to Britain’s economic recovery forecasts to promise higher public spending and new tax cuts, and he vowed to protect households from the sharp rise in inflation that could approach 5% next year.

Sunak announced multi-billion-pound investments to help Prime Minister Boris Johnson meet his “levelling up” promises to voters and ease a cost-of-living squeeze for low-earning households in a half-yearly budget statement on Wednesday.

But the plan came with a cost: Britain’s budget forecasters said the state’s tax take was on course to be its biggest since the 1950s, thanks to big tax hikes announced in March and September, while public spending was set for its largest sustained share of economic output since the late 1970s.

In a speech to parliament, Sunak hailed the improved growth forecasts that reflected the economy’s post-lockdown bounce-back and said he wanted to return to his Conservative Party’s traditional policy of cutting taxes before the next election, due by 2024.

The new forecasts from the Office for Budget Responsibility showed the economy was expected to grow by 6.5% in 2021, up from a forecast of 4.0% made in March, when Britain was still in a coronavirus lockdown.

“Today’s budget does not draw a line under COVID. We have challenging months ahead,” Sunak said. “But today’s budget does begin the work of preparing for a new economy post-COVID.”

The higher growth forecast for 2021 meant the economy was expected to regain its pre-pandemic size at the turn of this year, not in the second quarter of 2022 as predicted in March although it was still later than in other countries.

Long-term damage to the economy would also be lower, with 2% of output lost permanently, compared with 3% estimated before.

Sunak – who racked up Britain’s biggest-ever peacetime budget deficit to combat the coronavirus – will now be able to borrow less than previously expected.

The OBR projected the deficit for the financial year to the end of next March would be equivalent to 7.9% of economic output – down from its previous forecast of 10.3% and almost half the size of last year’s historic shortfall.

The OBR cut its forecasts for borrowing in each of the subsequent four financial years.

British government bond prices rose and the yield on 30-year gilts hit a one-month low on the reduced debt sale plans.

Sunak defied expectations that he would squeeze spending in many government departments, saying they would all get a real-term increase in spending, and he promised the biggest increase in a decade in the core funding of local governments.

But Ben Zaranko, an analyst at the Institute for Fiscal Studies think thank, said the highest spending was not enough to reverse the cuts of the 2010s.

“Austerity is over, but not undone,” he said.

Sunak also announced new rules to govern borrowing: underlying public sector net debt must be falling as a share of GDP and day-to-day government spending must be balanced by revenues within three years.

The OBR said Sunak was just about on course to meet those rules.

On taxes, Sunak lessened the hit for low-income families in work from the loss of a pandemic emergency top-up of welfare benefits. He also cut business rates for a year for hard-hit sectors such as retail and hospitality and froze them for others.

The benefit changes cost more than 2 billion pounds a year, while the cuts in business rates cost 2.7 billion pounds next year and more than 900 million pounds a year thereafter.

Drinkers would be spared a planned increase in duty on alcohol worth more than 600 million pounds a year.

“WILLING TO ACT” ON INFLATION

Sunak acknowledged the risks posed by rising inflation, much of which he blamed on problems in the global economy.

The OBR predicted inflation would hit almost 5% next year, and it said post-Brexit migration and trade rules had exacerbated supply bottlenecks in Britain.

“I understand people are concerned about global inflation – but they have a government here at home ready and willing to act,” Sunak said.

He announced further measures to ease a shortage of truck drivers and said the increases in spending would done “keeping in mind the need to control inflation.”

A big risk for Sunak is that the recent jump in inflation lasts longer than expected and pushes up the government’s debt costs sharply. A quarter of British gilts are indexed to inflation, more than most other rich economies.

A 1 percentage-point rise in interest rates and inflation would cost taxpayers an estimated 23 billion pounds a year, double the money Sunak plans to raise via higher social security contributions to fund the health service and social care.

Borrowing costs could start to go up as soon as next week when the Bank of England announces its November policy decision.

(Additional reporting by Paul Sandle, Kate Holton, William James, Kylie MacLellan, Andrew MacAskill and Costas Pitas; writing by William Schomberg and David Milliken; Editing by Hugh Lawson)

LONDON, UK – October 26, 2021: Define Tech Limited, an independent software vendor focused on Cloud technology has teamed up with CloudCIX Ltd., to help develop HPC, Storage and AI orchestration capabilities on top of the CloudCIX platform.

Best known for its data centre services, offering connectivity for Munster businesses, CloudCIX has also developed an Open-Source Cloud Provisioning Platform, making the technology available to businesses of all sizes. CloudCIX is a multi-region multi-tenanted Cloud provisioning platform, that supports Linux and Windows via KVM and HyperV virtualisation. CloudCIX runs on any hardware and is available either as a Public Cloud or as fully supported Private Cloud platform.

As businesses and consumers adopt more data intensive services, as well as HPC and AI tools and techniques, the need for affordable and latency-rich Cloud services will only continue to grow. According to a recent report from IDC, more than 90% of global enterprises will rely on some form of hybrid cloud by 2022, and similarly a report from Business Wire found that 97% of IT managers plan to distribute workloads across two or more clouds in order to maximize resilience, meet regulatory and compliance requirements, and leverage best-of-breed services from different providers.

As part of this new alliance, Define Tech will focus on building HPC and AI capabilities on top of the CloudCIX platform, including the integration of its Kubernetes stack that will enable containerised applications and simplified deployment methods – growing the platforms feature set for high-end workloads, and simplifying Cloud adoption for European customers.

“With both UK and EU political agendas focusing on tech sovereignty and in particular data sovereignty, we recognise the importance of having more local Cloud service providers across Europe. There is too much reliance on US providers where the vast majority of our critical infrastructure and sensitive data is being executed and stored – it’s time for us to deliver an alternative offering closer to home.” David Power, CTO at Define Tech

“The CloudCIX Open-Source Cloud Computing platform is an ideal underlay on which virtual solutions can be built. We are delighted to partner with Define Tech Limited to target several HPC sectors.” Jerry Sweeney, CEO at CloudCIX

To find out more, visit www.define-technology.com or www.cloudcix.com.

LONDON, 26 September 21. Today Quantexa, a global data and analytics software company, announced the Cabinet Office has selected its pioneering Contextual Decision Intelligence (CDI) technology to help the UK Government detect fraud in the COVID-19 loan schemes and assist in the fight against financial crime.

During the pandemic, fraudulent and illegal organisations are alleged to have abused the Government’s support system to defraud the UK taxpayer. The Cabinet Office is adopting Quantexa’s powerful entity resolution and network analytics technology to detect and fight this type of crime.

Quantexa’s advanced CDI software delivers best-in-class scheme-level network analytics and this will help Government efforts to pinpoint companies and individuals suspected of fraud. This would be impossible or impractical for manual processes to achieve. With CDI, data becomes more accessible and datasets from many sources join together to reveal real-world illicit behaviours bolstering the ability to detect and deter future fraud.

The software can reveal hidden connections and relationships between people and organisations, surfacing suspicious activities for future investigations. Quantexa’s CDI technology is already used by banks like HSBC and Standard Chartered in their anti-fraud departments, and adds to the Government’s rank of solutions already deployed to fight fraud.

Vishal Marria, CEO at Quantexa, commented: “The COVID loan schemes were designed to help the nation at a time of deep economic need, and we are honoured our Contextual Decision Intelligence technology is supporting the UK Government’s tenacious efforts to fight fraud.”

He added: “Contextual Decision Intelligence is invaluable when organisations need to dig deeper for better intelligence and insights, spot hidden risks and opportunities, and make better decisions.”

By Kate Abnett

LUXEMBOURG (Reuters) -European Union countries failed to agree on a bloc-wide response to surging energy prices in an emergency meeting of government ministers on Tuesday, with some countries seeking a regulatory overhaul and others firmly opposed.

European gas prices have hit record highs this autumn and remain at lofty levels, prompting most EU countries to respond with emergency measures like price caps and subsidies to help trim consumer energy bills.

Countries are struggling to agree however on a longer-term plan to cushion against fossil-fuel price swings, which Spain, France, the Czech Republic and Greece say warrant a bigger shake-up of the way EU energy markets work.

“There was no agreed position on whether or not intervention measures should be adopted at the EU level and applied in all member states,” Slovenian infrastructure minister Jernej Vrtovec, whose country holds the EU presidency, said after the meeting.

Spain made the case in Tuesday’s meeting for joint gas purchases by EU countries and proposed that individual countries should be able to opt out of the EU’s current system of setting electricity prices.

Those proposals faced resistance from other countries, who are wary of overhauling EU energy laws in response to what they say is a short-term price crunch.

Nine states including Germany – Europe’s biggest economy and market for electricity – published a joint statement ahead of the meeting that said they would not support EU electricity market reforms.

“This will not be a remedy to mitigate the current rising energy prices linked to fossil fuels markets,” the countries said.

JOINT GAS BUYING

The European Commission is analysing the design of Europe’s electricity market and gathering evidence on the behaviour of gas suppliers after some countries accused Russia’s Gazprom of manipulating the market to push up prices.

The Commission will also assess the pros and cons of joint gas buying among EU countries.

“There are many issues to be considered – who will pay for the costs of procuring and storing the gas, how the gas will be transported from the different regions,” EU energy commissioner Kadri Simson said.

Luxembourg energy minister Claude Turmes said Spain was “over-promising by saying joint gas procurement will solve the crisis”.

With less than a week until the international COP26 climate change summit, the energy price spike has also stoked tensions among EU countries as they prepare to negotiate a raft of new policies to tackle climate change, including higher tax rates for polluting fuels.

Hungarian Prime Minister Viktor Orban last week dismissed the plans as a “utopian fantasy”, a stance at odds with other states who say high fossil fuel prices should trigger a faster switch to low-emission, locally produced renewable energy.

(Reporting by Kate Abnett, Marine Strauss, Jan Strupczewski and Isla Binnie; Editing by Bernadette Baum, David Holmes and Jan Harvey)

BERLIN (Reuters) – The German government expects consumer price inflation to surge to 2.9% this year and ease to 2.2% next year, a source told Reuters on condition of anonymity.

In its updated economic forecasts, the government expects inflation to ease further to 1.7% in 2023, the source said. The figures compare with a consumer price inflation of 0.6% in 2020.

Economy Minister Peter Altmaier will present the updated economic forecasts during a news conference on Wednesday. A spokesperson for the Economy Ministry declined to comment.

(Reporting by Holger Hansen; Writing by Michael Nienaber; Editing by Riham Alkousaa)

By Ain Bandial

BANDAR SERI BEGAWAN (Reuters) – A Southeast Asian summit started on Tuesday without military-ruled Myanmar, after its junta refused to send a representative following its leader’s exclusion for ignoring a peace roadmap agreed six months ago.

The Association of Southeast Asian Nations (ASEAN) had said it would accept a non-political representative from Myanmar, but the junta said on Monday it would only agree to its leader or a minister attending.

Myanmar’s absence was not mentioned by either Brunei, the ASEAN chair, or the 10-member bloc’s secretary-general, at the opening of the virtual meeting.

ASEAN decided to sideline from the summit junta chief Min Aung Hlaing, who led a Feb. 1 coup against an elected government, for his failure to cease hostilities, allow humanitarian access and start dialogue with opponents, as agreed with ASEAN in April.

After Tuesday’s leaders meeting, Malaysian Prime Minister Ismail Sabri Yaakob said on Twitter he fully supported Brunei’s decision on Myanmar’s representation, while Thai counterpart Prayuth Chan-ocha said ASEAN’s dealings with Myanmar were crucial for its reputation and a test of its resolve.

“ASEAN’s constructive role in addressing this situation is of paramount importance and our action on this matter shall have a bearing on ASEAN’s credibility in the eyes of the international community,” Prayuth said, according to his office.

The sidelining of Min Aung Hlaing was a huge insult to the junta and a rare, bold step by a regional grouping known for its code of non-interference and engagement.

Myanmar’s military, which ruled the country for 49 of the past 60 years, objected strongly, accusing ASEAN of departing from its norms and of allowing itself to be influenced by other countries, including the United States.

ASEAN made the call days after its special envoy Erywan Yusof said he would not be given access to all parties in the country, including ousted leader Aung San Suu Kyi, who is charged with multiple crimes.

‘TRUST ASEAN’

Prayuth, a former coup leader in Thailand, urged Myanmar to follow its commitments and for Erywan to visit soon and make an “important first step in the process of confidence-building”.

Prayuth “expressed hope that Myanmar will trust ASEAN in helping Myanmar to achieve peace and harmony, as well as to return to the democratic process.”

Myanmar security forces have killed more than 1,000 civilians and detained thousands more, subjecting many to torture and beatings, according to United Nations envoys, who say the army’s excessive use of force has displaced tens of thousands of people.

Myanmar has rejected that as biased and exaggerated by unreliable sources and says the conflict is being stoked by “terrorists” allied with a shadow National Unity Government (NUG).

U.S. National Security Advisor Jake Sullivan met on Monday with representatives of the NUG, an alliance of pro-democracy groups, local militias and ethnic minority armies formed after the coup.

ASEAN leaders were due also to collectively meet leaders of the United States, China and South Korea.

U.S. President Joe Biden will attend a joint session of the ASEAN summit by video link.

Michael Vatikiotis, Asia Director of the Geneva-based Centre for Humanitarian Dialogue, said Myanmar’s junta “probably cares about being frozen out of the summit”, although it has a history of enduring international isolation.

“The question now is whether regional leaders will agree to engage with the parallel National Unity Government more formally, as the U.S. and EU has started to do,” he said.

(Reporting Ain Bandial in Bandar Seri Begawan; Additional reporting by Tom Allard, A. Ananthalakshmi in Kuala Lumpur, Panu Wongcha-um in Bangkok; Writing by Kay Johnson and Martin Petty; Editing by Simon Cameron-Moore)

By Siddharth Cavale

(Reuters) – Higher vaccination rates and improved mobility during the third quarter drove strong demand for Mucinex cough syrups and Durex condoms, Reckitt Benckiser Group said on Tuesday, prompting it to raise its full-year forecast.

That sent its shares up 5.8% in morning trading, making it the top gainer on the FTSE index.

Sales of over-the-counter medicines rose more than 20% in the quarter, driven primarily by Mucinex cough and cold remedies after a strong cold and flu season saw sales across most of its markets come in at or above 2019 levels, it said.

Improved mobility in markets including India also saw the company gain share in sexual wellness products such as Durex, Chief Executive Laxman Narasimhan said on a media call.

That drove like-for-like sales up 3.3% in the quarter, compared to the 0.7% drop analysts had expected, according to company-supplied estimates, which excluded sales from the recently completed sale of its infant nutrition business in China.

The company also raised its full-year net revenue like-for-like growth forecast to 1-3% from flat to 2% earlier, but cautioned that growth would be “softer” in the fourth quarter.

Like its peers, Reckitt said it was seeing a sharp rise in raw materials costs, which were up 10% in the quarter compared with an 8-9% rise it had estimated previously.

Chief Financial Officer Jeff Carr said he expected inflation to be “up a touch” in the fourth quarter and possibly in the low double digits in 2022, but could not estimate when these higher costs would subside.

“There will be another round of pricing we will take to offset the inflation,” Narasimhan said, over and above the 1.7% hikes it took in the third quarter.

Domestos maker Unilever last week also warned of another round of price hikes to battle fierce inflation.

Reckitt kept its adjusted operating profit margin forecast, excluding IFCN China, for the year in the range of 22.7% to 23.2%

Shares in the group were down 16% this year before the results, after hitting near-record levels in 2020.

(Reporting by Siddharth Cavale in Bengaluru; Editing by Anil D’Silva and Jan Harvey)