Business news live: UK retail sales up but £18bn government borrowing makes tax rises ‘all but certain’

UK economic data continues to paint a mixed picture this week, with government spending coming in higher than expected at more than £18bn for August - but so too were retail sales higher than anticipated for the same month.

That follows on from inflation holding steady at 3.8 per cent, but food prices continuing to surge and expected to surpass the 5 per cent mark before the end of this year. Yesterday, the Bank of England opted to hold interest rates at 4 per cent in response to this mixed set of numbers, with unemployment also up and wage growth still slowing slightly.

A rates cut by the US Fed did, however, push stock markets higher on Thursday - but the FTSE 100 was flat on Friday. In business news, Jaguar Land Rover expect the fallout from the cyber attack on their IT systems to leak into October and even November.

Follow The Independent’s live coverage of the latest stock markets and business news here:

Key points

• Government borrowing rose higher than expected in August to £18bn
• 'Tax rises all but certain' predicts finance expert after increased govt spending
• Retail sales increase but businesses face make or break run up to Christmas
• Six major high street lenders offering £200 and more to switch your current account

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16:00 , Karl Matchett

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Business and Money news - 19 September

07:53 , Karl Matchett

Good morning all - time to dive back in for one final weekday of business news, stock market updates and everything that matters for your money.

Today we’re looking at retail sales and government borrowing too - both higher than expected in August.

Government borrowing rises more than expected to £18bn

08:07 , Karl Matchett

Spending has been on the agenda again for the government it seems - and the bill has come in far higher than projected.

August’s total of £18bn is second for that month only to 2020 - the pandemic - and the OBR had only expected around £12.5bn in their projections earlier this year.

The ONS said:

“Last month’s borrowing was the highest August total since the pandemic. Although overall tax and National Insurance receipts were noticeably up on last year, these increases were outstripped by higher spending on public services, benefits and debt interest. Total borrowing for the financial year to date was also the highest since 2020.”

Tax rises all but certain in Budget says finance expert

08:19 , Karl Matchett

Tax rises in the Budget are “all but certain” as a result of the extra government spending, says Lindsay James, investment strategist at Quilter.

The deficit is now estimated at £62bn and with the economy simply not growing, it’s a big problem for Rachel Reeves to fix in her November statement.

“Once again the UK government’s borrowing for August highlights why it seems all but certain that tax rises are coming at the Budget in two months’ time,” said Ms James.

“The ONS has put August’s borrowing figure at £18bn, putting the budget deficit for the financial year to date at £62bn, £13.8bn higher than the same time last year. This was the highest level of borrowing in August for five years, when we were still dealing with the fallout of the first pandemic lockdown. These figures are staggering and are not showing an economy that is in rude health.

“It is clear that further borrowing is not an option and with the UK currently suffering from a yield premium compared to the rest of the G7, the markets are demanding additional reward for providing funds to the government. Indeed, the government has a litany of fiscal pressures outside of the now familiar low growth environment we find ourselves in. Productivity is likely to be downgraded when we get to the Budget, while higher and persistent inflation is pushing up index linked costs.

“The UK economy without a doubt is bending, but likely will not break yet. However, the remedy will need to be harsh, something politicians on all sides appear reluctant to accept. Labour is likely to go down the route of raising more taxes, particularly on wealthier individuals. But the economic growth effects this has will not be positive. Meanwhile, this government has shown it is incapable of driving through necessary spending cuts, when in reality there needs to be a mix of the two.”

Retail sales up 0.5% for August - but still down over three months

08:30 , Karl Matchett

Retail numbers have come through this morning too - and they are up for August.

Monthly sales rose 0.5%, same as they did in July, though that does still mean that across the three-month period there was a drop overall of 0.1 per cent.

“Retail sales fell slightly across the latest three months though at a slower rate of decline than seen last month,” said the ONS.

“This was mainly due to a poor period for non-food stores, such as antiques dealers and auction houses as well as tech stores, with fuel sales also falling. These were only partially offset by increases from online and clothing shops.

“Looking at the monthly picture, retail sales increased in August with feedback suggesting the good weather helped boost sales of clothing.”

Retail businesses facing decisive run to Christmas: 'Thrive or survive'

08:45 , Karl Matchett

Samuel Fuller, director at Financial Markets Online, has given some insight behind the wide-ranging retail sales numbers.

While August spending was up - and that’s clearly a good thing, economy-wise - it’s the wider lens picture which gives a clearer view.

With that still on a downward slope it’s going to put a lot of pressure on businesses for the pre-Christmas period to be a roaring success.

Of course, the Budget comes right in the middle of that...

“Specialist food stores such as butchers and bakers saw sales jump, but demand elsewhere was more muted. Total sales volumes were up a modest 0.7% compared to August 2024, in large part because rising prices forced consumers to spend carefully,” Mr Fuller explained.

“Over the same 12-month period, average prices - as measured by the CPI - surged by 3.8% and this is constraining demand.

“With the Bank of England predicting that CPI will climb even higher in September, Britain’s inflationary problem is proving a serious drag on the retail sector.

“For many retailers, the final three months of the year - dubbed the ‘golden quarter’ - will determine whether they thrive or survive in 2025.”

Inheritance tax receipts on the rise - and will keep going up

09:00 , Karl Matchett

More money data rolling in - and it’s an uptick for the government in Inheritance Tax receipts.

IHT income rose, for April to August 2025, to £3.7 billion - which is £200 million higher than the same period last year.

James Scott-Hopkins, from EXE Capital Management, says the public are being effectively hoodwinked by the government as a result of frozen thresholds.

“The insidious freezing of thresholds by recent governments is simply to fool the populace into believing that taxes are not really rising,” he said.

“Yet, inheritance tax receipts continue to rise and are on course for a record-breaking year. The freezing of thresholds, together with decades of house price rises, has brought an increasing number of estates into the tax band. And it will only get worse, with more people's estates being dragged into the IHT net.

“Not only does the IHT threshold remain frozen until 2030 but changes announced by the Chancellor, Rachel Reeves, in the Budget will begin to bite after April 2027. From then on, pensions and agricultural assets worth more than £1million will also be subject to IHT.”

Pets At Home boss exits with immediate effect as sales tumble

09:20 , Karl Matchett

Kicking off a trio of leadership exits of sorts, the chief executive of Pets At Home has departed after a second profit warning this year.

Shares in the company dived 16% yesterday with the news and Lyssa McGowan departs with immediate effect.

Another departure is that of Will Shu: the Deliveroo founder will step down once the £2.9bn takeover is complete, with DoorDash buying the firm.

And thirdly, a former director general of the Institute of Directors has been disqualified as a company director for Covid loan abuse, the Insolvency Service announced.

Anna Daroy served as interim chief operating officer and later as interim director general of the Institute of Directors for a year from October 2018.

The six major banks offering up to £200 cash to switch your current account

09:40 , Karl Matchett

Britain’s major lenders are cranking up their offers to get you to switch to a new bank or building society, with up to £200 in cash on offer to make the switch - and in many cases, the value goes beyond that.

Six banks or building societies - including Lloyds and Nationwide - are offering up front money to get you to move to them and there are plenty of perks besides the cash.

Here’s the run down on what’s on offer - make sure you choose the one which suits your overall needs.

Six major banks will give you £200 cash to switch your current account

One lender could earn you £394 in a year - expert details keys to bank account switch

10:00 , Karl Matchett

Speaking about those cash switch offers, Kate Steere from personal finance site Finder has pinpointed how it’s not always about the biggest up-front figure.

“If you’re looking at the biggest cash payment, Lloyds is currently offering a market-leading £200 when you switch to one of its Club Lloyds or Lloyds Premier accounts,” she explained.

“However, the best overall deal on the market right now is actually Nationwide’s £175 offer because it will get you the most over the course of the year.

“With the FlexDirect account, you get 5% AER on balances up to £1,500 for 12 months. If you keep that in your account for the full year, you could earn up to £75 in interest. You also get up to £60 cashback on debit card purchases for 12 months and access to the Flex Regular Saver at 6.50% AER. If you save the maximum of £200 every month, you’ll earn £84.50 in interest in a year.

“That’s a chunky £394.50 in your first year, including switching bonus, maximum savings interest and cashback.”

Even there though, we add in the others are worth consideration depending on your circumstances.

If you don’t have £1,500 to sit in your current account for a year for example, but can commit to saving more than £200 a month going forward, then first direct offer a 7% regular saver - while you’ll also need to consider if you’ve had the bonus and been a client from each of the lenders previously.

Always look to which one suits your overall picture - and then make the switch to reap all the benefits.

FTSE 100 flat as Asian stocks fall overnight

10:20 , Karl Matchett

Japan kept interest rates on hold last night but fears over the national bank selling a huge holding of funds led to a stock market downturn.

The Nikkei 225 was down 0.57%, the Asia Dow was at -0.27% and the Hang Seng ended flat.

In the UK, it’s rather like the latter this morning; the FTSE 100 dropped initially but is hovering at +0.06% a couple of hours into trading.

Miners Endeavour and Fresnillo are the two biggest risers, 3.2% and 2.1% up respectively. At the other end, owner of the stock exchange LSEG is down 3.3%.

270,000 car owners to get insurance compensation

10:40 , Karl Matchett

An estimated 270,000 motorists are expected to receive £200 million in compensation for historic insurance claims that were underpaid, say the FCA.

The payout is as a result of firms breaching rules on handling claims fairly. Of the £200m, £129m has already been paid to almost 150,000 customers, the FCA added.

Sarah Pritchard, deputy chief executive of the FCA, said:

“We’ll step in when consumers aren’t getting fair value - and we are pleased to see that the practices which led to some unfair payouts have already changed. This means thousands of motorists are getting back what their car was really worth, in cases where cars have been stolen or written off. If you’re owed compensation, your insurer will contact you, or will have already done so - there’s nothing you need to do.”

UK aims to boost exports to Brazil and Argentina

11:00 , Karl Matchett

The UK government is intent on expanding the recent spate of trade deals with other nations, with the likes of India and the US already targeted.

Trade Minister Chris Bryant is heading to Argentina and Brazil to try and negotiate improved terms for deals in both directions, giving British firms better access to South Americas biggest economies.

A statement from the Department for Business and Trade read:

“As part of the Trade Strategy’s plan to focus on practical deals that deliver faster benefits for businesses, Minister Bryant will progress several targeted partnerships with Brazil including on customs, good regulatory practices and export credit.

“The agreements signed will make it easier and cheaper for British businesses to sell to South America’s biggest markets by working to eliminate unnecessary red tape and increasing digital trade which will benefit UK consumers.”

Vodafone pay £26m for Romania expansion deal

11:20 , Karl Matchett

Vodafone have struck a deal to buy Telekom Romania’s post-paid customer base in a departure from recent sales of European assets.

The company sold off their operations in Spain and Italy over the past 18 months, the latter for $8bn. The Romania deal is worth around £26m.

Margherita Della Valle, CEO, said the deal “supports our strategy of building strong positions in growing markets, which enables us to invest in the high-quality networks our customers rely on.”

Meanwhile, the telecommunications firm has confirmed Ruth McGill as the new Chief HR Officer of the group and a member of the Group Executive Committee, starting 1 January 2026.

Trump UK visit: The British business winners and losers after US £150 billion investment pledge

11:40 , PA

Donald Trump’s UK state visit coincided with an announcement that US firms will invest round £150 billion into the UK.

The trip comes amid a key period for global trade, after the US president’s tariff plans led to significant trade tensions earlier this year.

Firms in some sectors have announced fresh commitments to pump billions into the UK, in a potential boost for Chancellor Rachel Reeves.

However, some industries criticised a lack of trade deal support and tough investment conditions in the UK.

So, which sectors have been winners and losers this week?

The British business winners and losers after US £150bn investment pledge

Barclays analysts not ruling out interest rate cut in November

12:00 , Karl Matchett

On the back of yesterday’s interest rates decision to stick at 4% from the Bank of England, most analysts were suggesting that’s it for this year.

Some even say only one cut between now and the end of 2026 - but analysts at Barclays are not buying it.

“We continue to think that a November cut is possible, in fact, it remains our base case, although it is increasingly finely balanced and dependent on the data flow in the coming weeks,” read the research note.

“Deputy Governor Lombardelli said after the decision that November is not decided and will depend on the path of the economy and what is happening to underlying inflationary pressures. The committee retained language that policy is not on a "pre-set path" and will remain "responsive to the accumulation of evidence" which we interpret as signalling ongoing data dependence.”

Treasury 'alarm bells' as situation could get worse before Budget, says expert

12:20 , Karl Matchett

It’s not great reading for Rachel Reeves and co at the moment but it could get even worse.

Grim borrowing figures, rising unemployment and inflation all being high could see consumers and businesses alike act cautiously over the coming months - making it even tougher to fix the problems, says one industry expert.

“Alarm bells are ringing in the Treasury after new figures showed public finances to be in a worse state than expected. That’s saying something, given expectations were already rock bottom, said AJ Bell investment director Russ Mould.

“UK government borrowing in August hit the highest level for the month in five years. Borrowing for the first five months of the financial year now stands at £83.8 billion, a rise of £16.2 billion year-on-year.

“It makes Chancellor Rachel Reeves’ job of plugging the black hole even harder and raises the likelihood of a swathe of uncomfortable decisions at November’s Budget. A drop in the pound and a spike in gilt yields was the financial markets’ way of saying that the latest government borrowing figures make for grim reading.

“The government continues to say it will get its finances under control, but the clock is ticking to convince the nation that the plan is the right one.

“Businesses are already showing signs of nervousness around potential tax changes at the Budget, and that’s causing many to delay investment or halt recruitment activity.

“The UK economy isn’t exactly thriving at present and there is a real risk that activity weakens in the run-up to the big day on 26 November.”

Octopus to spin off software arm Kraken for potential $10bn listing

12:40 , Karl Matchett

Octopus Energy is to spin off software arm Kraken, say reports, in a bid to allow the tech side to continue its rapid expansion.

Kraken could look to go public within two years, says the FT, in either London or New York.

A potential valuation of $10bn has been mentioned.

The tech company licences its software to other firms like Eon and EDF.

The pension problem we can’t keep ignoring

13:00 , Karl Matchett

In a first written piece for The Independent, Gabriel Nussbaum - also known as That Money Guy on Instagram, TikTok and the like - has delved into the world of pensions to offer a wake-up call why many of us need to do more...now.

You simply can’t afford to think pensions are boring. I’m 28, and I currently have £67,298.35 in my pension.

I don’t share that to brag, I share it to be transparent. Because we don’t talk about money in this country enough, and it’s time to change that. Especially since pensions will likely decide whether we can ever stop working.

Let me clarify something else. Pensions are boring. Another line on your payslip taking money out of your take-home pay. Something for “future you” to worry about. At least, that’s what I used to think. But here’s the truth…

Read more on pensions being your money superpowers:

The pension problem we can’t keep ignoring

Tax rises ‘inevitable’, experts warn after borrowing soars in another blow for Rachel Reeves

13:30 , Karl Matchett

Chancellor Rachel Reeves has suffered another blow after unexpectedly high borrowing figures led to warnings tax rises in November’s Budget now look "inevitable".

The highest August borrowing for five years outstripped predictions at £18bn, £3.5bn more than in August 2024, according to the Office for National Statistics (ONS).

Soaring interest on government debt also wiped out any boost from Ms Reeves’ controversial National Insurance tax raid unveiled at last year’s Budget, according to the ONS.

Martin Beck, chief economist at research and policy firm WPI Strategy, said: "The £10 billion buffer the chancellor pencilled in against her key fiscal rule in March has almost certainly gone. That means tax rises in November look inevitable."

More here:

Tax rises ‘inevitable’, experts warn after borrowing soars in another blow for Reeves

Record number of people took out debt relief orders in August

14:04 , Karl Matchett

A record number of people turned to debt relief orders (DROs) in August to ease their financial struggles, Insolvency Service figures show.

In total, the number of people going financially insolvent across England and Wales jumped by 16% in August compared with the same month a year earlier, according to Insolvency Service figures.

Some 11,348 people entered insolvency in England and Wales in August, which was also 7% higher than the total in July this year.

Record number of people took out debt relief orders in August

US stocks to rise as Trump call with China starts

14:30 , Karl Matchett

President Trump has a call with China’s Xi Jinping today, with TikTok and wider trade business on the agenda.

Optimism is high that a positive outcome is on the way and that seems to have fed into investments today, with US stocks set to go up after trading starts shortly.

Both the Nasdaq and S&P 500 are projected to rise around 0.2 per cent.

Starbucks staff to sue coffee shop over its ‘tone deaf’ new dress code

15:00 , Karl Matchett

Starbucks is facing legal challenges in three US states after workers initiated action over a new dress code, claiming that the coffee giant broke the law by not reimbursing them for new clothing required by the updated policy.

Backed by the union organising Starbucks staff, workers have filed class-action lawsuits in state courts in Illinois and Colorado. Additionally, complaints have been lodged with California’s Labour and Workforce Development Agency. Should the agency opt not to pursue penalties against Starbucks, the employees intend to launch a class-action lawsuit in California, according to the filings.

Starbucks staff are suing the coffee shop over its ‘tone deaf’ new dress code