Closing post
Time to wrap up….
Britain’s blue-chip stock index has risen through the 9,000-point mark to touch a new high today, before falling back.
The FTSE 100 share index hit 9,016.98 points in early trading on Tuesday, taking its gains during 2025 to more than 10%.
Analysts said the London stock market had benefited from a range of factors this year, including a move by some investors to diversify away from US shares because of concerns about Donald Trump’s economic policies.
The US president’s trade war has also helped UK stocks, as Britain is one of the few countries to have reached a trade deal guaranteeing lower tariffs
Inflation shot up in June as the impacts of Donald Trump’s tariffs slowly started to show in US prices.
Business leaders have said for months that the high, volatile rates of Trump’s tariffs will force companies to raise consumer prices. Prices remained stable in the spring, particularly as many of Trump’s highest tariffs were paused; however, they started increasing in May and have continued to rise in June.
Annual inflation rose to 2.7% in June, up from 2.4% in May, according to the Consumer Price Index (CPI), which tracks the prices of a basket of goods and services each month. Core CPI, which leaves out energy and food prices, ticked up slightly to 2.9%, compared with 2.8% in May.
The prices of appliances, furniture and toys, products typically manufactured outside the US, all rose. Food prices increased by 3%, with the price of beef rising by more than 2% over the month, coffee up 2.2% and citrus fruit prices rising 2.3%. While the price of eggs has been dropping over the last few months, a dozen eggs are still 27% more expensive than last year…
China’s economy grew more strongly than expected in the second quarter as it proved resilient in the face of Donald Trump’s trade war.
China’s gross domestic product (GDP) grew 5.2% in April to June compared with a year earlier, slowing from 5.4% in the first quarter, but just ahead of analysts’ expectations for a rise of 5.1%.
Rachel Reeves has unveiled a package of City changes meant to cut “unnecessary” red tape and encourage more financial risk-taking by companies and consumers in the hopes of spurring economic growth.
In a financial services strategy dubbed the Leeds Reforms, the chancellor outlined initiatives designed to boost the financial services sector, including plans to cut “unnecessary costs” related to accountability rules for senior bankers, and to launch an advertising campaign to get consumers investing cash savings in stocks.
Thames Water has said it could collapse into temporary nationalisation if emergency talks with creditors fail, as it slumped to a £1.6bn annual loss.
The loss for the 12 months to 31 March comes after a profit of £154m the previous year, even though revenues climbed by 8.7% to £2.7bn. It had net debt of £16.8bn, up from £15.2bn the year before.
Thames’ top management were also warned they could be held in contempt of Parliament if they continue to refuse to hand over board minutes related to the takeover approach from KKR, which collapsed last month.
Updated
FTSE 100 closes lower
The Footsie’s historic day has ended with a whimper, not a bang.
After breaching the tape on the 9,000-point mark in early trading, the FTSE 100 has slipped back during the day.
The index of blue-chip shares has just closed down almost 60 points, or 0.66%, at 8938 points, after the jump in US inflation dampened hopes of early interest rate cuts in America.
That’s lower than yesterday’s closing high of 8998 points, as well as (obviously) lower than the new intraday high of 9016.98 points set this morning.
But the mood in the City is still upbeat.
Here’s Neil Wilson, UK investor strategist at Saxo:
Overall, I’d say the FTSE has attraction from a value, income and defensive perspective given the volatility we have seen and changed macro backdrop and assumptions about US exceptionalism.
a) it’s offering some relative shelter with defensive names,
b) benefitting from flow dynamics as investors look beyond the US,
c) is enticing value-focused investors with relatively low multiples when growth is at a premium,
d) offers a good dividend income yield and
e) may be picking up a little juice from the government’s capital investment plans for defence/energy/houses. 10,000 here we come.
The US dollar has pushed higher since June’s inflation report was released.
The dollar index is now up almost 0.5% against a basket of currencies, probably a sign that hopes of early US interest rates cuts have been hit by the jump in the CPI rate last month.
This has pushed the pound down by a third of a cent, to $1.339.
Stocks are now lower on Wall Street too, where the Dow Jones industrial average is down 248 points or 0.56% at 44,210.
Updated
Bank of England's Mann says inflation is still a challenge
Bank of England interest rate-setter Catherine Mann has said today that UK inflation pressures remained a challenge despite a fall in the pace of pay growth in recent months, Reuters reports.
Mann, usually one of the hawkish members of the Bank’s Monetary Policy Committee, told Business in Wales:
“We have seen wage rates come down, so people are getting wage increases, but not at the rate in the past.
“And we’ve seen price inflation come down quite a bit, but it’s still a challenge because it’s still well above our 2% objective.”
We get the next UK inflation report tomorrow morning, followed by new labour market statistics on Thursday….
Trump: Fed should cut Rates by 3 Points
Donald Trump has repeated his call for sharp cuts to US interest rates.
Posting on his Truth Social account, he says:
Fed should cut Rates by 3 Points. Very Low Inflation. One Trillion Dollars a year would be saved!!!
A three percentage point cut to the Fed Funds rate, as Trump calls for, would lower the Fed’s target rate from 4.25%-4.5% to 1.25%-1.5%.
That would be a truly dramatic move for a central bank that likes to move in quarter-point or half-point change (when it moves at all!).
For example, in the run-up to the financial crisis the Fed lowered the Federal Funds rate from 4.5% at the end of 2007 to 2% at the start of September 2008. Following the collapse of Lehman Brothers, it accelerated its cuts, and brought the target rate down to 0 to 25 basis points by the end of the year.
Digging into the US inflation report, there are some indications that imported goods prices jumped in June.
In food, for example, the cost of ‘oranges including tangerines’ rose by 4.7% in June. Instant coffee prices were up 5.1% in the month
And among goods, nonelectric cookware and tableware prices rose 4.0% in June, with Audio equipment 2.9% more expensive.
You can see the jump in inflation in June.
— Heather Long (@byHeatherLong) July 15, 2025
Some key imports are starting to spike in price.
Price hikes in June alone:
Durable goods +0.5%
Linens +5.9%
Oranges +4.7%
Olives +4.4%
Cookware +4%
Audio equipment +2.9%
Major appliances +2.4%
Coffee +2.2%
Sports equipment +1.8%… pic.twitter.com/PHZCXwAD4z
Wall Street opens higher after inflation report
Ding ding! The opening bell of Wall Street has been rung, and shares are moving higher despite today’s rise in US inflation.
The S&P 500 share index has risen by 32 points, or 0.5% to 6,300 at the start of trading, although the narrower Dow Jones industrial average is only 0.02% higher.
The tech-focused Nasdaq index is up almost 1%.
Investors seem relieved that core inflation rose by less than expected in June (although the annual rate of core CPI did rise, to 2.9% from 2.8%.
Scott Helfstein, Global X‘s head of investment strategy, says:
This is kind of a perfect inflation report for the Fed, just hot enough to justify their policy of holding rates steady, but not reflective of runaway prices. The question now is whether the labor market holds up throughout summer, and it probably will.
If we see strong corporate earnings for the second quarter, growth forecasts for the US may be revised higher.
Updated
The financial markets are treating the US inflation report as ‘benign’, reports Kathleen Brooks, research director at XTB:
A small recalibration lower in expectations of a Fed rate cut in September, there is now a 59% chance; down from 60%.
— kathleen brooks (@KATHLEENBROOKS) July 15, 2025
Bond yields are lower, as the us is following European bond yields lower.
The market is taking this CPI report as benign, no hindrance to rate cuts. @XTBUK
The dollar index spiked to an intra day high on the back of the inflation data, but has immediately backed away.
— kathleen brooks (@KATHLEENBROOKS) July 15, 2025
Us stock index futures are still pointing to a higher open.
In the pre market, Nvidia is surging while JPMorgan is lower, and Citigroup is modestly higher. @XTBUK
Today’s June US inflation report revealed early signs of tariff-led price increases, though not yet large enough to meaningfully move the headline, reports Atakan Bakiskan, US economist at Berenberg:
With more tariff damage ahead, the Fed will certainly not feel content with today’s report, especially as core goods excluding used cars rose 0.3% mom in June -- the highest monthly increase since March 2023.
Thames Water confirms they tried to get off fines
Thames Water’s CEO has confirmed the company appealed to the government to let the company off up to £1bn in fines to avoid special administration.
This was previously revealed by my colleagues Anna Isaac and John Collingridge, but now it has been confirmed by the CEO.
Chris Weston told the Efra committee this morning that ministers and the regulators need to have a “recognition of the reality of the situation”, namely that they can’t both pay fines for polluting waterways with sewage and financially turn around the company.
He added:
We have talked to Ofwat about it, we have talked to the Environment Agency about it and we have talked to Defra about it.
Chair of Thames Sir Adrian Montague added that they had been talking to the Treasury about the issue. The Treasury is reportedly pressuring Defra to avoid special administration because of an upfront cost of over £3bn.
Weston claimed that this does not mean Thames is asking for “special circumstances” even though other companies are expected to pay their environmental fines.
He added:
I don’t think we are pleading special circumstances just for Thames. I think there are shortcomings in the regulatory regime, and part of what the regulatory regime needs is a structure which allows companies like Thames to turn themselves around for the benefit of customers and the environment.
We are suggesting a reset because there isn’t really an alternative.
He said that if the fines are upheld that Thames will probably collapse and go into SAR:
We are trying to find a pragmatic solution, if we don’t find a solution to this, we will be looking at going into SAR. If any creditor came to Thames they would have to be prepared to accept those penalties and fines, they would have to be prepared to do that, I would imagine they would find that a disincentive to invest in and support Thames, and they wouldn’t do it.
Updated
Britons should worry about the rising level of government debt, according to the Treasury’s independent watchdog, which warned that it may be difficult to cope with the next crisis without significant reforms to the public finances.
Richard Hughes, the boss of the Office for Budget Responsibility, said there were three reasons why a government is financially vulnerable and the UK fails each test.
The exposure to shocks is high, the ability to cut spending or raise taxes to provide a buffer is limited, and borrowing is becoming more difficult as traditional lenders, particularly UK pension funds, continue to decline, Hughes explains, saying:
In all three of those areas there are reasons for the UK to worry.
We are a country that is very exposed to shocks and has been particularly hard hit by the last three shocks the world has faced - the finacial crisis, Covid and then the energy price shock.
We have already raised taxes quite a bit, And the size of the state is near a post-war high.
And as we highlight in our fiscal risks report, there are concerns around the demand for UK debt and how that demand is going to wane over time, raising the cost of financing it.
Updated
IFS: Labour fails to make radical case for tax and spending reforms
Back in the UK, new Institute for Fiscal Studies boss Helen Miller made one of her first public appearances in the job this morning, at the Institute for Government, in a discussion about whether Labour is (still?) a mission-driven government.
It would be an understatement to say that Rachel Reeves’s team at the Treasury were not fans of her outspoken predecessor, Paul Johnson. But there was little sign from this event that Miller is going to give the chancellor an easier ride.
She argued that Labour had failed to make the case for radical reform of tax and spend, either in the general election campaign or afterwards.
“So they come into power, they have this ‘bring out the bodies’ event where you say, “Oh, we found a black hole”. Then you have a kind of one and done budget: “We found a black hole, we fixed a black hole”...That was always far too narrow,” Miller argued, adding:
“It ignored the massive set of risks that were coming down the road. It didn’t really make room, not just for more spending potentially, it didn’t make room for that broader debate about, ‘we need to reform things, we need to be bold’”.
Miller also suggested it wasn’t clear from Labour’s actions since that it is really prioritising its first mission, of growth - despite Reeves’s rhetoric.
“I think we should be throwing the kitchen sink at it. It doesn’t feel to me like this is driving through everything, and everyone’s trying to work out, ‘how do we get that growth?’ and everyone’s pushing in the same direction. It feels like, ‘we’re trying some things on the plus side, we’re doing some things on the negative side’ It really doesn’t feel like a driving force.”
Miller, who is a tax expert, repeatedly made the case for big bang tax reforms - including replacing vehicle excise duty with road charging and reforming stamp duty on housing transactions, for example. We can expect to hear a lot more about issues like these in the run-up to the crunch autumn budget.
Neil Birrell, chief investment officer at Premier Miton Investors, reckons today’s inflation report could help clear the way for a cut in US interest rates in September:
There have been a lot of hopes pinned on US CPI coming in lower than expected. June’s data was much as expected, but core inflation undershot, just, for the fifth month on the trot.
Obviously, the Fed will be looking at this, but they will want to see the PCE behaving itself before moving policy. However, there is no doubt inflation is OK for now and a September cut in rates is likely.
David Rees, head of global economics at Schroders, has spotted some signs in today’s inflation report that the Trump trade war is pushing prices in US shops:
“Tariffs loomed large over today’s rise in US inflation, helped up in part by the cost of core goods. For example, household furnishing rose by 1% month-on-month in June. Elsewhere, goods prices were relatively contained, but heightened challenges could be on the horizon if all the Trump administration’s tariff threats are enacted on 1st August.
“If they were to happen, we estimate the effective US import tariff rate could jump to 24%, potentially adding more than 1% to inflation - on top of our CPI forecast for average inflation of 3.1% through to the end of 2026 - and cutting GDP by more than 0.5%.
“While markets appear to assume President Trump will soften his stance, the risk of stagflation in the US is real - especially if rising goods and services prices feed through to a tight labour market.”
Egg prices falling, but much higher than a year ago
Donald Trump will be pleased that today’s US inflation report shows a fall in egg prices.
Earlier this year, the US president insisted that egg prices are tumbling. And we can now see that in June, egg prices fell by 7.4% month-on-month.
However, a rise in beef prices means that overall index for meats, poultry, fish, and eggs only dropped by 0.1% in June.
But on an annual basis, the egg picture is less pleasing.
The meats, poultry, fish, and eggs index has risen by 5.6% over the last 12 months, driven by a 27.3% increase in egg prices over the year. Still, that’s better than in February when eggs cost 59% more than a year ago.
US inflation rises to 2.7%
Newsflash: Consumer price inflation across the United States has accelerated, rather undermining Donald Trump’s claim that there is no inflation in the US.
The US CPI index increased by 2.7% in the year to June, new data from the US Bureau of Labor Statistics shows. That’s up from 2.4% in May.
Food prices rose by 3.0% over the year, while energy prices were 0.8% lower than a year ago.
Core inflation, which strips out food and energy, rose by 2.9% over the last 12 months, up from 2.8% in the year to May, but lower than expected.
The BLS says:
Indexes that increased over the month include household furnishings and operations, medical care, recreation, apparel, and personal care. The indexes for used cars and trucks, new vehicles, and airline fares were among the major indexes that decreased in June.
A whiff of tariff-related inflation? US consumer price inflation at the headline level picked up more than expected, rising 2.7% year over year, the highest since Feb. Core CPI's annual pace also increased, rising to 2.9%. pic.twitter.com/gDhwGwTWAf
— James Picerno (@jpicerno) July 15, 2025
Updated
Spotlight on Thames Water bonuses
There has been a big debate at parliament today over whether or not it is appropriate, or legal, for Thames Water to be paying bonuses worth 300% of salary to 21 senior executives, my colleague Helena Horton reports.
During the select committee hearing, Ian Pearson, a former Labour minister who now chairs the remuneration committee at Thames, gave a novel explanation. He said:
“We all have husbands and wives back at home who ask questions, why don’t you go and work for somebody else that will pay you more”.
The bonuses appear to have been constructed to get around environment secretary Steve Reed’s water (special measures) act. This is because the act bans specifically performance related bonuses to the CEO and CFO of a company. These are retention payments, paid regardless of employee performance.
Thames says it can still pay these out, though they are currently on pause. The first tranche was paid in April of this year. Pearson explained:
“We thought it was best to pause the plan and reflect on guidance that was coming from Ofwat. No decision has been made on restarting. I think we should always reserve the right to do things. What we are trying to do here is retain senior staff and we are trying to do so and reconcile that with the framework thats been set by Defra and by Ofwat. The payments that were made in April were to senior people in the organisation, they are not in any way related to Ofwat’s PRPP prohibition bill or to the water (special measures) act. “
They even believed that under the ban, they could pay CEO Chris Weston 300% of his salary in a retention payment.
Weston declined the bonus. He said:
“I decided that I wouldn’t participate. I was pleased the board expressed the confidence in me that they would offer it to me, but I felt that would be too much of a distraction and my number one priority was to address the stability in my team.”
Sir Adrian Montague, the chair of Thames, said that they disagree with Reed on whether the bonuses can be paid:
“We believed and continue to believe that the special measures act does not affect these bonuses. We don’t want to rest on that position, the secretary of state has made his views quite clear. I hope the secretary of state realises the interest we have in retaining our staff. We have not had a conversation with the department or the SoS about our dilemma. We need to retain these staff to see this restructuring through.”
The Trump White House has given America’s top central banker another nudge to consider his future.
US treasury secretary Scott Bessent said a “formal process” is already starting to identify a potential successor to the Federal Reserve chairman Jerome Powell.
Bessent told Bloomberg TV:
Well, look, there’s a formal process that’s already starting.
There are a lot of great candidates, and we’ll see how rapidly it progresses. It’s President Trump’s decision, and it will move at his speed.
Powell’s term as Fed chair expires next May, but there have been repeated chatter that Trump might try to fire him, and install a Fed chair more likely to cut interest rates.
Technically, Powell could remain on the Fed board until his tenure as a governor expires in January 2028.
But Bessent (who’s been reported to be a potential candidate!) also argued it would be “confusing” for Powell to remain at the Fed after his term as chair ends.
Traditionally, the Fed chair also steps down as a governor, and there’s been a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination.
And I can tell you, I think it’d be very confusing for the market for a former Fed chair to stay on.
Updated
JP Morgan: significant risks persist
Just in: the boss of banking giant JP Morgan has warned that trade war uncertainty is looming over the US economy, after reporting a drop in profits.
JP Morgan has kicked off the US bank reporting season by revealing a 17% drop in net income in April-June, to $15bn. Net revenue fell 10% to $45.7bn.
However, these measures are distorted because last year, JP Morgan gained $8bn through an exchange of shares in credit card giant Visa.
Income at its consumer & community banking arm was up 23%, while commercial & investment bank income rose 13%.
Dimon says:
The US economy remained resilient in the quarter. The finalization of tax reform and potential deregulation are positive for the economic outlook, however, significant risks persist – including from tariffs and trade uncertainty, worsening geopolitical conditions, high fiscal deficits and elevated asset prices.
As always, we hope for the best but prepare the Firm for a wide range of scenarios.
Updated
Thames Water could be in contempt of Parliament if KKR minutes aren't handed over
Thames Water’s top management have been warned they could be held in contempt of parliament if they continue to refuse to hand over board minutes related to their proposed rescue deal with KKR, which collapsed last month.
The Efra (environment, food and rural affairs) committee want to know why Thames plumped for KKR as its preferred partner, only to see the US private equity giant walk away in June, and also want to know why the KKR approach failed.
Efra committee chair Alistair Carmichael tells Thames at this morning’s hearing:
Can I just be quite clear about this?
In the event that we invoke the formal powers that parliament has given us, not to provide these minutes will be a contempt of parliament. Is that understood?
Thames chair Sir Adrian Montague says the company “understand and respect the committee’s powers”, before arguing that it is inappropriate at this juncture to give these minutes, for several reasons.
First, they contain confidential information concerning all the bidders; Thames are subject to confidentiality undertakings with regard to information.
Second, he says, the company is subjected to market abuse regulations which control the dissemination of material, non-public information.
The most important point, Montague argues, is that discussions over Thames’s future are at a “a very sensitive stage”.
Right now, it will be “really difficult to really counterproductive” to release these documents, he insists.
Montague also describes KKR’s bid as’ ‘exceptional’, adding that they didn’t give many reasons when they withdrew, but that KKR said they saw no financial or operational reason why they should not have been able to continue.
Updated
The government’s battle against red tape means it is proposing changes to rules brought in after the financial crisis to hold senior bankers to account.
The Treasury says it is consulting on reforms to the Senior Managers & Certification Regime, with the aim of “streamlining the regime to support growth and competitiveness”.
The SM&CR was brought in to hold senior managers accountable, following the disastrous decisions that led to the worst financial crisis since 1929, almost 20 years ago.
Today, though, the UK’s financial watchdogs – the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) – want to change it to drive growth in financial services.
The proposals include:
Give firms more time and flexibility to submit applications for approving new senior managers when there has been an unexpected or temporary change.
Strip out duplication where the same individuals are certified for separate functions, which would reduce the number of certification roles by 15%.
Provide guidance on how to streamline the annual checks firms need to undertake to certify individuals are ‘fit and proper’ to do their role.
Allow more time for firms to report updates to senior manager responsibilities.
Increase how long criminal record checks for senior manager applications are valid for, prior to application submission.
Help firms to better understand the definition of certain SMF roles.
Give firms more time to update the directory, which lists certified staff.
This streamlining may sound sensible. But, those who lived through the financial crisis of 2007-08 could be concerned that regulators are backsliding.
Indeed, the Treasury has launched a consultation about potentially developing a more proportionate replacement for the Certification Regime; significantly reducing the number of roles requiring regulatory pre-approval; and further streamlining the assessment process.
Sam Woods, chief executive of the PRA and deputy governor for prudential regulation at the Bank of England, suggests the new rules will still ensure ‘high standards’, saying:
High standards of accountability are important for maintaining confidence in our financial services industry. Today’s changes will reduce the burden of the Senior Managers and Certification Regime without diluting accountability, and we will work with the government on further reforms.
Updated
Alistair Carmichael then asks Thames about its lamentable record on pollution, with incidents up in the last year (see 7.59am post).
Carmichael points out that this morning’s annual report indicates that there was too much rain leading to overflows, shortly before Thames announced hose pipe bans!
Thames Water CEO Chris Weston says “I’m sorry about that”, before insisting that the weather is a reason, not an excuse.
He says:
Last winter, before we came into this spring, we had the second wettest winter on record. There were some months like last September, where the rainfall was more than double the normal monthly rainfall, and our system, I’m afraid, was never intended to deal with that.
We are taking huge steps to improve our position around pollutions. We are cleaning the network more than we ever have, and we are investing more than we ever have in our sewage treatment works, but it is going to take a while.
Weston then suggess that turning around and transforming Thames “is going to take Between five and 10 years. Maybe a bit more.”
This morning, he said this task could take at least a decade.
Thames Water chair apologises after being recalled before MPs
Over in parliament, the chair of Thames Water has apologised to MPs after the company was recalled before the Environment, Food and Rural Affairs Committee.
Sir Adrian Montague kicked off this morning’s session in a penitent manner, telling committee chair Alistair Carmichael MP:
I’m making an apology. It’s rare, as you said yourself, for water companies or any company to be recalled to the committee. We regret that we have made that necessary.
We have tried to be as forthcoming as we can with our disclosures. We will no doubt go into some of the reasons behind the actions we’ve taken.
But I just wanted to say before we start, honestly, you’re all busy people. I’m sorry that we are taking up your time again.
Carmichael had begun the session by telling Montague, CEO Chris Weston and non-executive director Ian Pearson, that Thames had been recalled after a ‘quite extraordinary session’ back in May.
Carmichael says the recall was triggered by Montague telling the committee he had “mis-spoken” in the first hearing, which Carmichael says came to light after an inquiry from the Guardian.
[Reminder: Montague told the committee that large bonuses for senior bosses which were to be paid from an emergency £3bn loan were insisted upon by creditors. We then reported that sources and court documents suggest the bonuses were agreed to by the creditors but not necessarily proposed by them.]
Carmichael says Thames have since provided “significant amounts of information”, which he thinks could have been handed over earlier if the company was committed to transparency.
He then accuses Thames of “quite a bit of gameplaying”, saying the committee only recieved a list of its senior creditors at 5.20pm yesterday, and pointing out that its annual report has been filed today, the last possible day.
Updated
The Treasury also point to the Bank of England’s decision, last week, to relax mortgage lending rules.
They say:
First-time buyers will be supported to get on the housing ladder, with the Bank of England allowing more lending at over 4.5 times a buyer’s income – which could help 36,000 more people buy a home over its first year and are helping Nationwide support an additional 10,000 first-time buyers by lowering income thresholds for its popular ‘Helping Hand’ mortgage from tomorrow.
Simplified mortgage lending rules being considered by the Financial Conduct Authority will also make it easier for existing borrowers to remortgage, while the introduction of a permanent government-backed Mortgage Guarantee Scheme will secure the availability of high loan-to-value mortgage products in times of economic uncertainty.
The new guidelines announced by the Bank of England last week mean that individual banks and building societies can offer more high loan-to-income (LTI) mortgages, which are equal to, or worth more than, 4.5 times a borrower’s annual earnings.
Rachel Reeves is also pledging to cut red tape, in a push to attract investment and drive growth.
Under the ‘Leeds’ reforms just announced, “unnecessary financial red tape” will be “drastically cut”, the Treasury says.
They add:
A new concierge service within the Office for Investment will harness UK networks globally to actively court international financial services companies, creating a one-stop-shop to promote the UK and provide tailored support to help businesses plan where to invest based on their needs – better harnessing specialist clusters across the country from asset management in Edinburgh, to Fintech in Leeds and Cardiff, and insurance in Norwich and Norfolk.
Government to consider reforms to Isas
A key part of the new ‘Leeds’ financial services reforms is a push to encourage people to invest more.
The Treasury says the UK has the lowest level of retail investment among G7 countries – that deprives businsses of capital, and means savers may miss out on returns.
So, there is going to be a new ‘industry-led ad campaign’ to explain the benefits of investing to the public (which feels slightly odd, as investment firms do this anyway).
From next April, the Financial Conduct Authority will allow banks to alert customers about specific investment opportunities to consider shifting money from a low-return current accounts to higher-performing stocks and shares investments.
There’s also going to be a review of risk warnings on investment products, “to make sure they help people to accurately judge risk levels”.
There has been speculation in recent weeks that Rachel Reeves could cut the amount of cash people could save in an Isa (a tax-free investment and savings account), to encourage people to put money into stocks and shares instead and boost the economy. That idea has been paused, though, after a backlash from the industry.
Instead, the government says it will “continue to consider reforms to Isas and savings” to achieve the right balance between cash savings and investment.
But as a first step, saves will be allowed to hold Long Term Asset Funds in Stocks & Shares Isas next year. This, they say, will help people to invest in assets such as innovative businesses and infrastructure – which could drive growth, and “can also deliver better returns”.
There’s an investing mantra that people should only put money into the markets which they’re prepared to risk.
The Treasury, though, is hailing the potential benefits of investing, saying:
Stocks and shares have performed significantly better than cash savings accounts in recent decades. According to some industry estimates, more than 29 million adults across the UK have cash sitting in a low-interest rate account offering around 1% - while the average return for stocks and shares over the last 10 years is around 9%. If those savers invested £2000 today, they could have £12,000 in 20 years’ time. This compares to £2,700 if they held this money in a cash account offering 1.5% at the current interest rate, making them over £9,000 better off.
This is a timely point, with the FTSE 100 share index at its record high today…
Updated
Reeves presents 'Leeds reforms' for financial services
Over in Leeds, Chancellor Rachel Reeves is setting out “the biggest reforms to financial services for much more than a decade”.
Setting out the “Leeds reforms” in the West Yorkshire city, she says the government is aiming to “really invigorate our financial services sector”, and thus reinvigorate the whole economy.
PA Media report that Reeves told finance chiefs in Leeds:
We are fundamentally reforming the regulatory system, freeing up firms to take risks and to drive growth.
Second, we’re providing certainty for banks operating in the UK, and ensuring that UK banks have the ability to compete internationally and drive economic growth.
Third, we’re doubling down on making the UK an innovation capital and the place of choice for fintechs to start up, to scale up and to list in the UK.
Fourth, we’re seizing opportunities in areas where we are already world leading, including asset management, sustainable finance and specialty insurance.
And fifth, we are delivering prosperity by increasing the firepower of our capital markets and boosting retail investment.
Reeves added that finance firms need to use these reforms to help the economy:
The measures today, the Leeds reforms, do represent the widest set of reforms to financial services for more than a decade.
We now need to work together to bring these to life, to make sure – whether it is more first-time buyers getting access to mortgages, more businesses getting access to capital to start up, to scale up, and then ultimately to list in the UK – that is now our job.
We’re giving you the tools we now need to work together to achieve that in reality.
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Compensation rates cut for financial firms who harm consumers
Adding to the raft of regulatory announcements being made on Mansion House day, the Financial Ombudsman Services is effectively slashing costs for banks and financial firms which are deemed to have harmed consumers.
The changes relate to the interest rate usually applied to the compensation owed to consumers, with the FOS saying it was “revising the rate to better reflect market conditions”.
At the moment, the rate is 8%, while the new rate will be +1% (that is, one percentage point) above the Bank of England’s base rate - which is currently 4.25%.
The FOS said the previous rate was due for reform, given it remained “unchanged for nearly 25 years despite significant shifts in the economic landscape and interest rate environment.”
Given that the last time the BoE base rate was 7% was the late 1990s, we’re unlikely to get back to current levels anytime soon under the new rules - meaning this is a significant win for the City and aggrieved banks who believe the FOS often goes too far in consumers’ favour and doesn’t make consistent rulings. Chancellor Rachel Reeves announced in her last Mansion House speech in November that she was going to reform the FOS
The changes will come into force from 1 January 2026.
Reminder: Reeves will address Mansion House tonight.
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The rise in the FTSE 100 this year will be a boost to those who invest in London-listed companies through their pension or ISAs.
But it doesn’t tell us much about the state of the UK economy.
Most of the index’s largest members are multinationals, such as pharmaceuticals firm AstraZeneca, HSBC bank, energy producer Shell and consumer goods maker Unilever.
Estimates suggest around 75% of the aggregate earnings of Footsie companies are made in foreign currencies, primarily the US dollar.
Credit data company Experian is leading the FTSE 100 risers this morning, while housebuilders’ shares are sliding.
Experian is up almost 5% in early trading, after cheering traders by reporting 8% organic revenue growth in the first quarter of the financial year.
But housebuilder Barratt Redrow is at the other end of the leaderboard, down 8%, after reporting that home completions in the year to 29 June were “slightly below” its guided range.
Barratt Redrow blamed “the impact of fewer international and investor completions than expected in our London businesses”.
It also reported it took charges totalling £98m to address fire safety issues at several properties – a large development in London, and four buildings in the south.
In total, it recognised “additional legacy property liabilities” of £248m for the last year, from the push to make buildings safer following the Grenfell Tower disaster.
Chris Beauchamp, chief market analyst at IG, says:
“Barratt Redrow shares have fallen out of bed this morning after it emerged it would have to pay up for remedial works on some projects.
The news has overshadowed a generally positive update, with shareholders evidently worried that other costs will emerge in the months to come. Barratt Redrow’s flat share price over a decade reflects not just policy headwinds but the company’s own failure to adapt. It’s been slow to reduce London exposure, late on cost control, and is now burdened with merger complexity and legacy liabilities.”
Bank of England eases rules for challenger banks
The Bank of England is easing rules for challenger banks, in a move meant to give a leg-up to mid-size lenders like Metro Bank and Starling.
One of the biggest changes involves changing rules around so-called MREL - or “Minimum Requirement for own funds and Eligible Liabilities”- which is one of the financial safety nets introduced in the wake of the financial crisis and came into force in 2016.
The Bank is raising the threshold at which smaller banks have to hold emergency funding that would ensure they can wind down without taxpayer support if they fail.
It means that, going forward, banks will only become subject to that emergency funding once their assets total £25bn-£40bn, compared to current thresholds which start from £15bn-£25bn. (It’s within that range that the BoE decides how to apply the MREL requirements, and which would be most appropriate for the bank in question)
MREL, which is made up of a mix of loss-absorbing debt and equity, will now be reviewed and thresholds updated, every three years starting in 2028, to reflect wider economic growth.
The Bank’s Prudential Regulation Authority has also announced “prospective plans” that would “make it easier for mid-sized banks to compete in the mortgage market.
There are few details so far, but the PRA said it will publish a discussion paper this summer that would give mid-sized lenders the ability to “adjust some barriers” to gaining permission from regulators to build their models that measure the risk of residential mortgages on their books (known as Internal Ratings Based Models).
China's GDP growth slows, but beats forecasts
The financila markets have also been cheered by the news today that China’s economy grew faster than expected in the second quarter of this year.
The world’s second-largest economy grew by 5.2% in the April-June quarter compared with a year earlier, beating forecasts of a 5.1% rise.
That’s still a slowdown from the 5.4% annual growth recorded in the first quarter, but means Beijing is still on track to hit its GDP target for 2025 of “around 5%”.
Activity appears to have been lifted by a rush to beat new US tariffs on Chinese goods.
“China achieved growth above the official target of 5% in Q2 partly because of front loading of exports,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, who added:
“The above target growth in Q1 and Q2 gives the government room to tolerate some slowdown in the second half of the year.”
A 6.8% rise in industrial production in June also boosted China’s GDP in Q2.
Lynn Song, chief economist for Greater China at ING, explains:
The biggest beat in June monthly data was in the value added of industry, which surprisingly bounced back to a three-month high of 6.8% YoY, up from 5.8% in May, bucking expectations for a further slowdown.
June industrial production benefited from a pickup of manufacturing (7.4%), in particular hi-tech manufacturing (9.7%), which has been an outperformer amid China’s transition up the value-added ladder.
RBC Brewin Dolphin: why the FTSE 100 has reached 9,000 points
John Moore, wealth manager at RBC Brewin Dolphin, says there are several reasons behind the FTSE 100’s ascent to 9,000 points today.
“The FTSE 100 has been driven to the 9,000-point milestone by several factors. Firstly, while the index’s composition had been a brake on its progress compared to other markets, now it is providing a tailwind, with strong earnings momentum in the banking and defence sectors, in particular, supported by the likes of some of the larger operators in other industries such as Next, Tesco, and National Grid.
“Currency has also played a role, though its impact is likely to fluctuate over time. If UK earnings grow by, say, 7-8%, but the pound moves 2-4% relative to the dollar, then you can meet or exceed what you might reasonably expect from the US market with the added benefit of sectoral and stylistic diversification in your investments.
“At the same time, the UK still offers robust income and optionality. That may have been out of favour in recent years, but the cash flow can be helpful in terms of managing a portfolio and providing a form of income beyond cash yields and bonds. And, while resource companies – which often produce a reasonable level of income – haven’t been working out recently, that could turn and provide some cyclical upside along with some indirect exposure to China.
“A number of UK companies have been taking self-help measures, with lots refining their portfolios and buying back shares. Oxford Instruments is a prime example, selling a non-core asset at a good price and then undertaking a £50 million share buyback programme. The likes of Hiscox and DCC have done similarly, and it is becoming more universal.
“Finally, the UK offers relative political stability compared to other parts of the world at present. While there may be tax increases to come, which was part of the reason for the sell-off of the pound in early June, the government has a clear mandate and tenure for the next few years. That compares favourably to other parts of Europe, even, where coalition governments are having a tough time.”
The FTSE 100 has also benefitted from the TACO trade this year – the bet that Trump always chickens out when his policies cause mayhem in the markets.
As this chart shows, shares in London slumped in early April after the US president announced high new tariffs on US trading partners.
On 7 April it hit a low of 7544 points, amid fears that Trump’s tariffs would chill global trade. But it then began to rally after the US president delayed those tariffs for three months, until early July (the deadline has since slipped again to 1 April).
UK defence companies have had a strong year on the stock market, helping to push the FTSE 100 to a record high this morning.
Defence contractor Babcock’s shares have risen by almost 120% this year, with BAE Systems up 65%, as Nato members have agreed to increase defence spending.
Engineering firm Rolls-Royce has gained 75%, as its turnaround plan has yielded results.
FTSE 100 hits 9,000 points for the first time ever
Newsflash: Britain’s blue-chip stock index has risen through the 9,000 point mark to hit a new record high.
The FTSE 100 share index hit 9,016.98 points at the start of trading in London, up around 0.2% today, taking its gains during 2025 to over 10%.
That’s a new intraday high for the “Footsie” (as it is known in City circles).
As covered in the introduction, the London stock market has benefitted from a range of factors this year, including a move by some investors to diversify away from the US stock market due to concerns over Donald Trump’s economic policies.
The Trump trade war has also helped UK stocks, as Britain is one of the few countries to have reached a trade deal guaranteeing lower tariffs.
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Thames has reported a rise in pollution incidents in the last year – they rose to 470 from 350 pollutions in the previous 12 months.
The company admits that reducing pollutions “continues to be a significant challenge for us”, and blames wet weather, saying:
Groundwater levels remained high and rainfall was above average, albeit not at the severity we saw in the previous year. Prolonged wet weather meant further rain had nowhere to go other than to inundate our ageing and fragile sewer network.
Reducing pollutions and discharges is something we’re really focused on, and we plan to invest record amounts in our waste network during the next five years.
Key event
CEO Chris Weston was paid just over £1m for running Thames last year, despite missing out on a bonus.
Today’s annual report shows Weston received total pay of £1.035m, including a salary of £850,000 plus pension benefits of £102,000. He did not receive any ‘variable’ pay, though.
The directors’ remuneration report explains:
As a result of pollution incidents performance, as well as the credit downgrading in 2024/25, which resulted in the Company no longer holding two investment grade ratings, the payment of a performance-related pay award to Chris Weston, for the 2024/25 financial year has been prohibited.
In June, the government announced that bonuses for 10 water company executives in England would be banned with immediate effect over serious sewage pollution.
Thames Water made a loss last year despite a rise in revenues, as customers were hit by higher bills.
The company has reported a £201m increase in underlying revenues, to £2.603bn.
Thames explains:
This increase was driven primarily by rises in our charges for water and wastewater services, per our allowed regulated revenue. Our 2024/25 allowed revenue reflects a Consumer Prices Index including Owner Occupiers’ Housing costs (CPIH) inflation rate of 4.2%, regulator-approved “K” factors of -4.9% for water and +4.1% for wastewater.
These increases were partially offset by historic wholesale and retail Outcome Delivery Incentive (ODI) penalties, which have a two-year lag flowing through into revenue
Thames Water CEO: turnaround will take at least a decade
Thames Water’s CEO has admitted it will take “at least a decade” to turn the company around.
Announcing today’s annual report, Chris Weston insists that Thames “made good progress in operational performance” in 2024-25, despite “the ongoing challenging financial situation”.
Weston adds:
“We invested a record £8.5 billion in infrastructure between 2020 and 2025. We enter the new regulatory period of 2025-2030 in a better place than we entered the 2020-25 period with leakage at its lowest ever level, down by 13.2% since 2020. A defining moment last year was the connection of the £4.5 billion Thames Tideway Tunnel to our London network supporting the reduction in sewage entering the tidal River Thames by 95%.
We recognise that our current gearing is too high and, to address this, we are progressing with our Senior Creditors’ plan to recapitalise the business which will see us return to a more stable financial foundation. This will come with a requirement to re-set the regulatory landscape and acknowledge it will take at least a decade to turn Thames around.”
Here’s a chart from Thames’s annual report, showing its financial performance in the year to 31 March 2025.
Thames Water reports £1.6bn loss
Newsflash: Troubled utility company Thames Water has reported a loss of over £1.6bn for last year, hours before its top executives are due to be grilled by MPs.
Thames’s annual report, just released, shows it made a total loss before tax of £1.647bn in the 2024/25 financial year, down from a £157m profit before tax in 2023/24.
Thames blames this whacking loss on a range of ‘exceptional expenditure’, including fines imposed by the regulator and costs associated with its restructuring plan as the company tried to avoid collapse.
Its annual report cites:
£1,271 million of expected credit loss provision recognised against the intercompany loan receivable from TWUL’s immediate parent company, Thames Water Utilities Holdings Limited. This balance is fully provided for, as it is not deemed recoverable
£285 million of exceptional financing costs, including consent fees related to our restructuring plan
£122 million of provisions raised for fines as a result of Ofwat investigations
£65 million of fees for advisors supporting in the equity raise process and balance sheet restructuring process
£33 million of turnaround and transformation expenditure
Even without all those costs, Thames made an underlying loss before tax of £6m, down from a profit of £204m in 2023/24.
Thames’s chairman, Sir Adrian Montague, says progress has been made towards putting Thames Water on a more stable platform.
We remain of the view that a market-led solution is in the best interests of our customers, UK taxpayers and the environment, and it is testament to our people that we’re moving forward with our recapitalisation and operational turnaround. It hasn’t been an easy path to get here, and we still face significant challenges, but we’re moving in the right direction.
Despite the huge scrutiny we are under, our teams have remained focused on the business priorities and the delivery of our essential services.
Montague will be quizzed by parliament’s EFRA Committee today, along with CEO Chris Weston and non-executive director Ian Pearson.
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Introduction: FTSE 100 could hit 9,000 points today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s stock market could enter uncharted territory today.
After touching a record high of 8,999 points last night, the FTSE 100 is on track to rise over the 9,000-point mark for the first time today.
2025 has already been a strong year for the Footsie, which has gained 10% since the start of this year.
Stocks in London have benefited from some investors looking to diversify their holdings beyond the US market, due to concerns over Donald Trump’s policymaking.
Growing confidence that Trump will back down and agree trade deals (the TACO trade) has also helped markets since the president’s tariff u-turn in April.
The FTSE 100 has also benefited from the recent weakness of the pound, which pushes up the value of multinational companies with overseas earnings. More nervous traders will have found its defensive stocks attractive.
The UK’s trade deal with the US has also bolstered confidence in British companies, at a time when Europe is being threatened with a 30% tariff from April.
AJ Bell investment analyst Dan Coatsworth says the UK has come out triumphant, explaining:
Not only has it got the framework of a (limited) trade deal in the bag, but its stock market has shown muscle in the wake of the EU worries. Its plethora of defensive industries have won over investors once again, with utilities, healthcare and grocers among the top risers on the FTSE 100.
“The UK stock market is the calming cup of tea and biscuit in an uncertain world. There’s nothing fancy on offer, just reliable names that do their job day in, day out. That’s an underrated characteristic and a reason why investors are finally warming to the UK stock market’s appeal in 2025.”
The futures market indicates the FTSE 100 will open higher, over that 9,000-point mark.
Against the European trend, FTSE 100 bounced yesterday on rate cut optimism, led also by a rally by some mining stocks. Wall Street trod water, thanks to Trump’s irrational tariff war - Opening calls FTSE circa +13 points at 9011, DJIA circa -23 points at 44436 at 5.36am
— David Buik (@truemagic68) July 15, 2025
The agenda
9.30am BST: Chancellor Rachel Reeves to announce ‘Leeds’ reforms of financial services
10am BST: The EFRA Committee will question Thames Water’s Sir Adrian Montague, Chris Weston, and Ian Pearson
10am BST: ZEW index of eurozone economic sentiment
10.15am BST: Officials from the Office for Budget Responsibility appear before the Treasury Committee
1.30pm BST: US inflation report for June
2:30pm BST: The Business and Trade Committee hold hearing with regulators, including FCA and Ofwat
Tonight: Mansion House speeches
