Global trade tensions and cyber attacks threaten UK economy, warns Bank of England; Black Friday spending ‘up 11%’ – business live | Business

Q: Have the risks of global fragmentation been increased by the election of a US president who advocates sharp increases in tariffs?

Governor Andrew Bailey says it’s very important to see what the Trump administration’s policies are, once it’s in office, rather than simply what the president-elect says.

But risks move based on what is expected to happen, and “we are seeing an increased risk of global fragmentation,” Bailey explains

It’s not right to pin that all on one event, though, he adds, saying:

We are living in a world that is, I’m afriad, more uncertain on a number of fronts with a number of very difficult events going on around the world.

My colleague Kalyeena Makortoff asks the Bank of England about Labour’s criticism of the reforms brought in after the 2008 financial crisis.

Q: Is the Bank concerned about the messaging from the government, encouraging risk-taking in the financial markets, and have you considered that when calculating the risk that banks and shadow banking could pose to financial stability?

Governor Andrew Bailey replies that this is a very important question.

The Bank is “obviously” very supportive of growth, he insists.

But, there isn’t a trade-off between growth and financial stability, he insists. That stability is the ‘bedrock’ for the economy.

He says the Bank could only switch its bank stress tests from every year, to every two years, because the UK now has financial stability. That decision cuts costs and work for banks, but is only possible because there’s more resilience within the sector.

The Bank of England’s new financial stability report also shows that around half of mortgages are expected to see payment increases by the third quarter of 2027.

That follows the sharp increases in interest rates – from record lows – in 2022 and 2023, before the Bank began cutting this year.

Despite this, though, the Bank says the share of households spending a high proportion of their income on mortgage payments is expected to remain low, adding:

While many UK households, including renters, are still facing pressures from the increased cost of living and higher interest rates, the share of households who are behind in paying their mortgages is low by historical standards.

It also warns that some companies will struggle with higher borrowing costs, saying:

Firms will come under more pressure if they have a large amount of existing market-based debt which is due to be replaced with new debt, or if a high proportion of income is being spent on repayments.

The Bank of England also warns this morning that geopolitical tensions also increase the risk of cyber-attacks.

In today’s financial stability report, the Bank says it “encourages efforts to build national and international resilience to these threats”.

It is concerned that higher geopolitical tensions also create an environment of heightened risk of cyber-attacks, which could coincide with, and amplify, other stresses.

The Bank points out that geopolitical risks and cyber-attacks remained the most frequently cited risks to the UK financial system by UK banks.

Earlier this week, UK minister Pat McFadden warned a Nato cybersecurity conference that Russia was “exceptionally aggressive and reckless in the cyber realm” and that Moscow “won’t think twice about targeting British businesses”.

Newsflash: Risks to the global economic outlook have increased since last summer, the Bank of England has warned.

In its latest Financial Stability Report, just released, the Bank warns that there are “material” global risks associated with geopolitical tensions, global fragmentation – including reduced co-operation on trade and international policy – and pressures on government debt levels.

The Bank says:

Uncertainty around, and risks to, the global economic outlook have increased. As the UK is an economy with a large financial sector and in which trade is significant, these risks are particularly relevant to UK financial stability.

The Bank singles out events in the Middle East, Russia’s continued war in Ukraine, and US-China relations as sources of material geopolitical risk.

And they cite the risks from disruption to global trade and supply chains. This could hit asset prices, including commodities, and fuel inflationary pressures, “putting upward pressure on interest rates and increasing challenges for households and businesses”.

Building society Nationwide has reported that spending is higher this morning than on last year’s Black Friday.

By 9am this morning, Nationwide customers had made 1.66 million transactions, it reports.

That’s 11% higher than on Black Friday 2023, and 21% higher than a typical Friday [today is, though, pay day for many Brits, which could also be a factor].

Mark Nalder, director of payment strategy at Nationwide Building Society, said:

“Black Friday 2023 was the busiest shopping day on record for Nationwide customers and this year’s Black Friday is shaping up to be even busier.

“The number of purchases made by 9am is already 11 per cent higher than the same period last year. Transactions are 21 per cent higher than a typical Friday as many people use the day to kick start their Christmas shopping.

“However, it’s important everyone shops safely and uses legitimate websites to ensure their bargain doesn’t result in them losing money to a scam.”

Phillip Inman

House sales are expected to accelerate over the next four months as buyers seek to benefit from tax breaks that are due to run out in April 2025, according to the online property website Zoopla.

The number of home sales increased across the UK this year, pushing up prices by 1.5% in the year to October. Next year prices are expected to rise by 2.5% and transactions will jump by 5%, the website said.

Inflation across the eurozone has risen back over the European Central Bank’s 2% target.

Consumer prices rose by 2.3% in the year to November, according to a flash estimate from statistics body Eurostat, up from 2% in October.

Services sector prices drove inflation up; they rose by 3.9% per year in November, while food, alcohol & tobacco prices rose by 2.8% and industrial goods prices were up 0.7%.

The deflation in energy eased – energy prices were down by 1.9% in the year, compared with a 4.6% fall in October.

This may not stop the European Central Bank cutting interest rates again next month, to support the struggling eurozone economy.

FX market analyst Kyle Chapman of Ballinger Group, says:

The uptick on the headline [rate] is purely the result of energy price volatility last year, so that is irrelevant for policy. Underneath, there is a lot for the ECB to like here.

Monthly services inflation is highly negative at -0.9%, and that has fed through to a lower yearly print of 3.9% and a downside surprise on core inflation. And with the growth picture looking soft, there is still no doubt that inflation will fall to 2% on a sustainable basis next year.

Back in the UK, more people have been applying for mortgages following the cuts to borrowing costs this year.

Around 68,300 mortgages for house purchases were approved in October, which is the highest since August 2022 – the month before the chaotic mini-budget drove up mortgage costs – when 72,200 were agreed.

Demand picked up after UK interest rates were cut in August, and ahead of the second reduction in early November.

The Bank of England has also reported that net consumer credit borrowing by individuals slowed slightly, to £1.1bn in October, slightly down from £1.2bn in September.

Over in New Delhi, people have been holding a protest calling on Amazon to pay higher wages, and provide better working conditions: