5 August 2025: 84k jobs have been lost in the hospitality sector since the Budget

As she prepares for her next tax raid, with concerns growing that this may become an annual occurrence as the economy remains sluggish, the Chancellor believes that things will improve gradually. Currently, the public is sceptical that Rachel Reeves is setting the country on a path to prosperity.

One area that has been decimated by Reeves’s tax-and-spend policies is the hospitality sector. It is believed that eighty-four thousand jobs have been lost, with one pub, restaurant or hotel closing every day.

On a visit to a holiday park in Allhallows, Kent, on Monday, Rachel Reeves said her reforms would make it easier for venues to stay open for more hours and to be able to "serve pints on the pavement".

When asked about the increase in the employer's national insurance contribution, Reeves said that the money had to be raised to keep the country’s finances on a solid footing. She was quizzed about where the money raised is being spent, with a large proportion being spent on immigration and interest on record borrowing.

Owners of a pub she visited later blamed tax increases introduced following last October’s budget for its halving of staff numbers and the closure of its restaurant.

Reeves encouraged people to spend their holidays in the UK, something that would boost the economy, but she was met with blank stares and further criticism.

The initial hope for the refugees in Gaza that was generated by the Prime Minister’s “threat” to recognise a Palestinian State has been replaced by fears that he is tacitly supporting terrorism, as questions emerge if his pledge is also dependent upon Hamas not being in power in the area.

Sir Keir Starmer has been praised as a “great diplomat” in Washington, as he managed to negotiate a far more advantageous trade deal for the UK when compared to the European Union.

The level of naivety this shows is staggering! Trump has been using Starmer as a support, as evidenced by the increase in the NATO budget, since the real target of his tariffs was always Brussels, since the UK’s exports to the U.S. are dwarfed by the European Union’s.

Policymakers are divided over whether underlying price pressures are easing and if a slowing labour market and weak growth will cause inflation to fall below target in the medium term without further rate cuts.

On balance, a cut is still favoured this week, but going forward, the Bank of England is unlikely to begin a cycle of rate cuts.

The pound tried to continue the gains it made on Friday but ran into some strong selling pressure. In early Asian trade, it rallied to a high of 1.3309, but then fell back to a low of 1.3253 before closing at 1.3284.

Federal Reserve Governor Adriana Kugler announced Friday she will resign from the central bank’s board Aug. 8, leaving a key vacancy for President Trump to fill ahead of schedule.

Kugler, who was appointed to the Fed board by former President Biden and confirmed in 2023, will leave the bank six months before the end of her term in January 2026.

The Fed board consists of up to seven members, or governors, with staggered terms of 14 years. The lengths of those terms are fixed and do not restart when another member, such as Kugler, takes over a term that was partially served out by a predecessor. The board shows the limit of the power that the President has over the Fed since the appointment of Governors remains within his gift.

Two of the current board members, Michelle Bowman and Christopher Waller, are Trump appointees.

It is common for Fed governors to leave the bank before their terms expire, especially when they are not renominated.

But Kugler’s departure comes amid unprecedented pressure on the Fed from Trump, who is eager to shift its leadership away from Fed Chair Jerome Powell.

Trump has pressured Powell to cut interest rates by staggering, crisis-level amounts or leave his post before the Fed chair’s term ends in May. Powell has resisted the pressure, insisting he will not leave before the end of his term nor make politically motivated decisions about rates.

Trump is likely to use Kugler’s spot on the Fed board to appoint his eventual successor for Powell, who could eventually be confirmed to a full 14-year term that would begin in February. Therefore, Kugler’s replacement will be followed more closely than normal.

The European Union announced it will delay tariffs on U.S. goods by six months while both sides implement their trade agreement. The tariffs President Donald Trump placed on imports from countries around the world take effect this week. This is being seen as another victory for the President, since it gives American exporters a “head start” over their European counterparts.

On the subject of tariffs, they have been further “weaponised” as Trump threatened to increase the level of tariffs being imposed on Indian exports to the U.S. following India’s purchase of Russian oil. Trump has said that from Friday, he will impose new sanctions on Russia as well as on countries that buy its energy exports, unless Moscow takes steps to end its 3-1/2 year war with Ukraine.

Russian President Vladimir Putin has shown no public sign of altering his stance despite the deadline.

With just three weeks to go before Labour Day and the traditional end of the summer in America, the financial markets are reaching their maximum level of tapering, with low liquidity seen across the board.

The dollar index regained its balance yesterday following major falls in the wake of the July employment report. It rallied to a high of 98.98 and closed at 98.74

The “stress tests” that have been carried out over several months on the EU’s banks by the ECB have shown an unexpected level of resilience in the financial sector, despite the European Union green-lighting several consolidations in the sector.

There is little doubt that the region is still “overbanked” with several financial institutions following Deutsche Bank’s lead and consolidating within national borders. The view of the ECB is that there should be fewer banks, but those banks should have a pan-Eurozone footprint.

It is assumed that such a move will happen gradually over time, although so far, banks have yet to find a strategy that works for them.

Prices remain stable in the Eurozone as inflation came in at 2% for July, the sixth consecutive month when year-on-year inflation has been 2.3% or less. This is being lauded by the ECB, which feels that if it can control inflation, economic growth and activity will follow organically.

A strong Euro throughout 2025 has made imports cheaper, combining with declining energy prices to dampen inflationary pressures. However, this may be about to change even as the U.S. delivers mixed messages over GDP and employment.

This has allowed the European Central Bank to take a knife to interest rates over the past year, following an aggressive strategy that has left the deposit rate at 2%.

Policymakers had been hoping this would help to engender economic growth in the bloc, but a disappointing 0.1% growth in Q2 suggests that this has not yet had the desired effect.

The imposition of 15% tariffs on EU goods exported to the US threatens a darker outlook for the Eurozone economy. Although an even more worrying 30% rate has been avoided with the deal negotiated with the US by European Commission President Ursula von der Leyen, this deal will lead to an increase in prices in the Eurozone.

German Chancellor Friedrich Merz has already expressed his fear that we will see a spike in inflation. The ECB will certainly wait and see before cutting interest rates again.

The financial markets do not necessarily agree with Merz’s view since the feeling is that while economic activity will be damaged, inflation may actually fall as China may see the EU as a natural alternative for their products, which they sell more cheaply than their U.S. equivalents.

The euro settled back into its recent groove yesterday, following its gains last Friday on the back of a weaker-than-expected Jobs report. It fell to a low of 1.1549, but regained its poise to close at 1.1571.

Have a great day!