12 May 2025: Starmer sees Farage as his main rival to be PM

To counteract Reform UK's popularity surge, the Government has announced a major overhaul of its immigration policies.

New measures will be introduced to update how it handles migration as it seeks to reduce the number of people coming to the UK.

Under the government's latest plans, skilled visas will only be granted to people in graduate jobs. In contrast, visas for lower-skilled roles will only be issued in areas critical to the nation's industrial strategy. In return, businesses must increase the training of British workers.

Companies in the care sector will no longer be able to seek visas for workers recruited abroad.

The government said the changes will be part of a policy document, to be published today, setting out how ministers plan to reduce immigration.

The White Paper, to be released later today, appears to solve one issue while creating another. Reform’s concerns are mostly driven by concerns over immigrants who arrive in the country with no means of supporting themselves, which places a huge strain on public services, particularly the NHS. Or they leave the role they were employed to do, but remain in the country.

We inherited a failed immigration system where the previous government replaced free movement with a free market experiment," Yvette Cooper, the Home Secretary, said in a statement. "We are taking decisive action to restore control and order to the immigration system."

While post-Brexit changes to visas saw a sharp drop in the number of European Union migrants to Britain, new work visa rules and people arriving from Ukraine and Hong Kong under special visa schemes led to a surge in immigration.

British employers have expressed concern about the government's plans to tighten the rules on foreign workers, saying they are needed to fill shortages in the job market.

It does feel like the Government is acting to solve a problem that does not exist. To replace the up to 50k jobs that will no longer be filled by overseas recruits in the care sector, businesses will have to make roles more attractive to “local” workers. This inevitably means an increase in wages and other benefits, such as a reduction in the number of hours worked.

Asked about the government's latest announcement, a spokesperson for the Confederation of British Industry pointed to comments by CBI Director General Rain Newton-Smith to The Times published on Friday, in which she backed the push for more training of British workers.

But it seems the government may take this support out of context, since she went on to say that immigrant workers are an important way to bridge the gap that cannot be filled by British nationals.

The US and the UK’s signing of a limited trade agreement last Thursday, while the Bank of England's cautious tone, despite cutting rates, in saying that monetary policy will stay restrictive for as long as necessary to ensure inflation risks subside, might hold back traders from placing aggressive bearish bets around the British Pound (GBP) and limit any meaningful depreciation for the pound.

The pound fell to a low of 1.3220 in the wake of the Bank’s decision, but recovered to close at 1.3315 on Friday.

The U.S. dollar will continue to be dominated by the country’s economic and trade policies as Donald Trump continues to try to be a major influence on global events. Over the weekend, he and his administration have made overtures to Ukrainian President Zelenskyy to try to make him meet Russian President Putin face-to-face to arrange a 30-day ceasefire.

He appears to have abandoned, to a large extent, the conflict which continues in Gaza and has turned his attention to the burgeoning crisis between India and Pakistan in the disputed territory of Kashmir.

Meanwhile, a majority of small businesses in the United States are pessimistic about the U.S. economy and concerned about tariff policies having a possible negative impact on their business, a U.S. survey showed on Friday.

According to the survey released by CNBC, about two-thirds of small business owners believe they either have been or expect to be impacted by tariffs, and more than half said they expect changes in trade policy to hurt their business over the next year.

Only 30% of respondents believe that they would rate the current state of the economy as excellent or good, while 70% said it's fair or poor, according to the survey, adding that 70% of small business owners said they believe the country is headed towards a recession.

Furthermore, uncertainty over trade policy has put increased financial pressure on small business owners, both for their businesses and for them, said the survey.

Over 60% of respondents said they are "very" or "somewhat" stressed about the financial situation of their businesses and their finances, it said. Inflation and consumer demand remain the top risks listed by small business owners.

This sentiment seems to chime with Fed Chair Jerome Powell’s comments, made after the FOMC voted to leave interest rates unchanged last week.

Trump believes that all that ails the economy would be solved by a “significant” cut in interest rates, although the survey appears to place the blame for pessimism more on consumer demand, which will be dampened by the introduction of tariffs on goods coming from overseas, China in particular.

Richmond Fed President Thomas Barkin said last week that they are watching consumer activity most closely because that's the biggest part of the economy. Barkin, who is not a voting member of the FOMC this year, said the worry is "how close we are to a moment where consumers decide to pull back; so far has not happened."

"The biggest thing affecting consumer spending is whether they have a job, second is confidence, third is the wealth effect."

Meanwhile, Fed Governor Adriana Kugler told Bloomberg TV on Friday that the policy rate is currently moderately restrictive and added that it makes sense to maintain it.

She went on to say the economy has been resilient so far, the current level of Economic health gives us time to make progress on inflation, while in times of uncertainty, key to watch different scenarios."

The dollar index has recovered to trade above the 100 level, which was a significant level of resistance recently. It reached a high of 100.85 in the wake of the Fed announcement but closed at 100.45 as traders still have doubts about its short-term resilience.

The confidence provided to German consumers by February’s election, which saw Friedrich Metz begin his term as Chancellor, should allow them to begin to book holidays outside their home nation this summer.

The effect of the COVID-19 pandemic and the severe weakness of their economy had seen Germans abandon the beaches of Spain and Italy in favour of staying at home.

Now Spain and Italy have been joined by Croatia, Montenegro and the Greek mainland as destinations of choice for German consumers.

This will provide much-needed support to the smaller economies of those countries, while seeing the strength that has been exhibited by Spain recently continue.

Gediminas Simkus, a member of the ECB’s Governing Council and the Governor of the Bank of Lithuania, stated that as the full impact of the US tariff policy has yet to materialise, inflation is expected to continue to slow down, and the ECB needs to further cut interest rates.

During an interview with the media on Friday at the Reykjavík Economic Conference, Simkus said that although the eurozone economy performed moderately at the beginning of the year, recent geopolitical trends, including trade threats from US President Trump, have had an adverse impact.

At the same time, he believes that the significant downward trend in eurozone inflation has also become very clear. "For me, the interest rate decision in June is already quite clear, another interest rate cut is warranted," he added, "and there may be further cuts after June," although the exact timing remains uncertain.

Also on Friday, Olli Rehn, the Governor of the Bank of Finland, said that if the ECB's latest forecast confirms a slowdown in inflation and a weakening of growth momentum, he would also support further interest rate cuts.

Although data shows that the economy performed better than expected at the beginning of this year, this may be due to European companies taking preemptive actions to avoid US tariffs announced in early April. Therefore, economic performance may reverse in the coming months, especially if the EU fails to ease trade tensions with the US.

Last month, ECB Chief Economist Philip Lane told the media that trade tensions have indeed darkened the economic outlook, but "the overall downward adjustment remains limited" as the economy continues to grow.

The European Central Bank is tipped to slash borrowing costs three more times this year, bringing its key deposit rate down to 1.5% by the end of 2025, according to analysts at Deutsche Bank.

In one scenario, the implementation of partially delayed U.S. tariffs leads to a "growth shock" in the eurozone, persuading the ECB to bring policy rates below the 1.5% level. Another outcome revolves around broader economic "resilience", stopping an ongoing ECB rate-easing cycle before borrowing costs dip to 1.5%.

"Our baseline continues to have the ECB cutting rates by 25 basis points in June, September and December,"

The single currency exhibited marginal strength throughout the morning on Friday, reaching a high of 1.1290, but lost ground as day traders took profit on long positions, and it fell back to close at 1.1233.

Have a great day!