22 May 2026: Families cannot afford Theme Parks as Reeves sugarcoats the problem

UK business activity contracted sharply in May, with the Composite PMI falling to its lowest level in 13 months, signalling a clear return to economic contraction. The flash S&P Global Composite PMI fell from 52.6 in April to 48.5 in May, well below the 50 threshold that separates growth from contraction. This marks the first decline since April 2025 and reflects broad-based weakening across the private sector.

Families cannot afford theme park trips, given the severity of the cost-of-living crisis engulfing the country. The political row over Rachel Reeves’ summer VAT cut shows exactly why the issue runs deeper than the government is presenting it. Data from multiple outlets paints a clear picture: the cost-of-living crisis is still biting hard, and temporary discounts don’t change the underlying affordability problem.

Families are being priced out of summer activities, such as trips to theme parks, despite Reeves’ summer VAT cut, because broader cost pressures on households, including energy bills, travel costs, and food inflation, remain far larger than the savings offered. Reeves is presenting the VAT cut as meaningful relief, but the evidence shows it barely scratches the surface.

Reeves cut VAT from 20% to 5% on theme parks, zoos, museums, cinemas, soft play, and children’s meals from June 25 to September 1.

The Government claims the measure will save £20 on a theme-park trip for a family of four, £1.50 on cinema tickets, and £2 on a family meal.

During the Pandemic, Labour was quick to criticise Rishi Sunak’s “Eat Out to Help Out” scheme, designed to support the hospitality sector. Still, this latest project, at £1.8 billion, is laughable by comparison.

Net migration fell to 171k in 2025, as the Government congratulated itself, even though the decline was mainly due to policies adopted by the previous Government.

Despite a sharp fall in UK net migration, the public still believes it is rising, a disconnect highlighted by multiple studies and the latest ONS data. The gap between statistical reality and public perception is now a defining feature of the UK’s immigration debate.

In typical Reform style, Nigel Farage reacted to the data by telling reporters that 250k young people who are “valuable assets” to the country have left and have been partially replaced by an increase in a sector the country neither needs nor wants.

However, the care and hospitality sectors were critical of policies they believe are creating shortages within their industries.

Sterling has swung sharply in both directions over the past week, reflecting a market that is directionless, headline-driven, and struggling to price a coherent macro narrative.

Over the past five sessions, GBP has fallen, recovered, fallen again, rallied, and then softened, with each move quickly unwound by the next. This is classic behaviour when traders lack conviction and macro signals are contradictory.

Yesterday, the pound lost ground, falling to a low of 1.3392 and closing at 1.3431.

The Federal Reserve is increasingly concerned that financial markets are overly optimistic, overly loose, and too willing to ignore risk, creating a disconnect between the Fed's policy intentions and market pricing. This gap is now large enough for officials to express concern openly.

Markets are pricing in cuts that the Fed doesn’t believe in. FOMC members have repeatedly said they need more evidence that inflation is returning to target. Yet markets continue to price in earlier and deeper rate cuts than the Fed’s own projections. This undermines the Fed’s tightening stance by prematurely loosening financial conditions.

Regional Fed Presidents have flagged equity valuations as “frothy” relative to earnings and credit spreads as too tight given current macro risks. AI-linked stocks are showing signs of speculative behaviour, and commercial real estate remains a source of systemic vulnerabilities.

This has raised concerns that a sudden correction could spill over into the real economy.

Meanwhile, new Fed Chairman Kevin Warsh is stepping into a Federal Reserve where inflation is no longer trending lower, financial markets are overly optimistic, and the policy debate is tilting toward the hawkish side again. His room for manoeuvre is narrower than it was even a month ago.

Warsh, who will be sworn in during a ceremony at the White House later today, the first such inauguration at the White House since Alan Greenspan forty years ago, is facing a tough task convincing his colleagues on the FOMC that an overall dovish approach to monetary policy will see the dual concerns of price increases and job losses abate.

Jamie Dimon is adopting a notably less sanguine tone than some of his banking peers on AI’s impact on finance jobs. The JPMorgan CEO said the technology will likely “reduce our jobs down the line,” but argued that the shift can largely be managed through attrition rather than mass redundancies. The bank will likely hire more AI specialists and fewer traditional bankers, he said.

Dimon’s language contrasts sharply with the more alarmist messaging from executives at Goldman Sachs, Standard Chartered and HSBC in recent weeks. StanChart’s CEO Bill Winters may wish he could take back his unscripted remarks as regulators in Hong Kong and Singapore seek clarity on his comments about “lower-value human capital.”

Dimon, meanwhile, reserved his harshest remarks for New York Mayor Zohran Mamdani’s plans to impose more taxes on the rich. “People think that somehow being anti-business is going to help the city—it’s not,” he said.

Despite the “rise” of AI, traders across several asset classes, including foreign exchange, find themselves in limbo, even as several of their colleagues experience the “froth at the top of their cappuccinos”. Currency traders are awaiting a definitive indication from President Trump of his next move in the Middle East. Trump, unusually, is doing far more consulting than he is wont to, perhaps due to his declining popularity.

The dollar index is currently experiencing a roller-coaster ride. Yesterday it rallied to a high of 99.52 but fell back to close at 99.20.

The Qivalis project, a Eurozone-backed stablecoin that’s been making waves in European banking circles for months, has added twenty-five more banks. The total now stands at 37 institutions, a significant number, especially given that Christine Lagarde, President of the European Central Bank, has publicly expressed reservations about such initiatives.

Among the newcomers are familiar names: Rabobank from the Netherlands, Bankinter from Spain, Handelsbanken from Sweden, and Nordea from Finland. Four large institutions, established in different markets with distinct banking cultures. That they have all come together on the same project is no small matter. It says something about the current mindset in the sector. Banks are looking to avoid missing the digital shift, and a euro-based stablecoin probably seems like a less risky bet than going it alone.

Lagarde’s position is well known. Concerns about financial stability and questions about regulation are classic central bank concerns when faced with private digital currency initiatives. No surprises there. But what’s interesting is that 37 banks have decided to move forward despite this. Probably not against the ECB; no one wants to antagonise the ultimate regulator of the Eurozone, but clearly not waiting for its green light either.

The global nature of the rise in energy prices accompanying the conflict in the Middle East may lead to slower growth and higher inflation in the Eurozone than if the impact had been more contained, the European Central Bank’s chief economist said on Wednesday.

While this is not an original point, Lane can take a broader view of the region without having to reserve his judgment based on an individual nation’s concerns, as Joachim Nagel or Pierre Wunsch might.

The latest jump in oil and natural-gas prices triggered by the war has drawn comparisons with the aftermath of Russia’s invasion of Ukraine in 2022.

Most economists see the likely impact on Eurozone inflation this time around as more limited, since natural-gas prices have risen less sharply, the labour market is looser, and the economy is cooler.

However, Lane said that work by the ECB’s economists suggests the shock's global nature may increase its impact.

In 2022, Europe was hit by higher energy prices as its natural gas supplies from Russia fell sharply. But in 2026, Asian economies are at the forefront, since they import a larger share of their energy needs through the Strait of Hormuz, which remains largely blocked.

They produce many of the inputs and finished goods consumed in Europe, and businesses may raise their prices to cover higher energy costs.

“A global shock means that costs are increasing around the world,” Lane said in a speech delivered in London. “This creates a compounding effect where the final price of a good reflects not just the direct increase in the local energy price but the cumulated effects of price increases across international suppliers.”

The Composite index fell to 43.5 in May, significantly below the level which determines growth or contraction.

The Euro fell to a low of 1,1576. Still, as with other G7 currencies, traders are reluctant to leave positions in place overnight, and the single currency rebounded to close only marginally lower at 1.1618.

Have a great day!