3 October 2025: Tesco begs Reeves not to burden supermarkets with tax: ‘Enough is enough’

There were two significant claims made about the perilous state of the UK economy yesterday. Both came from insurance giant Allianz. In the first, it discusses how the economy is suffering from what it calls “stagflation light”, while the second claims that the economy will only grow by 0.9% in 2026.

Inflation remains a concern, expected to stay above 3% through spring 2026 before softening to settle around the target by spring 2027. The Bank of England is expected to enter a prolonged pause, with the next rate cut not anticipated until April 2026, eventually lowering the base rate to 3.25% by the end of 2026 and 3.0% by 2027.

There are continuing concerns that the Chancellor's obsession with the level of Government borrowing could hamper growth, making the 2025 estimate of 1.4% optimistic, while increasingly restrictive macro policy is expected to weigh on growth in 2026, which may fall below 1%. The projected slowdown represents one of the sharpest decelerations among major economies, with Britain's growth rate set to fall by more than a third.

The Bank of England faces an extended period of monetary policy paralysis as inflation refuses to drop below three percent well into 2026, the analysis reveals. This stubborn price pressure will compel policymakers to maintain their current stance despite the slowdown, marking a significant departure from the European Central Bank's position.

The reports forecast that British inflation will remain elevated through spring 2026 before gradually easing, ultimately reaching the two percent target only by spring 2027. This contrasts sharply with the eurozone, where inflation has already stabilised near the ECB's target since the second quarter of this year.

Industry experts believe that the cyberattack on Jaguar Land Rover, which is still affecting operations in Merseyside and other UK sites, is 'the biggest ever experienced in the UK economy.'

It caused work at the firm's three sites to stop on 1 September, with JLR saying earlier this week that some production would resume 'in the coming days' while concerns regarding the vehicle manufacturing giant’s supply chain are equally serious. It could take up to three months for everything to return to normal, which means there could be layoffs further down the line.

The government said last weekend that it will underwrite a £1.5bn loan guarantee to JLR to support its suppliers.

Landlords need clarity on tax in next month’s instead of confusing government-inspired leaks, says a leading tax advisory firm. “The ‘kite flying’ we have seen in recent months, where the Government ‘leaks’ potential taxes to gauge public opinion, is extremely unhelpful. It is creating uncertainty in the property market and unnecessary stress for Landlords and their tenants.

The Government’s position on National Insurance, Income Tax, Capital Gains Tax (CGT) and Inheritance Tax (IHT) needs to be made clear. The change in the deduction for interest has already led to many buy-to-let landlords selling up, and the suggestion that National Insurance could be charged on rental income is causing many more to consider whether an ongoing buy-to-let portfolio, held personally, is viable.

The pound softened a little yesterday as traders squared positions, despite the expected delay in the release of the September jobs report in the U.S.

It fell to a low of 1.3400 and closed at 1.3436.

Barring a quick resolution to the partial government shutdown, the U.S. jobs report will not be released as expected on Oct. 3, leaving the Federal Reserve without one of its critical data points as officials weigh future interest rate decisions.

The shutdown has forced the Bureau of Labor Statistics, along with other federal agencies, to furlough employees while also pausing data collection and dissemination. A prolonged shutdown could also postpone the bureau's next Consumer Price Index report, a major benchmark for inflation, expected Oct. 15.

After a 0.25% rate cut in September, economists anticipated the Federal Open Market Committee would announce at least one more reduction before the end of the year. Without the BLS’s closely watched data on jobs and prices, the rate-setting committee would need to rely on private sector reports and alternative data sources.

In an interview earlier in the week, Chicago Fed President Austan Goolsbee said the committee would use outside data to inform decisions if the government reports are unavailable. As of Oct. 1, the Bureau of Labor Statistics' website reads, "Updates to the site will start again when the Federal government resumes operations."

Meanwhile, President Trump has withdrawn his nomination of conservative economist EJ Antoni as head of the Bureau of Labor Statistics (BLS).

The nomination came shortly after Trump fired BLS commissioner Erika McEntarfer in August, accusing her of deliberately adjusting data to make him and his administration look bad.

Antoni’s nomination was praised by Conservatives, but was criticised by many in the financial market, since he is felt to be under-qualified for the role.

Federal Reserve Bank of Dallas President Lorie Logan said yesterday that the U.S. Central Bank appropriately cut rates last month to guard against the risk of a sharp deterioration in the job market, but said that so far the cooling is gradual and signalled she is not eager to cut rates further.

"We need to be very cautious about rate cuts from here and make sure that we appropriately calibrate policy so that you don't ease conditions too much and only to have to reverse course, which would be very painful in terms of restoring price stability," Logan told a classroom of economics students at the University of Texas at Austin's graduate school of business.

"With expectations for tariffs and other pressures to lead to inflation trending a bit higher in coming months, my forecast has a little bit slower normalisation of the policy path in order to make sure we get all the way to 2%."

Logan is not a voter on the Fed's policy-setting committee this year, which allows her to view the economy from an independent perspective, said she supported the Fed's September decision to reduce the policy rate a quarter of a percentage point as "insurance" against a sudden rise in the unemployment rate, which in August was 4.3%.

The dollar index saw increased volatility yesterday as traders tried to understand the ramifications of the shutdown and how long it is expected to last.

It traded between 98.13 and 97.52, eventually closing marginally higher at 97.89.

Long-time readers of this report will have realised long ago that I am not a fan of the Eurozone. I have little faith in the “one size fits all” policies of the ECB and the ability of such a diverse group of nations to function under a single monetary policy. The ECB is infatuated by inflation, mainly due to the European Union providing it with a single mandate: to maintain price stability.

Over the past several years, it seems that as long as prices appear stable or at least the Central Bank is taking steps to control them, the rest of the economy could be falling into a deep recession without any concerns being voiced by the twenty Central Bank Governors who make up the Governing Council.

Arthur Hayes is an American entrepreneur and a co-founder and former CEO of cryptocurrency exchange BitMEX. He is reported as being the youngest African American crypto billionaire in history.

In a recent open letter, Hayes urged Europeans to dump the euro and convert their savings into Bitcoin, warning that France’s finances are collapsing, and the ECB will eventually unleash trillions in new money.

He compared France’s current crisis to the monarchy’s downfall after financing American independence, saying the same boomerang effect is now hitting the Fifth Republic.

Hayes wrote that France is too indebted, its savers are fleeing, and the euro is doomed. According to him, the ECB will be forced to print, and Bitcoin will be the winner.

He used extremely derogatory language to describe the single currency, calling it “an abomination created to stifle local culture.” He said past predictions of collapse during the 2011–2012 crisis failed because Germany and France printed together, but this time, Germany and France are pulling in opposite directions.

He predicted that French savers would see their euros re-denominated into a weaker Franc. He said a weaker Franc would help exports and tourism but would crush savings. Both left and right resent ECB control, he wrote, making a French exit from the euro inevitable.

The ECB voices concern over the French budgetary impasse and the inability of Germany to wean itself off its reliance on Russian energy, but Christine Lagarde sees individual nations’ issues as not something that the Central Bank can be involved in. Meanwhile, both Joachim Nagel and François Villeroy de Galhau appear powerless to even add their voices to support Friedrich Merz or Emmanuel Macron.

The report drawn up by former ECB President Mario Draghi, in which he lamented the pace of change in the Union, was welcomed, then ignored, which is a telling indictment of the current malaise.

The Euro mirrored the price action of the dollar yesterday, in that it traded between 1.1758 and 1.1683, eventually closing lower at 1.1715.

Have a great day!