22 March 2025
by Tony Redondo
Sadly, I am not referring to the first song on David Bowie’s magnificent ‘The Rise and Fall of Ziggy Stardust and the Spiders from Mars’ LP but that this Sunday is the fifth anniversary of then PM Boris Johnson calling the first Covid-19 lockdown. As I am sure you do too, I have many memories of that period. Some good, some bad and yes even some ugly memories.
This week is the last full week of March and could be a tough week both for the UK economy and the immediate fortunes of the Pound Sterling.
Economic data wise, on Monday we get the latest UK PMI figures for the Manufacturing sector, Wednesday the latest UK inflation data and Friday both UK GDP and retail sales data.
On Wednesday, we also get Chancellor Reeves announce her Spring Spending Statement or emergency Budget, depending on your point of view. The omens are not good. Even though Reeves is expected to announce public spending cuts, the scale of the deterioration in the UK’s finances means the fix will need to be more than a tinkering around the edges.
Reeves facing ‘awful April’ with flat growth and soaring debt | Politics | News | Express.co.uk
Currency Exchange Rates Update
For now, the Pound is doing well against the likes of the US, Australian, NZ and Singapore Dollars as these economies adjust to Trump’s on/off tariffs.
Against the US Dollar, the Pound recently hit and remains close to a 4-month high. Against the Australian and NZ Dollars, the Pound recently hit and remains close to a 9 year high and hit a 9-month high against the Singapore Dollar. Good news if you are emigrating, visiting or importing goods and services from these countries.
Against the Euro, the Pound gained just over 0.4% last week but is still over 1% down from a month ago. What’s in the news?
UK
Global air travel was thrown into disarray after a major power outage shut London’s Heathrow airport on Friday. Planes en route to the world’s fourth-busiest airport were diverted, with disruption expected to hit more than 1,300 flights. The cause of the fire at an electrical substation in Hayes is still under investigation.
The ONS (Office for National Statistics) have reported a staggering deterioration in Britain’s finances with falling tax receipts and public sector pay inflation driving public sector net borrowing in February 2025 to £10.7 billion, up £100m from the previous February. This is the fourth-highest February borrowing on record since 1993. The provisional rate of net government debt to GDP at the end of February was estimated at 95.5%.
Andrew Sentance, a former member of the Bank of England’s Monetary Policy Committee says “Public borrowing in the UK is now set to be £140-150bn in 2024/5, over 5% of GDP. In the March Budget, it was forecast at just over 3% of GDP. The main reason is a massive over-run in public spending presided over by this government, which is over £50bn in the past 6 months, or £100bn a year!”
As largely expected, the BoE (Bank of England) left UK interest rates unchanged at 4.5%, this time on an 8-1 vote with the sole dissenter in favour of an immediate 0.25% cut. The markets marginally pared their rate cut bets for 2025 with two more 0.25% reductions still fully priced in.
Former SNP chief executive Peter Murrell, Nicola Sturgeon’s husband appeared in court in Scotland charged with embezzlement.
A report by the IPPR (Institute for Public Policy Research) think tank and The Difference, an education charity shows schoolchildren across Britain are missing an extra 4.7m days every term after the pandemic triggered a national attendance crisis.
Good news
Norway’s $1.8 trillion sovereign wealth fund, the world’s largest has invested $740 million to buy a quarter of a property portfolio in London’s Covent Garden. It follows a £306 million investment by the state wealth fund for a 25% stake in the Duke of Westminster’s Grosvenor estate in January.
Cloud computing giant Oracle, run by Trump ally Larry Ellison has committed to investing £3.9bn in the UK by improving its data centre infrastructure and drive AI adoption among local businesses.
Not so good news
The OECD (Organisation for Economic Co-operation and Development) cited concerns about inflation as a reason for cutting its UK growth forecast to 1.4% in 2025 and 1.2% in 2026, down from previous projections of 1.7% and 1.3%.
The CBI (Confederation of British Industry) says the Chancellor’s £40bn tax raid is to blame for the manufacturing slump in the UK with output volumes falling more in the three months to March than in the previous quarter despite the proposed increase in UK defence spending. The CBI’s Industrial Trends Survey show only three out of the seventeen manufacturing sub-sectors escaped a fall in output.
Last month, the BoE halved its growth forecast from 1.5% to 0.75% and it’s now expected that the OBR (Office for Budget Responsibility) will do likewise, cutting its growth forecast rate for 2025 from 2% to around 1%.
The ONS published its latest wage growth and unemployment figures last week. Wage growth has continued to soar with annual regular pay, excluding bonuses, growing by 5.9% between November 2024 and January 2025. Unemployment remains at 4.4%.
HMRC revealed that inheritance tax receipts have reached a record high.
British families are £2.2 trillion worse off than initially thought after the ONS was forced to revise key economic estimates.
The ONS reported Britain’s public sector headcount rose to its highest level since 2011.
The influential EY Item Club is forecasting that Britain faces years of industrial decline and falling factory employment as high energy prices blamed on net zero undermine the manufacturing sector. Britain’s energy costs are four times as high as those in the US, and 50% more than those paid by factories in France and Germany.
The Insolvency Service reported that 2,035 companies filed for insolvency in February as a growing number of firms struggle to cope with soaring taxes and high inflation. It’s a 3% increase between January and February. Compulsory liquidations reached its highest level since 2014.
USA
The Federal Reserve held rates at about 4.5% and revised America’s economic outlook, cutting its growth forecast from 2.1% to 1.7% and predicted inflation could approach 3%.
February home resales jumped by 17% over the year, higher than expected, despite higher mortgage rates. US retail sales rose by 0.2% in February after an unexpected fall in January.
President Trump said there will be “flexibility” on his reciprocal tariff plan.
Trump is invoking emergency powers to boost the ability of the US to produce critical minerals and potentially coal as part of an effort to ramp up the output of natural resources and make the country less reliant on imports.
Nvidia plans to spend hundreds of billions on US chipmaking and other electronics over the next 4 years as the company tilts its supply chain back from Asia in the face of Trump’s tariff threats.
The EU
The EU (European Union) announced it will delay implementing its first set of tariffs on goods imported from the US until mid-April.
Germany’s Parliament, the Bundestag voted in favour of a major fiscal package, with 513 votes in favour and 207 votes against. The reforms include changes to the long-standing debt brake rule and a €500 billion infrastructure and climate fund.
The ZEW German sentiment index also improved more than expected in March.
Others
The latest CFIB Monthly Business Barometer from Canada showed a 24.8% drop in business confidence in March (year-on-year) and a 16.1% drop on a three-month basis. The figures are approaching Covid-crash lows and are entirely consistent with a Canadian economic recession. The CFIB report also shows small business optimism at its lowest point since 2000 and that businesses were reporting “very weak employment plans.” This points to a sharp slowdown in economic output and employment, raising the prospect that the Bank of
Canada will cut interest rates by more than markets currently anticipate in order to help support the economy. This would pressure Canadian bond yields lower and weigh on the Canadian Dollar. With the inflation rate in Canada also growing at its fastest pace in eight months, increasing the prospects of the Canadian economy entering a stagflationary phase piling further pressure on the Bank of Canada.
The next major risk event for the Canadian Dollar is the 2nd of April US tariff announcement.
Speculation is mounting that Canadian Prime Minister Mark Carney, whose Liberal Party has jumped into a lead in some public opinion polls, is poised to call a snap federal election for 28 April.
China’s central bank kept pace with the Fed and the BoE by keeping interest rates steady despite US tariff threats pressuring the Chinese Yuan currency.
In its annual military drills, for the first time, Taiwan identified 2027 as the potential year for a Chinese invasion.
The Swiss National Bank cut its interest rate to the lowest since September 2022, while Sweden’s Riksbank kept its rate unchanged at a two-year low but reiterated it’s finished with the easing cycle.
Stranger than fiction
For the eighth year in a row, Finland came top in the World Happiness Report 2025 ahead of Denmark, Iceland, Sweden and the Netherlands. The UK is in 23rd place, one ahead of the US in 24th place, its lowest ranking to date in the global ranking.
Bermuda has no freshwater springs, rivers or lakes. Over 400 years, its introduced, white-stepped roofs to houses to harvest rain and direct it to underground reservoirs. Each home is self-sufficient. There is no mains water and no water rates in Bermuda.
Global cereal yields have tripled over the last 60 years with maize and rice having the biggest yields while wheat and barley also performed well. This growth has been crucial to feeding a growing population while sparing natural habitat from expanding agricultural land.
Quote
Indira Gandhi, India’s first and, to date, only female prime minister “There are two kinds of people, those who do the work and those who take the credit. Try to be in the first group; there is less competition there.”
