Mandelson scandal has left Britain rudderless as it faces an economic storm, says ALEX BRUMMER
The Mandelson scandal casts a dark cloud over the stability of the Government. When and if the gloom lifts, a stark economic reality will have to be confronted.The stalemate over Iran is ravaging economic prospects. Ever more questions will be asked about how a government elected on the premise of delivering stability has turned the market for UK government bonds into a playground for hedge funds.Ahead of the Gulf conflagration, the UK economy, despite the burden of devastating taxes, was showing signs of recovery.Output climbed in February and commercial property was reviving. This improvement is reflected in the latest update from British Land.It talks of an ‘excellent’ year for leasing, with the UK attracting new tenants such as San Francisco-based Anthropic. Inflation threat: The Bank of England is not expected to raise rates from 3.75% despite surging energy pricesBritish Land’s push into retail parks is paying off with demand for high-quality space strong.Real estate has been dealt a sharp blow by events. The Middle East conflict has put big construction projects on hold. Despite planning reforms, house-building is slumping, with Crest Nicholson sharply lowering targets for new homes, triggering a share price collapse.The latest jobless figures may look better, with the headline rate falling to 4.9 per cent from 5.2 per cent. The reasons behind the drop will be uncomfortable for Labour.There is an increase of 169,000 in ‘inactive’ citizens who are out of work and not looking for a job. That moves them onto an already bloated welfare budget.The silver lining is that average earnings are trending down. Thus far there is no evidence that stubborn inflation and a surging cost of living are causing a wage-price spiral.Much of this will frame next week’s meeting of the interest-rate-setting Monetary Policy Committee. Indications from the governor of the Bank of England, Andrew Bailey, are that he is in no hurry to raise rates from 3.75 per cent despite surging energy prices. Bailey is carefully avoiding the word ‘transitory’ following the bad experience which saw prices surge to a peak of 11.1 per cent post the Ukraine war.If inflationary expectations are kept in check, Bailey is understood to be hopeful that he can hold borrowing costs and not do unnecessary damage to households and businesses.The Governor will need to overcome the reservations of chief economist, Huw Pill. He argues that the battle against higher prices is the Bank’s key mandate.Should make for a lively session.Breaking upFor George Weston, the decision to hive off Primark into a separate company next year is deeply personal.No-frills retailer Primark was until recently, when it lost some of its gloss in the UK, the growth engine of owner, Associated British Foods (ABF).The split will not weaken the Weston family vehicle’s grip on the enterprise. Instead, it will bring more clarity to the governance of the shopping arm and provide greater focus to the rump bread, sugar and food ingredients company. Weston also recognises that ABF will face a newly empowered rival in sauces and ingredients if McCormick investors give the go-ahead to the takeover of Unilever’s food operations.Weston is confident that Primark is on the mend in the UK by focusing on keeping costs down, improving the fast-fashion offer and stepping up digital investment. The same remedies will be applied to the sagging European operations.For the moment recovery is not being damaged by events in the Gulf and arguably demand for faster, cheaper clothing might be enhanced. But prolonged upward pressure on living costs would be bound to eventually take a toll.Spiked voteSaba says it still owns 29.9 per cent of Impax Environmental Markets and wants the board out.Impax says it thought that Boaz Weinstein’s Saba had sold out but it was impossible to know because of the ‘complexity and fluidity’ of the activist’s stake. A pity is the confusion for private shareholders, particularly those with holdings on platforms that failed to enable easy voting.We are all doomed if the Financial Conduct Authority thinks this is a wonderful example of shareholder democracy.DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
