Economics

British businesses pile on the pressure on U.K. Fin Min Reeves

Published

6 days ago

March 26, 2025

Rachel Reeves, UK chancellor of the exchequer, outside 11 Downing Street ahead of presenting her budget to parliament in London, UK, on Wednesday, Oct. 30, 2024.

Bloomberg | Bloomberg | Getty Images

Home improvement retailer Kingfisher became the latest British company to report a negative impact from U.K. Finance Minister Rachel Reeves’ October budget — as she prepares her latest update on the state of the British economy.

In its annual earnings release on Tuesday, Kingfisher, which owns home improvement retailer B&Q, said the government’s policies had “raised costs for retailers and impacted consumer sentiment,” with sales of big-ticket items falling.

It is the latest in a line of British businesses that have criticized Reeves’ bumper tax-rising budget since autumn. The companies will now be keeping a close eye on Reeves’ Spring Statement, when she’s set to update lawmakers on her latest spending and taxation plans at 12:30 p.m. London time Wednesday.

Top on the businesses’ list of complaints is a higher employment cost after the government pledged in October to increase national insurance contributions from employers and raised the country’s “national living wage” by 6.7% from April 1.

On Sunday, Reeves defended the tax rises ahead of the Wednesday statement, telling Sky News the government “took the action that was necessary to ensure our public services and public finances were on a firm footing.”

However, a number of consumer-facing businesses have flagged concerns with the Labour government’s economic policies in their earnings reports this quarter. They include supermarket giant Tesco, which said its higher national insurance contributions could add up to £250 million ($324 million) to annual costs, while the chairman of pub chain JD Wetherspoon, Tim Martin, said the changes will cost every one of his pubs £1,500 per week.

Regis Schultz, CEO of sportswear retailer JD Sports, said the policies mean it was tempting for businesses to reduce staff numbers and hours, “which will be bad news for the economy.”

It comes as the U.K. battles economic sluggishness, rising prices and widespread uncertainty as a result of U.S. President Donald Trump’s global trade tariffs.

The Office for Budget Responsibility (OBR), the country’s independent public finances watchdog, is reportedly expected to downgrade the U.K.’s growth forecasts for 2025 on Wednesday, halving its previous 2% estimate.

AB Foods, which owns budget fashion retailer Primark, blamed the Labour government’s budget as contributing to broader consumer weakness in the country. Finance Director Eoin Tonge told analysts that customers across its brands were cautious, citing “a shock and a fear, that’s driven people to pull in their horns.” That view was shared by clothing retailer Frasers Group, which said it saw weaker consumer confidence around the budget announcement. The company’s Chief Financial Officer Chris Wootton told Reuters the company “felt we’d been kicked in the face.”

The slew of negative corporate commentary is expected to pile pressure on Reeves ahead of her Spring Statement.

The British Retail Consortium has called on the government to “inject confidence into the economy,” warning that April’s rise in tax contributions and the minimum wage will generate £5 billion in additional costs for retailers, giving “many no option but to push prices up.”

The Confederation of British Industry (CBI) said Reeves “must inject business with a serious confidence boost” on Wednesday.

“As an immediate priority the government should re-commit to not raising the business tax burden further over the course of this Parliament,” Louise Hellem, chief economist of the CBI, said in a statement. “Setting an ambitious goal for R&D spending, making it easier to invest in skills and taking measures to reduce the regulatory burden on business would be encouraging moves that would show the government understood what business needs to see from them.”

Goldman Sachs Chief Equity Strategist Peter Oppenheimer meanwhile told CNBC on Monday that concerns over consumer and business confidence will see Reeves focus on cutting costs rather than raising taxes this week, but said the government’s focus on boosting growth was “a laudable objective, a difficult thing to do.”

CNBC has reached out to the U.K. Treasury for comment.

— CNBC’s Holly Ellyatt contributed to this report.

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Will Elon Musk’s cash splash pay off in Wisconsin?

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March 31, 2025

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TO GET A sense of what the Republican Party thinks of the electoral value of Elon Musk, listen to what Brad Schimel, a conservative candidate for the Supreme Court of Wisconsin, has to say about the billionaire. At an event on March 29th at an airsoft range (a more serious version of paintball) just outside Kenosha, five speakers, including Mr Schimel, spoke for over an hour about the importance of the election to the Republican cause. Mr Musk’s political action committees (PACs) have poured over $20m into the race, far more than any other donor’s. But over the course of the event, his name came up precisely zero times.

Economics

German inflation, March 2025

Published

9 hours ago

March 31, 2025

Business Finance News

Customers shop for fresh fruits and vegetables in a supermarket in Munich, Germany, on March 8, 2025.

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German inflation came in at a lower-than-expected 2.3% in March, preliminary data from the country’s statistics office Destatis showed Monday.

It compares to February’s 2.6% print, which was revised lower from a preliminary reading, and a poll of Reuters economists who had been expecting inflation to come in at 2.4% The print is harmonized across the euro area for comparability.

On a monthly basis, harmonized inflation rose 0.4%. Core inflation, which excludes food and energy costs, came in at 2.5%, below February’s 2.7% reading.

Meanwhile services inflation, which had long been sticky, also eased to 3.4% in March, from 3.8% in the previous month.

The data comes at a critical time for the German economy as U.S. President Donald Trump’s tariffs loom and fiscal and economic policy shifts at home could be imminent.

Trade is a key pillar for the German economy, making it more vulnerable to the uncertainty and quickly changing developments currently dominating global trade policy. A slew of levies from the U.S. are set to come into force this week, including 25% tariffs on imported cars — a sector that is key to Germany’s economy. The country’s political leaders and car industry heavyweights have slammed Trump’s plans.

Meanwhile Germany’s political parties are working to establish a new coalition government following the results of the February 2025 federal election. Negotiations are underway between the Christian Democratic Union, alongside its sister party the Christian Social Union, and the Social Democratic Union.

While various points of contention appear to remain between the parties, their talks have already yielded some results. Earlier this month, Germany’s lawmakers voted in favor of a major fiscal package, which included amendments to long-standing debt rules to allow for higher defense spending and a 500-billion-euro ($541 billion) infrastructure fund.

This is a breaking news story, please check back for updates.

Economics

First-quarter GDP growth will be just 0.3% as tariffs stoke stagflation conditions, says CNBC survey

Published

10 hours ago

March 31, 2025

Business Finance News

U.S. President Donald Trump speaks to members of the media aboard Air Force One before landing in West Palm Beach, Florida, U.S., March 28, 2025.

Kevin Lamarque | Reuters

Policy uncertainty and new sweeping tariffs from the Trump administration are combining to create a stagflationary outlook for the U.S. economy in the latest CNBC Rapid Update.

The Rapid Update, averaging forecasts from 14 economists for GDP and inflation, sees first quarter growth registering an anemic 0.3% compared with the 2.3% reported in the fourth quarter of 2024. It would be the weakest growth since 2022 as the economy emerged from the pandemic.

Core PCE inflation, meanwhile, the Fed’s preferred inflation indicator, will remain stuck at around 2.9% for most of the year before resuming its decline in the fourth quarter.

Behind the dour GDP forecasts is new evidence that the decline in consumer and business sentiment is showing up in real economic activity. The Commerce Department on Friday reported that real, or inflation-adjusted consumer spending in February rose just 0.1%, after a decline of -0.6% in January. Action Economics dropped its outlook for spending growth to just 0.2% in this quarter from 4% in the fourth quarter.

“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” wrote Barclays over the weekend.

Another factor: a surge of imports (which subtract from GDP) that appear to have poured into the U.S. ahead of tariffs.

The good news is the import effect should abate and only two of the 12 economists surveyed see negative growth in Q1. None forecast consecutive quarters of economic contraction. Oxford Economics, which has the lowest Q1 estimate at -1.6%, expects a continued drag from imports but sees second quarter GDP rebounding to 1.9%, because those imports will eventually end up boosting growth when they are counted in inventory or sales measures.

Recession risks rising

On average, most economists forecast a gradual rebound, with second quarter GDP averaging 1.4%, third quarter at 1.6% and the final quarter of the year rising to 2%.

The danger is an economy with anemic growth of just 0.3% could easily slip into negative territory. And, with new tariffs set to come this week, not everyone is so sure about a rebound.

“While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and DOGE cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year,” said Mark Zandi of Moody’s Analytics. “And a recession will be likely if the president doesn’t begin backtracking on the tariffs by the third quarter.”

Moody’s looks for anemic Q1 growth of just 0.4% that rebounds to 1.6% by year end, which is still modestly below trend.

Stubborn inflation will complicate the Fed’s ability to respond to flagging growth. Core PCE is expected at 2.8% this quarter, rising to 3% next quarter and staying roughly at that level until in drops to 2.6% a year from now.

While the market looks to be banking on rate cuts, the Fed could find them difficult to justify until inflation begins falling more convincingly at the end of the year.