UK Gilt Yields
Why is the cost of Government borrowing and thus consumer debt higher in the UK than in Europe? Fear not, this is not a Chancellor Reeves political rant, although the markets are yet to be convinced 15 months in that she has mastered her brief; rather it is the following: persistently high inflation at 3.8% versus 2% in the EU; fiscal sustainability: the UK’s public debt is at almost exactly 100% of GDP or 4.8% in the past year alone. The Chancellor has pledged to reduce that to 2.1% by 2030 but as we say above the jury is out on that. The last reason which is not within the remit of Chancellor Reeves is global capital scarcity i.e. the share of the globally available capital market pie. With China and Germany both previously more abstemious hoovering up larger slices, the UK is battling not least because the Bank of England is sitting on a mountain of unsold Gilts. The background to all the above is that while the EUR has the EU/ECB and the Dollar has its reserve currency status, GBP stands alone and global markets price in a risk premium to the UK which is not going to be removed in the foresee able future. Ergo UK rates/Gilt yields will remain higher.
EUR/GBP 0.8731.
A Warm and Welcoming Place
Not meeting financial targets is a well understood reason for management re-assignment or even branch closure, but Starbucks has raised the bar still further: if outlets do not clear financial hurdles and or meet the Head Office definition of being “a warm and welcoming place” the axe may well fall with 100 Starbucks already up for closure in the USA and the UK and 900 staff on the goodbye list as part of a GBP750 million cost reduction exercise. Some cynics will doubtless expect many more Starbucks closures based on that definition given the dark and grungy interiors and lack of hygiene provided as standard in most Starbucks.
GBP/USD 1.3405.