Good morning. Conservative party leadership contender Rishi Sunak has warned that it would be “complacent and irresponsible” to ignore the risk of markets losing confidence in the British economy, as wagers against UK government debt sent short-term borrowing costs in the gilt market soaring.
In an interview with the Financial Times, Sunak said his rival Liz Truss had made unfunded spending commitments that he feared could further raise inflation and interest rates and increase UK borrowing costs.
The former chancellor said he “struggled to see” how Truss’s promises of sweeping tax cuts and help for families struggling with soaring energy costs “add up”.
Truss is widely expected to be named as the UK’s next prime minister on Monday, but Sunak refused to concede defeat, claiming that many Tory activists were waiting until the last minute to vote.
Sunak said he did not believe the Bank of England needed a new mandate — Truss has called for a review of the independent central bank’s remit — arguing that it had the tools needed to fight inflation.
Investors are betting on a surge in UK borrowing costs as spiralling energy prices force the BoE to sharply increase interest rates. The two-year gilt yield, which reflects market expectations for BoE policy, touched 3 per cent on Tuesday for the first time in 14 years.
Thank you for reading FirstFT Europe/Africa — Gary
Five more stories in the news
1. Cineworld incorrectly reports largest shareholder The world’s second-biggest cinema chain misidentified its largest shareholder in its most recent annual report as it struggles to keep track of changes to its complex ownership structure. Cineworld is on the verge of filing for Chapter 11 bankruptcy in an attempt to restructure nearly $9bn in debt and lease liabilities.
2. UK probes tax status of remote workers The taxation of UK employees working from home or overseas will face greater scrutiny under a consultation by the Office of Tax Simplification, an independent government adviser, into hybrid and remote working, and whether staff abroad and their employers will be liable for income tax and social security outside the country.
3. Inflation’s ‘second wave’ to hit construction Albert Manifold, chief of CRH — the world’s largest building materials company, whose projects include London’s new east-west Crossrail line and the HS2 railway — has warned the construction industry faces a “second wave” of inflation as energy prices drive up costs from wages to logistics.
4. Edtech companies ‘breaking UK data laws’ An investigation by children’s digital rights charity 5Rights claims edtech companies and free remote learning software that was adopted by schools during the coronavirus pandemic break UK data laws by leaving children’s data vulnerable to third-party tracking and commercial exploitation. Among the products it cited were Google Classroom and ClassDojo.
5. Mikhail Gorbachev dies Mikhail Gorbachev, the last leader of the Soviet Union, has died aged 91 after a “serious and long-term illness”, according to Russian state media. Although he ruled for less than seven years, the consequences of Gorbachev’s tenure rewrote the global order. He will be buried at Novodevichy cemetery in Moscow alongside his wife Raisa, who died in 1999.
The day ahead
UK The FTSE Group’s quarterly review of the FTSE UK index series is released; fund manager Abrdn and Hikma Pharmaceuticals are expected to fall out of the FTSE 100. The final Conservative party hustings takes place in the evening. Here’s what FT readers think about the party and its future.
Economic data Eurostat releases eurozone flash August inflation figures, which are expected to hit a record of at least 9 per cent. France and Italy have preliminary August consumer and July producer price indices; the former also publishes second-quarter GDP, as does India. Germany publishes August labour market figures and Kenya and Uganda release August inflation data.
Nord Stream 1 Russia will halt gas supplies through its largest pipeline to Germany for three days of maintenance starting today. Fears that the gas flow will not resume, which alarmed officials during repairs in July, have resurfaced.
Corporate earnings US spirits and wine company Brown-Forman, Russian energy business Lukoil, cloud computing specialist Veeva Systems and Dalata Hotel Group, which operates properties in the UK and Ireland, will release results.
What else we’re reading
Retail traders rally behind ‘meme baron’ Ryan Cohen — chair of video game retailer GameStop, co-founder of pet supply store Chewy.com — is one of the most influential figures among legions of amateur investors. The 37-year-old’s tweets and investments, such as in Bed Bath & Beyond, on which he gained about $60mn, are dissected on social media sites, with sometimes volatile results.
Tough economic times lie ahead If the planned tightening of monetary policy is likely to generate a recession in the US, what might happen in Europe? The answer is that the recessions there are likely to be deep, given that the energy price shock is so large, writes Martin Wolf.
Where have all the teachers gone? As the rising cost of living squeezes salaries, schools across England are struggling to find teachers, diminishing an education system that was already facing a widening skills gap and exacerbating the challenge of tackling the UK’s productivity problem.
Chelsea’s new owners’ bet on Premier League English football club Chelsea’s new owners — a consortium led by US financier Todd Boehly and California investment firm Clearlake Capital that acquired it from Russian oligarch Roman Abramovich — have spent freely during the summer transfer window, hoping success on the pitch will unlock revenues from media rights and commercial deals.
Don’t ban private jets — make them a green testing ground Public anger is growing against the carbon-belching elite, with rising calls to ban private jets. Pilita Clark asks, should regulators instead turn such wasteful means of getting from A to B into a testing ground for new technologies and fuels?
A sea kayaking expedition to Scotland’s Iona and the Ross of Mull, following in St Columba’s sixth-century wake, reveals secret beaches and sacred spaces.
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