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How many times will the Bank of England cut interest rates in 2025?

2025-09-14 07:05:30 By

The speed at which the Bank of England reduces interest rates in 2025 will be a significant point of interest for financial markets, mirroring its importance in 2024. The Bank has only cut interest rates twice this year, leaving the Bank Rate at 4.75 per cent as we enter the new year.

Following the latest data release in December, financial markets anticipate a similarly slow pace of easing in 2025. Official figures released the week before Christmas revealed that inflation increased to 2.6 per cent in November, meeting expectations but confirming that inflation remains stubborn, as reported by City AM.

Wage growth exceeded market predictions, indicating that price pressures will continue for some time. Unsurprisingly, the Bank chose to maintain rates in December.

There was little alteration in the Bank's guidance, with policymakers pledging a 'gradual' rate of interest cuts due to numerous uncertainties surrounding the economic outlook. However, the voting split did surprise markets, with three out of the nine members of the Monetary Policy Committee (MPC) advocating for another cut, primarily due to the UK's recent sluggish performance.

GDP figures indicated a contraction of 0.1 per cent in October, marking the second consecutive month of shrinkage. The Bank of England predicts the economy will stagnate in the final quarter of 2024.

Indeed, since the summer, growth has been minimal at best and the Budget hasn't provided much relief for businesses. The Monetary Policy Committee (MPC) noted that the increase in National Insurance Contributions is "weighing heavily on sentiment".

As we move into the new year, many economists suggest that policymakers will be more influenced by the prospect of slow growth than persistent inflationary pressures. "Although the UK economy is facing significant wage pressures, economic activity is significantly less dynamic than in the US," said Guillaume Derrien, senior eurozone economist at BNP Paribas.

He added: "Between an ECB whose rate cuts will, admittedly, be gradual but steady, and a US Federal Reserve that is now more hawkish, the Bank of England will be in an intermediate position in 2025, with four rate cuts expected in 2025...at a rate of one cut per quarter," Ruth Gregory, deputy chief UK economist at Capital Economics, concurred. "We haven’t changed our view that the Bank will continue to cut rates by 25bps a quarter," she stated.

The rise in inflation in November was predicted long ago – it was mainly due to base effects – while the MPC pointed out that monthly pay figures can be "volatile". Persistent inflation could still pose a problem for the Bank, but at this point, sluggish growth appears to be the primary concern. Stagnation has already shown up in the official statistics.

The Monetary Policy Committee (MPC) is facing uncertainty regarding the influence of Donald Trump, particularly on interest rates and how his tariffs might affect the global economy. The specifics of the tariffs remain vague.

"Indicators of trade policy uncertainty had increased materially, but that the magnitude and the direction of the impact of any such policies on UK inflation was at present unclear. These effects might not be apparent for some time," commented the Bank during its last meeting. They indicated that President Trump is poised to significantly affect international trade policy yet refrained from estimating the potential outcomes.

Very Supportive

Professional Services

Bank of London appoints former Credit Suisse UK boss Christopher Horne as new CEO

2025-09-14 07:05:30

The Bank of London, a fintech 'unicorn' facing challenges, has today appointed the former UK head of Credit Suisse, Christopher Horne, as its new CEO. This move comes as the bank seeks to recover from a series of setbacks and the abrupt departure of its founder last year, as reported by City AM. The digital clearing bank announced that Horne, who previously led the unsuccessful Swiss lender's UK subsidiaries, would assume the role of CEO pending approval from the City regulator. "This is a unique opportunity to redefine what a bank can be — resilient, innovative, and aligned with the evolving needs of our clients and stakeholders," said Horne in a statement. "Together with the talented team at [Bank of London], I look forward to building a future that inspires trust and delivers lasting value." The Bank of London stated that Horne's appointment "highlights the bank’s commitment to innovation, governance, and long-term growth", adding that he would steer the company "into its next phase of growth and transformation". This recruitment marks the latest in a series of remedial actions taken by the firm after it was thrown into chaos last year following the exit of founder Anthony Watson. Days after Watson’s departure, City AM disclosed that the company had been served with a winding-up petition from HMRC over an unpaid tax bill, which it later settled. Shortly thereafter, investor Mangrove Capital spearheaded a £42m capital injection into the bank. Mangrove has since spearheaded a turnaround effort, appointing several new members to its board. High-profile figures including Peter Mandelson and Carlyle Group CEO, Harvey Schwarz, exited the board in October. Catherine Brown, chair of the firm’s UK Board, commented on Horne’s appointment today, stating it "reflects our commitment to building a leadership team that embodies excellence and vision". She added: "His wealth of experience will be instrumental in driving operational excellence and positioning the bank as a leader in the financial services sector."

Professional Services

IG Group boosts share buyback programme to £200m following Freetrade acquisition

2025-09-14 07:05:30

IG Group, the FTSE 250 firm, has announced plans to spend an additional £50m on share buybacks following its acquisition of trading app Freetrade. The company's six-month results up to 30 November revealed an extension of its previous share buyback programme from £150m to £200m, as reported by City AM. IG Group CEO Breon Corcoran stated: "It is pleasing to show how we can both invest in accretive growth and return capital at attractive equivalent rates of return on our buyback, all whilst safeguarding our robust balance sheet." The results showed a revenue increase of 11 per cent to £522.5m over the six months, with adjusted profit before tax rising 30 per cent from £205.7m to £266.8m. Despite IG Group's strong growth, analysts had mixed reactions to the results. Jefferies had predicted trading revenue would total £453m, but it only grew to £451.7m, although the analysts had forecast an adjusted profit before tax of only £242m. RBC, on the other hand, predicted a 12 per cent growth in revenue and a 40 per cent growth in earnings per share, compared to actual growth of 43 per cent. Corcoran added: "First half performance reflected more supportive market conditions, but we have work to do to grow active customers which will be necessary to deliver sustainably stronger growth," Last week, IG Group acquired stock trading app Freetrade for £160m, with the firm set to move to IG Group in mid-2025. The direct-to-consumer trading platform, which burst onto the scene in 2018, provides investors with commission-free options for shares, ETFs, and gilts. The announcement of its sale received mixed responses from investors, some of whom were vexed by a sale price that didn't match up to recent fundraising valuations. "CEO Breon Corcoran has re-energised the investment case for IG Group setting out the opportunity and identifying areas of improvement," remarked RBC analyst Ben Bathurst. On the positive side, IG Group's stock has seen a notable surge, climbing 25 per cent over the past half-year.

Professional Services

West Midlands Lloyds and Halifax branches to close

2025-09-14 07:05:30

A host of Lloyds and Halifax branches across Birmingham and the West Midlands have been tabled for closure over the coming months. The group is among 136 which the banking group has confirmed will be shut down. The first to close will be Lloyds and Halifax branches in High Street, Bromsgrove, at the end of May. They will be followed by Halifax, in Erdington's High Street in September, and Lloyds in Vicar Street, Kidderminster, just a few weeks later. Lloyds branches in Foleshill Road, Coventry, and High Street, Shipston-on-Stour, will both close in the first half of November and finally Halifax in Bearwood Road, Smethwick, will cease trading in March next year. Email newsletters BusinessLive is your home for business news from across the West Midlands including Birmingham, the Black Country, Solihull, Coventry and Staffordshire. Click through here to sign up for our email newsletter and also view the broad range of other bulletins we offer including weekly sector-specific updates. We will also send out 'Breaking News' emails for any stories which must be seen right away. LinkedIn For all the latest stories, views and polls, follow our BusinessLive West Midlands LinkedIn page here. Across the wider region there are branches in Staffordshire, Shropshire and the East Midlands also earmarked for closure. In total, 61 Lloyds, 61 Halifax and 14 Bank of Scotland branches will shut their doors for good between May and March 2026. The closures come weeks after Lloyds Banking Group said it would allow customers of Lloyds, Halifax and Bank of Scotland to use stores across any of its brands for in-person banking. The group has blamed the move on customers shifting away from banking in person to using mobile services but stressed it would offer affected workers roles elsewhere in the company. A statement said: "Over 20 million customers are using our apps for on-demand access to their money and customers have more choice and flexibility than ever for their day-to-day banking. "Alongside our apps, customers can also use telephone banking, visit a community banker or use any Halifax, Lloyds or Bank of Scotland branch, giving access to many more branches. "Customers can also do their everyday banking at over 11,000 branches of the Post Office or in a banking hub." The announcement means that more than 1,700 bank branches have shut or announced their intention to close since February 2022 when a voluntary agreement saw the major banking groups commit to assessing the impact of every closure. This has included both Lloyds and Halifax branches in Birmingham city centre and elsewhere across the region. It works out at an average of around 50 closures announced per month, with around 289 branches expected to shut this year.

Professional Services

Saga anticipates higher profits and strong travel growth, plans to refinance £325m debt

2025-09-14 07:05:30

Saga, the over-50s financial services and travel provider, has announced that it anticipates reporting an underlying profit before tax higher than previous forecasts. In a recent trading update, the company predicted that the underlying profit before tax for the last six months of 2024 would be slightly higher than the previous year, as reported by City AM. Saga's travel division is expected to report an underlying profit before tax "in the high single-digit millions", compared to the £1.5m reported in the prior year, indicating revenue growth of 15 per cent and passenger growth of nine per cent. Over the past six months, Ocean Cruise achieved a load factor of 91 per cent, three per cent ahead of the previous year, while River Cruise reported a load factor of 89 per cent, with combined ticket prices and onboard revenue per passenger amounting to £327, a total increase of 15 per cent from last year. "We continued to generate strong demand for both our cruise and travel businesses," stated Saga CEO Mike Hazell. Last month, Saga announced a 20-year partnership with Belgian insurance giant Ageas for motor and home insurance, which will see Saga’s price-comparison website, pricing, claims and customer service activities taken over by the insurer. However, earlier this week, City broker Peel Hunt downgraded Saga’s stock rating, noting that the firm faced "a refinancing hurdle" this year. The funds from the partnership with Ageas will be utilised by the firm to refinance £325m of outstanding debt by spring this year. Following the deal, Peel Hunt reduced its price target for the stock to 120p. Since the beginning of 2025, Saga’s shares have declined by over nine per cent. Looking forward, Saga reported that both Ocean Cruise and River Cruise's booked load factors are surpassing last year's figures. The company's River Cruise division is scheduled to launch a new ship, the Spirit of the Moselle, in July 2025, which will boost capacity. Currently, the booked revenue for travel stands at £126m, marking a 10 per cent increase compared to the same period last year, with 39,000 passengers booked in, an 11 per cent rise from the previous year.

Professional Services

London and Home Counties hardest hit by huge capital gains tax burden

2025-09-14 07:05:30

London-based investors and those from the Home Counties are poised to be the most affected by the upcoming rise in capital gains tax in April, prompting advice from a top accountancy firm to shift assets into more tax-efficient schemes. UHY Hacker Young, accountants, have provided data exclusively to City AM that taxpayers in the capital are expected to shoulder an additional £430m in capital gains tax (CGT) this year, comprising 30% of the total increased revenue, as reported by City AM. Neighbouring counties such as Buckinghamshire, Surrey, and Hampshire are also set to contribute substantially, with an additional £306m forecasted. In her initial Budget delivered towards the end of last year, Chancellor Rachel Reeves chose to increase both the lower and higher rates of CGT. Basic-rate taxpayers, earning up to £50,270 annually, are now subject to a CGT rate of 18%, a jump from the previous 10%. Higher-earners will experience an increase from 20% to 24% in their CGT when the changes take effect in April. Phil Kinzett-Evans, a partner at UHY Hacker Young, heavily criticised the tax increases, suggesting they could hinder economic growth and reduce market liquidity. "One of the problems with increasing capital gains tax is that it discourages investors from investing in UK growth companies that are listed on the stock market – exactly the kind of investment we need to see more of in the UK," he stated. "It [also] forces investors to consider holding on to assets rather than liquidating them, locking up money that would otherwise fuel the economy at a time when economic activity is stalling." The study, conducted through a series of Freedom of Information requests, revealed that residents of Kensington and Chelsea will be hit hardest by the increases, facing an additional £108m in CGT this year. This figure is more than double the expected receipts from the next highest council, which UHY Hacker Young predicts will be Westminster with an extra £53m in capital gains tax contributions.

Professional Services

Bank of England's Carolyn Wilkins highlights market discipline amid UK bond turmoil

2025-09-14 07:05:30

The recent upheaval in the UK's bond market is a clear indication that the "dragons of market discipline are alive and well," according to a statement made today by Carolyn Wilkins, an external member of the Bank of England's financial policy committee (FPC). Speaking at Fitch Ratings, she acknowledged the recent instability in the gilt market, as reported by City AM. "Recently we’ve seen orderly movements in global yields as one would expect given news that markets consider relevant to the global outlook." She further noted, "There have been spikes in yields in a number of individual countries in recent years, including the UK, that indicate the dragons of market discipline are alive and well," The UK government bonds experienced a significant sell-off, largely driven by the anticipation that US interest rates would remain high for a longer period due to persistent inflation. The yield on the 10-year gilt reached 4.93 per cent, its highest level since the financial crisis. Gilt yields are closely linked to movements in the US Treasury market. Although yields have almost entirely recovered following soft economic data, the FPC remains concerned about the high levels of public debt, both in the UK and globally. "The FPC that I sit on is of the view that global sovereign debt risks are material," Wilkins stated, adding that global public debt is likely to approach 100 per cent of GDP by the end of the decade. Concerns are intensifying among market participants about the sustainability of public debt externally, which could affect the internal cost of debt servicing for the UK government, as well as for households and businesses, an expert emphasized. In recent times, a slew of commentators have sounded the alarm on the rising debt in advanced economies. Significantly, the Congressional Budget Office in the United States highlighted an alarming trend on Friday, stating that US government debt is likely to exceed its post-World War II record, a projection that's yet to account for the impact of the tax cuts introduced by Donald Trump. "The fiscal situation is daunting, the debt trajectory is unsustainable," remarked Phillip Swagel, director of the CBO, after the office published its report.

Professional Services

Jobs saved as Horizon Works Marketing assets acquired

2025-09-14 07:05:30

Jobs have been saved at an established North East marketing agency following its administration. Horizon Works Marketing, which had operated from a base in Cramlington, called in administrators following challenges stemming from the Covid pandemic. The firm's founder says it is now looking positively to 2025 after a new company has been established to continue trading under the Horizon Works name, with 10 jobs secured in the process. Insolvency experts at KBL Advisory were appointed to Horizon Works late last year. Founder and managing director Samantha Vassallo acquired the assets of Horizonworks Marketing Limited and has established Horizon Works Limited. The business, which is now based out of the Blyth Workspace building at the Port of Blyth, was originally set up in 2010 and has established a specialism in business to business marketing services for innovation and technology-led manufacturing and engineering businesses. Its team of marketers, writers, designers, digital experts and PR and communications specialists provide a range of services including strategy creation, marketing campaigns, SEO, brand development, media relations and digital development. In the 15 years since its inception, Horizon Works has carried out work for a variety of clients across the automotive, process, engineering, energy and technology sectors - many of them North East-based and others further afield. It is also an affiliate partner of several sector-based groups such as the Engineering and Manufacturing Network, a Fit for Defence partner of Make UK Defence, and is a member of the North East Automotive Alliance (NEAA), NOF and the Entrepreneurs’ Forum. Samantha Vassallo, managing director of Horizon Works, said: "The restructure was necessary due to legacy financial pressure resulting from the Covid-19 pandemic. All jobs have been safeguarded and the specialist team that Horizon Works has built up over 15 years remains in place.

Professional Services

Bank of England to slash rates much faster than markets expect, Goldman Sachs says

2025-09-14 07:05:30

Goldman Sachs has posited that markets are significantly underestimating the likelihood of the Bank of England accelerating interest rate cuts. Traders currently foresee only two reductions this year, with an additional cut expected in 2026, which would bring the benchmark Bank Rate down to 4.0 percent from its present 4.75 percent, as reported by City AM. Despite concerns over persistent inflationary pressures within the UK economy and predictions of a headline rate surge to above three percent by spring, recent figures indicate private sector pay growth soared to 6.0 percent in the three months leading up to November, surpassing forecasts. The US investment bank acknowledged the "uncomfortably high" price pressures but noted "several indications" that the medium-term inflation outlook is easing. Citing factors such as a significant downturn in growth, a likely deceleration in household real disposable income, and the potential impact of escalating trade tensions, analysts including Sven Jari Stehn anticipate a modest 0.9 percent economic expansion for the UK in 2025, lagging behind the consensus estimate of 1.3 percent. Analysts also highlighted "notable signs of underlying cooling" in the labour market from various business surveys and recent unemployment data, suggesting this could help moderate wage increases. "We are sceptical that Bank Rate can stay above four per cent persistently – as priced by financial markets – without materially weakening the economy and thus inflation," they said. Goldman Sachs predicts a drop in interest rates to 3.25 per cent by mid-2026. "While it is possible that the BoE will slow the pace of cuts if underlying inflation fails to make progress, we believe that a step-up to a sequential pace of cuts in response to weaker demand is actually more likely," they argued. Investors are anticipating another rate cut from the Bank in February due to growing concerns about the economic outlook.

Professional Services

Lloyds and Natwest 'too good to ignore' - Barclays analysts

2025-09-14 07:05:30

Shares in Lloyds and Natwest have been deemed "too good to ignore" by Barclays analysts, who foresee bumper profits driven by higher interest rates and low unemployment. The analysts have revised their profit forecasts upwards, anticipating a significant increase in net interest income (NII) as the market adjusts its expectations for the pace of interest rate cuts in the future, as reported by City AM. NII, which measures the difference between the interest banks pay on deposits and what they earn from loans and other assets, is expected to rise with higher rates, allowing banks to charge more for lending. According to Barclays' projections, the Bank Rate is set to reach four per cent by the end of this year and then decrease to 3.5 per cent by the end of 2026, which is notably higher than predictions from three months prior. "A repricing higher in UK rates expectations sees us lift our NII estimates," stated Aman Rakkar and Grace Dargan in a note released today. Their rate forecasts are slightly more bullish than current market pricing, indicating potential upside risks to Barclays’ projections. Despite the prospect of sustained higher interest rates, the analysts maintain that credit risks for UK banks "remain low". They suggest that even if the unemployment rate were to rise to around five per cent, it would be a "non-event" for Lloyds and Natwest due to their prime loan books. Rakkar and Dargan also noted that broader market conditions have become more favourable. "Deposits are growing, competition has eased, savings rates are being cut...and mix is shifting positively," the analysts noted. They also suggested that the recent sell-off in UK government debt could provide a boost for Natwest shares. Higher yields make gilts an "attractive asset class", which could prompt banks to shift from "politically sensitive reserves" – deposits held at the Bank of England which earn Bank Rate – and opt for higher returns on gilts. Barclays analysts predict that thanks to these factors, Natwest will report pretax profit of £6.6bn in 2025 and £7.5bn in 2026, which is eight per cent and ten per cent ahead of consensus respectively. Lloyds is projected to report underlying pretax profit of £6.5bn in 2025 and £8.0bn in 2026, slightly less than 11 per cent ahead of market consensus for both years. "UK banks (are) on course to deliver among the strongest earnings growth and capital returns across European banks, at an ongoing discount," they concluded.

Professional Services

JP Morgan highlights UK policy strain as gilt yields soar, impacting government borrowing costs

2025-09-14 07:05:30

JP Morgan has issued a warning that UK policy credibility is "coming under pressure" in the wake of ongoing disturbances in the gilt market and concerns over sluggish growth. Gilt yields, which mirror the cost of government borrowing, have seen a significant rise in recent weeks, as reported by City AM. The yields on both 10-year and 30-year gilts have ascended for six straight days, resulting in the yield on the 10-year bond reaching a post-2008 peak, while the 30-year yield hit a post-1998 high. These movements in gilt yields are largely in tandem with US Treasury yields, as market participants have reached the consensus that global interest rates must escalate to curb inflation. However, JP Morgan analysts have pointed out that the market shifts in the UK have been "exacerbated" by worries over an "expansionary fiscal policy" that could stoke inflation further. This comes after Chancellor Rachel Reeves' first Budget, which saw an increase in spending plans by approximately £70bn annually for the next five years. "For now, the move has been orderly and there is no real case for the BoE to intervene on financial stability grounds as it did after the 2022 mini-Budget," wrote the JP Morgan analysts. They also noted that the mix of rising borrowing costs and notably weaker recent growth will likely elevate the deficit trajectory and constrain flexibility within the government's fiscal rules. There are indications that the Treasury is gearing up for "ruthless" public spending cuts to ensure adherence to these fiscal regulations. The Prime Minister's spokesperson confirmed that "nothing (was) off the table when it comes to delivering value for money for taxpayers". Analysts from JP Morgan noted that while faster interest rate cuts could relieve some pressure on the government, most surveys indicate a significant rise in inflation expectations.