May Update

National Update

The limited local elections at the beginning of May, involving 23 mainly county and unitary councils, saw massive losses for Labour and the Conservatives, losing 66% and 68% of their councillors respectively. Reform UK did very well, gaining 677 councillors, control of 10 councils, two regional mayors and an MP! The LibDems also made good gains, increasing their councillors by 31%. Both the major parties are considering what they need to do, following this bloodbath, to counter Reform UK. We will see if this is a UKIP type ‘flash in the pan’ or a sustainable change in the political landscape in England.

International trade wars induced by the USA led to massive falls in stock markets around the world, which then rallied as Trump reversed some of his tariffs. The month saw various new tariffs and reversals leading to market instability and uncertainty, especially in the gilts market which has seen a massive sell-off around the world. Subsequent interest increases were alarming and may mean the Bank of England will have to drop the base rate further at its next meeting in May.

Economy:

• Inflation Rates – In April it was reported that inflation was at 2.4%.  Significantly, food inflation was reported to have hit an 11-month high. Food prices increased by 2.6% year-on-year in April, up from 2.4% in March, marking the fastest annual rise since May of last year, according to the British Retail Consortium.
• Interest Rates – The Bank of England interest rate remains 4.5%. It is anticipated that the 8^th May meeting will see interest rates cut by 0.25%, or possibly 0.5%.
• GDP Growth – Perhaps not surprisingly given the trade wars , GDP growth has been limited. EY have downgraded the overall projected growth for 2025 from 1.6% to 0.9% with trade disruption expected to weaken the global economy and constrain consumer and business spending further. GDP reported for the three months to April was 0.7%, but the economy did not grow at all in April.
• House Market prices- It was reported in April that housing price growth had slumped and is forecast to slump further as the market loses momentum. However, there was a record number of housing sales as buyers attempted to miss the Stamp Duty rise.
• Unemployment rates – The latest ONS report on unemployment were released with disappointing results. It was reported that vacancies have continued to fall for the 33^rd consecutive quarter. Many business have blamed the impending changes to employment rights bill and the increased employer donations to employees national insurance.
• House Bills Increases – Dubbed ‘Awful April’, many experienced heightened household bills as everything from Council Tax to Energy bills saw increases. A large majority of households in England (88%) will now face the maximum permitted council tax increase of 4.99%, adding an average of £109 to a typical Band D bill. Meanwhile, Bradford, Newham, Birmingham, Somerset, and Windsor and Maidenhead have been granted approval to raise council tax beyond the 4.99% limit. Harlow in Essex is the only council in England not to increase its council tax.

Bills in Parliament:

• Renters Right Reforms – This bill has continued into the committee stage on the 28^th of April.  The bill proposes to abolish fixed-term assured tenancies and provide more assurances for tenants.
• Employment Rights Bill – The Lords have begun changing and updating the Employment Rights Bill. Major topics to be changed and updated on the Bill include ‘fire and rehire’, zero-hour contracts and unfair dismissal.
• British Steel Bill – The British Steel Bill was an emergency bill to save British Steel Scunthorpe Plant. Business secretary Jonathan Reynolds said the government was compelled to step in to rescue the Scunthorpe plant after Jingyi, the Chinese firm that acquired British Steel in 2020, revealed it was facing daily losses.

Current Affairs:

• Local Elections took place in 1 May – local elections have gone ahead in many counties with both the Conservatives and Labour party losing significant numbers of councillors, with the winners Reform UK, the LibDems and, to a lesser degree, the Green Party.
• Housebuilding in London dropped in April to its lowest level since the 2008 financial crisis, with only 1,210 new private homes started in the first quarter of this year, according to analysts. Developers report being hit by a ‘perfect storm’ of challenges, including delays in the planning process, sharply rising construction costs, flat property prices, a lack of affluent off-plan buyers, and persistently high interest rates.
• Silvertown Tunnel Opens – Motorists began using the Silvertown Tunnel for the first time on 7 April , with car drivers paying up to £4 to access the first new road crossing beneath the Thames in 58 years. London Mayor Sadiq Khan said he was “very proud” to have delivered the £2.2bn project, and unusually acknowledged his predecessor, Boris Johnson, who originally proposed the idea!
• Luton Airport expansion – At the start of the month, it was announced that the Luton Airport expansion had been agreed. London Luton Airport announced plans to nearly double its annual passenger capacity to 32 million by 2043, following government approval for its expansion, which includes building a new terminal. A spokesperson for Prime Minister Sir Keir Starmer said he was “pleased” with the decision, emphasising that strengthening national infrastructure is essential for driving growth and creating jobs across the UK.
• Pensions Reforms – It is being reported that the Government is strongarming pension funds to honour a proposed voluntary commitment to invest in more UK assets. This is a continuation of several financial reforms brought in by Chancellor Rachel Reeves in the hope of encouraging investment in UK companies. It is anticipated the plans will be officially announced at her Mansion House speech in July and that it will be agreed.

Government in conflict with Trade Unions over public sector pay – The government has made it clear that there is no additional funding available for any rises above 2.8% for public sector pay increases. However, it has been recommended that NHS staff receive at least a 3% increase and 4% for teachers. The Treasury has stated that they will carefully consider the decision. Stephen Kinnock has asked that ‘ Trade Unions work constructively with the government and also consider the financial reality of the government.’