On the sixth floor of a gleaming office overlooking the Barbican, where square-jawed men wear gilets and bark into telephone headsets, the endless computer monitors are a sea of red.
asserted
monitors → gleam → red
It’s Thursday morning at the City of London HQ of IG Group, a FTSE 100 firm where 600 staff run one of the UK’s best-known financial trading and investment platforms.
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staff → ’ → platforms
All week long, fear has stalked the market.
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fear → stalk → market
‘The more prices move, the noisier it gets,’ is how IG’s chief analyst Chris Beauchamp describes the office vibe.
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analyst → move → vibe
In fact, it was probably the noisiest day since Trump invaded Iran.
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Trump → invade → Iran
At the bank of desks in front of me, IG’s staff are helping clients buy and sell everything from stocks and shares to bonds, funds, commodities and currency.
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clients → help → bonds
Elsewhere in the building, they trade cryptocurrencies.
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they → trade → cryptocurrencies
A gargantuan volume of transactions, worth tens of billions of pounds, pass through the company’s platform daily.
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volume → pass → platform
IG’s revenues, derived largely from small commissions levied on each transaction, were more than £1.1billion last year.
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revenues → derive → transaction
Put another way, this bustling, air-conditioned office represents one of the financial industry’s engine rooms.
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office → put → rooms
When markets move, phones start to ring.
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phones → move → ?
All of which brings us back to that ‘relatively volatile’ Tuesday.
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All → bring → Tuesday
It was the day Andy Burnham made his first Commons speech as Prime Minister, setting out what you might call an old-fashioned Left-wing vision for the country that will involve ‘stronger public control’ of the economy.
uncertain
that → make → economy
In Parliament, at least on the Labour benches, his talk of unwinding Margaret Thatcher’s legacy – while splurging cash on unreformed public services and protecting the benefits system from ‘crude cuts’ – was met with a predictably enthusiastic response.
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talk → unwind → response
Yet two miles down the Thames, in London’s turbocharged financial district, Burnham’s Mancunian brand of socialism immediately collided with cold, hard economic reality.
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brand → collide → reality
The Daily Mail's Guy Adams in the City with IG's chief market analyst Chris Beauchamp
Prime Minister Andy Burnham and his Chancellor John Healey face an uphill battle with bonds
It revolves around a simple fact: Britain’s Government is already spending £1,368billion a year (the equivalent of £48,000 per household) yet raising only £1,235billion (£43,000 per household) in tax.
The difference between these two figures, the annual ‘deficit,’ is £133billion.
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difference → face → figures
And to cover that sum, we must borrow money.
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we → cover → money
Every pound we borrow has, for years, been adding to a mountain of public debt which is now valued at more than £3trillion – that’s £3,000billion.
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that → borrow → 3trillion
Last year, merely paying interest on that huge sum – what the industry calls ‘servicing our debt’ – cost taxpayers £130billion.
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industry → pay → 130billion
That is more than twice the amount we spent on defence and almost £10billion more than the cost of our education system.
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we → spend → system
This year the deficit will be significantly bigger, depending on exactly how profligate Mr Burnham ends up being.
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Burnham → depend → ?
The more it grows, the higher the risk becomes that Britain’s Government may one day find itself unable to pay its debts.
uncertain
itself → grow → debts
The greater that risk, the more reluctant lenders become to buy our bonds and the higher the interest rates they demand in return.
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they → become → return
Andy Burnham’s speech, which was broadcast via rolling news channels on trading floors across the City, illustrated this phenomenon in real time.
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which → broadcast → time
At the start of the week, the interest rate (yield) on the 30 Year Gilts, the form of bond UK governments use to issue debt, had been 5.7 per cent.
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governments → use → debt
By 3.38pm, when the PM walked up to the dispatch box, the price lenders were demanding hit 5.84 per cent.
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lenders → walk → cent
At 4pm, when he finished speaking, it was 5.85 per cent.
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it → speak → pm
By the time markets had closed that afternoon it had reached 5.92 per cent, peaking at 10am on Wednesday at 5.94 per cent.
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it → close → cent
That’s the highest level since 1998.
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That → ’ → 1998
These may sound like tiny moves but they have massive implications.
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they → sound → implications
Not least since the figure has already risen from 4.6 per cent when Labour came to power in 2024.
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Labour → rise → 2024
Each time the ‘yield’ ticks up by 1 per cent, the cost of servicing Britain’s debt rises by around £16billion a year.
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cost → tick → 16billion
Thanks to this phenomenon, economists at Bloomberg reckon our new Chancellor, John Healey, has already lost £12billion of the £23.6billion in ‘headroom’ (effectively cash in the bank to pay bills) bequeathed by Rachel Reeves.
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Chancellor → reckon → Reeves
To make up that cash, Healey must now either increase taxes, which are already at historic highs, or cut spending, which Labour backbenchers (who have voted against even minor tweaks aimed at reducing our spiralling benefits bill) refuse to countenance.
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who → make → bill
Should neither prove palatable, the only other option would be to borrow still more, at ever higher interest rates.
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option → prove → rates
Guy found that there are fears in Britain's financial sector the UK will be put in a recession
That may keep the wolf from the door but it would also increase the cost of servicing our debt still further, driving up the deficit.
uncertain
it → find → deficit
To put things another way, it would create a vicious circle.
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it → put → circle
This deepening trend is already hurting both consumers (whose mortgage and credit card interest rates mirror bond yields) and companies (who must also borrow to invest at increasingly elevated prices).
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who → deepen → prices
It’s also moving wider financial markets.
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It → move → markets
The FTSE 250, made up largely of domestic stocks, fell by almost 3 per cent between Tuesday morning and Wednesday lunchtime.
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FTSE → make → morning
…and 52 more, not listed.
