November 27, 2025 • 17 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Chancellor of the Exchequer Rachel Reeves did enough in her budget to help her and Prime Minister Keir Starmer survive, building back a vital fiscal buffer and expanding welfare.
(2) The UK government is expecting a bigger windfall from major reforms to a preferential tax system for wealthy residents, despite a growing number of ultra-rich individuals relocating to other territories.
(3) Hong Kong’s deadliest residential fire in decades has killed at least 44 people and left hundreds missing, throwing fresh scrutiny on the city’s housing standards as Chinese President Xi Jinping urges all-out efforts to reduce casualties
(4) Global equities were close to erasing their November losses as rising bets for Federal Reserve interest-rate cuts revived markets after a selloff sparked by worries over frothy AI valuations.
(5) US economic activity was little changed in recent weeks, though overall consumer spending declined further except among higher-end shoppers, the Federal Reserve said.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:09):
This is the Big Big Day, Baker at podcast. Good morning.
It's Thursday, the twenty seventh of November. I'm Caroline Hepga
in London. Coming up today, Chancellor Rachel Reeves ramps up
UK tax increases as Labour's hikes outstript what any government
has done in the UK in more than fifty years.
Hong Kong's worst far in half a century leaves dozens
(00:31):
dead with hundreds still missing. Plus private capital hits a wall,
while obstacles in Europe are proving to be insurmountable for
some private equity firms. Let's start with a roundup of
our top stories. Chancellor Rachel Reeves raised taxes on one
point seven million workers and the wealthy to pay for
(00:52):
welfare spending and build up her fiscal headroom. It's her
second tax hiking budget in a row, with levees on
safe properties worth more than two million pounds and a
range of other measures. Speaking after her budget proposal was
announced in an exclusive Bloomberg interview, the Chancellor refused to
(01:12):
rule out more tax hikes in future.
Speaker 3 (01:15):
I took the fair unnecessary choices today, but my focus
has been and always will be on growing our economy
so that we can keep taxes down and have the
money we need to invest in our public services.
Speaker 2 (01:28):
Although the Chancellor touted growth, the Office for Budget Responsibility
downgraded economic growth in every remaining year of the parliament.
But investors have so far reacted positively to the UK Budget,
which set aside more money as a buffer against guilt
market swings. So did labour rank and file MPs, who
(01:49):
were pleased to see a cap on welfare payments to
families with multiple children lifted, but questions remain about whether
Reeves did enough in her budget to help her and
Prime Minister Kis Starmer survive. The pair are Britain's most
unpopular prime minister and Chancellor since polls began in the
nineteen seventies. The UK government is expecting a bigger windfall
(02:13):
from its taxes on non domiciled residents, despite reports that
many of them are leaving. The Treasury expects to take
in nearly forty billion pounds from people who live in
Britain but keep their wealth overseas. Billionaire founders like Revolutes,
Nick Starronsky and Checkout dot COM's Gilian Pouzas are among
those who have publicly left Britain thanks to the measures.
(02:39):
Now to Hong Kong, where the deadliest residential fire in
decades has killed at least forty four people and left
hundreds of others missing. An eight tower housing block has
been burning for over twenty hours, throwing fresh scrutiny on
the city's housing standards are China correspondent midmn Low says
a number of issues could have caused the blaze.
Speaker 1 (03:02):
The CrOx of the issue is what exactly causes fire,
and authorities are still finding that out. But they did
say that the spread of the fire was much faster
and quicker than usual. This is a very old estate,
over forty years old, and it was undergoing heavy renovations.
There were ben rule scare foldings, green mesh surrounding the buildings,
(03:22):
and authorities said some of the buildings were not up
to complyance standards.
Speaker 2 (03:26):
Bloomberg's me and Minlow speaking their rescue operations are expected
to stretch into this evening, more than twenty four hours
after the blaze started. Chinese President Jijingping has urged all
out efforts to reduce casualties. Now, global equities were closer
to erasing their November losses as rising bets for Federal
Reserve interest rate cuts that have revived markets, the MSCI
(03:49):
All Country World Index climbing for a fifth straight session,
cutting its November drop to just half of one percent.
The moves track increased confidence for fire rate reductions, with
money markets pricing in a roughly eighty percent chance of
a quarter point reck rate cut next month and three
more by the end of twenty twenty six from the US.
(04:12):
The moves come as the Beige Book survey of regional
businesses showed that employment declined slightly and prices rose moderately,
with economic activity little changed. In recent weeks, two members
of the US National Guard are in critical condition after
being shot near the White House. The suspect was also
(04:34):
shot before being taken into custody by other Guard members
and Washington DC police authorities say the suspect is a
twenty nine year old Afghan national. A short time after
his nationality was released, the US government said that quote
effective immediately. The country has stopped processing immigration requests from
Afghan nationals. President Donald Trump has been reacting to the events.
Speaker 4 (04:58):
As heinus asw was an active evil and active hatred
and an active terror. It was a crime against our
entire nation. It was a crime against humanity. The hearts
of all Americans tonight are with those two members of
the West Virginia National Guard and their families.
Speaker 2 (05:20):
That was the President speaking. He also ordered an additional
five hundred National Guard troops to Washington following the shooting.
Those are some of our top stories for you this morning.
Let's bring you up to speed with the markets right now.
So we have no cash treasuries trading, of course because
of the Thanksgiving Day holiday. Hope you're having a good
(05:42):
day if it's beginning for you. In terms of for
the masci Ash Pacific Index up by four tenths of
one percent, Asia equities gaining for forte in a row.
The pound yesterday climbed above a dollar thirty two, positive
reaction from some investors to the budget. Guilts also rally.
Thirty year guilt yields fell by twelve basic points this morning.
The dollar is down by a tenth of one percent
(06:03):
and all prices are dropping half of one percent, with
gold down three tenths too. So those are the markets.
In a moment, we will bring you the latest on
the UK budget as well as the challenges facing private
equity in the European insurance space. So we'll get to that,
but this has caught my eye today. The US Transport
Secretary Sean Duffy is calling for more civility in the skies.
(06:26):
But as bloombergs leanne Al Roshdan has been writing, what
he really means is don't wear pajamas in public. However,
as she points out, what if your pjs are actually
the kind of first class swag that are provided by
a lot of airlines. Well, Duffy's requests set off this
huge public debate that got my attention today. I mean,
(06:46):
where angels fear to tread is what I think. The
reporters this week were told by Duffy, let's try not
to wear slippers and pajamas as we come into the airport.
The Trump administration has been strangely focused on sort of
looking the part, and Duffy is pledged to revive the
golden age of travel, of course, perhaps overlooking all of
(07:06):
the shortcomings of modern air travel, overflowing airports and flight delays,
and of course one carrier turning this whole thing on
its head. You've guessed it cheap and cheerless Ryan Air.
They are known for trolling their own customers and they
say we reserve the right to refuse service to anyone
wearing jeans on a four hour flight, so that you
(07:27):
have it. Shawn Duffy, the US Transports Secretary, in his
attempts to try to get rid of pjs on planes
and in airports, think you might need some luck with that.
I'm going to put a link to Lean's Peace though
in our show notes for you, and you have a
look all of that. Right. Let's think about yesterday's UK
(07:47):
budget now that the markets in the public have had
a bit of time to digest it. After months of
speculation and a very unfortunate pre release from the Office
Budget Responsibility, yesterday the UK Chancellor Rahed Reeves delivered one
of the biggest tax raising budgets of recent decades, driven
by a freeze on income tax thresholds beyond twenty twenty
(08:08):
eight and higher levees on areas including property, pensions, gambling
and dividends. Joining me now to discuss is our UK
politics reporter James Wilcock. James, good morning, Wow. Yesterday was
a huge day. The budget was really aimed at two
groups at market and at Labour MPs. That tells you
(08:28):
a lot about the current state of this government, doesn't it.
Speaker 5 (08:32):
It does. I mean, look, there were a lot of taxes.
There was a whole laundry list which adds up to
twenty six billion pounds and that you've got to put
that twenty six billion pounds in context, Caroline. Last year,
when Rachel Reeves came into government, she put up taxes
by forty billion pounds roughly, and that was one of
the biggest tax rising budgets on record and sort of
(08:53):
in modern British politics. To come back again after promising
she would not do this is a mentor's moment for
her career as the chancellor of the first Labor government
in fifteen years. Why has she done that? And to
this the story is about one surprise and two winners.
The surprise is that we were all expecting a massive
(09:14):
downgrade in her fiscal headroom due to the Office for
Budget Responsibilities forecasts. Now, although they brought down the growth
downgrade because of inflation and people being pulled into higher
tax brackets, they actually forecast that RACHERL. Reeves would have
far more money to play with. So where did that
money go, and these are the two winners. First it
went to the markets, arguably Rees putting money into her
(09:37):
fiscal buffer, so she now has far more room to
protect its guilt market swings and markets racted quite positively
to that yesterday. And then it went to welfare's budget,
the scrapping of the two child benefit cap, which broadly
most MPs I was talking to and also our rest
of our politics team went that was something they could back,
that they could sell on the doorstep and they could
(09:58):
say it's a progressive government.
Speaker 2 (10:00):
Yeah. And so to the reaction, and I'll just quote
as one example, the Daily Mail's front page this morning,
spiteful raids on strivers to lavish billions on benefit Street.
I mean, it's only a kind of straw pole view,
isn't it. What has been the reaction?
Speaker 5 (10:18):
I mean, look, there was this kind of initial shock
at a major leak from the Office of Budget Responsibility
when they posted their entire comic analysis about half an
hour before Red spoke, and that kind of honestly had
a lot of the journalists reeling. And but now things
are settling. Like you said, you talked about the Mail,
the ft talks about smashing tax records the Times high welfare,
(10:40):
high tax. The I quotes the ifs is summary of
the budget saying it's spend now, pay later, budget shambles
your mail line.
Speaker 3 (10:48):
There.
Speaker 5 (10:49):
There is this broad acceptance that the way this has
settled amongst sort of the at least the press is
people are going to be paying more and that money
is going to be going towards welfare. I think the
question for the Rachel uses now, how does she then
sell that message to the public, as the rest of the
Labor government do of this is going to generate a
better society, better people, better public services. That will be
(11:11):
sort of in the weeks to come, how the political
reaction shapes out. I think it's worth also pointing to
we are yet to see really the full sort of
market reaction as this budget gets digested. That's what we're
looking for today, in and sort of the coming weeks.
Speaker 2 (11:24):
Yes, and the issue, as you've sort of alluded to,
is that a lot of the measures are also backloaded
to the end of the parliament that could present some risks.
Speaker 5 (11:34):
Yeah, this isn't your first budget, I see, Caroline. Look,
this is a trick that Jeremy Hunt used towards the
end of the Conservative government and is a bit sneaky.
It's politically expedient because what you do is you front
load all the spending into now, so now as the
good times, and you say the cuts will come four
or five years down the road. The problem is politically
(11:55):
this year, this labor government failed to get through key
cuts to welfare and so their question for their market
and economic credibility is can they change that narrative and
get those cuts in or And this is where the
risks start to come. And for them, do the market
judge that these cuts are never coming, There'll always be
five years into the future, and that's where things start
(12:15):
to get a bit jittery for the government. And just
one final note, as well as the cuts, one other
thing that came out and sort of the back pages
of this budget and the OBR analysis is welfare spending,
pension spending. Some of these big ticket items are forecast
to spiral and spiral out in the four or five
year forecast mark with a welfare spending is already sixteen
(12:36):
billion higher than forecast in March due to high benefit caseloads.
So that is also some real headaches that we're starting
to see in the looming horizon.
Speaker 2 (12:44):
Yeah. Absolutely, and I also not on the markets that
Morgan Stanly's closed their bullish position bullish recommendation on sterling
as also markets are kind of thinking about the impact
on the currency and on bonds here in the UK. James,
thank you so much for being with me this morning.
That is our UK politics reporter James Wilcock. Stay with us.
(13:08):
More from Bloomberg Daybaquob coming up after this. Now to
another story. Private equity firms have been snapping up life
insurers in the US, but in Europe they're running into
pushback after failures like Italy's Eurovita, which raised fears about
risky investments and also long term stability. Our European asset
management reporter Leo Kensherper has been looking into this and
(13:32):
joins me now, Lea, good morning. Why is Europe so
wary of private equity firms buying life insurers? What's the
issue here?
Speaker 6 (13:40):
Yes, good morning, Caroline. So, as you mentioned, the big
wake up call for regulators in Europe really was Eurovita
Italian Life insurred with three hundred and fifty thousand customers
that went into administration two years ago. And what happened
there is that a lot of clients surrendered their policies
after interest rates had risen, and that sort of made
(14:01):
look made other savings products look more attractive really, and
that led to a capital shortfall which Eurovita's owner at
the time, the British buyout firm Sinvin, wasn't immediately prepared
to plug, and so Eurovita's customers effectively had to be
bailed out by a group of insurers and banks. And
regulator's key concern now is that the perceived that there's
(14:24):
essentially a perceived mismatch of a PE fund that owns
a life insurer. PE funds need to return capital to
investors of the as soon as after five years, and
life insurance policies, on the other hand, run for twenty
thirty years and they just need more long term backing.
So there's this mismatch that our regulators are worried about.
Speaker 2 (14:42):
Okay, that's interesting. So what are the differences then between
Europe and the US Because in the US private equity
controlling life insurance is actually a big.
Speaker 6 (14:50):
Theme, yes exactly, so globally pe control of life insurance
as it has risen by more than one trillion dollars
from very low level in two thousand and nine, and
most of that has actually, as you said, happened in
the US. Another key concern that really came to light
this year is the possibility of ratings shopping, you know,
(15:12):
insurers getting easy credit ratings for assets, which of course
has the potential to hide poor quality. And this has
reminded some very prominent voices, including the UBS chair Colin
kellaher of the run up to the Great Financial Crisis.
Speaker 2 (15:26):
Actually, so.
Speaker 6 (15:29):
It's really important to point out that in Europe insurers
actually get little, very little capital benefit from investing in
securitized assets, and they can also use their own internal
ratings which have been approved by regulators. So there's just
less of an incentive here to go ratings shopping.
Speaker 2 (15:45):
I see. And so in terms of what this means
for the cost and reliability of a life insurance products,
I think that also might be interesting to listeners.
Speaker 6 (15:54):
Is it is a good question. I think generally, I
think it's fair to assume that actually competition is good
for pricing. But when it comes to reliability, there is
another key concern regulators here have and it's really it's
really prominent in the US where essentially insurers use offshore
reinsurance the offload parts of the of the risks they
(16:15):
take to more lightly regulated jurisdictions like Bermuda and the
Bank of England this week actually published results of a
stress test where where they tested UK Insure us exactly
for for that reason.
Speaker 7 (16:30):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 2 (16:36):
Look for us on your podcast feed every morning, on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 7 (16:42):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2 (16:48):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka.
Speaker 7 (16:57):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day right
here on Bloomberg Daybreak Europe.
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:09):
This is the Big Big Day, Baker at podcast. Good morning.
It's Thursday, the twenty seventh of November. I'm Caroline Hepga
in London. Coming up today, Chancellor Rachel Reeves ramps up
UK tax increases as Labour's hikes outstript what any government
has done in the UK in more than fifty years.
Hong Kong's worst far in half a century leaves dozens
(00:31):
dead with hundreds still missing. Plus private capital hits a wall,
while obstacles in Europe are proving to be insurmountable for
some private equity firms. Let's start with a roundup of
our top stories. Chancellor Rachel Reeves raised taxes on one
point seven million workers and the wealthy to pay for
(00:52):
welfare spending and build up her fiscal headroom. It's her
second tax hiking budget in a row, with levees on
safe properties worth more than two million pounds and a
range of other measures. Speaking after her budget proposal was
announced in an exclusive Bloomberg interview, the Chancellor refused to
(01:12):
rule out more tax hikes in future.
Speaker 3 (01:15):
I took the fair unnecessary choices today, but my focus
has been and always will be on growing our economy
so that we can keep taxes down and have the
money we need to invest in our public services.
Speaker 2 (01:28):
Although the Chancellor touted growth, the Office for Budget Responsibility
downgraded economic growth in every remaining year of the parliament.
But investors have so far reacted positively to the UK Budget,
which set aside more money as a buffer against guilt
market swings. So did labour rank and file MPs, who
(01:49):
were pleased to see a cap on welfare payments to
families with multiple children lifted, but questions remain about whether
Reeves did enough in her budget to help her and
Prime Minister Kis Starmer survive. The pair are Britain's most
unpopular prime minister and Chancellor since polls began in the
nineteen seventies. The UK government is expecting a bigger windfall
(02:13):
from its taxes on non domiciled residents, despite reports that
many of them are leaving. The Treasury expects to take
in nearly forty billion pounds from people who live in
Britain but keep their wealth overseas. Billionaire founders like Revolutes,
Nick Starronsky and Checkout dot COM's Gilian Pouzas are among
those who have publicly left Britain thanks to the measures.
(02:39):
Now to Hong Kong, where the deadliest residential fire in
decades has killed at least forty four people and left
hundreds of others missing. An eight tower housing block has
been burning for over twenty hours, throwing fresh scrutiny on
the city's housing standards are China correspondent midmn Low says
a number of issues could have caused the blaze.
Speaker 1 (03:02):
The CrOx of the issue is what exactly causes fire,
and authorities are still finding that out. But they did
say that the spread of the fire was much faster
and quicker than usual. This is a very old estate,
over forty years old, and it was undergoing heavy renovations.
There were ben rule scare foldings, green mesh surrounding the buildings,
(03:22):
and authorities said some of the buildings were not up
to complyance standards.
Speaker 2 (03:26):
Bloomberg's me and Minlow speaking their rescue operations are expected
to stretch into this evening, more than twenty four hours
after the blaze started. Chinese President Jijingping has urged all
out efforts to reduce casualties. Now, global equities were closer
to erasing their November losses as rising bets for Federal
Reserve interest rate cuts that have revived markets, the MSCI
(03:49):
All Country World Index climbing for a fifth straight session,
cutting its November drop to just half of one percent.
The moves track increased confidence for fire rate reductions, with
money markets pricing in a roughly eighty percent chance of
a quarter point reck rate cut next month and three
more by the end of twenty twenty six from the US.
(04:12):
The moves come as the Beige Book survey of regional
businesses showed that employment declined slightly and prices rose moderately,
with economic activity little changed. In recent weeks, two members
of the US National Guard are in critical condition after
being shot near the White House. The suspect was also
(04:34):
shot before being taken into custody by other Guard members
and Washington DC police authorities say the suspect is a
twenty nine year old Afghan national. A short time after
his nationality was released, the US government said that quote
effective immediately. The country has stopped processing immigration requests from
Afghan nationals. President Donald Trump has been reacting to the events.
Speaker 4 (04:58):
As heinus asw was an active evil and active hatred
and an active terror. It was a crime against our
entire nation. It was a crime against humanity. The hearts
of all Americans tonight are with those two members of
the West Virginia National Guard and their families.
Speaker 2 (05:20):
That was the President speaking. He also ordered an additional
five hundred National Guard troops to Washington following the shooting.
Those are some of our top stories for you this morning.
Let's bring you up to speed with the markets right now.
So we have no cash treasuries trading, of course because
of the Thanksgiving Day holiday. Hope you're having a good
(05:42):
day if it's beginning for you. In terms of for
the masci Ash Pacific Index up by four tenths of
one percent, Asia equities gaining for forte in a row.
The pound yesterday climbed above a dollar thirty two, positive
reaction from some investors to the budget. Guilts also rally.
Thirty year guilt yields fell by twelve basic points this morning.
The dollar is down by a tenth of one percent
(06:03):
and all prices are dropping half of one percent, with
gold down three tenths too. So those are the markets.
In a moment, we will bring you the latest on
the UK budget as well as the challenges facing private
equity in the European insurance space. So we'll get to that,
but this has caught my eye today. The US Transport
Secretary Sean Duffy is calling for more civility in the skies.
(06:26):
But as bloombergs leanne Al Roshdan has been writing, what
he really means is don't wear pajamas in public. However,
as she points out, what if your pjs are actually
the kind of first class swag that are provided by
a lot of airlines. Well, Duffy's requests set off this
huge public debate that got my attention today. I mean,
(06:46):
where angels fear to tread is what I think. The
reporters this week were told by Duffy, let's try not
to wear slippers and pajamas as we come into the airport.
The Trump administration has been strangely focused on sort of
looking the part, and Duffy is pledged to revive the
golden age of travel, of course, perhaps overlooking all of
(07:06):
the shortcomings of modern air travel, overflowing airports and flight delays,
and of course one carrier turning this whole thing on
its head. You've guessed it cheap and cheerless Ryan Air.
They are known for trolling their own customers and they
say we reserve the right to refuse service to anyone
wearing jeans on a four hour flight, so that you
(07:27):
have it. Shawn Duffy, the US Transports Secretary, in his
attempts to try to get rid of pjs on planes
and in airports, think you might need some luck with that.
I'm going to put a link to Lean's Peace though
in our show notes for you, and you have a
look all of that. Right. Let's think about yesterday's UK
(07:47):
budget now that the markets in the public have had
a bit of time to digest it. After months of
speculation and a very unfortunate pre release from the Office
Budget Responsibility, yesterday the UK Chancellor Rahed Reeves delivered one
of the biggest tax raising budgets of recent decades, driven
by a freeze on income tax thresholds beyond twenty twenty
(08:08):
eight and higher levees on areas including property, pensions, gambling
and dividends. Joining me now to discuss is our UK
politics reporter James Wilcock. James, good morning, Wow. Yesterday was
a huge day. The budget was really aimed at two
groups at market and at Labour MPs. That tells you
(08:28):
a lot about the current state of this government, doesn't it.
Speaker 5 (08:32):
It does. I mean, look, there were a lot of taxes.
There was a whole laundry list which adds up to
twenty six billion pounds and that you've got to put
that twenty six billion pounds in context, Caroline. Last year,
when Rachel Reeves came into government, she put up taxes
by forty billion pounds roughly, and that was one of
the biggest tax rising budgets on record and sort of
(08:53):
in modern British politics. To come back again after promising
she would not do this is a mentor's moment for
her career as the chancellor of the first Labor government
in fifteen years. Why has she done that? And to
this the story is about one surprise and two winners.
The surprise is that we were all expecting a massive
(09:14):
downgrade in her fiscal headroom due to the Office for
Budget Responsibilities forecasts. Now, although they brought down the growth
downgrade because of inflation and people being pulled into higher
tax brackets, they actually forecast that RACHERL. Reeves would have
far more money to play with. So where did that
money go, and these are the two winners. First it
went to the markets, arguably Rees putting money into her
(09:37):
fiscal buffer, so she now has far more room to
protect its guilt market swings and markets racted quite positively
to that yesterday. And then it went to welfare's budget,
the scrapping of the two child benefit cap, which broadly
most MPs I was talking to and also our rest
of our politics team went that was something they could back,
that they could sell on the doorstep and they could
(09:58):
say it's a progressive government.
Speaker 2 (10:00):
Yeah. And so to the reaction, and I'll just quote
as one example, the Daily Mail's front page this morning,
spiteful raids on strivers to lavish billions on benefit Street.
I mean, it's only a kind of straw pole view,
isn't it. What has been the reaction?
Speaker 5 (10:18):
I mean, look, there was this kind of initial shock
at a major leak from the Office of Budget Responsibility
when they posted their entire comic analysis about half an
hour before Red spoke, and that kind of honestly had
a lot of the journalists reeling. And but now things
are settling. Like you said, you talked about the Mail,
the ft talks about smashing tax records the Times high welfare,
(10:40):
high tax. The I quotes the ifs is summary of
the budget saying it's spend now, pay later, budget shambles
your mail line.
Speaker 3 (10:48):
There.
Speaker 5 (10:49):
There is this broad acceptance that the way this has
settled amongst sort of the at least the press is
people are going to be paying more and that money
is going to be going towards welfare. I think the
question for the Rachel uses now, how does she then
sell that message to the public, as the rest of the
Labor government do of this is going to generate a
better society, better people, better public services. That will be
(11:11):
sort of in the weeks to come, how the political
reaction shapes out. I think it's worth also pointing to
we are yet to see really the full sort of
market reaction as this budget gets digested. That's what we're
looking for today, in and sort of the coming weeks.
Speaker 2 (11:24):
Yes, and the issue, as you've sort of alluded to,
is that a lot of the measures are also backloaded
to the end of the parliament that could present some risks.
Speaker 5 (11:34):
Yeah, this isn't your first budget, I see, Caroline. Look,
this is a trick that Jeremy Hunt used towards the
end of the Conservative government and is a bit sneaky.
It's politically expedient because what you do is you front
load all the spending into now, so now as the
good times, and you say the cuts will come four
or five years down the road. The problem is politically
(11:55):
this year, this labor government failed to get through key
cuts to welfare and so their question for their market
and economic credibility is can they change that narrative and
get those cuts in or And this is where the
risks start to come. And for them, do the market
judge that these cuts are never coming, There'll always be
five years into the future, and that's where things start
(12:15):
to get a bit jittery for the government. And just
one final note, as well as the cuts, one other
thing that came out and sort of the back pages
of this budget and the OBR analysis is welfare spending,
pension spending. Some of these big ticket items are forecast
to spiral and spiral out in the four or five
year forecast mark with a welfare spending is already sixteen
(12:36):
billion higher than forecast in March due to high benefit caseloads.
So that is also some real headaches that we're starting
to see in the looming horizon.
Speaker 2 (12:44):
Yeah. Absolutely, and I also not on the markets that
Morgan Stanly's closed their bullish position bullish recommendation on sterling
as also markets are kind of thinking about the impact
on the currency and on bonds here in the UK. James,
thank you so much for being with me this morning.
That is our UK politics reporter James Wilcock. Stay with us.
(13:08):
More from Bloomberg Daybaquob coming up after this. Now to
another story. Private equity firms have been snapping up life
insurers in the US, but in Europe they're running into
pushback after failures like Italy's Eurovita, which raised fears about
risky investments and also long term stability. Our European asset
management reporter Leo Kensherper has been looking into this and
(13:32):
joins me now, Lea, good morning. Why is Europe so
wary of private equity firms buying life insurers? What's the
issue here?
Speaker 6 (13:40):
Yes, good morning, Caroline. So, as you mentioned, the big
wake up call for regulators in Europe really was Eurovita
Italian Life insurred with three hundred and fifty thousand customers
that went into administration two years ago. And what happened
there is that a lot of clients surrendered their policies
after interest rates had risen, and that sort of made
(14:01):
look made other savings products look more attractive really, and
that led to a capital shortfall which Eurovita's owner at
the time, the British buyout firm Sinvin, wasn't immediately prepared
to plug, and so Eurovita's customers effectively had to be
bailed out by a group of insurers and banks. And
regulator's key concern now is that the perceived that there's
(14:24):
essentially a perceived mismatch of a PE fund that owns
a life insurer. PE funds need to return capital to
investors of the as soon as after five years, and
life insurance policies, on the other hand, run for twenty
thirty years and they just need more long term backing.
So there's this mismatch that our regulators are worried about.
Speaker 2 (14:42):
Okay, that's interesting. So what are the differences then between
Europe and the US Because in the US private equity
controlling life insurance is actually a big.
Speaker 6 (14:50):
Theme, yes exactly, so globally pe control of life insurance
as it has risen by more than one trillion dollars
from very low level in two thousand and nine, and
most of that has actually, as you said, happened in
the US. Another key concern that really came to light
this year is the possibility of ratings shopping, you know,
(15:12):
insurers getting easy credit ratings for assets, which of course
has the potential to hide poor quality. And this has
reminded some very prominent voices, including the UBS chair Colin
kellaher of the run up to the Great Financial Crisis.
Speaker 2 (15:26):
Actually, so.
Speaker 6 (15:29):
It's really important to point out that in Europe insurers
actually get little, very little capital benefit from investing in
securitized assets, and they can also use their own internal
ratings which have been approved by regulators. So there's just
less of an incentive here to go ratings shopping.
Speaker 2 (15:45):
I see. And so in terms of what this means
for the cost and reliability of a life insurance products,
I think that also might be interesting to listeners.
Speaker 6 (15:54):
Is it is a good question. I think generally, I
think it's fair to assume that actually competition is good
for pricing. But when it comes to reliability, there is
another key concern regulators here have and it's really it's
really prominent in the US where essentially insurers use offshore
reinsurance the offload parts of the of the risks they
(16:15):
take to more lightly regulated jurisdictions like Bermuda and the
Bank of England this week actually published results of a
stress test where where they tested UK Insure us exactly
for for that reason.
Speaker 7 (16:30):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 2 (16:36):
Look for us on your podcast feed every morning, on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 7 (16:42):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 2 (16:48):
Our flagship New York station is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka.
Speaker 7 (16:57):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day right
here on Bloomberg Daybreak Europe.
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