Global trade tensions and cyber attacks threaten UK economy, warns Bank of England; Black Friday spending ‘up 11%’ – business live

Back in the retail world, Amazon employees in Bad Hersfeld, Germany, have been holding strike action today.

According to the German union Verdi, around 1,200 Amazon employees from all over Germany, supported by colleagues from the USA, Sweden, the UK, and Italy, are on strike to draw attention to their working conditions and the lack of collective bargaining at Amazon.

Over in Canada, growth has slowed in the last quarter.

Canada, the last member of the G7 to release Q3 GDP data, expanded its gross domestic product by 0.3% in July-September.

That’s a slowdown on the 0.5% growth recorded in the first two quarters of this year.

Higher household and government spending lifted growth, while slower non-farm inventory accumulation, lower business capital investment and lower exports all dragged.

On a per capita basis, GDP fell 0.4% in the third quarter, which was the sixth consecutive quarterly decline.

Firms in shadow banking sector risk triggering £17bn asset sell-off, says Bank of England

Kalyeena Makortoff

Hedge funds, pension funds and other companies in the shadow banking sector are at risk of amplifying market shocks and triggering a £17bn asset sell-off, according to the Bank of England’s first ever stress test into the largely unregulated industry.

The landmark exercise, the first in the world by a central bank, tracked how non-bank financial institutions – often referred to as the shadow banking sector – would react in a short and sharp shock affecting financial markets.

The stress test showed that in this scenario, companies would rapidly sell off as much as £17bn worth of assets, as they scrambled to recapitalise or limit their activities, in a way that would “amplify the shock”.

Speaking of trade tensions…. the head of the World Trade Organization has said today she is eager to work with the incoming Trump administration and that she would take a “constructive and creative” approach.

Speaking at a press briefing, Ngozi Okonjo-Iweala said:

“We are looking forward to working with the new administration. I think we should come into things with a very constructive and creative approach to trying to deal with the issues that will face the world trading system.

She declined to comment specifically on tariff warnings by U.S. President-elect Donald Trump, adding:

“Until we get specifics on what is planned it is a bit premature to pronounce on these issues.”

[a point the BoE’s Andrew Bailey also made today]

Q: Have the risks of global fragmentation been increased by the election of a US president who advocates sharp increases in tariffs?

Governor Andrew Bailey says it’s very important to see what the Trump administration’s policies are, once it’s in office, rather than simply what the president-elect says.

But risks move based on what is expected to happen, and “we are seeing an increased risk of global fragmentation,” Bailey explains

It’s not right to pin that all on one event, though, he adds, saying:

We are living in a world that is, I’m afriad, more uncertain on a number of fronts with a number of very difficult events going on around the world.

Sam Woods, the Bank’s deputy governor for prudential regulation, says the UK’s motor finance scandal isn’t seen as a risk to financial stability.

But, misconduct has often been a “quite a significant headwind” to the financial sector in the past, so the Bank needs to monitor it.

Woods adds that the Bank didn’t attempt to make a ‘point estimate’ of the cost of compensation for customers caught up in the car loans issue, in its latest stress tests.

Instead, it used the average of the annual cost for conduct failings in the recent past, which is £5bn/year, giving a £25bn cost over the next five years.

Is that a hint as to what the Bank thinks it could cost? Moody’s has estimated £30bn, so it’s in a similar ballpark….

My colleague Kalyeena Makortoff asks the Bank of England about Labour’s criticism of the reforms brought in after the 2008 financial crisis.

Q: Is the Bank concerned about the messaging from the government, encouraging risk-taking in the financial markets, and have you considered that when calculating the risk that banks and shadow banking could pose to financial stability?

Governor Andrew Bailey replies that this is a very important question.

The Bank is “obviously” very supportive of growth, he insists.

But, there isn’t a trade-off between growth and financial stability, he insists. That stability is the ‘bedrock’ for the economy.

He says the Bank could only switch its bank stress tests from every year, to every two years, because the UK now has financial stability. That decision cuts costs and work for banks, but is only possible because there’s more resilience within the sector.

The Bank of England’s new financial stability report also shows that around half of mortgages are expected to see payment increases by the third quarter of 2027.

That follows the sharp increases in interest rates – from record lows – in 2022 and 2023, before the Bank began cutting this year.

Despite this, though, the Bank says the share of households spending a high proportion of their income on mortgage payments is expected to remain low, adding:

While many UK households, including renters, are still facing pressures from the increased cost of living and higher interest rates, the share of households who are behind in paying their mortgages is low by historical standards.

It also warns that some companies will struggle with higher borrowing costs, saying:

Firms will come under more pressure if they have a large amount of existing market-based debt which is due to be replaced with new debt, or if a high proportion of income is being spent on repayments.