WeekWatch

Inflation came in below expectations on both sides of the Atlantic last week, much to the relief of central bankers and investors everywhere.

In the UK, consumer price inflation (CPI) was expected to tick up slightly to 4.0% in September compared with the same month last year. Instead, it remained flat at 3.8% for the third month in a row. Core inflation, which doesn’t include the more volatile price effects of food, alcohol and tobacco actually slowed slightly compared to August, from 3.6% to 3.5%.

While this better-than-expected data was received well by the market, it is still significantly above the Bank of England’s (BoE) 2.0% target. According to Greg Venizelos, fixed income strategist at SJP, “The figure we got was better than a disappointment, but the Bank of England cannot latch on to these figures and start rapidly cutting rates again because we are not quite there yet in terms of target.”

The BoE’s Monetary Policy Committee, which decides the level of UK interest rates, is due to meet next week. It is expected to hold interest rates at their current level of 4%. Despite this, the more encouraging inflation data did have an immediate impact on UK government borrowings, known as gilts. 10-year gilt yields dropped to their lowest levels in 2025 (while their prices, which move in the opposite direction, rose). For chancellor Rachel Reeves, currently debating her options for the November 2025 Budget, lower borrowing costs will have been a welcome relief.

In more good news for the UK market, the London Stock Exchange (LSE) saw two new companies (food company Princes Group and challenger bank Shawbrook) list, both for over £1 billion. These came shortly after infrastructure company Fermi chose to dual list in the UK and US.

A few years ago, companies listing in the UK wouldn’t have been big news. However, a recent dearth of IPO activity in the UK has led to some concerns over the LSE’s long-term position as a global financial centre. As a result, the recent activity will have been welcome.

For Carlota Estragues Lopez SJP’s equity strategist, these listings add to the momentum that has been building in the UK as market conditions improve. She notes: “A lot of companies were listing in the New York Stock Exchange straight away. However, given the re-rating and improving UK valuations that we've seen year to date, it feels like UK companies are starting to improve on that, especially in more traditional sectors outside of technology.”

Bailey’s warning

It wasn’t all good news in the UK though. On Tuesday, BoE Governor Andrew Bailey warned ‘alarm bells’ were ringing in echoes of the 2008 global financial crisis, after recent US company failures.

Specifically, car parts maker First Brands and sub-prime auto lender Tricolor both collapsed in recent days. Bailey said: “We certainly are beginning to see, for instance, what used to be called slicing and dicing and tranching of loan structures going on, and if you were involved before the financial crisis then alarm bells start going off at that point.”

While Bailey’s warning might seem concerning, Carlota points out that we don’t yet know whether those companies will prove the thin end of a wedge or are likely to prove isolated issues. On top of this, she notes there are key differences between now and 2008 – banks are much better capitalised, for example. There are also more regulations in place, and regulators are much more vigilant.

Clearly investors were not too concerned about a potential correction, with the FTSE 100 up over 2.5% last week.

US inflation slows

Crossing the Atlantic, and there was more good news around inflation. As in the UK, US inflation came in softer than expected.

For the year to September, annual inflation was recorded at 3%, compared to 2.9% in August. This was slightly below the 3.1% expected by analysts.

The news was good timing for President Donald Trump, who has been pushing for an interest rate reduction. The Federal Reserve will meet next week and is widely expected to cut interest rates by 0.25%. Following this news on inflation, markets quickly priced in four interest rate cuts in 2026.

One slight caveat was that although September inflation was below expectations, it is still at its high for the year.

US markets ended the week on a high. Apart from the favourable inflation readings, investor sentiment is being buoyed by the latest quarterly updates. Companies beyond AI and tech are delivering strong results. European shares also rose, with eurozone business sentiment reported at a multi-month high. Chinese and Japanese shares also finished higher, the latter helped by the election of Sanai Takaichi as prime minister. The oil price rallied in response to further US sanctions on Russia’s energy sector. In contrast, gold had its worst week since the end of 2024.

Penalties related to the failure of people to disclose capital gains liabilities to HMRC have doubled in the past two years, a freedom of information request has revealed.

Capital gains tax (CGT) represents the amount payable based on profits made upon selling an asset. For CGT purposes, this could be personal possessions, a second home, any shares (excluding ISAs), or business assets.

The increase in penalty notices follows sharp cuts to the CHT allowance in recent years. In the tax year 2023/24, the annual exemption – i.e. the tax-free allowance – fell from £12,300 to £6,000. It was then reduced to £3,000 in 2024/25.

Experts are urging people to remember to submit any gains above the threshold to avoid fines from HMRC. The best way to ensure this is done accurately and on time is to make a record of any asset sales and disposals, and keep track of the deadlines to submit them.

Individuals who have questions about the scope of CGT – including whether they need to pay it – should seek financial advice. Based on the individual’s particular circumstances, an adviser can provide guidance on what falls within the CGT scope and recommend the most appropriate steps to take so that nothing falls through the cracks.

LLPs in the line of fire?

Limited liability partnerships (LLPs) could be in the firing line in next month's Budget as the chancellor looks to close a tax loophole, according to recent reports.

Currently those in LLPs – typically lawyers, accountants and GPs – do not have to pay employers’ national insurance (levied at 15%) because they are registered as self-employed.

More than 190,000 people in the UK work in an LLP¹. If Rachel Reeves levelled the playing field for all partnerships it could raise up to £2 billion, according to thinktank CenTax. Yet critics have warned such a move could lead to higher costs which could be passed onto customers and in the case of doctors, potentially to patients.

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.

Source: 1: The Guardian, 23/10/25