Creating a stink

 

 

 

Just in case you’d missed it, many utility bills including water, have increased from the 1^st April.

Rubbing sea salt into the wound, water companies released raw sewage into England’s rivers and seas for a record 3.61million hours last year, according to recent data from the Environment Agency.

While the actual number of recorded spill incidents was lower, each spill lasted longer on average. Not great news for aquatic life, wild swimmers, or surfers.  Environment Secretary Steve Reed said ‘these figures are disgraceful and a stark reminder of how many years of underinvestment have led to water companies discharging unacceptable levels of sewage into our rivers, lakes and seas.’

The sewage figures come at a time when Thames Water, the UK’s largest water company which serves about a quarter of the country’s population has been making the headlines over its £20bn debt and restructuring plans.

The figures also follow water regulator Ofwat’s latest price determination for the next five years.  Unfortunately, households will have to pick up the tab for cleaning up our rivers and seas. Ofwat recently confirmed that the average household water bill for 2025/26 will rise by 26% or £123. Not great news for lower income households or inflation. While water companies will invest £104bn over the next five years, of this sum, only £12bn will be allocated to reducing spills from storm overflows.

Was privatisation of the water sector such a good idea?

Could water regulator Ofwat or the government been more forceful? We’ll leave that political hot potato to you to decide. All we can say is that we are now all having to pay the price for years of under-investment in the country’s sewage system.

Higher water bills will also contribute to higher UK inflation in the months ahead. Should Labour re-nationalise the water sector? Like Thames Water, Chancellor Rachel Reeves is currently heading up sewage creek without paddles, due to financial challenges of her own making. The government doesn’t currently have the fiscal headroom to get directly involved, while it already has the Scunthorpe steel plant to deal with.

Rachel from accounts must be hoping Thames won’t need a government bail out!

What have we been watching?

The Trump global stock market rollercoaster continues!

Markets breathed a slight sigh of relief following Trump’s decision to impose a 90-day pause on his draconian tariffs to open the door to negotiations. The Trump administration said it was negotiating trade deals with seventeen countries and suggested there was a strong chance of a UK-US trade deal in the next three weeks. The mood at the start of last week was further helped by another Trump U-turn as he announced a $100bn of electronic products from China are to be exempted from the reciprocal tariff albeit still exposed to the initial 20% tariff. There were then reports that the 25% tariff on auto parts might be delayed to give more time for US car manufacturers to adapt. However, Trump then warned that pharmaceutical tariffs are coming in the ‘not too distant future.’    

Investors remain wary about the Trump administration’ ability to negotiate all the tariff deals in the set timescale. Furthermore, just what will be the details of these deals? As ever, the devil will be in the detail and let us not forget Trump has now threatened the pharmaceutical sector, one of the UK’s major exports, with a 25% tariff! China remains the main target of Trump tariffs and relations. China said it is open to trade talks with the US but only if the Trump administration shows more respect. This follows unhelpful comments by JD Vance’s referring to China as a country of ‘peasants.’ Elsewhere, representatives of the EU, another of Trump’s targets, said that they expect substantially all US reciprocal tariffs to remain and that they are making ‘little progress’ on talks with the US.

Markets wobbled once again just ahead of the Easter break as the World Trade Organisation (WTO) and Jerome Powell, Chair of the US Federal Reserve (Fed) once again highlighted the risks to the US and global economy. The WTO cut its global goods trade forecast for 2025 from growth of 2.7% to contraction of 0.2%. If reciprocal tariffs are imposed then the contraction would be 1.5%.  Meanwhile, freight companies have noted cancellations of Chinese freight ships as bookings plummet. The Fed warned that Trump’s policies are likely to mean slower US growth, higher prices, and unemployment risks. US tech stocks were also hit by AI-chip maker Nvidia which warned that US export restrictions on some of its chips to China would cost it $5.5bn. The air of uncertainty regarding Trump’s tariffs saw gold hit a record high. The US Dollar remained under pressure with Sterling moving above $1.34.       

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There was some positive news for Chancellor Reeves as UK inflation came in below forecast at 2.6% in March, helped by lower petrol prices. However, this feels a bit like the ‘rear view mirror’ as inflation is expected to track higher in the months ahead due to utility bills and the National Insurance hike. Meanwhile, service sector inflation remains ‘sticky’ at 4.7% while last week’s employment data showed private sector wage growth of 5.6%. However, gas prices have been falling and markets are now expecting three interest rate cuts of 0.25% by the Bank of England this year with the earliest possibly in May. The UK five-year swap rate has fallen to 3.75% and mortgage availability is improving.

ECB rate cut 0.25% as expected with the decision unanimous.

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In the US, company management confidence has plummeted with a survey showing 76% of respondents saying that Trump tariffs will adversely impact their business.

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China’s economy recorded annualised growth of 5.4% in the first quarter of 2025. Did this growth in GDP reflect a final surge in manufacturing and exports ahead of Trump’s tariffs? With tariffs now leading to major uncertainty and what must be falling activity what stimulus measures will the Chinese government announce? China clearly needs to stimulate domestic consumption albeit this has been the case for years!

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While bank holiday Monday was a pleasant and restful over in Europe, with most European markets closed, the US faced a broad sell-off following Trumps escalating attacks on Fed Chair Powell, with Trump stating “Powell’s termination cannot come fast enough!” This likely spooked global allocator, raising concerns about replacing Powel with a Trump loyalist, curtailing the central bank’s independence. Despite Powell’s influence, decisions are made by majority vote, so his removal could result in a backlash and greater opposition from the remaining members– undermining Trumps objectives! This put renewed pressure on US assets with the S&P500 falling -2.4%.

 

Almost finally, the law of unintended consequences. One of Trump’s goals is US energy security underscored by his ‘drill baby, drill’ mantra. Unfortunately, his Liberation Day tariffs have created uncertainty over the global economic outlook and oil prices have fallen sharply. This has created a ‘double whammy’ for America’s shale oil producers who now face the twin threats of falling demand and increased competition from lower cost producers such as Saudi Arabia.

Finally, how times change. News that WeightWatchers is planning to file for bankruptcy, a victim of the new weight-loss drugs. Sounds like its shareholders will be shedding quite a few pounds!

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Read Last Week’s Alpha Bites – On the brink of extinction

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Alpha Portfolio Management is a trading name of R C Brown Investment Management PLC which is authorised and regulated by the Financial Conduct Authority.