As part of his European tour, Canadian prime minister Mark Carney will today meet his UK counterpart Andy Burnham in Liverpool.
Houthi rebels have made further advances in their Red Sea offensive, capturing two key islands according to Guardian reporting. That news casts a shadow on UK inflation, which breached 3% again, led largely by rising diesel and petrol prices.
Carney meets Burnham
Carney’s tour of Europe kicks off in Liverpool as he meets UK prime minister Andy Burnham to discuss closer cooperation and build a deeper strategic partnership.
According to Politico’s UK Morning Trade newsletter, the pair will build on plans made under the Starmer administration to develop deeper ties in trade, critical minerals, defence and AI.
The BBC also reports that chancellor John Healey is considering a UK bid to join the Carney-led, multilateral Defence, Security and Resilience Bank (DSRB), which aims to enable lower borrowing costs for governments on defence spending.
Predecessor Rachel Reeves rejected Canadian offers to join the DSRB, which Healey supported as defence secretary. Current defence secretary Wes Streeting is also a proponent, describing the bank as a “really innovative and interesting mechanism for defence financing” during comments made this summer at the Farnborough International Airshow.
In a statement released ahead of the trip, Carney said that “in a more dangerous and divided world, Canada and our European partners are moving ever closer”.
“Our shared values, complementary strengths, and common interests serve as the strong foundation on which we can build a stronger future.”
However, the FT today reports on a lukewarm response to his overtures by some EU diplomats, who raised concerns about US retaliation against the EU and the level of cooperation proposed by a third country. That report is available here.
That hasn’t stopped European Commission President Ursula von der Leyen from suggesting Canada could become the EU’s first associate member, setting out plans for a broader trade agreement and expanded partnership.
Houthis take Red Sea islands
In a further blow to commercial shipping, Yemen’s Houthi rebels have seized two strategically significant Red Sea islands.
The Iran-backed militant group has taken the islands of Greater and Lesser Hanish, the Guardian reports. This follows their seizure last week of the port city of Mokha in Yemen.
The group’s offensive is designed to constrain shipping via the Bab al-Mandab strait, through which vessels travelling from Asia would access the Suez Canal in order to reach European destinations – and vice versa.
The offensive has contributed to further uncertainty in oil markets, as the Brent Crude oil benchmark hit US$106 per barrel yesterday.
That also followed the closure of a key Saudi Arabian oil pipeline yesterday, which Riyadh says is the result of damage sustained from drone attacks perpetrated by Iranian-backed militias in Iraq.
The pipeline had been used to divert supplies away from the Strait of Hormuz – the other shipping chokepoint Iranian forces are attempting to control amid the ongoing US conflict.
One Goldman Sachs senior commodity strategist told CNBC that the disruption threatens to again send Brent Crude above $120 per barrel.
“The attacks on oil infrastructure mark a meaningful escalation of the conflict and increase the probability of our price upside scenario, where Brent exceeds $120,” Yulia Zhestkova Grigsby told the publication.
UK inflation rises
The ongoing Middle East conflict and oil shocks were cited as the main reason for a rise in UK inflation.
The Office for National Statistics (ONS) reported that inflation rose to 3.1% in August, up from 2.9% in July, and is the highest figure for five months.
Diesel and petrol prices have increased significantly, with petrol prices up by 9.1p over the course of the month, reaching 161.3p per litre – “the highest price recorded since November 2022”, the ONS said.
The organisation’s chief economist Grant Fitzner said the increase could impact manufacturing:
“Rising crude oil and petrol prices increased both the annual cost of raw materials and the price of goods leaving factories respectively.”
"Today’s inflation figures are a reminder that global events continue to have a direct impact on costs here in the UK," said Chartered Institute director general Marco Forgione.
"The rise in fuel prices, driven by ongoing disruption in international supply chains, highlights how exposed businesses and consumers remain to geopolitical shocks and volatility in global trade.
"The priority must be to strengthen supply chain resilience, reduce unnecessary friction to trade, and support businesses as they navigate rising costs and heightened global uncertainty."
In further bad news for industry, rising inflation is also expected to increase borrowing costs, with a quarter-point Bank of England interest rate rise to 3.75% viewed as more likely before the year’s end.
Some City predictions anticipate the borrowing cost reaching 4.75% before the end of next year.
Elsewhere in the trade headlines
- The FT reports outrage from Scotch whisky-makers following the UK government’s decision to grant protections to English products through the UK Spirit Drinks Geographical Indications (GI) scheme
- Government advisers have called for changes to existing aviation sector climate policies before a third Heathrow runway is approved
Yesterday in trade
- A Chinese cargo vessel completed its maiden voyage of an Arctic Circle trade route that could offer alternatives to traditional Middle East global shipping routes
- Carney made his appeal to EU member states yet to ratify the Canada-EU Trade Agreement to do so, amid calls for closer cooperation
- UK industry warned that the EU’s proposals for greater domestic procurement could cause harm
You can read those stories and more here.
