ISSUE NO. 14 · THURSDAY 20 AUGUST 2026

Inflation back up to 2.9%, the government paying the most since 2007 to borrow, and two lenders finding out what money now costs

The UK inflation rate reached 2.9% in the year to July, up from 2.6%, and the energy price cap reset is doing most of the work. Strip the imported energy out and the domestic picture is calmer: services inflation eased to 3.4% and core inflation came in at 2.6%. That distinction matters more than the headline does, because it separates a problem Bank Rate can act on from one it largely cannot. The peak, on the economists' reckoning, is still months away.

The price of money is the through-line. The government sold medium-term debt this week at 5.155%, the highest rate on that maturity since 2007, which is what turns an inflation story into a spending story — every extra point of yield is cost of living support that no longer fits inside the Budget. Further down the scale the same force is at work: Klarna lost nearly a fifth of its market value on a modest downgrade, and Jaja Finance is paying 15% for the money that funds an Asda credit card. Separately, and on its own terms, ten wealth managers now serve 89% of UK clients.

Below in full: why 2.9% is an imported problem rather than a home-grown one, what a 19% share price fall says about a company that has just turned profitable, and what happens when debt interest outruns turnover. After those, the numbers, today's diary, and one calculator worth five minutes.

Lead

Inflation reached 2.9% in the year to July, up from 2.6%. The peak is months away.

The energy price cap reset fed straight into household prices, which is why the headline moved while the domestic measures did not. Services inflation eased to 3.4% and core inflation came in at 2.6%, so the pressure is being imported rather than generated here — and that limits what Bank Rate can usefully do about it. The harder number landed in the same week: the government sold medium-term debt at 5.155%, the highest rate on that maturity since 2007. Burnham inherited this rather than causing it, but the bond market has started charging him for the wait, and higher yields price out exactly the cost of living support that a rising cap makes necessary. The 17 September decision will show how much patience the Bank has left. Read the full story →

The Numbers

July's inflation reading is in the card below: 2.9%, up from June's 2.6% and now 0.9 points above the target. The gilt has turned with it, to 5.13% for August so far against July's 5.10%, and it is 1.38 points above a Bank Rate that has not moved since December.

More News

Klarna trimmed its revenue guidance. The market took nearly 19% off the shares.

The full-year revenue target came down to between $4.08bn and $4.16bn from more than $4.34bn, and gross merchandise volume guidance fell to $149bn from $151bn — with around $600m of that shortfall pinned on currency movement rather than on people buying less. The company posted a $27m profit in the second quarter, its second in a row, and raised its transaction margin guidance. So: a modest downgrade, a savage reaction, and a stock now down more than 50% since last September's float. The gap between the news and the response is the actual story. A currency knock with a German accent was enough to take a fifth off the price, which tells you the market has stopped extending this business the benefit of the doubt. Read the full story →

Jaja earned £12.4m last year and paid more than that to service its debt.

The company behind the Asda credit card has drawn nearly £50m from a debt facility since March at 15% a year. Revenue rose 6% to £12.4m, the pre-tax loss reached £35.8m — more than 30% worse than the year before — and shareholders have put in a further £42m of equity on top. There is a real product here and a real retail partner, and spending ahead of revenue is an ordinary thing for a lender to do while it builds a book. What is not ordinary is the price of the money. At 15%, the cost of the debt outruns the growth every month, which makes this a funding problem wearing the clothes of a growth problem. The next set of accounts will show whether it has been fixed. Read the full story →

On the Diary

• Today, 9.30am BST — Business insights and impact on the UK economy. The fortnightly read on what firms are actually doing, landing the morning after an inflation figure that moves their input costs.
• Today, 9.30am BST — Blue Book 2026: GDP impacts and expenditure components. The annual reconciliation of the national accounts, and where revisions to the growth figures come from.
• Tomorrow, 7.00am BST — Retail sales, Great Britain, July. Whether households kept spending through the month the energy cap reset. The demand side of everything above.
• Tomorrow, 7.00am BST — Public sector finances, July. In the same slot, the borrowing side. Read together with retail sales, these two frame what the Chancellor has to work with on 28 October.

The Toolbox

One tool from the site each issue, picked to fit what has just happened. Free, no sign-up, and it shows its workings.

Savings interest tax calculator

"Rates are high and inflation just went to 2.9%. This works out what the taxman takes from your interest first, which is the number that decides whether you are actually ahead."

The Close

Two of today's stories are companies discovering what money costs, and the third is a government discovering the same thing at scale. Jaja pays 15% and the interest outruns the revenue. Klarna lost a fifth of its value over what amounts to a currency movement. The Treasury sold debt at the highest rate on that maturity since 2007. None of those are demand problems, and that matters, because demand problems ease when the news improves and funding problems do not. Retail sales and the public finances both land at seven tomorrow morning — the spending side and the borrowing side, in the same slot.

If something here is wrong, or there is something you want dug into, just reply. It comes straight to me.

MJB