The Brief

Burnham enters office committed to Reeves’s fiscal rules and the 2024 manifesto, inheriting the £23.6bn headroom she set at the March spring statement against Starmer’s defence plan, which spends £15bn while leaving £10.3bn to undecided departmental reallocation and £4.7bn to the autumn budget.

That headroom was measured before the Iran war and rising gilt yields began eroding it, and the £10.3bn of savings rests on reallocation decisions no minister has taken, so the fiscal rule Burnham adopts is only as sound as an OBR verdict that has not yet been issued.

Defence-exposed contractors get a clearer multi-year demand signal from the £15bn, while the suppliers and services tied to the departments absorbing the £10.3bn cannot yet price a cut whose distribution across government remains undecided.

The risk is not that the rules have already failed, but that Burnham’s fiscal room is now hostage to the OBR’s autumn scoring of energy, gilt yields and unfunded defence costs, forcing tax or spending choices before he has had much time to define his own economic programme.

KKR and Energy Capital Partners have raised their offer for DCC to £65.25 a share in cash plus £1.47 in dividends, valuing the London-listed FTSE 100 energy group at £5.7bn, and the board has said it would be minded to recommend the terms while top holders Ninety One, Aviva Investors and Fidelity International have separately told the FT the price is too low.

The board is minded to recommend a price its three largest institutional holders have said they will not accept, and that split is the whole story, because a sponsor bid succeeds only on the shareholder vote the board cannot deliver, so KKR’s improved £65.25 has bought a recommendation that carries little of the register behind it.

The board is being offered a certain exit at a fixed price and the advisers earn their fee on completion whatever the outcome, while the long-only holders resisting that pressure are backing their own judgement that organic growth, further acquisitions and buybacks will beat £65.25 over the horizon they are prepared to hold.

The shareholder revolt matters because it tests whether UK-listed assets are still genuinely cheap to take private, or whether concentrated long-only holders can force sponsors to pay closer to intrinsic value before boards can recommend a fixed cash exit.

The Bank’s Decision Maker Panel showed firms’ year-ahead own-price expectations holding at 4.1% in the three months to June, the highest since early 2024, with expected wage growth at 3.5%, even as the Iran de-escalation pulled firms’ 12-month CPI expectations down to 3.3% from 3.7%.

The signal is the divergence: firms’ economy-wide inflation expectations eased with lower energy risk, but their own pricing plans stayed elevated, suggesting the shock is still embedded in corporate price-setting — the kind of second-round effect that keeps the MPC biased towards holding or even hiking rather than cutting.

A rate path held higher with a live hike risk raises the cost of capital, falling hardest on leveraged and rate-sensitive borrowers and on anyone refinancing before the pricing pressure clears, while widening net interest margins for retail banks and lifting returns for cash and money-market holders.

Markets fully price the first quarter-point rise only for April 2027 while calling an end-year hike more likely than not, a timeline that assumes the pricing stickiness fades on its own, and if own-price expectations hold near 4.1% the sharper risk is markets pulling that hike forward and tightening conditions before the Bank has moved.