Must read: FTSE 100, UK government borrowing, WH Smith

ii’s head of investment rounds up the morning’s big news.

21st August 2025 08:47

Victoria Scholar from interactive investor

GLOBAL MARKETS

The FTSE 100 has opened flat with defence stocks like BAE Systems (LSE:BA.) among the top gainers. Focus is on the latest UK flash PMI data that is due at 9:30am. Meanwhile, InterContinental Hotels Group (LSE:IHG), Entain (LSE:ENT) and Babcock International Group (LSE:BAB) are among the stocks that go ex-dividend today. Overnight, the ASX in Australia surpassed 9,000 for the first time.

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In the US, futures are pointing to a mixed open after the S&P 500 and the Nasdaq closed lower again amid a disappointing week for markets. According to the latest FOMC minutes, ‘almost all’ officials agreed that interest rates should remain unchanged. There were two dissenters who wanted a quarter-point reduction because of weakness in the jobs market. Focus turns to Jackson Hole and Federal Reserve Chair Jay Powell’s address for further clues into the central bank’s next move.

UK GOVERNMENT BORROWING

Public sector net borrowing hit £1.1 billion in July, £2.3 billion less than in July 2024 and the lowest borrowing for this month in three years. Borrowing in July and January are typically lower because of additional receipts from self-assessed income tax. But last month’s figure was even better than expected and a significant year-on-year improvement. For the financial year so far between April and July, UK government borrowing hit £60 billion, up 7% year-on-year but in line with official budget estimates.

July’s improved borrowing data was due to higher tax receipts which provided some support for the public purse. Total government spending on public services, benefits and debt interest all increased. However, this was partly offset by a boost from self-assessed income tax payments as well as central government tax and national insurance receipts.

Nonetheless, Chancellor Rachel Reeves is still expected to raise taxes in the Autumn Budget in order to comply with her strict fiscal rules.

WH SMITH

WH Smith (LSE:SMWH) has lowered its full-year profit outlook because of an accounting error. In April it expected annual profit of around £183 million, but that has been cut to £110 million after a financial review found an estimated £30 million overestimate of profit in its North America unit where its full-year profit forecast has been reduced from £55 million to £25 million.

Earlier this year, WH Smith sold its UK high street business to private equity firm Modella Capital for £76 million, letting go of around 480 stores and 5,000 staff. WH Smith has been focusing on its international travel retail business instead in locations like airports, train stations and hospitals where it believes it can operate most effectively.

However, today’s update is a major setback, with its share price reflecting this, shedding around a third of the company’s market cap. The stock has plunged to a more than five-year low amid a panic driven sell-off.

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