If the UK doesn't balance the books, the bond market won't be happy.
It's World Business Express from the BBC World Service.
I'm Leanna Byrne.
Venezuela could be stripping several Spanish airlines of their rights to land there.
And Serbia has a big oil supply problem.
Finance Minister, Chancellor Rachel Reeves, is expected to raise taxes for both individuals and businesses in the UK's budget on Wednesday.
She says the money is needed to cut health services waiting lists, reduce the country's debt and steady the economy.
Fiona Sincotta is Senior Markets Analyst at Citi Index.
Fiona, hello.
What are you expecting tomorrow?
Well, there's been lots of speculation for what feels like months now.
I mean, what we do know, spending has been high and growth has been low.
So tax hikes almost seem pretty much guaranteed.
We are expecting more tinkering around the edges, rather than that rise in income tax that had been floated previously.
But the market is going to be looking for the Chancellor to fill around a 30 billion black hole, which also includes a buffer.
That is not.
An easy job at all, Fiona.
We're going to hear from a business owner now.
We spoke with Marisa Booty, co-founder of K10 Restaurants, which operates five locations across the City of London, the Financial District, and employs 38 staff.
Hospitality was hit by the last budget and firms are worried they will get hit again.
The previous Labour budget increased our costs by £150000, and that was mainly made up of national insurance increases and business rates, as well as the national living wage increases as well, which were about 7.
That meant that we couldn't actually open another site.
It would cost us about 200 grand.
We've had to just manage our cash to pay those bills rather than growth.
We've not made anyone redundant.
We just haven't re-employed people.
We've installed kiosks.
We've used every which way we can to make the business more efficient, but just to keep where we are rather than to grow the business.
So what are you looking out for in the budget tomorrow and what are you worried about?
My concern is that business rates are not addressed.
I know it's a hard ask, but if you look at every other European country, hospitality VAT rates are significantly lower than standard VAT rates.
I know the economy is in difficult situations.
I know we need to raise tax.
But what we need is growth policies rather than things that hinder growth.
That's where the fundamental issue has got to be, is what are going to allow us to grow so that we can pay more tax, so that we can employ more people.
And it becomes a virtuous circle rather than a vicious circle.
I'll put it to you Maurice, that if the bond markets, these are, these global investors if they don't like what they see there, could mean that UK bonds would be hit, which then in really does affect the whole economy.
So in some ways they do have to balance the books, and is that not just?
We just have to deal with that.
The problem is you're not going to balance the books. without investment.
And if we don't get the right sort of budget that encourages investment, the bond markets are going to hit us even harder because interest rates will then go up and it'll become again.
That vicious circle just becomes more, spiralling downwards.
But if you encourage a pro-growth project, people will invest, even on a small, tiny little scale.
Investing a couple of hundred grand, employing 10 more people.
Doing two of those every year, that's another 20 people contributing to tax, paying rent, buying food.
And imagine that on a much grander scale.
That's what we're trying to do.
And that's what we're trying to encourage here.
That was Maurice Aboudi, co-founder of K10 Restaurants.
Fiona, you're still here.
We heard from a business which clearly wants help.
It wants to grow.
But at the same time, you've got the bond markets.
They want the UK to take care of its debts, doesn't it?
So now some people might hear the word bonds and switch off.
But why is this all so important?
Yeah, so basically I mean bonds, these in the UK we call them gilts, and they actually play a vital role in public finances.
So when investors are buying UK bonds, they're basically lending money to the UK government.
And in return, the UK government pays interest on the money they've borrowed.
Now, if there are concerns about the way that the government is managing its finances, there's less demand for these bonds, or gilts as we call them.
And that means the interest that the government has to pay on them rises dramatically.
And so that's obviously a big cost for the government.
But it also does affect households businesses, as it also increases mortgage rates, interest rates, and so borrowing becomes more expensive.
Yeah, I mean, it is difficult, though.
I really heard what Maurice says about he wants to grow, But there's two sides of this debate at the same time growth, and then you've got this big debt pile.
Can those things go hand in hand or is it really impossible to sort it for either side?
It feels like we're in a very, very difficult position, or should I say the Chancellor's in a very difficult position, just because of where we're at.
You know, spending has been extremely high.
You know, recent figures of public sector net borrowing were, you know, the highest they've been.
I think in October, they were the highest they've been since the pandemic and second highest ever.
So, you know, we're seeing very high spending.
At the same time, growth productivity are very low.
So it does feel that the government needs actually is in a corner where actually they do need to increase taxes in order to be able to do something.
But as we said, you know, that's going to have a difficult impact on the economy.
Perhaps a pleasant surprise might be if the Bank of England cuts interest rates in December, because measures sort of help reduce inflation.
Exactly.
And then the tough thing, of course as well Fiona, is that the Chancellor will not raise income tax.
So I suppose maybe we might see that further down the line.
You don't know.
OK, Fiona Sincotta, Senior Markets Analyst at Citi Index.
Thank you so much for joining us.
Venezuela's Airlines Association says the suspensions are unjustified, but Spanish officials insist.
The cancellations are temporary and based on strict safety assessments.
Now, Serbia says its main oil refinery may shut down within days.
The government says it's because of US sanctions on its owners, the majority of whom are Russian.
Guy Delany explained to me how any stoppage could lead to fuel shortages and higher prices.
Well, it's very serious because NIS, which is Serbia's national oil company, provides more than four-fifths of the petrol and diesel price on the market in Serbia.
So it's by far the largest provider.
It also provides almost all of the jet and heavy fuels in Serbia, and it has the country's only refinery.
So you can see this is a big problem for Serbia.
And when I've been speaking to the government about this in recent weeks, they've clearly been extremely worried.
They've been working behind the scenes to try and sort things out, to change the ownership of Nice, so that they can get these sanctions which the US has imposed lifted.
But so far, those efforts haven't come to anything.
And now you've got the president of the country going on live television and saying that in four days the refinery will shut down.
Now, can you just remind us why exactly Nice is caught up by these US sanctions?
Well, it's simply because its majority ownership is Russian.
So that's Gazprom and Gazprom-Neft, which are in essence the same company.
They own more than 50% of Nice.
The Serbian state retains a stake of around 30%.
And it's this Russian-owned stake which is the big issue, because the US has placed sanctions on Russian-owned oil companies everywhere.
Nice had managed to get a waiver for most of this year to those sanctions, but US patience ran out last month and it's been under sanctions since October, and that's what's causing these problems.
Is there any alternatives?
There isn't any alternative.
Serbia had tried to make a deal with Hungary that they would get petrol and diesel from a refinery of Hungary's oil company MOL, from their Danube refinery.
And just after they made this agreement, there was a fire at that refinery of Mol on the Danube.
So that's been posing a problem.
So basically what Serbia is having to do now is it's going to be relying on its reserves.
That's both national reserves and reserves that Nice have of all these different fuel types.
And the government has also been talking to oil companies in Greece and Hungary and in Austria about increasing imports, which is obviously going to be considerably more expensive than having their own refinery producing derivatives for the national market.
Guy Delany there, and that's it from World Business Express.
I'm Leanna Byrne.
Thanks for listening.
