Business
OBR head’s resignation leaves potential landmines for Reeves
The shock resignation came for a very specific reason, but the OBR saga will continue with a series of decisions the chancellor will have to make over Richard Hughes’ replacement.
Firstly the Chancellor will have to find a respected and credible economist to run the OBR.
There are several candidates, who might fit the mould of fiercely independent bean counters.
The list will be carefully watched by the markets for any departure from the normal model. The problem is that there is some political pressure to do just that.
One of the points of tension was the refusal of Richard Hughes to give credit to the Government for “pro growth” policies.
Mr Hughes had said he would not score any policy unless it was material in its impact on the economy. In the event, none reached the 0.1% of national income threshold.
It is a careful balancing act, however.
Any perceived interference with the OBRs independence could impact market credibility too, and, for example raise UK government borrowing costs.
When I saw the now-departing chairman on the evening of the Budget last week, he was clearly mortified by the responsibility of his organisation for the early release of Budget information.
While it is no surprise to me that Mr Hughes took the honourable decision to resign for an error identified as the fault of a junior member of staff, it was not the only issue vexing him.
He was a fierce defender of the independence of his organisation from political and ministerial pressure – from right and left. That was seen during the Liz Truss mini budget episode, and in recent weeks too.
There had been a drumbeat of noise from the right, and the left and now from the centre too about the restrictions the OBR system placed on the freedoms of elected Governments.
The OBR was in some corners seen as an arm of a “woke deep state”, and by others as an “agent of austerity”.
There had, however, been tension over the Budget.
Changes had already been planned. The Chancellor had also announced that it would only respond to the OBR’s forecasts once a year.
Mr Hughes told me: “We’ll still be producing two full economic and fiscal forecasts looking five years out, twice a year, now and in the spring.
“But with this change of legislation, the government doesn’t feel obliged to respond to those forecasts with policy in the spring. It’ll be more like a health check on the economy and the public finances.
“There’ll be no loss of transparency from the forecast documentation that we’ll produce.”
The precise design of the new approach to the OBR’s forecast will matter. If there is a marked improvement in the public finances in spring, will the chancellor really avoid spending any “surplus” ahead of crucial local elections?
The OBR did around the Budget score an improvement to the UK economy as a deployment of AI by the end of the decade. The OBR also used new powers to initiate a tricky costing for the ballooning cost of special educational needs in England, inviting a backlash from some Cabinet ministers.
For some this underscores its ability like no campaign or Cabinet minister initiative, to focus Government priorities. Hughes denied the 35-member forecasting group was too powerful.
“The powers given to us are those given to us by Parliament in an Act of Parliament, and that’s to produce a forecast. Chancellors set their own targets. They set their own policies. Chancellors are in charge of £1.5 trillion worth of revenue and £1.5 trillion worth of spending.
“If they don’t want to meet their targets, they can change them, which we’ve seen chancellors do in the past as well. All we do is produce a baseline forecast, cost government policies when they give them to us, and we give them an assessment about whether we’re up there, in line and on track to meet those targets,” he told me.
In terms of the Government’s difficulties over the run up to this Budget, Mr Hughes may also take some important details of the timing of various claims around the state of the public finances to his gardening leave.
He had been due to address the Treasury Select Committee this morning, that has now been cancelled. He recognised the publication of his clarification table on Friday of the evolution of the forecasts was unusual.
Over five years at the OBR Richard Hughes faced five chancellors, and his relationship with all of them was designed to help promote UK economic stability.
The new relationship with a different OBR is an opportunity for the Government, but a big risk too.
Business
PMI watch: India’s services growth eases in February as demand softens, costs rise – The Times of India
India’s services sector growth eased marginally in February as new business expansion slowed to a 13-month low, reflecting softer demand conditions and a rise in inflation, according to a monthly survey released on Wednesday. The seasonally adjusted HSBC India Services PMI Business Activity Index edged down to 58.1 in February from 58.5 in January. In PMI terminology, readings above 50 denote expansion, while those below 50 indicate contraction. “India’s Services PMI registered 58.1 in February, largely unchanged from January’s 58.5, signalling another month of robust expansion in the sector.” “While new order growth slowed to a 13-month low amid rising competition, service providers saw a notable pick-up in international sales and responded with increased hiring to meet operational needs,” said Pranjul Bhandari, Chief India Economist at HSBC. According to respondents, some firms benefited from stronger client enquiries and targeted marketing efforts, which supported sales. However, others reported that an increasingly competitive landscape limited the pace of growth. External demand stood out during the month. Services companies recorded improved business from several overseas markets, including Canada, Germany, mainland China, Singapore, the UAE, the UK and the US. Overall, international sales rose at the quickest pace since last August. Cost pressures intensified for service providers in February. Operating expenses increased at the sharpest rate in two-and-a-half years, prompting firms to raise their selling prices at the fastest pace in six months. “Input and output price inflation accelerated, with firms passing higher expenses — particularly for food and labour — on to customers, yet business confidence climbed to its highest level in a year as companies looked to broaden their market presence,” Bhandari said. At the combined level, private sector activity strengthened further. Total business output across manufacturing and services expanded at the fastest rate in three months, supported by improved demand and higher new business inflows. The HSBC India Composite PMI Output Index climbed to 58.9 in February from 58.4 in January. “Overall, the composite PMI rose to 58.9, reflecting the fastest pace of private sector activity growth in three months, buoyed by strong momentum in manufacturing,” Bhandari said. Composite PMI figures represent weighted averages of manufacturing and services indicators, with the weights reflecting their respective shares in official GDP data. While the pace of new order growth at the composite level was broadly similar to that seen around the start of the year, hiring activity strengthened to its highest level since last October. Inflationary trends were also evident in the broader private sector, with both input costs and output charges rising at quicker rates. These increases reached nine-month and six-month highs, respectively.
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India’s Sensex and Nifty correct 6-7%, with 80% of stocks in bear territory. Monarch AIF reports 64% of stocks over Rs 1,000 crore market cap has fallen 30%.
Hundreds of midcap and smallcap companies have quietly lost significant value.
India’s benchmark indices may not show it, but a large part of the market is already in deep correction. According to a report by Monarch AIF, while the Sensex and Nifty have corrected only about 6-7 per cent from their record highs, nearly 80 per cent of listed stocks are already in bear market territory.
The data highlights a sharp divergence between headline indices and the broader market.
Majority of Stocks Deep In Correction
The report analysed companies with a market capitalisation above Rs 1,000 crore.
It found that over 64 per cent of these stocks have fallen more than 30 per cent from their all-time highs. Nearly 78 per cent have declined over 20 per cent.
In simple terms, most stocks in the market have already seen a brutal correction even though benchmark indices remain relatively elevated.
This unusual divergence has been playing out for the past 18 months.
Why Indices Are Still Holding Up
According to the report, Indian markets are witnessing a rare phase of simultaneous time and value correction.
A narrow set of large-cap stocks has kept the benchmark indices elevated. Meanwhile, hundreds of midcap and smallcap companies have quietly lost significant value.
This has created a misleading picture where the indices appear stable but the broader market has been under sustained pressure.
Now A New Shock: Middle East War
The situation has become more complicated after the recent escalation in West Asia.
Following US-Israel strikes on Iran, global markets have turned volatile and crude oil prices have surged.
Amid these developments, the Sensex recently fell over 1,000 points, while the Nifty slipped below the 24,900 level.
For investors, the challenge is that a market already weakened by months of selling is now facing geopolitical risks and a potential oil shock.
Should Investors Buy Or Wait?
Aakash Shah, Technical Research Analyst at Choice Equity Broking, advised caution. “Amid persistent global uncertainties and elevated volatility, market participants are advised to maintain discipline and adopt a selective approach, focusing on fundamentally strong stocks during corrective phases. Fresh long positions should ideally be considered only after a decisive and sustained breakout above the 25,000 mark on the Nifty, which would signal improving sentiment and confirm the development of a stronger bullish structure,” he said.
Key Risk For India: Rising Oil
V K Vijayakumar, chief investment strategist at Geojit Investments, said the biggest concern for India is rising crude prices.
“With the war escalating and crude rising, markets are going into a period of heightened uncertainty. Nobody knows how long this conflict will go on and what will be the extent of the havoc it could wreck. From the perspective of India, which relies on imports for around 85% of her oil requirements, the real concern is the potential inflation and its consequences on economic growth. From the market perspective, the impact of potentially widening trade deficit, depreciating currency, higher inflation and perhaps lower growth is the real issue. If this fear materialises, corporate earnings will be impacted,” he said.
However, he added that the impact may be temporary if the conflict ends quickly.
“If it ends in, say 3 to 4 weeks, things will be back to normal,” he said.
Don’t Panic, Use Corrections
Despite the volatility, Vijayakumar advised investors not to panic. “Experience tells us that panicking and getting out of the market during uncertain times like these is not the right thing to do. Markets have an uncanny ability to surprise and climb all walls of worries,” he said.
According to him, investors with a long investment horizon and higher risk appetite can gradually accumulate quality stocks during corrections.
He added that sectors such as banking, pharmaceuticals, automobiles and defence may offer attractive long-term opportunities.
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March 04, 2026, 13:39 IST
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