February 2025 monthly update

Read our February monthly update – a roundup of the latest financial news and economic headlines.

Record number of Cash ISAs, firms urge use of investments instead

Individuals who wish to make the most of their annual ISA allowance before the end of the tax year have a wide range of products to choose from. 500 Cash ISA products were available in February last year, but this has risen to 582 in 2025. This is the highest figure documented by Moneyfacts since its records began in 2007.[1]

After a series of policy rate rises by the Bank of England (BoE) in 2021, providers rushed to create new Cash ISA products. In December 2023, the BoE rate surpassed 5% for the first time since the 2008 Financial Crisis. Savings products follow base rates instead, so accountholders benefited from the higher rates. Of the 582 products now available, 52% pay interest rates below 4% (based on a £5,000 deposit). Meanwhile 10% pay 4% exactly, and 39% pay higher rates.[2]

Of the 22 million people who utilise ISAs, 14 million only hold Cash ISAs. Some financial services firms, such as the London Stock Exchange and Phoenix (an insurance provider), have urged Chancellor Rachel Reeves to curb tax breaks on Cash ISAs. They argue that the £300bn currently held in them could produce better returns if invested in the stock market. Incentivising Stocks & Shares ISAs over their Cash counterparts could uplift Britain’s “languishing” equities market.[3]

A financial planner can help you decide if your wealth will work harder for you in a Cash or Stocks & Shares ISA. ISAs are excellent vehicles for tax-efficiently arranging your savings, but tailored financial advice is the best way to maximise potential returns.

Households should consider fixed energy bills as prices rise again

Ofgem is raising the energy price cap by 6.4% this April. As such, the average household will see their bill rise by £111 to £1,849/year (£9.25/month). The regulator suggests that people should consider switching to fixed tariff payments since that could provide certainty and reduce costs. Although, it should be noted that analysts believe that prices could fall in July.[4]

Recent cold weather, combined with inflation, helped drive up wholesale energy prices higher than the 5% energy consultants had predicted. Furthermore, it is the third straight quarterly cap increase and will hit alongside water and Council Tax hikes. This has heightened worries over affordability because Ofgem statistics show that 6.7 million people are already in debt to their energy supplier.[5]

While household bills have steeply declined from their £4,059 peak in early 2023, they are still much higher than before the 2021 energy crisis. Russia’s 2022 invasion of Ukraine only exacerbated gas shortages. Consequently, the government has responded to Ofgem’s announcement with a pledge to expand eligibility for the warm home discount. The move would net an extra 2.7 million households, meaning that a total of six million homes can receive £150 off their bills next winter.[6]

Government finances in surplus but Reeves faces budget pressure

Even though last month’s data shows a record £15bn public finances surplus, this figure is still below the £20.5bn expected. The Office for National Statistics (ONS) found that Income Tax and Capital Gains Tax revenues fell short of expectations.[7]

This is unwelcome news for Chancellor of the Exchequer Rachel Reeves. In less than a month, she is set to give an update on whether the Treasury is on course to meet their borrowing targets. Cumulative borrowing (for the first 10 months of the financial year) equalled £118.2bn. This figure is above the Office for Budget Responsibility’s (OBR) £105.4bn forecast, and the fourth-highest recorded.[8]

The OBR also believes that the overshot borrowing was primarily because self-assessed taxes and Corporation Tax receipts were lower than predicted. Moreover, higher borrowing by local governments added to the issue. Therefore, it is possible that the outlook could improve once the tax returns filed late in February are counted. Analysts, however, state that weak receipts are likely to reflect the poor underlying state of the economy.[9]

Retail sales over the three months to January were 0.6% less than the previous quarter. Meanwhile, S&P Global’s composite PMI index of business activity slipped from 50.6 in January to 50.5 in February. More services activity offset a downturn in manufacturing but the share of businesses expecting to cut jobs is at its highest since the 2008 Financial Crisis.[10]

Alex Kerr, from Capital Economics, thinks that the recent “run of bad news” in economic data underlines the difficult choices faced by Reeves. US President Trump has “rachet[ed] up” pressure on her to increase defence spending. With this, the Chancellor’s allotted headroom against the fiscal rules could be “wiped out completely”.[11]