Bank of England confirms emergency bond-buying scheme will end on Friday

The Bank of England has confirmed its emergency bond-buying scheme will close on Friday, despite reports that it was considering extending the programme.

The Bank said that other measures taken over recent days would be in place after October 14 “to ease liquidity pressures on LDIs (liability driven investments)”.

A spokesman for the Bank added: “As the Bank has made clear from the outset, its temporary and targeted purchases of gilts will end on 14 October.

“The governor confirmed this position yesterday and it has been made absolutely clear in contact with the banks at senior levels.”

According to reports, the Bank of England “signalled privately to bankers” a possible extension if market turmoil “flares up” again over Britain's debt-fuelled budget, citing people briefed on discussions. This is despite Bank governor Andrew Bailey warning pension funds had “three days left” before support is pulled.

Several bankers briefed by the

The Bank on Tuesday, before Mr Bailey spoke, said that officials were watching whether so-called liability-driven investment managers, which help pension funds manage risks in their portfolios, had been able to build up enough cash reserves to enable their clients to meet margin calls, the Financial Times reported.

The Bank of England has struggled to reassure investors after unveiling yet more measures to calm markets rocked by the UK government's recent tax-slashing budget.

“We think the rebalancing must be done and my message to the funds involved and all the firms involved managing those funds: you've got three days left now,” Mr Bailey said last night.

“You've got to get this done,” he said at an appearance at the Institute of International Finance in Washington.

The remarks sent sterling sliding as low as $1.0924 yesterday, with traders spooked by the prospect of more selling when the Bank of England removes the support.

The Bank had been forced to step in to buy up government bonds after the market turmoil following chancellor Kwasi Kwarteng’s mini-Budget left some pension funds close to collapse.

So far it has spent nowhere near the £65 billion that it had set aside to potentially prop up markets.

The Pensions and Lifetime Savings Association (PLSA) said a “key concern” of pension funds was that the bond-buying scheme should not be ended too soon. The PLSA – which represents pension schemes providing a retirement income to more than 30 million savers – suggested the emergency action should continue until at least the end of October.

The body said market turbulence has put “significant stress” on the gilt market and pension funds using LDI (liability-driven investment). The body said the majority of pension funds used LDI in a “prudent manner” and have taken steps to strengthen further their financial resilience.

It comes after the UK economy shrank 0.3 per cent in August. Grant Fitzner, chief economist of the Office of National Statistics, said the contraction was driven by a decrease in both production and services.

“Oil and gas production fell as more scheduled North Sea summer maintenance took place than usual,” Mr Fitzner said. “Notable decreases were also seen across much of manufacturing.

“Health also contributed to the decline, with a drop in the number of hospital consultations and operations.”

Business secretary Jacob Rees-Mogg told Sky News on Wednesday that the 0.3 per cent contraction was “a small amount in a very large economy” and said that “lots of figures come out that get revised later”.

“The previous quarter’s figure showed a contraction [and] was then revised to show economic growth. So, be very careful about how you interpret figures immediately after they’re released,” the business secretary said.