As Liz Truss and Rishi Sunak slug it out for PM, rightwing papers are waking up to the looming economic catastropheThe gloves are off and it’s bare-knuckle, below-the-belt slugging. Good. High time they grappled with the terrifying enormity of the waves of destitution rolling over millions already neither heating nor eating, facing unpayable bills. Liz Truss stumbled badly by telling the Financial Times she would only help them “in a Conservative way” with tax cuts not “handouts”, her gofers explaining she is “enabling people to keep more of the money that they earn”. No use now saying she was “misrepresented” yet again: she’s been panicked into promising her own emergency budget.Rishi Sunak in the Sun makes lethal (and true) accusations that “Liz’s plan” to deal with rising bills this winter is to “give a big bung to large businesses and the well-off”. “Worse still,” he writes, “she said she will not provide direct support payments to those who are feeling the pinch most.” Scrapping the health and social care levy only gives the average worker £170 and someone on the living wage “less than £60”, while “pensioners will not get a penny”.Polly Toynbee is a Guardian columnist Continue reading...

Central bank must tackle inflation pressures that are gaining foothold in UK economy, says Dave RamsdenThe Bank of England will probably have to raise interest rates further from their current 14 year-high to tackle inflationary pressures that are gaining a foothold in Britain’s economy, its deputy governor, Dave Ramsden, has said.The spread of inflation was showing up in rising British pay and companies’ pricing plans, having originally been triggered by the reopening of the world economy from Covid-19 lockdowns and then by Russia’s invasion of Ukraine, Ramsden said. Continue reading...

Cost of living crisis and rising inflation predicted to hit consumer confidence and spendingJuly could be the “lull before the storm” for retailers and consumers after the heatwave boosted sales of summer clothing, picnic treats and electric fans despite the intensifying cost of living crisis, experts have warned.Figures from the British Retail Consortium (BRC) revealed a 2.3% sales rise last month compared with a 6.4% rise the year before. Continue reading...

This blog is now closed. You can read all our coverage on the cost of living below

Rolling live coverage of business, economics and financial markets as analysts weigh risk of recessions across the worldIt may only be August, but already the prospect of a cost-of-living Christmas is lumbering into view, according to discount book retailer TheWorks.co.uk.Analysts are on the look out for big profit warnings as the cost-of-living crisis hits consumers, and The Works said the slump in sales is already here, with no clear end in sight.

The profession seems to have gone AWOL, just when we could do with a bit of modelling on tax cuts v handoutsCut taxes? No, give handouts. Go for growth? No, fight inflation. Increase debt, curb debt. Raise interest rates, lower them.Two members until recently of the same cabinet seem at opposite extremes of the economic spectrum. Both studied economics at Oxford. They must have attended similar lectures and read the same books. What’s their problem?Simon Jenkins is a Guardian columnist Continue reading...

In today’s newsletter: From GDP and government spending to inflation, it can be hard to get around the big figures you see in the headlines and what they really mean. So here’s a guide

Cost of living crisis has meant the average amount given to children has fallen to lowest level since 2001Children’s piggy banks are paying a high price for the cost of living crisis after almost a third of parents cut back on pocket money during the last year.The average amount that is going into the pockets of under-16s each week has dropped by 23% to £4.99 this year from £6.48 in 2021, according to research from the lender Halifax – the lowest amount since 2001. Continue reading...

Meanwhile £700m of support funds in business rates relief remains unpaid by local councilsDebt repayments, staff shortages and rising energy bills have pushed almost two-thirds of the UK’s top 100 restaurants into the red, according to research that reveals the impact of the pandemic, Brexit and the cost of living crisis on the hospitality sector.With a recession looming and further increases in energy bills weighing on businesses, a separate report found that £700m of business rates relief remains unpaid with only half of English councils paying out the support funds. Continue reading...

Outbound shipments grew 18% after struggle with shortages of raw materials and lockdowns in first half of yearChina’s export industries performed strongly last month after spending the first half of the year hampered by shortages of raw materials and pandemic-related lockdowns at major ports.Offering an encouraging boost to the economy, outbound shipments grew 18% in July from a year earlier, the fastest pace this year, official customs data showed on Sunday, beating analysts’ expectations for a 15% gain, though imports remained sluggish.

The Bank of England’s recent rate increase will do nothing to curb inflation, says Jean-Claude FouqueOnce upon a time, doctors would bleed patients who were in poor health as a cure. We now know this was not a good idea, and yet the Bank of England keeps raising its base rate while predicting a prolonged recession (Report, 4 August). Why? Because this is the traditional way to try to curb inflation when an economy is overheating. Raising interest rates is supposed to divert excess liquidity from spending to saving. But millions are already in poverty and the energy cost increases in the autumn will make matters worse. There is no excess liquidity.Most importantly, current pressures are due to external factors – mainly the Ukraine war, so how can raising interest rates help? Could it be that the Bank feels it must be seen to be doing something? I would call this the Titanic syndrome, ie we know it won’t do any good, but let’s rearrange the deck chairs anyway.

The global financial crisis brought large economies together but the current crisis comes at a time of deep divisionFifteen years ago this week the French bank BNP Paribas announced it was closing three of its hedge funds heavily exposed to the US sub-prime mortgage market.On the day little heed was paid to the news, but it quickly became apparent that not just BNP Paribas but just about every big financial institution was up to its neck in securities linked to underperforming American home loans. In early August 2007, BNP was simply the pebble that marked the coming avalanche. Continue reading...

America is simply too big for generalizations. The right question is whether your industry is in recessionAs someone who writes about small business and runs a small business and serves hundreds of small business clients I often get asked: “How are small businesses doing?” Recently the Big Question I’m being asked is whether or not we’re “in a recession”. The answer – like everything these days – is complicated.Sure, many can say we’re in a “recession”. The economy has shrunk two quarters in a row, which is one widely used definition. Both consumer and small business confidence have plummeted. The stock market is in bear territory. Inflation is high and interest rates are rising. Worldwide demand is tapering. Continue reading...

The Tory leadership contenders are pursuing a dangerous nirvana of low taxation while ignoring the damage inflicted by leaving the EUBritain is rapidly entering its worst economic crisis since the 1970s, but it is a crisis hardly discussed by the two rightwing Conservative politicians vying for the premiership.The National Institute of Economic and Social Research (NIESR) and the Bank of England have both pronounced that we are entering a recession that could last for much of next year. This will serve to aggravate already serious economic, industrial and social problems, with goodness knows how much public unrest. Continue reading...

Results this week will reveal the tour giant’s post-Covid boom, but what might a deep recession do to holiday bookings?Hundreds of flights delayed or cancelled, an engine fire on a Tui plane at Manchester airport, and an abject apology from the managing director … it has not been an easy summer for the world’s biggest tour operator.On Wednesday, a Tui report on bookings and revenues from April to June will shine a light on the whole holiday sector during its peak period. Continue reading...

Faced with stagflation, the Conservative leadership candidates have precious little to offer• You can order your own copy of this cartoon Continue reading...

Conservative leadership frontrunner insists on tax cuts despite claims they will fuel inflationThe Conservative leadership frontrunner, Liz Truss, has rejected “handouts” as a way of helping people affected by the cost of living crisis.Truss said she would press ahead with proposed tax cuts despite claims they would fuel inflation and “kiss goodbye” to the Conservatives’ chances of winning the next election. Continue reading...

With offshoring now faltering, a US-led trend sees firms shifting manufacturing and more to countries with shared values. But this won’t be cost-freeOffshoring was followed by reshoring – and now US officials’ latest wheeze to deal with massive global supply chain disruption is “friendshoring”. The turbulent events of recent years – including Donald Trump’s trade wars, the Covid-19 crisis and Russia’s invasion of Ukraine – have called into question the vision of a globalised economy.Many of the western companies that embraced offshoring – cutting costs by shifting manufacturing to countries with cheaper labour – have been encouraged by tariffs and pandemic supply chain disruption to bring production back to their home country, in a trend known as onshoring or reshoring. Continue reading...

We look at some options for safeguarding your nest egg amid rising prices and interest ratesInterest rates went up again this week, and many savers will see their rates boosted as a result, but rising inflation – currently 9.4% and set to go higher – is eating away at the value of people’s nest-egg cash.As central banks around the world raise interest rates to defeat inflation, fears are growing of a full-blown recession. So what can you do now to protect yourself from a potential hammer blow to your finances? Continue reading...

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Labour’s Rachel Reeves says Conservatives are ‘playing blame game’ for UK’s economic problemsLiz Truss has been accused of being “deeply irresponsible” for threatening to tinker with the Bank of England’s mandate on the brink of a recession.The shadow chancellor, Rachel Reeves, attacked the Tory leadership frontrunner after Truss and her allies repeatedly questioned the performance of the Bank’s governor, Andrew Bailey, and said she would review the institution’s remit. Continue reading...

If Britain ends up in the recession expected by the Bank of England, public anger will be looking for an outletWinter is coming. The Bank of England says so. Pick your measure of the economic gale that is heading this way, deepening a chill that’s already biting hard. The Bank says inflation will reach 13%, shrinking the value of wages, making everything more expensive, starting with eating and heating, forcing yet more people to decide whether to starve or shiver. We are to brace for a recession that will see five consecutive quarters of contraction, and a decline in household incomes of 5% by 2024 – the biggest fall since records began more than half a century ago. Of course, all this will hit hardest those with least. One in five UK households will be left with no savings at all by 2024. Meanwhile, inflation is as much as 30% higher in the towns and cities of northern England, thanks, says the Centre for Cities, to poor home insulation and a “car dependency” that forces people to shell out more on petrol.You don’t have to be a strict economic materialist of the old school to know all this will shape our politics, in ways both deep and shallow. Start with the latter and the current contest to pick Britain’s next prime minister, a process of anointment mysteriously delegated to a select priesthood of 100,000 or so Britons who are anything but representative of the country whose fate they hold in their hands.Jonathan Freedland is a Guardian columnist Continue reading...

He has been accused of being asleep at the wheel over inflation, but sacking the Threadneedle Street chief would be a risky stepFrom safe pair of hands to the government’s whipping boy, Andrew Bailey has certainly had a rollercoaster ride as governor of the Bank of England since he was appointed little more than two years ago.Bailey was handed the keys to Threadneedle Street by Mark Carney just as the first Covid-19 wave was breaking over the global economy. Since then it has been one nasty shock after another for the man long-tipped for the Bank’s top job. Continue reading...

Unemployment rate dipped to 3.5% in July, equal to its rate in February 2020 before the Covid-19 pandemic hit the USThe US added 528,000 jobs in July as the jobs market returned to pre-pandemic levels.The US has now added 22m jobs since reaching a low in April 2020. The unemployment rate dipped to 3.5% in July, a half-century low and equal to its rate in February 2020 before the Covid-19 pandemic hit the US. Continue reading...

Business secretary Kwasi Kwarteng says support will not be introduced until ministers return to workThe UK business secretary, Kwasi Kwarteng, has admitted it will be more than a month before ministers can introduce any measures to tackle the rising cost of living.Kwarteng, who is backing the foreign secretary, Liz Truss, to become the next leader of the Conservative party, said he was expecting a new prime minister to introduce a “support package” in an emergency budget but it could not happen until after they start work next month. Continue reading...

The business secretary, Kwasi Kwarteng, has criticised the Bank of England’s control of inflation, saying 'clearly something's gone wrong' at the institution, as prices are predicted to rise by 13% and the UK is forecast to suffer an economic downturn lasting more than a year.As a key supporter of the foreign secretary, Liz Truss, Kwarteng’s comments suggest the Bank’s independent mandate to keep inflation at 2% may be re-examined if she becomes the next prime minister

'If everybody tries to beat inflation – in price-setting and wage-setting – it gets worse,’ warns Andrew Bailey

In today’s newsletter: The biggest rate rise in nearly 30 years comes amid forecasts of economic decline. How bad might it be?• Sign up here for our daily newsletter, First Edition Continue reading...

Bleak period of recession combined with rises in cost of living dominate the front pages, with plenty of horrifying graphicsFriday’s papers are united in gloom, placing front and centre the Bank of England’s grim forecast of a lengthy recession and inflation rising to its highest level since 1980.The Financial Times goes big with a “red alert” graphic showing GDP and inflation alongside an image of Bank governor Andrew Bailey, under the headline: “BoE warns of long recession as interest rates rise by half-point”. It notes that the outlook is worse than that of the US or the EU. Continue reading...

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Base rate raised by 0.5 percentage points to 1.75%, as Bank says inflation will hit 13% in OctoberVladimir Putin’s invasion of Ukraine has left Britain on course for a recession lasting more than a year and inflation above 13%, the Bank of England has warned as it raised interest rates for a sixth successive time.Threadneedle Street said it had no choice but to increase borrowing costs by 0.5 percentage points to 1.75%, blaming Russia for cost of living pressures not seen in more than four decades and a 5% drop in living standards straddling this year and next – the biggest since records began in the 1960s. Continue reading...

Interest rates rise to 1.75% – the biggest jump in 27 years – as BoE warns UK faces long recession as high gas prices hit householdsUK car sales have continued to fall, as the cost of living squeeze hits demand and computer ship shortages constrain supply.Nnew car registrations fell by 9% in July compared with a year ago, the Society of Motor Manufacturers and Traders (SMMT) reports. It’s the fifth monthly decline in a row Continue reading...

Retailer also warns of slowing growth in coming months as cost of living crisis hits budgetsNext is set to make £10m more in annual profits than previously expected after a rise in sales of suits and summer outfits boosted sales despite a squeeze on shoppers’ spare cash from rising energy, petrol and food costs.The clothing and homeware retailer said full-price sales rose by a better than anticipated 5% in the three months to 30 July, but warned it was expecting a slowdown in growth to just 1% in the second half of the year as the cost of living crisis hit shoppers’ budgets. Continue reading...

On most issues – from immigration and equalities to tax cuts – the two candidates for PM are hugely out of step with votersThe Bank of England raises rates in the biggest jump since 1995. Just to “do something”, it deepens the cost of living crisis while doing nothing to ease inflation caused by the global price of energy and food. How could that be caused by a wage-price spiral when average wages are falling at their fastest rate in two decades. The Bank also predicts a recession as deep as that of the 1990s.For whoever steps through the door of 10 Downing Street next month, this is just one more misery that hits the “squeezed middle” and those above them with mortgages, as well as the “just about managing” and the low paid. But this strange Tory leadership contest inhabits another universe, barely touching on the issues that pollsters find most concern voters.Polly Toynbee is a Guardian columnist Continue reading...

Analysis: The monetary policy committee has been accused of being asleep at the wheel amid cost of living crisis

Chancellor Nadhim Zahawi said to be on holiday as Bank of England adds to dire economic outlook

One in 20 people unemployed and not seeking work have symptoms, says ONSOne in 20 people in the UK who are neither employed nor seeking paid work are suffering from long Covid, with the figure more than doubling in the past year, official data has revealed.The proportion is far higher than for the one in 29 people who are unemployed but seeking work who have long Covid symptoms, or the one in 30 employed people who are sufferers, data released by the Office for National Statistics (ONS) shows. Continue reading...

The Bank of England governor has warned the UK will enter a recession later this year. The Bank has cut its growth forecast and predicts the economy could fall into recession from the October to December quarter. Andrew Bailey highlighted the recent hike in gas prices as one of the biggest contributors to rising inflation

From first-time home buyers to credit card users, we look at how your finances may be affectedThe Bank of England has voted to raise interest rates by 0.5 percentage points to 1.75% as the UK battles to prevent inflation running out of control. We look at what that means for your finances. Continue reading...

Westminster is perpetrating the same scam as the rate-setters – bluffing that they can get the old economic machinery working like beforePerhaps you have been hoping that the age of lies is over. After all, Boris Johnson will soon be swept out of No 10 and whoever replaces him cannot be half as mendacious – can they? Liz Truss may love her pork markets but she can’t be as keen on telling pork pies. Well, I bring bad news. If lying is making a statement one knows to be false, then Britain is wading waist-deep into an era of systemic deceit.I don’t just mean the permanently malfunctioning Truss, who this week complained she was “wilfully misrepresented” by, um, her very own press release. No, the fabrications come from across the political establishment and they concern the future of our economy. And the ultimate fruit of these lies may well be another Johnson or Nigel Farage.Aditya Chakrabortty is a Guardian columnist Continue reading...

Markets expect 0.5 percentage-point rise for first time since independence as inflation risesThe US Federal Reserve has done it. The European Central Bank has done it. Now the Bank of England must decide whether to follow suit and opt for a bigger than usual rise in official borrowing costs when it meets on Thursday.After edging rates up by a quarter-point at a time, the financial markets are betting that Threadneedle Street’s monetary policy committee (MPC) will announce a 0.5 percentage-point jump this time, something that has never happened since the Bank was granted independence in 1997. Continue reading...

South of England experiencing faster recovery than north, Scotland and Northern IrelandVisits to high streets and shopping centres dipped to below pre-pandemic levels last month, with the north of England – plus Scotland and Northern Ireland – trailing behind the south in terms of the overall recovery from Covid-fuelled gloom.Footfall decreased by 14% in July compared with 2019, reversing gains made in April, as retailers struggled to entice shoppers amid a heatwave in the third week of the month and surging inflation. Continue reading...

A hike in interest rates does nothing to stifle inflationary pressures and adds to the pain for firms and householdsHere is a conundrum. At noon on Thursday, the Bank of England will most likely increase interest rates for the sixth time in a row. Analysts are generally expecting a rise of a half of a percentage point– the biggest single hike since before the Bank was made independent, when monetary policy was ultimately the responsibility of a chancellor called Ken Clarke.Yet this week’s rate rise is not intended to cool an overheating economy – far from it. Both the IMF and the OECD forecast that the UK will endure the weakest growth of any rich country next year, while the well-respected National Institute of Economic and Social Research (Niesr) believes that the country will enter a recession this summer and stay there until well into next year. So why, then, is the Bank pushing up interest rates? Continue reading...

Oil producers will lift oil production by 100,000 barrels per day in September, a much smaller rise than in recent monthsDespite economic headwinds, German exports beat forecasts with 4.5% growth in June.Exports from Europe’s largest economy hit a record level thanks to demand from the European Union, the United States and China, data this morning shows. Continue reading...

Resolution Foundation says Bank of England likely to forecast higher and later peak, on eve of interest rates decisionThe UK’s annual inflation could go as high as 15% by the start of 2023, experts have forecast, as further sharp increases in energy prices push up the cost of living.On the eve of the latest decision on interest rates by the Bank of England, the Resolution Foundation thinktank said price pressures were likely to be stronger and last longer than the Bank had previously forecast. Continue reading...

Rising tensions between US and China threaten to accelerate decoupling of world’s two biggest economiesRelations between the US and China were poor even before the visit of the House of Representatives speaker to Taiwan. Now they have the potential to turn very nasty indeed – with significant consequences for the global economy.At the moment, things look containable. Financial markets have responded relatively calmly to Nancy Pelosi’s visit and the military exercises that Beijing has ordered in response. The assumption is that China will put on a show of strength and leave it at that. Continue reading...

The rise will force the Bank of England to hike interest rates higher and for longer than previously expected, says NIESRInflation will soar to “astronomical” levels over the next year forcing the Bank of England to raise interest rates higher and for longer than previously expected, according to a leading thinktank.The National Institute of Economic and Social Research also forecast a long recession that would last into next year and hit millions of the most vulnerable households, especially in the worst-off parts of the country. Continue reading...

As small businesses crumble, shelves get emptier and the care-worker shortage intensifies, life outside the EU is having a dire effect on many of us. Why aren’t politicians talking about it?When British politicians talk about Brexit and its consequences, they tend to adopt rictus grins and assure us that, by some miracle as yet unexplained, everything is going to be OK. The Labour leader Keir Starmer, who only a few years ago was a passionate advocate of a second referendum on our exit from the EU, now has a five-point plan to “make Brexit work”. Meanwhile, as the Tory leadership contest grinds on, both the candidates are at pains to claim that life outside the EU is going wonderfully well, or soon will do.No matter that leaving the EU has tangled up businesses in form-filling, fees and a new world of unbelievable complexity: Rishi Sunak says he wants to “go further and faster in using the freedoms Brexit has given us to cut the mass of EU regulations and bureaucracy holding back our growth”. Liz Truss sounds even more zealous: she now wants to scrap all the regulations in UK law that are there as the legacy of our time in the EU by the end of next year, to “make the most of our newfound freedoms outside the EU”. Continue reading...

Energy companies have done themselves few favours by helping investors as they benefit from soaring pricesBP has done well out of the war in Ukraine. Soaring oil and gas prices that followed Russia’s invasion in February meant quarterly profits have tripled to just under £7bn. Only once, when oil prices hit a record level of almost $150 a barrel 15 years ago, has the energy giant posted higher profits.It was only two years ago that oil prices briefly went negative in the early stages of the pandemic, but the big energy companies can expect little public sympathy. Continue reading...

Analysis: High street lenders have shrugged off their concerns, announcing payouts for investorsUK banking bosses gave off an unexpected air of calm when they released second quarter earnings over the past week, defying wider anxiety over the cost of living crisis and its impact on businesses and consumers.Major high street lenders, including NatWest, Barclays, Lloyds and HSBC, largely shrugged off concerns over potential defaults linked to weaker economic forecasts, with most announcing fresh payouts for investors and instead releasing money they previously put aside for bad loans. Continue reading...