The banker and former regulator has seen many crises in his career, but war and political division have him worriedSir Howard Davies is a worried man. He is worried about political polarisation. He is worried about the long-term impact of Brexit on the City of London. And he is worried by the pushback against globalisation.One thing he is not especially worried about is the health of the bank he chairs, NatWest, which in its former guise as Royal Bank of Scotland was on the edge of collapse during the global financial crisis of 2008. Continue reading...

The Bank of England governor warned last week of ‘apocalyptic’ food price rises. Yet war in Ukraine, climate change and inflation are already taking their toll all over the worldApocalypse is an alarming idea, commonly taken to denote catastrophic destruction foreshadowing the end of the world. But in the original Greek, apokálypsis means a revelation or an uncovering. One vernacular definition is “to take the lid off something”.That latter feat is exactly what Andrew Bailey, governor of the Bank of England, achieved last week, possibly inadvertently, when he suggested Britain was facing “apocalyptic” levels of food price inflation. Tory ministers fumed over what they saw as implied criticism of the government’s masterly economic management. Continue reading...

Which? analysis finds cereal, mushrooms and cheese among the items to have risen the mostAt Sainsbury’s in Whitechapel, east London, the rising cost of food has forced Petra Emmanuel to change her shopping habits.“Coupled with my utilities bill, it’s ridiculous,” the 51-year-old teacher said. “Even though I don’t buy branded foods, it’s the simplest items that have seemed to have gone up. Continue reading...

We would like to hear your experiences of companies skimping on the quality of their productsWe would like to hear your experiences of “skimpflation” – a term used to describe when companies skimp on the quality of their products and services to save money instead of putting up prices. This can result in a worse experience, such as a long delay, a bad journey, or a poorer quality product.For example, does something you buy regularly still cost the same but now seems to be made out of cheaper materials or ingredients? Have you noticed changes in local cafes or restaurants? What was your experience when you went on holiday? Did you get the service you expected? Were you charged for things that used to be free? Continue reading...

Some Tory stalwarts may be angry but state of the economy could be what brings the prime minister down

BoE’s Huw Pill says MPC faces its biggest challenge in 25 years, and indicates further monetary tightening needed to avoid wage-price spiral

Tansy Hoskins, author of a book on the impact of fast fashion, says the true cost of knock-off clothes is being paid by garment workersBrowse the makeup sections of Aldi, Lidl, Primark and many more, and it won’t be long before you come across “dupes”. Immensely popular with generation Z, these are near “duplicates” of luxury items created by budget brands. Copyright issues aside, how ethical are they? I spoke to Tansy Hoskins, whose books dissect the impact of fast fashion.I’ll never forget being a teenager and discovering my Reeboks were actually knock-off “Reeborks”. The shame! Aren’t dupes fakes by another name?

Bank of England’s Huw Pill warns ‘further work needs to be done’ after recent base rate risesThe Bank of England will intensify its squeeze on the economy over the coming months as it seeks to bring down the highest inflation rate in 40 years, its chief economist has warned.Noting that Threadneedle Street was facing its toughest challenge since being granted independence in 1997, Huw Pill said “further work needs to be done” to bring the annual inflation rate back to the government’s 2% target. Continue reading...

Attempts to boost flagging GDP growth hindered by Covid lockdowns, Ukraine war and Sino-US tensionsAt a recent online gathering of top Chinese economists, a palpable sense of urgency filled the virtual meeting room. In recent weeks, a slew of reports by Chinese and foreign economists pointed to a deteriorating economy. Outside the country, talk of China being the engine of global economic growth no longer convinces.During the meeting Huang Yiping, a Peking University professor and a former central bank adviser, urged Beijing to “do whatever it takes to save the economy”. Huang was paraphrasing a line from the height of the European debt crises more than a decade ago, when the European Central Bank’s then president, Mario Draghi, said it was ready to “do whatever it takes to preserve the euro”. Continue reading...

Part of April increase may be down to people staying in to save money, says ONSConsumers in Great Britain carried on spending last month despite the highest inflation rate in 40 years, providing high street and online retailers with a surprise boost.The Office for National Statistics (ONS) said there was a 1.4% monthly jump in retail sales in April but said the trend was still weak and that part of the increase might be down to people staying in to save money. Continue reading...

Consumers increasingly pessimistic about economy and personal finances amid deepening cost of living crisisConsumer confidence in the UK has fallen to the lowest level since records began in 1974 amid growing concern over the cost of living crisis.Stoking fears that Britain is heading for a recession caused by the squeeze on family budgets, the latest monthly snapshot showed consumers are now gloomier about their prospects than they were during the 2008 financial crisis. Continue reading...

Kristalina Georgieva cites Russia’s war in Ukraine and cost pressures caused by China’s zero-Covid policiesGlobal finance leaders should prepare for multiple inflationary shocks, the head of the International Monetary Fund has warned, as fears of a global economic downturn continue to hit markets around the world.The IMF’s managing director, Kristalina Georgieva, said it is becoming harder for central banks to bring down inflation without causing recessions. Continue reading...

Analysis: the chancellor has a set of options for making the tax system fairer at the same time as bringing in revenueSuppose the chancellor wanted to follow Scottish Power’s advice, and give Britain’s most hard-up households £1,000 towards their energy bills this winter? Would it be possible to raise the £10bn needed in a way that didn’t just tax the same people he would be trying to help? I can think of at least three options, any of which would do the job, and all of which would make the tax system better as well. Continue reading...

Postal service says potential rise would help offset higher staff and energy costs and fall in parcel deliveriesRoyal Mail has warned that it is likely to raise prices again for stamps and letters, as part of efforts to combat rising costs and offset a post-pandemic slowdown in parcel deliveries.The delivery company said on Thursday it would try to make up for falling revenues and higher staff and energy costs through “price increases and growth initiatives” over the next year, having already raised the price of sending letters and parcels by 7% and 4% respectively. Royal Mail said it had also introduced a fuel surcharge in some of its contracts, in a move that finance chief Mick Jeavons said was “fairly measured”. Continue reading...

Chief of business association calls for stimulus that aids ‘hardest hit’ with rising food and fuel billsTackling rising food and fuel bills will not add to inflation and people who are “the hardest hit” need help now, the head of the UK’s biggest business association has warned.Official figures published on Wednesday revealed UK inflation soared to 9% in April – its highest level for more than 40 years – as the rising cost of gas and electricity pushed household energy bills to record levels. Continue reading...

As inflation hits 9%, four English businesses explain how they are negotiating soaring pricesNotifications arrive every day at Loveone, an Ipswich gift shop, heralding price increases of 5% to 10% on products it sells, usually adding a couple of pounds to the sticker price.“If I don’t get my orders in by a certain date then I will have to pay more,” says Cathy Frost, who has run the shop for 15 years. “I can kind of hold my prices for the moment as I ordered stock six months ago, but if the things I’m ordering now are going to be more expensive, I’m asking: ‘Will people pay more?’” Continue reading...

In today’s newsletter: As inflation hits a 40-year high of 9%, Archie Bland explores the causes of the crisis, and the potential solutions left out of the debate

Shortages of grain and fertiliser could cause ‘mass hunger and famine, says chief, as World Bank pledges $12bn to ease shortfall

Tories say taxes must fall to curb inflation, even at the cost of a higher deficit. Labour should argue that public spending could be increased for the same reasonThe Bank of England this week joined the ranks of the “enemies of the people”. Damned for the governor’s gloomy but accurate assessment that UK consumers face an “apocalyptic” spike in food prices, the Bank found itself on the front pages of the populist press. The Old Lady of Threadneedle Street stood accused of being “asleep at the wheel” as prices soared.But hiking interest rates would not have stopped escalating costs. The Bank’s governor, Andrew Bailey, was right when he said that inflation – which reached a 40-year high of 9% – had been driven by international events. Covid supply chain disruptions, the Russian invasion of Ukraine and Brexit are all beyond his control. Higher interest rates are not going to produce more oil or more wheat and bring down the prices of key commodities.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 300 words to be considered for publication, email it to us at guardian.letters@theguardian.com Continue reading...

Low wages growth, inflation, price rises and jobseeker are combining to put talk of a strong recovery from the pandemic into contextThe latest wage price index figures confirm that when Australians go to the polls this Saturday, their real wages will be lower than at the last federal election. Not only that, but so bad has been the fall that real wages are now essentially no different from what they were when Tony Abbott took office in 2013.In the latest minutes of the Reserve Bank board, the bank noted it decided not to wait for this latest wage data because while the board “agreed that this information would be helpful … the recent evidence on wages growth from the Bank’s liaison and business surveys was clear”. Continue reading...

Jane Jones, a supermarket worker from Flintshire, Wales, tells how desperate customers are stealing everyday things

Analysis: UK among hardest-hit countries thanks to perfect storm of war in Ukraine, Covid and BrexitBritain’s inflation rate has soared to the highest level since the early 1980s. After a record increase in gas and electricity bills in April, inflation is the highest in the G7. Having reached 9% last month, it is above the 8.3% rate in the US and Germany’s 7.4%. Japan, an economy characterised by low inflation for decades thanks to an ageing population, has the lowest rate at 1.2%.Here are some of the reasons why prices are rising faster in the UK than in other major economies. Continue reading...

UK inflation hits 9%, its highest level since 1982, with food inflation highest since 2011, and low-income families are worst hit

Average pump price for petrol hits 167.64p a litre and for diesel 180.90p a litre amid accusations of profiteeringThe prices of fuel at UK forecourts have hit record highs, as the cost of living crisis intensifies.The average pump price for petrol reached 167.64p a litre, the RAC said, surpassing the previous record of 167.30p set on 22 March. Continue reading...

Analysis: Chancellor has sought to deflect criticism by citing global factors but has hinted about support

Faced with the the biggest inflation rise in 40 years, the Bank must do more than berate workersIn the 25 years since the Bank of England was made independent, politicians have happily played along with the idea that they have no place in monetary management. Yet with inflation now reaching 9% – levels last seen 40 years ago – that pretence has broken.Instead, senior Conservative MPs scolded the Bank for letting prices soar, suggesting Covid stimulus measures had been allowed to go on too long. For his part, the governor of the Bank of England, Andrew Bailey, also abandoned neutrality with his repeated calls for workers to exercise “restraint” and sacrifice higher wage demands.Sahil Jai Dutta is a lecturer in political economy and co-author of Unprecedented: How Covid-19 Revealed the Politics of Our Economy Continue reading...

Headline CPI rate fuelled by increase in household bills and rising transport costs

Rolling coverage of the latest economic and financial news

Archie Norman backs UK plans to scrap parts of protocol, saying lorries require ‘700 pages of documents’

Most workers face fifth month of falling living standards despite soaring City bonusesSoaring bonuses for City bankers and high signing-on fees for construction and IT professionals pushed Britons’ average annual pay up by 7% in March, but most workers suffered a fifth consecutive month of falling living standards.Without bonus payments, workers were paid an average 4.2% wage increase in the three months to the end of March, well below the 7% inflation rate recorded in the same month, according to the Office for National Statistics. Continue reading...

Bank of England’s Andrew Bailey blames UK’s highest inflation rate for three decades on Russia-Ukraine war and Covid

Rolling coverage of the latest economic and financial news

European Commission downgrades growth prospects from 4% to 2.7%, while economy slows rapidly in China

Developed nations need to thwart the economic fallout from the Ukraine war from destroying the lives of the world’s most vulnerableBig shocks to the global economy, such as Russia’s invasion of Ukraine, understandably capture the most attention. But a new worldwide pattern of “little fires everywhere” may be equally consequential for longer-term economic wellbeing. Over time, these small fires can coalesce into one that is just as threatening as the initial large fire that acted as the catalyst.In addition to causing widespread death and destruction, and displacing millions of people, the Ukraine war continues to stoke strong stagflationary winds throughout the global economy. The resulting damage – whether in the form of higher food and energy prices or new supply-chain disruptions – cannot be easily or rapidly countered by domestic policy adjustments. Continue reading...

Leading economists publish letter to Rishi Sunak in response to proposed financial services and markets billA group of 58 leading economists and politicians, including the former business minister Vince Cable, has written to the chancellor to say that scaling back City regulation will put the UK at risk of another financial crash.The open letter, which has also been signed by the former Greek finance minister Yanis Varoufakis and Columbia University professor Adam Tooze, was sent in reaction to the Queen’s speech, which outlined Rishi Sunak’s plans to “cut red tape” through a financial services and markets bill. Continue reading...

Andrew Bailey’s appearance at select committee will come amid work from chancellor to find new ways to ease cost of livingThe Bank of England governor, Andrew Bailey, will face a grilling from angry Conservative MPs over inflation on Monday, as cabinet sources moved to quell the incendiary remarks about the Bank’s independence.The governor’s appearance before MPs – which has been likened to the showdowns with former Bank boss Lord Mervyn King during the 2008 crash – will come amid intense work from the chancellor, Rishi Sunak, to find new measures to ease the cost of living before the summer recess. Continue reading...

Covid has amplified the threats that accompany the country’s role as an economic superpowerChina has been central to the story of globalisation over the past 30 years, but now it is struggling. More than two years after Covid-19 cases were discovered in Wuhan, the world’s most populous country has yet to get on top of the virus. Draconian lockdowns have been imposed because China’s vaccines are less effective than those available in the west, and immunity levels are lower as well.Growth is slowing, and not just because of the tough restrictions insisted upon by President Xi Jinping. Flaws in China’s economic model coupled with a more hostile geopolitical climate mean the days of explosive expansion are over. Continue reading...

After an initial shock to businesses, manufacturing jobs are growing four times faster here than the UK averageWhenever Boris Johnson’s government wades into battle over the Northern Ireland protocol, it wields one assertion like a broadsword: that the protocol is ruining the region’s economy. Checks on goods entering Northern Ireland are disrupting trade, increasing prices and bankrupting businesses, and the damage will worsen unless the protocol is changed, goes the argument.The Institute of Economic Affairs (IEA), a rightwing thinktank, joined the fray last week with a report that estimated the annual cost of the agreement at £850m. Continue reading...

As Simon Kuper points out in his excellent book, both groups betrayed us to Moscow – but the former did it deliberatelyThe chaos caused by Brexit is here for all but the most pigheaded Brexiters to see. Why, no less a figure than the minister for Brexit “opportunities”, one Jacob Rees-Mogg, finds himself having to delay further implementation of customs bureaucracy because of the damage even he can see in front of him. Bringing in full checks the government had agreed in order “to get Brexit done” would, said Rees-Mogg, have been “an act of self-harm”, adding an extra £1bn to the already enormous cost of Brexit. No, I am not making this up.There was another priceless example of what a nonsensical government we have when Conor Burns, the minister of state for Northern Ireland, appeared on Channel 4 News last Wednesday. Continue reading...

Inflation is set to jump to 9% this week when official figures are released, and fears of a slump are growingBritain’s hard-pressed households could feel even worse done by this week when official inflation figures show just how fast the cost of living is rising. Economists are forecasting a jump from March’s 7% to 9.1% in April.If the pundits are right, the consumer prices index will be at its highest level since 1990, when the UK was struggling with one of its worst postwar property slumps and a full-blown recession. Continue reading...

ONS survey reveals worsening effects of cost of living crisis, with food prices forecast to have risen by 9% in AprilHouseholds have been warned that the UK’s “golden era” of cheap food is over, as official figures published on Friday pointed to the toll of the cost of living crisis, with two in five people buying less food to get by.The former Sainsbury’s boss Justin King said shoppers now faced hard choices over how to spend their money as the financial shock, caused by the war in Ukraine, pushes up prices on supermarket shelves. Continue reading...

Rolling coverage of the latest economic and financial news

With inflation set to reach 10% and wages falling short, ministers can’t ignore the crisis affecting ever more voters

Calls for emergency budget grow as UK economy contracts unexpectedly in March, with consumers cutting back on spending, and car sector struggling

Across-the-board tax cut would be blunt, very costly and give wealthy a boost, warns Howard DaviesThe chairman of NatWest bank has argued that changes to the benefits system would be the most effective way for the government to help the poorest families struggling to cope with the cost of living crisis, instead of cutting taxes that also give the wealthy a financial boost.Sir Howard Davies, a former deputy governor of the Bank of England, said soaring energy bills and rampant inflation were disproportionately affecting the poorest fifth of households and they should be the focus of financial support measures. Continue reading...

Analysis: Rising prices, a tight labour market and a falling pound – the economy ticks every warning boxThere is a word for what is about to hit the UK economy and it is stagflation.The combination of two dreaded terms in the economic lexicon – stagnation and inflation – should send ripples of apprehension and unease through the corridors of the Treasury’s Horse Guards Road offices and the Bank of England’s home on Threadneedle Street. Continue reading...

Dame Sharon White follows Tesco head in urging UK government to help with rising energy and grocery billsThe boss of John Lewis has urged the government to intervene with a financial package of support to protect families from the cost of living crisis on the same scale as it did to help the UK deal with the Covid pandemic.Dame Sharon White, a former second permanent secretary at the Treasury, said the government needed to act urgently because families were struggling to pay utility and food costs as energy bills and inflation soared. Continue reading...

Sharp selloff of shares and fall in pound against the dollar follow news of surprise contraction in economyPressure is mounting on the government to deliver an emergency summer mini-budget after recession fears were heightened by a surprise contraction in the economy in March.Evidence that the cost of living crisis was biting even before the arrival last month of dearer energy bills and higher taxes led to a sharp selloff in shares and a drop in the pound’s value to a two-year low against the US dollar. Continue reading...

The west should help rebuild after the Russian invasion – and it can learn lessons from the 1940s

Consumer price index reveals costs rising by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021Price rises slowed in the US in April but the annual inflation rate remained close to a 40-year high, leaving many Americans struggling to afford necessities including food, shelter and fuel.The latest consumer price index (CPI) figures – which measure a broad range of goods and services – showed prices rising by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021. Continue reading...