Cashflow hit by rising expenses amid surging bills and impact of Omicron, finds quarterly studyUK households have suffered the sharpest fall in the amount of cash they have available to spend for almost eight years, amid a worsening cost of living crisis driven by high inflation and rising energy bills.According to a report by the insurer Scottish Widows, increasing living costs at the end of last year hit people’s pockets and led to the steepest decline in cash availability since the start of 2014. Continue reading...

Federal Reserve chair Jerome Powell is appearing for a confirmation hearing at the Senate, as prices across the OECD jump at the fastest pace since 1996

Bank forecasts slowdown in growth as world copes with Covid, inflation and higher interest ratesThe risk of a hard landing for large parts of the global economy is rising as countries struggle to cope with the triple threat of Covid-19, inflation and higher interest rates, the World Bank has said.In its half-yearly forecasts, the Washington DC-based Bank said it expected a “pronounced slowdown” in growth in the next two years, with the less well-off parts of the world especially hard hit. Continue reading...

Sharper divisions between rich and poor countries are making a united response more difficult, survey findsScars left by the Covid-19 pandemic have deepened the global divide between rich and poor countries and will make it harder to find common cause in the fight against global heating, according to the World Economic Forum.A WEF report puts climate or environment-related threats in the top five slots in its list of the 10 long-term risks but warned a “vaccine divide” was making collaboration to limit temperature increases more difficult. Continue reading...

Industry says consumer spending is likely to be held back after strong full-year figures for retail in 2021Britain’s retailers have said the soaring cost of living risks dragging down high street sales in 2022 after a bumper Christmas trading period and year of recovery in consumer spending.Sounding the alarm over the risks for the UK economy as whole, the British Retail Consortium said there were significant headwinds for the industry in 2022 from high inflation, rising energy bills and planned tax increases. Continue reading...

Tech stocks continue to slide as investors brace for US Federal Reserve to tighten monetary policy due to high inflation

Share prices fell back on both sides of the Atlantic with the FTSE 100 shedding 40 pointsGlobal financial markets tumbled on Monday amid growing investor concerns about the US Federal Reserve potentially putting up interest rates in response to surging inflationary pressures.Share prices fell back on both sides of the Atlantic with the FTSE 100 shedding 40 points, or 0.5%, in London, to finish the day at 7,445, while stocks fell by a more substantial margin on Wall Street as traders bet on the American central bank leaping into action from as early as March to tackle high inflation rates. Continue reading...

Emerging economies should prepare for tough action from Federal Reserve, says fundHigher US inflation could lead to a tougher than expected response from America’s central bank that would send tremors through financial markets and put vulnerable countries at risk, the International Monetary Fund has warned.Adding to growing concerns about the sharp increase in price pressures being registered across the globe, the IMF said emerging market nations should brace themselves for muscular action from the US central bank, the Federal Reserve. Continue reading...

Make UK says two-thirds of companies fear customs delays and red tape from new rules will further hamper supply chainsManufacturers have warned that Brexit will add to soaring costs facing British industry, amid concerns that customs delays and red tape will rank among the biggest challenges for firms this year.Make UK, the industry body representing 20,000 manufacturing firms of all sizes from across the country, said that while optimism among its members had grown, it was being undermined by the after-effects of the UK’s departure from the EU. Continue reading...

Reaching for the tax-cutting playbook won’t solve Britain’s problems – the current crisis was a decade in the making before CovidBritain’s unfolding cost of living crisis is dominating the headlines. The soaring cost of a weekly shop, a record increase looming for utility bills, and the price of petrol through the roof. Households have never had it so tough.Yet the squeeze has been in place for longer than the current crisis might suggest. Far from the year of the squeeze, the opening months of 2022 reflect the problems of the past decade, compounded by Covid-19. Continue reading...

Labour must make it clear that regions suffering under the long squeeze of austerity have still more to fear from the ToriesApart from his bad luck in being struck twice by the need to go into isolation from Covid, the leader of the opposition, Sir Keir Starmer has a huge, indeed historic, weight on his shoulders. To put it bluntly: this government is so appalling that if, as it hopes, it is re-elected either this year or next, many of us will be seriously tempted to emigrate.The sleaze that finally overturned one of the safest Tory seats in the land, namely North Shropshire, brought to mind a line in Imperium, a novel by my old friend Robert Harris: Cicero (for it is the fictional he) describes a dodgy politician as “giving corruption a bad name”. Continue reading...

The Fed wants to raise interest rates and coronavirus support programs are ending. Millions of families stand to sufferFriday’s jobs report from the Department of Labor was a warning sign about the US economy. It should cause widespread concern about the Fed’s plans to raise interest rates to control inflation. And it should cause policymakers to rethink ending government supports such as extended unemployment insurance and the child tax credit. These will soon be needed to keep millions of families afloat.Employers added only 199,000 jobs in December. That’s the fewest new jobs added in any month last year. In November, employers added 249,000. The average for 2021 was 537,000 jobs per month. Note also that the December survey was done in mid-December, before the latest surge in the Omicron variant of Covid caused millions of people to stay home. Continue reading...

Some believe high pay deals will set off a wage-price spiral. But do the UK’s de-unionised workers have the power to demand them?Jack Saunders might possess a PhD and have lectured undergraduates for 10 years, most recently at University College London, yet in all that time job security and an above-inflation pay rise have eluded him.“I have been on a fixed-term contract since I started in 2011,” he said. “And there hasn’t been a pay award above inflation since Gordon Brown was prime minister. It means you are always searching the job market and each job is a stopgap.” Continue reading...

Fewer jobs created in December than expected, although October and November’s payroll revised higher

Survey finds Omicron meant a weak end to 2021 despite building costs easing to buck the inflation trendGrowth in the UK construction industry slowed in December as the impact of Omicron offset gains for building firms from fading supply chain disruption.Figures from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) showed building companies ending 2021 on a weaker footing, with coronavirus infections and fresh pandemic restrictions hitting demand. Continue reading...

The prime minister has failed to convince his party, the cabinet or voters what the country should look likeIf the Tory party could be summed up in a word, it would be power. The Conservatives have dominated the 19th, 20th and – so far – 21st centuries. Their most successful leaders have anticipated the national mood and shaped their party to profit from it. Boris Johnson won the last election by betting the right way on Brexit. But there is a fundamental disagreement at the heart of the Tory party as to what the future UK economy outside the EU should look like. This question urgently needs an answer, not least as the country looks past the pandemic.In the next six months Britain will almost certainly face a cost-of-living crisis. High inflation may go even higher before it ebbs away. Mr Johnson is in denial about this problem while people face going cold and hungry in their homes. Prices are driven higher by global energy costs, set by cartels such as Opec or gas producers such as Russia. However, the price at which electricity and gas is supplied to the UK’s companies and households could be capped and a windfall tax on oil companies used to reimburse suppliers. State intervention could help ordinary households – but ministers say that this would be at the expense of “this country’s reputation as a hub of international capital and investment”. Continue reading...

Activity weakened across UK services sector last month, as hospitality firms suffer cancellations and staff shortages

Consumer body calls for safeguards such as affordability checks in advance of FCA regulationStronger safeguards are needed to protect the millions of UK shoppers who use “buy now, pay later” deals because many people do not realise they are taking on debt, a consumer body has warned.Buy now, pay later (BNPL) lets shoppers delay payment for an item with no interest or charges – unless you fail to pay it back on time, at which point some firms impose late fees. Continue reading...

Last quarter survey of 2021 shows firms worried about raised interest rates, and cash flow and debt issues, prior to plan B Covid rulesBritain’s economic recovery stalled before the arrival of the Omicron variant of Covid and the dampening effect of the government’s plan B restrictions on consumer spending in the Christmas shopping period, a wide-ranging company survey has found.Businesses blamed spiralling inflation and shortages of imported goods for a decline in sales in the fourth quarter, which meant that an expansion during the spring and summer ground to a halt. Continue reading...

Energy bill and tax rises will hammer households by an average £1,200 from April, and could turn voters against Boris JohnsonTurn on the radio or scroll down your phone and the big headlines belong to Covid. But when this latest version of the plague drops off the front pages, another story is set to take its place – and this one will hang around for most of the year, setting the terms of trade at Westminster and possibly deciding Boris Johnson’s future.The cost of living is about to shape our politics in a way that it hasn’t for decades.Aditya Chakrabortty is a Guardian columnist and senior economics commentator Continue reading...

Alastair Hatchett writes that pay growth for some is quite strong, while for others it is very weakThe forthcoming economic crisis analysed by the Resolution Foundation (UK households warned of ‘year of the squeeze’ as cost of living soars, 29 December) is partly based on a view that wage growth is stagnant. This is true for a wide range of employees but not necessarily for all. In fact, earnings growth in the year to October was 4.9%, matching consumer price index inflation, in part buoyed up by labour market shortages. If we follow the Office for National Statistics’ breakdown of sectors, average earnings in the private sector grew by 5.4% in the year to October, while in the public sector the growth rate was 2.7%. So 2022 is set to be yet another tough year for public sector employees.Further analysis of the different parts of the private sector shows average earnings growing by 7.7% in the finance and business services sector, contrasting with a low rate of 2.8% in manufacturing. Pay growth for some is quite strong, while for others it is very weak and certainly below the rate of inflation.

Rolling coverage of the latest economic and financial news

Borrowing on credit cards reached highest level in more than a year in November, says Bank of EnglandConsumer borrowing on credit cards jumped to its highest level in more than a year in November, pushing all forms of household unsecured credit to £1.2bn, according to the latest Bank of England data.The increase in reliance on loans and credit cards exceeded City forecasts of a £0.8bn rise and beat the £0.6bn average of the previous six months. Continue reading...

Supply chain disruption and staff shortages held back economy in DecemberBritain’s manufacturers have suffered a drop in export demand amid pressure from Covid and Brexit, according to fresh data that shows supply chain disruption and staff shortages held back the economy in December.The latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) showed growth in UK factory output was limited last month by Covid restrictions and Brexit weighing on orders and pushing up costs. Continue reading...

Workers left their jobs at historic rates, with a record 4.5m quits at the end of November – but it happened against an economic picture that remains difficult to interpret2021 was the year of the “Great Resignation” – a year when workers quit their jobs at historic rates. According to some, the trend was driven by an economic and psychological shift as employers struggled – and often failed – to tempt anxious staff to return to industries that have too often treated workers as dispensable. The truth is more complicated.It is accurate to say that many people have quit their jobs in 2021 – “quits”, as the Bureau of Labor Statistics calls them, hit a high in September, with over 4.4 million people leaving their jobs, and was followed by a modest reduction of that trend in October. Continue reading...

The Brexit balloon is bursting, the cabinet is rife with division – and Keir Starmer and co are increasingly appealing to voters“I fucking hate the Labour party, they’re a fucking disgrace … They’ve betrayed the working classes, they’ve betrayed ordinary people.” Thus spake Noel Gallagher, the former Oasis guitarist, and out it poured on to Twitter.

Despite Brexit, a shared history and geography means Paris and London will have to find a way to work togetherAt the core of Boris Johnson’s Brexit is a conflict between ideology and geography. The purpose of the project is divergence – a competitive leap away from Europe into other markets. But that impulse to move is thwarted by the permanence of Britain’s location. No matter how much sovereignty the Eurosceptics claim over national regulation, governing a medium-sized power 30 miles from the coast of France will always require some accommodation with the interests of neighbouring states.EU membership was not the only possible way to manage those relationships, but it worked better than anything that had been tried in the preceding centuries, and nothing has been arranged to replace it. The Brexit withdrawal deal offers only a technical framework for economic partnership, and even that is unstable, as is clear from the ongoing negotiations over customs checks for Northern Ireland and operating licences for French fishers in UK waters. Continue reading...

Preparation means not just improving surveillance and buying more protective gear, but rethinking the way we liveThough at times it can feel hard to believe – especially in recent weeks, perhaps – this pandemic will not last for ever. With more than 5 million dead and huge economic and social costs, its toll has been immense, and unnecessarily so. Secrecy in China, complacency in Europe, reckless and callous rightwing populism in the US and Brazil, and the inequity in vaccine distribution have all contributed.Yet if we learn its lessons, we will be better prepared next time. For there will be a next time. Covid is not a once-in-a-century crisis – an idea encouraged by its arrival 101 years after the last major pandemic, the “Spanish” flu, which killed at least 50 million. The mega-flu outbreak that many experts had seen as the next great threat is no less likely to arrive because Covid got here first. A pandemic of similar scale is likely within the next six decades, and could happen at any point in that timespan, according to research published in the Proceedings of the National Academy of Sciences (PNAS) in August; others have put the risk of a comparable crisis within the next decade at around one in four. And as Prof Dame Sarah Gilbert, the creator of the Oxford/AstraZeneca jab, warned recently: “The next one could be worse. It could be more contagious, or more lethal, or both.” Continue reading...

Jonathan Powell says PM and Brexit ministers risking fragile peace in Northern Ireland and ‘don’t seem to care’One of the architects of the Northern Ireland peace deal has said Boris Johnson and the former Brexit minister Lord Frost have risked “all the work” the previous generation of politicians put into the Belfast Good Friday agreement by putting their hard ideological beliefs ahead of people.Jonathan Powell, Tony Blair’s former chief of staff and chief negotiator on Northern Ireland, said he was concerned that neither the prime minister nor the recently resigned Brexit minister seemed to understand or care about the fragility of the political settlement in Northern Ireland in 1998. Continue reading...

Half a million people have sunk into poverty since the pandemic struck, with rising costs forcing many to cut back on food

Analysis: the Omicron variant has given Britain a bad start along with looming inflation, weak growth and rising bills• The UK government should join us to create a fair and resilient economyBritain’s economy is beginning 2022 on the back foot as record numbers of coronavirus infections and tougher restrictions driven by the Omicron variant cloud the outlook for growth.It comes after a weaker pace of growth at the end of last year as businesses and households come under mounting pressure from rising energy bills pushing up inflation, as well as shortages of workers and materials. Here are five charts for the UK’s economic prospects in 2022. Continue reading...

With Omicron we’re facing the same old argument about whether to protect people’s livelihood in face of a crisis• What does 2022 hold for the UK economy and its households?Once again we start a new year with the country in the grip of Covid-19.But as 2022 dawns, the UK should have been better prepared for the disruption of a new variant. Continue reading...

It’s easy to see why the government is reluctant to add to the economic pain with tougher restrictions

With inflation rising and China tightening the screw, the best we can hope for is to come down to earth without a bumpToo much of a good thing can make anyone queasy – as many will be aware after a week of turkey leftovers. The same applies to the economy and markets, if analysts’ predictions for the year ahead are anything to go by.Sitting around doing nothing (or passive investment) is an admirable strategy in most years. In 2021 it was masterly. London’s stock benchmark, the FTSE 100, ended December 14.3% higher than last January, and in the US buying shares has been even more rewarding: the S&P 500 went up more than a quarter in value. Continue reading...

The Tories say they plan to boost the regions with powerful governors. But look at how they treat the mayor of LondonMichael Gove, in his new role as the cabinet’s major-domo and minister in charge of “levelling up”, is about to expend large amounts of intellectual and political capital attempting to close the gap between the south-east and everywhere else.Levelling up, as we are told repeatedly by No 10, will be the defining achievement of the Johnson administration and 2022 is the year that efforts to transform the much-neglected regions begin to gather pace. With this in mind, Gove is about to publish a white paper that outlines how the government plans to tackle this gargantuan task. Continue reading...

Centre for Economics and Business Research forecasts reasonably strong rise in face of inflation, Omicron and supply chain crisisThe year ahead will be dominated by efforts to fight inflation along with climate change, while global economic growth will be reasonably strong and stock markets weak, according to an economic forecaster.The world starts the year with economies held back by a supply chain crisis and the rapid spread of the Omicron coronavirus variant, but the global economy is still expected to grow by about 4% in 2022, compared with an estimated 5.1% in 2021, according to the Centre for Economics and Business Research (CEBR), a UK thinktank. Continue reading...

New customs checks will make imports more expensive and slower, says Cold Chain FederationBritain’s small businesses should expect trade with the EU to be “permanently damaged” from 1 January, the refrigerated supply chain trade body has said, after new customs checks take effect that it says will make imports from the bloc “more expensive, less flexible and much slower”.Amid growing public dismay at the negative impact of Brexit, the Cold Chain Federation said speciality food imports could face the same 70% decline that affected exports of food by small businesses this year after Britain quit the EU single market and customs union. Continue reading...

Rolling coverage of the latest economic and financial news, on the final trading day of the year

Stocks recover from shock of 2020 as vaccines allow economies to reopen and stimulus packages boost growth

Developers owe $19.8bn in dollar-denominated offshore debt in the first three months of the year as issues that blighted Evergrande spreadThe crisis engulfing the Chinese property sector appears certain to intensify in 2022 as companies face debt repayments in the new year that are double those of the final months of 2021, risking what one China expert calls a systemic crisis for the world’s second-biggest economy.Although concerns about the stricken giant China Evergrande have receded in recent weeks behind a massive state-led restructuring operation, it missed a bond repayment of $255m (£190m) on Thursday and the debt problems that have pushed the second biggest developer in the country into default are blighting many other firms. Continue reading...

From lockdowns and ‘pingdemics’ to petrol panic and supply chain chaos, the last 12 months have been a bumpy rideAs dawn broke on the first morning of 2021, dark storm clouds hung over Britain’s economic landscape. Hospitality, aviation and tourism had been at a standstill for much of the previous year, while high street retail had fared only a little better.A winter Covid-19 surge heralded yet another punishing lockdown and, as if that wasn’t enough, Brexit was crimping Britain’s international trade. Consumer confidence languished at rock bottom with no end to the pandemic in sight. Continue reading...

With inflation set to exceed the Bank’s 2% target in 2022 – many people will be hit hard by a cost-of-living crisisThe Bank of England has badly misjudged the persistence of inflation. It is also underestimating the risks that its policies pose to financial stability.The problems, however, don’t stop there. For much of the last decade, its policies of low rates have contributed significantly to inequality, boosting asset and house prices. Continue reading...

Rolling coverage of the latest economic and financial news

Post-Christmas price rises of as much as 50% attributed to cost increases across supply chainIkea has increased the price of its flat-pack furniture by up to 50%, blaming supply chain costs caused by Covid-19, in a move that will further stoke growing concern about the rising cost of living.After customers complained that prices appeared to have risen sharply after Christmas, the retailer said it was no longer able to absorb increased costs and was passing them on to consumers. Continue reading...

The pandemic is not over and the next 12 months pose geopolitical and systemic challengesDespite dips and disruptions from new variants of Covid-19, 2021 turned out to be a relatively positive year for economies and markets in most parts of the world. Growth rose above its potential after the severe recession of 2020, and financial markets recovered robustly. This was especially the case in the US, where stock markets reached new highs, owing partly to the US Federal Reserve’s ultra-loose monetary policy (though central banks in other advanced economies pursued radically accommodative policies of their own).But 2022 may be more difficult. The pandemic is not over. Omicron may not be as virulent as previous variants – particularly in highly vaccinated advanced economies – but it is much more contagious, which means that hospitalisations and deaths will remain high. The resulting uncertainty and risk aversion will suppress demand and exacerbate supply-chain bottlenecks. Continue reading...

Boris Johnson challenged to address ‘lost decade’ of falling real wages under Tory governmentsBritish workers facing soaring costs of living in 2022 need a bigger pay rise after a “lost decade” of wage growth under Conservative-led governments, the head of the Trades Union Congress has said.In her new year’s message, Frances O’Grady urged ministers to take immediate steps to encourage faster pay growth across the British economy amid soaring energy bills and other costs. Continue reading...

From 1 January checks and paperwork will finally begin and EU exporters face a rude awakening• ‘It won’t be easy’: the European exporters battling Brexit bureaucracyEU exporters of cheese, car parts and other goods are facing a mountain of red tape to continue sales to Britain after 1 January once thrice-delayed post-Brexit checks and controls are finally implemented.They had been due to come into force on 1 January 2021 but were pushed back to July, then to October and finally to January 2022, with a further set of controls due six months later in the coming July. Continue reading...

Rolling coverage of the latest economic and financial news

Tariffs remain on UK exports to US as European Union rivals gain a 25% price advantage from New Year’s DayThe UK steel industry is braced for an immediate slump in trade from New Year’s Day when European Union rivals will gain a 25% price advantage selling to the giant US market.The EU and the US reached a Halloween agreement to remove tariffs on a quota of steel and aluminium imported from the bloc into the US from 1 January, but tariffs will remain on all UK steel and aluminium exports after government talks failed to secure a matching breakthrough. Continue reading...

Stalling wages and rising tax and energy bills could cause catastrophe without government intervention, thinktank warnsUK households face a hit of £1,200 next year as stalling wages and rising tax and energy bills cause a “cost of living catastrophe” in the spring, a leading thinktank has warned.Government measures, including the new social care levy on national insurance and the freezing of the personal income tax allowance, will combine with high inflation to make 2022 the “year of the squeeze”, the Resolution Foundation said. Continue reading...