Rolling coverage of the latest economic and financial news

A pledge to use the state’s £290bn procurement budget to buy from British companies is all about a future outside the EUWhatever the patriotic gloss and 1960s-sounding slogan, the shadow chancellor Rachel Reeves’s Buy British policy announcement is a genuinely smart response to a newly emerging economic consensus. Pledging that a Labour government would use the state’s £290bn procurement budget to buy from British companies, provide funds for bringing supply chains back to the UK and seek improved agreements with the European Union on key trade pressure points such as professional qualifications, Reeves’s package is the surest indicator yet that both parties have accepted the previous assumptions of decades of free-market, “neoliberal” globalisation are shifting. Government intervention is back, in a big way, and the political arguments of the future will be about who can do it best, not whether it should be done at all.Strikingly, this is the first major economic announcement under Keir Starmer’s leadership that directly confronts Britain’s future outside the EU. By insisting that government spending could be deliberately targeted to create secure, high-paying jobs and support domestic supply chains, the policy would run up against the EU’s level playing field rules if Britain were still a member. When Jeremy Corbyn’s Labour launched a similar initiative in summer 2018, promising to Build it in Britain, the howling from certain quarters about “red Ukip” or worse pushed the party into a retreat. Now the country is decisively outside the EU, Starmer’s Labour faces no such constraint.James Meadway is director of the Progressive Economy ForumThis article was amended on 9 July 2021 to make clear that a government decision on Nvidia’s bid to buy ARM awaits the outcome of an inquiry. Continue reading...

GDP expanded by 0.8% in May, behind the 1.5% forecast, as construction sector also shrank

Investors worry resurgence of Covid-19 cases will slow economic growth and stall global recovery

ECB denies ‘moving the goalposts as prices begin to rise’ and says new strategy will be easier to communicateThe European Central Bank (ECB) has overhauled its rulebook to allow for the expansion of its unprecedented stimulus programme in a direct rebuff to German politicians concerned that printing billions of extra euros this year will spark an inflationary spiral.After an 18-month review, the central bank for the 19-member eurozone said it would shift its inflation target from “below but close to 2%” to a 2% target it said was easier to communicate to financial markets and the public.Related: Tax financial transactions to help Covid recovery, G20 told Continue reading...

Economists say Tobin taxes would raise vital funds to help support global poor and tackle climate crisis

Data comes before official figures for UK’s national income are expected to show fourth month of expansion

Analysis: labour market appears to have perked up with UK jobless rate at 4.7% but labour shortage ‘traffic jam’ could ease soon

Rush to reopen and departure of overseas workers have caused problems in areas including transport, hospitality and constructionBritain’s employers are struggling with the worst staff shortages since the late 1990s, amid the rush to reopen from lockdown and a sharp drop in overseas workers due to Covid and Brexit.Sounding the alarm over the risks to economic recovery from acute labour shortages, the Recruitment and Employment Confederation (REC) and the accountancy firm KPMG said the number of available workers plunged in June at the fastest rate since 1997. Continue reading...

Analysis suggests recent rise in employment will go into reverse over next six months

Office for Budget Responsibility says UK debt will rise to pay for decarbonisation, and early action would limit the bill

Chancellor faces unfunded spending commitments on health, education and transport, says watchdog

Rolling coverage of the latest economic and financial news

New alliance of multilateral institutions warns vaccine inequity could curb economic recovery

Analysis: Businesses and unions have doubts about big-bang approach to reopening economy

Research by Resolution Foundation and IFS suggests 18- to 24-year-olds could bear scars of crisis for yearsMore than one in four young people are worried that poor mental health will affect their ability to find work after the Covid-19 pandemic, according to a report.After the opening up of the British economy this spring, the Resolution Foundation said young workers were still suffering a heavier toll than their older colleagues and were paying a heavier price with their mental health.Related: Revealed: rise in stress among those working from home Continue reading...

Ground of pandemic is shifting, so forecast of post-Covid consumer spending boom could be mutedEngland is on the move. Despite rising infections and the race between coronavirus vaccines and variants back in full swing, there has been a distinct shift in tone from ministers over the past week about the English exit from pandemic restrictions.For several weeks the government has been watching and waiting, poring over Covid-19 data in the hope the link between infections, hospitalisations and deaths has been broken by the vaccination programme. So far, the news is encouraging despite rising concern as the Delta variant drives a fresh wave in the pandemic.Further growth in infections will put the recovery on the back foot, regardless of whether restrictions are relaxed Continue reading...

Buoyant Labour sets out post-Brexit vision promising that more public contracts will go to UK companiesLabour has announced a new post-Brexit economic vision for the UK involving ambitious plans to “make, sell and buy more in Britain” as it seeks to build a strongly patriotic policy platform with which to take on the Tories.Emboldened by its morale-boosting victory in Thursday’s Batley and Spen byelection, when the party halted Tory advances into its strongholds in traditional manufacturing areas, the move marks the opening shot in a new campaign to be led by Keir Starmer focused on jobs and the battle against crime in all local communities.Related: MPs criticise ministers’ failure to plan industrial policyRelated: Forget incremental change: the left shouldn’t be afraid of thinking big | Ed Miliband Continue reading...

But with government more keen on avoiding a crash than addressing inequality, property prices look safeHouse prices are soaring and gazumping has returned in property hotspots. The average cost of a home jumped by 13.4% in June from the same month last year, according to Nationwide building society.This is more than four times the 3% annual rate of growth in wages during April and more than six times the 2.1% increase in consumer price inflation (CPI) registered in May. According to upmarket estate agent Knight Frank, figures out next month are likely to show sales across Britain hitting an all-time record.£10bn of help-to-buy subsidy has done nothing to make homes more affordable for first-time buyers Continue reading...

June’s numbers suggest economy is continuing to recover at steady pace – but another pattern shows people are quitting their jobsThe Bureau of Labor Statistics reported on Friday that the US economy added 850,000 jobs last month. Hidden by this encouraging figure is the hint of an unusual trend: people are beginning to quit their jobs in extraordinary numbers.June’s numbers, in combination with last month’s figures, suggest that the economy is continuing to recover at a steady pace. The rate of unemployment was 5.9% and 9.5 million people remain unemployed. Continue reading...

Rolling coverage of the latest economic and financial news

• Joe Biden hails ‘historic progress’ and credits stimulus package• Number in or seeking work still 3m below pre-pandemic peakThe US added 850,000 jobs in June, a sign that the country’s post-vaccine rebound is continuing to accelerate.The national unemployment rate remained relatively stable, rising 0.1% to 5.9% in June, probably because more people came off the sidelines to join the labor force.Related: US adds 559,000 jobs in May as fears of hiring slowdown fade Continue reading...

UK GDP has fallen – yet house prices have soared. Even a small rise in interest rates could hurt the economyUK house prices appear to have defied economic gravity over the past year. The lockdowns triggered by the pandemic led to a 10% fall in GDP, the largest fall in 300 years, since the Great Frost of 1709. Yet the latest data shows house prices have grown at the fastest annual rate – 13.4% – in 17 years. Are we in the midst of another housing bubble?An optimistic scenario is that the current boom is driven by the unusual circumstances of the pandemic rather than more systemic problems. Spending more time at home has led many homeowners to desire more space and a better environment. They have used the record buildup of household savings, amassed during the lockdowns and supported by the government’s furlough scheme, to buy larger homes or move out of cities (property prices outside cities have increased by 14% compared with 7% within them).Related: UK house prices rise at fastest rate since 2004 amid stamp duty rushRelated: House price inflation will continue for now, hitting the young and low-paid | Larry ElliottJosh Ryan-Collins is head of finance and macroeconomics at University College London’s Institute for Innovation and Public Purpose Continue reading...

Warning signs are there for global economy, and central banks will be left in impossible positionIn April, I warned that today’s extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed rates, thus reducing many advanced economies’ public-debt burdens.The same loose policies that are feeding asset bubbles will continue to drive consumer price inflation Continue reading...

Chancellor tells Mansion House breakfast that talks on financial services equivalence have ‘not happened’

Landmark moment for world economy with OECD plan that also covers prevention of profit-shiftingEfforts to force multinational companies to pay a fairer share of tax have taken a decisive step forward after 130 countries and jurisdictions agreed to plans for a global minimum corporate tax rate.In a landmark moment for the world economy, the Organisation for Economic Co-operation and Development (OECD) issued a statement committing each of the countries to a two-pillar plan to radically reshape the global tax system. Continue reading...

Xi Jinping himself has warned China’s wealth gap is not only economic but political and could threaten party’s legitimacyWhen Wang Zhenyu moved out of his small village in central Henan province to the coastal city of Dalian at 18, he was astonished. “It was like a culture shock for me, even though it was just a big city in my country, not a foreign land.” A few years later when he was enrolled in Peking University as a graduate student, he found much fewer students in the country’s top university coming from a similar background to his.Growing up in a small village of 2,000 farmers, many of Wang’s childhood friends dropped out of school after finishing their nine years of compulsory education. Now with a decent academic job, Wang begins to experience “reverse culture shock” every time he goes back to his village for the annual lunar new year.Related: China has almost wiped out urban poverty. Now it must tackle inequalityRelated: China: 'ruthless' campaign to evict Beijing's migrant workers condemned Continue reading...

Ministers overrule Trade Remedies Authority to defend sector against cheap imports, notably from ChinaThe steel industry has welcomed the government’s extension of measures to defend the ailing sector from a flood of cheap imports.Liz Truss, the international trade minister, said the government had overruled the Trade Remedies Authority, a public body that had said protectionist tariffs and quotas on 10 types of steel product should be maintained for three years, but lifted on nine others. Continue reading...

Commonwealth research says UVI is better measure of small island states’ aid needs, especially on climateSmall island nations on the climate crisis frontlines have been overlooked in overseas aid, according to a new index.Urging a move away from the current benchmark of using gross domestic product (GDP) to measure aid allocation, researchers from the Commonwealth secretariat and the Foundation for Studies and Research on International Development (Ferdi), a French thinktank, have developed the universal vulnerability index (UVI) as an alternative. GDP, they claim, fails to reflect the realities nations face, particularly on climate.Related: UK to slash funding for overseas water and sanitation projects by 80% Continue reading...

The tech giant’s move to combat fraud and dodgy ads has taken too long. The online safety bill must change“We are committed to leading the necessary changes to help fight online scammers,” trumpeted Google’s UK managing director, Ronan Harris, this week, as if the tech giant were somehow a pioneer of a crackdown on online financial fraud and adverts offering “bonds” with implausibly high rates of interest.The reality is that Google’s harder approach has taken an age to appear. It was 18 months ago that the frustration of Andrew Bailey, then the chief executive of the FCA, boiled over. He called for “more assistance from the big internet service companies, particularly Google” on taking down obviously dodgy adverts quickly. If a bank or a regulated financial institution had received such a public shaming, immediate action would be expected.Related: Bank of England’s Andy Haldane warns of inflation rises Continue reading...

Departing chief economist says central bank could be forced to stop economy from overheatingThe Bank of England’s outgoing chief economist has warned that inflation could rise by more than expected and force the central bank into a dangerous “handbrake turn” to stop the economy from overheating.In a parting shot at his fellow rate-setters on his final day at Threadneedle Street on Wednesday, Andy Haldane said he expected that a surge in consumer prices would drive UK inflation close to 4% this year. Continue reading...

Job loss or need for universal credit add to vulnerability once firms required to pay more into plan, thinktank findsOlder workers are at most risk of being made unemployed in the second half of the year as the government’s furlough scheme is phased out, according to a leading welfare thinktank.The Resolution Foundation said the chancellor’s decision to wind down furlough support for employers from today would endanger the jobs of more than one in four workers aged 55 to 64 who have remained on the scheme since the recent lockdown.Related: Beware scaling back UK furlough scheme too soon, warns Resolution Foundation Continue reading...

Rolling coverage of the latest economic and financial news

Limited opportunities to spend could pave way for boom as restrictions relax, say economists

Our latest snapshot of key economic indicators finds business activity surging but stock markets slipping

Business leaders also warn of renewed threat to jobs and growth as Delta variant drives up infections

End of furlough, corporate sector debt and continuing crisis in other nations all mean it is too soon to get out the bunting

High political stakes in NI protocol shown in research released hours before unveiling of new UK-EU dealVoters in Northern Ireland are evenly split over the need for Brexit checks on goods coming in from Great Britain, a new survey has shown just hours before a new deal between the EU and the UK is revealed.The EU will on Wednesday say it is retreating from the threat of a trade war and confirm a “package” of arrangements to take the heat out of the bitter dispute over the sales of British sausages, secondhand cars and potted plants in Northern Ireland. Continue reading...

Bank for International Settlements says inflation spike could raise the cost of borrowing to post war highsInflation could spike this year, putting pressure on central banks to raise the cost of government borrowing to post war highs, according to the Bank of International Settlements, which warned of “daunting” issues confronting policymakers during the post-pandemic recovery.With UK government debt spiralling to £2.2tn due to the costs of the pandemic, a jump in interest rates to levels last seen in the 1990s could more than double the cost of national borrowing. Continue reading...

Rolling coverage of the latest economic and financial news

Car finance deals and personal loans increase as interest rates fallHouseholds increased their borrowing in May for the first time in eight months as the easing of lockdown rules coincided with a fall in loan interest rates.Figures from the Bank of England showed the first significant credit spending surge since last August, as a run of net repayments by households came to an end in May when £280m more was borrowed on consumer credit than was repaid. Continue reading...

Business lobby group warns failure to act will put UK’s economic recovery from Covid crisis at risk

Rolling coverage of the latest economic and financial news

Dozens of Nobel laureates sign open letter condemning treatment of economist Andreu Mas-ColellThreats of massive fines against the economist and former Catalan finance minister Andreu Mas-Colell for his alleged role in Catalonia’s failed independence bid in 2017 have prompted international condemnation.Mas-Colell, 76, who served as finance minister from 2010-16, is among 40 officials, including the former Catalan presidents Artur Mas and Carles Puigdemont, accused by a tribunal of illegally using €4.8m of public money between 2011 and 2017 to further the cause of independence.Related: Freed Catalan leader calls on Spain to ‘think about future generations’ Continue reading...

Thinktank warns of ‘dangerous complacency’ with strength of jobs market and pay growth both weaker than thoughtThe strength of the UK jobs market and rates of pay has been overstated, according to new research, just as the government prepares to cut back its wage support scheme for furloughed workers this week.There is a risk of “dangerous complacency”, the Resolution Foundation warned, as people are still working fewer hours than they were before the pandemic and headline pay growth is overstated.Related: The UK economy is barely out of first gear, so now is no time to hit the brakes Continue reading...

Renewable energy will rely heavily on an industry already berated for human rights violationsInterest in Dogger Bank was once restricted to insomniac enthusiasts for the BBC’s Shipping Forecast. Not any more. Today, the shallow sandbank, located 120 miles off the UK’s north-eastern shoreline, is home to the world’s largest windpower project. When fully operational, giant turbines will transmit 3.6 gigawatts (GW) of electricity, enough to power 5m homes, into the National Grid at prices well below current levels.Welcome to the beginning of the end of the fossil fuel era. Around the world, solar and wind now represent the cheapest source of new electricity generation – and prices are tumbling. Electric vehicle (EV) batteries are driving oil towards obsolescence. Stripped of government subsidies and corporate lobbying carbon-based fuels are a busted flush. The future of energy is green – and the future can’t come soon enough to tackle the climate crisis.Related: The rush to ‘go electric’ comes with a hidden cost: destructive lithium mining | Thea RiofrancosRelated: Record metals boom may threaten transition to green energyKevin Watkins is chief executive of Save the Children UK Continue reading...

Hurrahs for inflation reaching 2% as the economy grew gave way to panic over rising prices – and it’s all, of course, made much worse by BrexitIt is difficult not to laugh: as the economy has been recovering, in certain sectors, from the biggest contraction in output for several centuries, the Bank of England has been desperate to “achieve” the official inflation target. Finally we learn that it has indeed been achieved – that the index of consumer prices has risen by 2.1% in the past 12 months, marginally over the target of 2% – and, hey presto, there is panic in the ranks.Sorry, I should say some ranks. There is one hell of a debate going on in economic and financial circles about whether recent price rises in certain sectors warrant early counter-inflationary action – higher interest rates – or whether the “green shoots of recovery” could thus be nipped in the bud.Demands for finance reach Sunak from all sides, but he's hoist with his own petard: the impact of the Brexit he espoused Continue reading...

Combine the pandemic with rising raw material costs, stir in a labour shortage, a twist of Brexit, add a pinch of poor weather and voila …Tinned tomatoes are a taken-for-granted store cupboard staple, relied upon by Britons to whip up home cooked favourites such as spaghetti bolognese. But the price could soon make you take notice, amid warnings of higher shopping bills, set against a backdrop of soaring global food prices.From the packaging to the transportation and the energy used in manufacturing, nearly all aspects of the production of this popular ingredient now cost more. The crushed tomatoes alone are 30% dearer than a year ago, at €0.48 per kilo. The same pressures are driving the prices of many foods higher, meaning Britons will probably face bigger bills for groceries or meals out this autumn.Related: Bank of England’s Andy Haldane warns over UK inflation riskRelated: The fear that haunts markets – is inflation coming back? Continue reading...

Chief economist says Britain could face ‘nasty surprise’ in wake of US riseInflation could rise well beyond the Bank of England’s expectations, according to its chief economist, Andy Haldane, raising the chances of a “nasty surprise” in the form of a sharp interest rate hike.Speaking as US inflation reached 4.2%, its highest level since 2008, Haldane said the UK’s own rate of price rises was increasingly likely to catch up.Related: Recovery likely to push inflation above 3% by end of year, says Bank Continue reading...

Fifteen years of tax information on thousands of plutocrats is one of the biggest stories of the decade. And yet … cricketsAmerican billionaires don’t pay taxes, and American politicians are all but ready to send Seal Team Six to assassinate the nameless bureaucrat who let ProPublica in on this fact. Welcome to our political hellscape.This month, ProPublica revealed that American billionaires essentially do not pay taxes, and within hours the White House had awkwardly promised no fewer than four federal investigations into the identity of the individual who had alerted the news organization to this fact.Related: Petition urges Jeff Bezos to blast into space – and stay thereEvery billionaire is an inherently public figure, whose fortunes are inextricable from the fabric of our daily livesMaureen Tkacik is a senior fellow at the American Economic Liberties Project Continue reading...