by Richard Partington Economics correspondent on (#5E2B6)
Departure to cost EU 0.5% of GDP but UK 2.25% by end 2022, according to first official estimate since deal was agreedThe economic blow dealt by Brexit will be four times greater in the UK than the EU, according to the latest forecasts by Brussels.A month into the new relationship, the European commission said the UK’s exit on the terms agreed by Boris Johnson’s government would generate a loss in gross domestic product (GDP) by the end of 2022 of about 2.25% in the UK compared with continued membership. In contrast, the hit for the EU is estimated to be about 0.5% over the same period. Continue reading...
by Richard Partington Economics correspondent on (#5E1HN)
Business lobby group BCC urges swift action by both UK government and Brussels to deal with major problemsHalf of British exporters to the EU are facing difficulties with mounting Brexit red tape and border disruption after a month of the new rules, according to one of the most comprehensive business surveys since leaving the bloc.The British Chambers of Commerce (BCC) said that 49% of UK-based exporters in a survey of 470 firms had suffered problems with post-Brexit arrangements since the start of the year, as companies struggled to adapt and faced higher costs due to extra border checks and paperwork. Continue reading...
John Worrall on the fundamental shift needed in home ownership philosophy, Barry Jones on community-led housing groups and Duncan Roberts on challenging conventional home ownershipI’m surprised to see Larry Elliott (How to turn the UK’s ‘generation rent’ into ‘generation buy’, 7 February) pointing to “tough green belt regulations” and “local planning rules” as villains in the housing affordability equation, because, as he has previously said, the housing market isn’t a market at all in the traditional supply-and-demand sense. Developers won’t increase supply to the point where they have to drop prices. Granting them more planning consents simply gives them more bankable assets, which is why they donate millions to the Tory party.He does mention a land value tax to deter hoarding, but then compounds his felony by suggesting that the outrageous help-to-buy scheme, which has been bloating prices and developers’ profits since 2013, might be part of the future, along with other creative lending wheezes to saddle punters with more debt than banks think they can afford. Continue reading...
Smart, activist states could prove as effective at handling the biodiversity crisis as they have at tackling the pandemicLet’s be honest: few government-commissioned reports make a real difference. Often ministers call on an expert to look into a contentious issue in the hope of kicking it into the long grass, and when a weighty tome duly arrives with uncomfortable recommendations, it is quietly ignored.It is easy to see how the review into the economics of biodiversity by the Cambridge University academic Prof Sir Partha Dasgupta could be one of those that gathers dust in the Treasury, because it has a tough message. Put simply, Dasgupta says humanity – all 7.8 billion of us – is on a collision course with the planet. Our current economic system is unsustainable and endangers the prosperity of current and future generations.Larry Elliott is the Guardian’s economics editor Continue reading...
Banks now tackle diverse issues, be it Covid-19, climate change or inequality. Purists may disagree but there’s no other optionWe are used to thinking about the remit of central banks as focusing narrowly on price stability, or at most as targeting inflation while ensuring the smooth operation of the payment system. But with the global financial crisis of 2008 and now Covid-19, we have seen central banks intervening to support a growing range of markets and activities, using instruments that extend well beyond interest rates and open market operations.An example is the US Federal Reserve’s Paycheck Protection Program Liquidity Facility, under which the Fed provides liquidity to lenders who extend loans to small businesses in pandemic-related distress. This, clearly, is not your mother’s central bank.Related: The $2,000 stimulus cheques alone won't work – the US needs better infrastructureRelated: Can central banks keep holding off the Covid economic crisis? | Mohamed El-Erian Continue reading...
Many of us are living for the buzz of the doorbell – spending billions we can’t afford on stuff we don’t need. Here is how to recognise the problem and regain controlIn the past fortnight, I have bought the following items online: a hideous cat tree that takes up most of my living room, a lavender pillow spray, two scarves, a pair of gloves, two candles, a sheet mask, a pair of fleece-lined jogging bottoms (so comfy!), a card-holder and an under-eye brightening cream. None of these purchases were essential. Many I haven’t even taken out of the packaging, leaving them in a pile by the front door.Ten months into the pandemic, I know the rhythms of the courier networks better than I know my menstrual cycle. Royal Mail in the morning; DPD and Hermes in the afternoon. Amazon comes any time, including late at night. DPD couriers insist on taking a photo of you with the package, mortifyingly. I wonder where these photos go: me in a food-stained tracksuit, dirty-haired, holding an armful of packages I can’t remember ordering with an abashed smile. I pray they never see the light of day.It’s like sitting in a pub all day when you’re trying not to drink ... social media is full of things to buy Continue reading...
Within days of assuming power, Joe Biden had a plan to rebuild a Covid-scarred country. Boris Johnson has little to show after monthsWhen Covid struck, it was governments that decided people could not go to work and governments that took people’s money away. It is now down to governments to decide whether or not to return that money and when to open up the economy. In the US, Democrats want to give generously. While $1.9tn dollars is a lot of money – about the size of Canada’s GDP – it probably is not enough.As Yeva Nersisyan and Randall Wray of the Levy Institute have pointed out, the US government is engaged in relief, not stimulus, spending. It is offering much-needed assistance to the devastated balance sheets of households, school districts and local governments. Rescuing public services, making sure people don’t starve and building Covid-testing systems is not an economic stimulus but a necessary antidepressant. Reducing the size of the relief package would prolong the recession, which, given the virus’s capacity to surprise, may last longer than the experts predict. President Joe Biden was right to rebuff criticism that Democrats risked overheating the economy, saying the problem was spending too little, not too much. There is slack in the US economy: 400,000 Americans left the labour market in January. Continue reading...
Exporters badly hit already but KPMG says ‘biggest headaches’ have yet to come’ for importersBritish firms are warning of an escalation in Brexit red tape as the government prepares to introduce a long list of new controls on imports from the European Union in April and July.In the coming months further checks are due to be phased in at the UK border, controlling everything from the import of sausages and live mussels to horses and trees, along with new rules on the locations these checks can take place.Related: Fury at Gove as exports to EU slashed by 68% since Brexit Continue reading...
A new paper says a ‘blended mortgage’ can work for first-time buyers unable to access help to buy or the bank of mum and dadProperty is Britain’s obsession. As soon as the first lockdown ended there was a burst of activity in the housing market that only now seems to be tailing off. Andrew Bailey, the governor of the Bank of England, says if the only economic statistic available was the one for mortgage approvals you would never know there had been a pandemic raging in 2020.There was certainly a disparity between the strongest demand for home loans since 2007 and what was going on in the rest of the economy. Even after modest falls in January, prices are still rising at an annual rate of 5.4% according to the Halifax, and 6.4% according to Nationwide. Continue reading...
Bank of England governor Andrew Bailey says economy should make a strong recovery from the pandemicThe Bank of England is braced for the possibility that a mood of national depression that engulfed Britain as it plunged into a third national lockdown will end with a spending spree when restrictions are lifted.In an interview with the Observer, the Bank’s governor, Andrew Bailey, said there was a chance after being cooped up for so long people would “go for it” once the vaccine programme allowed the economy to reopen. Continue reading...
An interview with the ex-chancellor underlines the dangers that now face economically vulnerable areas of the UKI sincerely hope that it is only the lunatic fringe of Brexiters who do not accept that, having made the disastrous mistake of leaving the EU, this country should now try to align itself as closely as possible with the trading arrangements we have crassly abandoned.The chaos surrounding the “protocol” which is supposed to answer the latest manifestation of the Irish Question is the most extreme example of the damage caused by the rest of the UK leaving the single market. But for the past five weeks the obstacles arising from trying to unscramble the egg of our relationship with the rest of the European economy have been widely publicised, the reductio ad absurdum being the way in which businesses – in order to stay in business! – are finding it necessary to relocate some or all of their operations to continental Europe – in other words, within the single market.He predicts 'the cost … will be pretty much 100% absorbed by exactly the demographic profile that voted for Johnson, having never voted Tory before' Continue reading...
An important Brexit study reveals that financial security makes voters more likely to take risksElections often come down to whether the public wants to stick or twist. But how does voters’ wealth affect their appetite for a ballot-box gamble? It increases people’s willingness to risk a big change is the answer from an important new Brexit study. Challenging simplistic claims that Brexit was driven entirely by the economically left-behind, it shows that having wealth (especially housing) made people more likely to vote for Brexit.Previous research has shown people in high house-price areas tended to vote Remain, but this study digs deeper, focusing on voters’ own wealth. Having lots of it makes you particularly likely to have voted Leave if you live in an area such as the home counties. Why?Related: Live farm animal exports to mainland EU at a standstill post-Brexit Continue reading...
The Covid crisis has turbo-charged profits and share prices. But are the big six now too powerful for regulators to ignore?The coronavirus pandemic has wrought economic disruption on a global scale, but one sector has marched on throughout the chaos: big tech.Further evidence of the industry’s relentless progress has come in recent weeks with the news that Apple and Amazon both raked in sales of $100bn (£72bn) over the past three months – 25% more than Tesco brings in over a full year. Continue reading...
If higher inflation leads the US Fed to raise rates soon, emerging markets will face problemsEconomic recovery, like Covid-19 vaccines, will not be evenly distributed around the world over the coming two years. Despite enormous policy support provided by governments and central banks, the economic risks remain profound, and not only to frontier economies facing imminent debt problems and low-income countries experiencing an alarming rise in poverty. With the coronavirus far from tamed, populism rife, global debt at record levels, and policy normalisation likely to be uneven, the situation remains precarious.This is not to deny the overall good news of the past 12 months. Effective vaccines have become available in record time, far sooner than most experts originally anticipated. The massive monetary and fiscal response has built a bridge toward a much-hoped-for end to the pandemic. And the public has gotten better at living with the virus, with or without the help of national authorities.Related: David v Goliath narrative in GameStop story has serious flaws | Jeffrey Frankel Continue reading...
The Bank of England says a cut below zero is not imminent, but how could it affect mortgages, loans and savings?The Bank of England has told high street banks and building societies they have six months to prepare for negative interest rates. BoE policymakers stressed that the request did not mean a cut in borrowing costs below zero was imminent or even likely, but with few tools left to boost the economy in the event of a downturn, the central bank needs negative rates to be available as an option.Related: Bank of England: rapid GDP rebound likely as vaccines take effect Continue reading...
As bids close on applications to establish free ports, the jury is out on whether they will revitalise deprived areas of the UK or become mini-tax havensFive years ago a young, unknown MP wrote a pamphlet for a Thatcherite thinktank extolling the benefits of free ports. Now that Rishi Sunak is chancellor, his dream for Britain is – for good or ill – fast becoming reality.This week, alliances of port owners, businesses and local authorities must submit their bids to establish free ports, competing to set up zones exempt from normal tax and regulation.Related: Rishi Sunak’s free ports plan reinvents Thatcherism for the Johnson era | Quinn Slobodian Continue reading...
Analysis: economy would have to get much worse for Bank’s monetary policy committee to take unprecedented stepThe Bank of England is a venerable institution. Not once since it was founded in 1694 have interest rates gone negative and there is no immediate prospect of that 327-year-long record ending.To be sure, the most interesting piece of news from Threadneedle Street’s quarterly monetary policy report was that banks and building societies have been given six months to get ready for the possibility that rates might need to go below zero.In February 2021 the Bank of England told high street banks and building societies they have six months to prepare for negative interest rates. BoE policymakers stressed that the request did not mean a cut in borrowing costs below zero was imminent or even likely, but with few tools left to boost the economy in the event of a downturn, the central bank needs negative rates to be available as an option.Related: UK banks given six months to prepare for possibility of negative interest rates Continue reading...
My friend Richard Pearce, who has died aged 76, had a rich and extraordinary life encompassing three vocations: farmer, development economist and, in his last 20 years, he transformed himself into a psychotherapist, the profession he most cherished.His psychotherapy practice in Bath was called the Quiet Space. The choice of this name was in his own words to “highlight the place within us we often seek to find, and which, through the turbulence and sometimes anguish of living our lives we lose or fail to discover”. His services were in great demand. Alongside this, he was active within the Society of Existential Analysis, writing numerous papers, especially on the influence of Jean-Paul Sartre on psychotherapy. Continue reading...
Oil and gas giant says pandemic has fuelled weakest results for two decadesRoyal Dutch Shell plunged to a loss of almost $20bn (£14.7bn) last year after the impact of the Covid-19 pandemic on the global oil market stripped about $22bn from the value of its oil and gas assets.The oil company was forced to write down its assets after a slump in oil and gas market prices, leading the company to a loss of $19.9bn compared with a profit of $15.3bn the year before. Continue reading...
by Presented by Rachel Humphreys with Desmund Delaney on (#5DQMX)
When a group of amateur investors on a Reddit messageboard began buying up stock in a video games retailer it forced huge losses on major Wall Street hedge funds that had bet against it. But following a trading frenzy the stock began to fall, almost as quickly as it had risenAt the beginning of the year, not many people were paying attention to GameStop. Its business of selling video games in retail stores looked increasingly shaky as the market shifted ever more online in the grip of the Covid-19 pandemic. GameStop’s seemingly grim prospects led Wall Street hedge funds to take out big bets on the company’s share price falling further (known as short selling) but they had not reckoned with a force that was about to blow them away. Users of the Reddit messageboard WallStreetBets began grouping together to buy huge quantities of GameStop’s stock, driving the share price higher and higher and inflicting huge losses on the hedge fund titans.Desmund Delaney tells Rachel Humphreys that as part of the Reddit community he was tipping shares in GameStop back in 2019 and took his own advice investing in the company, despite the derision of other users. But he gave up on the company last year while its share price was below $10 and cashed out. If he’d sold last week he would be sitting on half a million dollars. Continue reading...
Dominic Rayner, Murray Gray, Phil Murray and Ian Foster respond to the Dasgupta review on the economics of biodiversityProf Sir Partha Dasgupta says we are all economic “asset managers” in our relationship with the environment (Economics’ failure over destruction of nature presents ‘extreme risks’, 2 February) and that the “natural capital” of forests, seas and so on should be ascribed a value, and that their annual regeneration should be viewed as equivalent to the yield on a government bond.If that is the way economists would like to measure nature, fine. But beware the implications for conservation: is your new road going to be more valuable than the woodland it displaces? Will it generate a higher annual return on investment than the value of the woodland’s performance in making leaf litter, harbouring biodiversity, absorbing carbon and providing a green space for people and their dogs to walk? If yes, goodbye woodland, hello tarmac. Continue reading...
Called on to lead Italy’s government in crisis, the former central banker will need all the skills he honed saving the European currency“Whatever it takes.” Three simple words that tamed the financial markets, saved the euro from possible collapse and turned Mario Draghi from an Italian technocrat into the central banker of his generation.And an obvious choice to head a new coalition government in Rome at a time when the country is facing the triple whammy of Covid-19, economic collapse and political chaos. Continue reading...
by Richard Partington Economics correspondent on (#5DPS1)
Covid, climate change and Brexit demand consensus on ‘a fairer, greener, economy’ says Tony DankerBritain needs an economic strategy for the next decade to match the ambition of the 1945 postwar recovery as the country emerges from the Covid-19 pandemic, the new head of the CBI said.In his first keynote speech as director general of the business group, Tony Danker said the “triple shocks” of Brexit, coronavirus and climate change highlighted the need for business and government to work together on a long-term plan. Continue reading...
Billionaire Issa brothers’ EG Group will buy forecourts to help fund £6.8m takeoverThe buyers of Asda have announced plans to sell off its petrol forecourts and distribution centres to help fund a £6.8bn takeover.The private equity firm TDR Capital and the billionaire Issa brothers aim to raise £950m from the sale of Asda’s distribution centres, which will then be leased back, while the group’s petrol stations will be bought by the brothers’ own EG Group for £750m.Related: Lidl's investment in 51 new UK shops sends it into the red Continue reading...
by Richard Partington Economics correspondent on (#5DP9Y)
Deliveries of items given to charities for sale on the continent have fallen foul of rules of origin requirementsA mountain of used goods is building up in the north-east of England as one of the biggest exporters of second-hand clothing to the EU has suffered a breakdown in trade caused by Brexit.Since January, exports to the EU from ECS Textiles in North Shields have ground to a halt due to border delays, piles of paperwork and confusion over post-Brexit rules, costing charities thousands of pounds in lost donations each week. Continue reading...
Sale of bullion rose 258% as investors raced for safe havens and online activists launched a buying frenzyThe United States Mint was unable to meet surging demand for its gold and silver bullion coins in 2020 and through January, due partly to pandemic-driven demand and plant capacity issues, it said.Sales of US gold bullion coins rose 258% last year while silver coin demand was up 28%, the Mint said on Tuesday. Heavy buying has continued in 2021, it said, squeezing supplies, which had already been tight as the coronavirus affected production. Continue reading...
by Damian Carrington Environment editor on (#5DMC9)
Landmark report says GDP should be ditched as measure of wealth and nature valued to protect wildlife and humans“Our economies, livelihoods and wellbeing all depend on our most precious asset: nature. We are part of nature, not separate from it.” These are the opening lines of a newly published landmark review of the economics of biodiversity.Biodiversity is declining faster than at any time in human history and the review aims to create a new economic framework, grounded in ecology, that enables humanity to live on Earth sustainably. “Our demands far exceed nature’s capacity to supply us with the goods and services we all rely on. We would require 1.6 Earths to maintain the world’s current living standards,” says Prof Sir Partha Dasgupta in the review, which was commissioned by the UK Treasury.Related: What is biodiversity and why does it matter to us? Continue reading...
Growth will generate tax revenues not just for federal government but for cash-starved states and citiesJoe Biden has proposed a $1.9tn (£1.4tn) rescue plan to help the American economy recover from the pandemic. Many Republicans oppose it, suddenly consumed with the fiscal religion they unceremoniously abandon whenever their party controls the White House. The massive tax cuts the GOP bestowed on billionaires and corporations in 2017 resulted in the highest US fiscal deficits on record, outside a deep recession or war. But the promised investment and growth never materialised.By contrast, Biden’s proposed spending plan is urgently needed. Recently released data show a slowdown in America’s recovery both in terms of GDP and employment. There is overwhelming evidence that the recovery package will provide enormous stimulus to the economy, and that economic growth will generate substantial tax revenues, not just for the federal government but also for the states and municipalities that are now starved of the funds they need to provide essential services.Related: Biden more likely to bypass Republicans on Covid stimulus aid after lowball offer Continue reading...
Centralised approach was meant to underline Europe’s solidarity but has had opposite effectThe EU has made an almighty hash of procuring treatments for Covid-19. Vaccine centres are running short of supplies as a result. National governments want jabs rather than excuses for what has gone wrong. The search for scapegoats is on.Stripped of the legal wrangling between Brussels and AstraZeneca, the protectionist plan to ban exports of drugs and the now-abandoned plan to close the border between Northern Ireland and the Republic, the EU has been incompetent – and no amount of bully-boy tactics can get away from that fact.Related: How EU’s floundering vaccine effort hit a fresh crisis with exports rowBut what really mattered was not price but speed and breadth of supply Continue reading...
A day at a frozen food transport firm in Northern Ireland exposes the obstacles to moving goods across the Irish SeaIt is day eight in a depot in Lymm just outside Warrington, Cheshire and a lorry carrying frozen carrots and mixed herbs is still waiting for clearance to board a ferry from Birkenhead to Belfast.Six separate customers, supermarkets and corner stores have other consignments on truck, all stuck in Lymm because the paperwork for a single pallet of carrots is missing key information. Continue reading...
The government says nobody could have done more but it’s clear poor leadership on Covid has brought the UK to this passIt was announced last week, to nobody’s excitement, that Sir Kenneth Branagh will take the role of Boris Johnson in a Sky TV drama about the first weeks of the pandemic. If Branagh’s casting indicates that this is to be conceived as a Shakespearean tragedy, with Johnson in the lead, then it would seem doomed from the start. The classic tragic hero has just a single fatal character flaw that proves his undoing. With Johnson, where do you start?As an opening scene in that drama, it will, anyhow, be hard to beat the speech that the prime minister gave almost exactly a year ago – perhaps the last moment in which he fondly imagined that all the world lay before him. The speech, delivered in the grand surroundings of Christopher Wren’s Old Royal Naval College at Greenwich on 3 February 2020, set out his vision for a buccaneering global Britain, high on union flags and free trade. Johnson had not long returned from his post-election beach frolics in Mustique with Carrie Symonds. Brexit had finally been “done” in Parliament Square three nights earlier. No opposition troubled his horizon. Labour was leaderless; Farage pointless. Even Michael Gove, his limp-daggered Brutus, had been co-opted to the cause.Related: How did Britain get its coronavirus response so wrong?We have all been cast as walk-ons in a drama which, from the very beginning, was partly, but fundamentally, of Johnson’s making Continue reading...
Liz Truss to seek to join 11-nation trans-Pacific partnership, whose nearest member is 3,000 miles awayThe British government is to formally apply to join a mammoth free-trade pact that includes Australia, Canada, Japan and New Zealand now that it has left the EU.Liz Truss, the international trade secretary, will ask to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) when she speaks to ministers in Japan and New Zealand on Monday.Australia.Brunei.Canada.Chile.Japan.Malaysia.Mexico.New Zealand.Peru.Singapore.Vietnam. Continue reading...