Impact of Covid lockdowns and shifting spending habits result in 0.3% drop from 2019 level

A progressive politics with a strong commitment to family relationships is certainly possible, but needs more detailsSir Keir Starmer’s sincerity when he talks about family is palpable. On Radio 4’s Desert Island Discs last year, as in a speech given on Monday, he appeared most animated when speaking of his feelings towards his parents, wife and children. The bonds between generations, and couples, clearly mean a great deal to him, as they do to most people. In 2021 our society is more honest than it used to be about the degree to which such relationships can and do go wrong. But our ties to the people we share our lives with remain, for most of us, an enormously important aspect of who we are.Policies geared towards families have always been part of social democratic politics. The Child Poverty Action Group, one of the charities supported by the 2020 Guardian and Observer appeal, helped persuade Harold Wilson’s Labour government to introduce a new child benefit, paid to mothers, in the 1970s. Under New Labour, the Sure Start programme channelled funding at under-fives as part of a successful effort to reduce child poverty. More recently, the Labour peer Alf Dubs led a campaign to give child refugees the right to be united with family members. Continue reading...

Tougher Covid rules will have impact before vaccine improves outlook, says chancellor

Silvana Tenreyo says negative rates worked elsewhere and would help UK recovery from Covid slumpCutting the UK’s official interest rate below zero would be good for growth and could be done without crippling commercial banks, a Bank of England policymaker has said.Silvana Tenreyro, one of the nine members of Threadneedle Street’s monetary policy committee, said negative rates had worked in other countries and would assist the UK’s recovery from its Covid-19 slump.Related: Is 'hysterical' market speculation pushing us towards another crash? Continue reading...

More than 250,000 small businesses expect to fail in 2021 as state support ‘dwindles’Small businesses and manufacturers are bracing themselves for a fight for survival this year, according to fresh survey data, as they negotiate the twin threats of Covid-19 and weaker post-Brexit trade with the EU.More than 250,000 small firms expect to fold without further government financial support, according to a quarterly poll by the Federation of Small Businesses (FSB). Continue reading...

QE is fuelling huge speculation with investors trusting central banks will step in if markets diveThere was plenty of bad news in America last week. A mob of Donald Trump supporters stormed the Capitol building. The number of new Covid-19 infections hit a record high. Employment fell by 140,000.None of it fazed Wall Street which continued to climb to dizzying new heights. That’s the way with financial markets. When they are in that sort of mood they go up when the news is good and they go up when the news is bad.Related: Is 'hysterical' market speculation pushing us towards another crash?Related: Why global markets appear impervious to bad news Continue reading...

Johnson’s agreement has only managed to save Britain from what would have been a catastrophic economic lockdownDonald Trump’s starring role in the storming of the Capitol on Wednesday marked a fitting end to the courtship of the US president by Boris Johnson. Just think: before the president lost convincingly to Joe Biden, our prime minister – a master of procrastination and prevarication – was holding out for a Trump victory and a world-beating UK-US trade deal, which might well have involved a no-deal Brexit.Johnson enthusiasts tell us what a brilliant tactic it was for the prime minister to take the negotiations with the EU to 11th hour, but the likelihood is that a deal of some sort was only decided on when the US option disappeared. As it is, the deal is most certainly thin, as described by Labour Leader Sir Keir Starmer: it does not cover the 80% of our economy accounted for by services, and involves massive increases in bureaucratic form-filling for businesses from manufacturers to road hauliers and wine merchants, not to mention British citizens in general. It particularly hurts the young, who are overwhelmingly against Brexit.Single market? Those crazed Brexit ministers had to have the single market explained to them when they met after the referendum result Continue reading...

The resurgence of coronavirus means renewed hardship, which the chancellor must once again spend to ameliorateWith the development of the coronavirus vaccine, there had been light emerging at the end of the tunnel after a long and difficult year. After the worst year for growth since the Great Frost of 1709, the post-Covid thaw this spring seemed as if it was set to launch the UK economy into a roaring 2020s.Now, clear signs are emerging that Britain’s economy will be hit hard by tougher restrictions needed to contain the surge in Covid-19 infections, fuelled by a new faster-spreading variant first identified late last year in southern England. Far from a boom in 2021, the economy is destined for a double-dip recession. Continue reading...

Despite Covid, global stocks started 2021 on a high. But some analysts warn of an ‘epic’ bubble, amid fears that the flow of stimulus has created a monsterInsurrections are not usually seen by investors as buy signals. Yet even as rioters stormed the seat of US legislative government last week, stock market indices hit new highs in New York, adding another chapter to 12 months of apparent defiance of economic gravity.Wall Street, measured by the benchmark S&P 500, was not alone in starting 2021 with a bang. London’s FTSE 100 jumped by more than 6% in the first week of the year as investors took in a heady cocktail of a President Joe Biden ready and able to spend money, cheap borrowing costs, and the hopes that vaccines will end the coronavirus lockdowns. Yet amid the exuberance a serious concern looms: are we on the cusp of another colossal crash? Continue reading...

A recession is coming but damage this time from ‘artificial hibernation by government diktat’ may prove shortlived, say economistsHarold Wilson was prime minister and Margaret Thatcher the newly elected leader of the opposition. Lord’s hosted the first cricket world cup final, David Bowie released Young Americans and inflation reached a post-war high of more than 25%. That was Britain in 1975, the last time the economy endured a double-dip recession.Until now, in all likelihood. When the Office for National Statistics releases growth figures for November next Friday the data is expected to show UK on course to contract in the final three months of 2020. An economy that was already losing momentum in the early autumn was further hampered by the four-week lockdown in England that ended in early December.Gross domestic product (GDP) measures the total value of activity in the economy over a given period of time. Continue reading...

Vaccine optimism, central bank action and Bidenomics keep prices above pre-Covid peakThe global economy has just had its worst year of the modern age and 2021 has not got off to the best of starts either. Yet stock markets appear impervious to bad news, with the MSCI World Index of developed market shares 10% above its pre-crisis peak. There are a number of reasons why equity markets are so hot.Central bank action. Led by the US Federal Reserve, central banks were quick to respond to the market turmoil that accompanied the first wave of the coronavirus pandemic in February and March last year. Interest rates were cut and money was pumped into the global economy through asset-purchase schemes known as quantitative easing. Just as importantly, the Fed gave the impression that it would not allow share prices on Wall Street to fall too far. Continue reading...

Port congestion and skeleton staffing cause shortage of freight containers while consumer demand reboundsThe cost of importing containers filled with consumer goods from Asia into the UK has reached a record high after a surge in demand in the weeks before Christmas and the UK’s exit from the EU.Shipping experts believe the UK has been dealt a double blow by the impact of the coronavirus, which has disrupted global shipping supply chains, and the end of the Brexit transition period, which caused a large increase in imports in the last months of 2020.Related: UK food freight firms warn of looming 'catastrophe' from clogged portsRelated: 'Humanitarian crisis': UN panel decries Covid rules that trapped crews at sea Continue reading...

British Retail Consortium says London hardest hit in December and seeks further business rates relief

The chancellor is abjectly failing to rise to the economic challenges posed by this public health emergencyA few days into 2021, and a large European country imposed yet another lockdown on its weary public. The leader of the governing rightwing party held out hopes for a mass vaccination programme, but insisted that in the meantime, non-essential shops and services must close and school pupils study from home. Not the UK, but Germany. Not Boris Johnson, but Angela Merkel. Our overwhelmingly parochial political debate nearly always ignores how countries very similar to our own can take far more imaginative and helpful measures. One of the first moves Chancellor Merkel announced this week was an extra 10 days’ leave for parents to look after children – double that for single parents. As policymaking, it is a modest but useful step. As politics, it is smart. And as an attempt to gain beleaguered families’ trust and their acceptance of the inevitable difficulties to come, it is deft.Compare that with the tin-eared response from London’s ministers. The day after Mr Johnson’s imposition of a third lockdown, the chancellor, Rishi Sunak, unveiled a £4bn package of one-off grants for retail, hospitality and leisure companies. If your firm does the laundry for a big leisure centre or supplies crockery to cafes, you will have to jostle with every other business for a part of a far smaller £594m contingency fund. All the new support is aimed at businesses rather than their workers. For anything else, the Treasury will wait until its March budget. Continue reading...

Vaccinations are key to Britain’s economic recovery. But the government’s repeated failures suggest this won’t be simple

Carbon border taxes alone will not encourage poorer countries to meet climate goalsWith the US president-elect Joe Biden’s incoming administration promising a fresh, rational approach to climate change, now is an ideal time to make the case for a World Carbon Bank that would transfer and coordinate aid and technical assistance to help developing countries decarbonise. The proposed Green New Deal in the US and the European commission’s European Green Deal have laudable environmental goals but are too inward-looking. When an entire building is burning, to concentrate firefighting resources on one floor would only delay, not prevent, its destruction.According to the International Energy Agency, almost all the net growth in carbon dioxide emissions over the next two decades will come from emerging markets. Although China recently pledged to achieve zero net emissions by 2060, it is sobering to consider that it accounts for half of the world’s coal output and half of its coal consumption.Related: The three most misused phrases in US politics in 2020 | Jeffrey FrankelDeveloping economies have neither the resources nor the technology to transform themselves overnight Continue reading...

Jeremy Grantham’s warning that an ‘epic bubble’ has formed on Wall Street should not be ignoredJeremy Grantham, a wise old investor with an excellent record in calling time on wild stock market exuberance, picked his moment well this week to warn that a “fully fledged epic bubble” had formed on Wall Street. On cue, world share prices hit all-time highs as investors seemingly looked beyond the pandemic and decided everything was about to go very right.Hopes for a Democratic clean sweep of US Congress were priced up before Senate election results in Georgia were even confirmed. The talk now is of great “reflation” trade – serious US government spending to stimulate economic growth, coupled with a pleasant level of inflation (but not enough to panic the Federal Reserve). Continue reading...

Index climbs close to pre-Covid level despite concerns over ‘hysterical’ investor behaviour

Institution says pandemic has led to sharpest rise in government debt in more than 30 years

Many stretched businesses and workers are wondering how they can survive

Rolling coverage of the latest economic and financial news as England and Scotland enter tough Covid restrictions

Rishi Sunak could prevent steep rise in unemployment if he supports move, says thinktankWhen Target Publishing cut staff pay after the first coronavirus lockdown last year, the magazine group knew it had to make a positive gesture to its employees. So it introduced a four-day week.“I felt better in myself that I was able to give something back to match the sacrifice everyone had made,” says Target’s founder and owner, David Cann. Faced with sliding advertising sales and several cancelled projects, the publisher of 20 titles including Natural Lifestyle and Health Food Business had cut pay for its 30 staff by 20%.Related: Unilever New Zealand to trial four-day working week Continue reading...

Thinktank finds the vulnerable hit hardest, and says policies are needed to repair the damage

Rolling coverage of the latest economic and financial news as investors bet on the success of the Oxford/AstraZeneca vaccine

It is clear now that there is a big downside to an economic model that pays little heed to sustainability

Donald Trump’s departure will alter the face of geopolitics. The climate crisis and Covid response will affect all nations – while others face very particular challenges. Observer correspondents examine the 12 months aheadA potent mix of hope and fear accompanies the start of 2021 in most of the world. Scientists have created several vaccines for a disease that didn’t even have a name this time last year. But many countries, including the UK and the US, are still stumbling through the deadliest period of the pandemic.The shadow of Covid will not begin to lift, even in richer countries, for months. Britain was the first to approve a vaccine and has secured extensive supplies, yet Boris Johnson’s suggestion that life might be returning to normal by Easter is widely seen as optimistic. Other countries, particularly in the south, face a long wait to get vaccines, and help paying for them. The rebuilding of economies shattered by Covid everywhere will be slow; even countries that managed to contain it have taken a hit, from Vietnam to New Zealand. Continue reading...

Holes in the Brexit deal need filling – not just for the City, but for the wider service sector that is essential to UK prosperityBrexit is done, and yet loose ends litter the negotiating room floor, now abandoned by both sides to satisfy Boris Johnson’s need for a 1 January deadline.The trade deal with the EU, approved by parliament last week, was not the comprehensive, neatly tied bundle of tariff and quota arrangements that was promised. Instead it is shot through with holes.EU negotiators are still angry at Johnson's betrayals, and wary about any handshake agreement with his right-hand man Continue reading...

The coronavirus and a near-catastrophic election showed Donald Trump is a symptom not a cause of what ails US societyIf America learns nothing else from these dark times, here are seven lessons it should take from 2020:Related: Ted Cruz and other Republican senators oppose certifying election resultsRelated: Hundreds of thousands more US Covid deaths possible amid vaccine chaosRobert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a columnist for Guardian US Continue reading...

Ministers must reconsider the dash to build pokey dwellings when so many more people may work from home in futureThere is a growing divide between those who want to rethink their lives after Covid and those who want to return to some kind of pre-virus normality. Thinktanks and academics have begun to ask how many people will change their work and social life, and what that will mean for employers, high streets, culture and even people’s ability to meet a partner, fall in love and have children.At the moment, they can only speculate. A poll might tell us how a random sample wants to work – some might view a return to the office or factory as the best outcome, while others say they prefer to work more from home more often.There is a concern that ministers will give permission for infrastructure that few will use, or that takes us in the direction of more car journeys Continue reading...

Universal credit boost, ban on evictions and mortgage holiday must continue, party says

New lockdown restrictions cut chances of rapid recovery as unemployment risesThe UK economy begins 2021 on the back foot as record numbers of coronavirus infections and tougher restrictions cloud the outlook for growth and limit the chances of a rapid recovery from the country’s worst recession in 300 years.There had been hopes that the arrival of successful Covid vaccines could prompt a rebound in activity. But with new government controls to combat the rising infection rate, the outlook is deteriorating. Here are five charts for the UK’s economic prospects in 2021. Continue reading...

From the decimation of several industries amid the Covid pandemic to the rise of Zoom, 2020 has been an unprecedented year

Travel curbs and homeworking prompt people to shop locally instead of in city centres

More than half of users will walk or cycle instead of taking buses and trains, Co-op survey finds

Rolling coverage of the latest economic and financial news

Late Brexit deal spurs FTSE 100 upwards as traders shrug off surge in coronavirus casesShares in London closed at their highest level in almost 10 months amid relief among investors that the UK and the EU had secured an 11th-hour trade deal.With the City open for business for the first time since the accord was agreed late on Christmas Eve, traders shrugged off a surge in the number of new Covid-19 cases and welcomed the avoidance of a no-deal Brexit. Continue reading...

Deal set to anger incoming Biden administration in US, which demanded to be consulted before deal went aheadChina and the EU appear to have resolved their differences over protecting labour rights in China and are set to sign a long-delayed investment agreement on Wednesday likely to make the economies of the two blocs more interdependent.The investment talks have centred on opening up Chinese markets for European investment, as well as addressing Chinese practices opposed by the EU concerning industrial subsidies, state control of enterprises and forced technology transfers. Continue reading...

Autonomy study says with proper planning companies can prosper if staff work fewer hours for same payA carefully designed four-day week could be introduced in the UK immediately and be affordable for most firms with more than 50 workers, a thinktank has said.A report by Autonomy – which is campaigning for a shorter working week without loss of pay – said the majority of 50,000 firms studied would be able to cope with the change through higher productivity or by raising prices.Related: Unilever New Zealand to trial four-day working week Continue reading...

‘Witch-hunt’,’ ‘black swan’ and ‘exponential’ entered wide use but were often applied incorrectlyDonald Trump and the Covid-19 pandemic dominated the news headlines in 2020. Three terms in particular came to symbolise the year: “witch-hunt,” “black swan” and “exponential”.Trump has tweeted the phrase “witch-hunt” approximately once every three days on average during his presidency and not only in connection with his impeachment trial. He continued to use it later in the year to describe accusations that he mismanaged America’s Covid-19 response, inquiries into his tax returns, an investigation into alleged criminal conduct at the Trump Organization and other controversies. Continue reading...

Backing of EU27 paves way for new arrangements between UK and EU to come into force on 1 January

Resolution Foundation says lockdowns and tier 4 restrictions will lead to depressed growth in 2021The fresh wave of coronavirus restrictions could lead to the economy being 6% smaller by Easter than official forecasters had predicted just last month, one of the UK’s major economic thinktanks has warned.The Resolution Foundation said the national lockdowns in Scotland and Wales and the tier 4 restrictions imposed in much of England would lead to depressed growth until Easter, and lead to 4.3% growth in 2021 compared with the 5.5% forecast by the Office for Budget Responsibility (OBR). Continue reading...

There’s no sign that ministers will use the twin shocks of the pandemic and Brexit to fix a broken system that is failing too many peopleWhen the UK entered the coronavirus age in March, state resources and collective commitment were mobilised on a scale not seen since the second world war. Decades ago, Britain had revealed itself, thanks in part to being able to marshal the industrial might of the empire, to be a formidable world power. Its economy was energised with breakthroughs in radar, atomic power and medicine.Although the story of the pandemic has not yet ended, there appears to be no such transformation in sight under Boris Johnson. Rather depressingly, familiar trends of greed, incompetence and cronyism are reasserting themselves. This is bad news for an economy where there has been a collapse of socially useful innovation. Britain’s lack of hi-tech manufacturing capabilities, notably in medical diagnostic testing, was cruelly exposed by the pandemic. Continue reading...

A quick look at the past 30 years explains why British voters were clear they wanted to leave the EUThirty years ago this month there were crunch trade talks in Brussels. After four years of discussions, attempts to secure a new global deal were not going well. Inside the negotiating room, the US and EU teams were at loggerheads. Outside, on the streets of the Belgian capital, farmers were rioting over proposed cuts in agricultural subsidies.As deadline time for the first editions of the UK papers loomed, the press room was graced by the arrival of the Daily Telegraph’s man on the spot: a young Boris Johnson. The paper’s news desk had belatedly twigged that there was a story in these collapsing trade talks and had told Johnson to find out what it was. Continue reading...

Threatening us with even more austerity is the last thing the chancellor should be doing in the midst of this profound crisisIn The Alchemist, the poet Ben Jonson, a rather more considerable figure than his near-namesake Boris Johnson, allows his principal character, Face, to make use of the plague for all manner of subterfuge.Until recently, the hardcore Brexiters were assuming that the latest plague, Covid-19, would divert attention from the predictable horrors of Brexit. Oh no. It is not turning out like that. Even during the “transition” period the monstrosity of it all was beginning to dawn on people. Why, the latest YouGov poll tells us that between 10% and 13% of Leave voters now regret their vote.His rationale is to prepare for the next crisis – 'building up the resilience you need to deal with the future shock'. But this IS the next crisis. This is the future shock Continue reading...

Borrowing has risen unsustainably during the pandemic among businesses, the government and consumersAs we look forward to 2021, there is much to be hopeful for. Vaccines pending, much of normal life will return and the economy can recover even more quickly than predicted by the Bank of England and the Treasury’s independent forecaster, the Office for Budget Responsibility.While bedding in a Brexit deal will prove to be difficult in the weeks and months after 1 January, there is the prospect of businesses beginning to see through the fog of uncertainty that has clouded the past four years. Continue reading...

A deal that makes us poorer, reduces global influence and imperils the nation’s integrityAny deal is better than no deal. But the agreement that Boris Johnson struck with the European Union on Christmas Eve is no political triumph, no diplomatic feat. It will one day surely be regarded as one of the greatest-ever deceits inflicted on the British electorate. We were told that a free trade agreement with the EU would be “one of the easiest in human history” to get, that we were “going to get a great deal”. We were told that a free trade agreement would give us “the exact same benefits” of EU membership without any of the obligations or financial costs.Yet the deal Johnson has reached will inflict all the costs he denied it ever would. It will take some weeks to fully digest the many pages of legal text. But it is already clear that this deal will have enduring consequences for Britain in the coming decades: for the wellbeing and resilience of communities across a highly unequal nation; for the potential for the UK to be an influence for good in an increasingly unstable world; and perhaps even for the very integrity of our nation. Johnson’s act of national harm could not come at a worse time. It will set in train significant economic damage during a global pandemic that has left the NHS and economy reeling. Continue reading...

Centre for Economics and Business Research says it expects this to happen half a decade sooner than it forecast a year agoChina will overtake the US as the world’s biggest economy before the end of the decade after outperforming its rival during the global Covid-19 pandemic, according to a report.The Centre for Economics and Business Research said that it nowexpected the value of China’s economy when measured in dollars to exceed that of the US by 2028, half a decade sooner than it expected a year ago. Continue reading...

Former president of the World Bank determined to alleviate poverty in less developed countries“If you have wealth, you have to share it,” was the watchword of the former president of the World Bank James Wolfensohn, a larger than life, egotistical, supremely confident, inveterate networker, but fundamentally a good and witty man. Wolfensohn, who has died aged 86, made a great deal of money and gave a great deal away.The zenith of his career was his two-term presidency of the World Bank, between 1995 and 2005, where his zest and passion for poverty alleviation left an indelible mark. Unafraid to confront the reality that too much of the World Bank’s lending found itself in anonymous offshore bank accounts held by recipients, he set up an anti-corruption task force, unthinkable before he arrived for fear of legitimising the bank’s critics while potentially smearing some innocent borrowers. Continue reading...