As in the novels of Jane Austen, social mobility in Britain today appears dependent on the wealth you inherit or marry in to, rather than how much you can set aside from a pay packetIn the 1970s British households held wealth worth around three times the nation’s GDP. Today it’s more than seven times, the highest such ratio in over a century. People in the top 10% of society have £2.5m, on average, in wealth. The bottom 10% have virtually nothing. The gap cannot currently be made up by saving. As in the novels of Jane Austen, social mobility appears dependent on the wealth you inherit or marry in to, rather than how much you can set aside from wages.Just how significant this trend has become was highlighted by the Institute for Fiscal Studies, which last week said as many as one in 10 UK adults born in the 1980s will inherit more than half as much money from their parents as the average person earns in a lifetime. Those born 20 years earlier in the top decile had received less than a third of average lifetime earnings. Continue reading...

Boris Johnson’s tenure will be coloured by the Covid-19 economic recovery but urgent fixes are needed nowA year into the premiership of Boris Johnson, a new kind of normality is beginning to dawn. The roads are getting busier, pubs are open again, and people are slowly returning to the high street as summer rolls on.It would be normal after a year in power for a prime minister to lay it on thick about their achievements so far. But after four months of crisis inflicted by the pandemic, Johnson’s achievements in the past year will always be coloured by Covid-19.Related: Until Covid-19 uncertainty melts away there's little chance of full economic recoveryRelated: A second wave of Covid-19 will punish the economy, lockdown or not Continue reading...

Its remote setting and a decision to shut down helped keep cases fairly low, but unemployment soared. What next?The Sheraton Waikiki stands just a sea-smooth pebble throw from one of Hawaii’s most famous beaches. Working the front desk, Jordyn Wallace loved meeting new people from different states and faraway countries in one of the world’s most beautiful holiday destinations.Related: Niagara Falls tour boats highlight US and Canada's stark Covid-19 divideRelated: Florida hospitals stretched to capacity by acute coronavirus outbreak Continue reading...

Epic challenges face us, yet the government is unprepared and devoid of imaginationThe last week has been my most human for four months. I have been to a hairdresser; eaten out in restaurants and at friends’ homes; played tennis and golf; stood in the street talking with work colleagues; and, what seemed most novel of all, shared a beer in a pub. It all feels rather heady.But none of it was normal. Everybody wore masks at the hairdresser; the restaurants were deserted; windows and doors were wide open at my friends; we had the inside of the pub to ourselves. Meanwhile, Zooming continues unabated; public transport still seems a risk of last resort; and, in the supermarket on Friday, I wore a mask like everyone else – and thought this right and unremarkable. Go into our city centres and they are eerily quiet. What is human and how we interact are being redefined.Suddenly it is obvious that a resilient public health system is the cornerstone of a functioning economy and society. Continue reading...

The £750bn package agreed in Brussels last week is an innovative way of sharing the pain of the pandemicBack in May, critics of the EU gleefully pounced on news that the German constitutional court had ruled unlawful the European Central Bank’s plans to flood the financial system with cheap credit.If the ECB was unable to expand its rescue mission for the eurozone, the euro itself was in danger and without the euro, the pillars of European political cooperation would collapse.The 'frugal four' wealthy countries wanted a veto over the management of the debt, but have acceded to majority voting Continue reading...

We should not be worrying about paying the pandemic bill yet. But some will worry – and Tory tensions may riseSebastian Haffner, who was a distinguished correspondent for the Observer after the second world war, was in Berlin during the 1930s before escaping to Britain, and witnessed with horror the rise of Hitler and the assault on treasured public institutions.After Haffner’s death, his son Oliver – with whom I was at school – discovered a manuscript written by his father of what it was like to see the decay of civilised standards. It became a bestseller in Germany, and Oliver translated it into English. The book was published here under the title Defying Hitler – catchy but somewhat misleading, because, of course, most didn’t defy Hitler.As has been noted by almost anyone who watched Sunak’s presentation of his mini-budget, Johnson’s body language was a sight to behold Continue reading...

In Harlow, a bounce-back in June is now petering out for some traders – and fears are still growing over jobsIt appeared from business surveys last week that Britain’s private sector was surging back to life. But on the streets of Harlow, Essex, opinions about the state of the post-lockdown economy are mixed.Nel Amodei, 46, is trying to rebuild trade at her fledgling coffee shop in Harlow’s old town, Nel’s, launched 10 weeks before the UK closed down in March – and said things were still not normal. Continue reading...

Aircraft maker says it will end French and Spanish state support used by Trump administration to justify tariffsAirbus has said it is taking the last step to end 16 years of bitter litigation with the US at the World Trade Organization (WTO) over subsidies that the White House said disadvantaged rival aerospace company Boeing.The European aircraft manufacturer on Friday said it will end a system of financial support from France and Spain that the WTO had deemed illegal and unfair to Boeing. Continue reading...

Consumer spending recovers near pre-pandemic levels but UK still on course for recession

IMF says 30 years of gains for women could be erased as recession deepens

Exclusive: Survey reveals lack of childcare played role in almost half of female layoffs

The recovery package promises deeper integration between European countries. Here’s why I think it won’t workDuring the early years of the eurozone crisis, I remember gauging its depths by the rapidly diminishing half-life of the celebrations that followed every European Union summit. Premature proclamations that the crisis was over inspired hope, which caused the money markets to rebound. But then, at some point, gloom would unfailingly return. As the years of austerity for the many and socialism for the few ground on, that point arrived sooner after each EU summit.Could it be that, at long last, this sad pattern has been broken by last week’s summit, which resulted in a brand new, €750bn post-pandemic EU recovery fund?Related: With its recovery deal, is the EU finally starting to act like a unifying force? | Shahin Valléee Continue reading...

Rolling coverage of the latest business and markets news after business activity jumped in July

Future of many council-owned sites hangs in balance as covid lockdown tips finances into red

Economy reopened in July as pent-up demand from customers led to jump in sales

Treasury and business committees to question whether policies will help or hinder sustainable recoveryMPs plan to scrutinise the government’s green economic plans and industrial strategy to test whether they are still fit for purpose in the wake of the coronavirus crisis.The government will face two separate inquiries into its plans, by the Treasury and business department parliamentary select committees, to question whether its existing policies will help or hinder sustainable post-pandemic economic growth. Continue reading...

The number of Americans filing fresh unemployment claims jumped last week to 1.4m, as states impose new lockdown measures

UK to bear brunt of job losses with 600 staff set to go as part of cost-cutting exercise

Figures come as Congress debates an extension to the $600 weekly lifeline for those on unemployment benefitsThe number of Americans filing for unemployment benefits last week rose again last week after four months of falls, as the surge in coronavirus cases led states, including California and Texas, to pause the reopening of businesses shuttered to slow the coronavirus’s spread.Related: Portland mayor teargassed as calls mount for Trump to withdraw federal agents – live Continue reading...

Shares rise on strong quarterly sales but company warns global recession has begun

The economy was sputtering before the pandemic hit and Covid-19 has delivered a body blowThe May budget was cancelled, so we’ve had to wait for revised forecasts mapping the impact of Covid-19 on the budget and the economy. The Treasury produced new numbers on Thursday. What did we learn?Related: Australian unemployment to tip over 9% by Christmas and budget deficit to hit $184bn in 2020-21Related: Economists on the Treasury update: 'the bottom line is we need more stimulus' | Emma Dawson, Chris Edmond and Cherelle Murphy Continue reading...

MPs say chancellor must fulfil vow to help workers, including newly employed and newly self-employed

The relationship between high streets and workers is up for renegotiation. Let’s not waste this momentA community is a community because of its people, and some of those people are only present because of proximity or force of habit. That twice-daily dam-burst of commuters back and forth between home and work supports the architecture of our economy, with its clusters of offices rising above jostling streets lined with restaurants, cafes and retailers.In its current form, a sufficient mass of people must keep moving to prevent it seizing up. How many can stay home before some of it becomes unsustainable?Related: Why the home-working boom could tumble London's skyscrapersRelated: Growing number of Britons working from home, says ONSGavin Chait is an open-data scientist and development economist at Whythawk Continue reading...

Cross-party MPs conclude government schemes drawn up ‘on the hoof’ amid Covid-19 crisis

Rishi Sunak is preparing an autumn of spending cuts – an economic folly and a political gambleThis is the week that Boris Johnson and Rishi Sunak began softening up doctors, teachers and other public sector workers for a squeeze to their pay and cuts to their departmental budgets. They have done their best to muffle that particular bit of bad news. Instead, aides to the publicity-conscious Mr Sunak briefed journalists on an inflation-busting pay rise for public servants – and on Tuesday got the desired morning headlines. Later that same day, the chancellor admitted it was a one-off for this financial year, and that over the longer run “we must exercise restraint in future public sector pay awards”. Meaning cuts are coming. It had been a crass and short-lived publicity trick: flash the cash in a big show now, then admit it would all be taken back in time. Not only that but, as the Trades Union Congress pointed out, in all the government’s trumpeting of its apparent largesse, little acknowledgement was given that there would be no such increment for jobcentre advisers, local government employees or care workers.Spin is a hardly a novelty on Downing Street, but the prime minister has developed a new, yet increasingly tiresome, strategy: blurt a falsehood, confess the truth, then hope the furore around the initial fib fixes it all the more firmly in voters’ minds. So Mr Johnson postures as the new Roosevelt, then announces a small spending commitment – but evidently hopes busy and only half-attentive voters will be left with the magic words “new deal”. Continue reading...

The huge economic boost breaks important political taboos, and suggests a willingness for more integrationIt was a long time coming, but the coronavirus crisis seems to have allowed Europe to make a leap towards genuine integration. The global financial crisis in 2008 exposed the inherent fragilities and incompleteness of Europe’s monetary union, prompting a decade of agonising debate over fiscal union. Essentially, sharing a common currency without sharing a real budget was always going to be unstable and potentially dangerous .Related: EU summit deal: what has been agreed and why was it so difficult? Continue reading...

Rolling coverage of the latest economic and financial news

The PM’s chief adviser thinks postwar US successes can be replicated here. But context is everything

The pandemic arrived in the run up to the tourist season, hitting seaside towns hard. We visited Brighton to find out how businesses and beach-goers are adaptingOf all the things coronavirus has taken away from life on Brighton’s seafront, among the saddest must be the high-fives. Previously undertaken without worrying where hands have been and what germs they might be carrying, they are now strongly discouraged: a sign actively bans them. “It says ‘No high-fives’,” says Katie Mintram, with a small laugh. She has run Yellowave beach sports centre – a cafe and several volleyball courts – since 2007. She is navigating her way through a summer that feels very different from normal. “In volleyball, it’s all about high-fives.”Yellowave is on the beach itself. Stepping over the tracks of the Volk’s Electric Railway (still closed) from a very quiet Madeira Drive is like stepping into a parallel world – busy, peopled, thriving, normal. Each of the six courts is full, matches being played by fit, happy people in shorts and bikinis; many of the cafe’s outdoor tables have customers sitting at them. It is nowhere near as bleak as the shuttered snack bars and souvenir shops on the main road. That is because there is a tournament on, explains Mintram – the first of the summer. “If the tournament wasn’t here, it probably would have been a bit more depressing,” she says. Continue reading...

FTSE 100 remained flat on a weak dollar and fears of a double spike after lockdownThe euro hit an 18-month high and stock markets gained ground after the EU agreed a €750bn pandemic recovery fund, in a deal struck hot on the heels of reports that a coronavirus vaccine could be ready within months.After more than four days of tortuous negotiation, the EU’s 27 leaders resolved to issue debt jointly, with the proceeds to be disbursed to countries wrestling with an economic downturn not seen since the Great Depression. Continue reading...

The chancellor is targeting savings from departments that will need more funding not lessThe government has embarked on a spending review across Whitehall that the chancellor says must include pay restraint.Rishi Sunak, in a letter to his cabinet colleagues, spells out his priorities for Whitehall departments and in among the calls for Britain to become a “scientific superpower”, improve public services and tackle crime, is the demand for a clampdown on pay.Related: Coronavirus: almost 900,000 public sector workers to get pay rise, says Sunak Continue reading...

Unions accuse chancellor of using smokescreen tactics to hide plans for pay restraint

Rolling coverage of the latest economic and financial news, as European stock markets hit five-month highs

Pandemic could reverse progress for women all over the world without governments taking powerful measures

The two powers must reach an understanding that competition does not preclude cooperationNot a day seems to pass without further evidence of the mounting economic tensions between China and the US, the world’s two largest economies. This growing antagonism will have a bigger immediate impact on China than on the US, as bilateral decoupling fuels a broader ongoing process of deglobalisation. And the negative spillover effects for a subset of other countries – which I call the dual-option economies – could be particularly significant.Even from a purely economic perspective, it is hard to envisage any durable abatement of Sino-American tensions in the near future. And that is before factoring in national-security issues, let alone those relating to technology and human rights.Related: TikTok halts talks on London HQ amid UK-China tensions Continue reading...

Plan B says government proposals unlawful in light of obligations to cut emissions

EU leaders have agreed a financial recovery plan after four days of intense negotiationsAfter four days and nights of hard-fought negotiations, EU leaders have agreed a €1.8tn (£1.6tn) financial package, comprising a €750bn recovery plan intended to haul the bloc out of the worst recession in its history, as well as a €1.074tn budget for 2021-27.Related: EU leaders seal deal on spending and €750bn Covid-19 recovery plans Continue reading...

The former WPP boss on the economy, Facebook and why his S4 Capital is growing despite the coronavirus crisisSir Martin Sorrell’s headline-grabbing, acrimonious departure from WPP seemed set to mark an ignominious end to the global ambitions of the most powerful man in advertising. But two years on his new media venture, S4 Capital, has just reached a market valuation of £1.5bn, making it worth more than DMGT, the publisher of the Daily Mail and Mail Online.Sorrell is now head of the UK’s sixth-biggest listed media company, with a value equal to a fifth of his bete noire WPP, and has continued to grow it even during the coronavirus pandemic. Continue reading...

Average income falls 4.5% in May compared with start of outbreak, thinktank says

Andy Haldane, however, clashes with fellow MPC member Silvana Tenreyo over economyThe Bank of England’s chief economist, Andy Haldane, has insisted that Britain is enjoying a V-shaped recovery, despite concerns among rival central bank policymakers that the economy is struggling after high-profile job cuts that are expected to send unemployment higher.Haldane, who has become a controversial figure in recent months for his comments that the UK is in the middle of a quick turnaround, said the UK economy had recovered about half of the massive fall in output that took place in March and April when the Covid-19 lockdown was most intense. Continue reading...

Rolling coverage of the latest economic and financial news

Orbán accuses Netherlands’ Rutte of ‘communist’ tactics on tense third day of talks

The economist and author Ann Pettifor suggests books that offer hope for the future and the Green New DealEveryday life has been upended by the pandemic, but the Arctic heatwave is a reminder that the climate crisis still poses an urgent threat to humanity. We will need resolve, ambition and optimism as we emerge from lockdown, so we can forge the green recovery that is so crucial. One book that has sustained my faith in the future is Herman E Daly and John B Cobb’s hopeful vision, For the Common Good. Daly, once (briefly) the World Bank’s chief environmentalist, is an advocate of the steady state economy, central to the Green New Deal. This book is as relevant today as when it was first published, more than 30 years ago.JA Baker’s 1967 memoir The Peregrine, is another vision – of the ecstatic joy brought on by a deep connectedness to nature. Baker documents his daily and increasingly close connection to the austere Essex landscape that was his home, and to what Gerard Manley Hopkins called “the brute beauty and valour” of an extraordinary bird. For greater understanding of how connected all living things are, Peter Wohlleben’s The Secret Network of Nature is less intense, but startling and delightful. Each chapter is a self-contained exploration of some link in nature: “How Earthworms Control Wild Boar”; “Fairy Tales, Myths and Species Diversity”. Or try Lev Parikian’s witty Into the Tangled Bank. He starts with the wildlife found in your kitchen sink, and gradually deepens connections to nature within and outside your own four walls. Continue reading...

Covid-19, risk of no-deal Brexit and geopolitical tensions are dragging down spendingAlmost two thirds of companies plan to cut investment spending over the next three years as they look ahead to a slow recovery that will delay almost half from clawing back pre-Covid-19 levels of sales before next summer.A survey of finance directors by the accountants Deloitte found that 65% said a combination of the coronavirus pandemic, the potential for a no-deal Brexit and worsening geopolitical conflicts has forced them to reduce capital spending.Related: Five key areas Sunak must tackle to serve up economic recovery Continue reading...

Boris Johnson’s recovery plan will not succeed if he doesn’t put worker protection at its heartIt’s easy to see why Boris Johnson wants to send people working from home back to the office. Despite the gradual rolling back of lockdown, Britain’s big town and city centres remain eerily quiet places.The coronavirus crisis scattering city workers to the suburbs has delivered a hammer blow to urban economic activity, laying low the service sector that powers the country’s growth engine. Not a week has gone by without waves of job losses at companies reliant on people leaving their homes and heading into towns and cities. Continue reading...

As people tend to mimic what they’ve heard, it’s crucial in this crisis that the right ideas prevailIdeas matter. They shape not just how we think, but what we do. And economics ideas matter more than most, given the central role they play in our politics, especially at times of crisis. I thought the idea that the UK was facing bankruptcy, supposedly like crisis-stricken Greece, played a major role in the speed and scale of austerity after the financial crisis, despite being nonsense. Others said it was pure politics, not ideas, that mattered.Luckily, more conclusive evidence is available. A fascinating recent study examined the impact of US judges attending a controversial two-week economics course, which was criticised at the time (the final decades of the 20th century) for its bias towards conservative economics. The paper shows that judges who attended the course tended to use more economics-related language in the years that followed, including phrases such as “efficiency” in their judgments. They were also significantly more likely to deliver conservative verdicts in economic cases, ruling against government regulators and delivering harsher criminal sentences. So far, so worrying. And these ideas spread. Other judges “exposed” to the attendees of the course were also more likely to start using similar language. Continue reading...

Without clear leadership from the top, employers will simply not risk a full return to the workplace this yearThere is little chance of the economy staging a full recovery by the middle of the decade, let alone by Christmas, as Boris Johnson believes is possible.Speaking with the optimism of a first world war general, the prime minister said on Friday that most restrictions on business activity would be lifted by December. This, he intimated, meant that for much of the population there will be a return to pre-coronavirus ways of working by the end of the year.it will take greater trust in plans to ease the lockdown and huge investment by government to bring the economy back to life Continue reading...

With bad economic news coming hard on the heels of the ‘mini-budget’, we look at the issues the chancellor must address in time for autumnThe direction of travel is set. After four months of lockdown, Boris Johnson last week announced fresh plans to get more companies to bring employees back to workplaces across England from August. Getting life back as close to normal as possible by Christmas is the prime minister’s aim, but significant challenges remain on Britain’s road to recovery, as was demonstrated by a series of worrying economic updates.Figures out last week showed that Britain’s economy failed to rebound by as much as had been hoped in May, when the prime minister first attempted to relax lockdown controls. The Office for Budget Responsibility killed off the idea of a rapid bounce-back, and warned that by Christmas unemployment could hit levels not seen since the 1980s. Continue reading...

Meeting follows acrimonious first day of negotiations with Dutch prime minister demanding national veto on spendingEU leaders reconvened a summit in Brussels after a stormy first day of talks on the terms of a €750bn (£682bn) economic recovery package ended with the Dutch prime minister, Mark Rutte, complaining of an increasingly “surly” response to his demand for a national veto on spending.Prime ministers and presidents declined to comment as they arrived back at the Europa building after the previous day’s 13 hours of talks – the first in person meeting for five months – ended in acrimony.Related: Angela Merkel set for central role in talks on EU recovery plan Continue reading...

Cooperation needed to avoid turning Covid-19 into deeper economic crisis, says economistPrivate sector lenders to some of the world’s poorest countries should agree plans to reduce debt payments or risk turning the Covid-19 pandemic into a deeper economic crisis, the World Bank has said.Speaking before the start of the G20 finance ministers meeting this weekend, the bank’s chief economist, Carmen Reinhart, said banks and hedge funds that lend to the developing world should cooperate with moves to cut debt payments, allowing poorer countries to pay for vital medical and food supplies. Continue reading...