Don’t let comparisons with Germany fool you. The policy encourages employers to keep a few staff and abandon the restThough the early days of the pandemic were terrible, they offered a fleeting glimmer of hope. Social scientists have debated for years whether it could be possible to transform the economies of the UK or US, where market forces have been unleashed on society, to more closely resemble the coordinated economies seen in Germany, France and Sweden, where workers are given a seat at the table and typically enjoy greater social protections. During the spring, with the Trades Union Congress (TUC) included in talks to design a previously unimaginable wage replacement scheme, the possibility of change looked tantalisingly close.Indeed, in the hours preceding the plan from the chancellor, Rishi Sunak, for the winter economy last week, many talked of a new “German-style” scheme to replace the furlough programme. The leaders of the TUC and the Confederation of British Industry (CBI) stood alongside Sunak as he prepared to make his speech, a show of unity that would have been surprising less than a year ago. The Kurzarbeit, the German policy of topping up pay for workers on reduced hours, which meant Germany was the only G7 country where employment did not fall following the financial crisis, was widely cited.Related: Fears for jobs grow as employers count cost of Sunak’s winter plan Continue reading...

Report warns of a cascade of job losses as coronavirus furlough scheme winds down

Andy Haldane has bemoaned ‘Chicken Licken economics’. So are things better than they seem?

Rolling coverage of the latest economic and financial news

Britain still experienced worst Q2 contraction of any major economy despite revised figure

Policy could be fine-tuned to help different groups, such as young people, whose lives are currently on holdCoronavirus – latest updatesSee all our coronavirus coverageDuring a pandemic, the virus and the economy feed back in a continuous circular loop of causality. You don’t need to be a trained economist or epidemiologist to see that.As the virus progresses, consumers respond to the risk to their health by cutting back spending on risky activities in leisure and hospitality, such as visits to pubs, cinemas, gyms, nightclubs and restaurants. How much they alter their behaviour depends on how much the virus is a threat to them and those they care for, or how much they know about it. And of course it also affects companies (whose profitability and outlook for the future worsens) and workers who, ultimately, may fall sick and not be able to work, or may fear turning up to risky workplaces. So the virus affects the economy.Related: Tory split on coronavirus has seen off any joined-up strategy | Phillip Inman Continue reading...

Andy Haldane says excess caution threatens economy’s recovery from Covid crisis

Political unrest hit tourism and retail, and coronavirus response has delayed recoveryHong Kong’s economy was already in recession when the pandemic hit in January. Six months of running battles between pro-democracy campaigners and local government had deterred many of the visitors who fuel the lucrative tourism industry, while the threat of violence on the streets and closures of shops had sent retail sales down nearly a quarter on the previous year.With much of Asia shut down by coronavirus restrictions during the winter months, there was little expectation of a recovery until the spring, when the level of infections fell to almost zero across mainland China and most of the rest of the region, and the measures could be eased.The national security law China imposed on Hong Kong in June 2020 has wrought profound changes on the region of more than 7 million people.Related: Demoralised but defiant, Hong Kong's spirit of resistance endures Continue reading...

Initiative aims to ensure low-income countries are not frozen out by rich nations

It’s a myth that Republicans handle the economy better – US recessions almost always occur under the GOPJoe Biden has consistently held a wide polling lead over US President Donald Trump ahead of November’s election. But, despite Trump’s botched response to the Covid-19 pandemic – a failure that has left the economy far weaker than it otherwise would have been – he has maintained a marginal edge on the question of which candidate would be better for the US economy. Thanks to Trump, a country with just 4% of the world’s population now accounts for more than 20% of total Covid-19 deaths – an utterly shameful outcome, given America’s advanced (albeit expensive) healthcare system.The presumption that Republicans are better than Democrats at economic stewardship is a longstanding myth that must be debunked. In our 1997 book, Political Cycles and the Macroeconomy, the late (and great) Alberto Alesina and I showed that Democratic administrations tend to preside over faster growth, lower unemployment and stronger stock markets than Republican presidents do.Related: Ten reasons why a 'Greater Depression' for the 2020s is inevitableRelated: The US is officially in recession thanks to the coronavirus crisis | Jeffrey Frankel Continue reading...

Concerned MEPs say definition of rule of law narrowed to unblock Covid recovery money

New mortgage approvals surged to 84,700 last month, as German harmonised inflation drops to -0.4%

Guardian analysis shows mounting fears of double-dip recession as activity weakens

Kristalina Georgieva says support for most vulnerable countries must be stepped up

We must act now to stop the pandemic inflicting long-term damage, says the head of the IMFUK economy shows signs of faltering before second Covid-19 waveIMF chief: Covid will widen inequality without global actionNever before in living memory have so many lives and livelihoods across the world been disrupted at the same time. The International Monetary Fund estimates the pandemic’s loss to the global economy at around $12tn (£9.4tn) over 2020-21. The poorest countries – with limited resources and constrained capacity – are hit hardest: growth in low-income nations will be at a standstill this year, compared with 5% last year.Without necessary action, this group of about 70 countries, representing more than 1 billion people, faces unprecedented human and economic devastation. The decades-long declining trend in global poverty is being pushed into reverse, with as many as 90 million additional people falling into extreme poverty, mostly in sub-Saharan Africa and south Asia.Related: IMF chief: Covid will widen inequality without global actionKristalina Georgieva is managing director of the International Monetary Fund Continue reading...

Our latest snapshot of key economic indicators shows UK plc is fast losing momentum

Thinktank warns chancellor will have to cut budgets, increase taxes or borrow moreA prolonged battle against Covid-19 would swallow up a large chunk of the government’s planned increase in public spending and force the chancellor into an unenviable choice between fresh austerity, higher taxes or more borrowing, a leading thinktank has warned.The Institute for Fiscal Studies said that even if only a quarter of the extra £70bn allocated by Rishi Sunak to fight the pandemic had to be repeated in future years, the Treasury would either have to find more money than set aside in this year’s budget or announce cuts.Related: Sunak's winter plan is the shadow chancellor's chance to fight back | Larry Elliott Continue reading...

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Readers air their views on economic and generational issues in the UK

Rolling coverage of the latest economic and financial news

Anneliese Dodds has been limited by Covid, but her questions about the job support scheme could prove canny

A Key West team is expected to enforce a new mandate allowing people to go maskless outdoors if they are 6ft apart – an impossible task among partygoersKey West code enforcement officer Paul Navarro was halfway through his shift and beginning to see signs of trouble. The crowds on lower Duval Street swelled just after 9pm, and social distancing quickly became impossible on the sidewalks.Navarro is the last line of defense against the high-risk behaviors which spread Covid-19 and is one of the principal enforcers of the Florida city’s mask mandate – an effort to protect public health and the local economy. Until 16 September part of that balancing act had included a strict mask mandate; now that rule has been loosened.Related: Can California's tourism industry survive a year unlike any other?We have the pressure of the business owners, [and] other pressure from people who want to do the right thing, which, at this point, I don’t know what that is Continue reading...

Losing a job reduces happiness as well as spending powerWe are entering the grim jobs-being-lost phase of this crisis: 695,000 fewer of us are on payrolls and the Bank of England expects unemployment to rise by 1.2m. The chancellor’s new measures will reduce, but far from halt, this tide.Economic policy specialists tend to focus on the financial effects of redundancies. And they are painfully large. A worker earning £20,000 loses 71% of their income if they lose their job and fall back on universal credit. Continue reading...

The chancellor held socially distanced breakfasts with key journalists, and his upbeat message struck a chordThe wave of flattering front-page headlines that followed the chancellor of the exchequer’s statement outlining his autumn strategy to tackle the tottering economy screamed out from news stands across the country.What was not known was that the often gushing coverage came after a Treasury mission to win the hearts and minds of national newspaper editors and political columnists at a crucial moment for the Conservative party. Continue reading...

Britain is condemned yet again to greater hardship by the government’s inept handling of the pandemicOn Thursday night, Britain’s restaurants and pubs emptied an hour early, to a chorus of protests from some of the inconvenienced revellers, alarm from the beleaguered hospitality industry and fury from many media commentators. The curfew is one of the additional restrictions imposed by the governments in Westminster, Wales and Scotland last week as Covid-19 infections continue to rise. Despite the concerns the move raised, on the brink of a second wave of coronavirus, the urgent question facing Britain is whether these restrictions go far and fast enough?The question has polarised political – and, to a lesser extent, scientific – opinion. There are echoes of mid-March, when many scientists were criticising the government for being too slow to act. But we should in theory be better poised to deal with a second wave: we know more about how the disease spreads; Boris Johnson’s government has had months to set up a test, track and trace infrastructure; the NHS has had time to prepare a strategy to keep elective treatment going; mask-wearing is much more prevalent.We know from the first wave that it is impossible to shield vulnerable people while the virus is spreading uncheckedRelated: Almost 90% of Covid tests in England taking longer than 24 hours to process Continue reading...

The battle between Treasury and health department has doomed us to a succession of contradictory gambits – and a long, hard winterIt would help if the cabinet could agree. Yet for the past seven months it has remained deeply divided, squabbling over the scientific advice and what Covid-19 might mean for the nation’s health and jobs.Britons have become familiar with a bewildering, almost weekly stream of tactical policies, twisting this way and that, many of them in direct opposition to each other.It is not hard to see that without financial protection in place for those affected, the virus will continue to spread Continue reading...

The new measures for workers on the furlough scheme are not generous enough to prevent a damaging rise in unemploymentThere are several moving parts in the engine designed by Rishi Sunak to keep the British economy motoring into next year. The most important is the replacement for the furlough scheme that has kept about 9 million workers in employment at some point in the last six months.Only days before the chancellor stood up to deliver his “winter economy plan” on Thursday, Boris Johnson announced a six-month extension to restrictions on sporting and cultural events and a new “rule of six”, restricting the number of people who could gather at any one time.We expect the unemployment rate to rise further, to at least 7% by the middle of next year Continue reading...

Young workers and those at the bottom end of the income scale will be the hardest hit

During the pandemic, the EU dropped its austerity-inducing budget rules and restrictions on its central bank’s ability to finance government spending. It get should rid of them permanentlyIn an emergency, the normal rules do not apply. Coronavirus has shown the EU can do things differently. Early on the commission dumped its obsession with balancing the books. The prohibition on monetary financing of government debt by the European Central Bank (ECB) was dropped. This allowed member states the freedom to mitigate the damage of a Covid recession without worrying too much about borrowing levels.That fear was well-founded. The EU had used high debt levels as a reason to intervene in public policy. Emma Clancy, an economist for the leftwing block of MEPs, has noted the commission had used debt burdens to ask member states to cut spending on, or privatise, healthcare services 63 times between 2011 and 2018. In the EU there is often an Olympian disdain for critics of its fiscal and monetary rules. This is understandable. No one likes to be reminded of one’s own mistakes. Continue reading...

UK borrowing has hits a new record high this year, and car production almost halved

What the new job support scheme and help for the self-employed means for workersThe chancellor unveiled a winter plan on Thursday which included schemes to protect what he referred to as “viable jobs” over the next six months. These include a job support scheme to replace furlough and an extension of help for some self-employed workers.Related: What is Rishi Sunak's job support scheme and how will it work?Related: Sunak warned winter economy plan not enough to stop wave of job losses Continue reading...

August’s near-£36bn borrowing figure follows unprecedented government spending

Chancellor says Britain faces winter of business failures and job losses due to Covid impact

The job support scheme looks fiddly, and unemployment looks sure to rise sharply“I cannot save every business, I cannot save every job,” said Rishi Sunak. We knew that, of course, because the chancellor has said it repeatedly since March and because he’s already on course to borrow about £370bn this financial year, a staggering sum. We can, though, say this: the new job support scheme (JSS) looks extremely fiddly, which may not help its aim.Giving a worker 33% of hours while paying 55% of his or her wages (which is how the figures work at the bottom end of the sliding scale) won’t appeal to every employer. Yes, those thinking about long-term training and recruitment costs will be attracted. The need to keep skills within a company matters.Related: What's missing from the chancellor's new scheme to save jobs? Continue reading...

Chancellor announces ‘job support scheme’ to subsidise wages of people in work; VAT cut extended for hospitality and tourism sector until end of March

Rolling coverage of the latest economic and financial news

Chancellor appears to defend decision to reopen swathes of economy amid coronavirus

The replacement for the UK furlough scheme is similar to Germany’s Kurzarbeit

Rishi Sunak outlines plans that will take over from furlough programme

The chancellor is unveiling measures to protect jobs in the Covid crisis

Chancellor will announce employment package to replace furlough scheme

Latest PMI surveys show growth slowed at UK companies this month, while eurozone service sector shrinks

UN body figures show people in Americas and lower to middle-income nations hardest hit

LSE analysis says long term economic hit will be two to three times as large as Covid impact

Cips/Markit estimates show outlook for business is at its weakest since May

Exclusive: option part of wider emergency package to help firms through second wave of Covid-19

Austerity policies will choke off recovery and risk a double-dip recession, says UnctadThe global economy faces a lost decade after the Covid-19 pandemic unless policymakers spurn austerity measures in favour of a comprehensive recovery plan built on investment in sustainable growth, the United Nations has said.In its annual trade and development report, the UN’s economic arm said a repeat of the cost-cutting conducted by governments after the financial crisis of 2008-09 would choke off recovery and risk a double-dip recession in 2022.Related: We must increase lending to the world’s poorest countries now – or pay the price later Continue reading...

Bank of England forecasts for 7.5% unemployment this winter may have to be revised up considerablyIt is March 2021. In the UK, the clocks are about to go forward and the government is about to ease restrictions imposed six months earlier in response to a rise in Covid-19 cases. A long, hard winter is over.But at what cost? That was the question exercising politicians, business leaders and economists after the prime minister announced curbs on opening hours for pubs and restaurants, and backtracked on the government’s previous advice that people should stop working from home. Economists at Bank of America think Britain is on course to contract in both the final three months of this year and the first three months of next. Continue reading...

Manufacturer insists supplies will not run out as long as customers don’t panic buy

Lobby groups say latest advice is ‘extraordinarily reactive’ as TUC tells PM to ‘get a grip’