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...
As a key budget approaches, the chancellor must resist the urge to please his hawkish admirers, and continue to spend freelyTime is short as the chancellor tries to devise a coherent package for his budget on 3 March. Already it looks like being an impossible task.In the same way as the Conservative party is at odds over how to tackle the pandemic, it also cannot decide on what direction to take when the vaccine – maybe by as early as the summer – begins to clear the economic fog.If the Treasury limits its room for manoeuvre and insists on pleasing all sides, then its spending will be incoherent Continue reading...
The idea of being able to put a price on nature is dividing opinion, but the financial value of ‘ecosystem services’ is increasingly guiding policyIn 1996, Prof Shahid Naeem was part of a team of researchers who set out to value the Earth. Specifically, they were trying to establish the dollar value of all of the “ecosystem services” the planet provides to humans every year. Around $33tn, they concluded, nearly double global GDP at the time.“The team was half ecologists and half economists. The ecologists found the exercise really scary but understood the utility of it. The economists felt nature could be valued but they disagreed about how it could be done,” Naeem says.We will be running a series of occasional articles looking at the key issues and people involved at the Cop15 of the UN Convention on Biological Diversity scheduled to be held in Kunming, China, in 2021. The meeting will bring together governments from around the world to sign up to a Paris-style agreement on biodiversity that sets goals for the next decade.
International Monetary Fund says there are concerns about share price bubbleGovernments and central banks must maintain their pandemic rescue programmes or risk triggering a stock market crash, the International Monetary Fund has said.Warning that there were legitimate concerns about a share price bubble, the Washington-based organisation said that without continued low interest rates and government subsidies it was possible a “correction” in stock markets would occur. Continue reading...
Ex-PM calls for Treasury to get ahead of Covid crisis as LSE report warns 1m firms could fail by spring putting 2.5m jobs at riskGordon Brown has called for emergency measures to support businesses in the budget after new research from the London School of Economics warned almost 1m UK companies were at risk of failure in the next three months.The former prime minister said the report’s finding that one in seven businesses – employing 2.5 million people – might be forced to close by the spring should act as a “clarion call” to Rishi Sunak as he prepares his tax and spending measures for 3 March.Related: IMF downgrades forecast for UK economic recovery Continue reading...
Financial body says UK growth in 2021 will be lower than earlier forecasts, while global recovery will be strongerThe International Monetary Fund has downgraded forecasts for the UK’s recovery this year while the expansion of the global economy, aided by accelerating vaccine rollouts, is expected to gather pace.Illustrating the severe impact of the pandemic on the UK economy, the IMF said in its latest forecast that the UK’s national income, or GDP, would expand by 4.5% this year, down 1.4 percentage points from the 5.9% growth forecast made last October. Continue reading...
The party has done the same thing every time a Democrat has won the presidencyHigh among the US president Joe Biden’s many priorities is reinvigorating an economy that – judging by the latest employment numbers – appeared to be slowing as 2021 began. Even if Covid-19 abates during the course of the year, and pent-up consumer demand kicks in, the US faces immediate challenges in areas such as education, infrastructure investment, state and local finances, and especially the fight against the pandemic itself.Biden has thus announced a $1.9tn (£1.4tn) “American Rescue Plan”. Moreover, he is rare among successful US presidential candidates in having stated honestly during the campaign that his spending would continue the recent trend of record budget deficits, notwithstanding his plans also to raise taxes on the wealthy. Most economists approve of this fiscal expansion, in light of the US’s still-high unemployment, low inflation and very low interest rates.Related: What can we learn from the UK's response to Covid-19? | Mohamed El-Erian Continue reading...