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...

John Marsh on modern monetary theory and David Cockayne on doughnut economics and artThe Guardian has done us all a service with this editorial (The Guardian view on Covid-19 economics: the austerity con of deficit hysteria, 14 July). I am reading Stephanie Kelton’s book and I believe that it may start a revolution in economic policy.Prof Kelton’s concern is not the government financial deficit – the balance between taxes and government spending – but the deficits and imbalance in the real economy such as unemployment and housing shortages. Modern monetary theory (MMT) suggests that governments which issue their own money cannot “go broke”. Continue reading...

GMB says employers need more support to ensure safe return on 1 August

Since March, unemployed Americans have received government money to pay rent and buy food – but if Congress can’t agree a new deal, what then?If Donald Trump and Senate Republicans have their way, roughly a week from now, the US will swap an imagined economic problem for a predictably devastating one, economists have warned.Related: 1.3m more file for unemployment as US economy continues to reelIt is such a feeling of being caged and trapped, and every decision I can make is a bad oneRelated: How will we know the US economy is recovering? Here are my key metrics | Gene Marks Continue reading...

Fund is accused of effectively bailing out private lenders to some of world’s poorest nations

Rolling coverage of the latest economic and financial news

Chancellor’s statement ‘corrosive to public trust’ for passing old funds off as newRishi Sunak has been accused of repackaging up to £10bn of previously announced government spending to form the backbone of his summer statement plan to save jobs during the pandemic.Serving the chancellor with a blunt rebuke, the Institute for Fiscal Studies said it was “corrosive to public trust” for the government to reallocate old funds and pass them off as new money. Continue reading...

End of furlough scheme likely to unmask true impact of coronavirus crisis on workers

ONS says number of workers on payroll fell 2.2% from March although rate of decline fell in June

British Chambers of Commerce reports big firms more likely to cut jobs than smaller businessesAlmost a third of companies plan to make job cuts in the next three months as the government prepares to wind down its furlough scheme, one of Britain’s leading business lobby groups has warned.Sounding the alarm amid warnings of a steep rise in unemployment, the British Chambers of Commerce (BCC) said 29% of businesses in a survey of 7,400 firms planned to cut the size of their workforce in the next three months. Continue reading...

City calls for state-owned recovery corporation to handle £35bn of unsustainable government-backed debt

Court defeat for Brussels is reminder of glacial pace at which international tax reform proceedsMargrethe Vestager may as well give up. If the EU’s competition commissioner can’t win her highest-profile case in the EU’s second-highest court, then the EU’s tax arrangements, as they apply to multinational tech companies, will remain a free-for-all.In practice, she may plough on. The Luxembourg-based general court’s order that Apple does not need to pay €13bn (£11.7bn) in back taxes to the Irish government can be challenged. Lawyers may yet enjoy many more years of lucrative work. Continue reading...

All you need to know about CGT and the possible outcomes of the chancellor’s surprise reviewIs capital gains tax (CGT) going to rise dramatically as the government attempts to claw back the cost of extra spending during the coronavirus pandemic? A surprise review of CGT unveiled on Tuesday by chancellor Rishi Sunak opens the door to higher taxes on the wealthy and possibly middle income earners, too. Continue reading...

Rolling coverage of the latest economic and financial news

From Covid-19 to the tobacco industry to the climate crisis ... a punchy, amusing history of the deliberate misuse of statisticsThe old saw that there are “lies, damned lies and statistics” is attributed to various figures, but was already considered proverbial in 1890 – perhaps as an adaptation of the old lawyers’ joke that there were three kinds of liars: “the liar simple, the damned liar and the expert witness”.Even though we have been well warned for more than a century, people still use statistics dishonestly all the time – as when, for example, it emerged that the number of Covid-19 tests the British government claimed were being performed each day included tens of thousands of test kits that had merely been sent out in the post, as well as multiple tests performed on the same individuals. Continue reading...

Lift to 0.6% in June from 0.5% in May also fuelled by lack of summer sales on high street

G20 countries aim their pandemic bailout spending at fossil fuel industries, leaving Paris climate change targets in doubt

Chancellor’s directive to focus on how people escape CGT ‘feels like starting pistol for a tax grab’, says analystWealthy households could be in line for tax rises to claw back the cost of extra spending during the coronavirus pandemic, after the government called for a wide-ranging review of capital gains tax.Rishi Sunak surprised backbench Tory MPs after he ordered the examination of the main tax on asset sales, which reaps billions of pounds for the exchequer each year on the sale of second homes, works of art and stocks and shares. Continue reading...

A new book is a much-needed piece of heretical questioning for politicians who argue that something needs to be done about the size of the public debtThe record government deficits are keeping the economy on life support during the Covid-19 crisis, and removing them would be like pulling the plug. Without the state stepping in, there would be mass unemployment and bankruptcies. The government is spending so much because people and companies cannot do so. It ought to be obvious that fiscal deficits, in and of themselves, are neither good nor bad. They should be used to save jobs and keep inflation low.Yet the message from the chancellor, the government’s economic watchdog and thinktanks is that the current level of spending is unsustainable and needs to be brought down by raising tax revenues or reducing spending, or doing both. This is not an economic argument but a political one. The public is being made anxious about the “debt” so that this fear can be weaponised. By persuading voters that something must be done about the national finances, and sustaining that outrage, politicians can push for spending cuts. This is a repeat of the familiar austerity con that voters fell for a decade ago. Continue reading...

Office for Budget Responsibility forecasts UK’s biggest peacetime deficit in 300 years and permanent ‘economic scars’

Worst-case scenario warns output may not rise to pre-pandemic levels until 2024

Britain’s economy has shrunk by a quarter since the pandemic began...and its fiscal watchdog fears the recovery will be slow and painful

There was nothing inevitable about a weak bounce back – the UK government has delayed the recovery by its dithering

GDP would shrink 12.4% and unemployment more than double in one scenario as budget deficit hits £322bn

‘We’re running a bit like a club,’ says chief executive, as grocery firm sales rise 40% in MayOcado has 1 million customers waiting to join its online grocery service after struggling to cope with a surge in demand during the coronavirus pandemic.Tim Steiner, its chief executive, said Ocado, which has about 800,000 customers, could have increased sales more than five times over, given the level of demand during the pandemic, but had been held back by the limits of its warehouses and delivery network. Continue reading...

An edict seen by some as un-Conservative is exposing divisions over the prime minister’s cautious approach to the pandemicIn the fortnight before the UK went into lockdown, Boris Johnson appeared in a video chat with Dr Jenny Harries to answer a series of questions about coronavirus. The deputy chief medical officer went over the regular symptoms, the low risk of large gatherings and the cons of face masks for all. She told a nodding prime minister that masks should only be worn if a medical professional tells you to, otherwise you could contaminate the mask and transfer the virus: “It’s really not a good idea and it doesn’t help.”Fast forward four months and that advice – along with several other parts of their conversation – has gone out of the window. The government has announced that face coverings will soon become compulsory in shops and supermarkets. Following in the footsteps of Scotland, and after a weekend of mixed messages from ministers, the new rule will come into effect on Friday 24 July, with a £100 fine for anyone caught not wearing one. Continue reading...

Agricultural groups call for more government help to access new markets amid concerns over heavy reliance on ChinaAustralia’s barley industry has raised fears it is bearing the brunt of “a fracture” in the relationship with China, as Canberra rejected the latest travel advice issued by Beijing as “disinformation”.A parliamentary inquiry on Tuesday heard calls from Australian agricultural groups for more help from the government to access new markets, amid concerns over the risks caused by a heavy reliance on China.Related: Australia's Hong Kong intervention was hardly strident but that didn't matter to ChinaRelated: China trade tension to hit Australian beef and wool exports, Rural Bank says Continue reading...

GDP for May at 1.8% disappoints analysts expecting a bigger boost after lockdownThe British economy returned to growth more slowly than expected in May as coronavirus lockdown restrictions were gradually relaxed after the sharpest plunge on record a month earlier.The Office for National Statistics said gross domestic product (GDP) grew by 1.8% in May as the economy staged a modest recovery from April, when GDP crashed by a fifth during the first full month of lockdown. Continue reading...

Significant pressure on high street outlets as consumers remain wary of health risks

Incoming head of OBR says lack of forecasting means emergency measures’ success will be hard to gaugeRishi Sunak’s multibillion-pound economic response to Covid-19 has been criticised for lacking transparency by the incoming head of the Treasury’s independent tax and spending watchdog.Richard Hughes, the economist picked by the chancellor to lead the Office for Budget Responsibility, told MPs on the Commons Treasury committee that taxpayers lacked enough information to know whether the measures outlined by Sunak at last week’s summer statement would be cost effective. Continue reading...

Declining job retention bonus was honourable and underlined £9.4bn scheme’s shockingly poor designRishi Sunak, the chancellor, readily conceded last week that there would be a “dead weight” cost to his policy of offering firms a £1,000 bonus for every employee recalled from furlough and kept in employment until the end of next January. That weight is the waste of rewarding firms for doing what they would have done anyway as the economy reopens.So it is good news, of a sort, for Sunak that some are too embarrassed to take the money. Primark was first out of the blocks at the weekend. The fashion retailer didn’t need a financial incentive to get 30,000 furloughed staff back in the shops and warehouses, so it would decline the kind offer of £30m of public money. Well played. Continue reading...

Rolling coverage of the latest economic and financial news

IoD says half of companies questioned cannot fully plan for end of transition period due to lack of clarity on rules