Rolling coverage of the latest economic and financial news

FSB survey, taken before general election, shows few exporters expecting a pick-upAfter a year dogged by Brexit deadlock, political uncertainty and slow growth, optimism among small UK firms has slumped to an eight-year low.The Federation of Small Businesses’s confidence gauge fell in October-December for the sixth quarter in a row. Managers at firms across the UK reported worries about the domestic economy and pessimism about opportunities overseas. Continue reading...

Weak data used to send stocks down but the promise of never-ending cheap money from central banks means the only way is upWith one day of trading to go, 2019 is on course to be one of the strongest in the history of financial markets after shares around the world racked up record after record in another barnstorming year.On Wall Street the Dow Jones industrial average has gone up almost 25% having reached record highs day after day, while the broader S&P500 is up 30% and the tech-heavy Nasdaq has grown 40% in value. The FTSE100 in London is close to its record high, as is the Dax30 in Germany. In the Asia Pacific, the Nikkei is up 15% while Australia’s ASX200 is still close to its highest ever point (reached in November).Related: It's more than a decade since the financial crisis. Where's the recovery? | Larry ElliottAustralia's stock market is within 0.2% of an all-time high. Might get there today. So excitedRelated: 'Amazing deal' or 'capitulation'? Why the US-China trade truce may not lastRecession gets priced out by a stock rally for the record books. Very big years in markets rarely come right before recessions. Research finds stock returns lead S&P earnings by a quarter. https://t.co/pm0AfIWXze pic.twitter.com/sMqXjTLxH1 Continue reading...

Market including food, drinks, clothing and energy has risen almost fourfold in past 20 yearsEthical consumer spending has hit record levels in the UK, according to a new report that reveals the total market – including food, drinks, clothing, energy and eco-travel – has swelled to over £41bn.Total ethical spending has risen almost fourfold in the past 20 years and outgrown all UK household expenditure, which has been broadly flat, according to the new study from Co-op.Related: Christmas jumpers add to plastic pollution crisis, says charity Continue reading...

We’ve had plenty of difficult periods before, but they were temporary and explicableIt’s the dog days of 2009. Gordon Brown is prime minister, Alistair Darling is chancellor of the exchequer and Mervyn King is governor of the Bank of England.Britain has been through a tough two years. As a country heavily dependent on financial services, it has been especially hard hit by the banking crash of 2008. The economy has suffered some severe recessions since the second world war but the slump of 2008-09 has been the worst of the lot. Continue reading...

Britain is being urged to ‘move on’ – but the prospect of crashing out after a year is very realA funny thing happened to me last Monday. I was lunching with my friend Sir Samuel Brittan, the great Financial Times economics commentator, in advance celebration of his 86th birthday. It was he who, when we were colleagues on the FT, suggested that I specialise in writing about the economy.During the lunch, several anti-Brexit sympathisers approached our table to express approval of the slogan on my pullover. It was the present from one of my daughters that I referred to here two years ago, which proclaims in large letters: “All I want for Christmas is EU.”The loss of tax revenue likely to accompany the mere approach to Brexit makes Johnson’s electoral promises for the north look, well, ridiculous Continue reading...

Average property in borough has leapt by 429%, as Newry, Northern Ireland, records slowest risesA former down-at-heel corner of east London, the borough of Newham, has witnessed the steepest rise in property prices in the UK this century, according to data from Halifax, while the slowest increases have been in Newry in Northern Ireland.The average house price in Newham has leapt by 429% since the start of the century, from £75,762 in 2000 to £400,574, a gain of 429%. The borough encompasses Stratford, home to the 2012 Olympics, and is peppered with new glass and steel residential towers, as well as some of the most deprived wards in the UK. Continue reading...

It was the decade of austerity, fracking, populism and internet lies. But not everything about the 2010s was terrible Continue reading...

Brexit uncertainty and snap election put investment on hold as high street spending stalled

Each month we look at key indicators to see what effect the Brexit process has had on growth, prosperity and trade

Two former members of Bank of England’s rate-setting committee on Britain’s economic prospects

Chairman of the US Federal Reserve Board in the 1980s who saw off inflation and later criticised financial deregulationPaul Volcker, who has died aged 92, was the most eminent financial statesman of his generation, the sworn enemy of the abuse of finance in any of its manifestations. That could be indulging inflation as the financial outcome of governments and society living beyond their means, or investment banks deluding themselves they had uncovered the alchemy of risk-free lending through the issuance of ever more complex financial derivatives.His twin mantras were that finance should be the servant not the master of economy and society. And that good government is an indispensable component of a good society, in particular keeping the temptations of clever-clever finance at bay. Sound money and good government went hand in hand. He practised what he preached, seizing the opportunity to embody his beliefs when the moment arrived. Continue reading...

Rolling coverage of the latest economic and financial news, on the final trading day before Christmas

Our film American Factory shows the damaging effect of reverse globalisation. British Steel should take heedFor Jill Lamantia, driving a forklift was the easy part of a hard life. Like countless other industrial workers in our hometown of Dayton, Ohio, Lamantia was excited that Fuyao Glass – a major Chinese company – had bought and reopened our abandoned General Motors factory. She had a job again.In her new role, after clocking off at the end of each shift, Lamantia retreated to a small brick house. Clutching spare keys, she would shut the front door and descend the stairs, squeezing past cleaning products on a mop rack. This Midwestern grandmother and former homeowner was living in her sister’s basement. Fuyao is the world’s leading automotive glassmaker. Based in China’s Fujian province, the company surprised many by exporting Chinese jobs to, of all places, America. In 2014 its billionaire founder, chairman and owner, Cao Dewang, saw the symbolic power in buying the gutted GM factory and rehiring scores of former employees such as Lamantia to make glass for the windscreens of motor vehicles manufactured in the US.Related: The Obamas' first film: will American Factory be the biggest documentary of 2019?Related: American Factory review – a sobering documentary by the Obamas Continue reading...

Brexit, climate change and the next recession mean central banking is in danger of becoming a failed paradigm that needs replacingThe appointment of Andrew Bailey as governor of the Bank of England is a safety-first move. The central banker knows his way around the City and it is reasonable to assume that he can stand up for the finance sector in the coming years of tough negotiations with Brussels. Mr Bailey has made a point of saying that Britain, home to Europe’s largest financial centre, must not become a “taker” of EU rules after it leaves the bloc. Tellingly, he is viewed by former Treasury chiefs as “one of us”. But is this enough, given the age we live in? The last three Bank of England governors have been big figures on the international stage, with the incumbent, Mark Carney, being a central banker whose words move markets. Mr Bailey, for all that he is an insider’s insider, is not in the same mould. Britain ducked its chance to hire such a transformational figure, which is strange given what lies ahead. We are all born with imperfect foresight, but there are three dangers to the country’s economy clearly visible on the horizon: Brexit, climate change and the next recession. We know next to nothing about Mr Bailey’s thoughts on how to deal with these.Since 2016 Mr Bailey has run the City watchdog, the Financial Conduct Authority. While his predecessor fined banks billions of dollars for trying to rig interest-rate benchmarks and foreign exchange markets, Mr Bailey took a softly-softly approach to the City. A key review into banking culture seen as core to restoring trust in banks disappeared with this new outlook. Earlier this month, a representative of victims of a City mini-bond scandal walked out of a meeting with Mr Bailey, accusing the FCA of not holding to account the financial firms it regulates under his stewardship. Whistleblowers say he failed to investigate alleged wrongdoing in high-street banks. He also was criticised by MPs for allowing banks “to continue to rip people off” when the regulator’s review of high-cost credit fell short of capping onerous rates. The view is that he backed the City over the consumer. Continue reading...

Donald Trump promises that a US-China trade pact will be signed ‘very shortly’A pre-Christmas rally fuelled by hopes of waning trade tensions have pushed share prices to a fresh high and on course for their biggest rise in a decade.Donald Trump’s promise that a US-China trade pact would be signed “very shortly” sent the MSCI gauge of stock markets around the world to new record levels.Related: Trump's lack of strategic vision is going to make China great again | Nouriel Roubini Continue reading...

Rolling coverage of the latest economic and financial news, as China gives the world economy a festive gift and Dennis Muilenburg is removed from Boeing

Low borrowing costs led to 14,500 additional babies being born in 2009, researchers sayNew research by the Bank of England has shown that its efforts a decade ago to prevent a 1930s-style depression had the spin-off effect of boosting Britain’s birth rate.The Bank’s study found that the emergency slashing of interest rates in the winter of 2008-09 cut the household bills for families on floating rate mortgages and made having children more affordable. Continue reading...

The US needs to work closely with allies to bring its model of society and economy into the 21st centuryFinancial markets were cheered recently by the news that the US and China have reached a “phase one” deal to prevent further escalation of their bilateral trade war. But there is actually very little to cheer about. In exchange for China’s tentative commitment to buy more US agricultural (and some other) goods, and modest concessions on intellectual property rights and the yuan, the US agreed to withhold tariffs on another $160bn (£124bn) worth of Chinese exports, and to roll back some of the tariffs introduced on 1 September.The good news for investors is that the deal averted a new round of tariffs that could have tipped the US and the global economy into recession and crashed global stock markets. The bad news is that it represents just another temporary truce amid a much larger strategic rivalry encompassing trade, technology, investment, currency and geopolitical issues. Large-scale tariffs will remain in place and escalation may well resume if either side shirks its commitments. Continue reading...

Productivity growth has fallen to 0.3% – we’ve named it the statistic of the decade. Targeted government action is now vital

Royal Statistical Society lauds figure that illustrates declining UK productivity as ‘capturing spirit of biggest issues’

Key economic measures swing positive for the first time since Brexit referendum, says IoDBusiness confidence in the British economy has leaped to its highest level for more than three years following the Conservatives’ election win, according to a survey of company directors.For the first time since spring 2018, firms have become optimistic about the economic outlook, with a key confidence measure swinging into positive territory and hitting 21% in December, up from -18% in November. Continue reading...

Central government should play a small role and let spending decisions be taken locally“Let’s sort this mess of a town out,” says a voter in Leigh, a former Lancashire mining and mill town on the edges of greater Manchester, writing on the Facebook wall of its first ever Conservative MP.“Like Labour have done anything for Leigh over the last 100 years apart from grind it in to the ground,” says another. Continue reading...

Middle-age workers may be more productive, but don’t expect them to launch companiesAgeing changes us all. What we do and how we do it shifts as the years tick by, affecting our lifestyles and economies.Here’s an example. The US prides itself on being a dynamic economy. But fewer firms have been springing up. Policy failures are partly responsible, with unnecessary occupational licensing making it harder to start a new business. Continue reading...

A large and growing share of older people vote Tory. This is a problem Jeremy Corbyn’s successor needs to solveFor the third election in a row, the ageing baby boomer generation played a major role in securing a Tory victory.According to the pollsters YouGov, Labour’s share of the vote fell among the over-65s by even more than last time – to under 20% in 2019 from 24% in 2017. In 2010, Ipsos Mori said that 31% of over-65s voted Labour. This time, the Conservatives’ vote share among the over-65s was more than 60%.When looking to issues beyond Brexit, older people put cultural issues higher than economic ones Continue reading...

He may be less high-profile than Mark Carney, but his to-do list will be every bit as demandingAndrew Bailey takes up the post of Bank of England governor on 16 March following more than two years of speculation about who will succeed the Canadian incumbent, Mark Carney.Bailey is a home-grown replacement, from Leicestershire, whose CV appears in stark contrast to that of Carney, the former Goldman Sachs banker. Most of Bailey’s career has been spent at the central bank’s neoclassical Threadneedle Street headquarters, most prominently as chief cashier, with his name on every banknote. He was head of the Bank’s supervisory body, the Prudential Regulation Authority, when in 2016 George Osborne, then chancellor, asked him to take over at the industry consumer watchdog, the Financial Conduct Authority. Continue reading...

New Bank governor’s reputation faced scrutiny at scandal-hit City regulatorAndrew Bailey, who will replace Mark Carney as the Bank of England governor, must roll his eyes every time he sees the phrase “safe pair of hands”. It comes to the fore almost whenever his name appears after 30 largely incident-free years at the Old Lady of Threadneedle Street.But his reputation has come under scrutiny since he quit as deputy governor in 2016 to become the finance industry’s consumer watchdog. Continue reading...

ONS revises up GDP growth from 0.3% to 0.4% but warns of slowdown signsThe British economy grew at a faster rate than initially thought in the three months to the end of September, according to official figures.The Office for National Statistics revised upwards its growth estimate for gross domestic product from 0.3% to 0.4%. Continue reading...

Bookies’ favourite Andrew Bailey emerges as the cautious option from a varied listThere were plenty of names bandied around as likely candidates to be the next governor of the Bank of England but in the end the government has chosen the person who has been the bookies’ favourite from the start.When it came to it, the only thing surprising about Sajid Javid’s decision to appoint Andrew Bailey to succeed Mark Carney was that the process took so long. And as the months dragged by, and Carney’s term was extended twice, speculation grew that Bailey would be overlooked. Continue reading...

Sajid Javid announces head of Financial Conduct Authority as replacement for Mark Carney

Layoffs are common, shifts have been cut – and workers in America’s manufacturing and farming heartlands are losing hopeWinter has come to Davenport, Iowa. Temperatures, at 14F (-10C), are well below freezing. But it’s the cold winds of Donald Trump’s trade wars that worry Shaun Buckles.Related: 'He pulled the wool over our eyes': workers blame Trump for moving jobs overseas Continue reading...

A marketised higher education system is not properly serving the interests of students nor the country as a whole, writes Chris PrattThe growth of financial incentives, lower entry requirements, unconditional offers and spurious advertising (Don’t mislead to attract students, says regulator, 19 December) is further evidence of a marketised higher education system that is not properly serving the interests of students nor the country as a whole.The product of this approach is the large proportion of university leavers going into jobs that don’t require a degree, one of the highest rates in Europe, while at the same time the UK has a growing skills shortage, including at graduate level. Some form of planning of courses and student numbers will be necessary if higher education is to do right by students and significantly improve its contribution to meeting the nation’s skill needs.

Rolling coverage of the latest economic and financial news

Much of growth in debt levels driven by China, says World BankEmerging market and developing economies (EMDEs) pushed their borrowing to a record $55tn (£42tn) last year, according to the World Bank, marking an eight-year surge that is the “largest, fastest and most broad-based in nearly five decades”.While much of the growth in debt levels was driven by China, the Washington-based development agency said most of the 100 countries covered by its analysis were affected, following an increased dependency on borrowing by both private and public sector organisations. Continue reading...

Two members of monetary policy committee vote for cut from 0.75% to 0.5%The Bank of England warned of mounting weakness in the British economy as it kept interest rates on hold despite two members of its rate-setting panel once again voting for an immediate cut.Sounding the alarm that economic growth would come close to flatlining in the final three months of the year, the Bank’s monetary policy committee (MPC) voted 7-2 to keep the official interest rate on hold at 0.75%.Related: Hedge funds hacked into Bank of England briefings Continue reading...

Progress lies in a sense of togetherness, forged in resistance to a decade of austerity. Labour needs to rebuild from the ground upA week seems barely long enough for the dust to settle on this election. Watching Boris Johnson tour old Labour heartlands in recent days has been salt in the wound; a charlatan selling snake oil to those he’ll betray before his new MPs have unpacked.Anecdotal accounts of racist and homophobic abuse are already emerging as the country’s bigots are emboldened. Continue reading...

Rolling coverage of the latest economic and financial news

Three-year low of 1.5% comes amid speculation that interest rates will be cut soonUK inflation remained at the lowest level in three years in November despite rising prices for a variety of goods including chocolate, concert tickets and package holidays.The Office for National Statistics (ONS) said the consumer prices index (CPI) held steady at 1.5% last month, the same level recorded in October, as the annual increase in some prices was offset by falling prices elsewhere, including for cigarettes and hotel rooms.Related: UK wage growth slows again but employment hits record high Continue reading...

Forget the wealth tax - there are many other easier ways to enforce policies more likely to land a Democratic presidentThree years ago, Donald Trump’s victory in the US presidential election triggered a search for explanations of what is still a shocking outcome. One immediately came to dominate: his Democratic opponents had been insufficiently aware of the problem of income inequality, or had neglected to propose effective solutions.That is presumably the logic behind the radical proposals to tackle inequality coming from some of the leading candidates for the 2020 Democratic presidential nomination. Senator Elizabeth Warren, for example, has proposed an annual tax (originally of 2%, but now up to 6%) on the richest Americans’ wealth.Related: Governments should turn back the clock over trade policy Continue reading...

Sterling has lost two cents against both the euro and dollar amid City fears of no dealThe pound has given up the gains made since the general election after Boris Johnson said he would write Britain’s exit from the EU next year into law without an extension in the transition period.Sterling tumbled by about two cents against the dollar and the euro on the international money markets, as the decision to enshrine time-limited Brexit negotiations into law caught investors by surprise. Continue reading...

Fears over election and future EU trade put sector in a tailspin, with car industry hardest hitManufacturing output in the UK tumbled this month at the fastest rate since the 2008 financial crisis as uncertainty surrounding Britain’s trading relationship with the EU and the outcome of the general election hit domestic and foreign orders.According to the latest monthly CBI industrial trends survey, the volume of manufacturing production in December dropped at a rate not seen since September 2009, keeping the UK sector deep in recession. Continue reading...

There’s little pressure among UK banks for deregulation – instead, France could be a bigger threatThe idea that London might have a post-Brexit future as a kind of deregulated “Singapore-on-Thames” is one of the more curious notions to have emerged in the three and a half years since the UK’s citizens voted narrowly to leave the EU in the fateful June 2016 referendum. In fact, at least as far as the financial sector is concerned, the bigger threat to European regulatory harmony could come from France.The phrase “Singapore-on-Thames” is shorthand for Britain becoming a low-tax, lightly regulated economy that can out-compete the sclerotic, over-regulated eurozone from a strategic position only 20 miles or so offshore. The general idea was first mooted a couple of years ago by Philip Hammond, then Britain’s chancellor of the exchequer, as a means of encouraging the EU to strike a friendly Brexit deal with the UK. Continue reading...

Rolling coverage of the latest economic and financial news

Stores try to win customers amid consumer uncertainty and heavy competitionRetailers are offering bigger than ever pre-Christmas clothing discounts this year in an effort to win customers against a backdrop of consumer uncertainty, heavy competition and relatively mild weather.Average price cuts could top 50% by Christmas Eve for the first time according to the advisory firm Deloitte, which analysed more than 800,000 online and in-store products. Continue reading...

OBR forecast means tax rises rather than tax cuts will be needed, say analystsThe scope for significant tax cuts in the new government’s budget has been reduced after gloomier predictions for the public finances from the Treasury watchdog showed higher levels of public borrowing and a deterioration in the British economy.The Office for Budget Responsibility (OBR) warned that government borrowing was on course to be about £20bn higher than previously expected in each year to 2023-24, dramatically cutting the government’s room for manoeuvre after Boris Johnson’s election victory.Related: The Tories need to turn on the spending taps in the north now | Larry Elliott Continue reading...

Trade tensions have eased and markets are steady, but politicians must make growth inclusiveThis being December, my natural inclination is to review the past year’s economic and financial developments to help policymakers and investors anticipate what might be coming in 2020. This year is ending on a relatively positive note, especially when compared with the same time last year. There is hope of a global growth pickup, trade tensions have lessened and central banks have reaffirmed they will maintain ultra-low interest rates and continue to provide ample liquidity. Financial volatility is subdued, and there are reasonable expectations of solid investor returns across many asset classes.As tempting as it is to dwell on current financial and macroeconomic conditions, doing so risks obfuscating a key element in the outlook for the future. There is a curious contrast between the relative clarity of expectations for the near term and the murkiness and uncertainty that comes when one extends the horizon further – say, to the next five years. Continue reading...

A splurge of investment is needed in long-forgotten smaller towns such as Burnley and StokeFifteen years ago the idea of the prime minister paying a weekend visit to Sedgefield would have attracted little or no media interest. That, though was when Tony Blair was in Downing Street and represented the County Durham seat as its MP.When Boris Johnson turned up on Blair’s old patch on Saturday it was very big news indeed because Sedgefield is now coloured blue on the political map of Britain. In large parts of the country, from Blyth Valley to Bolsover, working-class communities have abandoned Labour and turned to the Conservatives. The Tories are the party of the working classes.Related: If the rich are getting richer, then where are they hiding it? | Torsten BellRelated: Today’s weak economy shouldn’t aid the Tories: but that was true in 1992 too | Larry Elliott Continue reading...

Beijing knows the US presidents needs at least the appearance of a thriving economy before next year’s electionAt the beginning of September, Chinese president Xi Jinping incensed Donald Trump by imposing a flurry of new import duties on US goods, including semiconductor chips and mobile phones.It was a retaliation too far for the US president, especially when the stock market reaction was to send shares in America’s second most valuable company at the time, Apple, tumbling by almost 5%. For many observers it was just another skirmish in the tit-for-tat trade war that had rumbled on for 20 months. But in Washington it came as a shock, and was the driving force behind Trump’s premature announcement the following month of an interim deal – one that after much wrangling finally came to fruition, or at least appeared to, last week. Continue reading...

How can we believe that a party wedded to deregulation and flirting with Trump’s America will ever govern for ‘one nation’?The Chinese proverb is “be careful what you wish for”. My own adapted version is “be careful what you vote for”. I make no apology for having devoted so many columns to what on Thursday became the lost cause of Remain. The pro-European cause in this country has, alas, suffered from a colossal failure of leadership. The failure to make the case for our EU membership goes back a long way, as does the drip-drip of the vile anti-European campaign in the Murdoch press, and the obvious suspects in other sections of the media.The sequence of events was well brought out in Denis MacShane’s prophetic book Brexit – How Britain Will Leave Europe in 2015. (What lies in store is outlined both in MacShane’s latest volume, Brexiternity, and Sir Ivan Rogers’s recent magisterial lecture at Glasgow University.) As MacShane wrote in 2015: “The referendum on Europe is not on the benefits or cost of EU membership, but a wider protest about economic and social change which appears inside Britain to produce as many losers as winners.”For reasons that I fail to understand, Corbyn and his allies, such as Seumas Milne, believe that the EU is some kind of capitalist conspiracy Continue reading...

Donald Trump hailed the agreement, but others think it masks a process of deglobalisation as the two superpowers struggle for hegemonyThe trade war between the US and China may never be settled, experts fear, even after the two sides agreed on an outline “phase one” deal.Economists and investors have been poring over the weekend’s announcement, which appeared to end a dispute that has roiled financial markets for 17 months.Related: China confirms 'phase one' trade deal with USA limited deal is recognition that a broad deal is impossible. Both realise that phase one is all they can get.Related: Governments should turn back the clock over trade policy Continue reading...