Bonds rally after Rome bows to pressure but EU says more needs to be doneThe Italian government will be forced to cut “a few billion” across two of its flagship policies to meet the lower deficit target it has proposed to the European commission.Italian bonds rallied after the government bowed to pressure to reduce its deficit target for 2019 to stave off EU sanctions. The country’s prime minister, Giuseppe Conte, proposed cutting the target from 2.4% to 2.04%.Related: Italy's budget drama – all you need to know Continue reading...

Donald Trump says talks between Washington and Beijing are progressingFinancial markets around the world have rallied amid early signs of progress in the bitter trade standoff between the US and China, as hopes rise for a breakthrough in the dispute.Wall Street shook off days of volatility to post broad gains in early trading after Donald Trump said that talks between Washington and Beijing were progressing, while reports suggested that China was on the brink of redrawing its economic plans to give foreign companies more access to its domestic market.Related: Markets rally as China 'rewrites economic plan'; pound jumps over $1.26 - as it happened Continue reading...

Julian Dunkerton urges shareholders to help him take back control of brand after fresh profits warningThe co-founder of Superdry has said he needs to be back running the fashion chain within weeks if it is to be turned around by next Christmas – and has called on other shareholders to support his comeback campaign.Julian Dunkerton was speaking after the company issued its second profit warning in two months. Superdry shares collapsed by 38% to 354p on Wednesday, wiping £32m off the value of Dunkerton’s 18% stake.Maplin, Toys R Us and Jacques Vert have all collapsed in recent months, but several retailers and restaurant groups are facing financial problems and are trying to close stores or negotiate rent cuts. Continue reading...

Brexit’s unresolved problems mean the pound will still be vulnerable even if the PM staysNews that Theresa May was facing a confidence vote from her own MPs broke just before trading began in the City. But those expecting a market meltdown were swiftly proved wrong. Shares had one of their better recent days and the pound rose on the currency markets. If, as the old cliche has it, financial markets react badly to uncertainty it was hard to tell as much.The upbeat mood in the equity markets was easy to understand. Share prices around the world were higher on hopes of peace breaking out in the trade war between the US and China, and London surfed the same wave as all the other bourses. Continue reading...

Investors welcome signs that tensions between Beijing and Washington are thawing

Guardian journalists, supporters and industry experts discuss the failing health of UK high streets and the impact on communities. What can local spaces offer that out-of-town shopping centres and online giants can’t?UK high streets are facing the quietest Christmas since the credit crunch, according to forecasts. A combination of low consumer confidence caused by Brexit, more agile, online competitors and shoppers increasingly opting to buy experiences instead of products are just some of the reasons cited as being responsible for the shift in spending habits.This year has been particularly bleak in Britain as well known names such as Toys R Us, Maplin, Debenhams, House of Fraser, Evans Cycles and Mothercare have been either shrunk or terminated, with 85,000 retail jobs lost in the first nine months of 2018. Beyond retail, many towns are having to fight to save their local library, pub, nursery or community centre – the places that have always fulfilled an important social function as well as a commercial one. Continue reading...

Capital’s transport authority faces shortfall due to Crossrail delays and government cutsPlans to upgrade major parts of the London Underground will be put on hold after a decline in passenger numbers, government cuts and delays to the opening of Crossrail have left the capital’s transport authorities struggling to balance the books.Related: Delayed Crossrail could cost almost £3bn more than plannedRelated: TfL facing near £1bn deficit next year after journey numbers fall Continue reading...

Figures from John Lewis, Tesco and Sainsbury’s point to subdued consumer activityPoor figures from John Lewis, and a slowdown at Tesco and Sainsbury’s has raised fresh concerns that the uncertain political climate is taking its toll on consumer confidence this Christmas.December is the most lucrative time of the year for the retail sector but John Lewis said sales in its department stores fell by more than 5% last week. The picture from its fashion and homewares divisions was even weaker, with sales in both down by about 7%.Maplin, Toys R Us and Jacques Vert have all collapsed in recent months, but several retailers and restaurant groups are facing financial problems and are trying to close stores or negotiate rent cuts. Continue reading...

Despite high employment levels and good pay growth, Brexit uncertainty will weigh heavily on the economy for some timeEmployment is at record levels. Firms are struggling to hire workers. Pay growth is back to levels last seen before the financial crisis of a decade ago. So what does the Bank of England do?In normal circumstances, it would be a no-brainer. Some members of Threadneedle Street’s monetary policy committee would already be voting for an increase in borrowing costs and the City would be assuming action from the Bank in February. After all, at 0.75%, official rates are extremely low by historic standards.Related: Gilets jaunes protests continue despite Macron concessions Continue reading...

Average weekly earnings rose by 3.3% in October despite jump in unemploymentBritish workers secured their biggest pay rise in a decade in October, despite a rise in unemployment that revealed cracks in Britain’s previously robust labour market ahead of Brexit.Average weekly earnings, including bonuses, rose by 3.3% on the year, the biggest rise since July 2008 and comfortably beating forecasts by City economists.Related: Demand for NHS staff rises as EU applicants 'drop off a cliff' Continue reading...

Treasury select committee also criticises failure to look at economic impact of backstopThe government kept MPs in the dark when it presented an overly optimistic assessment of its Brexit deal, rather than a realistic prediction of the final relationship, an influential committee of MPs has found.The Treasury select committee, chaired by the former cabinet minister Nicky Morgan, found that the UK government had also failed to give adequate information on how the backstop mechanism would affect the economy.A backstop is required to ensure there is no hard border in Ireland if a comprehensive free trade deal cannot be signed before the end of 2020. Theresa May has proposed to the EU that the whole of the UK would remain in the customs union after Brexit, but Brussels has said it needs more time to evaluate the proposal.Related: Brexit chaos: what happens next?This soft Brexit compromise has been championed by the former Conservative minister Nick Boles as a plan B for leaving the European Union if Theresa May’s withdrawal agreement is defeated in the Commons. Continue reading...

The late president tried to tackle the budget deficit by doing a deal with Democrats to raise taxesWhen George HW Bush was laid to rest last week, the encomiums appropriately remarked on his general decency and competence, which tended to be followed by a “but”. For journalists and historians, it is “but he was only a one-term president”. He lost the 1992 election, in part because of the recession of 1990-91. For his fellow Republicans, however, it is “but he broke with the legacy of Ronald Reagan by repudiating his ‘no new taxes’ pledge”. Bush’s electoral defeat was blamed on that supposed betrayal.But Bush’s mistake was that he made that anti-tax pledge in the first place and stuck to it in the first part of his presidency. His courageous 1990 reversal on fiscal policy set the stage for a decade of economic growth that eventually achieved budget surpluses.Related: Cryptocurrencies are like lottery tickets that might pay off in future | Kenneth Rogoff Continue reading...

Deputy head David Lipton says global banking system is not prepared for another downturnThe storm clouds of the next global financial crisis are gathering despite the world financial system being unprepared for another downturn, the deputy head of the International Monetary Fund has warned.David Lipton, the first deputy managing director of the IMF, said that “crisis prevention is incomplete” more than a decade on from the last meltdown in the global banking system. Continue reading...

Capital no longer growing at a much faster pace than the rest of the UK, report saysSlowing growth in London since the Brexit vote has put the British economy on track to narrow the north-south economic divide over the coming three years, according to a report.The accountancy firm EY, despite warning of a weaker outlook for almost every region through to 2021 amid continuing Brexit uncertainty, said London would no longer continue to grow at a much faster pace than the rest of the country.Related: Brexit vote has cost each UK household £900, says Mark Carney Continue reading...

News that Theresa May will abandon plans for Tuesday’s vote on her Brexit deal is rocking the financial markets

Sterling slumps to below $1.26 after Theresa May postpones vote on her Brexit planThe pound has dropped to its lowest level for almost two years amid the growing risks to the British economy from political paralysis over Brexit and on a no-deal scenario.Theresa May’s decision to delay the parliamentary vote on her Brexit plan to avoid an embarrassing defeat for the government sent sterling tumbling by more than 1.3% against the dollar and by almost 1% against the euro on the foreign exchanges.Related: May roundly condemned by MPs after delaying Brexit vote to seek fresh backstop assurances – Politics live Continue reading...

Dr John Somers reflects on his path not taken, and Katy Simmons writes of the schools that are missing outI read ‘We are in an education arms race’ (G2, 5 December) with interest and some dismay. I attended a very good village primary school in Wales immediately after the second world war and, from the beginning, was acutely aware that near the end of my time there I would take an exam, the result of which would decide whether I went to an urban grammar school or a rural secondary school.The education received in each was wildly different, and when I passed the exam at the second attempt I entered a world of Latin, trigonometry and other studies. These seemed irrelevant to my life as a rabbit and mole-catching youngster living in a village house lit by oil lamps with a weekly tin bath in front of the living-room fire, where my mother seemed to work from the time her eyes opened until she slept. My subsequent career in education led me from an urban secondary modern to a comprehensive, a college of education and a university. I have worked extensively abroad, founded and edited an international research journal and held senior roles in my university. If I had gone to the rural secondary school – the curriculum of which prioritised rural skills including pig-keeping and gardening – I would probably have left at 14 and got a labouring job in my locality. Continue reading...

Brexit jitters weigh on manufacturing and automotive sectors, official data showsUK economic growth slowed in October as car sales went into reverse, while factory output stalled amid heightened uncertainty over Brexit.According to the Office for National Statistics, GDP growth cooled to 0.4% during the three months to October from a rate of 0.6% in the three months to September, as the economy hit a softer patch in the autumn after a strong summer. Continue reading...

The likes of bitcoin may well be worthless – but there’s a chance they will be valuable somedayWith the price of bitcoin down 80% from its peak a year ago, and the larger cryptocurrency market in systemic collapse, has “peak crypto” come and gone? Perhaps, but don’t expect to see true believers lining up to have their cryptocurrency tattoos removed just yet.At a recent conference I attended, the overwhelming sentiment was that market capitalisation of cryptocurrencies could explode over the next five years, rising to $5-10tn (£4-8tn). For those who watched the price of bitcoin go from $13 in December 2012 to roughly $4,000 today, this year’s drop from $20,000 was no reason to panic.Related: Only a fool would have bought into bitcoin late last year. So guess what I did? | Arwa Mahdawi Continue reading...

Hedge funds make million-pound bets against high street as Brexit uncertainty threatens UK economyA pair of hedge funds owned by prominent Brexit supporters have made significant bets against companies exposed to the British consumer including big high street names.Odey Asset Management, part-owned by Crispin Odey, and Marshall Wace, part-owned by Sir Paul Marshall, have declared short positions against consumer-exposed companies, including retailers, estate agents and banks, equivalent to £149m and £572m respectively – as rising political uncertainty threatens the economy.Related: George Soros makes £10.5m stock market bet against WH Smith Continue reading...

With consumer confidence low, footfall is likely to decline for ninth December out of last 10The crisis on Britain’s high streets is to intensify this Christmas, with shopkeepers preparing themselves for the quietest festive period since the credit crunch, according to forecasts.A combination of low consumer confidence because of Brexit, more agile online competitors and Christmas shoppers increasingly buying experiences such as concert tickets instead of products, will combine to ruin the season for more high-street stores, said the retail research group Springboard.Related: Spending at UK department stores falls for 13th month in a rowRelated: Why switching on Christmas lights is now a big turn-off Continue reading...

Markets are more jittery about the prospect of a downturn than May’s doomed dealIt is crunch time for and Theresa May and the financial markets are in turmoil. The drama at Westminster has been mirrored by drama on stock markets, with share prices tumbling and money flooding into the customary safe haven assets – gold and government bonds. Squeaky bum time all round.None of this really has much to do with May’s doomed Brexit agreement, because the City has known since the minute the deal was signed that it had zero chance of getting parliamentary approval. Investors will only really get interested in events at Westminster if defeat for May is followed by a period of political paralysis or – even worse as far as the financial markets are concerned – the prospect of a Labour government. Continue reading...

Foreign-owned businesses are more productive than British firms and it’s all down to their superior management skillsAs Britain walks closer to the EU’s exit door, it is worth considering the nation’s capacity to survive without, as the Bank of England governor, Mark Carney, would say, the kindness of strangers.The strangers in this case are foreign investors and the foreign companies they own, which are based in the UK either to sell stuff to the domestic market or as part of a global network of suppliers.Related: Productivity woes? Why giving staff an extra day off can be the answer Continue reading...

US economy only created 155,000 new jobs last month and wage growth disappoints

Austerity, as the UN’s poverty expert noted, is especially harmful to women. The economic shock from Brexit is likely to widen the inequality gapWhen Theresa May became prime minister and set out her vision, women were among the groups she promised to champion. She cited unequal pay on a list of “burning injustices” alongside race and class inequalities. This year companies with more than 250 employees were for the first time compelled to report on their gender pay gap. This can be calculated in different ways, but the Office for National Statistics has it at 17.9%, down 0.5% from last year. At this rate it will be decades before women and men are paid the same, but the data is moving in the right direction.Unfortunately, even such modest progress is the exception rather than the rule in 21st-century Britain. Unpalatable though it may be both to ministers and feminists, the evidence suggests that women’s advancement has stalled and is in danger of going backwards – if it is not doing so already. The government did not accept last year’s finding by the House of Commons Library that 86% of the burden of austerity since 2010 has fallen on women – £79bn, against £13bn for men – and refuses to conduct its own analysis. But work by the Institute for Fiscal Studies, Women’s Budget Group and Runnymede Trust has shown that women, and particularly BAME women, are disproportionately affected by cuts to public services and other spending. Continue reading...

Effectiveness of monetary policy will be limited in next recession, say ex-BoE officialsThe government will need to cut taxes or boost spending when the next economic downturn arrives, according to two former Bank of England officials who said the central bank was low on firepower.The former deputy governors Rachel Lomax and Sir Charles Bean warned ministers they will be unable to rely on monetary policy to combat the next recession now that interest rates are at historically low levels.Related: Central bank warnings on the global economy are getting louder Continue reading...

Failed neoliberal policies have caused serious hardship, leader tells European socialists

John Whitley says anger over austerity should be directed against the UK government, and Danny Tanzey thinks simplistic explanations do not apply hereDan Rainey letter (6 December) on immigration accurately reflects some of the perceptions about immigration. But perceptions are not evidence when they are not supported by facts. Most studies show that immigration has not reduced wage levels and has actually increased economic activity since immigrants are typically younger and pay more in taxes than they take out in benefits.The lack of housing is not from extra demand from immigrants but rather a decade-long failure of housing policy to increase the number of homes available. More importantly, the reason why incomes of the average worker have stagnated is not immigration but the effects of austerity. Immigration is the wrong target. Continue reading...

Prices grew by only 0.3% in the year to November, down from 1.5% in October, Halifax saysHouse prices grew at the slowest rate in almost six years in November, as wavering consumer confidence before the UK’s departure from the EU took its toll on the housing market.Prices grew by 0.3% in the year to November, down from 1.5% in October, according to the Halifax house price index, published on Friday. Continue reading...

London stock market has suffered its worst day in over two years, as the FTSE 100 falls by 217 points (3.15%) to 6704

Commerce ministry says China will ‘implement consensus’ on farm products, cars and energyChina has said it will immediately implement measures agreed under a trade war “truce” with the US.The commerce ministry’s remarks came days after Donald Trump and his Chinese counterpart, Xi Jinping, agreed to give negotiators 90 days to resolve their trade spat. Continue reading...

The reasons to stay awake at night are multiplying – let’s hope this time we have priced the risks correctlyWhen I took over responsibility for banking supervision in the United Kingdom, in 1995, a wise old bird in the Bank of England (BoE) warned me that I would find it a thankless task. No newspaper ever prints a headline reading “All London Banks Safe and Sound this Week”. But if a problem occurs, it is almost invariably seen as a case of supervisory failure. Dozy watchdogs asleep at the wheel are a trope that trips quickly into journalists’ coverage.Regulators are caught in a crossfire of conflicting expectations. Banks want to be left alone, unless they need help. Consumers and their political representatives want regulators to be aware of every transaction, ready to intervene in real time if any glitch occurs. In the years running up to the 2008 financial crisis, the pendulum swung toward the non-interventionist end of the spectrum. Today, “intrusive” has a positive connotation in the regulatory lexicon. But the need to strike a sensible balance remains.Related: GDP is not a good measure of wellbeing – it's too materialistic | Joseph Stiglitz1. Extreme weather events Continue reading...

Hammond tells MPs that Brexit will lead to slower growth, but it’s worth it

Europe is being affected by the threat of US sanctions on firms that trade with IranPlans to reduce European Union dependence on the US dollar – and so improve the bloc’s ability to run an independent foreign policy that is less exposed to US sanctions – were unveiled on Wednesday by the European commission.The proposal has grown in significance for European integrationists as firms from EU countries withdraw investments from Iran faced by the threat of punitive secondary sanctions from the US.Related: Why a rising dollar risks unbalancing the world outside the US | Mohamed El-ErianRelated: Can Trump strike the right balance on monetary policy? Continue reading...

Service sector firms rein in activity to levels last seen just after EU referendumThe risk of a disorderly Brexit caused the British economy to almost flatline last month as service sector firms reined in business activity to the weakest level since immediately after the EU referendum two years ago.According to a shock health check from IHS Markit and the Chartered Institute of Procurement and Supply (Cips), the biggest sector of the economy, which includes banks, hotels and restaurants, recorded only very marginal expansion in output last month. It was the worst monthly data since the immediate aftermath of the Brexit referendum in July 2016.Related: Brexit betrayal would damage society, Philip Hammond tells MPs Continue reading...

King’s attack on Theresa May’s Brexit did not give us an estimate of the economic damageSome would say governors of the Bank of England should slip quietly into the shadows after leaving office, but at least Mervyn King offers value for money when he steps on to the stage. His attack on Theresa May’s Brexit deal was a blistering and inflammatory must-read.“There is no case whatever for giving up the benefits of remaining without obtaining the benefits of leaving,” Lord King wrote, which is a well-crafted line that remainers and leavers alike might support. Similarly, the comments about “vassalage” will chime with opponents to May’s deal from both camps. Jo Johnson, when he quit the cabinet and called for a second referendum, described the Brexit process “a failure of British statecraft on a scale unseen since the Suez crisis”. King went bigger by drawing a comparison with 1930s appeasement. Continue reading...

Mark Carney has defended his warning that disorderly Brexit would cause economic harm, as Jacob Rees-Mogg is accused of ‘contemptuous’ remarks

Number of workers entering poverty rising faster than employment, says Joseph Rowntree FoundationMore than 500,000 British workers have been swept into working poverty over the past five years, according to a report that shows the number of people with a job but living below the breadline has risen faster than employment.In the latest sign that the link between entering work and making ends meet has become increasingly frayed in 21st-century Britain, the Joseph Rowntree Foundation (JRF) said that the number of workers in poverty hit 4 million last year, meaning about one in eight in the economy are now classified as working poor. Continue reading...

UK retail boss calls for new tax on web retailers, and faces criticism over House of Fraser takeover

Despite stock markets surging, timeframe for reaching deal to end hostilities appears too tightAs ever with financial markets, what matters is the difference from expectations. Investors did not think the G20 summit would produce an easing of trade tensions between the US and China, therefore stock markets surged after Donald Trump declared that relations had taken “a BIG leap forward”.Yet it is only sensible to believe Trump’s hyperbole when there is something on the table to inspect. All that has been agreed so far is a pledge to keep talking until March. The tariff increases the US had planned for January won’t go ahead, which is clearly positive for markets, but it requires extreme optimism to believe a three-month truce can produce a negotiated deal on all the areas in the Trump administration’s sights. Continue reading...

Amount of space fell in all but five local authorities between 2008 and 2015, study findsMore than a quarter of all retail floor space in England and Wales disappeared in the aftermath of the 2008 financial crisis, research has shown, as the industry struggled with the shift to online purchases.The amount of shop space fell in all but five of 348 local authorities analysed in the study by academics at Northumbria University, Newcastle. Continue reading...

Why focus on production of goods, rather than on health, education and environment?Just under 10 years ago, the international Commission on the Measurement of Economic Performance and Social Progress issued its report, Mismeasuring Our Lives: Why GDP Doesn’t Add Up. The title summed it up: GDP is not a good measure of wellbeing. What we measure affects what we do: if we measure the wrong thing, we will do the wrong thing. If we focus only on material wellbeing – on, say, the production of goods, rather than on health, education, and the environment – we become distorted in the same way that these measures are distorted; we become more materialistic.We were more than pleased with the reception of our report, which spurred an international movement of academics, civil society, and governments to construct and employ metrics that reflected a broader conception of wellbeing. The OECD has constructed a better life index, containing a range of metrics that better reflect what constitutes and leads to wellbeing. It also supported a successor to the commission, the High Level Expert Group on the Measurement of Economic Performance and Social Progress. Last week, at the OECD’s sixth World Forum on Statistics, Knowledge, and Policy in Incheon, South Korea, the group issued its report, Beyond GDP: Measuring What Counts for Economic and Social Performance.Related: Trump's trade wars and Brexit are making us all poorer | Jeffrey Frankel Continue reading...

Sum available for 2021-25 represents doubling of current five-year planThe World Bank is to make about $200bn (£157bn) available to fund action on climate change from 2021-25, helping countries adapt to the effects of warming and reduce greenhouse gas emissions.The sum represents a doubling of the five-year investment plan put in place after the landmark Paris agreement of 2015. Continue reading...

Firms fear imports of raw materials will dry up or rise in price when Britain leaves the EU, survey saysManufacturers are stockpiling goods ahead of March’s Brexit date as the prospect of queues at Britain’s ports grows more likely.Production remained strong across the manufacturing sector in recent months, with firms fearful that imports of raw materials will dry up in the event of a no-deal Brexit or go up in price should a deal go ahead. In response, they are making as many goods as possible and piling them up in storage, according to a quarterly survey from the EEF, the manufacturers’ trade body. Continue reading...

Trump and Xi’s truce at the G20 is a start but international trade still stands at the crossroadsContestants on Strictly Come Dancing dread the Argentine tango. No matter how good the choreography, it is technically tricky and devilishly difficult to get right.So the audience was holding its breath as Donald Trump and Xi Jinping got into hold for their own version of the dance in Buenos Aires this weekend. Trade tension between the world’s two biggest economies has increased markedly over the past 12 months and the chances of what Strictly judge Craig Revel Horwood calls a “dance disaster” were high.Related: The Observer view on Donald Trump’s growing list of failures | Observer editorial Continue reading...

Strains are showing in the US economy and the president knows a downturn would harm his chances for a second termThe strong economy that helped Donald Trump scrape through the midterm elections looks like it might make itself absent when he runs for re-election in 2020. In recent months, strains have started to appear that belie America’s vigorous headline growth rate and its buoyant jobs market.Last week the International Monetary Fund (IMF) warned that Trump’s escalating trade war with China was beginning to hurt global trade.Related: The G20: Donald Trump and the rise of the strongmen Continue reading...

It wouldn’t be wholly surprising if the PM won the ‘meaningful vote’. But no one will give much for Britain’s chances if she doesUnlike some of the people I meet, I am not beginning to feel sorry for Theresa May. In the way she has handled her referendum inheritance from David Cameron, she has aggravated the crisis at almost every turn.The chaos the Conservative party has inflicted on this benighted nation is such that almost anything could happen in the next few weeks and months. Indeed, as a betting man (a small punter, not a serious gambler) I have placed a tiny bet that, notwithstanding the forecasts of almost every political pundit, her attempt to rally the electors to persuade their MPs to back her in the 11 December vote might just succeed against all the odds.Even Philip Hammond has had to concede that all Brexit scenarios involve self-inflicted economic damage Continue reading...

The author of a seminal account of French society charts widening cultural divisionsFrom the 1980s onwards, it was clear there was a price to be paid for western societies adapting to a new economic model and that price was sacrificing the European and American working class. No one thought the fallout would hit the bedrock of the lower-middle class, too. It’s obvious now, however, that the new model not only weakened the fringes of the proletariat but society as a whole.The paradox is this is not a result of the failure of the globalised economic model but of its success. In recent decades, the French economy, like the European and US economies, has continued to create wealth. We are thus, on average, richer. The problem is at the same time unemployment, insecurity and poverty have also increased. The central question, therefore, is not whether a globalised economy is efficient, but what to do with this model when it fails to create and nurture a coherent society?'Workers' no longer live in areas where employment is created, giving rise to a social and cultural shockRelated: France’s ‘gilets jaunes’ leave Macron feeling decidedly off-colour Continue reading...

Each country’s legislature must also approve the agreement but Democrats in the US are already demanding changes

Business group warns of growing shortages across all skills levelsNine in 10 businesses say Brexit has affected their ability to recruit and train staff this year, the Confederation of British Industry has said.The Recruitment and Employment Confederation, the professional body for the recruitment industry, says the public sector, including the NHS and schools, face up to seven more years of skills shortages, based on current demand. Continue reading...