Sector regaining ground after sluggish 18 months but will still contract in 2017, industry report saysManufacturers are enjoying a “delayed recovery” with increased output and orders and optimism for jobs, according to a report published on Monday.The manufacturers’ organisation the EEF said the sector was now regaining ground after a “sluggish” 18 months. Despite the improvement in conditions, the EEF said it was still forecasting that manufacturing will contract in 2017. Continue reading...

The government is hoping low inflation will keep the electorate from getting restive. But it will only be achieved thanks to feeble consumer and public spendingAs the nation’s shoppers turn their thoughts to Christmas, a dark cloud looms. Could it be that rising inflation will spoil the party? Only a few weeks ago, Theresa May, Philip Hammond and the rest of the cabinet could have been forgiven for worrying about the impact of inflation after most economic forecasters predicted it was about to send shop prices sky-rocketing. And, worse, more of the same is expected next year, with rising prices eating into disposable incomes to more than halve Britain’s GDP growth rate.In recent days the news has been better. Comments by Hammond and Brexit minister David Davis holding out the possibility of a more accommodative stance towards the European Union have pushed up the value of sterling against the dollar and euro and cut the chances of a much more expensive festive period. Continue reading...

He made the company a punchbag during his anti-globalisation election crusade, and now takes credit for saving jobs. But how did it happen, and who really won?Donald Trump scored an early public relations win this week as he took the credit for persuading a US firm not to outsource jobs to Mexico. But the case – and its implications – are more complex than they first appeared.Related: Carrier deal saves Indiana jobs, but Trump critics fear dangerous precedentThe vast majority of Americans will see nothing more than the headline that just says Trump saved 1,000 jobsIt's terrible if businesses make decisions to please politicians rather than customers and shareholders Continue reading...

Unemployment rate falls to lowest level in nine years but concerns remain over slow pace of wage growth in US economyAn interest rate rise in the US looks a near certainty after another solid month of job creation in the world’s largest economy.In a boost to Donald Trump as he prepares to move into the White House next month, government figures showed the unemployment rate dropped to a nine-year low in November and employers hired new workers at a faster pace as they banked on a rebound in economic growth.Related: Prepare for a US interest rate rise before Christmas Continue reading...

Donald Trump and Theresa May are not flagbearers in the distance. We are already some years into a phase of deglobalisationThe world is getting smaller. That is the unbidden meme of our generation, thanks to the juggernaut of growth unleashed by an outpouring of global bodies, free trade agreements, technology and international capital. Every business and person now has a global reach and audience.Today’s paradigm is globalisation and free trade is its evangelical mantra.The hand-wringing is half a decade too late, because globalisation is already dead and we are already some miles into the journey back. Continue reading...

Andy Haldane says UK at risk of sharp slowdown as BoE weighs up conflicting forces of inflation from weak pound and the Brexit vote denting confidenceThe Bank of England should be wary of rushing into interest rate rises to curb inflation, according to its chief economist, in a warning that the UK economy is vulnerable to a sharper slowdown next year than forecasts would suggest.Andy Haldane said he was comfortable with the Bank’s current wait-and-see stance on borrowing costs as it weighs up the conflicting forces of a lower pound stoking inflation and the Brexit vote denting business confidence. Continue reading...

With an extra 178,000 jobs created in November and growth accelerating fast it seems unlikely the Federal Reserve can delay a rate rise any longerInterest rates in the world’s biggest economy are going up before Christmas. That was the clear message from the latest set of US employment figures measuring job creation in November.Non-farm payrolls – the bellwether of demand for labour in the US – rose by 178,000, almost bang in line with what Wall Street was expecting. This was solid rather than spectacular, but good enough to trigger a move from the Federal Reserve, America’s central bank, when it meets later this month. Continue reading...

President Michel Temer is aiming to enshrine 20 years of austerity in the constitution. It amounts to a coup against the poor – and against democracy itself

Soaring costs indicate pound’s fall since Brexit vote is increasing import costs for British businessesBritish construction firms continued to rebound from their post-referendum soft patch last month but reported the steepest rise in prices for more than five years.In the latest sign that the pound’s sharp fall since the Brexit vote is raising import costs for UK businesses, the poll of construction firms (pdf) showed they reported a “steep and accelerated rise” in what they were paying for building materials in November. That put the rate of inflation in the sector at the highest since April 2011, according to the survey’s compilers IHS Markit.Related: London's 73-storey Trellis skyscraper gets green light Continue reading...

Calls to turn the bailed-out Royal Bank of Scotland into a network of local lenders are bound to intensify now that it has failed its annual health checkEight years after the banking crisis, Royal Bank of Scotland (RBS) has failed its annual health check. If this were a medical before getting life insurance, it would be like a doctor telling the patient to get fit; it is not notice of sudden death.Related: RBS fails Bank of England stress testRelated: RBS may be fined more than $12bn to settle US mis-selling scandal Continue reading...

Italians vote on Sunday in a referendum that could seal Matteo Renzi’s fate as PM. We look at why the markets are worriedItalians are voting in a referendum on 4 December that is causing concern across Europe after the UK’s vote to leave the EU and Donald Trump’s US presidential election victory. The vote could lead to the resignation of Matteo Renzi, the prime minister. However, the fallout from a no vote on Sunday could be economic and financial as well as political.Related: After Trump victory, Italy referendum is seen as test of populism's riseRelated: Italy referendum: all you need to know about Renzi's crunch vote Continue reading...

Latest industry figures show consumers face rising costs for food and household goods in coming monthsGrowth in the UK’s manufacturing sector has eased and the weak pound is further driving up firms’ prices, according to an industry survey.The closely watched manufacturing purchasing managers’ index fell to 53.4 in November from 54.2 in October, according to the latest monthly snapshot from Markit/CIPS. A reading above 50 signals expansion; a reading below points to contraction. Continue reading...

Voters warmed to the idea of spending our own money on our own priorities – now the chancellor is showing the wayAs we leave the EU, the UK can turn its back on the austerity policies that have been the hallmark of the euro area. My main argument against staying in the EU has been the poor economic record of the EU as a whole, and the eurozone in particular. The performance has got worse the more the EU has developed joint policies and central controls.Related: Housing gets £4bn boost to increase number of new homesWhy do we have a balance of payments surplus with the rest of the world but a deficit with our EU neighbours? Continue reading...

A draconian regime could deprive British firms of vital workers, says CBI director general Carolyn Fairbairn as report on regions is unveiledTheresa May must avoid making any new immigration system too bureaucratic or risk harming Britain’s businesses, the CBI director general Carolyn Fairbairn has warned.Sources suggest ministers hope to negotiate a Brexit deal that would allow the government to control high- and low-skilled immigration. Continue reading...

Katie Allen poses three crucial questions on how to improve Britain’s productivity (The road to greater productivity is via pay and flexibility, 28 November). Namely how it links in with low pay, how it interacts with working hours, and what it tells us about the importance of staff taking ownership of their work.I have put a proposal to the government that sets out to cover each of these points. I have proposed a network of public employment services, driven locally by Jobcentre Plus and sustained by City Deal funding, with the specific aim of helping low-paid workers to climb the earnings ladder and craft their jobs to match their skills and circumstances. Continue reading...

Taxpayer-backed bank unveils plan to bolster its capital by £2bn after faltering in annual health check of UK banking systemRoyal Bank of Scotland was the biggest failure in the Bank of England’s annual health check of the UK banking system and has embarked on a new plan to bolster its financial strength by £2bn.The Edinburgh-based bank, which is 73% owned by taxpayers, is to cut costs and reduce its exposure to risky assets after the results of the toughest tests yet on the banking system were published on Wednesday.Related: Bank of England stress tests released – business live Continue reading...

Donald Trump appoints ex-Goldman Sachs banker who says he will oversee ‘the largest tax change since Reagan’Donald Trump has nominated Steven Mnuchin, a Goldman Sachs banker-turned-Hollywood movie financier with no government experience, as US Treasury secretary.Mnuchin, a multimillionaire who was dubbed a “foreclosure king” for buying up distressed mortgages and evicting thousands of homeowners during the financial crisis, immediately announced he would oversee “the largest tax change since Reagan” and said his “No 1 priority is tax reform”.Related: 10 economic consequences of Donald Trump's election winRelated: Donald Trump claims he is leaving his business interests 'in total' Continue reading...

Consumers view economy with increasing despondency as businesses worry recovery after Brexit vote is starting to recedeConsumer and business confidence tumbled in November amid concerns the UK economy would struggle to grow after a post-referendum slowdown, two surveys have found.Consumers were “resolutely gloomy” and viewed the economy with increasing despondency, while a broad range of businesses said they were worried the economic recovery after the Brexit vote was starting to recede. Continue reading...

Zoe Williams (Forget Fidel Castro’s policies. Above all, he was a dictator, 28November) bases her judgment of Castro on a frighteningly simplistic division of states into democracies, by implication multiparty ones, and dictatorships, by implication any state that is not multiparty. She then makes a blanket assertion that the latter are so inherently bad that their actual record of government is irrelevant. This is to ignore all the complex details of political structures by which a population can be oppressed or empowered. For us, from a practical point of view, the worst danger of such thinking is to exaggerate the benefits of our political system.While Castro may be rightly criticised for executing Batista supporters, even those guilty of torture and multiple murder, it may be salutary to remember that back then, in 1959, Britain executed people accused of a single murder. It was also a time when British forces were imprisoning and torturing Kenyans, and those of the French multiparty democracy were torturing and killing Algerians. Even those crimes pale before the horrors the US multiparty democracy was shortly to unleash on Vietnam. Continue reading...

Companies run like piggy banks for a select few are crippling our economy. The practice must stopAs important as the detail of the government’s proposals to change the way big businesses are run is the context. Today’s green paper comes in the year of Brexit and Donald Trump, at a time when voters, as Theresa May recently said, “see the emergence of a new global elite who sometimes seem to play by a different set of rules and whose lives are far removed from their everyday existence”. Well ensconced in that global elite are the chief executives of major companies. Think of Philip Green, whom MPs have accused of letting BHS die. Think of Mike Ashley, apologising for staff mistreatment at Sports Direct. Think of all those bumper pay deals at FTSE 100 firms.As the High Pay Centre points out, the average FTSE 100 CEO is now earning as much as 147 of their own employees. The average CEO pay package comes in at £5.5m a year. Those are just the front-page stories: leaf through the business section of any paper and chances are it will contain some tale of fat-cattery. Crucially, all this is happening in the middle of the sharpest pay squeeze for 70 years and historic spending cuts. Continue reading...

America’s economy is growing faster than expected, as Opec struggles to reach agreement on output curbs

Theresa May and her cabinet refuse to move on from ideas that hurt the poor and help the rich. It’s a collective death wishOn 11 September 1929 the Wall Street Journal quoted Mark Twain for its thought of the day: “Don’t part with your illusions; when they are gone you may still exist, but you have ceased to live.” Whatever that day’s subeditors thought they were doing, their choice now sounds as falsely confident as a rambler about to step off a ledge.Markets were already in turmoil, America was sinking into economic depression and running through the daily news was a thin, high note of hysteria. Still, Irving Fisher and the other wise men foresaw only the slightest of setbacks, and the brokers couldn’t take the cash fast enough. As John Kenneth Galbraith writes in his classic, The Great Crash 1929: “The end had come, but it was not yet in sight”.Related: George Osborne made more than £300,000 in a month from speechesThe Theresa May modus operandi can be summed up as: Cameroonism with a very quick paint job. Continue reading...

PA Consulting accused of overcharging the taxpayer and lack of clarity about invoices relating to £19m of government contractsA management consultancy firm that provided experts to a government agency has been accused by MPs of “potential sharp practices” that resulted in the cancellation of a £19m government contract.PA Consulting was also blamed by a parliamentary committee on Monday of breaches of corporate governance after appearing to mislead the government agency UK Trade and Investment when providing trade specialists to attract overseas investors. Continue reading...

Disclosing the difference between the chief executive’s pay and a company’s median earner is a modest proposal whose time has comeExecutive pay reforms do not come much more modest than the idea of requiring public companies to say how much the chief executive is paid relative to the firm’s median earner. Nothing would have to happen as a consequence. Shareholders would not be asked formally if the ratio is too high or too low. The boss’s pay would not have to be capped at a fixed multiple. Instead, the hope is that boards, occasionally, might be embarrassed into exercising a little discipline.Yet even this gentle proposal, likely to be included in the government’s green paper on corporate governance on Tuesday, is running into resistance. Pay ratios are too crude and could mislead, runs one argument, because an investment bank, where lots of people tend to earn megabucks, could seem to be a “fairer” employer than a supermarket chain employing tens of thousands of shelf-stackers and checkout assistants. Worse, pay ratios could prove inflationary if bosses demand a higher place in a theoretical league table, runs another objection. Continue reading...

President of European Central Bank says Britain should address uncertainty over how withdrawal from EU will play outMario Draghi, the president of the European Central Bank (ECB), has urged the British government to disclose more information about its plans to leave the EU.He told the European parliament’s committee on economic and monetary affairs that the UK should address the uncertainty over how Brexit will play out.Related: Bank of England prepares to protect City firms from hard Brexit Continue reading...

The new president should seize the chance to tackle issues such as investment, tax reform and job creationDonald Trump’s victory in the US presidential election surprised most of the world. But the president-elect is not finished defying expectations. Contrary to the predictions of many experts, stock markets have rallied strongly since his victory, with the three major US indices reaching record highs while the dollar has soared. Explaining these unexpected responses could provide a glimpse of what the next few months have in store for markets.Before the election, most analysts predicted that a Trump win would trigger a large stock-market selloff and a rush into low-risk government bonds. And, indeed, when the results began rolling in, that is what happened, beginning with Trump’s dramatic victory in Florida and gaining traction as his lead in the electoral college grew. By the time that lead appeared insurmountable, the Dow Jones index of US stocks had fallen by 800 points, and the broader S&P 500 was “limit down”. Moreover, the dollar began to slide, and a flight to quality in US Treasury markets caused bond yields to plummet.Related: 10 economic consequences of Donald Trump's election win Continue reading...

From the French right’s selection of Fillon to the Italian referendum and Austrian election, Europe’s centre is oblivious to its own existential crisis. They might want to dust off their copies of Thomas Mann’s Death in Venice‘Good news for Europe,” read the first line of the analyst note. If I tell you it was from an investment bank that backed eurozone austerity to the hilt, you might guess what the good news is. Yes, François Fillon (the French Thatcher) stands poised for a runoff with Marine Le Pen (the French Mussolini) in next year’s presidential election.What could be better news for the investment banking community than having all non-fascist voters, left, right and centre, obligated to vote for a politician who wants to slash the welfare state, sack workers and extend the working day?Related: François Fillon is as big a threat to liberal values as Marine Le Pen | Natalie Nougayrède Continue reading...

The IMF and the OECD’s predictions of economic gloom went awry, and continued fallbacks may see them lose credibilityIn the months leading up to the EU referendum in June, George Osborne had two people he could always rely on to back the argument that Brexit would have immediate, dire consequences for the UK economy. One was Christine Lagarde, the managing director of the International Monetary Fund. The other was Ángel Gurría, the secretary general of the Organisation for Economic Co-operation and Development.Osborne’s belief that voters would be swayed by fears of recession meant Lagarde and Gurría popped up regularly during the campaign. In the event, the plan did not work. Those who voted to leave the EU appeared sceptical about the forecasts produced by the IMF and the OECD – and those from the Treasury and the Bank of England, for that matter.Related: The IFS was not wrong to describe shrinking UK pay packets as dreadful Continue reading...

The US president-elect’s policies are likely to be good for domestic growth – but rhetoric on trade is likely to have global implicationsFor those of us who were wrong about the US presidential election, it is worth suppressing emotional reactions, at least for a month or two, and attempting a dispassionate judgment about what Donald Trump’s administration may mean for the world. So here are 10 likely consequences of the Trump presidency, divided equally between the good and the bad.The good news starts with US growth, which will almost surely accelerate above the 2.2% average annual rate during Barack Obama’s second term. This is because the Republican aversion to public spending and debt applies only when a Democrat like Obama occupies the White House. With a Republican president, the party has always been glad to boost public spending and relax debt limits, as it was under Presidents Ronald Reagan and George W Bush. Thus, Trump will be able to implement the Keynesian fiscal stimulus that Obama often proposed but was unable to deliver.Related: World trade hangs in the balance as Trump prepares plan of action Continue reading...

In its first forecasts since Donald Trump’s election, thinktank says jobs will suffer if politicians row back on globalisationA new wave of protectionism and trade tensions risks denting global growth, stoking inflation and harming living standards, the west’s leading economic thinktank has warned in its first in-depth forecasts since Donald Trump won the US election on an anti-globalisation platform.The Paris-based Organisation for Economic Co-operation and Development (OECD) said it was optimistic that expected spending measures and tax cuts under the new US administration would boost growth there and in other countries. But it said global trade growth was already “exceptionally weak” and jobs would suffer if politicians rolled back the clock on trade liberalisation.Related: World trade hangs in the balance as Trump prepares plan of action Continue reading...

Survey latest to show decline in businesses optimism, with many expecting slowdown to replace robust growth since Brexit voteThe strain of sluggish consumer spending and rising wages hit profits and dented the optimism of the UK’s services sector in November, according to the Confederation of British Industry.Predictions of a healthy Christmas failed to lift the sector’s spirits after falls in the pound and a rise in the government national living wage increased costs, a survey by the CBI found. Continue reading...

Wealth-creating sectors and manufacturing would be hit most significantly by leaving single market, a cross-party study warnsLeaving the single market would be damaging to almost every sector of the British economy, from manufacturing and energy to retail and financial services, according to a report commissioned by an alliance of Conservative, Labour and Liberal Democrat politicians trying to stop a hard Brexit.The study by the Centre for Economics and Business Research found that every major wealth-creating sector would be affected negatively, with manufacturing hit if there were tariff barriers to EU trade and the creative industries suffering a “body blow” if there were strict controls on immigration.Related: Bank of England prepares to protect City firms from hard BrexitRelated: Of course the forecasts are bad: no one has a plan for BrexitRelated: Brexit? I've no idea what's going on either, says Mark Carney Continue reading...

Governor Mark Carney begins work on transitional arrangements to maintain London’s stature in global financeThe Bank of England is pushing ahead with plans for transitional arrangements after Brexit negotiations in an attempt to protect financial institutions from a cliff edge deal that could undermine their stability.Governor Mark Carney has met senior figures in the City to stress the need for a smooth path out of the European Union that maintains its stature and strong links with the continent.Related: Bank of England to reveal stress test results for UK's biggest banks Continue reading...

Snapshot assesses resilience of six banks and one building society as well as risks to post-Brexit financial systemThe Bank of England is due to provide a snapshot of the strength of Britain’s biggest lenders after assessing their resilience to a dramatic economic downturn and sharp fall in house prices.Threadneedle Street will announce the outcome of its annual health check of the six biggest banks – and one building society, Nationwide – on Wednesday, alongside its assessment of the major risks to the financial system in the wake of the Brexit result.Related: RBS takes biggest knock of UK banks in EU-wide financial stress testRelated: Ireland is 'ideal home' for European banking regulator after Brexit Continue reading...

Picking infrastructure is easy, but unless low pay in the services sector is addressed productivity goals will remain elusiveAll roads lead to Rome, and experience would suggest, all autumn statements lead to roads.Under Alistair Darling there was an M1 upgrade in what was then called a pre-budget report. His Conservative successor George “we are the builders” Osborne pledged the biggest road investment programme since the 1970s and a permanent pothole fund. Then last week, Osborne’s successor Philip Hammond stuck with tradition and promised to push ahead with road schemes in the “northern powerhouse” and to tackle congestion on key routes under plans to revive the UK’s pitiful productivity growth. Continue reading...

The Leavers somehow managed to deflect the blame for austerity on to ‘Europe’. But they are far less convincing about our economic future nowThe European Union did not cause the 2007-08 financial crisis. The European Union did not instruct George Osborne to introduce an austerity policy which magnified the deleterious effects of that crisis. The European Union did not impose neoliberal and excessively deregulatory policies which contributed to a situation where the “fruits of globalisation” were concentrated in the top 5% of the population.However, in a propaganda feat which will go down in history, the Leave campaigners managed to persuade enough British voters that the EU was the source of many of our problems, and, just as bizarrely, that leaving the EU would be the answer. Continue reading...

The forecasters due to be quizzed by the Treasury select committee this week are not likely to strike a chord with its buttoned-up chairmanA big week in parliament for the Jacob Rees-Mogg committee (formerly known as the Treasury select committee), which will again be grilling one of its favourite targets: economic forecasters.First up on Tuesday comes Paul Johnson, director of the Institute for Fiscal Studies, which last Thursday said that Brexit really means British workers facing the longest pay squeeze in 70 years. The following day will see Robert Chote, chairman of the Office for Budget Responsibility, whose organisation also had a run-out last week, when it predicted the UK economy would slow next year and inflation would rise. Continue reading...

Outstanding loans have risen sharply to 40% of GDP but analysts fear the end of the credit binge could trigger a crisis for the wider worldChinese household debt has risen at an “alarming” pace as property values have soared, analysts have said, raising the risk that a real estate downturn could wreak havoc on the world’s second largest economy.

The president-elect’s protectionism has alarmed the WTO and been damned as ‘destructive’ in a major report. But was it just loud campaign bluster?Donald Trump’s determination to stamp his mark on US trade policy “would be horribly destructive”, according to the most exhaustive assessment of his pre-election tweets, speeches and declarations in Fox News interviews.Among the more consistent themes in his various pronouncements, the president-elect said he would tear up the Nafta agreement that gives Mexico tariff-free access to US markets on about half of its goods. Continue reading...

Sliding deadlines for safety improvements following the Rana Plaza disaster demonstrate why the Bangladesh government must act (Bangladeshi workers still in danger despite safety pledges, says report, 21 November).Rana Plaza made the potentially deadly conditions in garment factories impossible to ignore. Safety improvements promoted by retailers have brought some positive changes but, given the scale of the problem in Bangladesh, these cannot tackle the root of the problem on their own, and they are not exclusive to garment factories – so what about other sectors? Continue reading...

ONS says consumers kept spending and business investment beats forecasts, defying predictions of slowdownBritish businesses continued to invest and consumers carried on spending in the months following the Brexit vote, defying predictions that a wave of uncertainty would hit economic activity.In the first official estimate of how firms’ spending fared after the referendum, the Office for National Statistics said business investment rose 0.9% in the July-to-September quarter. That was only a small slowdown from 1% growth in the previous quarter and beat forecasts for 0.6% growth in a Reuters poll of economists. The figures echoed business surveys suggesting companies have shrugged off the shock of the referendum result for now.Business investment increases by 0.9% (£0.4 billion) in Q3 2016 compared with Q2 2016 pic.twitter.com/iTsX4OPjc1Related: UK living standards squeeze 'will be worse than after global crash'Q3 #GDP increase led by growing consumer spending, fuelled by rising household incomes https://t.co/idV7bGKXHB Continue reading...

Chancellor’s cash to help startups grow to scale is welcome, but it’s a mere drop in the ocean – especially after Skyscanner saleThe best joke in Philip Hammond’s autumn statement was the line about how he is injecting £400m of venture capital funding into the British Business Bank “to tackle the longstanding problem of our fastest-growing technology firms being snapped up by bigger companies, rather than growing to scale”. A day later, one such UK pioneer, Edinburgh-based Skyscanner, is being bought by large Chinese travel group Ctrip for £1.4bn, a sum that makes Hammond’s £400m fire-fighting fund look like a water pistol.The Treasury might argue that it has smaller, earlier-stage companies in mind for its £400m and that Skyscanner, boasting 60 million users a month for a service that scans the internet for cheap flights, had already achieved scale.Related: How will the autumn statement change Britain? Our panel’s views | Matthew d’Ancona, Martin Kettle, Gaby Hinsliff, Aditya Chakrabortty and Polly Toynbee Continue reading...

The attack on the Office for Budget Responsibility reveals where power now lies. Leavers are the masters, and will flex their muscles at willThe Office for Budget Responsibility shines like a good deed in a naughty world. It was created as an independent statutory body in 2010 to promote more trustworthy government. It was an excellent idea, was widely welcomed and has worked well. It has survived six and a half years. Now, though, it has been kneecapped in a back alley by Brexit provos and its brand has been trashed in the anti-European press’s embrace of post-truth politics.It may survive the encounter. Let us hope that it does. But this week’s hit-and-run attack means the age of OBR innocence is over. Its cautious forecasts about the impact of Brexit on the British economy had barely been reported by Chancellor Philip Hammond on Wednesday before Brexiteers decided the OBR had to be done over for displaying insufficient optimism in the cause.Related: Philip Hammond admits Brexit vote means £122bn extra borrowing Continue reading...

Expert analysis of the impact of the autumn statement shows the worst pay outlook in 70 years. That could be fertile territory for populist agitationThe slow economic strangulation of millions of Britons started long before the vote to leave the European Union this year. It was first felt when austerity wrapped its long fingers around public spending. But it all began with the Great Crash in 2008. Cataclysmic events have contributed to desolate times for workers for many years ahead. The Institute for Fiscal Studies’ finding that after this week’s autumn statement real wages in the country will still be lower by 2021 than they were in 2008, as the workforce suffers the worst decade for pay in at least seven decades, should ring alarm bells. The reasons are now well known: lower business investment, scared off by Brexit uncertainty, will result in lower productivity and sink wage growth. The drop in sterling, sparked by the fears of Britain’s departure from the continent, has pushed up inflation. Real wages will flatline next year and looming benefit cuts will squeeze living standards. The thinktank pointed out that by 2021 real GDP per household will be £1,000 lower than expected only months ago, back in March.This points to a dark time ahead for a country already split over attitudes to Europe and polarised by political forces once considered on the fringe, but now firmly in the mainstream. The IFS revealed a nation divided since 2007: while the over-60s saw their incomes rise 11% until 2014, British workers aged between 22 and 30 saw median wages fall 7%. The tax and benefit changes, modelled by the IFS, reveal that over the next five years the top 30% of earners will benefit; the bottom 70% will lose out. The government’s plan to raise the new minimum wage for over 25s – to £9 an hour by 2020 – has been derailed by lower growth. Continue reading...

Dismal trade, growth of low-level service jobs with low-level pay, and a chronic lack of investment only partly explain the gapExtra funds for new roads, research and development and skills training will drive up UK productivity and put the economy in a better position to withstand the looming Brexit shock.That was the central message in Philip Hammond’s autumn statement and went to the heart of a debate about the UK’s low productivity growth, which according to official figures, has fallen well behind Germany, the US, France and Italy.Related: Business leaders call for 'tarmac and telecoms' from productivity fund Continue reading...

This week there is much unenlightening squabbling about economic forecasts. In 1971 I arrived at university intending to read engineering and economics. After two weeks I swapped to pure engineering because I had realised that there was no “right answer” in economics. I have spent my life developing mathematical models of physical systems and making “engineering forecasts” or predictions, as engineers call them. Now, older and wiser, I realise that there is no right answer in engineering either.However, engineers address that difficulty directly. It is standard engineering practice to attach an estimate of error or uncertainty to a central estimate – to provide only a central estimate can be highly misleading. It seems this approach has not reached economics. With proper analysis of the forecasting model it will be possible to attach a probability of exceedance to any central estimate. The Brexiters might then adopt a level with, say, a 30% probability of exceedance (optimistic), whereas the remainers might adopt 60% (cautious). Political interpretation of a result can then be clearly distinguished from the model used to derive it. Such an approach might also have been useful before the referendum. I recommend it to economists who may find the results both frightening and embarrassing!

Given that real wages will still be below their 2008 level in 2021, the outlook for people on low and middle incomes is bleakDirectors of the Institute for Fiscal Studies normally avoid hyperbole. They do not tend to use words such as “dreadful” when analysing the state of the economy or the public finances.But that was the term Paul Johnson, the head of the IFS, chose to describe the era of shrinking pay packets triggered by the financial crash of 2007-08.Related: IFS warns of biggest squeeze on pay for 70 years over BrexitRelated: Autumn statement: what the economists sayRelated: UK living standards squeeze 'will be worse than after global crash' Continue reading...