Britain’s trade gap widened in May, and industrial output misses forecasts after a drop in manufacturing output

Drop in manufacturing, construction slowdown and widening of trade deficit knock pound lower against dollar euroA drop in manufacturing output, a slowdown for the construction industry and a widening in Britain’s trade deficit have doused expectations that the Bank of England will raise interest rates over the coming months.

Jean-Claude Juncker says EU would react with countermeasures within days to any action by Donald TrumpThe European Union is prepared to impose countermeasures within days if Donald Trump takes action to protect the US steel industry, the European commission president has said.

The Save Our Schools campaign is just one example, but all across the UK an ever-increasing range of people are being driven to protest

Politicians say that it’s sound finance, when in fact it’s a tool used to demonise immigrants and profit from ‘working-class concerns’

It was the international trade secretary’s moment in the spotlight. He’d dressed for the occasion – but he hadn’t done much elseSome might say that Liam Fox has landed his ideal job. As international trade secretary, his mission is to jet around the world doing a bit of meet-and-greet over dinner. Indeed, as no trade deals can be signed before Britain leaves the EU, and only the vaguest expressions of future interest can be made so long as the terms of the divorce remain unknown, the Flying Fox is rather obliged to do the bare minimum. And with lengthy transitional arrangements looking increasingly likely, the minister’s time in office could well develop into an extended sabbatical.To his credit, the Flying Fox made little effort to imply he was finding his responsibilities in any way onerous in his first departmental questions of the new parliament. He spoke lyrically about how he had met 20 trade ministers in order to deepen relations before doing any actual work, and how he was now flat-out busy preparing for the Commonwealth summit. Choosing the wine, working out the seating plan and ordering the flowers.Related: Liam Fox: BBC would rather see Britain fail than Brexit succeedRelated: Wimbledon strawberries to stay British after Brexit – probably Continue reading...

It’s easy to see the return of two-party politics as a return to the 1980s, but new problems need new solutions

Real disposable income per head fell 2% in first quarter of 2017 from year earlier, the steepest decline since end of 2011Rising prices in the wake of the Brexit vote have put the tightest squeeze on household incomes for more than five years, according to official figures on Britons’ economic wellbeing.

Joseph Rowntree Foundation says inflation and benefit cuts are pushing decent standard of living further out of reachRising inflation and less generous state benefits have made it harder over the past year for families on tight budgets to enjoy what the public considers a decent standard of living, according to one of Britain’s leading thinktanks.The Joseph Rowntree Foundation (JRF) said that despite an above-inflation increase in the “national living wage”, low-income families were falling further behind a minimum income standard.Related: Consumer confidence is lowest since Brexit vote aftermath, survey findsRelated: Public sector pay cap is matter for future budgets, says Grayling Continue reading...

Shinzo Abe to meet Donald Tusk and Jean-Claude Juncker in Brussels – but UK exporters likely to see no gain due to BrexitThe European Union and Japan are on course to sign a trade deal on Thursday, after talks gained impetus in the wake of Donald Trump’s threat to put up barriers to international commerce.Cecilia Malmström, the European trade commissioner, announced she had reached a political agreement with the Japanese foreign minister, Fumio Kishida: “We ironed out the few remaining differences in the EU-Japan trade negotiations,” she tweeted. “We now recommend to leaders to confirm this at summit.”Related: Japan seeks early free trade talks with UK amid Brexit fearsRelated: Records come round again: Sony to open vinyl factory in Japan Continue reading...

Narrowly pursuing national interests could damage all countries, lender says before Hamburg meeting on FridayThe International Monetary Fund has warned leaders in the run-up to the G20 summit in Hamburg that they are putting at risk a recovery in global growth by pursuing national policies at the expense of internationally agreed rules on trade and climate change.Related: Hamburg braces for G20 violence as tensions rise over police tacticsRelated: Are you protesting at the G20 summit in Hamburg? Tell us why Continue reading...

Easing of austerity policies aimed at reducing deficit would lead to Greek-style economic collapse, claims the PMTheresa May raised the spectre of a Greek-style economic collapse if Britain fails to press ahead with tackling the deficit on Wednesday, as she was challenged repeatedly by Jeremy Corbyn over the public sector pay cap.With intense political pressure on the prime minister – including from her own cabinet colleagues – to ease the strain for cash-strapped public servants, including nurses and teachers, she warned MPs about the risks of loosening the purse strings.Related: PMQs verdict: Corbyn goes on offensive as May channels Osborne Continue reading...

Heather Stewart is joined by Rafael Behr, Polly Toynbee and Sam Hall to discuss the Tory wobbles on the public sector pay cap. Plus: Labour’s Baroness Smith on how Brexit bills will fare in the Lords and Cathy O’Neil on regulating big dataAs public sector pay becomes the latest political battleground, cabinet splits surface as Downing Street struggles to keep control. Are key Tories softening their stance on austerity – or is it just the early pangs of the race to succeed Theresa May?Joining Heather Stewart to discuss it all are Guardian columnists Rafael Behr and Polly Toynbee, plus Sam Hall of the Conservative think tank Bright Blue. Continue reading...

Business optimism hits second-lowest level since 2011, as service sector firms are buffeted by Brexit-related worries

Demand cools after strong first half in latest sign consumers are becoming reluctant to commit to major spending decisionsNew car sales in the UK went into reverse for a third month in June in the latest sign that consumers are becoming increasingly reluctant to commit to major spending decisions.Sales fell by 4.8% year on year last month to 243,454, following an 8.5% drop in May and a 19.8% slide in April, according to the Society of Motor Manufacturers and Traders (SMMT). In the first half of the year overall, new car sales fell by 1.3% to 1.4m vehicles, which was still the second biggest first half on record.Related: All Volvo cars to be electric or hybrid from 2019 Continue reading...

It managed to escape a deep crisis after oil prices plummeted – but prospects don’t look as promising as they did five years agoWhen the Russian president, Vladimir Putin, meets his US counterpart, Donald Trump, at this week’s G20 summit in Hamburg, he will not be doing so from a position of economic strength. To be sure, despite the steep drop in oil prices that began three years ago, Russia has managed to escape a deep financial crisis. But while the economy is enjoying a modest rebound after two years of deep recession, the future no longer seems as promising as its leadership thought just five years ago. Barring serious economic and political reform, that bodes ill for Putin’s ability to realise his strategic ambitions for Russia.Back in 2012, when Putin appeared onstage with the Nobel laureate economist Paul Krugman at a Moscow bank conference, Russia’s 1998 economic crisis seemed a distant memory. With oil prices well over $100 a barrel, the government’s coffers were bursting. So Putin could proudly contrast Russia’s government budget surplus with the large recession-driven deficits across the west. He surely delighted in having Russian audiences hear Krugman’s view that western democracies had come up badly short in handling the global financial crisis.Related: First meeting for Trump and Putin: what will the power dynamics reveal? Continue reading...

The decade-long flatlining of Britain’s economy has hit living standards – firms have to be weaned off plentiful, low-skill labour to invest in new kitBritain’s economy has moved sideways over the past decade. That’s the main message from the latest set of official figures for productivity which, once again, are dismal.It is not just that the performance in the first three months of 2017 was poor. The 0.5% quarterly drop in output per hour worked meant productivity fell back below where it was in the last quarter of 2007, the period immediately before the economy nosedived into recession.Related: UK service sector growth hits four-month low as political uncertainty bites - business live Continue reading...

Slump in June completes ‘triple whammy’ of weak data, reflecting a lack of consumer confidence and political uncertaintySlowing growth across Britain’s services companies in June completed a “triple whammy” of disappointing economic news this week that also saw growth in the construction and manufacturing industries fade in response to Brexit uncertainty and weak consumer confidence.Activity in the services industry, which accounts for almost 80% of economic activity, fell to a four-month low in June, dragging down the all-sector IHS Markit/CIPS purchasing managers index (PMI) from 54.5 in May to 53.9 in June, the lowest since February.Related: Bank of England's Michael Saunders: 'Prepare for higher interest rates' Continue reading...

Consumers who put £1,000 cash in a savings account in 2007 will now have £878 in real terms, say expertsIt has been a difficult decade for savers. For 10 years they have suffered falling or ultra-low interest rates, leaving them in the red on their deposit accounts when they might reasonably have expected a modest gain.The last time the Bank of England put up interest rates was on 5 July 2007. But the financial crash put paid to further rises. In the next 20 months it tumbled to 0.5% and then further in the wake of last year’s Brexit vote to 0.25%. Continue reading...

Laura Pidcock, the new Labour MP for North West Durham, criticises the ‘archaic’ parliamentary system and calls for an end to the indignity caused by austerity, in her maiden parliamentary speech

Transport secretary says decision will be taken in the autumn, despite senior Tories’ calls for quicker easing of controlsChris Grayling, the transport secretary, has dampened hopes of an imminent lifting of the 1% public sector pay cap for teachers, police and prison officers, saying the issue was a matter for future budgets.He said a decision on the future of the cap would be taken collectively by the cabinet at the next budget in the autumn, despite signals from some senior Tories – including Michael Gove, Boris Johnson, Justine Greening and Jeremy Hunt – that they would like to see a quicker easing of the controls. Continue reading...

Thinktank says replacing maintenance grants in England hits students from lower-income households hardest

The MPC member on why he voted for a rise – and why policymakers should not hold fire during Brexit talksHouseholds should prepare for interest rates to rise as the Bank of England withdraws some of the emergency support it injected into the economy in the wake of last year’s Brexit vote, a top policymaker has warned.Michael Saunders used a Guardian interview to explain why he had voted for a rate rise last month and to emphasise that it was no longer necessary for Threadneedle Street to keep its foot to the floor with record low borrowing costs.Related: Bank of England edges closer to increasing UK interest rates Continue reading...

Threadneedle Street tells credit card and personal loan providers to stick to their terms and conditionsThe Bank of England is stepping up its scrutiny of banks and other lenders on credit cards, personal loans and car purchases amid fears that growing consumer debt could rebound on the banking system.Threadneedle Street is writing to the firms it regulates after reviewing the consumer credit sector, where lending is growing at 10.3% a year – outpacing the 2.3% rise in household income.Related: Bank of England tackles consumer credit problems, as construction growth slows - business liveRelated: Business Today: sign up for a morning shot of financial news Continue reading...

Former British PM says ministers calling for public sector pay cap to be lifted wanted to spend money they might need in futureDavid Cameron has described critics of austerity as “selfish”, saying their calls to boost spending and raise public sector pay may appear compassionate but would simply saddle future generations with debt.The comments triggered a furious response from Labour and the Lib Dems, who described the former prime minister as totally out of touch, claiming it was astonishing he could make the argument when nurses were turning to food banks to get by.Related: The Guardian view on public sector pay: Hammond stares into the abyss | EditorialRelated: Martin Rowson on the Conservatives and public sector pay – cartoon Continue reading...

Voting to impoverish public servants is bad enough, laughing about it is contemptuous and cold-hearted. They don’t deserve their power

The Bank of England has given lenders a deadline to prove they are adequately protected against credit risks

Wages are falling in real terms thanks to Conservatives’ 1% pay cap amid rising inflation, official figures showWhen Theresa May took the stage at the Conservative party conference last autumn she reprised her pledge for a fairer economy. Specifically, she homed in on pay growth, or the lack of it.“Our economy should work for everyone, but if your pay has stagnated for several years in a row and fixed items of spending keep going up, it doesn’t feel like it’s working for you,” the prime minister declared. Continue reading...

Public servants’ pay continues to plummet in real terms, but the consensus is growing that they should receive a rise. The government must listenAlthough it seems longer, it was just three weeks ago that Conservative MPs returned from the election with tales of lost votes from nurses and teachers – and the unfairness of artificial public sector pay caps exploded into the mainstream of political debate. Today there is yet further evidence that solving the public sector staffing crisis is urgent: for every five new nurses and midwives joining the NHS, six experienced staff leave.It should have been no surprise that the government artificially holding down pay for 5.5 million workers was an election issue. Not when midwives are down over £3,000 a year in real terms, and nurses, teachers and firefighters are all down over £2,000.Related: Applauding a public sector pay cap? Tories are cheering their own demise | Polly ToynbeeEveryone in the public sector has seen their real pay fall year on year since 2010 Continue reading...

All the day’s economic and financial news, including new manufacturing reports from around the world

Reforms are building a safer, simpler and fairer financial system, FSB chairman and Bank of England governor tells G20 leadersFundamental reforms undertaken since the US sub-prime mortgage market triggered the deepest global recession since the second world war have created a safer, simpler and fairer financial system, Mark Carney has said.With the 10th anniversary of the financial crisis next month, Carney said the world’s biggest banks were stronger, misconduct was being tackled, and the toxic forms of shadow banking were no longer a threat.Related: Business Today: sign up for a morning shot of financial news Continue reading...

Open University says firms pay extra for recruitment, temps and inflating salaries and advises them to train their staffSkills shortages in Britain are costing businesses more than £2bn a year in higher salaries, recruitment costs and temporary staffing bills, according to research by the Open University.Its survey of 400 firms found 90% had faced difficulties recruiting workers with the required skills in the last 12 months. The findings will add to concerns that employers are already struggling to fill key jobs even before a potential clampdown on immigration once Britain leaves the EU.Related: Almost half of highly skilled EU workers 'could leave UK within five years' Continue reading...

A new global report is putting pressure on publicly listed companies to disclose their risk to climate changeSome of Australia’s largest listed companies, including Woodside, Rio Tinto and Santos, are likely to face sweeping changes to the way in which they model, plan for and disclose risk from climate change to investors. How they respond will affect their ability to attract funding from lenders, insurers and superannuation funds who are under pressure to stress-test investments for a carbon-constrained future.The release last week of a report by the Financial Stability Board’s taskforce on climate-related financial disclosures is expected to add pressure on publicly listed companies to formalise their climate risk disclosure practices – particularly through scenario analysis – or risk investors pulling finance and rating agencies making assumptions about their risk profile.Related: No more business as usual: the corporates stepping up to save the planetRelated: Business is leading the transition to renewables while politicians dither Continue reading...

Foreign secretary becomes latest frontbencher to demand change of direction on austerityBoris Johnson has waded into the escalating cabinet row over public-sector pay, throwing his weight behind calls for the 1% ceiling on wage rises to be lifted for austerity-weary workers including nurses and teachers.The chancellor, Philip Hammond, has come under increasing pressure to ease spending constraints in several areas since the general election deprived Theresa May of her majority. Johnson is the latest cabinet heavyweight to demand a change of direction. Continue reading...

Years after the event, the bank is due in court on Monday for a hearing into the fundraising it conducted in the maelstrom of the financial crsisWestminster magistrates court will be the venue on Monday for the opening chapter in what is expected to be a landmark case arising from the 2008 financial crash. The former Barclays chief executive John Varley and three of his former colleagues – Roger Jenkins, Tom Kalaris and Richard Boath – are the first senior bankers to face criminal charges arising out of the crisis, and are due to appear in court in the afternoon.The four are charged with offences following a five-year investigation into the events surrounding the £11.8bn emergency fundraising conducted by the bank in 2008 that allowed it to avoid a bailout by the taxpayer. Continue reading...

People’s view of their own financial situation and general economic outlook have got worse, says market research firmWorries about the economic outlook and a squeeze on household budgets dented consumer confidence this month, according to a closely watched survey.The monthly barometer of consumer mood from the market research firm GfK dropped to its lowest level since the aftermath of last summer’s EU referendum. Continue reading...

Traders got into a panic about impending rate increases last week, but they have taken fright too soonWherever investors looked last week, the picture was rosy. The eurozone, for so long the laggard in the global growth league, could be seen zipping along following first-quarter GDP growth that hit 0.6%.German business confidence hit a record high, and France and Italy finally joined the party with higher than expected output. In the US, official estimates upgraded growth for the first quarter to an annualised 1.4% from an initial estimate of 0.7%. Even Japan, the standard-bearer for more than 20 years of economic stagnation, is due to exceed expectations this year as exports soar. Continue reading...

It’s time for the bank and the Global Partnership for Education to spend money they have set aside for these emergenciesImagine, if you will, a city the size of Birmingham with a population of a million or so. Now imagine that a disaster has befallen that metropolis, a brutal war that has caused its citizens to flee with little more than the clothes on their backs. Picture the lines of refugees heading west to find a place of safety, which they eventually find across the border in Wales. There, despite severe financial constraints, the million displaced people are met with warmth and generosity.This is not a science-fiction story. Substitute South Sudan for Birmingham and Wales for Uganda and you get an inkling of what is happening in one of the poorest parts of the world’s poorest continent.Related: 'The refugees are like our brothers': Uganda's example to the world – in pictures Continue reading...

If the public did not vote to be poorer, as a resurgent chancellor suggests, they must be disturbed by the mounting evidence of looming economic damageAs the true extent of the Brexit farce becomes more apparent, it is now open warfare between the Brexiters, while the rest of the world – with the possible exceptions of Presidents Putin and Trump – look on in sympathetic bewilderment.One of several satisfactory aspects of the election result was the way that Theresa May and her advisers at No 10 met their comeuppance over their widely leaked plans to sack the chancellor of the exchequer. Continue reading...

The digital currency can now be bought at ATMs around the countryMy journey into the dark economy starts much as expected: in front of a computer screen, late at night. It ends somewhere quite unexpected, in a humdrum setting a world away from the stereotype of modernity, equality and sticking it to the man promised by digital currencies such as Bitcoin: it ends in a used DVD store, my purchase refused.The dark economy is moving into the light. In a few scattered places, 40 or so in London, one in Manchester, another in Birmingham, Bitcoin ATM machines have appeared, issuing the cryptocurrency from an unlikely array of convenience stores, vaping outlets and barbershops. Does this mean that the virtual has become real? Can anyone join the Bitcoin challenge? Can you buy stuff with Bitcoin? And what the heck is a cryptocurrency anyway?Related: How can I invest in bitcoin? Continue reading...

Low interest rates, high house prices, new car deals and low-cost credit cards make an explosive mixture - which regulators may struggle to keep a lid onOne thing sure to upset Bank of England officials is any suggestion that the Old Lady of Threadneedle Street has gone soft on the banking industry and turns a blind eye to reckless lending. It brings back disturbing memories of the 2008 credit crunch, the chaos it brought to the economy and the damage it caused the institution’s reputation.Last week, the Bank of England, which has become the overarching regulator of the banking system, made a point of being tough on the banks following the publication of its latest financial stability report. Continue reading...

Theresa May’s top aide says student debt is ‘huge issue’ in speech urging Tories to modernise to win over Labour votersBritain may need to have a national debate on university tuition fees, Theresa May’s most senior minister has said after urging the Tories to modernise to win over young metropolitan voters who backed Jeremy Corbyn’s Labour.Damian Green said the current system, with fees capped at £9,250 a year, allows UK universities to deliver high quality courses and teaching, and accounts for the country’s disproportionate number of top institutions.Related: The Guardian view on the Queen’s speech: In office but not in power | EditorialRelated: Thousands join anti-austerity march in central London Continue reading...

Economic growth following the Brexit vote has come to an abrupt halt as consumers raid piggy banks to battle rising inflation and stalled wagesThe consumer-driven momentum that has kept the British economy afloat since the Brexit vote is declining rapidly, with new data showing households in the grip of the most protracted squeeze on living standards since the economic crisis of the mid-1970s.Against a backdrop of rising prices and stagnant wage growth, incomes adjusted for inflation have now fallen for three successive quarters, the first time this has occurred since the International Monetary Fund had to bail Britain out in 1976.Related: BoE economist wants to hear about hardship in the UK - first stop Wales Continue reading...

Andy Haldane, Bank of England’s chief economist, hears from families shopping around for cheap bread and stopping children going on school tripsAndy Haldane, the Bank of England’s chief economist is in Wales, on tour. But this is not the usual speechifying trip, addressing business audiences on the dry details of monetary policy. Instead Haldane – who some regard as a potential successor to the governor of the Bank, Mark Carney – is in listening mode, on the first leg of a nationwide tour that is aiming to feed the everyday experiences of ordinary households into monetary policymaking.Britain’s poorest families, he says, are being hardest hit by the rising prices of essentials like food and fuel, and action to prevent higher inflation becoming entrenched must therefore be a priority.Related: Sharp rise in UK food prices inflates household shopping bill Continue reading...

The preferred Korean bidder for the South Australian steelworks has asked for government funding while a second buyer has offered to buy Arrium without any federal assistanceThe sale of Arrium and its troubled Whyalla steelworks is expected to be delayed today while the federal government finalises a deal that would give one of the bidders up to $400m in taxpayers’ funds.The future of Whyalla and thousands of Arrium workers hangs in the balance as administrators finalise a deal to sell off the company.Related: The steel city blues: the future of Whyalla and why we should all care | Mark Bahnisch Continue reading...

Soaring level of borrowing on credit cards, overdrafts and loans could bolster case for interest rate rise, say expertsBritain’s hard-pressed consumers are increasingly turning to credit cards, overdrafts and loans to support their spending, according to the Bank of England.Threadneedle Street’s monthly report on money and credit found that the outstanding amount of unsecured consumer credit rose by 10.3% in the year to May, five times as fast as the growth rate of earnings.Related: Many Britons are hooked on costly credit. Here’s what the new minister should do | Rowena Young Continue reading...

Ex-chancellor and Evening Standard editor will use unpaid lecturing role at university to champion ‘northern powerhouse’George Osborne, the editor of the Evening Standard and former chancellor of the exchequer, has added a sixth job to his portfolio – that of honorary professor of economics at the University of Manchester.Related: What exactly does George ‘six jobs’ Osborne add to my economics degree? | Francesca Rhys-WilliamsGeorge Osborne has become a professor of economics at the University of Manchester pic.twitter.com/pOgJHz83psRelated: Osborne's Evening Standard savages Theresa May's election campaign Continue reading...

Now that desperate people have seen how money can somehow be found to pay off the DUP, they are going to get very angry with this governmentWatch Theresa May scramble in the shadow of no majority and the subsequent paper-thin Queen’s speech and it’s as if government as we know it has been entirely disbanded. While EU negotiations and a costly DUP deal take centre stage (and £1bn of public money) a domestic policy agenda is missing in action.This would be disturbing at the best of times, but it is happening as Britain teeters on the edge of its worst living-standards crisis in modern politics. Continue reading...

Rolling coverage of the day’s political developments as they happen, including Theresa May and Jeremy Corbyn at the first PMQs of the new parliament