The Israel-Hamas war could broaden, and many developing countries are on a path to crisisRecession, stagflation, a cost of living crisis, damaged public finances and higher interest rates. The four years since a new deadly virus spread around the world from the Chinese city of Wuhan has been a catalogue of woe for the global economy. 2023 has been the first year since 2019 to be relatively shock-free, in the sense that there has been no repeat of the pandemic of 2020, the supply-chain bottlenecks of 2021 or the Russian invasion of Ukraine in 2022. The financial repercussions of conflict in Israel have, until this point, been limited to the region. But that may change. The global economy is still not in a good place as 2024 dawns. Here are a few things to look out for in the year ahead. Continue reading...

Retailers warn post-Brexit checks on fresh food due from April could further drive up shopping costsShop prices continued to rise at 4.3% in December as a price rise on non-food items offset easing costs on food.The increase in the price of goods in stores compared with a year ago was the same rate of inflation as in November and came after several months of easing. Continue reading...

Japan's example 30 years ago shows islands of excellence can combine with deep structural imbalancesThere were contrasting reactions when the US rating agency Moody's downgraded China's A1 credit rating outlook from stable to negative last month. Financial markets, focused on the economy, paid it barely any attention. Chinese state media, looking at the politics, saw red. Global Times called it biased and unprofessional". A few days later, the Ministry of State Security issued a statement stipulating that the only purpose of negative talk" was to doubt or deny China's socialist system, and to contain its development.The Chinese Communist party's prickly attitude to criticism is not uncommon. It chooses instead to propagate a narrative of continuous success in which its own role is pivotal. It recognises that China confronts big challenges nowadays, but attributes them to low confidence, thinks they are fleeting, and says they'll be resolved in 2024. Continue reading...

Call by economics of happiness expert Richard Layard comes as research agency set up under David Cameron is to be axed in Whitehall cutsA Labour government should make the UK the world's first country to make policy based on its impact on wellbeing as well as the economy, one of the world's leading experts on the economics of happiness has said.With Keir Starmer in No 10, Downing Street should require Whitehall departments to appraise the potential impact on citizens' wellbeing when they make funding bids, Richard Layard said. The next chancellor should announce measures of happiness and misery alongside GDP in their annual budget statements, he added. Continue reading...

Labour will be going on the attack, mindful of having come to power in 1924, 1964 and 1974Labour governments have come to power five times in the past century and three of those occasions have come in years that end in a four: 1924, 1964 and 1974. If Rishi Sunak does call an election during the course of 2024, history suggests he will lose.But not by all that much. In 1924, Ramsay MacDonald formed a minority government after the December 1923 election. Harold Wilson scraped home with a slender overall majority in October 1964 and returned to Downing Street after the inconclusive result in February 1974. Continue reading...

UK's pension regime makes investment nigh-on impossible. A radical reform under Labour would turbo-charge the economyThe British corporate sector is dying in front of our eyes. Corporate decay and the lifelessness of our stock market, now ranking a mere 10th in the world, affects everything: jobs, careers, good wages, pensions, tax revenues and vibrant public services. Worse, Britain is rich in the research and intellectual knowledge on which successful 21st-century economies will be founded: the opportunity is being squandered. Decisively addressing what is happening must be at the forefront of the 2024 electoral debate.What needs fixing is the financial doom loop in which our publicly listed companies are locked. Britain has organised its savings system not to support British company formation and growth. In essence our pension funds, the single most important way we save collectively and a source of finance for business, have been set up so that increasingly the risk" of investing in British companies has been avoided or not undertaken at all. Michael Tory, former Morgan Stanley banker and co-founder of the investor advisory consultancy Ondra, calculates in his research paper Britain plc in Liquidation" that in 1990 UK pension funds owned more than 1tn worth of UK companies; now they hold less than 100bn. Increasingly, they invest in safety-first government bonds or in destinations overseas. It is a de facto investment strike - a wrong-headed attempt to make pension funds so safe they are killing our economy and paradoxically themselves. Continue reading...

If enacted in Jeremy Hunt's spring budget, the move would provide a windfall for the richest at the expense of less affluent peopleBritain's public finances are in a parlous state", according to the Institute for Fiscal Studies. More than a decade of public spending cuts has ripped the welfare safety net and left the NHS and other public services more stretched than ever, while it is costing increasingly more to service the country's high and rising debt burden. Yet speculation increased last week that the chancellor, Jeremy Hunt, may be considering the abolition of inheritance tax in his spring budget in March. This would be a pre-election giveaway for some of the country's wealthiest families that the UK can ill afford.There is a conundrum at the heart of inheritance tax that makes it an appealing prospect to some Conservatives ahead of an election. It is paid by a relatively small number of people; currently, only the wealthiest 5% at death. Continue reading...

Freight and logistics sector is turning to women to fill gap as demand for drivers grows alongside cap on overtimeWhen Mayumi Watanabe tells people what she does for a living, most struggle to hide their surprise, and not just because of her diminutive stature. As a truck driver with 23 years behind the wheel, she is one of a small but growing number of women coming to the rescue of an industry that is the beating heart of Japan's economy.I can see they're thinking, How can such a tiny woman drive a big truck?'" Watanabe, who is 152cm (5ft) tall, told the Observer as she prepared for the busy run-up to the end of the year. But I've always loved cars, so it felt natural to want to be a truck driver." Continue reading...

Over-60s are richer thanks to high interest rates and well-performing pension funds. And the Tory voters among them will look kindly on a chancellor who helps out by cutting inheritance taxWealthy baby boomers are going for gold. Not literally, in the sense that they crave the yellow metal; the gold they want is a mix of tax breaks and subsidies that will enrich them in retirement and feather-bed their offspring in a way unimaginable a couple of decades ago.Like winners at life's casino, they want to cash in their chips and bank their winnings. In the main, their assets boil down to property and pensions. And both need to be safeguarded to make sure they are immune to the trials and tribulations of the wider economy. Continue reading...

Only one in 10 feel leaving the EU has helped their finances, while just 9% say it has benefited the NHS, despite 350m a week pledge according to new pollA clear majority of the British public now believes Brexit has been bad for the UK economy, has driven up prices in shops, and has hampered government attempts to control immigration, according to a poll by Opinium to mark the third anniversary of the UK leaving the EU single market and customs union.The survey of more than 2,000 UK voters also finds strikingly low numbers of people who believe that Brexit has benefited them or the country. Continue reading...

Rolling coverage of the latest economic and financial news, as house prices defy fears of a crash, on the final trading day of 2023

As we enter an election year, how will the effects of inflation, weak GDP growth, unemployment, tax cuts and rising housing costs sway voters' intentions?The UK is entering an election year with the economy struggling to grow as households and businesses come under pressure from rising borrowing costs, higher taxes and elevated living expenses.Rishi Sunak is expected to send voters to the polls in 2024 having declared victory on his primary economic target to halve inflation in 2023. However, the Bank of England has warned the UK is facing a 50-50 chance of a recession, while living standards are on track to be lower at the end of the parliament than they were at the start of it for the first time on record. Continue reading...

The UKCA quality standard is imposing unwelcome costs, from chemicals to construction materialsWhen the government announced this year it would indefinitely delay plans to force UK companies to adopt a new post-Brexit quality mark, the UKCA, Simon Blackham, of the insulation maker Recticel, was delighted. Yes! An outbreak of common sense," he recalls thinking.His joy was short-lived, however. It quickly emerged that the government's change of heart did not apply to construction products, such as the insulation panels Recticel manufactures in Stoke-on-Trent. Continue reading...

Annual card spending report says consumers are prioritising travel and nights out and buying value-range groceries amid cost of living crisisHard-pressed consumers cut back on eating out and buying new clothes to prioritise spending on travel, entertainment and a visit to the pub over the past year, as soaring inflation and rising bills sharply curtailed the rate of spending growth.Consumer card spending increased by 4.1% year-on-year in 2023, almost two-thirds lower than the 10.6% rise in 2022, as the sharp increase in the cost of living took its toll on households. Continue reading...

Total value of mergers and acquisitions dealmaking fell to just over $265bn, down from $395bnUK takeover and tie-up dealmaking shrank by a third this year, hitting its lowest level since 2009, as rising interest rates and concerns over Britain's economic outlook affected buyers' appetites.Figures compiled by London Stock Exchange Group's Deals Intelligence team show that the total value of mergers and acquisitions deals involving UK firms fell by 33% to just $265bn (207bn) over 2023. Continue reading...

Slashing the headline rate may offer short-term gains, but the responsible route may be better bet for Jeremy HuntSince the summer, there have been rumours that the government is looking to cut inheritance tax. The prospect of an early election has only heightened speculation that this is coming in the March budget. While commentators and pundits argue over the question of whether or not a cut is coming, they miss the more important question: how would an inheritance tax cut be made?When he stands up on 6 March, Jeremy Hunt will have two options for how he could make such a cut. The first, reported to be popular on the right of the party, is simply to cut the headline rate.Arun Advani is an associate professor of economics at the University of Warwick and a research fellow at the Institute for Fiscal Studies. Continue reading...

PwC predicts inflation will fall near normal levels' in 2024, but corporate insolvencies are forecast to jump2023 has been a poor year for dealmaking, particularly in the City of London.The value of merger and acquisition activity with any UK involvement shrank by 33% this year to $265.4bn, new data from LSEG Deals Intelligence shows.Steeply rising interest rates and a concerning outlook for the UK economy, combined with stricter antitrust enforcement and ongoing geopolitical tensions curbed the appetite for deal making in 2023.M&A involving UK companies declined 33% to the lowest level in fourteen years, with double-digit percentage declines for both the domestic and cross-border deal categories, and across all sectors.A barrel of Brent crude has edged below $80 pushing down energy giants, Shell and BP in early trade.With Maersk now scheduling tankers resuming their passages via and Suez Canal and the Red Sea, thanks to the reassurance of a US-led maritime force in the region, it's helped dispel some immediate concerns about supply issues. Continue reading...

The 62m dispensed on last Friday before Christmas beat 51m record set in 2022 to reflect sharp annual rise in inflationMore than 62m in cash was withdrawn from Post Office branches on the Friday before Christmas, the most ever in a single day, as people rushed to finish their festive shopping.The record withdrawals on 22 December from the 11,500 Post Office branches across the UK beat the previous record of just over 51m, set on the final Friday before Christmas last year. Continue reading...

Chancellor has asked the OBR to prepare forecasts for the economy and public finances to be presented to parliament

Over the holidays, this column will explore next year's urgent issues. Today we look at how the past helps us understand the dollar's power and pitfallsNext year marks the 110th anniversary of a global financial crisis that shaped the world. The crash of 1914 was the biggest systemic crisis that the City, the centre of imperial rent extraction, had faced. It was also, at the time, a largely unremarked upon event. The unprecedented closure of the London Stock Exchange did cause headlines, with this paper noting that the shutdown left brokers swarming outside like ants around the destroyed heap". In the summer of 1914, however, Britons could be forgiven for being preoccupied by a life-and-death struggle emergingonthe continent.What makes the episode historically significant is the UK government's unprecedented scale of spending to save the City. In 1914, the Bank of England invented quantitative easing by purchasing bad loans from the banks in order to support the economy. Britain's declaration of war on Germany effectively rendered banks bust, since international bills of exchange, bills of trade and other financial instruments issued by enemy nations were unenforceable and hence in default. Since these were traded in London, the losses began to pile up in the City's finance houses. Something had to be done. Continue reading...

UK economic prospects are bleak but an agenda-setting fiscal event such as sweeping tax cuts in March offers another roll of the diceTo grasp the nettle, or wait in the hope that things somehow miraculously improve. This is the choice Rishi Sunak will be weighing for the next general election, as the Conservatives limp towards the finishing line of another challenging year.After Jeremy Hunt announced the government would hold an earlier than anticipated budget, with a date set for 6 March, the possibility of a poll in May, in the afterglow of some electioneering tax cuts, is clearly being given considerable thought. Continue reading...

Our politicians must stop crushing hope for a better future by talking about fiscal rules that can doom us all, write Richard Murphy and Colin HinesIt's not just the future of the EU that is threatened by the straitjacket of fiscal rules" (Editorial, 19 December). Far too many UK politicians are threatening to take the UK down the dead-end path ofwhat your editorial correctly terms the discredited economics of austerity".The public wants the next government to supply a more secure future, where wages and conditions improve and more local jobs are available. This will require a massive investment programme to build the foundations of the socially equitable and environmentally sustainable future that people crave. Continue reading...

Influx of high street shoppers should cheer retailers with numbers up by nearly 9% on 2022Bargain hunters flocked to Britain's high streets in greater numbers this Boxing Day than last, with crowds of shoppers in central London returning to pre-pandemic levels for the first time.Full-day footfall was up by 4% compared with 26 December 2022 on a national level, according to figures from the retail analysts MRI Software, improving on initial estimates at midday of a 1.4% increase. On high streets the picture was even better, with a full-day rise of 8.8% year on year. Continue reading...

Rolling coverage of the latest economic and financial news, as news publisher says AI tools use its content without permission

Inequality and poverty arose by design, not chance and stories of human rights abuses and failures in development have deep roots. Here, Prof Benjamin Selwyn recommends key non-fiction texts to help unravel some global complexitiesOne of the key questions in development is, can all countries become rich, and if so, how? Rostow, a US academic and adviser to JFK, rising to national security adviser to President Lyndon Johnson in the mid 1960s, said they can. Continue reading...

Weaker Christmas spending amid cost of living crisis and fewer shops opening cut visitor numbers by 30% on 2019Retailers have recorded a small pickup in Boxing Day footfall, but visits to stores remained well below pre-pandemic levels as several high street chains stayed shut.Retailers have been braced for weak spending over the Christmas period as the UK economy stagnates amid the cost of living crisis. Continue reading...

The big seven firms are weighted as much on global indices as all Japanese, British, French, Canadian and Chinese companiesIn the old days, there were the FAANGs, the five big US tech stocks that dominated the investment landscape - Facebook (now Meta), Amazon, Apple, Netflix and Google (now Alphabet). That picture is now out of date. Say hello instead to what is variously called the Super Seven or the Magnificent Seven - four of the above (the dropout being Netflix) plus Microsoft, Tesla and the chip-maker Nvidia. This group's domination is the stock market story of 2023.The chart below is one for the ages", says Duncan Lamont, the head of strategic research at the fund manager Schroders. It shows how, even if you invest via one of the broadest and most widely used global" stock market indices, you will end up with a portfolio that is very American and very skewed towards US tech. Continue reading...

Some big retailers stay shut as Black Friday overshadows traditional sales and people watch their budgetsShoppers are expected to spend 3.7bn this Boxing Day - but that's 3% less than a year ago as the sales are now overshadowed by Black Friday events and shoppers remain cautious about their budgets.The fall in spend marks a big drop in the volume of items being bought, given that inflation remains at about 4.3%. Continue reading...

Employees who fill up their schedule with them and do little should take a hard look in the mirror and change their waysWant to have a successful meeting? Don't meet at 2.36pm.According to a new survey of more than 2,000 employees, people typically hit the wall" around that time. The post-lunch slump" may be caused by personal habits such as lack of sleep, not drinking enough water, not getting enough exercise and an overall poor diet. But the problem is exacerbated by the meetings themselves, which are oftentimes monotonous" and overly lengthy". Continue reading...

Importers, exporters, private citizens and the Labour party all urgently need the economy to function better than thisFor a long time, people would ask me: Why do you go on all the time about Brexit?" My answer would take various forms, but essentially it boiled down to: Because it is the biggest self-inflicted British economic crisis of my career." Brexit affects businesses and what economists call consumers" every day - almost always adversely.More recently, the consistent message from readers I encounter, when Brexit comes up in the conversation, has been please don't stop". Indeed, it is time to get Brexit undone". Continue reading...

The government's reliance on the private sector has led to a UK economy on the brink of recession and a crumbling stateThe economy will end the year on the brink of recession and it is not hard to see why. After 13 years of Conservative misrule that reached its nadir last year during Liz Truss's brief tenure as prime minister, the country is crawling towards a light that flickers dimly. Even the so-called recovery since Truss's calamitous mini-budget has proved a mirage. Official figures on Friday showed that the economy shrank in the summer, when previous estimates told a story of modest growth. The signs are already flashing red for a further contraction in the autumn and winter months.If a technical recession - one that charts a decline in gross domestic product (GDP) across a six-month period - comes to pass, it will reveal that Rishi Sunak's mix of income tax rises and public sector cuts have backfired, as many experts said they would, leaving the UK worse off in almost every way possible. Continue reading...

The ghosts of Brexit, immigration and recession decide not to wake the prime minister Continue reading...

Inventor defends economic policies of Kwasi Kwarteng and Liz Truss that sent economy crashingSir James Dyson has criticised the government for not going for growth" after the latest official figures revealed an increasing likelihood of a recession in the UK.The inventor said wealth generation and growth had become dirty words" while praising the economic policies of former chancellor Kwasi Kwarteng and former prime minister Liz Truss, whose disastrous mini-budget sent the pound crashing against the dollar and brought the near collapse of pension funds and soaring mortgage costs. Continue reading...

Fun-size packs of bars, Milk Tray and Quality Street up by at least 50% since 2022 as cocoa, sugar and packaging costs balloonSupermarkets have increased the price of some festive chocolate treats by more than 50% on last year as inflation takes its toll on cocoa, sugar and packaging, research has shown.Top of the Christmas inflation pack was Green & Black's miniature chocolate bar collection which was up by just over 67% on last year to 6 at Asda, according to analysis of supermarket pricing by Which?, the consumer group. Continue reading...

Many UK cheese makers could face 245% duty from 1 January, making exporting unaffordableA priceless opportunity to sell more affordable high-quality cheese to Canada" was one of those many Brexit boons that Boris Johnson championed with his customary blather as prime minister.A bespoke UK-Canada trade deal was going to open up the Canadian market to cheddar, stilton and wensleydale in a way that had never been possible under a trading agreement struck between the EU and Canada. Continue reading...

Lagos loves to wine, dine and dance in the month leading up to Christmas, but soaring prices and rampant inflation mean would-be revellers are staying homeA normal December for Nigerian student Ibukun Ometesho involves a seemingly endless roll of music concerts and dinners out with friends. This year, however, she is hosting friends at home because she can't afford to party.Ometesho wanted to attend the Palmwine music festival in Lagos, but a student ticket costs 21,100 naira (20) - double what she paid last year, and three times more than in 2021. I saw the prices and I was shocked. It just does not make sense," she says. Continue reading...

UK GDP fell by 0.1% in July-September, worse than first estimated, raising fears of a recessionThe 0.1% fall in real GDP in Q3 may mean that the mildest of mild recessions started in Q3, says Ashley Webb, UK economist at Capital Economics.Webb adds:But whether or not there is a small recession, the big picture is that we expect real GDP growth to remain subdued throughout 2024.Rishi Sunak is a Prime Minister whose legacy is one of failure. He failed to beat Liz Truss, he failed to cut waiting lists, he failed to stop the boats and now he has failed to grow the economy.Thirteen years of economic failure under the Conservatives have left working people worse off with higher bills, higher mortgages and higher prices in the shops. Continue reading...

Rising cost of food and drink, as well as presents such as books, takes shine off festivitiesChristmas is supposed to be the season of good cheer, but this year the rising cost of festive treats across Europe is taking the shine off celebrations.Whether it's food and drink or presents such as books, higher prices are making life tougher for European households. Here we examine the effect that inflation has had on various countries across the continent and on the items that make up a traditional Christmas in each one. Continue reading...

Whether or not a recession materialises, the GDP figures are bad news for government

Inflation fall to 3.2% fuels calls for Federal Reserve to cut rates sooner as UK GDP figures push economy towards recession

A strike by Channel Tunnel workers has blocked train travel between France and Britain, while powerline problems hit West Coast mainline

Analysts blame rises in welfare costs and debt interest bill for monthly deficit of 14.3bn in NovemberGovernment borrowing was higher than expected last month despite an increase in tax revenues and a reduction in the level of energy support for millions of households.Analysts blamed increases in the cost of welfare benefits and the debt interest bill for a monthly deficit of 14.3bn in November. That was lower than the 15.2bn in the same month last year, but higher than City economists expected. Continue reading...

Firm says it is weighing up options to secure product availability amid Yemeni rebel attacks on shippingIkea has warned that the disruption to global trade caused by Yemeni rebel attacks in the Red Sea could delay its deliveries and affect availability of some products.The world's largest furniture company said it was evaluating other supply options to secure the availability of our products" after many big shipping companies stopped sending vessels through the Suez canal in response to the attacks by Houthi militants' protests against the Israel-Gaza war. Continue reading...

New libertarian president accused of drawing up a battle plan against working people'Thousands of protesters have poured on to the streets of Buenos Aires after Argentina's new president announced a far-reaching emergency decree containing dozens of controversial economic measures - a move one prominent critic compared to the actions of an absolute monarchy.Javier Milei, a radical libertarian economist who was inaugurated less than a fortnight ago, won power promising a dramatic shake-up of Argentina's moribund economy amid rampant inflation and widespread poverty. On Wednesday night Milei appeared on television, flanked by 12 stony-faced ministers and top officials, to unveil a decree he claimed would haul the South American country out of the economic hell we are now living through". Continue reading...

Falling inflation and tax cuts in a February budget would signal a spring poll but weak growth and rising mortgage bills bode cautionGo early or postpone election day in the hope that things will look brighter at some point in the future. It is a dilemma that James Callaghan, John Major, Gordon Brown and Theresa May all faced. To that list, now add the name of Rishi Sunak who ends 2023 with a tricky call to make.The Labour party has been on election footing for months, suspecting that the prime minister might call a snap election in the spring. But it was Jeremy Hunt's announcement in the autumn statement that he was cutting employee national insurance (NI) contributions that really alerted Westminster to the possibility of a May poll. Continue reading...

Soaring prices and worsening insecurity on the roads is spoiling a cherished tradition of family reunions during the holidaysEmmanuel Ejeh has a barbershop set in a park in Maitama, an affluent area of Nigeria's capital city, Abuja. The last time he travelled to his home town in Benue state more than 200 miles away to see his elderly mother was eight years ago.Since then, things have continually gotten worse and worse," he says of his business and personal finances. Instead of spending so much money on transportation to Benue and back to Abuja, it is better to send part of that money to my mother instead. It does not make up for seeing her, but what other option do I have?" Continue reading...

Developing countries are right to want to fight illicit financial flows and combat aggressive tax strategies that rob them of cash they needIt has long been a paradox that the rich countries whose professional services firms are responsible for most of the world's cross-border tax abuse also write global tax rules. That, pleasingly, may not be the case in the future. Last month, developing countries at the UN won a historic vote to set up a tax convention, over the objections from the body that wields power today - the Organisation for Economic Co-operation and Development (OECD), a club of wealthy countries, including the US, the UK and Japan. This is a long-overdue and much-needed change. Poor nations' ability to feed, educate and provide healthcare to their people is hobbled by illicit and hidden movements of capital worth billions each year.The vote was overwhelming. More than 120 mostly developing countries, representing 80% of the world's population, called for a framework convention on international tax cooperation". The UK, rather shamefully, tried to scupper the vote by bringing forward an amendment to strike out the word convention" and remove the possibility of having a legally binding outcome. Thankfully, this attempt at wrecking the proposal failed. Critics say that many UN conventions are commendable, but they are more honoured in the breach. This misses the point. Having a tax convention is better than not having one; it allows pressure to be applied on governments to take ambitious positions and stick to agreed deals. Continue reading...

Treasury says post-Brexit tie-up to be signed on Thursday will ease cross-border market access for financial servicesThe UK and Switzerland will agree to forge closer links on Thursday in a post-Brexit accord that aims to deepen ties between the City and the Swiss banking system.In a move that brings Europe's largest financial centres closer together, the mutual recognition agreement will be signed on Thursday by the chancellor, Jeremy Hunt, during a visit to Berne. Continue reading...

Forecast-beating drop in November takes rate to lowest level in more than two years

Typical household bill predicted to fall to 1,660; pound drops below $1.27 as data adds pressure on Bank of England to lower interest ratesLet them eat cake! Prices of a number of bread products, including white and wholemeal sliced loaves, and packs of cakes all fell between October and November, but rose a year ago.Other smaller downward contributions to the change in the inflation rate came from meat; milk, cheese and eggs; and soft drinks. The only partially offsetting upward effect came from fruit, where prices of strawberries rose this year by more than a year ago.Yet in absolute terms, core inflation in Britain is still more than twice the Bank of England's 2% inflation target. And even though the pace of easing is more than welcome, the Bank of England is still last in line to join the pivot party.Therefore, hawkish BoE expectations should limit the pound selloff if, of course, investors continue to divest from the US dollar on the back of softening Fed expectations. Continue reading...