Live, rolling coverage of business, economics and financial markets as Bank of England's Andrew Bailey calls for UK to embrace AI'The Bank has said that the full effect of interest rate increases is yet to come through to the economy, suggesting there may be more pain ahead.It said:The full effect of higher interest rates has yet to come through, posing ongoing challenges to households, businesses and governments, which could be amplified by vulnerabilities in the system of market-based financeThe full impact of higher interest rates will take time to come through. Given the impact of higher and more volatile rates, and uncertainties associated with inflation and growth, some risky asset valuations continue to appear stretched.Conditions remain challenging, given increased geopolitical tensions and uncertainties over growth, inflation and interest rates.The UK banking system is strong enough to support households and businesses, even if the economy does worse than expected. Continue reading...

All you need to know about the European Commission's new proposal to delay its 10% charge on EVs

Economy grows more slowly than expected, with consumer spending flat under the pressure of high interest rates

Commission moves to delay 10% sales charge after intense lobbying by EU and UK carmakersThe European Commission looks set to propose a three-year delay to a 10% tariff on sales of electric vehicles between the EU and the UK, in a major boost for car industries across Europe.Duties were due to kick in on 1 January 2024 but all the major carmakers in the UK and Europe including BMW, Volkswagen and Stellantis have been lobbying for a temporary reprieve. Continue reading...

European Commission chief Ursula von der Leyen to meet Chinese president Xi Jinping at summit on ThursdayThe EU is to tell China that its 400bn (343bn) trade deficit is not sustainable long term amid fears that it will flood the bloc with subsidised electric cars, solar panels and medical devices, threatening European manufacturing and jobs.Ursula von der Leyen, the European Commission chief, and Charles Michel, the European Council president, will meet Xi Jinping at a summit on Thursday, the second of its kind this year. Continue reading...

Moody's cuts its outlook on China's credit rating, while trading in smaller stocks in London is hit by systems problems

Festive feast for four rises in price far below annual food inflation rate with sparkling wine and pudding cheaper than in 2022The cost of a traditional Christmas dinner for four has risen 1.3% this year to 31.71, as fierce competition between supermarkets offsets high inflation.The increased cost of a festive family feast is far below the 9.1% rate of general grocery inflation tracked in November, which marks a further easing from 9.7% in October, according to research by Kantar. Continue reading...

Rating agency says Beijing may need to bail out local governments as property sector collapsesChina's ability to repay its government borrowing has been downgraded by the credit rating agency Moody's, which said the ripple effects from a crisis in the property sector would undermine efforts to revive its flagging economy.Moody's warned that Beijing would need to bail out local and regional governments and state-owned enterprises that were struggling with rising debts, hampering efforts to boost investment and growth. Continue reading...

Many still hanker for how things were: but looking across the Channel, it's completely illogical to do thatBrexit is a dead issue at Westminster. There are any number of issues where it is hard to separate Labour and the Conservatives, and the reluctance to reopen the 2016 referendum debate is one of them. As with tax and spending, Keir Starmer is broadly offering continuity Rishi Sunak.That doesn't mean the debate about leaving is over. Plenty of people still nurture the hope that the decision will be reversed and are working to that end. But any successful campaign would need to do two things: convince voters that the UK economy had become a basket case since the Brexit vote and that life for those still in the club was so much better. Continue reading...

Fixing a broken economy with service-led growth and increases in public investment as well as welfare spending should be seriously consideredAdam Smith, the father of economics, condemned as unproductive the labours of churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers". How wrong he turned out to be, says the Resolution Foundation thinktank. It points out that the creative industries accounted for 6% of the UK economy last year, and have grown faster than the UKeconomyoverall since 2011.The report, Ending Stagnation, says the last 15 years of low growth and high inequality have seen a living standards gap worth 8,300 open up between typical households in Britain and those in France, Germany and the Netherlands. It suggests fixing this by growing the UK economy through its service sector - and the work of Smith's grave" lawyers and frivolous" musicians - to pay for higher investment and higher benefits. Continue reading...

Resolution Foundation report underlines lack of progress by Tories but Labour proposals seem woolly

Home secretary to announce big hike in salary requirement for migrants to the UK as Rishi Sunak tries to cut net migration figuresHunt says the government wants to speed up the time it takes to get a connection to the national grid by 90%.Zanny Minton Beddoes, the editor of the Economist, is interviewing Hunt. She says he has mentioned the 110 policies, but she wants to know what the growth strategy is. Continue reading...

Labour leader refuses to rule out keeping planned cuts to government departments if he wins power

Gold at all-time high, and bitcoin at 20-month peak, as traders bet on US interest rate cuts early next year, while ONS shows that mortgage holders face higher inflation

Ours is the most unequal major economy in Europe, with poorer workers losing out most. It's time to start playing to our strengthsBritain has huge strengths, but it is now impossible to miss that we're in a phase of relative decline. A year or two of poor productivity growth and flatlining wages is survivable, but 15 long years of stagnation is not: workers today take home no more than they did heading into the financial crisis. The cost of wages not growing as they used to? 10,700 a year for the average worker.Slow growth combines with longer-lasting high inequality: the UK is Europe's most unequal large economy. That combination has proved toxic for people in Britain on middle and low incomes. We think we're similar to the likes of France or Germany, but our poorer families are now a staggering 27% worse off than their French and German counterparts.Torsten Bell is chief executive of the Resolution Foundation Continue reading...

Chancellor says vote led to incredibly challenging time' as he defends tax cuts paid for by public sector austerity

Trade has been hit by Brexit, while the number in poverty has risen sharply in a country ill-prepared for the future

Bidenomics remains abstract against the cold hard reality of higher prices and higher taxesMy home city of Philadelphia has a population of about 1.6 million people, of which about 1 million are registered voters. According to the most recent numbers from the Commonwealth of Pennsylvania, approximately 75% of voters are registered Democrats and 11% are Republicans. Our mayor, city council and district attorney and most other important political leaders are Democrats. Joe Biden would win by a landslide if the 2024 presidential election were held only in Philadelphia. Of course, it's not.Pennsylvania is a big state with a critical 20 electoral votes. In many ways it is a good proxy for how the US as a whole will vote and - as someone who works with businesses across the state - fast-approaching 2024 will be all about the economy. Continue reading...

Amid the cost of living crisis and threats to the climate, many are pledging to consume less and spend sustainably

The climate and cost of living crises make belief in expanding GDPs look as stale as last year's mince pies. But when central governments rely on consumerism to shore up spending, it will be hard for degrowth' to gain any tractionWhen Kat Butler made her first post-lockdown trip to the high street in 2021, she found herself staring, disorientated, at the aisles of clothes in the Perth branch of Mountain Warehouse. There was just rails and rails of stuff," she says.Before the pandemic, Butler, 36, a freelance graphic designer, had enjoyed browsing clothes shops, touching the fabrics and inspecting garments' construction. But when she returned after the lockdown months, she was just overwhelmed by the amount of stuff". Continue reading...

The cost of government is rising, yet raising taxes is bad politics. From productivity to degrowth', the left ought to get behind the more radical approachesTaxing the better-off is not going to be easy. For one thing, no one can agree on how to go about it. Thinktanks have put forward various proposals, usually targeting individual wealth.Voices across the political spectrum agree with the need for such a move. Free-market economists are just as worried about the excessive accumulation of personal capital as those on the left. Continue reading...

Modest fall in mortgage costs and rising manufacturer confidence fuel hopes that UK is turning the corner'

Nationwide reports house prices only fell 2% in year to November, and rose during the month, as mortgage rates fallNationwide has also provided this chart, showing how UK interest rate expectations in the financial markets have eased back, after surging earlier this year:Robert Gardner, Nationwide's chief economist, explains:These shifts are important as they have led to a decline in the longer-term interest rates (swap rates) that underpin fixed rate mortgage pricing, as shown below.If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at c.30% below pre-pandemic levels. Continue reading...

Labour chancellor of the exchequer who in 2008 found himself in the eye of an unparalleled economic stormAlistair Darling, the former Labour chancellor of the exchequer, who has died of cancer aged 70, was appointed to run the Treasury in the early summer of 2007, just weeks before a devastating credit crisis at Northern Rock led to the first run on a British bank in 150 years, which would in turn serve as the harbinger of the ensuing global financial recession. It was Darling who announced that the government and the Bank of England would guarantee the deposits at Northern Rock and who later ordered the 50bn rescue of the Royal Bank of Scotland within hours of its collapse.He would reflect afterwards that Britain had been perilously close to a breakdown in law and order, which could have been precipitated by the failure of what was then, if briefly, the largest bank in the world. He thus left the Treasury in 2010, after three tumultuous years, with his previously established reputation for maintaining stability in times of trouble considerably enhanced. His earlier close friendship with the then prime minister, Gordon Brown, was ruptured, however, by the differences over how they handled the sequence of critical events of the period. Continue reading...

Richard Walker calls for price cap on infant formula as competition watchdog finds evidence of greedflation

As chancellor during the financial crisis he showed great wisdom and courage, and he played a huge part in keeping the UK intact in the Scottish referendum

Labour politician, who has died aged 70, faced toughest challenge of his career when economy crashed in 2008

November's figures fuel speculation about timing of ECB interest rate cut as concerns grow about national finances

Consumer price index rose last month at an annual rate of 4.9%, which is lower than economists had forecast

CMA announces move after finding popular grocery brands put up prices on number of products faster than costs rose

Stance on inflation poses threat to soft landing' forecast for global economy, says OECD

Treasury's independent forecaster says uncertain spending plans and higher than expected inflation could scupper cutsGovernment plans to reduce the UK's debt mountain by restricting Whitehall spending are among the biggest risks to the outlook for the public finances, according to the Treasury's independent forecaster.The Office for Budget Responsibility (OBR), which predicts the impact of economic trends and government spending decisions on the public finances, said the uncertainty surrounding the government's spending after next year and higher than expected inflation meant there was a risk that planned budget cuts to debt in five years' time would be dashed. Continue reading...

Business and Trade Committee hear apology from Wilko chair over retailer's collapse, while auditors defend their handling of Wilko's accounts

CEO Charlie Nunn calls for measures such a windfall tax to be ruled out before next general electionThe chief executive of Lloyds Banking Group has fired a warning shot at UK policymakers, saying measures such as a windfall tax on banks should be ruled out before what is expected to be a hard-fought election year.With Labour largely silent on its plans for City regulation despite its current commanding lead in the polls, Charlie Nunn said City firms and investors alike were looking for more certainty and clarity around the future". Continue reading...

Shop price inflation eased to 4.3% in November but ministers' plans could lead to higher prices, BRC saysThe UK's largest retailers have warned Rishi Sunak that his government risks prolonging the cost of living crisis by driving up the cost of doing business on the high street with Brexit red tape and higher taxes.The British Retail Consortium (BRC) said a number of measures laid out by the chancellor, Jeremy Hunt, in last week's autumn statement risked adding to inflation next year. Continue reading...

Alarmed by the rising tide of waste we are all creating, my family and I decided to try to make do with much less. But while individual behaviour is important, real change will require action on a far bigger scaleOne freezing cold morning, I drove past the outer edge of Denver, Colorado, past Buckley air force base, past the suburban neighbourhoods huddled at the edge of the Great Plains. I saw rising from the prairie several low bumps, lifting from the horizon like icebergs. As I got close to them, I saw they were encircled by barbed wire and knew I had reached my destination.I pulled into the Denver Arapahoe Disposal Site, cutely known as Dads. I was part of a tour, arranged by a local reporter. Ten people gathered around our guide, Doc Nyiro, a Dads manager, middle-aged, with a studious, geeky demeanour. Nyiro began by telling us that Dads is open 24 hours a day, six days a week. Every day, 800 trucks arrive, culminating in about 2m tonnes of refuse a year. We watched the trucks pulling into the weigh station. It just doesn't slow down," Nyiro said. Truck after truck." Continue reading...

Rishi Sunak's foreign investment claims include pledges and spending that would have happened anyway

Bosses have doubts despite glitzy summit seeking investment from US, Saudi Arabia and others

At summit to drum up foreign investment PM says he does not intend to change policy towards Beijing

Rolling coverage of the latest economic and financial news, as hundreds of investors meet at Hampton Court

Defense Production Act of 1950, passed to streamline production during Korean war, was last used during Covid pandemicThe White House has announced it plans to use a cold-war era law to ease supply chain issues that the administration argues are contributing to higher inflation - a key electoral challenge to Joe Biden's re-election chances next year as polling consistently suggests voters are not buying his Bidenomics pitch.In a statement, the White House said Biden will use the Defense Production Act to improve the domestic manufacturing of medicines deemed crucial for national security and will convene the first meeting of the president's supply chain resilience council to announce other measures tied to the production and shipment of goods. Continue reading...

Andrew Bailey again dismisses speculation about rate cuts, saying fight to bring inflation down to 2% is hard work'

Extreme weather contributing one-third of all food price inflation with worse to come in 2024, warn climate researchersBritish households' food bills have been driven up by more than 600 over the past two years by the global climate emergency and soaring energy prices, according to a report warning of further increases to come in 2024.Sounding the alarm over the impact from increasing extreme weather patterns for food production, the Energy and Climate Intelligence Unit (ECIU) thinktank said that global heating was directly contributing to the cost of living crisis. Continue reading...

Inequalities of income, wealth and power cost UK 106.2bn a year compared with average developed OECD countryThe UK spends more than anywhere else in Europe subsidising the cost of structural inequality in favour of the rich, according to an analysis of 23 OECD countries.Inequalities of income, wealth and power cost the UK 106.2bn a year compared with the average developed country in the Organisation for Economic Co-operation and Development (OECD), according to the Equality Trust's cost of inequality report. Continue reading...

Report says lack of intellectual diversity' at senior level and too wide a range of priorities led to errors and fall in public confidenceThe Bank of England's reliance on inadequate" forecasting models and a lack of intellectual diversity within its most senior ranks contributed to inflation sticking at among the highest levels in decades, a Lords report has found.In a report critical of Threadneedle Street, the powerful Lords economic affairs committee said the central bank had made errors" in its handling of the inflation shock triggered after the Covid pandemic and Russia's invasion of Ukraine. Continue reading...

Music, theatre and art have been crushed by years of Tory cuts. They need to be nurtured again, with purpose and with prideAs the Conservatives clutch at political straws, the Labour party is readying itself for government. Some predict a general election as early as next spring. In Thangam Debbonaire - who started out as a professional cellist - there is the unusual prospect of a culture secretary who understands the arts from deep personal experience. Two months into her job shadowing the unimpressive incumbent, Lucy Frazer, she is in listening mode. The next step is to get herself a serious, ambitious plan for power.As Labour culture secretary, she would almost certainly score easy points by just not being Tory. That means, to pick some random examples, by not being among the 12 Tories to hold the post in 13 years. By displaying less ignorance about the brief (Nadine Dorries's startling misapprehension, when culture secretary, that Channel 4 is publicly funded, stands out amid a strong field). By not relentlessly starving, punishing and criticising the BBC, the UK's largest cultural organisation. By not dragging the arts into a cynical, divisive culture war. By not being part of a government that unleashes something as self-harming as an exit from the European Union. By not engaging in a zero-sum game in which London is pitted against the rest of the country in the name of levelling up.Charlotte Higgins is the Guardian's chief culture writer Continue reading...

High-priced homes do not create wealth, Alan Kohler says, they redistribute it. Now financial success is largely a function of geography, not accomplishment

Immigration fuels growth and much-needed workers but there are ways to wean UK plc off its dependencyRishi Sunak can't catch a break. Barely was the ink dry on last week's autumn statement than the news came out of record migration figures. The previous week, a bigger than expected fall in inflation was followed within hours by the supreme court ruling against the government's plan to process asylum seekers in Rwanda.No question, migration ranks alongside the record level of tax and the dismal state of the economy as one of the three big economic challenges facing the prime minister. The way the opinion polls are looking they will soon be problems Keir Starmer will inherit. Continue reading...

Jeremy Hunt's almost carefree approach to the autumn statement bespoke a chancellor, and a party, that has largely ceased to careWhat impressed me most about the delivery of last week's autumn statement was the good-humoured - almost jovial - manner in which our fourth chancellor in three years unveiled a seemingly endless list of measures supposed to promote growth".In most cases they were nothing of the sort. But Jeremy Hunt was so relaxed that one wonders if he believed a word of it. I had the wicked thought that as his party is assumed by most observers - not least its own members - to be approaching the electoral scaffold, the prevailing mood was one of lie back and think of the election after next". Meanwhile, they can enjoy the spectacle of a Labour party struggling to carry out its traditional role of trying to sort out the mess it is likely to inherit. Continue reading...

The chancellor's tax giveaway will simply load even more painful spending cuts on to an inflation-devastated public sectorJam today, austerity after the next election - that was the thrust of the chancellor's heavily trailed autumn statement last week. As expected, Jeremy Hunt announced tax cuts that the country can ill afford. But despite his claims to be focused on the long term, he is paying for these cuts by raiding the money that should be reserved for public services after the next election to help them cope with rising inflation.If this further round of spending cuts is imposed, it will blight the lives of the people who disproportionately rely on Britain's public infrastructure - children from disadvantaged backgrounds, older people with care needs, women suffering domestic abuse. It will also continue to suppress the country's future growth prospects, perpetuating the austerity fallacy that cutting public spending makes good economic sense despite the fact that it inevitably shrinks future tax revenues. Continue reading...