Updated quarterly GDP confirms UK was fastest-growing economy in G7 with consumer confidence returning

The Tories' cuts were an obvious economic blunder, but their disastrous consequences are still piling up - and there is little hope Labour will reverse the damageUnless the polls are wildly inaccurate, the Conservative party is heading towards a catastrophic defeat in the coming election.All across the rich world, voters are angry at their governments - they blame politicians for a burst of inflation that happened almost everywhere and is now subsiding almost everywhere, including in the UK. But the Conservatives deserve defeat more than most: they took power 14 years ago promising to deliver responsible policies and economic success. Instead they have presided over economic stagnation and a collapse in public services. Continue reading...

Shadow business secretary says trying to rejoin single market or customs union would cause more difficulties'Labour would rather have stability in the UK's relationship with Europe than try to seek accelerated economic growth by rejoining the EU's single market or customs union, the shadow business secretary has said.Addressing the British Chambers of Commerce (BCC) conference on Thursday, Jonathan Reynolds acknowledged that Brexit had been very difficult for businesses" because it had erected trade barriers, but said reopening the debate would be worse. Continue reading...

Rolling coverage of the latest economic and financial news, as UK central bank publishes its new financial stability report

Central bank raises concerns over newly elected governments as more than 80 countries go to polls this year

The party's roadmap must favour comprehensive reforms, carried out at the same time, and sooner rather than laterAs in many other developed countries lately, the two major political parties in the UK have embraced economic growth as their top policy priority. After the volatile 49-day experience of Liz Truss's government and its dash for growth" in 2022, however, both parties emphasise that there are no financial shortcuts. The focus, instead, is on devising measures to boost productivity, resource allocation, and growth over the long term. In this respect, the opposition Labour party is ahead of the ruling Conservatives, though both are still working out the details of actual implementation.Buoyant, durable, sustainable and inclusive growth is essential for a country where the older generations risk seeing their children end up worse off than they are. That has not happened in many decades. Only growth can deliver the resources needed to enhance living standards, improve public services, support sustainable energy initiatives, limit the scale of generalised tax increases, and combat inequality of wealth, income and opportunity. Continue reading...

British Chambers of Commerce director general calls on politicians to improve ties with EU and strike better deal

Some Legal & General Investment Management funds will divest from Glencore Plc on concerns about its production of the most polluting fuel.Investment management giant Legal & General's ESG (environmental, social and governance) funds, and some of its pension funds, are to divest from Glencore due to concerns over its coal production.LGIM warns this morning that it believes companies need to do more to play their part in efforts to mitigate climate change risks.LGIM remains concerned that Glencore has not disclosed plans for thermal coal production that are aligned with a net zero pathway." Continue reading...

Hollywood group says 200-hectare site will be based around popular film and games franchises and open 365 days a yearThe movies group Universal has said a Hollywood theme park it plans to build in Bedfordshire, England, will be open 365 days a year and will boost the UK economy by nearly 50bn.Universal Destinations & Experiences, which is owned by the US telecoms group Comcast, the parent company of Sky, plans to build on a 192-hectare site (476 acres) in Kempston Hardwick near Bedford. The company has an option to buy a further 25 hectares. Continue reading...

Boom in air cargo due to shoppers' expectations of speedy delivery and shift in post-pandemic economy, researchers sayAir freight operators have increased their greenhouse gas emissions by 25% compared with 2019, analysis has found.In 2023, air freight operators ran about 300,000 more flights than in 2019, an increase in flight volume of almost 30%. The US accounted for more than 40% of global air freight emissions, according to the report by campaign group Stand.earth. Continue reading...

Global demand for renewable energy is surging so why make solar panels, wind turbines and EVs dearer for western consumers?With historic heatwaves sweeping across the US and other parts of the northern hemisphere, June is expected to be the 13th consecutive month of record-breaking global temperatures. The primary cause, of course, is the enormous amount of greenhouse gases in the atmosphere. Despite the existential threat posed by rising atmospheric concentrations of greenhouse gases, emissions continue to increase at a faster pace than previously anticipated.On one front, however, progress in the fight against the climate crisis has exceeded expectations. Amid the global shift from internal combustion engines to electric vehicles and the accelerated adoption of solar and wind power, demand for renewable energy is rapidly rising in the US and the EU. Continue reading...

Kevin Craig says he will take the consequences of this stupid error of judgment on the chin'

Government policies should be judged by their effect on the life satisfaction of the population, not by economic growth alone, says Prof Richard Layard. Plus letters from Sarah Davidson and Ethan OshokoYour editorial rightly points out that GDP is not a good measure of how people are faring (19 June). As an alternative, you offer the UN's human development index. But we already have a better British alternative - the measure of life satisfaction in the Office for National Statistics' annual population survey.The question asked is: Overall, how satisfied are you with your life these days (0: not at all satisfied, 10: completely)?" The results are published every quarter. That is an excellent measure of the nation's success. It provides a good account of how we are doing on average and of the degree of fundamental inequality in our society. Continue reading...

Nvidia shares rise in early trading after sliding 13% over last three sessions, wiping out half a trillion dollars of valueAirbus's woes have hit UK aerospace manufacturers.Rolls-Royce, which makes and maintains jet engines, are down 3.3% in London, while Melrose, which produces engine components, are down 3.7%.In commercial aircraft, Airbus is facing persistent specific supply chain issues mainly in engines, aerostructures and cabin equipment.These are mainly related to updated assumptions on schedules, workload, sourcing, risks and costs over the lifetime of certain telecommunications, navigation and observation programmes. Continue reading...

Institute of Fiscal Studies also dismissive of plans by Lib Dems, Greens and - in particular - Reform UKBritain's public finances are in a mess. Difficult decisions loom once the election is over. But the public is being kept in the dark about what might happen.That, put briefly, was the gist of what the Institute for Fiscal Studies had to say about the Conservative and Labour party manifestos. The thinktank was also pretty dismissive about the plans of the smaller parties: the Liberal Democrats, the Greens and - in particular - Reform UK. Continue reading...

Business secretary Kemi Badenoch and Labour opposite number, Jonathan Reynolds, debate key issues

Thinktank's director Paul Johnson says pressures on spending would be too powerful for party to make cutsA Labour government would raise taxes or soften debt rules rather than cut spending in the event that stronger growth fails to rescue it from tough post-election choices, the head of a leading thinktank has said.Paul Johnson, the director of the Institute for Fiscal Studies, said the pressures on spending - including from public sector pay - were so powerful that he couldn't envisage a Labour chancellor making cuts to balance the books. Continue reading...

After fleeing Hitler, brilliant Jewish economist Karl Polanyi was never welcomed by the British. Now, for the first time in 80 years, his masterwork The Great Transformation has been published in the UKIn 1944, the groundbreaking political economist Karl Polanyi published his radical magnum opus, The Great Transformation. In it, he accused influential liberal economists, including David Ricardo and Thomas Malthus, of commodifying human beings and the environment in the name of the free market.Their Industrial Age ideas, he argued, ushered in the barbarism and poverty that came with 19th-century globalisation and unfettered capitalism, and this led, in the 20th century, to far-right and far-left backlashes against the movements of socialism, individualism and liberalism that followed. Continue reading...

Without minimising the challenges faced by Starmer and Reeves, it is actually not a bad time to be arriving in officeLabour will win by a mile but is coming to power at the worst possible moment. The economy has been laid waste by the Conservatives, who have deployed a scorched earth policy that will ensure the incoming government has the inheritance from hell.That, at least, is the conventional wisdom, a view that Keir Starmer and Rachel Reeves have done nothing to counter. There is a reason for that. It suits Labour's campaign message to paint the blackest possible picture so that it can blame the Tories for any tough decisions they have to make. Continue reading...

A demographic timebomb caused by an ageing, shrinking population is looming for many western countries, so where are the policies to defuse it?A conference on changing demographics I attended last week tackled the fact that,while we are living longer - a great product of medical innovation - many of us will also experience extended periods later in life with physical and mental decline, so requiring more health and social care than inthe past. Yet falling birthrates mean there will be fewer working-age taxpayers, raising the question of how we foot the bill.As I listened, the Institute for Fiscal Studies' description of this general election campaign being aconspiracy of silence" came to mind. Neither the Conservatives nor the Labour party are confronting voters with the tough fiscal choices facing the country. Further cuts on already underfunded public services are baked into spending plans accepted by both parties. To avoid them, either taxes or the national debt would have to rise in a context of high interest rates, unless theeconomy somehow starts booming. And so the election has inevitably ended up feeling a bit like a phoney war. Difficult decisions inevitably await a new government on 5 July, but we are none the wiser on exactly how they will play out. Continue reading...

Starmer and Reeves plan to improve parts of the relationship with the EU. But what of becoming a member of the single market - or even a return to full membership?Labour's plans to re-engage with Brussels after a tumultuous and often acrimonious eight years since the referendum will be welcomed by all those who have recognised Brexit as an act of self-harm. Keir Starmer and Rachel Reeves have put forward tentative proposals tackling discrete issues in the UK's relationship with the EU. Here we look at what might be achieved - and the benefits of taking a bolder approach. Continue reading...

Caution is understandable, but, if elected, Starmer and Reeves will need to make bold decisions on investment and EuropeAre you familiar, dear reader, with the Ming vase" strategy?It seems to be a commonplace in inner Labour party pre-election discussion. It refers to the way that the man who is on the verge of being prime minister, and his chancellor to be, Rachel Reeves, are being so depressingly cautious in their electoral commitments that many natural Labour voters are asking themselves: what is the point? Continue reading...

With polling revealing 56% think Brexit has had a bad effect on the economy, Keir Starmer has wriggle room for renegotiationEconomic growth will be the linchpin of Labour's strategy for government if it wins the election, as it is comfortably expected to do in two weeks. Rachel Reeves, Labour's shadow chancellor, has ruled out raising those taxes that are the big revenue raisers, and has committed Labour to effectively adopting Jeremy Hunt's fiscal rule that debt should be forecast to fall as a share of GDP in five years' time. So if a future Labour government wants to invest in significantly improving financial support for children in poverty or in public services, it is vital it finds ways to grow the economy.Labour says its approach is centred around delivering greater stability in order to encourage higher levels of private investment. But many economists think it will also take higher levels of public investment to achieve anything like the business investment needed to generate growth. Yet after it scaled back its proposals to invest 28bn a year in the green transition, levels of planned public investment under Labour would only be marginally higher than under Conservative plans.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 250 words to be considered for publication, email it to us at observer.letters@observer.co.uk Continue reading...

Labour leader told if elected he will have to rejoin the customs union to meet party's manifesto pledges, while 56% of voters say Brexit was bad for economyA Labour government under Keir Starmer will fail to maximise the UK's economic growth unless it takes the country back into the European Union's single market and customs union, leading economists and diplomats have said.The warnings come as an Opinium poll for the Observer finds that 56% of voters now believe Brexit has been bad for the UK economy as a whole, compared with just 12% who believe it has been economically beneficial. Continue reading...

About 1,500 Tata Steel workers will begin an indefinite strike in July over the company's plans to cut thousands of jobs, the trade union Unite saysOver in the eurozone, the economic recovery has suffered a setback this month as firms report a drop in new business.The latest survey of eurozone purchasing managers has found that new orders decreased for the first time in four months in June, leading to slower rises in business activity and employment levels.Is the recovery in the manufacturing sector ending before it began?Both we and the market consensus anticipated that the increase in the index in May would be followed by another rise in June, potentially setting the stage for an upward trend. However, rather than moving closer to expansionary territory, the HCOB Flash Eurozone Manufacturing PMI reading fell, dashing hopes for a recovery. Continue reading...

Exclusive: Sources say changes to inheritance tax and capital gains tax are being discussedThe Labour party has been drawing up options for how it could raise money through extra wealth taxes to help rebuild Britain's public services if it wins the general election, according to sources who have spoken to the Guardian.The proposals under consideration include increases in capital gains tax (CGT), first revealed by the Guardian two weeks ago, that could raise 8bn. Continue reading...

France's economy minister name-checked Liz Truss as he sought to warn voters of the risks of voting for RNIt's a big deal, of course it's a big deal," says Sophie Montanari, emerging from the Metro at Notre Dame de Lorette in central Paris to talk about her struggles to make ends meet.We never used to have trouble at the end of the month. Now we do. It'll certainly influence our vote." Continue reading...

ONS says most retailers enjoyed a better month in May, with increases in clothing and household goods

Seventh consecutive freeze comes despite fall in rate of inflation to 2% target last month

Bank of England leaves interest rates unchanged despite inflation falling to its 2% target yesterday

The effects of austerity, Covid, war and the cost of living crisis are still haunting government and domestic financesWhile inflation figures usually generate a news story in their own right, last month's figures led to the biggest news line of them all.Rishi Sunak's surprise announcement that he would hold a snap election on 4 July came hours after April's inflation figures were announced. They were widely reported to have heavily influenced his decision to take the country to the polls. Continue reading...

Isabella Weber, who linked corporate profits to inflation, shares how to prevent food shortages - and price gouging

We want to hear about how the rising cost of food has affected people in the USWalk through any US grocery store and you're likely to experience some sticker shock. Food prices have soared 25% in recent years, outpacing inflation, so that now the average US household spends more than $1,000 a month on groceries alone. Even with news that inflation is finally starting to steady, food remains stubbornly expensive.We're interested in hearing how the rising cost of food has affected people in the US: the prices you've been most surprised by, how it's changing your shopping and eating habits, and whether you have any tips for keeping your grocery bill low. Continue reading...

Shadow chancellor on why the gender pay gap is at the top of her agenda and a terrible Tory inheritance

The public doesn't understand how economic growth is measured, let alone enjoy much of it. So why is it central to this election?Great news this morning!" beamed Rishi Sunak on Wednesday. Not every release from the Office for National Statistics gets its own prime ministerial post on Instagram, but inflation falling to 2% was, the Tory leader claimed, a personal victory. When he moved into No 10, it was 11%, he reminded voters. But we took bold action, we stuck to a clear plan and that's why the economy has turned a corner."Not so fast, Mr Sunak. The prices of food and petrol remain about 25% higher than two years ago. More than one in five households say that they are strugglingto pay their bills or to make ends meet. The cost of living crisis was always much bigger than a number on the consumer price index: it was a catch-all term, taking in everything from a punitive welfare system and poorly paid and insecure work to rising expenses. Millions of households were in a cost of living crisis long before it made the front pages; long after the term falls out of fashion, they will still be in one. Continue reading...

Leading economists and policy experts believe the ambitious reforms proposed by Keir Starmer and Rachel Reeves will help grow the economy.

The cost of gas, electricity and garden furniture has plunged ... but cocoa and vets' services cost a lot more Labour says pressure on family finances still acute as inflation falls to 2%The UK's annual inflation rate fell to 2% in May, in line with the forecasts of City economists.The Office for National Statistics compiles the overall reading using the consumer prices index but also logs prices for individual goods and services. Here we look at how the cost of many of those everyday items has changed over the past year. Continue reading...

Inflation returns to target for first time since July 2021; breakfast cereal, crisps, vegetables become cheaperPrices for recreational and cultural goods and services rose at an annual rate of 4.1% in the year to May, down from 4.6%, today's inflation figures showed.Prices of pets and related products, and books fell between April and May this year, compared with a monthly rise a year ago. Prices of package holidays and cultural services rose this year by less than a year ago. Continue reading...

Rachel Reeves warns cost of living crisis is not over, as inflation hits official target for first time in three years

It will take time for voters to forget the financial toll from the highest inflation in four decades - and time is not on the PM's side

Largest annual rise since records began in 1987 sees forecast of average 1,660 extra debt amid cost of living crisisUK households are expected to rack up extra unsecured debts of more than 1,600 this year, including on loans and credit cards, as the cost of living crisis continues to bite, according to a TUC analysis.The TUC said its analysis showed that unsecured household debt - including loans and credit cards but excluding mortgages and, for this exercise, student loans - was on course to increase by 9.4%, or 1,660, in real terms on average per household this year. Continue reading...

Exclusive: Changes early in expected new government intended to stop repeat of catastrophic Truss mini-budgetLabour has challenged the Conservatives to match its commitment to strengthen the economic watchdog within the first 100 days of government.Rachel Reeves, the shadow chancellor, has pledged to introduce legislation giving the Office for Budget Responsibility greater powers in Labour's first king's speech. Continue reading...

Institute for Fiscal Studies praised Conservatives' ambition but said by some measures gap had widenedProgress towards a series of levelling up goals set by the UK government has been glacial", and achieving them by the target date of 2030 will require a big increase in resources for struggling areas, a leading thinktank has said.The Institute for Fiscal Studies (IFS) said that, on many measures, regional inequality had widened and the UK had gone into reverse.The share of pupils in England meeting expected standards at the end of primary school dropped from 65% in 2018-19 to 60% in June 2023, against a target of 90% by 2030. In only 10 English local authorities - all in London - did at least 70% of 11-year-olds meet this target.The total number of further education and skills courses completed in England fell by 14% between 2018-19 and 2022-23. In the lowest skilled areas, the decline was almost 20%. The goal for 2030 is to have 200,000 more people successfully completing high-quality skills training annually, driven by 80,000 more people completing courses in the lowest skilled areas.A 21-percentage-point gap in the average employment rate between the best and worst-performing local authority areas in the UK - the widest it has been since at least 2005. The aim is to have rising pay, employment and productivity in every area of the UK, and a smaller gap between the top performing areas and others.The Conservatives' aim is for local transport connectivity across England to be significantly closer to the standards of London, but the gap between the use of public transport in London (39% of journeys) and in the rest of the country (7%) during 2022-23 was at its second-widest level since 2002-03, as passenger numbers failed to recover to pre-pandemic levels. Continue reading...

Rolling coverage of the latest economic and financial newsIceland's chairman, Richard Walker, says Kantar are correct that the cost of living squeeze isn't over - before squeezing in a plug for his supermarket:Back in January, Walker (a former Conservative supporter) announced he was backing Labour, saying Keir Starmer understood how the cost of living crisis has put an unbearable strain" on families. Continue reading...

Bad weather makes consumers trim supermarket shop and rethink summer purchases despite slower food price rises

Institute for Public Policy Research urges Labour and Conservatives to reverse planned cutsInvestment in the UK has trailed other G7 countries including the US and Germany since the mid-1990s, according to a report that urges Labour and the Conservatives to reverse planned cuts to investment or risk long-term damage to economic growth.The Institute for Public Policy Research (IPPR) thinktank found the UK was bottom of the G7 league for investment in 24 out of the last 30 years, using figures from the Organisation for Economic Co-operation and Development (OECD). Continue reading...

The UK can't continue with policies that have produced a productivity slump and record amounts of insecure workIn the manifestos of both the Conservative and the Labour parties, there is a commitment to implementing the NHS long-term workforce plan to ensure that the country will be able to populate the health service with UK-trained doctors and nurses. However, neither of the parties are suggesting that they will fund the 30bn it would cost to employ the tens of thousands of staff they say they will train. Instead, voters are expected to believe that the confidence fairy will turn up when the next government arrives - and businesses will invest, leading to economic growth.It is magical thinking to believe that, without actually doing anything, private spending in Britain will be stimulated to such an extent that it will more than compensate for the anticipated public sector cutsthat depress it. Continue reading...

Rolling coverage of the latest economic and financial news

Authority has debts of 1.8bn after years of local government funding cuts and has failed to find an auditorWarrington council's inability to find an auditor to sign off its accounts has led the credit rating agency Moody's to withdraw its monitoring of the authority, amid mounting concern about the broader crisis in local government funding.In a statement, Warrington borough council said Moody's Investors Service was no longer providing it with a credit rating, a crucial metric used by potential lenders to assess a borrower's creditworthiness. Continue reading...