Recent banking turmoil fuels decision to extend trading plan for second time to 2025A plan to whittle down the government’s stake in NatWest has been extended by another two years after weeks of banking turmoil that hit the lender’s shares and temporarily fuelled fears over a fresh financial crisis.UK Government Investments (UKGI), which manages the shares on behalf of the Treasury, said the scheme to strategically sell portions of the British taxpayer’s shareholding – after NatWest’s near-£46bn state bailout in 2008 – would now run until August 2025. Continue reading...

All you need to know about the Opec+ decision to cut production and the potential knock-on effects

KPMG study shows scale of household spending cutbacks, with eating out hit particularly hardMore than half of UK consumers have cut back on discretional spending since the start of the year, with nearly two-thirds choosing to reduce the amount they spend on eating out, according to research from KPMG.As households grapple with a swath of bill increases and tax hikes coming into effect from the start of this month, the survey of 3,000 consumers also found that 49% plan to spend less on non-essentials now that energy bill support payments have come to an end, while 30% will use their savings to cope. Continue reading...

The government is spending five times more on refugees in the UK than it allocates in aid to AfricaDonald Trump never did manage to build the wall on the US’s southern border. Rishi Sunak may have no better luck stopping the small boats with his plan to put refugees on barges or send them to Rwanda.But the extent to which governments will go to “defend” their borders shows just how hot a political topic migration has become across developed western countries. Nor is it just the case in the US and UK. Sweden and Germany have seen the emergence of anti-immigration parties in recent years as the number of migrants has increased. Continue reading...

Being dull but safe won’t help Keir Starmer pull off a big win over the Conservatives. He needs to offer meatier fare than thatHow dull can an opposition party be and still command the kinetic energy to win an election that requires a swing of up to 13 percentage points? Especially as the haul of seats it would need for an outright majority – given its dreadful losses in England in 2019, the SNP’s troubled but hardy grip on Scotland and the fact of fewer Welsh MPs being returned to Westminster – approaches the 145 gained by Tony Blair in the 1997 landslide.Elections do not always vindicate early predictions. Much can happen between now and the election deadline of January 2025 (which effectively means going to the polls in the latter half of next year) that makes yesterday’s “impossible” look like tomorrow’s “told you so”. It would, however, be unwise for Labour to rely, as one of its sharpest advisers on strategy succinctly puts it, on “Tories being crap and Labour being a bit less crap”. Continue reading...

The blight on living standards makes the case for rejoining stronger every day – and this PM is nothing if not pragmaticFor many years, when asked to speak about the British economy, I used to point out that the influence of technological progress on productivity allowed an average growth rate of 2.25% to 2.5% a year. This meant that living standards could double every 25 years or so. Political battles raged over the sharing of the growth, but on the whole most people gained to some extent.No longer! Beneath all the fanciful predictions emanating from this tired government come the hard facts from the independent Office for Budget Responsibility (OBR), the Resolution Foundation and the Organisation for Economic Co-operation and Development. A collapse of investment, with more and more international corporations deciding Britain is no longer the place to invest for a foothold in the European market. And dire forecasts of a 6% fall in living standards in the next two years. Some platform for an election, eh? Continue reading...

Explainer: Report’s recommendations on the central bank are due out this month. Here’s what you need to know

Hailed by Tory MPs as a Brexit benefit, CPTPP membership actually turns the UK into a willing pawn in Washington’s geopolitical gameTory MPs hailed the UK’s entry last week into the Indo-Pacific trading bloc as a major step on the road to re-establishing Britain as a pioneer of free trade.It was a coup for Rishi Sunak, said David Jones, the deputy chairman of the European Research Group of Tory Eurosceptics, who was excited to be aligned with “some of the most dynamic economies in the world”. Continue reading...

After UK narrowly misses recession IoD reports rise in business demand, confidence, hiring and investment in MarchBritain’s businesses are reporting a spring surge in order books, boosting hopes that the economy may finally be recovering after flirting with recession late last year.After official figures showing the UK performed slightly more strongly than originally thought towards the end of 2022, the Institute of Directors said there had been an improvement in demand, confidence, hiring and investment intentions in March. Continue reading...

Average UK house prices fell 3.1% in year to March, while energy costs are now falling in the eurozone and US core PCE inflation has dropped

PM also refused to say what he would do if inquiry into Dominic Raab found justice secretary bullied officials. This live blog is closedThe UK government has announced a £57m funding package to support Northern Ireland charities and community organisations facing a financial crisis due to a loss of European money, PA Media reports. PA says:Eighteen projects across the region will receive backing through the UK shared prosperity fund with a focus on groups helping support people into work.The announcement comes just a day before financial support provided by the European social fund comes to an end due as a consequence of Brexit. Some charities in Northern Ireland had warned they would have to cut staff and support programmes if funding was not replaced. Continue reading...

Annual rate down to 6.9% this month, with signs of cost of living pressures easingThe eurozone’s annual inflation rate fell sharply in March as plunging energy prices eased pressure on the cost of living across the 20 countries that use the single currency.Amid signs that upward pressure on prices is easing, the EU’s statistical agency Eurostat said the headline inflation rate dropped from 8.5% in February to 6.9% this month. Continue reading...

Comments threaten to worsen already tense relationship between senior ministers and civil servants

Study commissioned by Guardian details scale of hit to household finances from April

Unions have condemned clauses in deal that will allow large firms to sue UK government behind closed doorsBritain has joined the 11-member strong Asia-Pacific trade bloc that includes Japan and Australia after nearly two years of negotiations.The deal, part of a push to agree worldwide trade deals after Brexit, secures access for British exporters to 500 million people in the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Continue reading...

Economist predict Spain’s inflation will keep falling, after a drop in energy prices this month eased the cost of living crisisFour bankers who helped a close friend of Vladimir Putin move millions of francs through Swiss bank accounts have been convicted of lacking diligence in financial transactions.Reuters has the details, from Zurich:The four were found guilty on Thursday of helping Sergey Roldugin, a concert cellist who has been dubbed “Putin’s wallet” by the Swiss government.The executives - three Russians and one Swiss - helped Roldugin, who is godfather to Putin’s eldest daughter Maria, deposit millions of francs in Swiss bank accounts between 2014 and 2016. Continue reading...

Outgoing boss David Malpass says more money needed to combat overlapping crises of war, pandemics and climate emergencyA dramatic increase in financial help is needed to help poor countries meet the $2.4tn (£1.9tn) annual cost of coping with the combined impact of wars, pandemics and the climate crisis, the outgoing head of the World Bank has said.Speaking in Niger, David Malpass defended his record for funding support for developing countries since becoming president of the Washington-based organisation and said further increases would probably be announced at the Bank’s spring meeting next month. Continue reading...

Push to block platform reflects rising distrust of China and limited understanding of tech worldThe spectacle of the US Congress grilling TikTok CEO Shou Zi Chew on 23 March could one day be remembered as a turning point in the history of globalisation. Over five hours of aggressive questioning, Chew – who is not Chinese, but Singaporean – did a magnificent job of defending his company’s Chinese ownership in the face of Congress’s limited understanding of the tech world.The Biden administration views TikTok as a potential national-security threat and wants its Chinese-owned parent company, ByteDance, to sell the platform to a US-owned company or face a possible ban. Chew, however, proposes that ByteDance retain its majority ownership of TikTok but have its US operations run entirely by the Texas-based tech giant Oracle, which would store all US user data on its servers and monitor how TikTok’s algorithms recommend content. Meanwhile, the Chinese government has said that it would oppose a forced sale. Continue reading...

This blog is now closed.

Treasury committee holds hearing on the sudden collapse of Silicon Valley Bank this month

Prices rise fastest for eggs, milk and cheese amid shortages of salad and other itemsSupermarket price inflation in the UK has hit another record high, raising the increase in average annual household bills to £837, as shoppers increasingly turn to multiple supermarkets to hunt for bargains.Year-on-year price increases for groceries hit an all-time high of 17.5% in the four weeks to 19 March compared with a year earlier, according to the latest figures from the data firm Kantar. The prices of eggs, milk and cheese are rising at the fastest pace. The latest price rises mean an average annual household bill for groceries is £5,617, Kantar said. Continue reading...

Asked if he could have anticipated the collapse of the Silicon Valley Bank, the Bank of England governor said it was probably the fastest collapse of a bank he had seen in his three-decade long career.'It is probably the fastest passage from health to death since Barings,' said Andrew Bailey, speaking before a Treasury select committee on Tuesday. Comparing the collapse of Silicon Valley Bank to Barings, which went under in 1993, Bailey added: 'Barings, as you will remember, was a sort of Friday to Sunday thing and this was pretty similar'

Shares in First Citizens Bank surge 45% as it agrees to buy much of Silicon Valley Bank, while Saudi National Bank’s Ammar Alkhudairy resigns

My friend and former colleague Graham Pyatt, who has died aged 86, was a founding member of the department of economics at the University or Warwick, having been appointed professor of mathematical economics there at the age of 28.While at Warwick he was influential in the creation of several degree programmes, was also a consultant to the accounting firm Coopers and Lybrand (1968-74), and was responsible for the early BBC Election Night computer predictions (1968-74), presenting cameo insights into the results, on-screen, alongside the political scientist David Butler. Continue reading...

Kristalina Georgieva joins others in voicing fears about threat to world economy after recent bank collapsesThe head of the International Monetary Fund has warned that the global economy faces risks to its financial stability because of the turbulence in the banking sector.Kristalina Georgieva, the managing director of the Washington-based lender of last resort, said rising interest rates had put pressure on debts, leading to “stresses” in leading economies, including among lenders. Continue reading...

Governor Andrew Bailey has had to accept that the economy is resilient, but he’ll still find reasons to keep interest rates highFrom the fog of contradictory economic data over recent months comes a sense of direction. Suddenly, there is no more talk of recession, even as business surveys show firms doing OK. Instead, the picture is clear and there is no doubt the economy is growing again.A slump that was supposed send the economy backwards in the first half of this year has vanished, notwithstanding worries about a global banking meltdown and credit crunch. That leaves predictions of a decline in economic activity being replaced by an expansion during the second, third and fourth quarters of 2023. It’s quite a turnaround. Continue reading...

Cat food brand caught in shrinkflation storm as owners say new pouches and recipe leaves pets hungryThe mercurial nature of cats means owners spend a lot of time trying to understand “cat speak”. However, the chances that loud miaowing is about food have increased after Whiskas not only slashed the size of its cat food pouches but changed the recipe .The price of Whiskas has risen sharply in the past year and pet owners have taken to the brand’s Facebook page to vent their outrage over the smaller packets, which are 85g rather than 100g, but cost the same. Others complain their cat does not like the “new taste” and, in extreme cases, that it disagrees with them. Continue reading...

Critics of corporate behaviour over the pandemic and Ukraine war say company profit and loss accounts tell their own story

Andrew Bailey says interest rates will have to rise again unless inflation falls

Almost four in 10 people have to use credit cards to cover such costs, says NationwideInflation and rising bills mean UK households are spending 12% more on essentials than they were a year ago, with almost four in 10 people having to use credit cards to cover these costs, new data shows.Two days after it emerged that the UK’s annual inflation rate unexpectedly jumped to 10.4% in February, Nationwide said its figures showed that consumers spent 34% more on utility bills and 17% more on mortgage payments last month than they did in February 2022. Continue reading...

UK central bank sets interest rates at 14-year high after inflation jumped to 10.4% in February

The Bank of England’s move risks squeezing the economy just as inflation is expected to start fallingTasked with striking a balance between an unexpected increase in February’s inflation numbers and concerns about a new banking crisis, the Bank of England has voted for an 11th consecutive rate rise. The question now is whether they will opt for a 12th.Markets are pricing in a further small hike to 4.5%. However, a glance at the forecasts for inflation show it declining rapidly this year, mostly in response to a dramatic fall in energy costs. While wholesale gas prices are expected to be double the pre-pandemic level next year, they will have fallen back from the five-fold increase in 2022.This article was amended on 23 March 2023. A previous version incorrectly referred to the Bank of England cutting interest rates. Continue reading...

Monetary policy committee votes to increase base rate after February’s surprise rise in inflation

How the new base rate of 4.25% might affect mortgages, house prices and credit cards

Unite says their analysis shows banks have made £7bn in extra profit from the rise in borrowing costsBritain’s biggest banks are under pressure to pass on higher interest rates to savers after figures showing they have made an extra £7bn by refusing to do so, and as they stand to benefit from a tax cut announced by Jeremy Hunt.On the day the Bank of England is expected to announce a further rise in interest rates, the Unite trade union said banks had already made billions of pounds in extra profit from the dramatic rise in borrowing costs. Continue reading...

US central bankers must decide whether to push on with monetary tightening, or pause rate hikes amid banking turmoil

Fed announces rise to a range of 4.75% to 5% – its ninth consecutive rate rise and the highest rate since 2007Facing the worst banking crisis since 2008 and the highest inflation rate in a generation, the Federal Reserve chose to keep fighting price rises and announced another hike in interest rates.The US central bank announced on Wednesday that its benchmark interest rate would rise another quarter of a percentage point to a range of 4.75% to 5% – its ninth consecutive rate rise and the highest rate since 2007. A year ago interest rates were close to zero. Continue reading...

International Monetary Fund breaks ground with first such support for a country at warThe International Monetary Fund, the global lender of last resort, has agreed a package of support for Ukraine of $15.6bn (£12.8bn).The loan, the first the Washington-based lender will make to a country at war, could represent one of the biggest tranches of financial support for Ukraine so far. It still needs to be signed off by the IMF’s executive board, a process that should conclude within weeks. Continue reading...

Britain appears to be an international outlier after the shock reading in double digits this week

From low-fat milk to sugar, energy bills to clothing, how costs have soared

Increase confounds forecasts of a modest dip and adds to pressure on Bank of England to raise interest rates

With food prices increasing at their fastest rate in 45 years, we hear how one family is coping with the financial pressure

Surprise increase makes hike more likely, but economy is perilously close to recession

The ghosts of 2008 return. Plus: 20 years after the Iraq invasion

While inflation remains high, traders are now uncertain if Bank of England and US Federal Reserve will hike rates – and how muchCentral banks on both sides of the Atlantic are facing one of the toughest calls on interest rates in years, as concerns over the worst banking crisis since 2008 cast doubt on the need for further action to reduce sky-high inflation.Financial markets expect the US Federal Reserve to raise its main rate by 0.25 percentage points on Wednesday, down from predictions just two weeks ago for the US’s central bank to increase borrowing costs by twice that amount. Continue reading...

UBS’s rescue of Credit Suisse is expected to result in tens of thousands of job cuts, while bank shares are recovering today on both sides of AtlanticUK government borrowing rose last month to the highest February deficit on record, largely because of spending on support schemes to help households and businesses with spiralling energy bills.The government borrowed £16.7bn in February, £9.7bn more than a year earlier and the highest February borrowing since monthly records began 30 years ago, according to the latest figures from the Office for National Statistics. Continue reading...

US officials step in to guarantee deposits after smaller US banks have been pummeled by a wave of withdrawals, triggering crisisThe treasury secretary, Janet Yellen, pledged to protect depositors at smaller US lenders on Tuesday from “contagion” after bank runs led to customers pulling billions in funds.US officials have stepped in to guarantee the deposits of two banks that collapsed earlier this month and in a speech in Washington Yellen gave the clearest signal yet that they will step in again if the crisis continues. Continue reading...

Inflation is receding, albeit slowly, so there’s no reason to risk more financial tumult. Will the central bank see it that way?The global financial system is facing a crisis of confidence. Which makes this week’s meeting of America’s central bankers critically important.None of the 12 members of the Federal Reserve Board’s Open Market Committee were elected to their posts. The vast majority of Americans don’t even know their names, except perhaps for the chairman, Jerome Powell. Continue reading...

Deficit increases despite higher tax receipts and lower interest paymentsUK government borrowing rose last month to the highest February deficit on record, largely because of spending on support schemes to help households and businesses with spiralling energy bills.The government borrowed £16.7bn in February, £9.7bn more than a year earlier and the highest February borrowing since monthly records began 30 years ago, according to the latest figures from the Office for National Statistics. Continue reading...

FTSE 100 rises and European banking shares are up after early jitters over what UBS takeover deal means for bondholders