Prospects for artificial intelligence and green transition fuel sense that the only way is up for the global economyThe world has become hard-wired for pessimism, and there was plenty of it on display in Davos last week.Much has changed in the 52 years since the World Economic Forum was first held in the Swiss ski resort. At that original WEF summit the global economy was dominated by the rich nations of Europe and northern America, currencies were fixed under the Bretton Woods system, and oil was $2 a barrel. Continue reading...

Nobel prize-winning economist calls for new top rate of income tax and 2-3% wealth tax on fortunesJoseph Stiglitz, the Nobel prize-winning Keynesian economist, has called for the super-rich to be subjected to taxes as high as 70% to help tackle widening inequality.Stiglitz, who won the Nobel prize in economics in 2001 and pioneered many ideas about globalisation and inequality, said introducing a special worldwide income tax rate of 70% on the highest earners “would clearly make sense”. Continue reading...

The Labour front bench was highly visible in Davos, while Sunak didn’t even attend. One senses that the guard is changingThe Labour party under Keir Starmer is clearly a government in waiting. The Labour leader and his shadow chancellor, Rachel Reeves, were generally considered to be representing the UK last week at the resumed, post-epidemic annual meeting in Davos of the World Economic Forum. Our prime minister, the hapless Rishi Sunak, may be desperate for overseas investors to back Brexit Britain, but did not even bother to beat the drum by going to Davos himself.Sunak must know that the game is already up. He seeks consensus, but is tortured by the detritus of what has become the Conservative and Brexit party, who are out to get him. Now, in a sane world, there would be a general election this year; the Augean stables would be cleared and this reprehensible, indeed disgusting, government would be thrown out. But unless one of Harold Macmillan’s “events” precipitates an unexpected election, we are fated to wait another year. Continue reading...

From the threat of AI weaponising spam to a trade war sparked by green subsidies, the taxing topics at this year’s World Economic ForumA number of big themes emerged from the World Economic Forum in the Swiss resort Davos. Here are five of most pressing questions that came to dominate this year’s gathering of the global elite. Continue reading...

Rolling coverage of the final day of the World Economic Forum

Kristalina Georgieva hints growth forecast could be upgraded thanks to retreating inflation, but warns against overoptimismProspects for the global economy have brightened amid signs that inflation is retreating from its four-decade high, the head of the International Monetary Fund has said.Speaking at the closing session of the World Economic Forum in Davos, Kristalina Georgieva said growth prospects had picked up in recent months but warned against overoptimism. Continue reading...

John Allan says it is needed to ensure UK economy recovers from cost of living crisisRishi Sunak must come up with a long-term growth plan to ensure the UK economy recovers from the cost of living crisis, the chair of Tesco has said.“The reality is many people in this country are suffering through this cost of living crisis,” said John Allan, who also chairs Barratt, Britain’s biggest housebuilder. “What we’d love to see from the government is a really serious, thought-through, long-term growth plan.” Continue reading...

Jerome Powell and Mervyn King reject taking on climate policy, while Mark Carney and Christine Lagarde say action is vitalThe climate crisis has come to represent a major challenge for central banks. How much should their monetary policy and approach to banking supervision be influenced by it?On one hand, there is growing evidence that global heating, particularly through its effect on agriculture, may create inflationary pressures. And there is even stronger evidence that the physical and transition risks created by the climate crisis are having, and will continue to have, a major impact on the value of financial assets and financial firms, which those responsible for the stability of the financial system cannot ignore. Continue reading...

Treasury secretary says department will take ‘extraordinary measures’ to skirt default while also urging Congress to actThe US government has hit the ceiling on its debt, brushing up against its legal limit of $38.381tn and piling pressure on Congress to approve an increase to avoid a debt default in the coming months that would send a shock wave through the global economy.In a letter to congressional leaders, the treasury secretary, Janet Yellen, said it would begin taking “extraordinary measures” to make the government’s cash on hand last until Congress acts. These include a “debt issuance suspension period” lasting from today until 5 June, as well as suspending investments into two government employee retirement funds. Continue reading...

This live blog has now closed, you can read more on this story hereRishi Sunak has defended the distribution of levelling up funds, saying that the north of England has received more per head than the south.Speaking on a visit to Accrington, in Lancashire, he said:The region that has done the best in the amount of funding per person is the north. That’s why we’re here talking to you in Accrington market, these are the places that are benefiting from the funding.If you look at the overall funding in the levelling-up funds that we’ve done, about two-thirds of all that funding has gone to the most deprived part of our country.With regard to Catterick Garrison, the thing you need to know is that’s home to our largest army base and it’s home to actually thousands of serving personnel who are often away from their own families serving our country. Continue reading...

Labour’s top team take advantage of Rishi Sunak’s absence from the World Economic ForumIt was blue versus red in Davos. Within minutes of the business secretary, Grant Shapps, regaling a CBI lunch at the swanky Belvedere hotel about his plans to “scale up Britain” on Thursday, Keir Starmer took his seat in the main hall in the conference centre a couple of hundred of yards down the road.The Labour leader proved less of a draw than Volodymyr Zelenskiy the day before, but that wasn’t the point. The man who aims to be the UK’s next prime minister had the stage he needed to make his case. Continue reading...

The US government has hit its borrowing limit, known as the debt ceiling – here’s what that meansThe US government has hit its borrowing limit, known as the debt ceiling, marking the beginning of what looks to be a vicious fight over the government’s budget and one that threatens to worsen an already precarious economic outlook.The US treasury secretary, Janet Yellen, has said “extraordinary measures” are now being put in place to prevent the United States from defaulting on its obligations – essentially moving some money around so the government does not default just yet. Those measures will last a few months, but if the limit is ultimately not raised, the federal government will run out of funds. Continue reading...

Jamie Dimon warns that US creditworthiness should be ‘sacrosanct’ as country’s debt races toward $31.4tn limitThe US should not be “playing games” with the debt ceiling, the JP Morgan chief executive, Jamie Dimon, warned warring US political factions on Thursday as a heated row over the federal borrowing limit reached a crisis point.“We should never question the creditworthiness of the US government. That is sacrosanct and it should never happen,” Dimon said on Thursday in an interview on CNBC. “This is not something we should be playing games with at all.” Continue reading...

The World Economic Forum has returned to the Swiss Alpine town of Davos for its first winter meetup since 2020. Almost 600 CEOs and more than 50 heads of state or government are believed to be attending Continue reading...

IMF and others have warned we face the most acute economic and financial challenges in decadesA host of interconnected “megathreats” is imperilling our future. While some of these have been long in the making, others are new. The stubbornly low inflation of the pre-pandemic period has given way to today’s excessively high inflation. Secular stagnation – perpetually low growth owing to weak aggregate demand – has evolved into stagflation, as negative aggregate supply shocks have combined with the effects of loose monetary and fiscal policies.Where once interest rates were too low – or even negative – they have now been rising fast, driving up borrowing costs and creating the risk of cascading debt crises. The age of hyper-globalisation, free trade, offshoring, and just-in-time supply chains has yielded to a new era of deglobalisation, protectionism, reshoring (or “friend-shoring”), secure trade and “just-in-case” supply-chain redundancies. Continue reading...

Sector reacts to post-pandemic shift in digital spending and gloomy economic outlook for 2023Microsoft is cutting 10,000 jobs as it cited a post-pandemic shift in digital spending habits and weakness in the global economy.The tech group joined a list of US peers making extensive job cuts, including Facebook owner Meta, Amazon, and business software-maker Salesforce, who have scaled back on workforce expansions stoked by a pandemic-related boom in demand for their services and products that have lost momentum. Continue reading...

German chancellor tells WEF that we must avoid conflict becoming war between Russia and Nato

Price rises of many goods outstripped December’s 10.5% inflation rate with bread up 20.5%, electricity 65.4% and hotels 18.1%The UK’s inflation rate fell for a second month in December, dropping to 10.5%. But households remain under pressure as prices continue to rise for a wide range of goods and services.Despite the fall in the headline rate, food and non-alcoholic drinks jumped by a collective 16.8%, the fastest annual rate of increase since 1977. Price rises for restaurant meals and overnight stays in hotels also accelerated. Continue reading...

Bank of England must proceed with caution as households are still cutting back and business confidence is weak

Analysts warn bloc’s lack of industrial policy may impede riposte to $370bn US subsidy packageAnger is mounting in EU capitals at a “massive” and “super aggressive” $370bn US green subsidy package that many fear will deal a hammer blow to Europe’s industry and economy. But the bloc is deeply divided over how to respond.Signed into law last August, the Inflation Reduction Act (IRA) offers huge subsidies and tax credits to companies investing in electric vehicles and renewable energy technologies, such as batteries, solar panels and wind turbines – as long as the products and parts they manufacture are made in America. Continue reading...

Family business says sky-high bills for energy and wheat are causing friction as customers experience cost of living crisis

Annual rate falls in December, although it remains at one of the highest levels in 40 years

Huge rise in cost of own-label ranges outstripped 12.6% increase in supermarkets’ luxury brandsConsumers reliant on supermarkets’ budget ranges bore the brunt of food price inflation in the run-up to Christmas, with increases far outstripping those for luxury own-label and premium brands, according to a survey.The price of budget items rose 20.3% on average in December, compared with the same month a year before, according to research from the consumer group Which?, while supermarkets’ luxury ranges rose 12.6% and the price of branded items went up 12.5%. Continue reading...

Rolling coverage from the World Economic Forum in Davos, where vice-premier Liu He says China has passed its peak of Covid-19 infectionsOlena Zelenska has discussed the situation in Ukraine with WEF president Klaus Schwab today, she tweets.She hopes that global business will listend and respond to the need for reconstruction at cities across Ukraine. Continue reading...

Inflation-adjusted figures also show growth in the public sector significantly trailing private sectorAverage real-terms pay in Britain fell at among the fastest rates for more than two decades at the end of 2022, as public sector pay deals continue to fall behind the private sector during the cost of living crisis.The Office for National Statistics said wages in real terms declined by 2.6% in the three months to November, among the largest falls in growth since comparable records began in 2001. Continue reading...

The downfall of the FTX cryptocurrency exchange proves how much markets need rulesI’ve laboured hard not to engage with cryptocurrency, to turn the page on its scandals and file its many bin fires under “fools and their money being easily parted”. But this has been a mistake, because the story is just getting good.The PayPal cofounder Peter Thiel said in 2020 that crypto was one of two poles of technological conflict, the other being artificial intelligence. AI could “theoretically make it possible to centrally control an entire economy” while crypto “holds out the prospect of a decentralised and individualised world”. He concluded that AI is communist and crypto is libertarian; it was unnecessary to add which of those he thought was better.Zoe Williams is a Guardian columnist Continue reading...

But Bank of England’s Andrew Bailey says worker shortage may still pose major risks in cost of living crisisThe governor of the Bank of England has said there could be a “rapid” fall in inflation in Britain amid a drop in global energy prices over recent weeks but warned that a shortage of workers could still pose major risks amid the cost of living crisis.Andrew Bailey told MPs on the Commons Treasury committee that the UK’s rate of inflation could fall back substantially this year after hitting the highest levels since the early 1980s during the autumn after Russia’s invasion in Ukraine led to an increase in wholesale energy costs. Continue reading...

Worker shortages and need to adapt to tech changes given as reasons in survey as Davos meeting beginsAlmost two in five of the bosses of global companies fear their businesses will be unviable within a decade because of the struggle to find talented workers and the need to adapt to technological change.As the World Economic Forum got under way in Davos on Monday evening, a survey of chief executives by the consultancy firm PwC was released, showing a downbeat mood about the immediate global outlook and longer-term survival prospects. Continue reading...

Carol Wilcox and Tony Brauer respond to an article by James Meadway of the Progressive Economy ForumThere is little point in James Meadway regretting Keir Starmer’s lack of spending commitments while maintaining the fiction that “spending increases will have to be met by at least some tax rises” (Keir Starmer may win power, but he won’t be able to turn the UK around on the cheap, 9 January).The government creates new money by instructing the Bank of England to credit private bank accounts to pay salaries, benefits, grants, etc. It needs neither taxes nor borrowing (its own money) to do this. Taxes cancel some of that money, but they have other important purposes. Tax rises to accommodate a “fiscal rule” serve no purpose. Continue reading...

International Labour Organization expects to see workers pushed into informal employment in 2023More workers will be forced to accept lower quality and poorly paid jobs this year as a result of the global economic slowdown, according to a report from the International Labour Organization (ILO).In its latest assessment of the state of the labour market, the Geneva-based ILO warned that “high and persistent” uncertainty over the state of the global economy was depressing business investment, eroding real wages and pushing workers back into informal employment, which can involve street vending, housekeeping or picking through landfills. Continue reading...

Breaking out of a mindset is not easy, but this crisis, 10 years in the making, could have been avoidedBefore it became the meeting place for the global elite, Davos was known as a place where those suffering from TB came to be treated. Thomas Mann set his story The Magic Mountain in a sanatorium in the small Swiss town and rarely have the links with Davos’s literary past seemed more appropriate than now, with the global economy in rehab after a three-year sickness still not shaken off. There have been plenty of relapses since the start of the Covid-19 pandemic.The first couple of weeks of 2023 have seen a modest improvement in the short-term outlook but that doesn’t mean the long-term problems have been cracked. The structural problems facing the global economy – weak investment, poor productivity, the climate emergency, rising inequality, political fragmentation – are still with us. Continue reading...

With prices soaring but wage rises still well below inflation, employees in the UK are getting the rawest deal in EuropeSigns that corporate Britain is winning the inflation war can be found wherever you look.Gaze beyond the ailing independent retailers and small-scale manufacturers that dominate TV and radio news coverage to the sales and profits of our largest businesses, where robust performance is the norm and promises of bumper shareholder payouts are being kept. Continue reading...

Janet Yellen told Congress that ‘extraordinary measures’ would be taken to avoid default until legislation is passed to raise ceilingJanet Yellen, the US treasury secretary, has notified Congress that the US is projected to reach its debt limit on Thursday, 19 January, and will then resort to “extraordinary measures” to avoid default.In a letter to House and Senate leaders on Friday, Yellen said her actions will buy time until Congress can pass legislation that will either raise the nation’s $31.4tn borrowing authority or suspend it again for a period of time. Continue reading...

Blue-chip stock index ends week 1% off all-time best as markets across Europe rise amid falling energy pricesThe UK’s FTSE 100 share index approached a record high on Friday, as European markets were lifted by hopes that the inflation shock from energy prices is easing.The blue-chip stock index, which includes the 100 largest companies listed in London, hit its highest level in more than four years. It touched 7,864.95 points, less than 1% away from the record intraday high of 7,903 points set in May 2018, before closing at 7844.07. Continue reading...

UK economy beat forecasts with 0.1% growth in November, as food and drink businesses benefited from the FIFA World Cup

From political dysfunction to economic turmoil, the evidence of Brexit as a great problem-creator is all around. No wonder European support for leaving the EU has tanked since 2016We’re good Europeans at last. Nearly seven years after we voted to leave, Britons are finally doing their bit for the European Union. Diligently and with dogged devotion to duty, we are strengthening the ties that bind the 27 remaining nations of the EU – though not quite in the way anyone would have wanted.Take a look at the Europe-wide survey, published yesterday , which showed that support for leaving the EU has tanked everywhere since 2016. In every EU member state where data was available, from Finland to the Netherlands, Portugal to Hungary, pro-leave sentiment has fallen through the floor. Even Europe’s most hardcore anti-EU parties have abandoned the goal of actually leaving the EU – no more talk of Frexit or Italexit – aiming instead merely to reform the union from within.Jonathan Freedland is a Guardian columnist Continue reading...

Jeremy Hunt is not getting carried away by November growth, and monthly GDP moves can be erratic

Figure comes as people began Christmas shopping, while World Cup gave pubs and bars a boost

Bloomberg estimates Bank made profit of £3.5bn after intervening to prevent run on pension fundsThe Bank of England has finished unwinding the emergency bond-buying scheme it launched to calm the financial markets after Liz Truss’s disastrous mini-budget last autumn.Threadneedle Street said it had completed the sale of £19.3bn of government bonds three months after it was forced to intervene in markets to halt a run on pension funds. Continue reading...

Investec predict UK energy bills will average £2,500/year in the second half of 2023 year, as US consumer price index falls to 6.5% in year to December

Retailer boasts biggest share of clothing and homeware market in seven years, as Tesco hails festive boom

Exclusive: council bids for tax breaks and liberalised planning rules axed as government dismantles Liz Truss’s agendaHundreds of bids by councils to be granted tax exemptions and liberalised planning rules under the “investment zones” scheme have been killed off, as Rishi Sunak’s government dismantles another of Liz Truss’s projects.Sources said ministers were trying to scale down the scheme, which was a key part of the previous government’s growth strategy, while salvaging some aspects of it as a sop to the former prime minister and her allies. Continue reading...

Blue-chip share index is approaching its record high set over four years ago

Warning comes in annual global risks report for next week’s World Economic Forum in DavosSoaring prices for energy and food could persist for the next two years, hurting global efforts to combat poverty and the climate crisis, a report prepared for next week’s World Economic Forum in Davos, Switzerland, has warned.The WEF’s annual global risks report found the international cost of living crisis unleashed by the Covid pandemic and Russia’s war in Ukraine topped the list of concerns in a survey of more than 1,200 global experts, policymakers and business leaders. Continue reading...

Fraud and error have left ‘eye-watering’ amount owed to HMRC, says public accounts committeeThe government has been criticised for failing to collect £42bn in unpaid tax from businesses and individuals amid concern over the strain on the public finances as the UK’s economy stands on the brink of recession.The cross-party Commons public accounts committee (PAC) said that an “eye-watering” amount of tax was owed to HMRC, while also criticising tax collectors for lacking ambition to tackle fraud and error. Continue reading...

A project to revive the economic fortunes of former mill towns can be a model for the rest of the countryThe inventor of the flying shuttle, the 18th-century innovation that transformed textile production and helped Manchester earn the nickname Cottonopolis, actually came from Bury. By the late Victorian period, John Kay’s home town and neighbouring Rochdale and Oldham were all renowned hubs of textile manufacture, while Manchester had become a globally important cotton trading hub. What contemporary economics would call an agglomeration effect – a kind of virtuous circle of growth driven by new methods and investment – spread growth across the region.The contrast with modern Greater Manchester is stark. Partly as a result of a property investment and services boom, much of the city of Manchester has thrived in recent years. But the end of coal and cotton in the 20th century saw former mill and mining towns struggle to find a new role, and too much work in such places remains restricted to low-wage, low-skill jobs. Continue reading...

Campaigners say bank should rush to rescue countries facing recession – but can it do so without resulting in mass debt write-offs?Not since the early 1990s has the world faced such a period of low growth.Discounting the havoc caused by the financial crash of 2008 and the initial impact of the Covid-19 pandemic, the World Bank says that by the end of 2024 it will have been 30 years since the global economy grew at an average of less than 2% a year. Continue reading...

Online shopping giant announces consultation to shut warehouses at Hemel Hempstead, Doncaster and Gourock

Washington-based body cuts 2023 growth forecast amid threats from inflation, interest rates, Covid and warAny fresh setback to a global economy already rapidly weakening as a result of high inflation, interest rates and war could result in a second recession within three years in 2023, the World Bank has warned.In its half-yearly health check, the Washington-based institution said it had cut its 2023 growth forecast from 2.9% to 1.7% after the risks it identified six months ago all materialised. Continue reading...