Rishi Sunak soon rowed back from his predecessor’s chaotic experiment, reasserting the seven pillars of UK Treasury wisdomIt was all over for Liz Truss’s war on economic orthodoxy the moment she decided to summon Kwasi Kwarteng back from the annual meeting of the International Monetary Fund in Washington.If the sacking of the Treasury’s top mandarin, Sir Tom Scholar, marked the beginning of the campaign against Whitehall beancounters, then the end came when Jeremy Hunt became the fourth chancellor of the exchequer of 2022. Continue reading...
Climate crisis, Ukraine invasion and China-US tensions are challenging assumption free markets are bestThis was supposed to be the year when things returned to normal. After the collapse of activity during the months of lockdown in 2020 and the supply bottlenecks of 2021, the hope was that 2022 would call time on an era of seemingly permanent crisis. It hasn’t quite turned out like that.Indeed, 2022 is shaping up to be a pivotal year for the global economy, taking its place alongside the end of the Bretton Woods fixed exchange rate system in 1971, the reunification of Germany in 1990 and the near collapse of the banks in the financial crisis of 2008. Continue reading...
Inflation soared in 2022 amid Covid-19, the war in Ukraine and a broken supply chain – but here’s what we can expect nextJust a few years ago, inflation seemed like an issue the US and many other major western economies had outgrown. “Is inflation dead?” Businessweek asked in 2019, beneath an image of an ailing dinosaur. And then came Covid-19.Supply chain issues, sickness, death and the war in Ukraine upended global trade. Propped up by government handouts and savings, consumers bounced back from the pandemic shutdowns only to find a short supply of everything from used cars to housing was triggering a cost of living crisis unseen in a generation. US inflation this year reached a 40-year high. Continue reading...
The Labour leader must be clear about how he’ll succeed where Tories have failed – rehashing Blair’s strategies isn’t enoughThe future direction of UK plc now looks more likely to come from the Starmer and Reeves emporium than the woeful management of the present Are You Being (Under) Served? government. In the mayhem of 2022, the Tories forfeited their claim to be the natural managers of the UK economy. Opportunity knocks for the opposition to fill that gap.Attacking the government’s record here is straightforward: the economy has had skimpy growth for most of its 12 years in power (on a per-person basis, the economy has grown just 7% in real terms since the financial crash of 2007-08). Perhaps more concerning for any potential replacement, productivity has lagged behind competitors. Voters feel the result in their real-terms household incomes, and lower earners now find basics, let alone treats, less affordable. So “the Tories tanked the economy” is a line with a lot of truth to it. Planning to get the economy upright again is a more daunting task. That will need to change in 2023 as voters will want to know more about Labour’s intended direction of travel.Anne McElvoy is senior editor at the Economist Continue reading...
Passport control staff striking at Heathrow, Gatwick, Manchester, Birmingham, Cardiff and Glasgow airports, and Newhaven portHere’s our news story on PCS union head Mark Serwotka’s warning that the strike disruption by Border Force staff could last six months, and a “huge escalation” in January unless the government comes to the negotiating table.Britain’s biggest airport said that so far there has been no disruption from the Border Force strike.“The morning arrivals peak has started well. Immigration halls are free flowing at Heathrow with Border Force and the military contingency providing a good service.” Continue reading...
UK GDP contracted by 0.3% in July-September, lagging behind other G7 countries, as UK households’ living standards fall again….. while rail fares in England to rise by nearly 6% in March
ONS says economy shrank by 0.3% in third quarter, with UK only G7 country whose GDP is still lower than before pandemicBritain’s recovery from the Covid-19 pandemic has been even weaker than originally believed and is the only member of the G7 group of leading industrial countries where output is still below its pre-crisis level.The Office for National Statistics said the UK economy contracted by 0.3% in the three months to September – compared with an original estimate of a 0.2% decline. The ONS also revised down growth in every quarter stretching back to the third quarter of 2021. Continue reading...
As staple food inflation runs above 16%, many say they have skipped or reduced the size of a mealMore than half of all adults in Great Britain are buying less food and drink, with surging costs leaving the most vulnerable worst off.People in the most deprived areas of England are the most likely to have cut back, with 61% saying they were buying less food when shopping last month, compared with 44% in the least deprived areas and 51% across Great Britain. Continue reading...
by Richard Partington Economics correspondent on (#673D5)
Experts say cuts to public services and NHS waiting times could be contributing to UK worker shortageRishi Sunak is under growing pressure to offer more help to older workers who have fallen out of the workforce due to ill health, as official figures show a sharp increase in the rates of long-term sickness in every region of the UK except London.Highlighting deep regional divisions, figures from the Office for National Statistics show economic inactivity due to long-term sickness has increased most among 50 to 64-year-olds outside the capital since the Covid pandemic. Continue reading...
Buying expensive presents once helped push me into debt. Take it from me: no present is worth your peace of mindWhether we are driven to move, impress or simply not disappoint, many of us feel undue pressure to choose the perfect gifts for our loved ones at Christmas, no matter the cost. And each year, our expectations of our gift-giving abilities only increase – presents must be bigger and better and we must outdo ourselves again and again, otherwise we will have failed.The practice is known as “giftflation” and it sets a ruinous precedent. In the UK, we spend more than any other European country at Christmas, with projected sales this year estimated at £82.2bn. And each year, our rampant consumerism reaches dizzying new heights. In 2020, at the height of the Covid-19 pandemic when celebrations were curbed to reduce transmissions, Britons still spent £26 more on presents than the previous year, with those struggling with debt spending £51 more than in 2019.Clare Seal is an author, financial coach and founder of the @myfrugalyear Instagram account Continue reading...
Which? says most common bill not paid was energy as data suggests wave of defaults in cost of living crisisAs the cost of living crisis continues to ravage people’s incomes, it has emerged that almost 2m households have defaulted on at least one significant bill in the run-up to Christmas.According to the latest findings from Which?’s consumer insight tracker, an estimated 1.9m households failed to make at least one mortgage, rent, loan, credit card or other bill payment over the last month. Continue reading...
Half a million workers have vanished. Policymakers don’t seem to understand whyAs the UK sidles gingerly past the pandemic, a big mystery looms. Where have all the employees gone? Unemployment is around its lowest level since 1974 and well over a million positions are vacant. There are plenty of jobs to help offset those eye-watering fuel and grocery bills yet, since Covid hit these shores, 565,000 Britons have dropped out of the workforce. They have become what statisticians define as “economically inactive”, which is to say of working age yet neither in a job nor wanting one.Even as trains sit in sidings, Christmas post goes undelivered and nurses form picket lines, here is a different story about workers – one that gets barely a mention. The country’s workforce has shrunk, with serious implications for employers, inflation, tax revenues and economic growth. Yet the policymakers paid to analyse such phenomena have no idea why it has happened. The governor of the Bank of England, Andrew Bailey, accepts that the situation is “very unusual”, while one of his deputies, Dave Ramsden, says: “It’s not clear what is driving this participation puzzle.” A giant shrug from Threadneedle Street then, while ministers waited until last month to launch an investigation. Continue reading...
If Beijing is expecting an immediate boost from abandoning its tough controls it is mistakenFrom zero tolerance to “let it rip”. China has not just changed its mind on how to cope with Covid, it has executed the mother of all U-turns in response to slower growth and mounting civil unrest at the draconian lockdowns.If Beijing is expecting an immediate economic boost from abandoning its tough controls it is mistaken. There will be a growth dividend from the policy shift but the state of the world’s second biggest economy will get worse before it gets better, and it will be next spring at least before the easing of restrictions starts to pay off. Continue reading...
Nationwide says a ‘relatively soft landing’ in housing market is possible, while TSB is penalised for operational failings over botched move to new IT platform in 2018In a worrying sign for the global economy, Taiwan has suffered its biggest drop in export orders in over a decade.Taiwan’s manufacturers were hit by a plunge in demand from China, where Covid-19 outbreaks and lockdowns hit its economy, and weakening consumer demand worldwide as interest rate hikes bite.Taiwan’s orders for all major product categories fell, with optical products, plastics and basic metals registering the biggest contractions. Electronic products, which includes orders for semiconductors, fell by 15.2% versus November 2021.The government attributed the bigger-than-expected decline to waning end-user demand, inventory adjustment by clients and to disruption to manufacturing in China due to Covid controls, according to the ministry’s statement. Continue reading...
With shoppers prioritising cheaper gifts over sustainable ones, independent businesses are struggling to stay afloatWith just one week left until Christmas, shoppers are hurrying to choose their final presents – and retailers are vying for much-needed year-end custom.For many of the UK’s small businesses, the cost of living crisis has hit profits. For those whose mission is sustainability, the knock-on effect has been dramatic. Continue reading...
by Richard Partington Economics correspondent on (#670T3)
Loss of employees since Covid raises fears of weaker growth and higher inflation, says Lords reportAn exodus of more than half a million people from the British workforce since the Covid pandemic is putting the economy at risk of weaker growth and persistently higher inflation, a Lords report has warned.The House of Lords economic affairs committee said the sharp rise in economic inactivity – when working-age adults are neither in employment nor looking for a job – since the onset of the health emergency was posing “serious challenges” to the economy. Continue reading...
by Kalyeena Makortoff and Jasper Jolly on (#66ZTQ)
Elon Musk says he will honour the results of a Twitter poll asking whether the should resign as head of the social media platformCall it Chekhov’s Jet: a Twitter account placed on the mantelpiece in act one must surely go off in act five.Seven days after buying the social network he tweeted that his commitment to free speech extended even “to not banning the account following my plane”. Six weeks later, his reversal of that policy set in motion a series of events that seems increasingly likely to end in his dramatic departure as chief executive of Twitter. Continue reading...
CBI calls for support on energy costs as country will be in recession throughout much of 2023Britain’s factory output is falling at its fastest rate in more than two years amid growing signs that rising inflation has pushed the economy into recession.At a time of severe cost pressures and weaker demand for their goods at home and abroad, companies responding to the monthly survey by the Confederation of British Industry (CBI) said they expected no letup in the tough trading environment in early 2023. Continue reading...
Ted Heath and Jim Callaghan paid a big price for taking on the trade unions, and once again voters are blaming the politiciansFor those of us who were there, the rows over pay, the strikes, the picket lines and an ineffectual government bring it all back. Britain is facing its 2022 equivalent of the late 1970s’ winter of discontent. It was bitterly cold back then, too.Rishi Sunak’s approach to the widespread industrial action is clear. The government will warn that excessively high wage deals risk entrenching inflation. It will argue that the recommendations of the public sector pay review bodies (PRBs) are reasonable and must be adhered to. And it will wait for support for action to crumble as striking workers contemplate the harsh reality of lost pay at a time of a cost of living crisis, and gradually give up the fight. Continue reading...
Job cuts have risen this year, even as the US economy shows no signs of a downturn for nowWhile many American workers are preparing for the holiday season, some are grappling with the mental and financial anguish of being suddenly laid off.After corporations complained of labor shortages through 2021 and 2022, several companies have shed workers in mass layoffs as 2022 comes to a close. Continue reading...
Whatever the chancellor and the Bank may suggest, wage settlements are still running behind the rate of inflationIs inflation the fault of the workers? Striking nurses and rail staff could be forgiven for starting to believe that rising prices can be blamed on their demands for pay. Jeremy Hunt said as much last week, as did the governor of the Bank of England, Andrew Bailey.By the same token, warehouse workers distributing goods for Aldi, who received a 10% annual pay rise, and East Midlands airport security staff, who secured a whopping overall 17% increase this year, must also be to blame. If wages account for about 70% of a business’s expenses on average, then it must be true that bumper wage increases are the enemy of those who seek to bring down inflation. Continue reading...
Higher salaries would boost the UK economy and bring us in line with many other rich countriesFor almost half a century, in other words within the limits of political memory, Britain has been a country where the priority of most governments has been to keep a few key economic numbers low. Income tax, interest rates, inflation and most people’s wages: all were deliberately suppressed by Downing Street and its collaborators in business and the Bank of England. By doing so a space was created – in theory at least – for certain interest groups to flourish: employers, entrepreneurs, shareholders, top earners, homeowners and consumers. Together, they were supposed to boost our previously sluggish rate of economic growth.It hasn’t quite worked out like that. Britain is on the brink of recession yet again. Interest rates, taxes and inflation are all high. Only average wages are still low. And even that dubious achievement of British government and capitalism since the 1980s now feels fragile, with strikes solidifying and spreading across both private and state sectors, determinedly driven by workers who have finally had enough of years of falling pay. As Mick Lynch of the RMT union put it with characteristic pithiness on the Today programme last week: “The price of labour isn’t at the right price in this country.”Andy Beckett is a Guardian columnist Continue reading...
Bank of England says most housing market indicators have continued to soften, as it increases UK interest rates to 14-year high of 3.5% in split decision
Survey says many cutting down on showers and washing machine use, and going to bed early to cope with high energy billsA quarter of adults are struggling to keep warm in their living rooms – and many are going to bed earlier to stay comfortable this winter in the face of high energy bills.A study showed 23% of adults were occasionally, hardly ever, or never able to keep comfortably warm in their living room in the past two weeks. Continue reading...
The US is facing a cost of living crisis with soaring inflation, with the latest interest rate hike the seventh increase this yearThe Federal Reserve lightly tapped the brakes on its high-speed interest rate rises on Wednesday following news that suggested two years of runaway inflation may be slowing down in the US.After a two-day meeting the Fed announced another half-point increase in interest rates, its seventh increase of the year but one that follows four straight three-quarter-point interest rate hikes. The increase brings the Fed’s benchmark interest rate – used for everything from setting mortgage rates and loans to credit cards – to a range of 4.25% to 4.5%, its highest level in 15 years. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#66V9V)
Bonus pool could be slashed by up to 40%, in possibly the lender’s largest cut to payouts since the financial crisisGoldman Sachs bankers are reportedly at risk of having their bonus pool slashed by up to 40%, in what could be the lender’s largest cut to payouts since the 2008 financial crisis.The bank is still in the process of deciding the size of its bonus pools for 2022, but the prospective cut could mean its 3,000 investment bankers endure the most significant drop in variable pay among their peers, according to the Financial Times, which first reported the news. Continue reading...
Some praise UK’s most powerful non-elected official for mini-budget response while some say Bank of England governor is out of touchOn Andrew Bailey’s first official day as Bank of England boss he was virtually alone in the palatial building. The footsteps of a skeleton security crew echoed as they hit the polished mosaic floors . In March 2020, the first Covid-19 lockdown had turned London’s financial district into a ghost town. Far below in the vaults, shelves of gold ingots rested on London clay beneath the fortress affectionately known as the Old Lady of Threadneedle Street.A trip to the deserted canteen failed to yield a sandwich. Bailey had to resort to rooting around in a fridge. It was slim pickings: a bottle of champagne, and half a loaf of sliced bread. He nabbed the bread and went back to his desk to call important figures in the short-term credit markets, which had become highly stressed. He was calm, reassuring, and “zero-bullshit”, said one City figure who received a call from Bailey, “far more impressive than he is at press conferences”. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#66SFC)
Central bank to examine shadow banking sector amid fears it could put UK financial stability at riskHedge fund and private equity lending will be scrutinised by the Bank of England in the world’s first stress test of the shadow banking sector, amid fears the underregulated industry could put the UK’s financial stability at risk.The tests are meant to help the Bank understand the weaknesses within, and risks posed by, non-bank lenders including hedge funds and money market investment funds, a sector that has doubled in size since the 2007-08 financial crisis and accounts for about half of the loans currently issued to companies globally. Continue reading...
Latest consumer price index figures showed prices rising by 7.1% from last November, down from 40-year high of 9.1% in JuneThe cost of living continued to rise at levels unseen in decades in November, the US Bureau of Labor Statistics reported on Tuesday, but the rate of inflation does appear to be finally slowing.The latest consumer price index (CPI) figures – which measure a broad range of goods and services – showed prices rising by 7.1% from last November with a 0.1% increase from October. Continue reading...
Chancellor Jeremy Hunt warns economy likely to get worse before improving, after UK GDP rose 0.5% in October, but shrank by 0.3% in the August-October quarter
Jeremy Hunt has said the UK's economy is 'likely to get worse before it gets better'. The chancellor also confirmed he had a 'plan that will more than half inflation over the next year'.His comments came after figures on Monday showed a bounce-back in growth in October but the weakest three-month performance since early 2021. Hunt also told the BBC he did not know whether inflation had peaked or not
US tech company signs 10-year strategic partnership with LSEG for data analytics and cloud technologyMicrosoft will buy 4% of the London Stock Exchange as part of a multibillion-pound deal to work together on data analytics and cloud technology.The US tech company will acquire the stake from a consortium of Blackstone and Thomson Reuters, and will take a seat on the board of the London Stock Exchange Group (LSEG). The consortium previously sold the financial data company Refinitiv to LSEG in a £22bn takeover. Continue reading...
Industry body Make UK says ‘no sugar-coating poor outlook’ for next year and ‘possibly beyond’Fears are growing over the state of the UK economy as it emerged that the manufacturing sector shrank by about 4% this year and is forecast to decline by a further 3.2% in 2023.Increasing raw material costs, sagging consumer demand, staff shortages and higher borrowing costs have collectively formed the perfect storm for the UK manufacturing sector, according to the latest Make UK/BDO outlook report. The study showed that investment in the sector has gone “negative” for the first time in nearly two years. Continue reading...
by Richard Partington Economics correspondent on (#66QG7)
The government says it wants to tame public sector pay to fend off a highly unlikely wage-price spiralFor all of the warnings against a repeat of the 1970s, of industrial unrest, soaring inflation and national decline, it is this period in recent British history that Rishi Sunak wants the country to think of most.Born in 1980, a year after the winter of discontent contributed to the fall of James Callaghan’s Labour government, Sunak, like millions of others, has no memory of this turbulent decade. Yet the prime minister is hoping to rekindle the idea of greedy union barons bringing the country to its knees. Continue reading...
Low rate of vaccination of elderly and a lack of natural immunity mean country may be in for a bumpy rideBeijing’s abrupt dismantling of zero-Covid controls has been welcomed by economists, even as the country braces itself for the human impact of letting the disease spread through a vulnerable population.The leadership’s abrupt U-turn on how it handles the pandemic appears to have been triggered by protests against controls that began last month, a nationwide show of discontent on a scale China had not seen in decades. Continue reading...