Live, rolling coverage of business, economics and financial markets as economists brace for long UK recessionThe FTSE 100 has gained ground at the opening bell. It is up by nearly 0.3% in the opening trades.It is following the trend across much of Europe, where the major indices have edged up.EUROPE’S STOXX 600 UP 0.1%FRANCE’S CAC 40 UP 0.1%SPAIN’S IBEX FLATEURO ZONE BLUE CHIPS UP 0.1% Continue reading...
Enough is Enough campaign garners 300,000 signs-ups with 50 rallies planned next week across BritainA new campaign group urging the government to do more to tackle the cost of living crisis will kick off a series of 50 rallies across Britain with a launch event in London next week.Trade unions, community groups, tenants’ organisations and politicians launched the Enough is Enough campaign this week and it has already received 300,000 sign-ups with the launch video viewed more than 6m times. Continue reading...
ONS says two bank holidays to mark Queen’s jubilee contributed to fall in output in JuneBritain’s recovery from the pandemic stalled in the three months to June when the economy contracted by 0.1%, according to official figures that revealed the weakening outlook for the UK, which is expected to enter a recession later this year.Exports fell and consumer spending contracted to push the UK closer to a long period of contraction that the Bank of England expects will stretch to the end of 2023. Continue reading...
Live, rolling coverage of business, economics and financial markets as chief executives of energy companies visit Downing Street to discuss crisisChancellor Nadhim Zahawi has said that energy companies who attended a meeting with him and Prime Minister Boris Johnson today agreed to “do more to help the people who most need it” – but did not detail what that would entail.In a readout from the meeting Zahawi said the companies pledged to work “in the spirit of national unity”.This morning I hosted industry leaders from the electricity sector to discuss what more they can do to work with Government and act in the interest of the country in the face of rising prices caused by Putin’s illegal invasion of Ukraine.We have already acted to protect households with £400 off energy bills and direct payments of £1,200 for 8m of the most vulnerable British families. In the spirit of national unity, they agreed to work with us to do more to help the people who most need it. Continue reading...
Study shows pay rises could fall behind inflation by 8% later this year, an unprecedented drop in living standardsPay rises could fall behind inflation by almost 8% later this year, marking the biggest fall in real wages for 100 years, according to analysis by the TUC.The TUC said a prediction by the Bank of England that inflation would jump to 13% in the fourth quarter of this year at a time when wages were expected to increase by just 5.25% meant living standards would fall by an unprecedented 7.75%. Continue reading...
Economists say inflation possibly hit its peak, and there are signs the pressures behind it are easing – but it’s hard to say what’s nextWhat goes up must come down. Right? Inflation has been soaring over the last year. But price rises in July were “just” 8.5% higher than what they were last July, down from a 9.1% yearly rate in June. Perhaps the worst is over?Americans have been feeling the hit at the gas pump, grocery stores, restaurants and when planning vacations. In response, the Federal Reserve raised interest rates from near zero to between 2.25% and 2.5% as it tries to drive inflation down to its target rate of 2%, but it is unclear when that goal can be reached. Continue reading...
Gas prices drop sharply after a hitting a national average of $5 a gallon in mid-JuneThe pace of price rises dipped in the US in July as gas prices eased, bringing down the annual rate of inflation to 8.5%, still close to a multi-decade high but lower than the four-decade peak it hit in June.July’s figure, while still high, represents a significant fall from the annual rate of 9.1% recorded in June and will raise hopes that inflation has finally peaked in the US. It follows other indicators that have suggested price rises are moderating. Continue reading...
The Inflation Reduction Act is a big win for jobs and the environment, but Truss and Sunak have nothing similar to offerOver the weekend, US Democrats overcame months of political struggle to pass the Inflation Reduction Act in the Senate, marking a major victory for the president, Joe Biden, and for “Bidenomics” before the US midterms.The bill makes the single largest climate investment in US history, with $369bn for climate and clean energy. It is expected to enable the US to get two-thirds of the way towards its Paris agreement commitments while reducing energy costs. It lowers health costs for millions of Americans. It seeks to tackle inflation by directly reducing costs for individuals and by reducing the deficit through closing tax loopholes and increasing tax on corporates and the wealthy.Carys Roberts is executive director of the Institute for Public Policy Research Continue reading...
by Presented by John Harris with Mick Lynch and Miatt on (#62BCW)
The Bank of England has predicted the country will hit a recession by the end of the year. To make matters worse, energy bills are soaring and parts of the country could be brought to a standstill over the next few weeks due to strikes. The Guardian’s John Harris is joined by RMT general secretary Mick Lynch and Miatta Fahnbulleh, the chief executive of the New Economics Foundation, to talk about how to tackle this social emergency Continue reading...
Severe cuts to services feared as rising costs absorb a big chunk of increased departmental spendingThe government will need to spend an extra £44bn over the next three years on public services to keep pace with rising inflation and avoid steep cuts, according to analysis by the Institute for Fiscal Studies.In a review of the rising costs facing the public sector, the IFS said that without further funding, Whitehall budgets faced being overwhelmed by rising cost pressures that would force departments to cut staff and services. Continue reading...
Candidates to replace Boris Johnson take questions amid reports of emergency planning for winter blackoutsLiz Truss, the frontrunner in the Tory leadership contest, has hit back at claims from the Rishi Sunak camp that her economic plans would amount to an “electoral suicide note” for the Tories because they would not protect people from soaring energy bills. (See 9.13am.) Speaking on a visit to Reliance Precision Ltd, a defence company in Huddersfield, she insisted that her approach would help people. Here are the main points she made.My campaign is all about growing the British economy ... What I care about is Britain being successful. I don’t agree with these portents of doom. I don’t agree with this declinist talk.I believe our country’s best days are ahead of us. What I’m going to do, if selected as prime minister, is keep taxes low, get the economy growing, unleash the potential right across Britain. That’s what I’m about.What I’m doing is making sure people are paying less taxes and also having a temporary moratorium on the green energy levy to save people money on their fuel bills.I’m not going to write the budget in advance. We’ll see what the situation is like in the autumn. But I’m committed to making sure people are supported and I’m committed to growing the economy.What I don’t believe in is taxing people to the highest level in 70 years, and then giving them their own money back.We are Conservatives, we believe in low taxes. What I’m not going to do is announce the next budget in advance - of course we’ll need to deal with the circumstances as they arise - but my fundamental principle is that people should keep more of their own money.The latest projections of annual energy bills exceeding £4,200 from January is the latest in a series of terrifying warnings over the past week, from the Bank of England and others. Families on low incomes cannot afford these eye watering sums and as a nation we can’t afford to ignore an impending disaster.Both candidates to be prime minister must now recognise the extraordinarily fast-changing situation and act to protect the hardest hit from the coming emergency. Continue reading...
New prime minister must drop small state rhetoric and come up with response to impending crisisHard though it is to remember, the UK’s energy price cap was originally marketed as a modest measure designed to protect households on expensive variable tariffs from being fleeced. Nobody in early 2019 had the slightest inkling that by the summer of 2022 it would be a key barometer of the UK’s economic health.Yet here we are – one pandemic and one unfinished war later – on tenterhooks for the latest intelligence on what is likely to happen to household gas and electricity bills this winter. Continue reading...
Key fob warning | Missing economists | Erasmus academics | Holiday essentials | Chip shop favouritesHiding car keys in the microwave doesn’t always work (AA chief reveals his microwave tip to foil tech-savvy car thieves, 5 August). My father did this until my mother heated milk for coffee without first checking that the microwave was empty. The key fob was destroyed and the microwave badly damaged.
Sharon White says government should ‘think much more’ about encouraging Covid retirees to return on flexible basisThe boss of John Lewis has said that the 1 million mostly over-50s who left their jobs during the Covid pandemic should be encouraged back to work to tackle the labour shortage that is pushing up inflation and wages.Dame Sharon White, a former second permanent secretary at the Treasury and chief executive of media and postal regulator Ofcom, said she had never seen such a difficult economic situation facing businesses. Continue reading...
As Liz Truss and Rishi Sunak slug it out for PM, rightwing papers are waking up to the looming economic catastropheThe gloves are off and it’s bare-knuckle, below-the-belt slugging. Good. High time they grappled with the terrifying enormity of the waves of destitution rolling over millions already neither heating nor eating, facing unpayable bills. Liz Truss stumbled badly by telling the Financial Times she would only help them “in a Conservative way” with tax cuts not “handouts”, her gofers explaining she is “enabling people to keep more of the money that they earn”. No use now saying she was “misrepresented” yet again: she’s been panicked into promising her own emergency budget.Rishi Sunak in the Sun makes lethal (and true) accusations that “Liz’s plan” to deal with rising bills this winter is to “give a big bung to large businesses and the well-off”. “Worse still,” he writes, “she said she will not provide direct support payments to those who are feeling the pinch most.” Scrapping the health and social care levy only gives the average worker £170 and someone on the living wage “less than £60”, while “pensioners will not get a penny”.Polly Toynbee is a Guardian columnist Continue reading...
Central bank must tackle inflation pressures that are gaining foothold in UK economy, says Dave RamsdenThe Bank of England will probably have to raise interest rates further from their current 14 year-high to tackle inflationary pressures that are gaining a foothold in Britain’s economy, its deputy governor, Dave Ramsden, has said.The spread of inflation was showing up in rising British pay and companies’ pricing plans, having originally been triggered by the reopening of the world economy from Covid-19 lockdowns and then by Russia’s invasion of Ukraine, Ramsden said. Continue reading...
Cost of living crisis and rising inflation predicted to hit consumer confidence and spendingJuly could be the “lull before the storm” for retailers and consumers after the heatwave boosted sales of summer clothing, picnic treats and electric fans despite the intensifying cost of living crisis, experts have warned.Figures from the British Retail Consortium (BRC) revealed a 2.3% sales rise last month compared with a 6.4% rise the year before. Continue reading...
Rolling live coverage of business, economics and financial markets as analysts weigh risk of recessions across the worldIt may only be August, but already the prospect of a cost-of-living Christmas is lumbering into view, according to discount book retailer TheWorks.co.uk.Analysts are on the look out for big profit warnings as the cost-of-living crisis hits consumers, and The Works said the slump in sales is already here, with no clear end in sight.
The profession seems to have gone AWOL, just when we could do with a bit of modelling on tax cuts v handoutsCut taxes? No, give handouts. Go for growth? No, fight inflation. Increase debt, curb debt. Raise interest rates, lower them.Two members until recently of the same cabinet seem at opposite extremes of the economic spectrum. Both studied economics at Oxford. They must have attended similar lectures and read the same books. What’s their problem?Simon Jenkins is a Guardian columnist Continue reading...
In today’s newsletter: From GDP and government spending to inflation, it can be hard to get around the big figures you see in the headlines and what they really mean. So here’s a guide
Cost of living crisis has meant the average amount given to children has fallen to lowest level since 2001Children’s piggy banks are paying a high price for the cost of living crisis after almost a third of parents cut back on pocket money during the last year.The average amount that is going into the pockets of under-16s each week has dropped by 23% to £4.99 this year from £6.48 in 2021, according to research from the lender Halifax – the lowest amount since 2001. Continue reading...
Meanwhile £700m of support funds in business rates relief remains unpaid by local councilsDebt repayments, staff shortages and rising energy bills have pushed almost two-thirds of the UK’s top 100 restaurants into the red, according to research that reveals the impact of the pandemic, Brexit and the cost of living crisis on the hospitality sector.With a recession looming and further increases in energy bills weighing on businesses, a separate report found that £700m of business rates relief remains unpaid with only half of English councils paying out the support funds. Continue reading...
Outbound shipments grew 18% after struggle with shortages of raw materials and lockdowns in first half of yearChina’s export industries performed strongly last month after spending the first half of the year hampered by shortages of raw materials and pandemic-related lockdowns at major ports.Offering an encouraging boost to the economy, outbound shipments grew 18% in July from a year earlier, the fastest pace this year, official customs data showed on Sunday, beating analysts’ expectations for a 15% gain, though imports remained sluggish.
The Bank of England’s recent rate increase will do nothing to curb inflation, says Jean-Claude FouqueOnce upon a time, doctors would bleed patients who were in poor health as a cure. We now know this was not a good idea, and yet the Bank of England keeps raising its base rate while predicting a prolonged recession (Report, 4 August). Why? Because this is the traditional way to try to curb inflation when an economy is overheating. Raising interest rates is supposed to divert excess liquidity from spending to saving. But millions are already in poverty and the energy cost increases in the autumn will make matters worse. There is no excess liquidity.Most importantly, current pressures are due to external factors – mainly the Ukraine war, so how can raising interest rates help? Could it be that the Bank feels it must be seen to be doing something? I would call this the Titanic syndrome, ie we know it won’t do any good, but let’s rearrange the deck chairs anyway.
The global financial crisis brought large economies together but the current crisis comes at a time of deep divisionFifteen years ago this week the French bank BNP Paribas announced it was closing three of its hedge funds heavily exposed to the US sub-prime mortgage market.On the day little heed was paid to the news, but it quickly became apparent that not just BNP Paribas but just about every big financial institution was up to its neck in securities linked to underperforming American home loans. In early August 2007, BNP was simply the pebble that marked the coming avalanche. Continue reading...
America is simply too big for generalizations. The right question is whether your industry is in recessionAs someone who writes about small business and runs a small business and serves hundreds of small business clients I often get asked: “How are small businesses doing?” Recently the Big Question I’m being asked is whether or not we’re “in a recession”. The answer – like everything these days – is complicated.Sure, many can say we’re in a “recession”. The economy has shrunk two quarters in a row, which is one widely used definition. Both consumer and small business confidence have plummeted. The stock market is in bear territory. Inflation is high and interest rates are rising. Worldwide demand is tapering. Continue reading...
The Tory leadership contenders are pursuing a dangerous nirvana of low taxation while ignoring the damage inflicted by leaving the EUBritain is rapidly entering its worst economic crisis since the 1970s, but it is a crisis hardly discussed by the two rightwing Conservative politicians vying for the premiership.The National Institute of Economic and Social Research (NIESR) and the Bank of England have both pronounced that we are entering a recession that could last for much of next year. This will serve to aggravate already serious economic, industrial and social problems, with goodness knows how much public unrest. Continue reading...
Results this week will reveal the tour giant’s post-Covid boom, but what might a deep recession do to holiday bookings?Hundreds of flights delayed or cancelled, an engine fire on a Tui plane at Manchester airport, and an abject apology from the managing director … it has not been an easy summer for the world’s biggest tour operator.On Wednesday, a Tui report on bookings and revenues from April to June will shine a light on the whole holiday sector during its peak period. Continue reading...
Faced with stagflation, the Conservative leadership candidates have precious little to offer• You can order your own copy of this cartoon Continue reading...
Conservative leadership frontrunner insists on tax cuts despite claims they will fuel inflationThe Conservative leadership frontrunner, Liz Truss, has rejected “handouts” as a way of helping people affected by the cost of living crisis.Truss said she would press ahead with proposed tax cuts despite claims they would fuel inflation and “kiss goodbye” to the Conservatives’ chances of winning the next election. Continue reading...
With offshoring now faltering, a US-led trend sees firms shifting manufacturing and more to countries with shared values. But this won’t be cost-freeOffshoring was followed by reshoring – and now US officials’ latest wheeze to deal with massive global supply chain disruption is “friendshoring”. The turbulent events of recent years – including Donald Trump’s trade wars, the Covid-19 crisis and Russia’s invasion of Ukraine – have called into question the vision of a globalised economy.Many of the western companies that embraced offshoring – cutting costs by shifting manufacturing to countries with cheaper labour – have been encouraged by tariffs and pandemic supply chain disruption to bring production back to their home country, in a trend known as onshoring or reshoring. Continue reading...
We look at some options for safeguarding your nest egg amid rising prices and interest ratesInterest rates went up again this week, and many savers will see their rates boosted as a result, but rising inflation – currently 9.4% and set to go higher – is eating away at the value of people’s nest-egg cash.As central banks around the world raise interest rates to defeat inflation, fears are growing of a full-blown recession. So what can you do now to protect yourself from a potential hammer blow to your finances? Continue reading...
by Heather Stewart Political editor and Emily Dugan on (#626VS)
Labour’s Rachel Reeves says Conservatives are ‘playing blame game’ for UK’s economic problemsLiz Truss has been accused of being “deeply irresponsible” for threatening to tinker with the Bank of England’s mandate on the brink of a recession.The shadow chancellor, Rachel Reeves, attacked the Tory leadership frontrunner after Truss and her allies repeatedly questioned the performance of the Bank’s governor, Andrew Bailey, and said she would review the institution’s remit. Continue reading...
If Britain ends up in the recession expected by the Bank of England, public anger will be looking for an outletWinter is coming. The Bank of England says so. Pick your measure of the economic gale that is heading this way, deepening a chill that’s already biting hard. The Bank says inflation will reach 13%, shrinking the value of wages, making everything more expensive, starting with eating and heating, forcing yet more people to decide whether to starve or shiver. We are to brace for a recession that will see five consecutive quarters of contraction, and a decline in household incomes of 5% by 2024 – the biggest fall since records began more than half a century ago. Of course, all this will hit hardest those with least. One in five UK households will be left with no savings at all by 2024. Meanwhile, inflation is as much as 30% higher in the towns and cities of northern England, thanks, says the Centre for Cities, to poor home insulation and a “car dependency” that forces people to shell out more on petrol.You don’t have to be a strict economic materialist of the old school to know all this will shape our politics, in ways both deep and shallow. Start with the latter and the current contest to pick Britain’s next prime minister, a process of anointment mysteriously delegated to a select priesthood of 100,000 or so Britons who are anything but representative of the country whose fate they hold in their hands.Jonathan Freedland is a Guardian columnist Continue reading...
He has been accused of being asleep at the wheel over inflation, but sacking the Threadneedle Street chief would be a risky stepFrom safe pair of hands to the government’s whipping boy, Andrew Bailey has certainly had a rollercoaster ride as governor of the Bank of England since he was appointed little more than two years ago.Bailey was handed the keys to Threadneedle Street by Mark Carney just as the first Covid-19 wave was breaking over the global economy. Since then it has been one nasty shock after another for the man long-tipped for the Bank’s top job. Continue reading...
Unemployment rate dipped to 3.5% in July, equal to its rate in February 2020 before the Covid-19 pandemic hit the USThe US added 528,000 jobs in July as the jobs market returned to pre-pandemic levels.The US has now added 22m jobs since reaching a low in April 2020. The unemployment rate dipped to 3.5% in July, a half-century low and equal to its rate in February 2020 before the Covid-19 pandemic hit the US. Continue reading...
Business secretary Kwasi Kwarteng says support will not be introduced until ministers return to workThe UK business secretary, Kwasi Kwarteng, has admitted it will be more than a month before ministers can introduce any measures to tackle the rising cost of living.Kwarteng, who is backing the foreign secretary, Liz Truss, to become the next leader of the Conservative party, said he was expecting a new prime minister to introduce a “support package” in an emergency budget but it could not happen until after they start work next month. Continue reading...
The business secretary, Kwasi Kwarteng, has criticised the Bank of England’s control of inflation, saying 'clearly something's gone wrong' at the institution, as prices are predicted to rise by 13% and the UK is forecast to suffer an economic downturn lasting more than a year.As a key supporter of the foreign secretary, Liz Truss, Kwarteng’s comments suggest the Bank’s independent mandate to keep inflation at 2% may be re-examined if she becomes the next prime minister
In today’s newsletter: The biggest rate rise in nearly 30 years comes amid forecasts of economic decline. How bad might it be?• Sign up here for our daily newsletter, First Edition Continue reading...
Bleak period of recession combined with rises in cost of living dominate the front pages, with plenty of horrifying graphicsFriday’s papers are united in gloom, placing front and centre the Bank of England’s grim forecast of a lengthy recession and inflation rising to its highest level since 1980.The Financial Times goes big with a “red alert” graphic showing GDP and inflation alongside an image of Bank governor Andrew Bailey, under the headline: “BoE warns of long recession as interest rates rise by half-point”. It notes that the outlook is worse than that of the US or the EU. Continue reading...
by Larry Elliott, Phillip Inman and Heather Stewart on (#6252V)
Base rate raised by 0.5 percentage points to 1.75%, as Bank says inflation will hit 13% in OctoberVladimir Putin’s invasion of Ukraine has left Britain on course for a recession lasting more than a year and inflation above 13%, the Bank of England has warned as it raised interest rates for a sixth successive time.Threadneedle Street said it had no choice but to increase borrowing costs by 0.5 percentage points to 1.75%, blaming Russia for cost of living pressures not seen in more than four decades and a 5% drop in living standards straddling this year and next – the biggest since records began in the 1960s. Continue reading...
Interest rates rise to 1.75% – the biggest jump in 27 years – as BoE warns UK faces long recession as high gas prices hit householdsUK car sales have continued to fall, as the cost of living squeeze hits demand and computer ship shortages constrain supply.Nnew car registrations fell by 9% in July compared with a year ago, the Society of Motor Manufacturers and Traders (SMMT) reports. It’s the fifth monthly decline in a row Continue reading...
Retailer also warns of slowing growth in coming months as cost of living crisis hits budgetsNext is set to make £10m more in annual profits than previously expected after a rise in sales of suits and summer outfits boosted sales despite a squeeze on shoppers’ spare cash from rising energy, petrol and food costs.The clothing and homeware retailer said full-price sales rose by a better than anticipated 5% in the three months to 30 July, but warned it was expecting a slowdown in growth to just 1% in the second half of the year as the cost of living crisis hit shoppers’ budgets. Continue reading...
On most issues – from immigration and equalities to tax cuts – the two candidates for PM are hugely out of step with votersThe Bank of England raises rates in the biggest jump since 1995. Just to “do something”, it deepens the cost of living crisis while doing nothing to ease inflation caused by the global price of energy and food. How could that be caused by a wage-price spiral when average wages are falling at their fastest rate in two decades. The Bank also predicts a recession as deep as that of the 1990s.For whoever steps through the door of 10 Downing Street next month, this is just one more misery that hits the “squeezed middle” and those above them with mortgages, as well as the “just about managing” and the low paid. But this strange Tory leadership contest inhabits another universe, barely touching on the issues that pollsters find most concern voters.Polly Toynbee is a Guardian columnist Continue reading...