Foreign secretary says ‘free and open Indo-Pacific’ is ‘critical to UK’ and releases manga-style cartoons to mark his visitJames Cleverly has arrived in Japan for a G7 foreign ministers’ summit to promote a “free and open” Indo-Pacific, as the UK government steps up its focus on the region after Brexit.The foreign secretary and his counterparts from countries including the US and France will hold high-level talks on closer security and defence ties in the face of China’s growing assertiveness in the Pacific. Continue reading...
Bridgetown Initiative could be way for rich nations’ development finance words to become actionKristalina Georgieva is one of life’s optimists, so it was no surprise that the managing director of the International Monetary Fund found things to be cheerful about at last week’s gathering of finance ministers and central bank governors in Washington.The two Bretton Woods institutions – the IMF and the World Bank – meet every six months, and since October, fears of a deep recession have receded. As Georgieva noted, the global economy has shown unexpected resilience. Energy prices have come down and that makes the outlook for inflation better. What’s more, the IMF chief said there was a can-do approach at the meeting. Continue reading...
Attacks on Rishi Sunak are pointless if Labour is going to let the crowning disaster of Tory government pass without commentFirst we hear from the International Monetary Fund that the UK economy is bottom of the G7 class. Then come the absolutely disastrous export figures for October-December from the Office for National Statistics: the volume of exports was more than 9% below the pre-pandemic average. This compares with a double-digit increase in Italy’s exports – er, yes, a country which is still a member of the European single market.There was a time when devaluation of the pound revived exports. No longer. Brexit and the damage wreaked by a succession of Conservative governments have seen to that. The pound has been spectacularly devalued against the dollar and the euro since the Brexit referendum. This has done precious little to boost exports but has had an all too obvious effect on import prices. Hence inflation in the UK is worse than in other industrial countries – thanks to, guess what, Brexit. Continue reading...
by Richard Partington Economics correspondent on (#6AV54)
Hopes for a drop in the headline rate are pinned on lower oil and gas prices, but it could still go the other wayFor months there has been hope that inflation might come tumbling down from its highest rate in 40 years. In search of an elusive peak, and despite having already made several wrong calls, some forecasters are suggesting that a rapid decline is all but “guaranteed”.This week will put those expectations to the test, with the publication of a range of economic data that will influence the Bank of England as it considers whether to hit the pause button on its most aggressive policy of interest rate rises in decades. Continue reading...
The pound strengthened as data showed US economy cooling, before Fed policymaker vowed to press on with interest rate risesAldi and Lidl have cut the price of milk to match Tesco and Sainsbury’s as the annual ‘spring flush’ rise in production leads to oversupply.The price cuts are the first since 2020 as rises in energy, fertiliser and feed prices have led to a surge in the price of milk since then. Continue reading...
Package similar to 2005 deal needed as struggling African countries suffer severe funding squeeze, says officialWestern countries need to put together a debt relief and aid package to match that of the landmark Gleneagles summit deal in 2005 in order to counter a severe funding squeeze affecting struggling African countries, the International Monetary Fund has said.Abebe Selassie, the director of the IMF’s African department, said without a scaling up of financial support some of the world’s poorest countries would have no chance of meeting the 2030 UN goals for poverty reduction. Continue reading...
Warning from Kristalina Georgieva after G7 explores economic resilience, secure global supply chains and less reliance on ChinaFragmentation of the global economy into rival trading blocs runs the risk of prompting a new cold war, the head of the International Monetary Fund has said.Kristalina Georgieva, the IMF’s managing director, said a combination of the Covid pandemic, the war in Ukraine and shortcomings with globalisation had led to a potentially dangerous splintering. Continue reading...
by Larry Elliott in Washington, and Richard Partingto on (#6ARYY)
Chancellor’s remarks come despite industrial action being major factor in zero GDP growth in FebruaryThe government is willing to accept short-term damage to the economy from public sector strikes rather than give in to pay demands and risk a longer-term hit from persistently higher inflation, Jeremy Hunt has insisted.Speaking in Washington, the chancellor said he “completely understood” public anger at the high cost of living but added that the impact of rising prices would be longer lasting and more damaging if ministers acceded to “hard to justify” pay demands. Continue reading...
Governor has played down repeat of financial crisis but review of payout policy points to unhappy memoriesWhen Andrew Bailey revealed in a speech that the Bank of England was working on updating Britain’s deposit insurance guarantee scheme, which gives government protection on savings up to £85,000 in the event of a bank run, it was with one eye on the recent shocks, and the other on events from 15 years ago.Northern Rock, Bradford & Bingley, and Icesave may sound like names from another era, but the memory of what happened in 2007 and 2008 still reverberates around the Bank’s Threadneedle Street offices to this day. Continue reading...
Latest GDP report shows that civil service and teachers’ strikes held back service sector growth, leading to no growth in FebruaryTom Stevenson, investment director for Personal Investing at Fidelity International, also predicts the UK will suffer a year of stagnation in 2023…. before a modest rebound next year.He fears the UK is the ‘weak link’ among developed economies (as shown by the IMF’s latest forecasts, which Jeremy Hunt has vowed to beat).The British economy failed to grow at all in February, confirming that, while the UK may avoid recession, it is the weak link among the developed world’s economies. The UK’s growth is slower than in other rich countries and its inflation higher. We face a year of stagnation in 2023 before a modest rebound next year.‘Although January’s growth was revised up slightly to 0.4%, February’s flat line reflects the impact of the UK’s winter of discontent. Strike action took the shine off a modest increase in retail sales, while falling production in the month offset better construction activity.“A combination of upward revisions in GDP data and an improvement in global economic conditions could help the UK economy avoid a recession this year. While this will provide relief for policymakers, the outlook for growth in the medium-term remains relatively weak by historical standards.“Economic activity will remain subdued in the near term as households continue to be squeezed by elevated prices and the cumulative impact of past interest rate increases. Although business sentiment continues to improve, bolstered in part by the fall in wholesale energy prices, we expect investment to be constrained this year amidst the tightening in credit conditions and uncertainty about future policy direction. Continue reading...
by Richard Partington Economics correspondent on (#6ARMK)
Number of working-age adults in work or job hunting is still lower than before pandemic, OECD figures showBritain has emerged as the worst-performing country in the G7 for workforce participation since the Covid pandemic, after an exodus of half a million people at a time of record levels of long-term sickness.Figures from the Organisation for Economic Co-operation and Development (OECD) showed the UK’s labour force participation – the percentage of working-age adults either in work or job hunting – was 78.6% in the final three months of 2022, down from 79.5% in the same period at the end of 2019. Continue reading...
As recent banking failures in US and Europe show, rich countries can act quickly when they want toAfter a decade or more in which they have been obsessed with their own problems, countries in the wealthy west are starting to wake up to the risk of a looming debt crisis in poorer parts of the world.This week’s gathering of the International Monetary Fund and World Bank in Washington has been marked by a discussion about what to do about countries that are in debt distress or on the brink of it. Continue reading...
The 2010s were a wasted decade for economies and the environment. The 20s have all the makings of a secondRemember the roaring 20s? Even as Covid gripped the world, optimists piped up that the economy would come roaring out of the pandemic, bolstering incomes and kickstarting an almighty boom. Harking back to the Spanish flu pandemic of a century earlier, they saw a decade of glorious growth ahead.Well, they were wrong. Ahead lies not roaring but snoring; no boom, but ever-deepening gloom. That is the message from the International Monetary Fund and the World Bank, which are holding their spring meetings in Washington DC this week. In its economic outlook, the IMF not only outlines what a mediocre few years lie ahead, it is also worried that things could get even worse. As for the World Bank, it has published a 564-page book whose chief preoccupation is in its title: Falling Long-term Growth Prospects. It warns of a “lost decade in the making”, and projects that the meagre growth of the 2010s will “extend into the remainder of the current decade”. We may be less than a third of the way into the 20s but, as far as the serried ranks of the top economists in Washington are concerned, it is already game over. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#6AQGD)
Exclusive: Leaked recording raises concerns over governance at development bank, at which David Malpass is now presidentWorld Bank staff were apparently told to give preferential treatment to the son of a high-ranking Trump administration official after the US Treasury threw its support behind a $13bn (£10bn) funding increase for the organisation, a leaked recording suggests.Shared with the Guardian by a whistleblower, the recording of a 2018 staff meeting suggests colleagues were encouraged by a senior manager to curry favour with the son of David Malpass, who is now president of the World Bank but at the time was serving in the US Treasury under Donald Trump. Continue reading...
Speculation of further 0.25-point increase in rates after speech by Bank of England governor to IMFThe governor of the Bank of England, Andrew Bailey, has played down the risks of a system-wide banking crisis, paving the way for further interest rate increases to combat the UK’s high inflation levels.Despite the recent problems that affected regional banks in the US and Credit Suisse in Europe, Bailey said the reforms to make banks safer after the 2008 global financial crisis had worked and there was no need to alter Threadneedle Street’s approach to setting borrowing costs. Continue reading...
In a bleak report from the International Monetary Fund (IMF), the UK is forecast to be one of the poorest performing major economies among the G7 nations in 2023.Although the IMF slightly upgraded its last forecast, it still anticipates a contraction in the UK economy this year. Contributing to the strong headwinds faced by the UK, the IMF underlined the mounting effects of elevated energy costs, persistent inflation and financial risks from raised interest rates
Consumers reduce spending on groceries, clothes and eating out as they seek to balance budgetsUK consumers cut back on groceries, clothes shopping and eating out last month but streaming and pay TV subscriptions jumped as cash-conscious viewers switched to nights in.The return of big hit series such as Succession, The Mandalorian and Ted Lasso fuelled a healthy 4.1% increase in spend on digital content and subscriptions in March, the highest year-on-year rise in five months, according to Barclays’ regular snapshot of consumer credit and debit card use. Continue reading...
IMF suggests invasion spending is pushing up GDP but academics argue non-military economy is founderingThis week the International Monetary Fund will assess how well Russia’s economy has held up during the Ukraine war and is expected to estimate it had a mild downturn last year, faces a small contraction this year and will enjoy a healthy level of growth in 2024.This seems to contradict the warning from shortly after the invasion that the country faced a contraction of up to 15% and last month’s prediction from the oligarch Oleg Deripaska that international sanctions would drain the Kremlin’s finances by next year. Continue reading...
Sunak or Starmer will win votes – and most UK households will gain – if they replace the council taxRishi Sunak needs a gamechanger to have any hope of leading the Conservatives to victory at the next general election. Sir Keir Starmer could do with something to seal the deal with the British public.The conventional wisdom is that there are no easy wins available to either the prime minister or the leader of the opposition in these straitened times. But the conventional wisdom is wrong. There is one policy that would be both popular and make economic sense, and that is reform of the UK’s property taxation. Continue reading...
October saw the UK chancellor in the hot seat. Now the US’s Janet Yellen will face flak over green subsidies and banking securityAs a spectacle, this week’s half-yearly gathering of the world’s finance minsters and central bank governors in Washington will be hard-pressed to come up to the standards of the last occasion they met, in October 2022.Inflation was soaring, there were fears that the squeeze on businesses and consumers would plunge the world into recession and war was raging in Ukraine. Yet it was the UK that was the talk of the annual meetings of the International Monetary Fund and the World Bank – and for all the wrong reasons. Continue reading...
By kicking retirement reforms down the road again, vote-hungry politicians are allowing a wealthy generation to prosper at the expense of the youngThere is an election coming, so reforms that harm the finances of older voters are off the table.The over-50s dominate participation in local polls even more than they do in general elections, so it was little wonder that a proposal to bring forward the date when the state pension age starts to rise to 68 – adversely affecting millions of people born in the 1970s – was considered toxic by the government and kicked into touch at the end of last month. Continue reading...
Traditional roast lamb will also make a bigger dent this year as lamb and goat prices climb by 9.4%The cost of Easter has soared by nearly a quarter compared with last year, as inflation hits popular items including chocolate eggs and hot cross buns, analysis suggests.While millions prepare to celebrate over the Bank Holiday weekend, research compiled by the Labour party found bills for supermarket staples will be, on average, 23% higher. Continue reading...
March saw fewer jobs added to economy compared with February as effects of Fed’s interest rate increases are feltThe US added 236,000 jobs in March, a sign of gradual weakening in the labor market as the effects of the Federal Reserve’s interest rate increases start to be seen in the economy.Friday’s closely watched jobs report provides data that will heavily influence the Fed’s decision to either halt or continue interest rate hikes at its next board meeting in early May. The non-farm payrolls data published by the Bureau of Labor Statistics’ (BLS) suggested a slowdown in the jobs market in the world’s largest economy last month, after an upwardly revised 326,000 jobs were added in February and 504,000 in January. Continue reading...
by Richard Partington Economics correspondent on (#6AHX5)
Kristalina Georgieva says slowdown last year after Covid pandemic and Russian invasion of Ukraine could persist for five yearsThe global economy is heading for the weakest period of growth since 1990 as higher interest rates set by the world’s top central banks drive up borrowing costs for households and businesses, the head of the International Monetary Fund has warned.Kristalina Georgieva, the IMF’s managing director, said a sharp slowdown in the world economy last year after the aftershocks of the Covid pandemic and the Russian invasion of Ukraine would continue in 2023, and risked persisting for the next five years. Continue reading...
by Angelique Chrisafis in Paris and Amy Hawkins on (#6AG9R)
French leader sees Beijing as possible ‘gamechanger’ and will also discuss European trade on three-day visitEmmanuel Macron has arrived in China for a three-day state visit during which he hopes to dissuade Xi Jinping from supporting Russia’s invasion of Ukraine while also developing European trade ties with Beijing.Shortly after arriving in the Chinese capital, Macron said he wanted to push back against the idea that there was an “inescapable spiral of mounting tensions” between China and the west. Continue reading...
by Richard Partington and Kalyeena Makortoff on (#6AFTY)
Jamie Dimon says downfalls of Silicon Valley Bank and Credit Suisse have undermined confidenceThe financial turmoil that led to the downfall of Silicon Valley Bank in the US and Credit Suisse in Europe is not yet over and its effects will be felt for years, the boss of America’s biggest bank has warned.In an annual letter to JP Morgan’s shareholders, Jamie Dimon said last month’s failure of SVB and the Swiss government-brokered takeover of Credit Suisse by its rival UBS had undermined confidence in the banking system. Continue reading...
One of the most influential postwar Conservative chancellors seen as the main architect of Thatcher’s radical economic reformsAt the time that Nigel Lawson, Lord Lawson of Blaby, who has died aged 91, resigned as chancellor in October 1989, his departure was immediately interpreted by the more perceptive political analysts as the beginning of the end of the Thatcher years.And so it proved. The man whom Margaret Thatcher once called “my golden boy”, the politician who was credited as the main architect of her government’s economic success, had lit a touchpaper that would smoulder across the months and lead to her ignominious departure a little more than a year later. Continue reading...
Report calls for tighter regulation of non-banks as comfortable decade of low interest rates comes to an endThe near collapse of Britain’s pension funds during Liz Truss’s brief premiership highlights the risk that higher global interest rates will trigger more financial crises in the coming months, the International Monetary Fund (IMF) has warned.In a report, the agency based in Washington DC said the rescues of Silicon Valley Bank and Credit Suisse may not have been isolated incidents and that there was a chance that problems could stretch beyond the traditional banking sector to pension funds, insurers and hedge funds. Continue reading...
by Richard Partington Economics correspondent on (#6AFFW)
MPC member Silvana Tenreyro expects such a move ‘to avoid significant inflation undershoot’The Bank of England may need to cut interest rates earlier and faster as the impact from previous increases drags down the economy and pulls back inflation, one of its senior policymakers has said.Silvana Tenreyro, a member of the central bank’s rate-setting monetary policy committee (MPC), said there were signs inflation would fall “well below” the central bank’s 2% target rate after a sharp decline in global energy prices. Continue reading...
CPTPP membership will result in more deforestation and endanger animal welfare, say campaignersThe UK’s membership of a Pacific trade agreement will result in more deforestation overseas, endanger animal welfare and “make a mockery” of the government’s environmental commitments, campaigners have said.Ministers signed an agreement late last week for the UK to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trading bloc of 11 nations including Japan, Canada, Australia and Mexico. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#6AED2)
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...
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...
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...
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...