Analysis: claims by ex-chancellor about Foreign Office weakness towards Beijing look like an attempt to head off a similar attack on himRishi Sunak’s pre-emptive strike attacking Liz Truss over alleged Foreign Office pusillanimity towards China looks to have been a daring attempt to fend off an imminent assault from his Tory leadership rival.But it locks the contestants into a potentially uncontrollable dogfight as they seek to prove their credentials as the truer enemy of authoritarianism. Continue reading...
Select band of economists back Liz Truss’s tax plan, but Rishi Sunak’s team say it could cost homeowners £6,600 a yearLiz Truss is short of heavyweight support for her plan to cut taxes immediately if she succeeds Boris Johnson as prime minister. Last week, when questioned on the Radio 4 Today programme, she came up with only one name: Professor Patrick Minford.So it came as little surprise to find a letter appearing in the Daily Telegraph signed by a group of economists endorsing Truss’s proposal. Continue reading...
Fears of gas shortages drive German business confidence to two-year low, as Gazprom prepares to cut gas supplies to Europe via Nord Stream 1A European Central Bank policymaker has signalled that further large interest rate rises may be coming, after it surprised markets with a larger-than-expected hike last week.Martins Kazaks has told Bloomberg that a further ‘quite significant’ increase to rates may be needed in September, on top of the 50-basis point rise agreed at July’s meeting.“I would not say that this was the only front-loading,I would say that the rate increase in September also needs to be quite significant.” Continue reading...
Supply bottlenecks, cost pressures and softer demand hit British industryGrowth in UK factories’ order books and output has slowed to its weakest in 18 months as cost pressures, supply bottlenecks and softer demand hit British industry.The latest update on manufacturing from the CBI found business optimism fell for a third quarter running amid signs that the strong expansion of the past year has come to an end. Continue reading...
Former leadership contender wants manifesto to include state ownership and a living standards contract for citizensThe former Labour leadership contender Rebecca Long-Bailey has called for Labour to drop its cautious approach to the economy and fight the next election on a radical manifesto including state ownership and a living standards contract between government and public.In her first significant economic policy intervention since the 2020 leadership contest won by Sir Keir Starmer, Long-Bailey said Labour would need transformative policies if it was to win the next election. Continue reading...
Inflation and a cost of living crisis mean the new PM will have little time to produce a feelgood factorBritain has a chequered economic past so it is not exactly unusual for new prime ministers to take over at times of crisis. It is hard, though, to think of a premiership in recent times that has begun with the skies as dark as they are today.Liz or Rishi? Tax cuts now or later? In a sense, it doesn’t really matter because whoever takes over from Boris Johnson will be handed one heap of problems. Continue reading...
Liz Truss and Rishi Sunak feel bound to talk lower spending to party members, but the former chancellor at least must see the folly of losing billions off our GDP‘They are trying to hide the failure of Brexit behind policy stunts.” This observation about the fiasco of the Conservative party’s leadership contest came from an economist friend and neatly sums it up.Liz Truss, who voted Remain but is now an ardent Brexiter, cannot admit to herself that she was right first time, and that the trade deals she goes on about that are supposed to have made up for our crass departure from the European Union do not amount to a hill of beans. Continue reading...
Britain’s top hotels are suffering from bartender shortages, with many leaving the industry or moving to new projectsFor those in the business, the role of head bartender at the Savoy’s American bar in London is much more than a job – it’s the chance to join a prestigious club of just a handful of people and to earn a place in history.In its more than 130-year existence, only 13 people have held the role, inventing cocktails such as the Moonwalk and the Hanky Panky, and serving clientele including Marilyn Monroe, Charlie Chaplin, Ernest Hemingway and Winston Churchill. Continue reading...
The European Central Bank is effectively deciding how much a eurozone government can spend. That can’t last for longEver since May 2010, when the European Central Bank began bailing out Greece, the continent’s leaders have sought to reassure markets that such help was a one-off measure. But there is nothing as permanent as a temporary solution. The aftershocks of the financial crash meant that Italy, Spain and Portugal would have become insolvent without the large-scale bond buying of the ECB. In return, recipient states had to swallow the bitter pill of austerity.That the ECB effectively funds governments’ spending, in violation of European constitutional treaties, by buying their debt has been brushed under the carpet. No one could stomach the alternative policy of kicking out countries from the eurozone. Monetary financing became normalised during the pandemic when Europe, like the rest of the world, had to spend whatever it took to keep economies ticking over. This was the right thing to do. Continue reading...
Rolling live coverage of business, economics and financial markets as retail sales and factory surveys suggest UK economy losing momentumAway from public markets, there were notable comments on the future of the Port Talbot steelworks last night from the boss of Tata, the Indian conglomerate that owns it. He wants as much as £1.5bn from the government to upgrade the plant.
The group blamed rising inflation for job losses as it vows to protect shoppers from higher pricesThe Co-op Group is cutting 400 jobs at its head office in Manchester and consulting on about 50 more job losses at its Nisa business, as the retailer said it faced tough trading conditions amid rising inflation.The job cuts come after the Co-op, which employs more than 63,000 people including 4,000 at its head offices, warned in April of continuing problems with food supplies and inflation after its annual profits more than halved amid supply chain disruption and higher staff wages. Continue reading...
by Lisa O'Carroll Brexit correspondent on (#61NPX)
New Treasury estimate comes as European Central Bank increases interest rates for first time in 11 yearsIncreasing interest rates in Europe could push up the UK’s Brexit divorce bill by £5bn, the government’s Treasury office has said.The new estimate comes as the European Central Bank increased its interest rates for the first time in 11 years by 0.5 percentage points, ahead of the 0.25 percentage points expected by economists. Continue reading...
Current plans predicated on stable growth seem foolish when we know that shocks such as global heating aren’t going awayTemperatures in Britain hit 40C. Runways melt at major airports. The London fire brigade reports its busiest single day since the second world war as fires rage around the city. The Met Office warns of temperatures so high they “could lead to serious illness or loss of life”.Meanwhile, inflation grinds inexorably upwards. Russia’s invasion of Ukraine is part of it, but other pressures were already apparent. Staples such as coffee saw price rises as a result of extreme weather disrupting harvests. Even silicon chips have been affected, with droughts in Taiwan putting the hugely water-intensive production of semiconductors at risk.James Meadway is director of the Progressive Economy Forum
Latest snapshot of private sector activity reveals manufacturing and services struggling with rising costsInterest rate increases expected later this year will weaken a UK economy that is already expanding at its slowest pace since it began emerging from the 2021 lockdown, the latest private sector activity snapshot suggests.Although performing slightly stronger than the eurozone or the US, the latest monthly survey from the S&P Global/Chartered Institute of Procurement and Supply (Cips) showed both the UK services and manufacturing sectors struggled to cope with rising cost of living pressures. Continue reading...
Increase in food and drink sales not enough to offset overall impact of cost of living crisis, ONS data showsA boost to food and drink sales over the Queen’s jubilee weekend was not enough to prevent the cost of living crisis from pushing down retail sales last month.The Office for National Statistics (ONS) said sales volumes dipped 0.1% in June, after a 1.2% rise in food and drink sales failed to offset a slide in clothing, as well as consumers’ reluctance to purchase furniture and other big ticket items. Continue reading...
Analysis: experts are lining up to warn that her policies will increase inflation and leave the UK with higher debtLiz Truss claims her economic agenda of tax cuts and public spending will revitalise the UK economy, but it is not just her rival prime ministerial candidate Rishi Sunak arguing that the measures will be self-defeating.Economists have lined up to warn that her £30bn package – including the reversal of this year’s national insurance rise, the suspension of green levies on power bills, and the cancellation of a sharp rise in corporation tax in 2023 – will increase inflation and leave the government with higher debt bills. Continue reading...
Child poverty campaigners criticise government plans for free theatre tickets and supermarket discountsChild poverty campaigners have accused the government of “abandoning” struggling families after it announced a cost-of-living package that included free theatre tickets and supermarket discounts.They spoke out as Boris Johnson prepared to meet with some of the UK’s biggest retailers on Thursday to discuss the Help for Households scheme which is meant to help families facing soaring food and fuel bills after inflation hit a 40-year high of 9.4%. Continue reading...
Bank surprises markets with 0.5 percentage point rise as inflation reaches 8.6% in eurozoneThe European Central Bank (ECB) has raised interest rates for the first time since 2011 to tackle eurozone inflation that increased to 8.6% last month.In a surprise move, the ECB pushed its base rate up by 0.5 percentage points, after economists had expected a smaller 0.25 point rise. Continue reading...
In an interview with BBC Radio 4, the foreign secretary, Liz Truss, defended her pledged tax cuts as she gets ready to go head to head with the former chancellor Rishi Sunak for the leadership of the Tories. Sunak described her plan as a 'fairytale' during the live debates. When asked if a single economist agreed with her view that debt-funded tax cuts would not increase inflation, Truss cited the work of Patrick Minford, a professor of economics at Cardiff University. Sunak and Truss have clashed throughout the Tory leadership contest on opposing economic plans and have made the issue central to their respective campaigns
Potential for future tax cuts narrows with budget deficit on course to top £100bn this yearSoaring inflation pushed interest payments on UK debt to a record high in June, putting the government’s budget deficit on course to reach more than £100bn this year, almost double its pre-pandemic level.Highlighting the scale of the economic challenge that will face the next prime minister, debt interest payments hit £19.4bn last month alone, the highest since monthly records began in April 1997, according to the Office for National Statistics. Continue reading...
In the fight against inflation the ECB, Bank of England and Federal Reserve risk either doing too much too soon, or too little too lateWhatever it takes. With those three words the then head of the European Central Bank quashed doubts in July 2012 about whether the euro had a future. Mario Draghi’s message to the financial markets was that they should not doubt his commitment to defend the single currency. The warning worked.Ten years later, the ECB is again in the spotlight, but so are two other major central banks – the US Federal Reserve and the Bank of England. All three are facing the same problem: what to do about annual inflation rates that are nudging 10%. Continue reading...
An unprecedented number will spend this winter choosing between freezing and starving. Britain needs an active state to helpWhat an almighty mess the British economy is in. To quote just a few of the stories from this week alone: inflation surged on Wednesday to a fresh 40-year high, and the Bank of England governor, Andrew Bailey, warned that it faced its “largest challenge” in keeping prices under control, and interest rates could rise next month by half a percentage point. Meanwhile, economists at UBS Global Wealth Management believe 99% of British workers are getting worse off, their pay not keeping pace with the price of food, energy and petrol.The seriousness of this moment cannot be overstated. By the end of August, the energy watchdog Ofgem will set its new price cap for fuel bills. On current market trends, it is likely to push the yearly limit for the average household energy bill to a whopping £3,244. That is a 65% rise on the current cap, so a family paying £100 a month will pay £165. Market analysts believe it could easily keep rising into the new year. This will more than swallow up the government’s planned energy grant of £400. And where energy prices go, so too do food prices and the cost of other goods and services. For a government that has spent most of this year in crisis management and that will emerge in September with a new prime minister and cabinet, dealing with a policy agenda so urgent and all-encompassing will be as overwhelming as bailing out a dinghy in a hurricane. The most likely outcome must be that it will sink. Continue reading...
EU says Russia ‘likely’ to halt gas supplies, while in the UK, milk, cheese, eggs, vegetables and ready meals become more expensiveThe Liberal Democrat Treasury spokesperson Sarah Olney said families and pensioners were being hammered by relentless price hikes while the government stood by.Britain now has a Zombie government in the middle of a cost of living crisis. The country can’t wait any longer for this Conservative party to play out their horror show leadership contest.VAT must be slashed right away to cut prices at the shopping tills and fuel pumps.Prices normally fall at this time of year as the summer sales season begins, but there was little movement in 2022 and, in 2021, prices were still rising following the end of the coronavirus lockdown. Continue reading...
Andrew Bailey also announces plan to sell off some of Bank’s bonds stock to reinforce effect of higher rates in tackling inflationThe governor of the Bank of England has said a half-point increase in interest rates is “on the table” for next month as Threadneedle Street considers toughening its anti-inflation stance.On the eve of official figures that are expected to show the annual increase in the cost of living edging closer to 10%, Andrew Bailey told an audience in the City that the Bank’s monetary policy committee (MPC) was considering ditching its policy of increasing rates in quarter-point steps. Continue reading...
From milk to mineral water, petrol to pet products – how the costs of goods and services have surgedInflation last month jumped to a new 40-year high of 9.4%, the latest figures show. The Office for National Statistics uses the consumer prices index to measure the rising cost of living, and as well as this headline figure it also compiles the increasing prices of individual goods and services. Here is a breakdown showing how a range of everyday items have shot up over the past year.In each case, the figure is the percentage change in the average price over the 12 months to June 2022. Continue reading...
The government must face the reality that the economic model of an oversized City is fundamentally brokenWhile millions of households struggle with soaring costs and the government rejects any demands for pay rises, the bankers’ bonuses are back, alongside plans to unleash City bosses’ pay as part of a post-Brexit deregulation agenda, much like the one that paved the way to the 2008 financial crash. Under the guise of “international competitiveness”, the City and the government are seeking to double down on a finance-led economy that serves global financial markets rather than supporting communities and the green transition.In June, the then Treasury minister John Glen outlined his vision for an “advanced financial services sector that is globally competitive”, starting with plans to introduce a new competitiveness objective for regulators. The new chancellor, Nadhim Zahawi, is expected to showcase this vision for financial regulation in his speech to bankers at a lavish dinner at Mansion House tonight, before introducing legislation to parliament tomorrow. Despite the Tory leadership turbulence, it seems that whichever combination of prime minister and chancellor takes over, they will firmly support the City. The reason the finance industry has spent a decade lobbying for this is so it can argue that all the activities it does in the name of profit are to increase international competitiveness – think mortgage mis-selling, money laundering and excessive risk-taking. We only have to turn the clock back to 2008 to see what chasing the “competitiveness” of the finance sector does to our economy.Fran Boait is executive director of campaign group Positive Money Continue reading...
Jobs data from the Office for National Statistics shows real terms pay, which accounts for inflation, fell 2.8% between March and MayEconomics editor Phillip Inman has the full story on today’s labour data:British workers’ living standards dropped in May at a record rate after pay rises failed to keep pace with inflation. Continue reading...
Money Saving Expert founder calls for warm public spaces in winter as cost of living becomes ‘unaffordable’ for someThe consumer champion Martin Lewis has warned the next prime minister that they stand to inherit a country on the brink of a “national financial cataclysm” as soaring energy bills threaten to tip households into crisis this winter.The founder of the Money Saving Expert website has become increasingly vocal in recent months on behalf of financially stretched households, amid surging inflation and a cost of living crisis. Continue reading...
Number of people in employment rises but cost of living crisis worsens as pay fails to keep pace with prices• Analysis: UK living standards squeeze will intensify as real pay plungesBritish workers’ living standards dropped in May at a record rate after pay rises failed to keep pace with inflation.Earnings growth increased across the private and public sector by 4.3% in the three months to May excluding bonuses, the Office for National Statistics said, but that left pay down by 2.8% year on year – a record fall. Continue reading...
Analysis: Rising inflation likely to lead to more strikes and falling spending unless government actsForget talk of a return to the inflationary spirals of the 1970s. The real story of Britain’s labour market is of an intensifying squeeze on living standards as the gap between pay and the cost of living widens.Real regular pay – wages adjusted for prices once bonus payments have been stripped out – were 2.8% lower in the three months to May than in the same period of 2021. Not only was that the sixth monthly decline in a row, it was the biggest drop since modern records began in 2001. Continue reading...
Don’t take my word for it that the Conservatives are the party of low growth? Just ask Liz Truss and Tom TugendhatAfter years of division, the unexpected sudden arrival of unity should be cause for celebration. It has long been accepted by the government’s opponents that 12 years of Tory rule have been a disastrous combination of stagnation and decline, so it is to be welcomed that pretenders to the Conservative crown have now embraced these facts.That Liz Truss has savaged the economic policies of the government she has served in since 2019 is notable enough, damning Rishi Sunak for plunging the country into a coming recession. But Truss’s critique is far more sweeping than that, damning “business-as-usual economic management, which has delivered low growth for decades”. Whether Truss is aware of this or not – she did, after all, get lost leaving the room during her campaign launch – this is a timeframe that includes the last three Conservative prime ministers. And she is on point: the average economic growth of the 2010s was only marginally better than the 2000s, itself the worst decade for growth since the war.Owen Jones is a Guardian columnist
My father, David Evans, who has died aged 81, was a pioneering international development economist and family man. He dedicated his career to improving the world, one economic policy at a time.Born in Perth, Western Australia – the third of four sons of Flower (nee Southwood) and Bill Evans – David grew up near the banks of the Swan River, where he developed a lifelong love of boats, water and adventure, enjoying youthful success in competitive rowing and sailing. Continue reading...
Brent crude prices pushed past $100 per barrel after US president Joe Biden failed to secure output hike agreements with the world’s top oil exporterGrant Thornton has been fined £1.3m for “serious” failures in two audits of Sports Direct accounts.The fine applied by the accounting watchdog, the Financial Reporting Council (FRC), relates to two audits in 2016 and 2018.The audit failings in this case were serious and relate to fundamental auditing standards.It is particularly important that auditors follow up with due rigour where they have identified potential related party transactions as a significant audit risk.
Monetary policy committee member says Bank must act to prevent high inflation becoming embeddedInterest rates could rise above 2% in the coming year as the Bank of England acts to prevent high inflation becoming embedded in the economy, one of its policy setters has said.Michael Saunders, who leaves Threadneedle Street’s monetary policy committee (MPC) next month, said he supported tighter policy because the risks of doing “too little, too late” outweighed the risks of doing “too much, too soon”. Continue reading...
by Peter Walker Political correspondent on (#61GZS)
Tom Tugendhat most likely to be eliminated after bruising ITV debate marked by Sunak and Truss clashesConservative MPs will cull the five-strong field hoping to succeed Boris Johnson by one more on Monday, as the International Monetary Fund cautioned the candidates over their race to announce sweeping tax cuts.Following an often bruising debate on ITV on Sunday night, a third round of voting by MPs will take place on Monday afternoon, with the result announced at 8pm by Sir Graham Brady, the chair of the 1922 Committee of backbench Tories. Continue reading...
by Introduced by Jane Lee. Presented by Nosheen Iqbal on (#61GHR)
This year has been a disaster for many investors in cryptocurrencies. Alex Hern, Guardian UK technology editor, draws the parallels of the spreading panic in the new digital economy with the 2008 financial crisisThis episode was originally published on the Guardian’s global news podcast, Today in Focus.When the global financial system went into meltdown in 2008, banks collapsed and governments around the world were forced to step in to protect the financial system. It cost billions of dollars and also proved a pivotal moment: it profoundly shook the confidence that many had in their governments. Continue reading...
Whoever is the next prime minister will likely resurrect a form of capitalism that almost broke the economy in 2008It is no coincidence that the modern-day Conservative party was born just when Britain was its most equal, in the late 70s. Thatcherism was a counter-revolution in economic thinking. Its aim was to roll back what had until then been a successful model of state intervention in favour of business interests. During the 1970s, energy price shocks produced inflation. Yet this was attributed by rightwing thinkers to slack government fiscal and monetary policy. When policy was tightened, the lengthening dole queues that resulted were blamed on the power that trade unions had gained after decades of full employment.Thatcherism pinned the sense of the country being adrift on egalitarianism. Its supporters argued that economic progress needed more, not less, inequality. Tories first identified their enemies and then opportunistically scapegoated them for the country’s plight. That ploy worked when they were insurgents, but today’s Conservative party has been in power for 12 years. It is struggling to repeat the trick. Voters do not recognise trade union leaders as “barons” because they do not think of their status as being more privileged than that of their members or the general public. Continue reading...
The 1920s also began dismally. But for a fourth industrial revolution to happen, much more has to be doneOptimism abounded as 2019 drew to a close. If the 2010s had been a lost decade of weak growth and stagnating living standards then the years to come were going to be much better.The talk was of a new Roaring Twenties, a repeat of the decade that followed the first world war. There were even Great Gatsby-themed fancy dress parties to celebrate the good times to come. Continue reading...
Some US firms have announced hiring slowdowns and layoffs in recent weeks amid fears of recessionAs top tech companies prepare to release their quarterly earnings reports starting next week, investors are bracing for bad news.Several US tech companies have announced hiring slowdowns and layoffs in recent weeks, and the difficulties are expected to continue. “It’s not a great time for tech in general,” said Paul Verna, an analyst at Insider Intelligence, a market analysis firm. “There is no question that companies are going to be spending less, cutting back budgets, and maybe implementing hiring freezes. None of that is good news for the next quarter.” Continue reading...
As the Fed raises interest rates, dollar-denominated loans become an unsustainable burden to states around the globeLater in July US interest rates are expected to jump for a second time this year, and that’s going to wreck any chance of a global recovery.The Federal Reserve could push its base rate up by as much as a full percentage point, ending 15 years of ultra-cheap money, intended to promote growth. Continue reading...
by Larry Elliott and Richard Partington on (#61FTD)
The Bank of England’s former chief economist has a clear idea of what caused the current inflation mess, but fears the UK lacks any clear plan for solving itAndy Haldane has a simple but stark message for those seeking to replace Boris Johnson as prime minister: Britain has serious economic problems and they won’t be solved by massive tax cuts.Nor, according to the man who until last year was chief economist at the Bank of England, does the solution to Britain’s cost of living crisis lie with the decisions Threadneedle Street makes about interest rates. Continue reading...
Rampant inflation, war in Ukraine, fuel poverty, Brexit… we ask 10 experts to explain – for absolute beginners – what the economic crisis means for Britain and how we should respondVicky Pryce
Pandemic and economic uncertainty caused by Brexit have added to pressures on businesses, insolvency expert saysThings have turned sour in the swanky tonic market.Fevertree, the premium carbonated mixer maker, has cut its profit forecasts and warned that logistic problems and rising costs have “significantly worsened in recent months”, including shortages of workers and glass bottles. Continue reading...