Andy Haldane says starting mortgage rate rises sooner would have nipped inflation in the budThe former chief economist of the Bank of England has warned there is “more pain to come” for households and the wider economy as mortgage rate increases hit people’s bank accounts and weigh on spending.Andy Haldane, who is now chief executive of the Royal Society of Arts, said it was painful to see the effects of rising interest rates since he left the Bank of England and its rate-setting monetary policy committee in June 2021. Continue reading...

Crises in productivity and wealth inequality won’t be solved with ideas from the 80s. It’s not about a bigger pie – we need a different oneAccording to our politicians and most of the media, the central problem facing the British economy is a lack of growth. We need growth, we are told, to pay for this or that public service, or good wages, or housing. Just this week it was reported that the chancellor would need to plan further cuts in expenditure as a result of the Office for Budget Responsibility downgrading the UK’s growth prospects.But we should beware framing the lack of growth as the main affliction. In any case, the solutions to the growth problem have been tried and largely failed, whether the austerity of the Cameron years, the tax cuts proposed by Liz Truss and Kwasi Kwarteng or the innovation promised by all governments since the 1990s. The problems of the present are genuinely novel, and require not so much growing the British economy as transforming it. Continue reading...

Producers blame avian flu for the soaring costs, but one farmers’ group is airing accusations of price-gougingThe egg carton has become the symbol of inflation. By the end of 2022, prices had shot up 60% year-over-year putting a strain on holiday budgeting for households across the country.Some Americans got creative with their sourcing. Attempts to smuggle eggs across the US-Mexico border have surged, US border patrol says, with the agency reporting that the number of egg and poultry seizures rose 108% from 1 October to 31 December. Shoppers are also seeking out local farms, which can be cheaper. Egg farmers on TikTok have poked fun at this boon, calling themselves “egg dealers”, weighing their produce as if it were a kilo of drugs. Continue reading...

Despite the highest inflation growth in 32 years, the figures suggest a peak has likely been reached

Appetite for organic food continues from Covid boom but firm warns inflation and rising costs are eating into profitsThe organic vegetable box company Riverford doubled its dividend to its founder, Guy Singh-Watson, to £850,000 last year and tripled its workers’ bonus pool to £2.4m despite a dive in profits.Sales rose 1% to £110.8m in the year to 30 April 2022, managing to top the pandemic boom. However, the company said that trading conditions and cost pressures this year and next could be some of the worst in its 36-year history after profits dived 56% to £5.2m. Continue reading...

OBR tells Jeremy Hunt he will have £9bn less income to factor in amid falling tax receipts

High energy prices, rising interest rates and falling demand point to risk of recession, say analystsBusiness activity contracted at its fastest pace in two years in December as the high cost of living restricted household spending and companies cut investment, raising the prospect of a UK recession.The services sector, which accounts for about three-quarters of private sector output, faced the biggest squeeze since the second Covid-19 lockdown, according to a closely watched survey. A slump in manufacturing output dating back to last August continued in December. Continue reading...

Chancellor likely to tread cautiously after record December budget deficitBudget day on 15 March is less than two months away and if ever there was a government in need of a feelgood event then this is it. Unfortunately for Rishi Sunak, the state of the public finances means the chances of a voter-friendly giveaway to counter a cost of living crisis and sleaze allegations look vanishingly small.Jeremy Hunt certainly provided no hint in his response to the latest Office for National Statistics figures that he was preparing anything other than a steady-as-she-goes package. It was vital, the chancellor said, to stick to his deficit reduction plan. Continue reading...

Spending exceeds receipts by £27.4bn, as higher interest payments also contribute to deficitGovernment payments to soften the impact of rocketing energy bills helped send UK public borrowing soaring to more than £27bn last month – the highest figure for December since modern records began 30 years ago.The latest bulletin on the health of the UK’s finances from the Office for National Statistics showed government spending last month exceeded receipts by £27.4bn. Continue reading...

Business lobby head deserves response after government sloth on green investment and tax incentivesThe CBI billed it as a “major speech”, which is a judgment best left to others, but, yes, Tony Danker, the director general of the CBI, made a couple of excellent points on Monday as he addressed the current obsession in UK boardrooms: where is the national plan for growth?First, it’s time for the UK to stop congratulating itself of having built so many offshore windfarms, and understand that “a subsidy arms race”, as Danker put it, is under way in green investment. The dramatic phrase may sound like a plea for corporate handouts (and, up to a point, it is) but it is also a widely held assessment of President Joe Biden’s misleadingly named Inflation Reduction Act. A $369bn (£298bn) package to direct subsidies towards green technologies is enormous and has the potential to change the investment landscape and increase the gravitational pull of the US. It is a hard piece of legislation to ignore. Continue reading...

Jim Bamford says mainstream funding needs to be rebalanced; plus letters from John Marriott, Joanna Christina and Les BrightGovernment spending overall is planned to be £1,182bn in 2022-23. The levelling up expenditure announced last week was just £2.1bn – less than 0.2% of that (Editorial, 18 January). It is the way that the other 99.8% is spent that has created the gross regional imbalance that so disfigures Britain’s economy. Mainstream funding has depressed the north – and other areas outside London, such as the West Country – and it is that mainstream funding that needs to be rebalanced if levelling up is ever to become real.A good place to start would be with bus services, on which the government is overseeing terminal decline outside London just when the cost of living and climate crises demand a “London solution” (ie public control and ownership) for the whole country. And judicious spending could solve the perpetual chaos on the north’s railways, so frequently reported but rarely with solutions offered.

Tony Danker’s ‘major’ speech on Monday likely to be viewed as rebuke of No 10 and Treasury policyThe head of the UK’s leading business organisation is to call for Rishi Sunak to show more ambition on the economy, warning that the country risks being left behind on green growth and that a cull of EU laws could scupper a recovery.While stressing that he did not want to be seen as a “doomster or gloomster”, Tony Danker, director general of the Confederation of British Industry (CBI), is to use what the organisation is billing as a “major” speech to call for action on several fronts. Continue reading...

Contrary to other recent economic analysis the business consultancy EY forecasts 0.7% drop in GDP this yearThe UK’s impending recession could be twice as bad as previously thought, according to leading economic forecasters at the business consultancy EY.Reduced government support, higher taxes and an overall worsening outlook have all led the firm’s analysts to conclude that the next three years could be worse than they anticipated three months ago. Continue reading...

Exclusive: Forecasts predict exports will fall to £707bn next year and target will not be reached until 2035Ministers have been accused of leaving a “record of failure and broken promises” as internal forecasts show Britain will be 15 years late in achieving its £1tn annual export target after being hit by Brexit.Projections from the Department for International Trade (DIT) show the value of UK exports will not reach £1tn until 2035, based on current trends, with the total due to fall to £707bn next year. Continue reading...

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

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

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

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

Rolling coverage of the final day of the World Economic Forum

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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