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...
One in 20 people unemployed and not seeking work have symptoms, says ONSOne in 20 people in the UK who are neither employed nor seeking paid work are suffering from long Covid, with the figure more than doubling in the past year, official data has revealed.The proportion is far higher than for the one in 29 people who are unemployed but seeking work who have long Covid symptoms, or the one in 30 employed people who are sufferers, data released by the Office for National Statistics (ONS) shows. Continue reading...
The Bank of England governor has warned the UK will enter a recession later this year. The Bank has cut its growth forecast and predicts the economy could fall into recession from the October to December quarter. Andrew Bailey highlighted the recent hike in gas prices as one of the biggest contributors to rising inflation
From first-time home buyers to credit card users, we look at how your finances may be affectedThe Bank of England has voted to raise interest rates by 0.5 percentage points to 1.75% as the UK battles to prevent inflation running out of control. We look at what that means for your finances. Continue reading...
Westminster is perpetrating the same scam as the rate-setters – bluffing that they can get the old economic machinery working like beforePerhaps you have been hoping that the age of lies is over. After all, Boris Johnson will soon be swept out of No 10 and whoever replaces him cannot be half as mendacious – can they? Liz Truss may love her pork markets but she can’t be as keen on telling pork pies. Well, I bring bad news. If lying is making a statement one knows to be false, then Britain is wading waist-deep into an era of systemic deceit.I don’t just mean the permanently malfunctioning Truss, who this week complained she was “wilfully misrepresented” by, um, her very own press release. No, the fabrications come from across the political establishment and they concern the future of our economy. And the ultimate fruit of these lies may well be another Johnson or Nigel Farage.Aditya Chakrabortty is a Guardian columnist Continue reading...
Markets expect 0.5 percentage-point rise for first time since independence as inflation risesThe US Federal Reserve has done it. The European Central Bank has done it. Now the Bank of England must decide whether to follow suit and opt for a bigger than usual rise in official borrowing costs when it meets on Thursday.After edging rates up by a quarter-point at a time, the financial markets are betting that Threadneedle Street’s monetary policy committee (MPC) will announce a 0.5 percentage-point jump this time, something that has never happened since the Bank was granted independence in 1997. Continue reading...
South of England experiencing faster recovery than north, Scotland and Northern IrelandVisits to high streets and shopping centres dipped to below pre-pandemic levels last month, with the north of England – plus Scotland and Northern Ireland – trailing behind the south in terms of the overall recovery from Covid-fuelled gloom.Footfall decreased by 14% in July compared with 2019, reversing gains made in April, as retailers struggled to entice shoppers amid a heatwave in the third week of the month and surging inflation. Continue reading...
A hike in interest rates does nothing to stifle inflationary pressures and adds to the pain for firms and householdsHere is a conundrum. At noon on Thursday, the Bank of England will most likely increase interest rates for the sixth time in a row. Analysts are generally expecting a rise of a half of a percentage point– the biggest single hike since before the Bank was made independent, when monetary policy was ultimately the responsibility of a chancellor called Ken Clarke.Yet this week’s rate rise is not intended to cool an overheating economy – far from it. Both the IMF and the OECD forecast that the UK will endure the weakest growth of any rich country next year, while the well-respected National Institute of Economic and Social Research (Niesr) believes that the country will enter a recession this summer and stay there until well into next year. So why, then, is the Bank pushing up interest rates? Continue reading...
Oil producers will lift oil production by 100,000 barrels per day in September, a much smaller rise than in recent monthsDespite economic headwinds, German exports beat forecasts with 4.5% growth in June.Exports from Europe’s largest economy hit a record level thanks to demand from the European Union, the United States and China, data this morning shows. Continue reading...
Resolution Foundation says Bank of England likely to forecast higher and later peak, on eve of interest rates decisionThe UK’s annual inflation could go as high as 15% by the start of 2023, experts have forecast, as further sharp increases in energy prices push up the cost of living.On the eve of the latest decision on interest rates by the Bank of England, the Resolution Foundation thinktank said price pressures were likely to be stronger and last longer than the Bank had previously forecast. Continue reading...
Rising tensions between US and China threaten to accelerate decoupling of world’s two biggest economiesRelations between the US and China were poor even before the visit of the House of Representatives speaker to Taiwan. Now they have the potential to turn very nasty indeed – with significant consequences for the global economy.At the moment, things look containable. Financial markets have responded relatively calmly to Nancy Pelosi’s visit and the military exercises that Beijing has ordered in response. The assumption is that China will put on a show of strength and leave it at that. Continue reading...
The rise will force the Bank of England to hike interest rates higher and for longer than previously expected, says NIESRInflation will soar to “astronomical” levels over the next year forcing the Bank of England to raise interest rates higher and for longer than previously expected, according to a leading thinktank.The National Institute of Economic and Social Research also forecast a long recession that would last into next year and hit millions of the most vulnerable households, especially in the worst-off parts of the country. Continue reading...
As small businesses crumble, shelves get emptier and the care-worker shortage intensifies, life outside the EU is having a dire effect on many of us. Why aren’t politicians talking about it?When British politicians talk about Brexit and its consequences, they tend to adopt rictus grins and assure us that, by some miracle as yet unexplained, everything is going to be OK. The Labour leader Keir Starmer, who only a few years ago was a passionate advocate of a second referendum on our exit from the EU, now has a five-point plan to “make Brexit work”. Meanwhile, as the Tory leadership contest grinds on, both the candidates are at pains to claim that life outside the EU is going wonderfully well, or soon will do.No matter that leaving the EU has tangled up businesses in form-filling, fees and a new world of unbelievable complexity: Rishi Sunak says he wants to “go further and faster in using the freedoms Brexit has given us to cut the mass of EU regulations and bureaucracy holding back our growth”. Liz Truss sounds even more zealous: she now wants to scrap all the regulations in UK law that are there as the legacy of our time in the EU by the end of next year, to “make the most of our newfound freedoms outside the EU”. Continue reading...
Energy companies have done themselves few favours by helping investors as they benefit from soaring pricesBP has done well out of the war in Ukraine. Soaring oil and gas prices that followed Russia’s invasion in February meant quarterly profits have tripled to just under £7bn. Only once, when oil prices hit a record level of almost $150 a barrel 15 years ago, has the energy giant posted higher profits.It was only two years ago that oil prices briefly went negative in the early stages of the pandemic, but the big energy companies can expect little public sympathy. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#622YN)
Analysis: High street lenders have shrugged off their concerns, announcing payouts for investorsUK banking bosses gave off an unexpected air of calm when they released second quarter earnings over the past week, defying wider anxiety over the cost of living crisis and its impact on businesses and consumers.Major high street lenders, including NatWest, Barclays, Lloyds and HSBC, largely shrugged off concerns over potential defaults linked to weaker economic forecasts, with most announcing fresh payouts for investors and instead releasing money they previously put aside for bad loans. Continue reading...
Unions criticise oil giant who recorded second-highest profits in its history after Ukraine war drove up energy pricesBP has reported ‘eye-watering profits’ at a time when the public are very worried about their energy bills jumping in the autumn, says Rachel Reeves MP, Labour’s Shadow Chancellor.“People are worried sick about energy prices rising again in the autumn, but yet again we see eye-watering profits for oil and gas producers.“Labour argued for months for a windfall tax on these companies to help bring bills down, but when the Tories finally u-turned they decided to hand billions of pounds back to producers in tax breaks. That is totally wrong.Our people have continued to work hard throughout the quarter helping to solve the energy trilemma - secure, affordable and lower carbon energy.We do this by providing the oil and gas the world needs today - while at the same time, investing to accelerate the energy transition. Continue reading...
Average price of a home was £271,209 last month after the 12th monthly rise in a row, says NationwideThe UK housing market remained buoyant in July with price growth accelerating to an annual rate of 11%, according to the country’s biggest building society.The average price of a home was £271,209 last month, up 0.1% from June when taking account of seasonal effects, and the 12th monthly rise in a row, said Nationwide building society. This took the annual change to 11% from 10.7%. Continue reading...
Lebanon is worst-hit by food inflation after food grain store explosion in Beirut in 2020Food inflation has soared across much of the developing world since Russia’s invasion of Ukraine and has trapped several richer countries in a cycle of rising prices, a report by the World Bank has found.The Washington-based development organisation said the war in eastern Europe would hit many countries with an increase in food bills worth more than 1% of their annual national income (GDP), while others would fail to contain the impact and be plunged into a full-blown debt crisis. Continue reading...
Analysis: Bank ruling that borrowers don’t have to show they can afford steep repayment hikes raises questions over how to curb excessive borrowingFrom today, there is one less barrier to obtaining a mortgage. The path to high value property loans has opened to a much wider audience after the Bank of England killed off a regulation demanding borrowers show they can cope with a three-percentage-point rise in interest rates.In a move planned last year and implemented on 1 August, the financial policy committee of the central bank said it was scrapping the rule because forcing borrowers to stay within a limit of 4.5 times earnings when they apply for a loan was enough. Continue reading...
British manufacturers suffer first drop in output in over two years in July, while retail sales in Germany slumped over 8% as inflation hit consumersGerman retail sales have fallen at the largest annual pace since records began in 1994, as households cut back in the cost of living crisis.Retail sales fell 8.8% in real terms in June compared with the same month last year.The difference between the nominal and real results reflects the high price increases in retail, which are having a noticeable impact on consumer confidence. Continue reading...
Former chancellor takes leaf out of rival Liz Truss’s book but his plans may be too good to be trueHarold Wilson’s quip that a week is a long time in politics has rarely been more true than in the case of Rishi Sunak.Seven days ago the former chancellor was marketing himself as the candidate of financial rectitude as he pitched to be Britain’s next prime minister. Tax cuts, Sunak said, would have to wait until they could be afforded and inflation had been tamed. Continue reading...
As energy bills soar, survey shows almost half of homes are worried about paying rent or mortgageMore than one in eight UK households fear they have no further way to make cuts to afford a sharp increase in annual energy bills this autumn.More than a quarter of households earning less than £20,000 worry they will be unable to cope with higher bills, with families in Yorkshire, the south-west and Northern Ireland the least confident about covering their costs, according to the latest rebuilding Britain index of 20,000 people by Legal & General. Continue reading...
Sharpest contraction is in energy-intensive industries, such as petrol, coking coal and ferrous metalsChina’s factory activity unexpectedly shrank in July as sporadic Covid outbreaks disrupted the sector and the slowing global economy weighed on demand.The official manufacturing purchasing managers’ index (PMI) fell to 49.0 in July from 50.2 in June, China’s National Bureau of Statistics said on Sunday. That was weaker than forecast, below the 50-point mark separating expansion from contraction. Continue reading...
Policies are tightening when major economies are either falling into recession or heading that wayIt’s over. An era of ever-rising house prices stimulated by cheap money is coming to an end. Central banks created a colossal real estate boom and soon they will have to cope with the consequences of the bubble being pricked.In China it is already happening. Banks in the world’s second biggest economy are under orders to bail out property developers so they can complete unfinished projects. Mortgage boycotts are on the rise because people are, unsurprisingly, unhappy about paying home loans for properties they are unable to occupy. Continue reading...
A few short years after the financial crash, oil, food and flights were affordable again. But this downturn looks much darkerWatching the Conservative party candidates spray money around as they vie to win the keys to No 10, it seems churlish to ask where the cash will come from. Running a 21st-century economy is not cheap and, unfortunately for those in power, gets more expensive every year.More immediately, to prevent a cost of living crisis translating into a calamity this winter for low- and middle-income households, a bigger bailout is on the cards. Continue reading...
This week’s decision on interest rates will be fraught, but many think Britain is heading the same way as the USWhen Bank of England officials meet this week to consider how much to raise the central bank’s base rate by, they could be forgiven for having spent the previous day scratching their heads.There are figures that show the UK economy is – like an 18th-century depiction of John Bull after a feast of pies – straining at full capacity. In normal times, low unemployment and a record number of vacancies would indicate a boom in full swing. Continue reading...
Analysis: In spite of high employment and robust hiring, many Americans are pessimistic about the economyThe Republican chair of the Federal Reserve doesn’t think it’s happening. Neither does the Democratic president, Joe Biden, nor do a good number of economists.And yet, many Americans appear to believe the world’s largest economy is in a recession, creating yet another liability for Biden in the run-up to November’s midterm elections, where voters are already inclined to hand Republicans control of at least one chamber of Congress. Continue reading...
The opposition should be clearer about its own solutions to disputes that the government is shamefully trying to prolongIt is perverse, but seemingly true, that Britain’s current industrial disputes over pay and jobs are causing more problems for the Labour opposition than they are for the Conservative government. There was a telling example on Wednesday, when Keir Starmer sacked an obscure junior shadow minister, Sam Tarry, for making media appearances on a rail workers’ picket line. The action generated more heat and headlines than anything triggered by Liz Truss’s belligerent pledge this week to impose new legal restrictions on public sector strike action, or Grant Shapps’ instant plan of 16 different measures that would emasculate unions’ rights to strike at all.There are several lessons here, but the main one is that the Conservatives are not being held to proper account for the spiralling effects of the squeeze on living standards over which they are presiding. They, not Labour, are the government. They, not Labour, set public sector pay policy. They have the formal power to change public finance rules. They also have the informal authority to bring pressure on the two sides to negotiate a settlement. As guardians of the public interest, if nothing else, the government should also avoid unnecessarily provoking the dispute or becoming a protagonist. Continue reading...
US oil companies post huge earnings, as sky-high fuel costs hit consumers and drive up inflationCities in Germany are switching off spotlights on public monuments, turning off fountains, and imposing cold showers on municipal swimming pools and sports halls, as the country races to reduce its energy consumption in the face of a looming Russian gas crisis.Hanover in north-west Germany on Wednesday became the first large city to announce energy-saving measures, including turning off hot water in the showers and bathrooms of city-run buildings and leisure centres. Continue reading...
Cost of living crisis comes as 19-member currency bloc beats growth forecasts in second quarterInflation in the eurozone reached a record high of 8.9% this month, closing the gap with the UK’s 9.4% rate.Dearer energy was blamed for the lion’s share of the increase from 8.6% in June, as the fallout from the Russian invasion of Ukraine continues to hammer European economies. Continue reading...
People borrowed an extra £1.8bn in June, up from £900m in May, Bank of England figures showUK consumer credit growth in June accelerated at the fastest rate in three years, as households struggle to cope with the rising cost of living.People borrowed an additional £1.8bn in consumer credit last month, up from a £900m increase in May, according to the latest Bank of England data. Continue reading...