by Richard Partington Economics correspondent on (#609GC)
Impasse over Brexit deal forcing companies to reconsider investing in Britain, says business lobby groupThe UK’s foremost business lobby group has warned the government that its threat to override the Northern Ireland protocol is forcing companies to think again about investing in Britain and dragging down the economy.The Confederation of British Industry (CBI) said immediate talks with the EU, rather than political grandstanding, were needed to resolve the impasse over the protocol, which governs post-Brexit trade between the EU, Northern Ireland and Great Britain. Continue reading...
Exclusive: Debt Justice calls on UK to use power to make private lenders take part in effective relief schemeThe lack of an effective debt relief scheme is forcing some of the world’s poorest countries to cut public spending to keep up payments to their creditors, research reveals.A report by Debt Justice says the most heavily indebted nations were expected to reduce public expenditure by 3% on average between 2019 and 2023 despite the need to counter the impact of spiralling food and energy prices. Continue reading...
A ruling on whether or not to waive patent rules will this week show if the trade body is for the world or the westA crisis at the World Trade Organization has been brewing for years and it now looks like coming to a head. There are many potential flash points as trade ministers assemble for talks in Geneva this week but in the end they boil down to a single issue: vaccines.Put simply, the WTO’s members need to decide whether they are going to waive patent protection for Covid-19 treatments developed in the west so that poorer countries can manufacture their own lower-cost vaccines. What the meeting ought to do is come up with a meaningful agreement covering the waiving of patent rules not just for the current but any future pandemic. If it does so, the WTO will live to fight another day. All the other vexatious issues – and there are plenty of them – will be fudged or kicked down the road. Continue reading...
As we try to find our place in the world, politics veers between the equally unreal claims of boosters and decliners. The latter are now in the ascendantDecline is back. Commentators are noticing that the UK economy has not been doing well and is projected to stagnate. Other countries are doing better, in productivity, investment, research and skills. It really is deja vu all over again. But not quite. Only yesterday we were being told a different story – one of the fastest rates of growth in the OECD, of a new global, buccaneering Britain, a science superpower, an innovation hub, the fastest vaccine rollout… What is going on?We have been living in an era of revivalism. At its core is an economic story which holds that Thatcherism had reversed the longstanding British economic decline, which had perhaps started in the 1870s, or perhaps in 1945. From being the sick man of Europe, the UK could stand proud again, and return to a global role. This view profoundly affected politics. New Labour, the party of post-decline cool Britannia, started to talk of British leadership, of global Britain, of a special internationalist destiny.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 250 words to be considered for publication, email it to us at observer.letters@observer.co.uk Continue reading...
The true cost of Brexit is becoming painfully clearer by the dayBritain’s growth prospects are the gloomiest of all developed nations. The OECD predicted last week that the UK economy would not grow at all next year, the worst outlook for any OECD nation. This follows warnings in April from the IMF that the UK will experience the worst growth out of the G7 nations in 2023. After a decade of stagnant wages, it seems Britons need to resign themselves to the fact that the buoyant growth of the 2000s is but a distant memory.Every country has suffered the shock of the pandemic, followed by the spike in oil and wheat prices triggered by Russia’s illegal war in Ukraine. But other developed economies have proved more resilient, enjoying export-driven recoveries in the wake of Covid. Here in Britain, the economic malaise left exposed by the 2008 financial crisis is long term and structural. Continue reading...
As with another self-inflicted economic injury in the 1920s, Britain is struggling under a burden that could be reversedIn my last column I suggested that Brexit is the biggest act of self-harm inflicted on the British economy since the return to the gold standard in 1925. Even arch-Brexiter Jacob Rees-Mogg has recently admitted that implementing the next stage of the bureaucracy associated with Brexit would be an “act of self-harm”. I did not make that up.As minister for Brexit opportunities he has the sisyphean task of searching for such opportunities. One of the few he is reported to have come up with is the chance to abandon EU rules on the manufacture of vacuum cleaners, thereby making them more powerful and less environmentally friendly. I am not making that up either. Continue reading...
Boris Johnson’s hopes of an economic ‘reset’ look unlikely in the face of rising fears over pay and the cost of livingSoaring inflation, an economy falling to the bottom of global league tables, and a summer of strike action ahead. As Boris Johnson attempts to reset the political agenda, the economic backdrop could hardly be worse.This week the government will face more troubling news, with official figures on Monday expected to show the economy came close to stalling in April as families struggled with a record rise in energy bills. On Tuesday, fresh data will probably confirm wages again failed to keep pace with the cost of living, while the Bank of England is expected to raise interest rates to tighten the screw on household and business borrowing. Continue reading...
An investor’s rant gives an insight into the City’s short-termist view of the environment crisisIf the future remembers any corporate villain from 2022, it will be Stuart Kirk. The satirically titled head of “responsible investment” at HSBC looks the part: shaven headed, tightly trimmed beard, hard, sharp eyes. Like all the best villains, the banker’s arguments are insidiously appealing. He says out loud what his audience thinks, cutting through polite society’s pious crap to reveal its selfish desires.“There’s always some nut job telling me about the end of the world,” he told the Financial Times’s Moral Money conference – and I haven’t made that title up either. “Who cares if Miami is six metres underwater in 100 years? Amsterdam has been six metres underwater for ages and that’s a really nice place.” Continue reading...
Analysis: the assault in Ukraine continues, but it seems clear that real damage is being done to Putin’s economy• Russia-Ukraine war: latest updatesSanctions have affected many aspects of life in Russia, but one particular shortage has sent the wealthy elite into a spin: beauty clinics are running out of Botox.The business daily newspaper Kommersant reported this month that Botox imports saw a threefold drop to 74,500 units in the period between January and March compared with the same time last year, after one western manufacturer stopped exporting to Russia. Continue reading...
As staff grapple with rising food and petrol prices, average pay of FTSE 100 bosses has risen to pre-Covid levels“If that had been our CEO, he would’ve been on the front pages with whiskers painted on him and labelled a greedy fat cat,” remarked the executive, chewing on a roasted scallop in a busy north London restaurant. The diner works at an energy supplier and has just seen the thumping £6.5m handed out to John Pettigrew, boss of National Grid, the privately owned national electricity operator.Pettigrew’s job in charge of a low-profile, non-customer facing infrastructure business perhaps spared him from scrutiny. But it is AGM season, when executive pay deals are published and put to a vote by shareholders, and there will doubtless be others who become an emblem of corporate largesse as worker discontent deepens in the coming months. Continue reading...
My former colleague JR (Dick) Sargent, who has died aged 96, was the founding professor and chair of the economics department at Warwick University when it launched in 1965. Following a period of unrest, he was instrumental in reshaping the university to make it more democratic. The changes that were made reverberated through other universities.Within a few years of Warwick’s launch many staff and students felt the university’s structure was insufficiently democratic and excessively oriented towards the business community. These views were influenced by les événements, the wave of student and worker unrest that swept across Europe in 1968. They were articulated by a staff member, the labour historian EP Thompson, in his book Warwick University Ltd (1970). Continue reading...
Theme parks, toy brands and even coastal hotspots are looking to the latest dinosaur blockbuster for a bump in salesDinosaur attractions across the UK are braced for a fresh wave of visitors following the release of Jurassic World Dominion this weekend.The sixth film in the franchise is expected to offer a boost not only to UK cinemas – the series’ box-office takings so far top £200m – but to the country’s many dinosaur-themed attractions. Continue reading...
Inflation rate sends stock markets into tailspin as S&P 500 falls over 2% and Nasdaq down over 3.5%Inflation in the US rose unexpectedly last month to a fresh four-decade high of 8.6%, the labor department said on Friday.The latest consumer price index (CPI) figures showed that the cost of living increased by one percentage point from April and was broad-based, with the indexes for shelter, gasoline and food being the largest contributors. Continue reading...
by Robert Booth Social affairs correspondent on (#6074A)
As campaigners seize on how Covid shook up work, 70 UK firms embark on largest trial yet of shorter weekFive days on, two days off has been the defining pulse of British labour for more than 80 years. But as 70 UK companies embark on the largest trial yet of a four-day week, the working calendar may finally be changing.Campaigners are seizing on the way Covid shook up working lives to push back the boundaries of the weekend for the first time since the postwar years when the whole of Saturday became a day off for most. One advocate predicts a four-day week could be available to the majority in Britain within five years and Stephen Fry this week gave his voice to an increasingly confident four-day week campaign, which argues shorter hours boosts productivity, cuts carbon emissions and improves family life – all without cutting pay. Continue reading...
PM must act quickly as economy and household finances worsen, but Treasury is not sympatheticPetrol heading for £2 a litre. A £100 bill to fill the average family car with fuel. A warning from the west’s leading thinktank that only Russia of the world’s 20 leading economies will have weaker growth than the UK next year.Boris Johnson might have hoped for easier weeks to begin his political fightback. A pickup in the economy is vital if the prime minister is to cling on to his job after 148 of his MPs said they lacked confidence in him. Things are not going to get any easier for some time to come. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#606YP)
Assessment finds customers could access accounts despite any collapse but three banks have shortcomingsThe UK’s largest banks are no longer “too big to fail” and could foot the bill for their own failures, the Bank of England has said, but it found shortcomings at three banks including HSBC and Lloyds.Fourteen years on from the financial crisis that threatened a collapse of the banking system and led to huge taxpayer bailouts, the Bank of England’s first public assessment of lenders’ “living wills” found that even if a major UK lender were to collapse, customers would be able to access their accounts, and banks could broadly provide services as normal. Continue reading...
Shortage of candidates since January means thousands of vacancies unfilledUK employers increased the number of new staff in May at the slowest pace since early 2021 after a steep fall in the number of workers responding to job adverts.After an increase in job switching by workers last year, often to secure higher pay, employers said the shortage of candidates since January meant they were unable to fill thousands of vacancies. Continue reading...
Base rate to rise by 0.25% and quantitative easing to stop in July after ECB warns about inflationThe European Central Bank (ECB) plans to raise interest rates next month for the first time since 2011 after warning inflation would increase by more than previously estimated.Resisting calls for a 0.5% increase next month, the ECB’s governing council said the base rate for the 19-member currency bloc would be raised by 0.25% with a further, and possibly larger increase scheduled for September. Continue reading...
Pepco says ‘acute spike in inflation’ and lack of wage rises forcing consumers to spend lessThe cost of living crisis is prompting UK shoppers to cut back even on essential items as wages fail to keep pace with inflation, the owner of Poundland says.Pepco Group, which owns Poundland in the UK, Dealz in Ireland and the Pepco chain across Europe, says that while the absolute levels of inflationary pressure are greater in central and eastern European markets, higher wage growth of about 10% in those regions compared with others is substantially offsetting this. Continue reading...
RAC calls it a ‘truly dark day’ as latest increase puts cost of filling typical 55-litre family car at £100.27The average cost of filling a typical family car with petrol has exceeded £100 for the first time on what was labelled a “truly dark day” for drivers.Figures from data firm Experian Catalist show the average price of a litre of petrol at UK forecourts reached a record 182.3p on Wednesday. Continue reading...
Analysis: US to examine with fresh urgency easing reliance on China as pandemic disruptions expose global economic vulnerabilitiesEveryone has a story to tell about the supply chain problems that have affected the global economy, from the beginning of the pandemic through to the disruption caused by the war in Ukraine. From shortages of Ikea furniture and Christmas turkeys, to the dearth of computer chips that sent the cost of secondhand cars soaring, the dislocation of a once smooth-running system has caused havoc in the global economy.But while predictions about the easing of bottlenecks have come and gone without any improvement, it has become clear the disruptions of the past two years or more are spurring fundamental changes to the world economy that could have yet more profound impacts on our lives. Continue reading...
Business group downgrades its outlook for growth next year to 0.6% as inflation soarsBritain’s economy will “grind to a halt” before shrinking in the second half of this year as soaring inflation and tax rises take their toll, according to forecasts from one of the UK’s leading business groups.Consumers and business will pay a high price for Russia’s invasion of Ukraine and persistent delays to supplies from China, said the British Chambers of Commerce (BCC) as it downgraded its outlook for growth next year to 0.6%. Continue reading...
Zero-growth warning for UK as petrol prices surge and OECD says Britain will be weakest economy in G7 next yearBoris Johnson’s attempt to reset his troubled premiership has received a double blow after petrol prices had their biggest daily rise in 17 years and a leading international thinktank said the UK economy would slow to a standstill next year.Fears that Britain is heading for a prolonged period of 1970s-style stagflation intensified amid fresh evidence of the damaging impact of the war in Ukraine on the cost of living and growth. Continue reading...
Treasury secretary admits she regrets describing inflation as ‘transitory’ and says it is ‘top economic problem at this point’Janet Yellen told Congress that the US is facing “unacceptable levels of inflation” on Tuesday as the treasury secretary defended herself from criticism of her previous comments that rising prices were “transitory”.Although the hearing with the Senate finance committee was centered on Joe Biden’s budget for 2023, Yellen was forced to answer questions on inflation, including some on how she once said that inflation would be “transitory”, or temporary. Continue reading...
Stagflation feared as global economy suffers fallout from Covid pandemic, Chinese lockdowns and war in UkraineThe global economy faces a protracted period of weak growth and high inflation reminiscent of the 1970s as the impact of a two-year pandemic is compounded by Russia’s invasion of Ukraine, the World Bank has warned.In its half-yearly economic health check, the Washington-based Bank said echoes of the stagflation of four decades ago had forced it to cut its growth forecast for this year from 4.1% to 2.9%. Continue reading...
Food Standards Agency says number of people who skip meals or use food bank has leapt in past yearThe cost of food is a big worry for the vast majority of Britons while the number of people who skip meals or use a food bank has jumped in the past year, according to the Food Standards Agency (FSA).Its research shows food prices are a significant future concern over the next three years for more than three-quarters of UK consumers (76%), and the number using a food bank has risen from around one in 10 in March 2021, to nearly one in six this March. Continue reading...
Number of people visiting shops during June bank holiday week was up 17% on May averageFour days of jubilee celebrations provided some much-needed respite for Britain’s retailers after a tough May in which cost of living pressures weighed heavily on spending.There was a sharp increase in consumer footfall on the high streets during the long bank holiday weekend to mark the Queen’s 70 years on the throne, according to the British Retail Consortium (BRC). Continue reading...
by Kalyeena Makortoff Banking correspondent on (#6028B)
Total donated to parties by financial firms and individuals tied to the sector over two years, report saysConcerns have been raised over the City’s influence on Westminster, after a report found financial firms and individuals tied to the sector donated £15m to political parties and gave £2m to MPs during the pandemic.The campaign group Positive Money tallied the gifts, expenses and donations handed to MPs, peers and their parties, as well as the value of income from politicians’ second jobs, saying it contributed to finance’s “oversized influence” on policymaking. Continue reading...
Cryptocurrencies’ use in avoiding taxes, laws and capital controls makes restrictions seem inevitableWith cryptocurrency prices plummeting as central banks start to raise interest rates, many are wondering if this is the beginning of the end of the bubble. Perhaps not yet. But a higher opportunity cost of money disproportionately drives down the prices of assets whose main uses lie in the future. Ultra-low interest rates flattered crypto, and young investors are now getting a taste of what happens when interest rates go up.A more interesting question is what will happen when governments finally get serious about regulating bitcoin and its brethren. Of the big economies, only China has so far begun to do so. Most policymakers have instead tried to change the topic by talking about central bank-issued digital currencies (CBDCs). Continue reading...
With work changed for ever by the pandemic, businesses are testing whether pilot represents a recognition that ‘the new frontier for competition is quality of life’More than 3,300 workers at 70 UK companies, ranging from a local chippy to large financial firms, start working a four-day week from Monday with no loss of pay in the world’s biggest trial of the new working pattern.The pilot is running for six months and is being organised by 4 Day Week Global in partnership with the thinktank Autonomy, the 4 Day Week Campaign, and researchers at Cambridge University, Oxford University and Boston College. Continue reading...
During Queen’s reign, country has tended to move quickly from national gloom to premature belief that it has finally ‘cracked it’In her 70 years on the throne the Queen has been served by 14 prime ministers and 22 chancellors of the exchequer. She has seen the country become wealthier and healthier despite five significant recessions. In 1952, the economy was dominated by manufacturing and powered by coal. Seven decades later, the pits have all closed and Britain is primarily a service-sector economy.The past 15 years have been the toughest of the Queen’s reign. Two deep recessions have provided the bookends to a period of extremely weak growth and flatlining living standards. Inflation is the highest it has been in four decades and the immediate prospects for the economy are poor. Continue reading...
Workers in Las Vegas are still feeling the effects of employers’ pandemic cuts – all made worse by rising inflation and low wagesIn the rotating restaurant at the top of the Strat hotel and casino, guests can once again enjoy $20 cocktails or a $90 shellfish display for two while taking in the expansive views of downtown Las Vegas from its landmark tower. After the Covid shutdown, Vegas is back in business. But not everyone seems happy, or sure how long it will last.On a recent afternoon, just out of view of the hotel’s 1,000-plus feet (350-metre) spike, a couple of hundred hospitality service workers were gathered in a nearby car park. In baking 90F (32C) heat, speakers told the workers that they must fight to get improved contracts and controls for soaring rents. “Sí, se puede” – yes, we can – they shouted outside the headquarters of Nevada’s powerful Culinary Workers Union. Continue reading...
Firing up the property market with a tax break is usually the Conservatives’ go-to tactic in times of trouble. But the chancellor must have his reasons…Boris Johnson’s government, out of ideas and beyond its sell-by date, is stuck in a rut. With the economy heading south as inflation ravages household incomes, there is a sense among Tory MPs that the chancellor should have something more up his sleeve.Yet all the Treasury can offer them is a looped tape of Rishi Sunak’s 2021 budget speech, when he laid out spending plans that were immediately submerged by the cutbacks and tax rises his fiscal conservatism demanded. Continue reading...
Plummeting prices and lost life savings confirmed for many that the blockchain dream was too good to be true – and it may now struggle to hit past highsEven if you don’t live and breathe cryptocurrency, you’ve probably noticed some turmoil in the sector. Eye-catching headlines about missing apes and collapsing stablecoins are indicative of the chaos, but what’s really going on? Continue reading...
Price hikes driven by combination of factors, including inflation and the war in UkraineThe price of a pint in London has long been bemoaned as the sign of how expensive it is to live in the capital.However, as crowds flocked to central London to toast the Queen on the jubilee bank holiday weekend, some would have been staggered if they ordered a round of drinks in one pub, after it emerged the the average price of a pint has topped £8 for the first time. Continue reading...
Unemployment rate holds at 3.6% for third month but rate for Black Americans is nearly twice that of white peopleThe US extended a year-long streak of strong jobs growth in May, adding another 390,000 new jobs, the Department of Labor said on Friday.The unemployment rate remained at 3.6% for the third month in a row, near a half-century low. The number of unemployed people was also essentially unchanged at 6 million. Continue reading...
Central bank moves to stem double-digit inflation and protect currency, taking borrowing to highest level since 2015Ukraine more than doubled interest rates to 25% on Thursday in a move to try to stem double-digit inflation and protect its currency, which has collapsed since Russia’s invasion.In the first interest rates intervention since Vladimir Putin’s troops attacked on 24 February, the Ukrainian central bank’s governor, Kyrylo Shevchenko, increased the benchmark interest rate from 10% to 25%. Continue reading...
Business and political elite embraced new ethos at WEF without reflecting on past mistakesThe World Economic Forum’s first meeting in more than two years was markedly different from the many previous Davos conferences that I have attended since 1995. It was not just that the bright snow and clear skies of January were replaced by bare ski slopes and a gloomy May drizzle. Rather, it was that a forum traditionally committed to championing globalisation was primarily concerned with globalisation’s failures: broken supply chains, food and energy price inflation, and an intellectual property (IP) regime that left billions without Covid-19 vaccines just so that a few drug companies could earn billions in extra profits.Among the proposed responses to these problems are to “reshore” or “friend-shore” production and to enact “industrial policies to increase country capacities to produce”. Gone are the days when everyone seemed to be working for a world without borders; suddenly, everyone recognises that at least some national borders are key to economic development and security. Continue reading...
On 5 June 1947, secretary of state George Marshall put forward the idea of a European economic recovery plan to be financed by the US. See how the Guardian and Observer reported events6 June 1947It would be neither fitting nor efficacious for this government to undertake to draw up unilaterally a programme designed to place Europe on its feet economically. This is the business of the Europeans. The initiative, I think, must come from Europe. The role of this country should consist of friendly aid in drafting a European programme and of later support of such a programme so far as it may be practical to do so.It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world without which there can be no political stability and no assured peace. Our policy is directed not against any country or doctrine but against hunger, poverty, desperation and chaos.United States assistance should not be doled out as crises develop. Any assistance the government may render in future should provide a cure rather than a mere palliative. Any government that is willing to assist it in the task of recovery will find full cooperation on the part of the United States government. Any government which manoeuvres to block the recovery of other countries cannot expect help from us. Furthermore, governments, political parties or groups which seek to perpetuate human misery in order to profit therefrom politically or otherwise will encounter the opposition of the United States. Continue reading...
In normal times consumers spend for gratification – in this cost of living crisis they are spending out of desperationWhen credit card balances begin to rocket, analysts are usually convinced the trend indicates consumers are growing in confidence and the economy is bowling along in rude health. In more normal times, consumers feel less concerned about the possibility of paying a super-expensive rate of interest if it means they can buy what they want straight away.These are not normal times. Britain’s economic recovery has ground to a standstill and a cost of living crisis means most things we buy are becoming less affordable by the day. So it was not surprising that City economists agreed that April’s £1.4bn rise in credit card balances was most probably an act of desperation by middle- and low-income households. Continue reading...