The unpopular truth is that leaving the EU has not magically transformed Britain, but nor has it been calamitousPlenty of people – on the left as well as the right – believed George Osborne when he conjured up a dystopian vision of Britain after a vote for Brexit during the final weeks of the referendum campaign. The then chancellor said victory for leave would result in a “DIY recession”, the loss of 800,000 jobs, a weaker housing market and a stock market crash. Two years on from our date of departure from the EU, none of it has happened.Unemployment is lower than it was in 2016 and, although this is very much a mixed blessing, house prices are higher. Share prices have risen and until Covid-19 arrived there was no recession. That hasn’t halted the flow of gloomy predictions: Nissan would quit the UK, tens of thousands of City jobs would be lost to Paris, Frankfurt and Amsterdam. More recently, Brexit supply chain problems would mean a turkey-less Christmas and empty high street shelves in December. None of that happened either, and the wait for economic meltdown goes on.Larry Elliott is the Guardian’s economics editor Continue reading...

City economists expect increase from 0.25% to 0.5% on Thursday amid cost of living crisisThe Bank of England is poised to raise interest rates on Thursday amid growing concern over the pressure on households from high inflation in Britain’s cost of living crisis.City economists widely expect the central bank to increase its key rate from 0.25% to 0.5% in response to inflation hitting levels not seen for almost 30 years, with financial markets suggesting a 90% chance of an increase in borrowing costs. Continue reading...

There is much that could give relief – measures Labour has called for – but the government is more interested in distraction

Rising housing and energy costs plus higher taxes mean ministers have to come up with somethingGovernments underestimate the power of celebrity at their peril. First it was Marcus Rashford and his campaign for hungry children. Now it is Jack Monroe pointing out how the official inflation figure bears no relation to the real cost of living increases facing the neediest households.The footballer and the chef have performed an important public service by highlighting, in a way that official statistics and thinktank reports can’t, just how tough life is on or close to the breadline. Continue reading...

Observer writers examine whether the claims in the PM’s speech to parliament on 19 January actually hold waterJohnson detailed what he meant by “getting the big calls right” in a Commons speech on 19 January. He listed the decision to focus on the booster campaign in December, not opting to use the European Medicines Agency for vaccine procurement, and investing early in lateral flow tests and “cutting-edge drugs”. He also claimed that the UK had the “fastest booster campaign in Europe” and was “first to emerge from the Omicron wave”. Continue reading...

The economy is booming and corporate profits are huge, but American wages still stagnate. History provides the answerAccording to this week’s release from the commerce department, the US economy has been growing at its fastest pace in almost 40 years. Corporate profits are their highest in 70 years. And the stock market, although gyrating wildly of late, is still scoring record gains.So why do most Americans remain gloomy about the economy? Mainly because their real (inflation-adjusted) wages continue to go nowhere. Continue reading...

We’ve always been told cars devalue rapidly, but the booming secondhand car market shows this may not be true in a pandemic

The Conservatives will provoke electoral anger in 2024 if the free-spending promises of 2019 are replaced by a new austerityAs the Conservative party plots a way out of “partygate”, with or without its current leader, the path towards re-election in 2023 or 2024 is looking hazardous.In December 2019, flush with an 80-seat majority and a public spending deficit of just 2.6%, the outlook was rosy for a cabinet dominated by Brexiters keen to reward their supporters with one spending initiative after another. Continue reading...

Be it meat, coffee or pasta, the costs of UK grocery staples are going up. We look at the cocktail of cause and effect inflating your bills

The race to fund the lockdown economy ensured speed trumped due diligence, leaving the taxpayer wide open to fraudIn the final days of April 2020, bankers and Treasury officials were huddled over laptops in makeshift home offices across the country, negotiating the terms of what is fast becoming the most controversial of the government’s pandemic rescue schemes.The country was in its sixth week of national lockdown after the Covid outbreak, and the Treasury’s head of banking and credit, David Raw, was leading video calls with more than 20 senior staff from across government and the City – including the big banks HSBC, NatWest, Barclays and Lloyds, Santander, Virgin Money and AIB – to try to push through the chancellor Rishi Sunak’s ambitious plan for a more accessible, 100% government-backed small business loan scheme. Continue reading...

Readers on the ‘Sam Vimes “Boots” theory of socioeconomic unfairness’ about how price rises disproportionally affect those who are worst offThe “Sam Vimes ‘Boots’ theory of socioeconomic unfairness” (Cost-of-living crisis: Jack Monroe hails ONS update of inflation calculations, 26 January) was not invented by Terry Pratchett.Paul Jennings expressed exactly the same idea in his Observer column Oddly Enough in 1954: “You find, for instance, that you have got to have a new pair of shoes, so you rush into a shop and buy some; some cheap ones, and they are worn out in three months. But if you were on one of the inner platforms [Jennings’ term for the rich] you would go calmly into a rather splendid shop and buy the sort of shoes that are bought by men on leave in London from Africa, or down from their Scottish moorland estates. Continue reading...

Rolling coverage of the latest economic and financial news

Rolling coverage of the latest economic and financial news

Housing is increasingly attractive asset for institutional investors due to near zero interest ratesThe rate at which institutional investors, such as private equity and pension funds, are buying up housing is accelerating in major European cities, driving up house prices, research suggests.The volume of purchases in Europe hit €64bn (£53bn) in 2020, with about €150bn worth of housing stock conservatively estimated to be in the hands of such large investors. Continue reading...

Markets in Japan and Korea lose more than 3% on fears of costlier borrowing, with FTSE and Wall Street on course to follow suitStock markets in Asia have tumbled to their lowest in nearly 15 months after America’s central bank chief confirmed widely expected plans to tackle higher inflation with an increase in interest rates this year, beginning in March.With investors also concerned about political tensions between Russia and Ukraine, supply chain problems and rising oil prices, the prospect of sustained increases in the cost of borrowing by the world’s most powerful economy sent a spasm of anxiety through financial markets on Thursday. Continue reading...

Rishi Sunak asked to investigate escape of market sensitive information and warned his policies are inflationaryMPs have expressed “deep concern” over the leaking of price-sensitive information before Rishi Sunak’s budget last year and warned the chancellor his package of measures risked adding to Britain’s already surging inflation rate.The influential all-party Treasury committee called for Sunak to investigate how details of a planned increase in the national living wage to £9.50 an hour were disclosed in the runup to the budget in late October. Continue reading...

Rolling coverage of the latest economic and financial news

Fed chair Jerome Powell said the central bank would make a decision on the rate raise in its March meetingThe Federal Reserve is preparing to raise rates in March for the first time since the coronavirus pandemic struck the US as it attempts to curb rising prices.After its latest two-day meeting the central bank announced that it would leave interest rates close to zero for now but signaled it was preparing to raise them at its next meeting. Continue reading...

Move by government statisticians follows analysis by UK poverty activist of impact on poorest families

President signals more cautious approach to climate crisis and says China must ‘overcome notion of rapid success’China’s ambitious low-carbon goals will not be realised easily and should not come at the expense of energy and food security or the “normal life” of ordinary people, its president, Xi Jinping, has said, signalling a more cautious approach to the climate emergency as the economy slows.China, the world’s biggest source of greenhouse gas emissions, has been under pressure to “enhance ambition” and take more drastic action to tackle global heating. In the past two years, Beijing has also made a number of pledges to show its commitment. Continue reading...

A different Tory leader will not save a failing social security system. We need a new welfare state from the bottom upThe thing about governments in crisis is that they have little time for governing. Boris Johnson – once king of the world, now lame duck – is a prime minister consumed with his own survival. Insiders say Johnson is motivated to hang on to power not to deliver a pressing policy agenda but to beat former Bullingdon Club chum, David Cameron: “He won’t accept the last Etonian PM having survived longer than him.” Meanwhile, in the real world, British families are about to endure the worst cost of living crisis for 30 years, and are left waiting for anyone in power to notice.For many, the money going out is about to soar, causing that coming in to shrink in real terms. Inflation rose to 5.4% last month, driven by pricier food and clothes. Energy tariffs are escalating and tax bills are set to go up too. At the same time, the £20 universal credit uplift has been cut and unemployment benefits are about to hit their lowest real value in more than three decades, a rate that experts call “only slightly more than destitution”. Ministers can claim work is the solution but it is good jobs, not any job, that is a reprieve; the majority of people living in poverty in the UK last year were in working households. The official line may be that the pandemic is over, but this too is still hitting personal finances – just ask the clinically vulnerable pensioner shielding in a cold home. The result of all this is clear enough: simply getting by is increasingly going to become a luxury.Frances Ryan is a Guardian columnist and author of Crippled: Austerity and the Demonisation of Disabled People Continue reading...

Large crowds gather for Invasion Day protests; NSW marks grim Covid milestone as nation records at least 87 deaths from Covid-19; lockdown call for NT remote communities; Scott Morrison speaks at Australia Day ceremony in Canberra. This blog is now closed

Resolution Foundation report also highlights risk of British firms being undercut by lower cost rivalsGains from a UK trade deal with India could be on a par with those from an agreement with the US but risks exposing the economy to tougher competition, a report says.The Resolution Foundation thinktank said successful talks between London and New Delhi had the potential to gain “first-mover” advantage in India and replicate the success of German manufacturing exporters to China. Continue reading...

Rolling coverage of the latest economic and financial news

Latest public finance data shows government borrowing £13bn less this year than forecast in October budgetPressure is mounting on Rishi Sunak to scrap April’s planned increase in national insurance contributions (NICs) after the latest figures for the public finances showed the government borrowing £13bn less this year than expected in the October budget.With cost of living pressures mounting, thinktanks and City analysts said a faster drop in the UK’s deficit would prompt the chancellor into a rethink of the £12bn tax hike to pay for the NHS and social care. Continue reading...

Global growth downgraded to 4.4% as body predicts especially marked slowdown for US and ChinaThe International Monetary Fund has sharply cut its growth forecast for 2022 with a warning that higher-than-expected inflation and the Omicron variant have worsened the outlook for the global economy.In a quarterly update to predictions made in October 2021, the IMF said it anticipated growth of 4.4% this year – down 0.5 percentage points – and emphasised the risks were of a weaker performance. Continue reading...

Survey finds labour shortages driving ‘intense and escalating cost and price pressures’Cost pressures for Britain’s factories are growing at their fastest pace since 1980 as companies struggle to find workers to meet growing demand, a leading business lobby group has said.The CBI warned that higher manufactured goods prices were inevitable after its monthly healthcheck of industry showed labour shortages at their most acute in almost half a century.Average costs growth accelerated at the fastest pace since April 1980.Average domestic price growth in the quarter to January was similar to October, which was the highest figure since April 1980 and is anticipated to accelerate over the next three months.Average export prices in the quarter to January grew at their quickest pace since April 1980 and price growth is again expected to pick up over the coming quarter.The share of firms citing skilled labour as a factor likely to limit output next quarter rose to its highest since October 1973. Continue reading...

Despite reports of US worker shortages, people who are less than five years from retirement are facing a lack of employment optionsElaine Simons, a 61-year-old substitute art teacher in the Seattle, Washington area, was on a 10-month contract and hoping to settle into a more permanent role at the school where she was teaching when the Covid-19 pandemic hit the US in March 2020.Her school shut down for the remainder of the school year, with Simons having to pack up her classroom and learn to navigate the technology necessary to teach remotely. In June 2020, Simons was informed her teaching contract would not be renewed. Continue reading...

The Boston-based fund manager has hard-to-deny evidence to back up his prediction of a ‘wild rumpus’Jeremy Grantham’s warning that share prices are heading for a mighty fall is just part of the new year financial calendar, say his critics. On this occasion, however, the British co-founder of Boston-based fund manager GMO and highly regarded observer of stock market bubbles, may have got his timing spot-on.Certainly “Let the Wild Rumpus Begin” was a terrific title for Grantham’s piece last week: a rumpus is roughly what we’re seeing, at least if one looks at the US, where the technology-heavy Nasdaq has lost 16% since the start of January. It was clobbered so severely on Monday that even the UK’s FTSE 100 index, a decidedly non-tech collection of stocks, was obliged to react to the apparent shift in investor sentiment. The Footsie lost 187 points, or 2.6%, even if a possible Russian invasion of Ukraine was also in the mix. Continue reading...

Some near-term nasties loom on the horizon, but larger threats are geopolitical and difficult to predict

European markets slide to lowest levels since October, while New York sees wild trading sessionGlobal stock markets have fallen sharply as fears of military conflict in Ukraine spooked investors, wiping £53bn off the value of the UK’s blue-chip share index.European markets tumbled by 3.8% to their lowest levels since October, their biggest one-day fall in more than 18 months, after Nato said it was reinforcing its eastern borders with land, sea and air forces as a Russian invasion of Ukraine appeared increasingly likely. Continue reading...

Hospitality, leisure and travel firms feel impact of Covid variant in January

Former Brexit secretary last week called for Boris Johnson to resign over alleged breaches of Covid rulesBoris Johnson is facing growing demands from his own party to make a dramatic U-turn on planned national insurance tax increases in response to Britain’s worsening cost of living crisis.On a day of renewed pressure for the prime minister, the former Conservative cabinet minister David Davis threw his weight behind calls for the tax increase due to come in from April to be scrapped. Business leaders and opposition parties also warned urgent action is required to help households with the highest rates of inflation for 30 years. Continue reading...

Our global finance system is failing to rise to the challenges we face. It’s time it was reimagined – and grounded in our shared humanity“The peoples of the Earth,” Henry Morgenthau said, “are inseparably linked by a deep underlying community of purpose.”In July 1944, Morgenthau, the US Treasury secretary, was closing the Bretton Woods conference with a reflection on extreme nationalism and the failures of cooperation that had led to war. Cautioning against the pursuit of national interest through “the plan-less, senseless rivalry that divided us”, he outlined an accord for new institutions grounded in an appeal to shared humanity. Continue reading...

Poor country repayments to creditors are running at highest level in two decadesFears are growing that action by the US central bank to combat high inflation will trigger a fresh debt crisis, as it emerged poor-country repayments to creditors are already running at their highest level in two decades.The Jubilee Debt Campaign said debt payments by developing countries had more than doubled since 2010 and were likely to increase further if, as expected, the Federal Reserve pushed up interest rates. Continue reading...

The Bank of England upped the base rate to 0.25% in December, but since then only a handful of savers have felt the benefitThe recent unexpected rise in interest rates could have been the good news that savers had waited so long for. But more than five weeks after the Bank of England increased rates, only four financial firms have passed on the full rise to all, or nearly all, of their variable-rate savings account customers.The Bank decided on 16 December to lift the base rate from its historic low of 0.1% to 0.25%, prompting expectation it would be passed on. Continue reading...

Two-year study reveals households are being ‘battered again and again’ by an ‘unfit’ welfare state that is in urgent need of reformBritain’s welfare system is “unfit for purpose” and in urgent need of reform, experts warned on Sunday amid fears that millions more families will struggle to make ends meet amid the dual pressures of the pandemic and the spiralling cost-of-living crisis.The soaring price of food and rent, along with energy bills – which are expected to more than double in April when the price cap is lifted, bringing the number of households under “fuel stress” to at least 6 million – is forcing families to choose between basic essentials such as food and heat, the experts said, while growing numbers are being forced into debt and relying on food banks. Continue reading...

Johnson is at the mercy of his cabinet. The trouble is, as Leavers, none of them will face up to our post-EU crisis eitherWay back in the mid-1960s, during a quiet summer, a former journalist turned public relations man persuaded the chairman of a public company to conduct a search for the Loch Ness monster.Quiet summers used to be known in Fleet Street as the “silly season”. One day, the PR man responsible for what was essentially a publicity stunt was called into the chairman’s office. The chairman, a retired general, was in a state of panic. “What on earth are we going to do if we find the monster?” he said. Continue reading...

The LSE’s director and former Bank of England economist is outspoken over the need for a reset of the wider capitalist systemMinouche Shafik seemed destined for the top job at the Bank of England when she arrived in 2014, but becoming the first female governor was not to be.She only spent two years inside the Bank’s imposing offices on Threadneedle Street before quitting as deputy governor to head the London School of Economics. Continue reading...

Hardline approach to pandemic risks damaging global economy, says Kristalina Georgieva

Rolling coverage of the latest economic and financial news

Chiefs of CBI, BCC, IoD, Make UK and FSB say ‘rocketing’ charges will delay economic recovery from CovidFive of Britain’s leading business groups have demanded urgent and decisive government help to tackle the UK’s energy crisis, warning failure to act will result in lower investment, an increase in poverty and the risk of an inflationary spiral.In a letter to Rishi Sunak, the heads of the CBI, the British Chambers of Commerce, the Institute of Directors, Make UK and the Federation of Small Businesses said “rocketing” domestic and business bills would put the brake on economic recovery. Continue reading...

Sales volumes dropped by 3.7% in December as Omicron resulted in a more cautious mood

Rolling coverage of the latest economic and financial news

We’re keen to hear how small and medium sized businesses in the UK are affected by a sharp rise in inflation and rising energy billsUK inflation figures have risen to their highest in almost 30 years, and energy costs are expected to increase further this year.We’d like to hear from owners of small or medium sized UK businesses about how their enterprises are affected by skyrocketing costs. Continue reading...

Inflation is at a 30-year high, while workers are suffering their third drop in real wages in a decade – and worse is yet to comeThe economic news this week is stark. Inflation has hit a 30-year high and the average British worker is entering their third drop in real wages in a decade. But what’s really sobering is that the worst is still to come. Next month, the regulator Ofgem announces the maximum price for heating bills, and energy company bosses are already warning that they will almost certainly be double last winter’s levels. The new price cap kicks in from April, at just the point that national insurance goes up alongside council tax increases in many boroughs, and there’s a stealth rise in income tax. If government ministers think they’re unpopular now, they should check back once voters are paying what economists estimate as an extra £1,200 a year for the average household.Without immediate state action, the human fallout of all of this will be severe. Two big points need to be borne in mind: first, when basics are shooting up in price, households cannot put off their purchases or buy something cheaper. You either switch the heating on or not; you either have enough food or you go hungry. Second, although prices are going up for everyone, not all families have the same financial buffer against this storm. As it is, debt charities are already warning of many more people trying to borrow to keep on top of their bills. Fuel poverty looks almost certain to shoot up. Continue reading...

The concern is not about getting more backpackers working here, but that those workers are more likely to be exploitedOn Thursday the December labour force figures will come out, quite likely showing good news.The latest payroll job index released on Wednesday covers the same period – up to the week ending 18 December – and it revealed better numbers than in November: Continue reading...

After three decades of stability the virus has done for the cost of living what wars did in the pastMobile phones were still a rarity. Shopping online was a thing of the future. The launch of football’s Premier League was looming. This was Britain in March 1992, the last time the annual inflation rate was as high as it is today.Nobody under the age of 30 can really recall when the cost of living was a pressing political issue. There have been the occasional surges, usually caused by a rise in global oil prices, but nothing to match what has happened in the past six months. Continue reading...

Cost of living crisis worsens, piling pressure on Bank of England to raise interest rates againBritain’s cost of living crisis worsened in December after inflation jumped to 5.4% – its highest level in almost 30 years – driven by the higher cost of clothes, food and footwear.Heaping further pressure on Bank of England policymakers to raise interest rates when they meet next month, the price of furniture and eating out also increased as shortages of staff pushed up wage costs and hold-ups at UK ports hiked the cost of imports. Continue reading...