Forecasters at three leading institutions suggest inflation rate will halve to 2% by AprilThe Bank of England may be forced to bring forward the date of its first interest rate cut after three leading forecasters issued a surprise update suggesting the inflation rate will halve to 2% by April.The Oxford Economics consultancy and analysts at Investec and Deutsche Bank have reassessed their outlook for inflation in 2024 and concluded that the consumer prices index (CPI), which dropped to 3.9% in November last year, will fall below 2% within four months. Continue reading...
James Meadway, once a Labour adviser and now a podcast host, says the separation between climate and economy has to endJames Meadway is an economist who is not at all impressed with economics. Formerly an adviser to John McDonnell when he was Labour shadow chancellor, Meadway has plenty to say about what mainstream economics gets wrong. But one of his central gripes is the way it treats the environment. We cannot simply pretend that ... the entire ecological crisis is a separate and distinct thing from what's happening in the economy," says Meadway, who now works on climate finance. And yet that is precisely what happens.This critique informs the podcast, Macrodose, which Meadway presents and which has recently turned one year old. Its tagline is Your weekly fix of climate economics". Every Wednesday, in 15 minutes or so, Meadway analyses the key economic stories of the week. Part of the aim is to make economics more accessible because, he says, it is often thought of as something so difficult that you have to be really clever to do it". Continue reading...
Global economy set to slow for third year in 2024, with poor countries especially hard hit, body saysThe global economy is set to slow for a third successive year in 2024 and is now on course for its weakest half-decade of growth since the early 1990s, the World Bank has warned.The Washington-based organisation said poor countries were being especially hard hit by a series of setbacks since the arrival of the Covid pandemic and there was a risk that the 2020s would be a wasted" decade. Continue reading...
The 28bn pledged for green projects would boost growth - Keir Starmer shouldn't just stick to it, he should go furtherBritish wages are expected to remain below their 2008 level until 2028 in real terms, and the cost of living crisis is raging on. The UK is one of the most gas-dependent economies in Europe, while gas prices are still more than double their historic average. Addressing these problems requires more public investment to upgrade our energy system, accelerate the switch to renewables and help make homes and industry more efficient. This would help to create new jobs and make Britain less vulnerable to the whims of global energy markets, and until recently, both Labour and the Conservatives recognised that more government spending was necessary. But while Labour has cautiously restated its commitment to achieving climate targets, the Conservatives have reversed course, while attacking the opposition for its spending pledges.We urgently need a more enlightened debate on this issue. The chancellor, Jeremy Hunt, has repeatedly argued that more investment will contribute to higher inflation and force the Bank of England to raise interest rates. Tory MPs have cited dubious unpublished studies in support of these arguments. At the same time, we hardly ever hear about the benefits that public investment could deliver. In 2022, the government froze public investment in cash terms, meaning it will fall to 1.8% of GDP in five years' time. This is below pre-pandemic levels, which many economists already regarded as too low. Though Labour has promised to spend 28bn a year on green projects by the second half of the next parliament - subject to its fiscal rules - even this would still fall well below the average in other advanced economies.Carsten Jung is a senior economist at the Institute for Public Policy Research Continue reading...
After the EU and US failed to agree aid packages, we must send a clear message to regimes waging warsAs Russia's war against Ukraine continues to wreak havoc regionally and globally, the Ukrainian people and their allies demonstrate remarkable determination and courage. But almost two years after Russia launched its full-scale invasion, it is increasingly clear that the international community can and must do much more to help.While the G7 countries and other governments around the world have been extraordinarily generous in supporting the Ukrainian war effort, there are signs of growing fatigue in some circles - a development Russia appears to have anticipated. With the US and the EU failing to commit more than $100bn (80bn) in aid to Ukraine in December, the idea of seizing Russian assets frozen by western countries has re-emerged as a potential solution. Continue reading...
Making goods cheaper isn't going to fix the fact that income has shifted to the top 10%The policy debate about the cost of living is among the most confused and confusing in recent memory. All sorts of measures to reduce the cost of living are proposed, then criticised as being potentially inflationary. The argument implies, absurdly, that reducing the cost of living will increase the cost of living.The issue here is that the cost of living" is an essentially meaningless concept, rather like the sound of one hand clapping. The problem isn't the cost of buying goods, but whether our income is sufficient to pay for those goods. For most of us, that means the real (inflation-adjusted) value of our wages, after paying tax and (for homebuyers) mortgage interest. Continue reading...
by Richard Partington Economics correspondent on (#6HNN4)
Findings show British bosses growing in confidence over sector's prospects despite headwinds of sustained economic challenges'Britain's largest manufacturers believe the UK is increasing its competitiveness as a global hub for manufacturing, despite high energy costs, worker shortages and political instability holding back progress.In a crunch period for the economy before the general election, the manufacturing trade body Make UK and the accountancy firm PricewaterhouseCoopers said industry bosses were growing more confident about the sector's prospects, but headwinds of sustained economic challenges" still remained. Continue reading...
Wine in imperial measures, we are told, is what leaving was all about', while the UK struggles outside the single marketOne day in January 1985 I was staying in my usual Paris hotel, writing an article about the French economy and due to interview the finance minister that morning. He stood me up, but with good reason. The telephone rang and his assistant said Monsieur Delors had just resigned from the treasury and was off to Brussels to become president of the European Commission.I hesitate to use a dreadful cliche, but I shall: the rest is history. Delors formed an alliance with Margaret Thatcher which led to the creation of the single market, with Thatcher's nominee Arthur (later Lord) Cockfield playing a leading role in its formation. Continue reading...
Chancellor says reduction to 10% will bring significant relief' but return to pre-pandemic levels of tax can't be achieved in one goJeremy Hunt has said he does not know if he can afford to cut taxes for British households, on the day a national insurance reduction came into force.The main rate of national insurance contributions (NICs) paid by employees is now 10%, down from 12% as announced by the chancellor in his autumn statement in November. Continue reading...
by Vikram Dodd Police and crime correspondent on (#6HM8G)
Leader of Britain's police chiefs Gavin Stephens says policing is still being damaged by austerityPolice forces are still being damaged by government cuts, with 6,000 officers having to work away from frontline crime fighting to fill gaps caused by a funding crisis, police chiefs have said.Gavin Stephens, the chair of the National Police Chiefs' Council, said police were cutting crime but faced severe funding pressures and a 3.2bn cash shortfall. Continue reading...
From a potential roaring 20s in the markets to recession fears in the UK, here's our look ahead to the year in financeIf the past few years have taught us anything, it's to expect the unexpected. Nevertheless it seems reasonable to predict that certain familiar themes will dominate the international financial picture in 2024.Here we unpack what the next 12 months are likely to hold in store for major economies, interest rates and markets. Continue reading...
by Written by Chip Colwell and read by James Sobol Ke on (#6HKTQ)
Alarmed by the rising tide of waste we are all creating, my family and I decided to try to make do with much less. But while individual behaviour is important, real change will require action on a far bigger scale Continue reading...
As railway staff, lorry drivers, farmers and others threaten to strike, we examine the challenges the country facesRailway staff, lorry drivers and farmers are among those threatening strike action across Germany from Monday in nationwide protests over grievances ranging from pay and conditions to cuts in agricultural subsidies and higher road tolls.Long Europe's powerhouse, Germany is struggling with a potent mix of short-term and deeper structural problems that - along with a divided and seemingly ineffectual government - have prompted economists to talk of the sick man of Europe". Continue reading...
by Richard Partington Economics correspondent on (#6HKEC)
Secretary general urges countries to increase investment to avoid falling behind on climate action and sustainable developmentThe world faces a protracted period of weak economic growth that will undermine progress on sustainable development, the UN has warned, as it urged countries to raise investment to tackle the climate emergency.Its annual assessment of the state of the global economy presents a sombre outlook for growth as countries grapple with the impact of higher borrowing costs, geopolitical tensions and heightened risk of climate disasters. Continue reading...
High interest rates, a slowdown in China and a possible Trump victory could make for a rocky yearThe global economy was full of surprises in 2023. Despite the sharp rise in interest rates, the US successfully avoided a recession, and major emerging markets did not spiral into a debt crisis. Even Japan's geriatric economy exhibited stunning vitality. By contrast, the EU fell behind, as its German growth engine sputtered after China's four-decade era of hypergrowth abruptly ended.Looking ahead to 2024, several questions loom large. What will happen to long-term inflation-adjusted interest rates? Can China avoid a more dramatic slowdown, given the turmoil in its real estate sector and high levels of local government debt? Having maintained near-zero interest rates for two decades, can the Bank of Japan (BOJ) normalise rates without triggering systemic financial and debt crises? Will the delayed effects of the Federal Reserve's interest rate rises eventually push the US into a recession? Can emerging markets maintain stability for another year? Last, what will be the next major source of geopolitical instability? Will it be a Chinese blockade of Taiwan, Donald Trump winning November's US presidential election, or an unforeseen event? Continue reading...
In today's newsletter: Guardian experts assess the government's progress on the prime minister's key promisesSign up here for our daily newsletter, First EditionGood morning. After Hanukkah, Christmas, Kwanzaa and New Year, the last great festival of the season: Rishi Sunak's five pledges anniversary day. The prime minister is marking the occasion with a trip to the east Midlands, while Keir Starmer is making a speech in which he will promise to lift the mood of a downtrodden country". Personally, I'll be saying a prayer to the god of setting your own homework, and another to the god of unfulfilled ambition.When Sunak came up with this device exactly a year ago, it was generally viewed as a smart rhetorical move: in several cases, he appeared to have dressed the central expectations of most experts in language that could make it look as if he was responsible for their achievement. He said there were no tricks", and that we're either delivering for you or we're not." But there were, in fact, tricks: the criteria were slippery, and the timelines were ambiguous. Everything seemed set up for the prime minister to set the terms of the debate and declare victory in time for the next election campaign.Iran | Two explosions have killed almost 100 people and injured scores more at a memorial ceremony in Iran marking the fourth anniversary of the US killing of Qassem Suleimani, the head of Iran's Quds Force. Iran did not immediately attribute blame and no side claimed responsibility for the deadliest single terrorist incident since the Iranian Revolution in 1979. Read Julian Borger's analysis.NHS | Junior doctors' leaders have said they are prepared to stage yet more strikes after the longest stoppage in NHS history. On Wednesday night, it emerged that as many as 20 hospitals had asked junior doctors to return to work but had the requests rejected amid claims they had not shown steps they had taken to mitigate the problems first.Jeffrey Epstein | Court documents identifying associates of notorious sex offender Jeffrey Epstein were made public on Wednesday. Some of the high-profile names in the unsealed court documents include Prince Andrew, the former US president Bill Clinton, Michael Jackson and David Copperfield. Read an explainer.Politics | Conservative MPs are pleading with Reform UK not to stand against them in the general election, the leader of the rightwing populist party has claimed. Richard Tice also insisted that Nigel Farage would play a formal role in Reform's election campaign.UK news | A 15-year-old boy has been arrested on suspicion of murder after a teenager was killed while waiting to watch New Year's Eve fireworks. Harry Pitman, 16, died after what police described as an altercation" as crowds gathered in Primrose Hill, Camden, north London, to watch the display. Continue reading...
Calls for drastic overhaul of funding as conflicts and climate crisis drive surge in humanitarian needs and appeals fall shortThe queue for water at Metche, a camp of 40,000 refugees on the Sudan-Chad border, starts at dawn and lasts until sunset. The aid agencies helping the people there, who fled fighting in Sudan earlier this year, do not have enough money to drill boreholes, so there is a chronic water shortage.Latrines have also yet to be dug and the desert around the camp serves as an open-air toilet. There are no blankets or mosquito nets, even though nights are cold and the area is plagued by malaria. There are similar shortages at all the hastily built camps for the 500,000 refugees who have crossed into Chad since Sudan's war erupted in April. Continue reading...
by Richard Partington Economics correspondent on (#6HHHV)
Higher borrowing costs and slump in demand contribute to 17th consecutive month of contractionBritain's factories started the year on a weaker footing after 17 consecutive months of contraction, as higher borrowing costs and a slump in demand took their toll.Factory output fell by more than expected in December after a drop in orders from domestic and export clients, according to the latest snapshot from S&P Global and the Chartered Institute of Procurement and Supply. Continue reading...
The Israel-Hamas war could broaden, and many developing countries are on a path to crisisRecession, stagflation, a cost of living crisis, damaged public finances and higher interest rates. The four years since a new deadly virus spread around the world from the Chinese city of Wuhan has been a catalogue of woe for the global economy. 2023 has been the first year since 2019 to be relatively shock-free, in the sense that there has been no repeat of the pandemic of 2020, the supply-chain bottlenecks of 2021 or the Russian invasion of Ukraine in 2022. The financial repercussions of conflict in Israel have, until this point, been limited to the region. But that may change. The global economy is still not in a good place as 2024 dawns. Here are a few things to look out for in the year ahead. Continue reading...
Retailers warn post-Brexit checks on fresh food due from April could further drive up shopping costsShop prices continued to rise at 4.3% in December as a price rise on non-food items offset easing costs on food.The increase in the price of goods in stores compared with a year ago was the same rate of inflation as in November and came after several months of easing. Continue reading...
Japan's example 30 years ago shows islands of excellence can combine with deep structural imbalancesThere were contrasting reactions when the US rating agency Moody's downgraded China's A1 credit rating outlook from stable to negative last month. Financial markets, focused on the economy, paid it barely any attention. Chinese state media, looking at the politics, saw red. Global Times called it biased and unprofessional". A few days later, the Ministry of State Security issued a statement stipulating that the only purpose of negative talk" was to doubt or deny China's socialist system, and to contain its development.The Chinese Communist party's prickly attitude to criticism is not uncommon. It chooses instead to propagate a narrative of continuous success in which its own role is pivotal. It recognises that China confronts big challenges nowadays, but attributes them to low confidence, thinks they are fleeting, and says they'll be resolved in 2024. Continue reading...
by Robert Booth Social affairs correspondent on (#6HGDA)
Call by economics of happiness expert Richard Layard comes as research agency set up under David Cameron is to be axed in Whitehall cutsA Labour government should make the UK the world's first country to make policy based on its impact on wellbeing as well as the economy, one of the world's leading experts on the economics of happiness has said.With Keir Starmer in No 10, Downing Street should require Whitehall departments to appraise the potential impact on citizens' wellbeing when they make funding bids, Richard Layard said. The next chancellor should announce measures of happiness and misery alongside GDP in their annual budget statements, he added. Continue reading...
Labour will be going on the attack, mindful of having come to power in 1924, 1964 and 1974Labour governments have come to power five times in the past century and three of those occasions have come in years that end in a four: 1924, 1964 and 1974. If Rishi Sunak does call an election during the course of 2024, history suggests he will lose.But not by all that much. In 1924, Ramsay MacDonald formed a minority government after the December 1923 election. Harold Wilson scraped home with a slender overall majority in October 1964 and returned to Downing Street after the inconclusive result in February 1974. Continue reading...
UK's pension regime makes investment nigh-on impossible. A radical reform under Labour would turbo-charge the economyThe British corporate sector is dying in front of our eyes. Corporate decay and the lifelessness of our stock market, now ranking a mere 10th in the world, affects everything: jobs, careers, good wages, pensions, tax revenues and vibrant public services. Worse, Britain is rich in the research and intellectual knowledge on which successful 21st-century economies will be founded: the opportunity is being squandered. Decisively addressing what is happening must be at the forefront of the 2024 electoral debate.What needs fixing is the financial doom loop in which our publicly listed companies are locked. Britain has organised its savings system not to support British company formation and growth. In essence our pension funds, the single most important way we save collectively and a source of finance for business, have been set up so that increasingly the risk" of investing in British companies has been avoided or not undertaken at all. Michael Tory, former Morgan Stanley banker and co-founder of the investor advisory consultancy Ondra, calculates in his research paper Britain plc in Liquidation" that in 1990 UK pension funds owned more than 1tn worth of UK companies; now they hold less than 100bn. Increasingly, they invest in safety-first government bonds or in destinations overseas. It is a de facto investment strike - a wrong-headed attempt to make pension funds so safe they are killing our economy and paradoxically themselves. Continue reading...
If enacted in Jeremy Hunt's spring budget, the move would provide a windfall for the richest at the expense of less affluent peopleBritain's public finances are in a parlous state", according to the Institute for Fiscal Studies. More than a decade of public spending cuts has ripped the welfare safety net and left the NHS and other public services more stretched than ever, while it is costing increasingly more to service the country's high and rising debt burden. Yet speculation increased last week that the chancellor, Jeremy Hunt, may be considering the abolition of inheritance tax in his spring budget in March. This would be a pre-election giveaway for some of the country's wealthiest families that the UK can ill afford.There is a conundrum at the heart of inheritance tax that makes it an appealing prospect to some Conservatives ahead of an election. It is paid by a relatively small number of people; currently, only the wealthiest 5% at death. Continue reading...
Freight and logistics sector is turning to women to fill gap as demand for drivers grows alongside cap on overtimeWhen Mayumi Watanabe tells people what she does for a living, most struggle to hide their surprise, and not just because of her diminutive stature. As a truck driver with 23 years behind the wheel, she is one of a small but growing number of women coming to the rescue of an industry that is the beating heart of Japan's economy.I can see they're thinking, How can such a tiny woman drive a big truck?'" Watanabe, who is 152cm (5ft) tall, told the Observer as she prepared for the busy run-up to the end of the year. But I've always loved cars, so it felt natural to want to be a truck driver." Continue reading...
Over-60s are richer thanks to high interest rates and well-performing pension funds. And the Tory voters among them will look kindly on a chancellor who helps out by cutting inheritance taxWealthy baby boomers are going for gold. Not literally, in the sense that they crave the yellow metal; the gold they want is a mix of tax breaks and subsidies that will enrich them in retirement and feather-bed their offspring in a way unimaginable a couple of decades ago.Like winners at life's casino, they want to cash in their chips and bank their winnings. In the main, their assets boil down to property and pensions. And both need to be safeguarded to make sure they are immune to the trials and tribulations of the wider economy. Continue reading...
Only one in 10 feel leaving the EU has helped their finances, while just 9% say it has benefited the NHS, despite 350m a week pledge according to new pollA clear majority of the British public now believes Brexit has been bad for the UK economy, has driven up prices in shops, and has hampered government attempts to control immigration, according to a poll by Opinium to mark the third anniversary of the UK leaving the EU single market and customs union.The survey of more than 2,000 UK voters also finds strikingly low numbers of people who believe that Brexit has benefited them or the country. Continue reading...
by Richard Partington Economics correspondent on (#6HF5X)
As we enter an election year, how will the effects of inflation, weak GDP growth, unemployment, tax cuts and rising housing costs sway voters' intentions?The UK is entering an election year with the economy struggling to grow as households and businesses come under pressure from rising borrowing costs, higher taxes and elevated living expenses.Rishi Sunak is expected to send voters to the polls in 2024 having declared victory on his primary economic target to halve inflation in 2023. However, the Bank of England has warned the UK is facing a 50-50 chance of a recession, while living standards are on track to be lower at the end of the parliament than they were at the start of it for the first time on record. Continue reading...
The UKCA quality standard is imposing unwelcome costs, from chemicals to construction materialsWhen the government announced this year it would indefinitely delay plans to force UK companies to adopt a new post-Brexit quality mark, the UKCA, Simon Blackham, of the insulation maker Recticel, was delighted. Yes! An outbreak of common sense," he recalls thinking.His joy was short-lived, however. It quickly emerged that the government's change of heart did not apply to construction products, such as the insulation panels Recticel manufactures in Stoke-on-Trent. Continue reading...
Annual card spending report says consumers are prioritising travel and nights out and buying value-range groceries amid cost of living crisisHard-pressed consumers cut back on eating out and buying new clothes to prioritise spending on travel, entertainment and a visit to the pub over the past year, as soaring inflation and rising bills sharply curtailed the rate of spending growth.Consumer card spending increased by 4.1% year-on-year in 2023, almost two-thirds lower than the 10.6% rise in 2022, as the sharp increase in the cost of living took its toll on households. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#6HEVQ)
Total value of mergers and acquisitions dealmaking fell to just over $265bn, down from $395bnUK takeover and tie-up dealmaking shrank by a third this year, hitting its lowest level since 2009, as rising interest rates and concerns over Britain's economic outlook affected buyers' appetites.Figures compiled by London Stock Exchange Group's Deals Intelligence team show that the total value of mergers and acquisitions deals involving UK firms fell by 33% to just $265bn (207bn) over 2023. Continue reading...
Slashing the headline rate may offer short-term gains, but the responsible route may be better bet for Jeremy HuntSince the summer, there have been rumours that the government is looking to cut inheritance tax. The prospect of an early election has only heightened speculation that this is coming in the March budget. While commentators and pundits argue over the question of whether or not a cut is coming, they miss the more important question: how would an inheritance tax cut be made?When he stands up on 6 March, Jeremy Hunt will have two options for how he could make such a cut. The first, reported to be popular on the right of the party, is simply to cut the headline rate.Arun Advani is an associate professor of economics at the University of Warwick and a research fellow at the Institute for Fiscal Studies. Continue reading...
PwC predicts inflation will fall near normal levels' in 2024, but corporate insolvencies are forecast to jump2023 has been a poor year for dealmaking, particularly in the City of London.The value of merger and acquisition activity with any UK involvement shrank by 33% this year to $265.4bn, new data from LSEG Deals Intelligence shows.Steeply rising interest rates and a concerning outlook for the UK economy, combined with stricter antitrust enforcement and ongoing geopolitical tensions curbed the appetite for deal making in 2023.M&A involving UK companies declined 33% to the lowest level in fourteen years, with double-digit percentage declines for both the domestic and cross-border deal categories, and across all sectors.A barrel of Brent crude has edged below $80 pushing down energy giants, Shell and BP in early trade.With Maersk now scheduling tankers resuming their passages via and Suez Canal and the Red Sea, thanks to the reassurance of a US-led maritime force in the region, it's helped dispel some immediate concerns about supply issues. Continue reading...
The 62m dispensed on last Friday before Christmas beat 51m record set in 2022 to reflect sharp annual rise in inflationMore than 62m in cash was withdrawn from Post Office branches on the Friday before Christmas, the most ever in a single day, as people rushed to finish their festive shopping.The record withdrawals on 22 December from the 11,500 Post Office branches across the UK beat the previous record of just over 51m, set on the final Friday before Christmas last year. Continue reading...
Economics | The Guardian