Category Archives: Economics

Economic growth to pick up but risks to recovery ‘elevated’, say UK forecasts

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Households and firms can expect more financial pain despite Britain dodging technical recession, says KPMG

Britain will be left with deep scars from the pandemic despite narrowly escaping a second recession within three years and growing signs of an economic pick up, according to new forecasts.

A new report by the accountancy firm KPMG has found that the economy has enjoyed a better start to the year than it had thought, and is now expected to grow by 0.3% this year, compared with its previous prediction of an uplift of just 0.1%.

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Labour says ‘Tory mortgage penalty’ costs homeowners extra £7,000 a year

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Opposition finds fallout of Liz Truss mini-budget has raised average mortgage interest payments by £150 a week in two years

Homeowners are being hit with a “Tory mortgage penalty” of £7,000 a year with interest rates triple what they were two years ago, according to Labour.

Pat McFadden, shadow chief secretary to the Treasury, blamed what he called the “reckless economic gamble” taken by the Conservatives during September’s mini-budget when Liz Truss was prime minister.

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Eurozone sinks into recession as cost of living crisis takes toll

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GDP shrank 0.1% in first quarter of 2023 and final three months of 2022 after revisions to earlier estimates

The eurozone slipped into recession in the first three months of the year, after official figures were revised to show the bloc’s economy shrank as the rising cost of living weighed on consumer spending.

Figures from Eurostat, the EU’s statistical agency, showed gross domestic product (GDP) fell by 0.1% in the first quarter of 2023 and the final three months of 2022 after revisions to earlier estimates. A technical recession is generally defined as two consecutive quarters of negative growth.

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Housebuilders cut back on construction as UK mortgage rate rises spook buyers

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Work on residential building sites slips in May to weakest level since 2009

Britain’s housebuilders are cutting back on the construction of new homes amid signs that potential buyers are being spooked by the prospect of increases in mortgage rates over the coming months.

The latest report on the construction sector found that work on residential building sites slipped in May to the weakest level since 2009, apart from when sites were locked down during the Covid pandemic.

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UK’s post-Brexit trade deals with Australia and New Zealand kick in

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Move called ‘historic’ but agreement with Australia forecast to raise Britain’s GDP by only 0.08% by 2035

The UK’s post-Brexit trade deals with Australia and New Zealand have come into force, a moment lauded by the government as “historic” despite critics arguing they give away “far too much for far too little”.

The trade agreements – the first of those negotiated after Britain’s EU exit to enter into force – come after George Eustice, who was the environment secretary when the UK-Australia trade pact was struck in December 2021, admitted it was “not actually a very good deal” for Britain.

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UK food inflation falls in May, raising hopes prices may have peaked

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British Retail Consortium says rate fell from 15.7% to 15.4% even as rise in overall shop prices hits fresh high

Food inflation in the UK fell in May, lifting hopes that the rapid increase in grocery prices may have reached its peak after keeping the broader consumer prices index painfully high so far this year.

After more than a year of sharp increases in the price of food, the British Retail Consortium (BRC) said annual food inflation eased this month from 15.7% to 15.4%, even as the overall rise in shop prices hits a fresh high.

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‘Shops will close’: soaring cost of potatoes batters British chippies

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The once humble, low-cost staple more than doubles in price, putting many fish and chip shops at risk

Whether it’s fried, baked or mashed, potatoes have traditionally been a low-cost staple food in the UK – but not any more.

A surge in costs is clobbering high street chippies, while in the supermarket, oven chips and the once humble baking potato are casualties of soaring grocery prices.

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Rishi Sunak warned over possible UK recession in 2024

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High inflation likely to push interest rates above 5% and force up mortgage and loan payments just ahead of election

Rishi Sunak has been warned the UK economy could be in recession next year as stubbornly high inflation pushes interest rates to more than 5% before the next general election.

Setting the stage for a further rise in borrowing costs on mortgages and loans for millions of households, economists predicted the Bank of England could be forced to drive Britain’s economy into a recession to tame inflation.

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UK homeowners and first-time buyers warned to brace for 5%-plus mortgage rates

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Lenders forced to raise fixed-term deals after latest inflation figure pushed swap rates upwards

Households looking for a new mortgage deal have been warned to expect 5%-plus fixed-rate deals in the coming weeks, after Wednesday’s inflation figures sent the money markets back into turmoil.

Nick Mendes, the mortgage technical manager at the broker John Charcol, said on Thursday that he doubts that there will be any two-year fixed-rate mortgages and probably few five-year deals priced at less than 5% in the coming weeks, as lenders are forced to reprice their mortgages upwards.

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Sunak to urge G7 support for collective action against ‘economic coercion’

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Leaders expected to form council that will discuss response if states such as Russia and China boycott trade for political reasons

The UK and other G7 countries are planning collective action against Russia and China if they threaten trade boycotts for political reasons, announcing a new body to deal with “economic coercion”.

Rishi Sunak will urge “bold and pragmatic collective action” against hostile states that stop trading with other countries when they disagree with their geopolitical decisions.

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No 10 food summit ‘no more than a PR stunt’ and failed to tackle key issues

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Rishi Sunak’s Farm to Fork meeting, the first of its kind, failed to address solutions to inflation, soaring costs and food security, say attenders

Rishi Sunak’s Downing Street food summit has been described as “empty" by food and farming industry representatives, who rounded on the prime minister for failing to discuss soaring inflation or set out measures to safeguard British food production.

The Farm to Fork summit, the first meeting of its kind, brought together farmers, food producers and some of Britain’s largest supermarkets.

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One in five workers will be higher-rate taxpayers by 2027 – IFS

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Jeremy Hunt’s freeze on allowances and thresholds will put a quarter of teachers and one-eighth of nurses in 40% income tax bracket

One in four teachers and one in eight nurses will be higher-rate taxpayers by 2027 as a result of the government’s record freeze on income tax allowances and thresholds, according to a leading thinktank.

The Institute for Fiscal Studies said better-paid public sector workers will be among the almost 8 million people – one in five of all taxpayers – who will pay income tax at 40% or above as result of the Treasury’s attempt to reduce the UK’s budget deficit.

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Cyprus handed 800-page US dossier on Russia sanctions breaches

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Report details how local people and firms helped Alisher Usmanov’s conceal immense wealth

Cyprus has received an 800-page dossier from the US government detailing sanctions breaches by local individuals and entities that are alleged to have enabled the Russian billionaire, Alisher Usmanov, to conceal his immense wealth.

As the island’s leader Nikos Christodoulides vowed to push ahead with the prosecution of law and audit firms that had aided the oligarch, Washington released documents that amounted to a toolkit to facilitate the process. At least two other dossiers are expected to follow.

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Trading in PacWest shares suspended amid fears of new US banking crisis

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Banks seek to calm markets as investors fear repeat of First Republic and SVB failures

[NEW]Trading in shares of the California-lender PacWest have been suspended after plummeting 42% amid wider fears about the health of the US’s regional bank sector.

PacWest had sought to calm markets on Wednesday and said it was in talks with several potential investors after its shares plummeted by as much as 60%. But the sell-off continued on Thursday and affected other regional banks.

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European Central Bank chief suggests firms are engaging in ‘greedflation’

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Comments by Christine Lagarde come after central bank raises interest rates for seventh time in succession

The president of the European Central Bank suggested companies were taking advantage of high inflation when raising prices, after the bank raised interest rates by a quarter of a percentage point to tackle the cost of living surge.

Christine Lagarde said wage pressures in the eurozone had strengthened, as workers try to recoup some of the purchasing power they have lost due to inflation, but hinted some firms were engaging in so-called greedflation.

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UK ministers under scrutiny for failure to publish Treasury spending details

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Department is worst for publishing spending data, records show, with ministers apparently in breach of guidelines

Treasury ministers appear to have broken government guidelines by failing to publish details of their department’s spending for several months, and in some cases more than two years.

Public records show the Treasury is the worst department in Whitehall for publishing key data on what its officials are spending public funds on, despite its role overseeing spending across government.

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Time running out for US financial firms to bid for ailing bank First Republic

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Deadline of Sunday set for companies such as JPMorgan Chase to table offer for California bank whose shares have plummeted

US regulators are racing to secure the sale of California bank First Republic, which is on course to become the third American lender to fail this year, a sequence of collapses that has drawn uncomfortable parallels with the 2008 global financial crisis.

Half a dozen US banks are in the running to take over stricken First Republic, according to reports over the weekend, with leading bidders including JPMorgan Chase, Citizens Financial and PNC Financial Services.

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Sainsbury’s and Unilever deny claims of profiteering in cost of living crisis

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Supermarket chain and consumer goods company insist they are protecting shoppers from inflation surge

Sainsbury’s and the Marmite maker Unilever have both insisted they are protecting shoppers from inflation, amid accusations that some companies are profiteering from the cost of living crisis.

“We are not profiteering in any form,” the chief executive of Unilever, Alan Jope, said as the consumer goods company insisted it was only passing on three-quarters of its increased costs to customers.

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If China invaded Taiwan it would destroy world trade, says James Cleverly

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UK foreign secretary warns a war across Taiwan strait and likely destruction of semiconductor industry would have global effects

A Chinese invasion of Taiwan would destroy world trade, and distance would offer no protection to the inevitable catastrophic blow to the global economy, the UK’s foreign secretary, James Cleverly, warned in a set piece speech on Britain’s relations with Beijing.

In remarks that differ from French president Emmanuel Macron’s attempts to distance Europe from any potential US involvement in a future conflict over Taiwan, and which firmly support continued if guarded engagement with Beijing, Cleverly said “no country could shield itself from the repercussions of a war in Taiwan”.

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Bank of England predicted to raise interest rates one more time in May

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Increase to 4.5% will be last rise in current cycle, former rate-setter Michael Saunders predicts

The Bank of England is likely to increase interest rates one more time in May, to 4.5%, before inflation falls “sharply” over the rest of the year, a former rate-setter has predicted.

Michael Saunders, who was a member of the monetary policy committee until August, said the UK was nearly at a “turning point” for interest rates, which have risen sharply over the past year as policymakers tried to curb a surge in prices caused by an increase in energy costs.

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