Category Archives: Economics

UK to drop ‘Facebook tax’ in favour of post-Brexit trade deal

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Recently introduced tax would have raised £500m, helping to reduce Britain’s huge Covid bill

The UK government is preparing to drop a recently introduced tax on global technology companies such as Facebook, Google and Amazon, due to fears that the so-called “Facebook tax” could jeopardise a post-Brexit trade deal.

Rishi Sunak is reportedly planning to ditch the digital services tax which was expected to generate about £500m to help pay towards the huge cost of the government’s response to the coronavirus pandemic.

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Debt in developing countries has doubled in less than a decade

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Jubilee Debt Campaign reveals sharp rise in number of countries in distress since 2018

Developing nation debt has more than doubled in the past decade and left more than 50 countries facing a repayment crisis, according to a campaign group.

Data from the Jubilee Debt Campaign shows that even without taking full account of the impact of the coronavirus pandemic, there has been a sharp jump in the number of poor countries in debt distress since 2018.

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Tale of two Cities: FTSE 100 rises despite economic collapse

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Surge in shares contrasts with Covid-related downturn and growing unemployment

The economic collapse in Britain during the second quarter of 2020 was the most brutal on record. Unemployment is forecast by the Bank of England to soar to 2.5m by Christmas. The Brexit cliff edge approaches. Yet in the City, the FTSE 100 has been on the up.

Never has the disconnect between financial trading and economic fundamentals appeared so extreme. What explains surging asset prices (the FTSE jumped 2% on the same day it was revealed the economy had slumped by 20%) when the outlook for many workers is so grim?

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China retail sales fall fuels concern for global recovery from Covid-19

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Retail sales dropped 1.1% in July while industrial production remains subdued

Fears over the strength of China’s economic recovery from the coronavirus pandemic have been raised after retail sales slumped in July and industrial production remained subdued.

Fuelling concerns for the world economy, retail sales in China dropped in July by 1.1% compared with the same month a year ago, missing predictions for a small increase in consumer spending.

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Forget doom-laden headlines, the dollar has not gone into terminal decline | Barry Eichengreen

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Too much is being read into the greenback’s recent weakening against the euro

The dollar is in freefall! The global greenback is doomed! screamed recent headlines. Actually, such sensational headlines are “too sensational”, to echo that noted authority on currencies, Miss Prism, in Oscar Wilde’s The Importance of Being Earnest.

The dollar’s fall in July to a two-year low against the euro was the immediate impetus for these stories. In fact, the dollar’s recent slide is one in a series of readily explicable fluctuations. When the Covid-19 pandemic went global in March, the dollar strengthened on the back of safe-haven flows into US Treasuries, as it does at the start of every crisis. By May, the Federal Reserve, acting as global lender of last resort, had accommodated this mad scramble for dollars by pouring buckets of liquidity into financial markets and the greenback gave back its early gains.

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Covid-19: UK economy plunges into deepest recession since records began

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GDP falls 20.4% – the worst of any G7 nation in the three months to June

Britain has entered the deepest recession since records began as official figures on Wednesday showed the economy shrank by more than any other major nation during the coronavirus outbreak in the three months to June.

The Office for National Statistics (ONS) said gross domestic product (GDP), the broadest measure of economic prosperity, fell in the second quarter by 20.4% compared with the previous three months – the biggest quarterly decline since comparable records began in 1955.

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Stock markets boom as hopes rise for US economic stimulus and Covid-19 vaccine

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S&P edges towards all-time record with oil prices and hospitality stocks rising as investor optimism rebounds

US stock markets moved closer to record highs on Tuesday after investors bet on a fresh round of government spending to lift the economy and counter the effects of the Covid-19 pandemic.

The S&P 500, seen as the broadest measure of US investor sentiment, raced to a 10-point gain by mid afternoon to leave it just 16 points short of the all-time high reached in February.

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UK to plunge into deepest slump on record with worst GDP drop of G7

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Official measure to be declared this week as coronavirus lockdown shrinks GDP by 21% in second quarter

Britain’s economy will be officially declared in recession this week for the first time since the 2008 financial crisis, as the coronavirus outbreak plunges the country into the deepest slump on record.

Figures from the Office for National Statistics on Wednesday are expected to show that gross domestic product (GDP), the broadest measure of economic prosperity, fell in the three months to June by 21%.

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‘Coronavirus has stolen our future’: young people’s despair as jobs evaporate

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New graduates and school leavers across the UK have paid the price of lockdown, says survey

Young people across Britain believe their future has been “stolen” as a result of the coronavirus outbreak, with more than half fearing it has damaged their prospects.

Amid growing evidence that the pandemic is fuelling a generational divide, two thirds of 16- to 24-year-olds also said that their age group, loosely defined as ‘Generation Z’ will pay the economic price for a disease that has mostly affected older people, according to a survey by the Hope not Hate charitable trust, an anti-racism group.

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US economy suffers worst quarter since the second world war as GDP shrinks by 32.9%

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Drop in quarterly gross domestic product comes as 1.43m people file for unemployment benefits, a second week of increases, amid Covid-19 pandemic

The US economy shrank by an annual rate of 32.9% between April and June, its sharpest contraction since the second world war, government figures revealed on Thursday, as more signs emerged of the coronavirus pandemic’s heavy toll on the country’s economy.

The record-setting quarterly fall in economic growth compared to the same time last year came as another 1.43 million Americans filed for unemployment benefits last week, a second week of rises after a four-month decline.

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Shell reports $18bn loss as global oil and gas prices collapse

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Energy giant hit by massive change in fortunes as Covid-19 crisis forces writedown in asset values

Royal Dutch Shell has reported a deep financial loss after a record writedown on the value of its oil and gas assets due to the collapse in global market prices triggered by coronavirus.

The Anglo-Dutch oil giant revealed a net loss of $18.3bn (£14.1bn) for the second quarter 2020, down sharply from a net profit of $3bn over the same period last year and $2.7bn in the first three months of 2020.

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Economic fallout from pandemic will hit women hardest

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IMF says 30 years of gains for women could be erased as recession deepens

Even before the coronavirus pandemic, there were vast inequalities between men and women in the world of work. Despite chipping away at the glass ceiling over recent decades, in 2020 the gender pay gap still remains stubbornly high, while more men called Steve and Dave run FTSE 100 companies than women.

Four months from the launch of lockdown, and as Britain slips into the deepest recession for three centuries, it is increasingly clear the economic fallout from the pandemic is having a disproportionate impact on women.

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The EU coronavirus fund will take Europe another step towards disintegration | Yanis Varoufakis

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The recovery package promises deeper integration between European countries. Here’s why I think it won’t work

During the early years of the eurozone crisis, I remember gauging its depths by the rapidly diminishing half-life of the celebrations that followed every European Union summit. Premature proclamations that the crisis was over inspired hope, which caused the money markets to rebound. But then, at some point, gloom would unfailingly return. As the years of austerity for the many and socialism for the few ground on, that point arrived sooner after each EU summit.

Could it be that, at long last, this sad pattern has been broken by last week’s summit, which resulted in a brand new, €750bn post-pandemic EU recovery fund?

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EU leaders go into extra time as tempers fray at coronavirus summit

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Proposals on the size and terms of a recovery fund have led to splits between member states

Angela Merkel and Emmanuel Macron said they are willing to walk away from a summit of EU leaders, as they arrived at the third day of a long and acrimonious debate on the terms of a €750bn (£682bn) pandemic recovery fund.

With the EU split between northern and southern member states as well as eastern and western, France’s president and the German chancellor both indicated their patience was waning despite the need to respond to the economic recession facing the bloc.

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EU leaders in bitter clash over Covid-19 recovery package

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Orbán accuses Netherlands’ Rutte of ‘communist’ tactics on tense third day of talks

Hungary’s prime minister, Viktor Orbán, accused his Dutch counterpart of using the same methods as his country’s former communist leaders on Sunday, as EU leaders publicly clashed during tense and acrimonious negotiations over the terms of a proposed €1.8tn budget and recovery package for the bloc.

A third difficult day of a summit of the EU’s 27 heads of state and government – the first in person for five months – saw movement towards agreement as talks stretched deep into the night, but laid bare the deep splits between north and south, and east and west.

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Governments put ‘green recovery’ on the backburner

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G20 countries aim their pandemic bailout spending at fossil fuel industries, leaving Paris climate change targets in doubt

Governments are spending vastly more in support of fossil fuels than on low-carbon energy in rescue packages triggered by the coronavirus crisis, new data has shown, despite rhetoric from many countries in support of a “green recovery”.

Data from the Energy Policy Tracker, a new research effort by several civil society groups, shows that at least $151bn (£120bn) of bailout cash has been spent or earmarked so far to support fossil fuels by the G20 group of large economies. Only about a fifth of this spending is conditional on environmental requirements such as reducing greenhouse gas emissions or cleaning up pollution.

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Bono campaign group accuses UK of wasting international aid budget

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Campaign group One, founded by U2 frontman, is calling for a reorganisation of aid spending

A development campaign group founded by Bono has accused the UK government of wasting a large chunk of its international aid budget and called for spending on overseas assistance to be cut by £1.6bn.

In a report that echoes criticisms by some Conservative MPs, the U2 singer’s One campaign said there was too much spending on projects that failed to reduce poverty.

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Global ‘catastrophe’ looms as Covid-19 fuels inequality

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Job losses, homelessness, school closures and acute hunger set to rise dramatically without urgent support, Christian Aid warns

The pandemic has exposed and reinforced deep inequalities across the world, with the true extent yet to be seen, according to a major new report.

The crisis in the poorest countries threatens to escalate into a catastrophe as job losses and food insecurity mount. “The economic, social and political impacts are only starting to unfold,” says Building Back with Justice: Dismantling Inequalities after Covid-19, to be published by Christian Aid later this month.

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Covid-19 has revealed a pre-existing pandemic of poverty that benefits the rich

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The World Bank’s flawed and misunderstood poverty benchmark has led to a deceptively positive picture and dangerous complacency

  • Philip Alston is the outgoing UN special rapporteur on extreme poverty and human rights

Poverty is suddenly all over the front page. As coronavirus ravages the globe, its wholly disproportionate impact on poor people and marginalised communities is inescapable. Hundreds of millions of people are being pushed into poverty and unemployment, with woeful support in most places, alongside a huge expansion in hunger, homelessness, and dangerous work.

How could the poverty narrative have turned on a dime? Until just a few months ago, many were celebrating the imminent end of poverty; now it’s everywhere. The explanation is simple. Over the past decade, world leaders, philanthropists and pundits have embraced a deceptively optimistic narrative about the world’s progress against poverty. It has been lauded as one of the “greatest human achievements”, a feat seen “never before in human history” and an “unprecedented” accomplishment. But the success story was always highly misleading.

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China has shown it is willing to pay the economic price of suppressing Hong Kong | James Lim

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Now that it has its own financial hubs on the mainland, Beijing may be prepared to risk the fate of its golden goose

Last week, the Chinese government passed a broad national security law criminalising dissent in Hong Kong. While the law has already had a chilling effect on protests, the consequences for Hong Kong’s economy are unclear. Since 1 July, Hong Kong’s stock market has climbed. Some foreign businessmen in Hong Kong have dismissed the law’s potential effect on business. This incredulity is unsurprising: for decades Hong Kong has thrived as a gateway for international capital into and out of China. Surely Beijing wouldn’t kill its own “golden goose”?

But investors and businessmen, used to the unencumbered movement of capital, may have lost sight of recent changes. Contemporary China is different today to just 10 years ago, let alone to the 1990s when Hong Kong was handed over by the British. Now a global power that commands one-sixth of the world’s GDP and is increasingly authoritarian, it is approaching Hong Kong with a new rationale that is both political and economic.

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