Category Archives: Economics

Relief for borrowers as UK interest rates cut but little sign big reductions to come

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Incremental cuts likely over two to three years with rates expected to stay well above pre-Covid levels of 0.75%

Borrowers will breathe a collective sigh of relief. The Bank of England has cut interest rates by a quarter point to 5% and major lenders are shaving their best-buy mortgage offers in response.

Those wanting to get on the housing ladder should find property slightly more affordable after the cut, which ends a year of ultra-high borrowing costs and is the first rate cut in more than four years.

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Bank of England cuts interest rates to 5% in first reduction since March 2020

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Committee voted by five votes to four in favour of cut as governor says inflationary pressures have eased enough

The Bank of England has cut interest rates for the first time since the start of the Covid pandemic, moving to ease the pressure on households after ratcheting up borrowing costs to combat the worst inflation shock in four decades.

In a finely balanced decision after holding borrowing costs at the highest level since the 2008 financial crisis for a year, the Bank’s monetary policy committee (MPC) voted by a narrow majority to cut its base rate by a quarter of a percentage point to 5%.

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World Bank warns 108 countries risk being stuck in ‘middle-income trap’

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Too many nations, including China and India, are relying on outmoded strategies to become advanced economies, says report

More than 100 countries – including China, India, Brazil and South Africa – risk becoming stuck in a “middle-income trap” unless they adopt radical growth strategies for their economies, the World Bank has said.

The Washington-based development organisation said emerging market nations would struggle to close the gap on US living standards unless they relied less heavily on investment to increase growth.

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France’s GDP gets €1bn lift from giant cruise ship as German economy shrinks

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Analyst says eurozone could have turned a corner as it avoids recession with 0.3% growth

The delivery of the world’s second-largest cruise ship lifted France’s economy in the second quarter, according to official data that also showed Germany heading into a recession.

Built in Saint-Nazaire for the cruise ship operator Royal Caribbean, the Utopia of the Seas added €1bn (£840m) to French economic output, helping to increase trade growth to 0.6% in the three months to the end of June and gross domestic product to 0.3%.

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Rachel Reeves paves way for cuts and tax rises to fill shortfall left by Tories

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Chancellor will announce pause in work on a number of infrastructure projects, saying Conservatives ‘covered up’ true state of finances

Rachel Reeves will lay the ground for cuts to public spending, tax rises and delays to some major infrastructure projects on Monday as she sets out the toxic inheritance the Labour government inherited from the Tories.

She is expected to pause work on a string of infrastructure projects, including Boris Johnson’s flagship plan to build 40 new hospitals and the proposed two-mile road tunnel bypassing Stonehenge.

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Tories ‘deliberately covered up’ true state of public finances, says minister

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Steve Reed hits out at Conservatives’ handling of public services as chancellor prepares to detail ‘£20bn black hole’

The last Conservative government “deliberately covered up” the true state of public finances, a cabinet minister has said, as the chancellor prepares to detail a “£20bn black hole” in the public finances.

The environment secretary, Steve Reed, said his cabinet colleagues “always knew” the inheritance from the Tories was “going to be bad”, but that since coming to office they had found “additional pressures” that had not been disclosed by the Tories.

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How bad are Britain’s finances? Five questions on the state of the UK economy | Phillip Inman

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Several factors restrict the Labour government’s room for manoeuvre in its agenda for growth

The economic outlook is improving, but a recovery from last year’s recession will be long and arduous without a boost to public investment.

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Labour facing moment of truth over tax pledges, economists warn

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Experts say 5.5% pay increase for public sector not ‘consistent’ with spending plans that rule out tax rises

Labour is fast approaching a moment of truth over its election pledges on tax and spending, experts have warned, after Rachel Reeves indicated the government could agree above-inflation pay rises for public sector staff.

The chancellor promised a full statement on pay board recommendations that teachers and NHS workers should receive 5.5% pay awards, ahead of an autumn budget that is set to be one of the most difficult economic balancing acts in years.

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China posts record trade surplus as foreign importers rush to beat tariffs

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The $99bn figure comes as data shows exports growing at fastest rate in 15 months while imports fell

China posted a record $99bn (£76.4bn) trade surplus last month amid signs of importers bringing forward orders to beat higher tariffs on goods from the world’s second biggest economy.

The latest official figures from Beijing showed exports growing at their fastest rate in 15 months, while the weakness of China’s domestic economy resulted in falling imports.

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US consumer prices unexpectedly fell in June, drawing Fed closer to cutting interest rates

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Joe Biden says in statement that falling prices and rising wages are ‘thanks to my economic plan’

Prices unexpectedly fell in the US last month, lifting hopes that the Federal Reserve is on the verge of cutting interest rates.

As inflation fell 0.1% on a monthly basis in June, having been unchanged in May, the consumer price index’s annual increase was also the smallest in a year.

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French stock market swings to gain after election surprise; Britvic agrees to improved Carlsberg offer – business live

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Live coverage of business, economics and markets after New Popular Front is largest party in second round of France’s election, with far-right third

The French election has meant that Marine Le Pen’s far-right National Rally (RN) will not be in power, but it has not settled what France’s new government will look like.

The New Popular Front (NFP), the hastily arranged coalition of left-wing parties, won the most seats, but it is far short of a parliamentary majority. The result will mean a lot of negotiation to agree on who will be the new prime minister – let alone on achieving anything meaningful in governing the country.

The French parliament is more divided than ever, made up mainly of three blocs (Left – 182 seats, Centre – 168 seats, Extreme Right – 143 seats) and a number of smaller ones. As we predicted before the elections, no bloc can claim an absolute majority.

Minority government

French political parties “are not used to making concessions in order to create a programme around a coalition with other parties”, and the NFP’s most prominent figure, Jean-Luc Mélenchon demanded its entire programme be implemented. “If political parties maintain such positions, a long period of instability will ensue,” said Ledent.

Learning to cooperate

“Excluding the 80 MPs from the far left and the 145 from the far right, there are over 350 MPs left to form a broad coalition ready to reform France, taking into account the diversity of opinions. In other European countries, including Germany, such a configuration would be quite natural and would result in a government with a clear majority.

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EU plan to impose import duty on cheap goods could dent Shein and Temu

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Brussels move to end tax loophole exploited by China-linked marketplaces could also dent Shein’s planned London listing

The EU is moving forward with plans to impose customs duty on cheap goods in a shift that could hit imports from online retailers and harm a hoped-for London listing by the fast-fashion seller Shein.

The potential change comes amid growing disquiet among retailers based in the UK, elsewhere in Europe, and the US about rising competition from Chinese-linked marketplaces Shein and Temu, which exploit a loophole that excludes low-value items from import duty.

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Next UK government poised to benefit from fall in inflation and fuel prices

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Pressure on household finances eases as shop price rises slow to 0.2% and petrol costs drop for second month

Britain’s next government is poised to benefit from easing pressure on household finances after a slowdown in inflation in stores and a fall in fuel prices, but costs remain “too expensive” for many families.

Figures from the British Retail Consortium (BRC) show that annual UK shop price inflation cooled last month to 0.2%, down from 0.6% in May – the slowest pace since October 2021 – as retailers cut the prices of many of their key products, including butter and coffee.

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Greece introduces ‘growth-oriented’ six-day working week

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Pro-business government says measure is needed due to shrinking population and shortage of skilled workers

Companies in countries worldwide may be toying with the idea of implementing shorter working weeks, but in Greece employees have been told that, henceforth, they can put in a sixth day of labour in an unorthodox step aimed at turbocharging productivity.

After outpacing other Europeans in terms of economic growth, the nation once at the heart of the continent’s worst financial crisis has bucked the trend again, introducing a 48-hour working week. The measure, decried as “barbaric” by unions, takes effect from Monday.

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Soaring government debt could roil global financial markets, warns BIS head

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Agustín Carstens says world economy on course for ‘smooth landing’ after inflation but political turmoil poses risk

Rising government debt levels could disturb global financial markets, the head of the body that advises central banks said on Sunday before France’s high-stakes parliamentary elections.

Agustín Carstens, the general manager of the Bank for International Settlements (BIS), said the world economy was on course for a “smooth landing” from the inflation crisis, but he warned that policymakers, especially politicians, needed to be careful.

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Labour to seek ‘stable position’ with Europe rather than reopen Brexit debate

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Shadow business secretary says trying to rejoin single market or customs union would cause ‘more difficulties’

Labour would rather have stability in the UK’s relationship with Europe than try to seek accelerated economic growth by rejoining the EU’s single market or customs union, the shadow business secretary has said.

Addressing the British Chambers of Commerce (BCC) conference on Thursday, Jonathan Reynolds acknowledged that Brexit had been “very difficult for businesses” because it had erected trade barriers, but said reopening the debate would be worse.

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Global wave of elections could hit UK financial system, warns Bank of England

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Central bank raises concerns over newly elected governments as more than 80 countries go to polls this year

Uncertainty caused by a global wave of elections, starting this weekend in France, risks destabilising the UK’s financial system, the Bank of England has warned.

Officials are concerned about the kind of policies that newly elected governments may enforce in large economies, including the US, where Donald Trump is vying for another term as president in the run-up to the election in November.

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UK must stop ‘walking on eggshells’ over post-Brexit deal, says BCC chief

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British Chambers of Commerce director general calls on politicians to improve ties with EU and strike better deal

The UK’s current trade deal with the EU is not working and the country must stop “walking on eggshells” around the issue of building closer ties with its biggest trading partner, the director general of the British Chambers of Commerce (BCC) is expected to say.

At the annual BCC global conference in London on Thursday, Shevaun Haviland will say that the UK must forge closer ties with the EU and the next government should focus on improving trading relations to grow the economy.

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UK general election live: Labour suspends candidate Kevin Craig over Gambling Commission probe

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Party says it acted after being contacted by the regulator about the candidate for Central Suffolk and North Ipswich

All along the course of the Thames, turning north, meandering south, passing through locks, historic landmarks, Richmond and Kew, swelling beneath the House of Commons with the turning tide, and on to Docklands and beyond – concern for the health of the Thames has led many other ordinary people, who live, work or play on the water, to take up the fight for the health of the river.

The last 15 years of decline in rivers suggests they have much to do. In 2009, a year before the Conservatives first took power in a coalition with the Liberal Democrats, a quarter of English rivers were judged as being of good ecological standard, a marker which examines the flow, habitat and biological quality; by 2022 not one river was in a healthy state.

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Starmer’s growth plan ‘doomed’ without access to EU markets, warn economists

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Labour leader told if elected he will have to rejoin the customs union to meet party’s manifesto pledges, while 56% of voters say Brexit was bad for economy

A Labour government under Keir Starmer will fail to maximise the UK’s economic growth unless it takes the country back into the European Union’s single market and customs union, leading economists and diplomats have said.

The warnings come as an Opinium poll for the Observer finds that 56% of voters now believe Brexit has been bad for the UK economy as a whole, compared with just 12% who believe it has been economically beneficial.

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