A bad Brexit deal will hit the services sector hard

The end of the transition period is looming. Businesses are asked to prepare, but they don’t know what to prepare for. With just two weeks to go, there is still a lack of clarity on most crucial issues especially with regard to the services industry, which represents almost half of UK exports. Are we ignoring the services sector at our peril in the current Brexit negotiations, asks Vicky Pryce

Is Energy Security the New ’Net Zero’?

As the economies in the West are facing the very real prospect of stagflation, we have seen a shift in thinking. As oil and gas prices are going through the roof following the Russian invasion of the Ukraine, energy security rather than net-zero has for the moment moved up on the agenda. Larry Summers the former US Treasury secretary in an interview for the BBC this week argued on the that any recessionary impact from those higher prices would be less hard than what we experienced due to Covid. He also thought that any worsening in this prognosis that might follow a decision at any point to cut Russia’s ability to export oil and gas to the West would be worth it in the longer term as ’ freedom has its price’ and restoring world order was paramount

Should we worry about deflation?

With the focus of most governments and central bankers being on fighting inflation, how do we cope with the sudden re-emergence of deflation? It isn’t new- Japan has struggled with that for decades, certainly since the collapse of its property markets back in the 90s.iAnd it is only now enjoying a return to inflation, partly due to higher energy prices which have finally done what years of monetary injection and zero interest rate policy had failed to do . Japanese inflation has stayed sustainably above zero for the last two years and is currently at 3.3%

Too soon to blame Brexit for the slowdown in the pace of the UK’s recovery?

Is the economic slowdown that we are seeing after the initial bouncebackable a worrying sign for the UK economy? Growth slowed down to 0.8% in May from 2 % in April according to official ONS statistics, despite the easing of restrictions on the month. This was due mainly to shortages of inputs into the manufacturing sector affecting industrial production. This may have been a temporary effect. But the June output surveys also show that authoring the further opening up of the economy meant the overall picture remains a positive one, the pace of overall economy output growth also slowed with June composite PMIs below those in May. And footfall data and latest retail sales also indicate that recent exuberance when pubs opened up indoors too has faded away somewhat. The run up to the football Euro final has helped but these bounces are never sustainable. The further easing in mid July should help but the rises in Covid cases and the confusion that exists in relation to isolation and returns from overseas trips is still bedevilling the industry and could dent consumer confidence causing serious concerned about the sustainability of the economy particularly . And it is quite likely that post Brexit issues which have been a drag on growth for some time will eventually become more pronounced

Just Ahead of the November Budget, the Markets Have It...

The latest UK data for GDP in September painted a sorry picture. Services activity dropped significantly and output across the economy suffered leading to an 0.6% drop in GDP and a drop of 0.2% in the third quarter . Yes, as we had all anticipated , an extra bank holiday for the Queen’s funeral was always going to affect September figures . But what we are seeing is a worrying trend with manufacturing in the quarter down by 2.3%, with every sub-sector within it in falling, something not seen, as the ONS reminded us, for 40 years. Interestingly, in contrast, GDP grew by 0.2% in the Eurozone and the EU as a whole in the third quarter and there was positive activity was positive in all the larger countries in the EU such as France, Germany, Italy and Spain[i]

Why Worry About Rising Debt?

There are numerous concerns about whether the recent rapid acceleration in inflation in recent months will put a break to the bounce-back of the world economy in 2022. In the UK the Bank of England just revised its forecast for this year to 3.75%, a sharp cut from the 5% they expected in the autumn[i]. Not only are workers being affected by a cost of living crisis, mainly as a result of higher world energy costs, but higher interest rates will also act as a dampener to growth. However there is extra dimension that will hang over any recovery, possibly limiting its growth – namely the level of accumulated debt, both public and private during the pandemic which may well prove even more of a challenge than the disruption caused by what is now the highest rate of inflation in 30 years

We Need To Deal Imaginatively With the Post-Brexit Labour Shortage

The economy was stagnant in February . But at least we are at last back to pre-pandemic levels of output. And with the UK seemingly so far having avoided a technical recession, the good news is that the IMF have upgraded their expectations for the UK for 2023 . They now expect a smaller fall of just 0.3% for the year as a whole and return to positive growth in the years after. But that growth is likely to remain below earlier averages, constrained partly by a shortage of labour which is keeping UK inflation above many of our competitors. So this is the policy conundrum- how to ensure the supply of people in the labour force remains strong to allow for that growth to get back to previous long term averages but without it fuelling a wage/price spiral

We rightly worry about the young – but what has Covid done to women’s gender equality progress?

Recent data has highlighted the plight of the younger workers – and those that are just entering the labour force from schools and universities – as likely to lose massively from the actions of firms that have been hit by the economic fallout from coronavirus. Their large presence in insecure and rather poorly paid jobs, many in the badly affected retail and hospitality sectors, has reduced both jobs availability and pay and it is feared that the negative impact will be felt throughout their working lives

Is There Light At the End of the Tunnel?

The Wold Bank recently warned that the current, as they call it, ‘synchronised’, though not necessarily coordinated, raising of interest rates, however necessary in their view, is likely to lead to global recession. With core inflation now exceeding central bank targets worldwide, the OECD has issued downbeat forecasts for the developed nations in 2023 with the UK likely to show stagnation for the year overall , one of the worst performers in its table except for Russia which is likely to see declines both this year and next. The IMF in its forecast accompanying its annual meeting in Washington this week now expects a drop in German and Italian GDP in 2023, both much affected by the cutting of Russian energy supplies. The UK ‘s growth rate for next year was downgraded to 0.3%