Displaying items by tag: Economy

A University of California study highlights the long-term damage caused by Brexit and austerity measures on the UK’s economic growth and social cohesion. The report calls for urgent action from the incoming government to address setbacks since the 2008 financial crisis. Political scandals, such as rule-breaking during the pandemic, have intensified public discontent and eroded trust in UK institutions. The study warns of interlocking crises for the next government, including signs of stagnation, particularly in addressing social and economic challenges. The report predicts a potential historic defeat for the Conservatives in the election and a challenging path for Labour to restore public trust and economic stability. Labour’s pledges include fiscal discipline, housing and infrastructure reforms, and clean energy investments. The study concludes that austerity and Brexit have left lasting scars on the UK economy, urging the government to prioritise regional planning and recovery.

HSBC has joined Barclays and NatWest in reducing mortgage rates after hints of a summer base rate cut by the Bank of England. HSBC’s new rates took effect on 26 June, with more lenders expected to follow. However, borrowers still face high costs, and average mortgage rates have been rising due to a lack of competition during the election campaign. A commentator notes that the recent rate increases are now being unwound in small steps. Fixed mortgage rates remain constant until the deal expires, after which borrowers must choose a new rate or default to a more expensive variable rate. Around 1.6 million borrowers have expiring fixed-rate deals this year. The Bank of England may cut rates at its next meeting on 1 August, influencing recent lender moves.

Over twenty Christian leaders, including former Archbishop of Canterbury Rowan Williams, have urged UK political leaders to view taxes as a societal benefit rather than a burden. In an open letter organised by the JustMoney Movement, they called on Rishi Sunak, Keir Starmer, and Ed Davey to promote fairer taxation, emphasising its role in funding public services and addressing inequality. They argue that the wealthiest should contribute more equitably, aligning with biblical principles of justice and community responsibility.

Labour, the Conservatives, and the Liberal Democrats have all pledged not to raise value-added tax (VAT) if they win the general election. Chancellor Jeremy Hunt confirmed that the Tories would maintain the current VAT rate, challenging Labour to do the same. Shadow chancellor Rachel Reeves dismissed claims of a planned VAT hike as 'nonsense,' also ruling out increases in income tax or National Insurance. Lib Dem spokesperson Munira Wilson echoed this. Ahead of the official election campaign, Labour promised economic stability and explicitly ruled out tax hikes for working people. They plan to impose VAT on private school fees to fund state school teachers. Jeremy Hunt criticised Labour's tax stance, suggesting a potential VAT rise if they win. However, Rachel Reeves labelled this claim 'absolute nonsense’, reiterating Labour's commitment not to increase taxes on working people.

The UK housing market currently has £230bn worth of homes for sale, the highest supply in eight years, keeping house prices stable for the rest of 2024. According to Zoopla, the supply of homes for sale is 20% higher than last year, with the average estate agent handling 31 homes - the highest level in eight years. Richard Donnell, Zoopla's executive director, said the increased supply reflects renewed homeowner confidence, leading to a rise in house prices as more sales are agreed upon. Sales have increased by 13% year-on-year, with a third of homes for sale having been marketed in 2023. The surge in supply is due to more three- and four-bedroom homes returning to the market as owners feel confident to move despite rising mortgage rates. The upcoming general election in July is not expected to impact the property market significantly, with 392,000 homes in the sales pipeline. Experts say that serious buyers and sellers should price their homes realistically to achieve sales despite election uncertainties.

Homeowners face rising mortgage rates as a Bank of England interest rate cut is delayed. Several banks have raised some mortgage rates, responding to uncertain economic forecasts. Inflation remained higher than expected at 3.2% in March, influencing market predictions and delaying anticipated rate cuts. Mortgage brokers have advised securing rates swiftly to avoid financial strain. One broker highlighted the volatile nature of current rates, while another noted increasing frustration among homebuyers due to these changes. Currently, the average two-year and five-year fixed mortgage rates stand at 5.82% and 5.40% respectively.

The UK's unemployment rate surged unexpectedly to 4.2% in the three months to February, up from 3.9% in January, the highest level in nearly six months. This increase, alongside a slowdown in earnings growth, reflects economic uncertainty affecting the job market. Real wages rose by 2.1% due to falling inflation. Economists suggest these weaker-than-expected employment figures may prompt the Bank of England to consider interest rate cuts as early as June. HMRC data revealed a significant decline in workers on payrolls by 67,000 in March, the largest drop since November 2020. Vacancies also decreased for the 21st consecutive period. While recent output data suggests potential economic growth in the first quarter, the Office for National Statistics (ONS) advises caution in interpreting unemployment rate data due to low survey response rates. There are also concerns over industrial action and increasing inactivity rates. Acting shadow work and pensions secretary Alison McGovern said:  'Tory failure is laid bare by the reality that we are now the only country in the G7 with an employment rate stuck below pre-pandemic levels’. See also

German chancellor Olaf Scholz has tried to strike a delicate balance on a trip to China. He wanted to promote business ties but also to raise concerns over China's export surge to Europe and its support for Russia’s war in Ukraine. Meeting with top leaders including Xi Jinping, he adopted a conciliatory tone in his discussions, emphasising partnership while acknowledging China as a competitor and systemic rival. This marked his first visit since Germany categorised China as such and called for reduced dependency on Chinese goods. Germany faces economic challenges, exacerbated by rising energy prices due to the Ukraine war. Scholz also urged Jinping to press Russia to end its ‘senseless’ war with Ukraine: see

The British Chambers of Commerce (BCC) have reported that nearly half of UK businesses plan to raise prices soon, despite overall inflation pressures easing. Their survey, covering 4,800 firms, found 46% expecting to increase prices, 51% planning to maintain current prices, and only 3% foreseeing a reduction. This pricing trend is linked to economic challenges affecting business investment, which remains sluggish. A significant factor is the higher labour costs, particularly in the hospitality and manufacturing sectors; 77% and 76% of firms respectively cite it as a major influence on pricing decisions. Additionally, the survey indicates a stagnant landscape for business investment. Most firms reported no change in their investments in new equipment and machinery this quarter: only 24% have increased their investment, while 16% noted a decrease.

UK inflation has dropped to 3.4%, the lowest in over two and a half years, potentially signalling a Bank of England (BoE) interest rate cut this summer. This decrease, primarily driven by slower food price increases, may lead to cheaper mortgages, providing relief to homeowners. Initially predicted at 3.5%, the February inflation rate was pleasantly surprising, especially as food inflation fell to 5% from 7% in January. The decline supports Rishi Sunak's commitment to reduce inflation, and aligns with the BoE's target of 2%. This news prompted NatWest to lower mortgage rates even before the BoE's decision. Financial markets expect the BoE to maintain the current 5.25% interest rate, but the reduced inflation increases the likelihood of a summer cut, which could significantly lower mortgage payments. However, renters face contrasting challenges, with rental costs rising at record rates due to market constraints. The average UK rent soared by 9% over the past year. As homeowners anticipate potential financial relief, renters continue to struggle with escalating living expenses.