Displaying items by tag: Economy

The Bank of England is expected to lower its base interest rate to 3.5% in the coming months, a relief for home buyers and businesses as the UK economy shows signs of improvement. Experts predict the economy will grow at double the previously expected rate. One leading firm has highlighted the need for increased public investment to sustain this growth trajectory. While interest rates have surged due to inflation concerns, prompting households to save rather than spend, the easing of rates is expected to boost consumer confidence. The Organisation for Economic Co-operation and Development (OECD) also upgraded the UK’s growth forecast, positioning the UK just behind the US in expected economic performance within the G-7 nations. Despite lingering uncertainties, these optimistic projections suggest a stronger economic outlook for the UK in the near future.

Millions of pensioners will lose winter fuel payments after the Government won a Commons vote to end the universal benefit. Chancellor Rachel Reeves introduced the measure as part of an effort to address a £22 billion deficit in public finances. The payment , which had been given to all pensioners, will now be restricted to those receiving pension credit. The move, which will save around £1.5 billion annually, has drawn criticism for its sudden implementation without public consultation. 53 Labour MPs abstained from voting, and some people have vowed never to vote Labour again. One Labour MP, Jon Trickett, broke ranks and voted against the measure, citing concerns about pensioner poverty and criticising the Government for targeting the vulnerable rather than the wealthy. The winter fuel payment, introduced in 1997, was designed to help pensioners with heating costs, but its removal will affect ten million people, leaving many facing increased hardship this winter.

Scotland's deputy first minister, Shona Robison, has announced £500 million in public spending cuts to address financial pressures. The cuts, which span various sectors, aim to balance Scotland’s budget while facing ongoing economic challenges. Robison emphasised that difficult decisions were necessary to manage increasing demands on public services and rising costs. The cuts will affect education, healthcare, and transport, sparking concerns from public sector workers and unions. Critics argue that the reductions could lead to decreased quality in essential services and further strain on already under-resourced sectors. Robison defended the cuts as crucial to prevent long-term financial instability, noting that the government is committed to protecting vital services as much as possible. However, she acknowledged that the cuts were far from ideal and called for a review of how public funds are distributed and used efficiently.

Sir Keir Starmer has promised to reverse the last decade of decline in the UK and tackle the nation’s pressing issues. Speaking at a recent event, he criticised the Conservative government for its handling of economic challenges, rising living costs, and the NHS crisis. He outlined his party’s commitment to reforming public services, boosting economic growth, and restoring trust in political leadership. Starmer emphasised the need for stability and competent governance, pledging to provide clear solutions and a steady hand. He also promised to address the UK's housing crisis by building more affordable homes, and to invest in renewable energy to combat climate change. Starmer's vision includes creating a fairer society with equal opportunities for all, aiming to bridge social divides and improve the quality of life for citizens. As the UK faces numerous challenges, his proposals seek to offer a fresh start and a new direction for the country.

Rachel Reeves is preparing to implement a tough October budget that includes tax increases, spending cuts, and stricter benefit policies. Despite stronger-than-expected economic growth in early 2024, she faces a significant budget deficit, with government borrowing reaching £3.1 billion last month, more than double the amount from the previous year. Reeves had already announced initial cuts, including the scrapping of winter fuel payments for most pensioners and halting plans for social care reform. The upcoming budget is expected to raise more revenue from inheritance and capital gains taxes, maintain a 1% increase in public spending with cuts in some departments, and uphold the two-child benefit cap. Despite improved economic performance, the Treasury insists that the financial situation remains dire, with borrowing on track to exceed forecasts. Reeves argues that she inherited the worst public finances since World War II, and further tough decisions are necessary to address the substantial 'black hole' in the budget.

Paetongtarn Shinawatra, 37, has been officially endorsed by King Maha Vajiralongkorn as Thailand’s new prime minister, just two days after her election by parliament. The country’s youngest and second female leader, she follows in the footsteps of her father, former PM Thaksin Shinawatra, and her aunt, Yingluck Shinawatra, the country's first female premier. She has taken over after the dismissal of her predecessor, Srettha Thavisin, by the constitutional court. In her first speech, she pledged to govern with an open heart, emphasising stability and continuity. She has vowed to maintain key policies of her predecessor, focusing on economic stimulus, healthcare reform, tackling illegal drugs, and promoting gender diversity. The economy is a real concern for voters, with many asking why her party has failed to fulfil its promise to give about $300 to every voter in Thailand.

The UK economy showed a growth of 0.6% over three months, marking a positive trend despite a flatline in June, attributed to the general election and ongoing strikes. Businesses across various industries delayed purchases pending the election's outcome, while strikes, including those by junior doctors, further contributed to the stagnation. The June GDP figure fell from the previous month’s 0.4% growth, yet overall the UK outperformed most G7 nations in the first half of 2024. The UK’s growth, particularly in scientific research, IT, and legal services, has been the highest among G7 nations. This consistent growth has left the threat of recession behind, a significant achievement after the economy contracted at the end of 2023. The Labour government has highlighted economic growth as essential to funding public sector investments without increasing national debt.

The UK government has announced a £32 million investment in nearly 100 AI projects nationwide, despite the new Labour government's controversial decision to cancel £1.3 billion in tech funding previously promised by the Conservatives. This funding supports 98 projects, enhancing construction safety and prescription delivery efficiency, benefiting over 200 businesses and research organisations across the UK. Rick McConnell, CEO of Dynatrace, praised the investment, emphasising its potential to drive immediate value and attract private sector confidence in AI. However, the Labour government's decision to scrap major projects like the £800 million exascale supercomputer and £500 million for AI Research Resource has raised concerns about the UK's commitment to tech innovation. Minister for digital government and AI, Feryal Clark, reiterated the importance of AI for economic growth and public service improvement.

The Bank of England has cut interest rates by a quarter percentage point to 5%, marking the first reduction in over four years. This decision ends the joint-longest period of stable rates since the Bank gained independence in 1997. The nine-member Monetary Policy Committee (MPC) voted five to four in favour of the cut. Lower interest rates will impact many savings accounts and floating rate mortgages immediately, though fixed rate mortgages had already anticipated this change. The rate cut follows a drop in the consumer price index rate of inflation to 2%, the MPC’s target. However, the Bank's updated forecasts indicate that inflation will rise to around 2.75% by the year's end. Governor Andrew Bailey cautioned that while inflationary pressures have eased, rates should not be cut too quickly to maintain stable inflation and support economic growth. The forecasts will be reviewed after the new chancellor’s budget announcement in October.

Market expectations for an August interest rate cut diverge from economists' predictions. A Reuters poll of economists indicates that the Bank of England is expected to cut interest rates next week for the first time in over four years. Most economists surveyed—over 80%—anticipate the rate will drop to 5% from the current 5.25%, which is the highest it has been in over 15 years following 14 consecutive hikes. However, market sentiment is less certain. A slight majority (54%) believe rates will be held steady, while 46% anticipate a cut. Earlier predictions were more confident about a rate reduction, with 97% of economists in a June poll expecting a cut before the latest inflation data was released. The anticipated rate cut would make borrowing cheaper, as evidenced by Nationwide offering a five-year fixed-rate mortgage deal at less than 4%. The last interest rate cut occurred in March 2020 during the onset of COVID-19 in the UK. The Bank of England has maintained higher rates to combat inflation, aiming to bring it down to 2%. Despite recent drops in inflation, rates have remained at 5.25%.