Recession is Coming, Where’s the Growth Plan?

This morning’s dismal revised ONS GDP data revealed that

  • UK GDP fell by a revised 0.3% in Q3 (previously estimated to be a 0.2% decline).
  • GDP is now at 0.8% below pre-pandemic levels (revised down from prior estimate of 0.4% below).
  • Household spending dropping by 1.1% after inflation in Q3.

Liz Truss, despite the now prevailing derision towards her, was right: growth is more important than balancing the books in the short term. Guido doesn’t get the feeling that Sunak or Starmer are prioritising economic growth above political positioning. Britain will almost certainly be in recession in 2023 – what’s the growth plan?

Rishi says the illegal migrants issue is getting his focus in Downing Street, “I do think that the absolute priority that the British people have right now, as do I, is to grip illegal migration… I can tell you that I’ve spent more time working on that than anything else…”. Guido disagrees with his sense of priority. Economic decline is impacting on everyone’s living standards and the latest Ipsos MORI survey confirms people are far more concerned about the economy than immigration. We need to prioritise getting a grip on growth.

mdi-timer 22 December 2022 @ 15:00 22 Dec 2022 @ 15:00 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Narrowly Avoided Recession in Q2

There is a rare sliver of good economic news this morning, as the ONS confirmed we are not currently in recession. The body has announced that a previous estimate that economic growth fell by 0.1% in the three months to June has been revised up to a rise of 0.2%, narrowly avoiding a second month of negative growth which would have defined the UK as in a recession. Small mercies…

The UK’s current account deficit has also improved, according to the revised figures, from the £43.9 billion previously calculated to a mere £33.8 billion.

Liz and Kwasi shouldn’t be too pleased, however. The ONS now also calculates that the UK economy has recovered less from the pandemic than previously believed and is now the only G7 country still languishing below pre-pandemic levels by 0.2% compared to the final quarter of 2019. The Queen’s death and subsequent economic pandemonium are expected to quash any hope of further good GDP news in the final two quarters of 2022…

mdi-timer 30 September 2022 @ 08:20 30 Sep 2022 @ 08:20 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Go Big or Go Into Opposition: 2.5% Growth Target Decides Next Election

“Chancellor Kwasi Kwarteng will struggle to hit his target of boosting annual UK economic growth to 2.5%” writes the FT’s Chris Giles in an article that is representative of much of the broadsheet commentary since Friday, with the honourable exception of the Telegraph. Starmer is, at the time of this going to pixel, not planning to reverse Kwasi’s tax cuts or the now cancelled tax rises he’d already opposed, with the result that the Labour Party is quibbling with very little of the changes. It boils down primarily to their rejection of the abolition of the 45% rate bringing the top rate of income tax down to 42.5% (including NI). Labour have accepted two thirds of the personal income tax cuts. They are only rejecting one cut, the top rate cut…

So the the dividing line between the parties is: Will “new era” economics work and crank growth up to 2.5% before the next election?

Not a chance say Rachel Reeves and the assembled hardline-centrists of the broadsheet punditry, plus all the orthodox economists from the IFS, Institute for Big Government and gloomy Torsten Bell with his distribution charts. Kwasi and Liz say it will work. It won’t surprise co-conspirators that Guido thinks it is less of a gamble than the BBC’s Faisal Islam reckons. Barring oil going to $300 or some other catastrophe, it is far more likely to work than the doomsters would have you believe. If Kwasi and Liz fail to hit the 2.5% target they have set for themselves, they will deservedly lose the next election. The choice now is pull out all the stops and go for growth, or go into opposition…

mdi-timer 25 September 2022 @ 17:14 25 Sep 2022 @ 17:14 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Dynamic Tax Modelling Finds £100 Billion Output Growth from Fiscal Measures

Using a dynamic tax model* the Taxpayer’s Alliance (TPA) finds the fiscal measures announced by Kwasi Kwarteng today will boost output by £99 billion over the next 10 years. This would see the Treasury recuperate 75% of forgone revenue. The most effective budget bolstering measure is the scrapping of the rise in corporation tax, which accounts for over half of the prospective gains. The mini-budget’s benefits also extend to average weekly earnings, which are set to rise by £22. The Growth Plan certainly lives up to its name…

Duncan Simpson, chief economist at the TPA adds:

“The chancellor has been true to his word, providing a package that will have a significant impact on long run economic growth… The package today represents a bold first step towards the liberalising policies which will be required to meet the government’s growth aspirations.” 

A great start…

*The TPA’s dynamic tax model was built in collaboration with the consultants Europe Economics, the firm where Matt Sinclair worked before moving to Downing Street to become the PM’s chief economic adviser. Full briefing note can be downloaded here.

mdi-timer 23 September 2022 @ 15:52 23 Sep 2022 @ 15:52 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Economy Grew by 0.5% in May

Away from the leadership melodrama, some welcome news from the Office for National Statistics (ONS) this morning, as latest figures show the economy grew by 0.5% in May. A nice, albeit small surprise, given economists had predicted zero growth in the face of rising energy costs and, of course, soaring inflation…

According to ONS director for economic statistics Darren Morgan, the minor upturn is explained by an increased travel bookings and, erm, more people visiting the doctor:

“Health was the biggest driver with many more people seeing GPs, despite test and trace and the vaccination programmes winding down. Road hauliers also had a busy month, while travel agencies fared well with pent up demand for summer holidays. There was widespread growth across manufacturing after several tough months, while construction also fared well with housebuilding and office refurbishment driving growth.”

Still, in welcoming the figures, newly-minted Chancellor Nadhim Zahawi insisted he was “not complacent” and would continue to “support growth” in future. Not a bad way to end his first week in the job at least…

mdi-timer 13 July 2022 @ 08:33 13 Jul 2022 @ 08:33 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Economy Grows Faster than Expected, Household Savings Drop

The UK economy grew at a faster rate than expected between October and December last year, at 1.3% compared to forecasts of 1% according to the Office for National Statistics. GDP is now just 0.1% below its pre-pandemic figure. All this despite the Omicron hysteria at the end of last year…

The rise is also a bounce back from the downwardly revised growth of 0.9% in Q3, with total yearly growth sitting at 7.4% in 2021. Household savings, meanwhile, are at their lowest point since the start of the pandemic, with the ratio at 6.8% by December. Just as inflation begins to bite…

ONS director of economic statistics Darren Morgan said:

“GDP grew a little stronger than we first thought in the fourth quarter, meaning it is now only 0.1 percent below its pre-pandemic level. Savings were at their lowest level since the start of the pandemic as household spending rose, mainly driven by rising prices.

House prices still continue to soar at their fastest rate since 2004, with the typical price now 21% higher than before the pandemic…

mdi-timer 31 March 2022 @ 09:00 31 Mar 2022 @ 09:00 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
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