Today’s top stories
Microsoft has agreed to buy a £1.5bn stake in the London Stock Exchange as part of a 10-year strategic partnership in the latest tie-up between exchanges and Big Tech.
European Commission chief Ursula von der Leyen said she wanted to establish an EU-wide ethics body following a probe by Belgian police into Qatari influence at the European parliament.
It’s a big week for central banks with the US Federal Reserve, the European Central Bank and the Bank of England all pronouncing on interest rates. Veteran investor Mohamed El-Erian says the Fed has some unpleasant choices to make next year after its mistake last year of believing inflation was “transitory” and being initially too timid to withdraw its monetary stimulus. The ECB warned that eurozone banks were are at risk of mounting bad loans and a funding squeeze.
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Good evening.
It’s not just freezing temperatures that have brought forward anguished cries about a bleak midwinter at Westminster.
Blue Monday so far has brought more signs of an impending recession, deteriorating trade figures and plummeting business investment, while ministers are making contingency plans for soldiers to drive ambulances and staff borders at airports.
New GDP figures this morning showed output shrinking 0.3 per cent in the three months to October, the largest fall since the first-quarter lockdown period of 2021.
Monthly growth of 0.5 per cent in October was better than expected and reversed the fall in September when output dropped because of the additional bank holiday for the Queen’s state funeral, but even chancellor Jeremy Hunt admitted this was merely a false dawn and the situation “would get worse before it gets better”.
The fresh data come ahead of the Bank of England’s decision on interest rates on Thursday, where policymakers have to grapple with the fact the UK not only has the worst growth outlook of any major economy but some of the most persistent inflation. Some argue that a big rise is necessary to bring inflation expectations under control while others suggest more increases will deepen and lengthen the impending recession.
Meanwhile, a new report from trade body Make UK suggests investment in British manufacturing is set to fall for the first time in two years as companies start to cut spending. It also forecasts a 4.4 per cent fall in output this year as businesses struggle with rising energy bills, input costs and new post-Brexit paperwork. Separate ONS data showed the UK trade deficit widened to £23.9bn in the three months to October — a near-record high.
Ministers, meanwhile, are preparing to send in the army as public sector strikes start to bite. Union action is also set to shut most of the country’s rail network this week.
Pay is the main cause of unrest, especially among public sector workers who have been hit hardest by the cost of living crisis. However, Hunt argues that high wage demands will only damage the economy and prevent inflation falling.
On the other hand, chief economics commentator Martin Wolf says government policy is “foolish”. It is also dishonest to let inflation reduce real wages while expecting services to be maintained, he argues, adding: “Public sector pay should be set at levels needed to attract and motivate the required staff. An upsurge in inflation does not change that logic.”
The FT editorial board says the current wave of protest will not be fixed by tightening restrictions on strikes, and neither will it improve the unpopularity of the government. Instead, it argues, “ensuring Britain has enough people ready to work as nurses and teachers should be seen as what it is: a challenge for policy”.
Need to know: UK and Europe economy
In better news for the UK government, the first big test of winter resilience has proved successful, with the electricity grid operator instructing two emergency-use coal generators to stand down after being told to warm up “to give the public confidence” in energy supplies.
Environmental groups are challenging the UK’s plan to award 100 new licences to explore for oil and gas in the North Sea, the first for nearly three years.
Brussels is struggling to match the incentives for business on offer in US president Joe Biden’s big green push. Problems include tax policy lying with member states rather than at EU level and strong state-aid rules.
The EU is appointing David O’Sullivan, a former ambassador to the US, as its sanctions envoy to push for tighter enforcement of restrictions against Russia.
Investors are starting to eye up reconstruction opportunities in Ukraine. Kyiv puts the cost of rebuilding at about £349bn. In the meantime, as our Big Read reports, the EU is bracing for a big influx of Ukrainians on top of a large increase in migrants from elsewhere.
Need to know: Global economy
An adviser to President Joe Biden said US shale investors’ opposition to increased drilling was “un-American” while oil groups hit record profits. Russia has threatened to cut oil production in response to the price cap on its products imposed by the G7.
Chinese experts urged Beijing to speed up the approval of updated Covid vaccines as infections spread. Most of the population has been jabbed with shots designed to target the original virus strain identified in Wuhan in 2020. Pandemic restrictions on transport workers have been lifted.
Need to know: business
UK fashion and homeware chain M&Co went into administration, putting nearly 2,000 jobs at risk, after being hit by rising costs and a drop-off in demand. Womenswear business Monsoon, however, said it would open more stores next year after a recovery in profitability and a “surprising” return to high-street shopping. Spain’s Mango is rethinking China’s central role in its supply chain.
Food delivery group Meituan and shopping app Pinduoduo, both pandemic success stories in China, are having to adapt to renewed competition as coronavirus curbs are relaxed.
Mars, the world’s largest confectionery maker, is aiming to double its sales in developing countries with new products such as a bacon Snickers in Brazil. Consumers in emerging markets eat just 500g of chocolate a year, compared with 7kg in Europe.
Our new film investigates “banking deserts” in the US, where branch closures have doubled since the pandemic began. African-American communities have been hit the hardest.
The World of Work
A record number of UK companies are setting up employee-ownership trusts (similar to the model of retailer John Lewis) as alternative ways to reward staff while benefiting from a tax break.
After the pandemic put the brake on the Yuletide office knees-up, many employees may find themselves experiencing forced fun for the first time in two years, writes Emma Jacobs. The office grinch may have a point, she argues.
Get the latest worldwide picture with our vaccine tracker
Some good news
A “game-changing” clean energy breakthrough scientists has boosted hopes for a zero-carbon alternative to fossil fuels. Physicists have sought to harness the fusion reaction that powers the sun since the 1950s, but until today no group had been able to produce more energy from the reaction than it consumes. Fusion reactions emit no carbon, produce no long-lived radioactive waste and a small cup of the hydrogen fuel could theoretically power a house for hundreds of years.
Source: Economy - ft.com
