Aurelia Butler

Surging consumer price inflation, which hit a 40-year high of 9.1% in May, means workers are pushing for bigger than normal pay rises, and there have been widespread strikes in Britain’s privately operated rail industry over the past week.Prime Minister Boris Johnson has said pay restraint in the public sector is needed to save money and reduce the risk of a longer-term inflationary spiral.Average pay excluding bonuses in the public sector in the three months to April was up by an annual 1.8%, compared with 4.8% in the private sector, official figures show. The Guardian said the National Health Service Pay Review Body – a panel that makes annual pay recommendations to the government – would recommend an increase of “somewhere between 4% and 5%”.The body, which normally makes its annual recommendation in July, did not immediately reply to a request for comment. Last year it proposed a 3% pay rise, which the government accepted.It recommendations cover most staff other than doctors, dentists and senior managers in Britain’s National Health Service, totalling almost 1.5 million workers.In a submission to the review body in February, the health ministry said it had a fixed budget to last until 2025, and that there were “stark trade-offs between pay and other NHS spending” such as staffing levels and medical equipment.($1 = 0.8155 pounds) More

Just six months in office, Olaf Scholz hosts Sunday’s G7 summit at a time of peril for the west, as soaring inflation, an energy crisis and the threat of recession test the wealthiest economies’ ability to deploy a co-ordinated response.The meeting — also attended by the leaders of the US, UK, France, Italy, Japan and Canada — comes as economists across the world downgrade their growth forecasts and revise up their inflation projections. Energy and food prices have spiralled higher since Russia’s invasion of Ukraine in February, and this month central banks have raised rates by bigger margins than markets expected.“It would have been impossible to imagine at the last G7 summit that we’d be facing a situation like this,” said Holger Schmieding, chief economist at Berenberg Bank. “Things are pretty bad and could get even worse.”The dire outlook was underlined last week when Germany took a step closer to rationing gas after a sharp drop in Russian deliveries through the Nord Stream 1 pipeline.Scholz said the main aim of the summit, held at the luxury resort of Schloss Elmau in the Bavarian Alps, was to project unity. Leading democracies must show they are as “united as never before”, not only in the “struggle against [Russian president Vladimir] Putin’s imperialism, but also in the fight against hunger and poverty, health crises and climate change”, the chancellor told the Bundestag on Wednesday.Scholz will notably push for a “Marshall Plan” for Ukraine, modelled on the American scheme that bankrolled Europe’s postwar reconstruction. Ukrainian president Volodymyr Zelenskyy will take part in the summit by video link.Leaders will also discuss the disruptions to global food supplies caused by Russia’s blockade of Ukraine’s Black Sea ports. It was incumbent on the G7 to “prevent a catastrophic famine”, said Scholz, who has also invited Indonesia, India, South Africa and Senegal to the summit.But a common policy response might be harder to reach on the looming macroeconomic threats to the G7 states themselves — discussion of which will dominate the first day of the summit. An AS 332 Super Puma helicopter of Germany’s federal police Bundespolizei flies over Schloss Elmau © Wolfgang Rattay/ReutersSome of the recent developments are seen as outside the leaders’ control: China’s zero-Covid policy playing havoc with global supply chains, and the Kremlin’s reduction of gas flows to Europe, which has rattled gas markets and increased the odds of winter energy crunch.“It’s not the G7 leaders who have caused these problems — it’s [Chinese president] Xi Jinping and Vladimir Putin,” said Schmieding. That contrasts with the Covid-19 pandemic, when governments embraced massive fiscal support and monetary stimulus to shield businesses during lockdowns. Then there was, said a senior German official, a “simple consensus” on how to respond — a “textbook macroeconomic answer, namely an expansive monetary and fiscal policy”. “The situation we’re in now is a lot more complex, a lot more difficult,” he added. “This completely clear, almost instinctive idea that you just pursue expansionary policies is no longer so obvious.”This time, said Paschal Donohoe, president of the eurogroup of finance ministers, policymakers will have to strike a balance between supporting households most exposed to surging energy prices and taking care not to stoke inflationary pressures — a task he described as “demanding”.“This is a very difficult challenge for central banks and for governments,” he said in Brussels on Friday. “History shows us that if inflation becomes a multiyear phenomenon at very high rates, the challenges we face in the cost of living only grow.”The US has been holding talks with European leaders on how to ease the pressure on energy prices. The focus, officials said, is on ways to prevent G7 restrictions on Russian oil from pushing crude prices higher and bolstering Putin’s export revenues.

One answer that has long been pushed by the US, and will be discussed at Schloss Elmau, is a cap on oil prices paid to Russia. It would require changes to Europe’s ban on insuring Russian oil shipments: a compromise might allow countries to obtain insurance if they observe the price cap.But Scholz is lukewarm on the idea. On Friday he said that it was “no good” if just a few countries complied with the oil price cap — it would only work if everyone did. “[Oil] demand is global,” he said. “And unless we can get everyone on board, or nearly everyone, then it won’t be so effective.” More

“What we can’t have is a situation in which increases in pay are just wiped out by further increases in prices, and so that’s why you’ve got to be responsible,” Johnson told Sky News.Johnson also said that “overall” the Bank of England had done an outstanding job managing inflation over the past 25 years and he said the recent surge in price growth was due to global inflation problems. More

The board said Ecuadorian authorities planned to use the funds for budget support. The announcement comes after nearly two weeks of sometimes-violent mass protests led by indigenous groups demanding lower fuel and food prices.Deputy Managing Director Antoinette Sayeh said in a statement that Ecuador’s 4.2% GDP growth in 2021 had been supported by good macroeconomic management and a successful vaccination campaign, and that macroeconomic and financial stability had been preserved.”While the ongoing war in Ukraine is adversely affecting some export sectors, higher oil prices are improving Ecuador’s external and fiscal balances,” she said.The IMF approved a 27-month EFF arrangement for Ecuador worth about $6.5 billion on September 30, 2020. More

Air travel chaos and cost of living worries have spurred a surge in bookings by Britons for domestic summer holidays, offering hope to a sector struggling with financial pressures and a worsening economic outlook. UK domestic holiday businesses had feared 2022 would spell an end to the summer staycation boom of the pandemic’s first two years, when onerous travel restrictions and fears of catching Covid-19 deterred holidaymakers from international travel. But inquiries and late bookings for domestic summer holidays have jumped since early June, after flight cancellations caused major travel disruption during the school half-term holiday and balmy weather swept across the country. Last-minute bookings for summer holiday accommodation from Sykes Holiday Cottages, one of the UK’s leading holiday rental agencies, were up 22 per cent at the start of June, compared with the same period last year. Just under 40 per cent of Britons said they were more likely to choose a domestic holiday instead of an overseas break than before the pandemic, according to polling conducted in mid-June and published on Friday by VisitBritain, the UK’s tourist board.Of those choosing a staycation, 65 per cent told VisitBritain it was because UK breaks were easier to plan, 54 per cent said they wanted to avoid long queues at airports and the risk of cancelled flights, and 47 per cent said it was because UK holidays were more affordable. “Whether families think they can’t afford a summer getaway abroad, or they’ve had their flights cancelled, or the potential of sitting with four kids for 12 hours in the airport has just scared them off, many are opting to stay at home,” said Sir David Michels, president of the Tourism Alliance, a lobby group. “That’s a net-positive for the UK tourism industry.”Michels said he did not expect demand for domestic holidays this summer to surpass the heights of summer 2021, but it was possible levels of demand could mirror last year. He added that sterling’s depreciation this year “certainly wouldn’t hurt” the domestic market as it would “put some people off” travelling overseas. The currency is down 9.3 per cent against the dollar and 2.2 per cent against the euro since the start of 2022.Cottage bookings on Awaze, a vacation rental company, for June were flat compared with 2021 and up 21 per cent on 2019, while bookings for August this year were 6 per cent higher than the same month last year and 46 per cent up on 2019. July was slightly down on 2021 levels. Graham Donoghue, chief executive of Sykes Holiday Cottages, said the UK was “continuing to ride the staycation wave despite the return of foreign travel”.“Uncertainty around Covid restrictions has seemingly been replaced with another worry — overseas travel disruption — while an increased pressure on household budgets is leading to many turning to staycations as the better value option,” explained Donoghue. On Thursday, British Airways check-in staff voted to strike later in the summer over pay, setting the stage for yet more air travel disruption. Lengthy delays at airport have increased the appeal of UK staycations © Frank Augstein/APHenrik Kjellberg, Awaze chief executive, said the travel chaos had “benefited” the domestic tourism market as holidaymakers looked to “avoid the stress and hassle” of overcrowded airports. He said people had been “introduced to the charms of staycations” during the pandemic and they were “here to stay”, adding that pandemic travel restrictions had combined with a “gradual trend of people thinking more and more about their CO₂ footprint” to encourage more families to consider holidaying locally. Meanwhile, members of the trade body UKHospitality reported a 20-30 per cent uplift in inquiries over the platinum jubilee weekend in early June from customers searching for holidays in late summer or over the school half-term holiday in October, according to Kate Nicholls, chief executive. Nicholls said the extension of the staycation boom would provide a lifeline for independent businesses, which have been hit hardest by cost pressures resulting from supply chain issues and the war in Ukraine.

“British holidaymakers will tend to go for the less obvious options,” said Nicholls. “There’s a proportion of customers who will always go branded, but there is also a proportion of domestic visitors who are much more confident about going off the beaten track and looking for independents, looking for boutique options.”The success of domestic tourism has become more significant because inbound tourism is not expected to rebound to pre-pandemic levels until 2025. The task for the industry now is to convince British holidaymakers to keep returning in future summers. “If the sun keeps shining, I think it’s going to be a much fuller UK with UK residents than summers before the pandemic,” said Michels. “We’ve now had three years of lots of people holidaying at home. I don’t think this is going away.”“The longer this trend lasts, the stickier those habits become and the more beneficial it will be for communities across the country,” said Nicholls. More