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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.“The UK has some of the highest regional inequalities of any advanced country. Today, these are larger than those between east and west Germany and north and south Italy. New technologies, global competition, the loss of old industries — and the failure to support new ones — have all driven that divide.”This is the opening of a report, “Why hasn’t UK regional policy worked?”, out last week. Co-authored by Ed Balls, former Labour shadow chancellor, this is the second in a series. The earlier one, published in March, examined the failures of UK regional policy. This one asks leading policymakers, including three prime ministers (John Major, Tony Blair and Gordon Brown), what lessons they draw from them.These are the main conclusions: first, widening regional divisions are not inevitable but correcting them is hard; second, “past policies to grow the UK’s regional economies were geographically biased and insufficiently ambitious”; third, the government has relied too heavily on centralised approaches to delivering more balanced regional growth in England; fourth, policy instability has led to short-termism and damaged outcomes; fifth, sustained top-level political will and leadership are necessary to overcome Whitehall’s centralising tendencies and empower local government; and sixth, today’s cross-party support for the “combined authority” model, in which local governments work together within city-regions, might produce a workable consensus.Yet some big points of disagreement remain. What, for example, should be the main levers for growth in English regions and what is the right level of decision-making? How far should Whitehall itself drive through a comprehensive reform of local government? Last, but perhaps most important, how is regional revival to be funded? How, in particular, does one balance the self-evident case for greater local fiscal autonomy and accountability with the need to redistribute resources from the rich regions — namely, London and the South East — towards the less productive rest?What is most striking about these conclusions is how precisely they reveal the core weaknesses of governance and the economy in the UK.This is hardly surprising. As I have argued in earlier columns on this topic, the extreme regional divergences in productivity are the consequence of both potent economic forces, particularly deindustrialisation and the rise of London as a global financial hub, and failures in policy and politics. The latter in turn reflect a combination of over-centralisation, addiction to policy gimmicks, all too familiar myopia, and hope that the economy, left largely to itself, will solve the problems on its own.It turns out, alas, that it cannot. The great deindustrialisation of the Thatcher era did not lead to the blooming of thousands of new economic flowers across the country. It led instead to overconcentration on one economic activity (finance) in one part of the country. Worse, that once-verdant tree is no longer what it was. London is rich. But it is no longer as dynamic as before.Properly understood, therefore, what this report identifies is something bigger than regional economic problems, important though they are. It identifies fundamental and pervasive weaknesses in the UK’s economy, governance and politics. This is particularly important right now, because, whatever these regrets of past policymakers, the thrust of contemporary politics, in the aftermath of Brexit’s fraudulent diversion, is towards changing as little as possible. It is towards a consensus on conservatism.Given that, it is hard to believe that the deep-seated failures identified in this report and others, notably the government’s own levelling up white paper, will be dealt with by any government. Some even argue that it is impossible to do so: the regional divergence is ineluctable. Instead, we should be even more ruthlessly laissez-faire and encourage people to migrate to the south.Since London and the South East still make up only 27 per cent of the population, that is evidently impossible. In sum, greater prosperity is needed across the entire country. Regional policy should therefore be seen not as something apart, but as the heart of any sensible growth strategy, which must be simultaneously national and regional. This then has become a core — arguable the core — political, institutional and economic challenge.Yet what I take from these depressing regrets over past failures is how difficult, perhaps impossible, the task will be. Is the UK able to remedy the failures that have led to huge regional inequalities and low growth? Alas, I doubt [email protected] Follow Martin Wolf with myFT and on Twitter More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Travelling abroad can often spur bouts of “e-envy” — or jealousy over the digital ease of life elsewhere. Whether it is the ability to file a tax form in a click or to renew a passport via a smartphone, business leaders and tourists get an insight into how their government might drain less of their time back home. Immense pressures on the public sector, however, come not only from disgruntled citizens. With debts elevated and demands on public spending growing, governments across the world must work out how they can deliver more, with less.The public sector already plays a prominent role in advanced economies. It employs around one in five workers while general government spending accounts for 40 per cent of gross domestic product on average. This gives it a significant bearing on national productivity. Ageing populations, climate change, and national security challenges are meanwhile bringing additional burdens on the state. Indeed, with tight budgets and rising debt interest payments, it is now even more essential that tax and spend decisions are not wasteful, and that governments find ways to become more productive.Defining what public sector productivity means is part of the challenge. It is often equated with cutting jobs or shifting resources from lower priority departments. But this comes at a cost — dilapidated infrastructure, longer healthcare waiting lists, and administrative blunders. Instead, governments need to work smarter, both in identifying and eliminating waste, and also by extracting more — and higher quality — from their existing resources. For measure, research by McKinsey estimates that operational improvements could save the US government $750bn per annum, without reducing the effectiveness of services.Leveraging technology — for instance by digitising paperwork, using data to generate policy insights, and automating tasks — offers most promise for boosting long-term efficiency and quality. Many nations have already made strides in e-governance, with Scandinavia leading the way, according to UN rankings. Estonia’s e-Tax system sends pre-filled tax forms to be checked and filed within minutes. In Singapore registering a company online can take just 15 minutes. Indeed, digital governance can streamline staffing needs, smooth compliance processes, and raise the productivity of the private sector — small businesses can lose a few working weeks per year grappling with regulation.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The reams of data collected by governments can also be cleaned and analysed to unearth inefficiencies, improve services, and even raise revenues, particularly with the aid of artificial intelligence. America’s Inland Revenue Service, for example, recently announced plans to use AI to collect unpaid taxes. In Britain’s NHS, the auto-generation of cumbersome patient forms could free up time for nurses and clinicians, while machine learning could also help hospitals to manage capacity better.Ditching outdated technology — particularly fax machines, which are shockingly still used by some governments — for existing best practice is a no-brainer. Adopting newer gadgetry may have an upfront cost, but it can bring significant long-term efficiency gains. Broader operational improvements can also come through developing and attracting talent better, boosting partnerships with the private sector, and encouraging innovation and experimentation. Revamping vast bureaucratic machines while they are operating is not easy. Governments have to balance the more effective use of technology and data with privacy concerns, cyber security risks, and regulation. The skillsets to manage transformation can be lacking too. These challenges need to be overcome. The cost of not doing so means an ever-growing strain on public services, and ongoing pressure to raise taxes. In the meantime, envious travellers can at least help prod governments into action. More

Economists spent much of 2023 warning that a recession could be imminent as the Federal Reserve raised interest rates to the highest level in more than two decades. But for companies like Soergel Orchards in western Pennsylvania, a slowdown is nowhere in sight.“People are buying the decorative things,” said Amy Soergel, manager at the company who explained that gourds and cornstalks were in high demand and that customers were coming out to select pumpkins and apples. “People love to pick — people will pick anything.”Sales are up even though a string of rainy weekends have held back attendance at the farm’s annual fall festival. Demand at the hard cider shop has been solid. And the owners are bracing for a strong season in their store selling Christmas decorations.Soergel’s bustling business is a microcosm of a trend playing out nationwide. Consumer demand has unexpectedly boomed in 2023, defying widespread expectations for a slowdown and helping to fuel strong overall growth. The economy expanded at an eye-popping 4.9 percent annual rate in the third quarter, far faster than the roughly 2 percent pace officials at the Fed think of as its standard growth pace.That is great news for American companies. But it is a also a source of confusion. Why is the economy still growing so quickly more than a year and a half into the Fed’s campaign to slow it down, and how long will the upswing last?Fed officials have lifted interest rates above 5.25 percent, making it more expensive to take out a mortgage, borrow to expand a business or carry a credit card balance. Those moves were meant to trickle out through markets to cool the real economy. Some parts of the economy have felt the squeeze — existing home sales have slowed, for instance. Yet employers continue to hire and families keep spending.Customers were coming to Soergel Orchards to select pumpkins and apples.Ross Mantle for The New York Times“People love to pick — people will pick anything,” a manager said.Ross Mantle for The New York TimesCornstalks and gourds are in high demand at Soergel’s.Ross Mantle for The New York TimesIt is difficult to predict what comes next as the all-important holiday shopping season approaches. A solid job market and cooling inflation could combine to give consumers the wherewithal to keep powering the economy forward. But many companies are being careful not to build up too much inventory or predict too strong a sales outlook, worried that higher borrowing costs could collide with smaller savings piles and the accumulated effects of more than two years of rapid inflation to make Americans thriftier.“Sentiment definitely feels down,” Thomas Barkin, president of the Federal Reserve Bank of Richmond, said during an interview on Oct. 19. “The folks I talk to are still clamping down in preparation for 2024.”What happens with holiday shopping could help shape what the Fed does next.The central bank has been trying to slow growth for a reason: Inflation has been above 2 percent for 30 months now. To get prices under control, policymakers think they need to tamp down demand.The logic is fairly simple. If rapid hiring continues and wage gains prove quick, people who are earning more money are likely to feel confident and keep spending. And if shoppers are eager to buy restaurant dinners, new gadgets and updated wardrobes, it will be easier for companies to protect their profits by raising prices.That is why Fed officials are keeping an eye on how strong consumers and the job market remain as they contemplate what to do next with interest rates. Policymakers are almost sure to leave rates unchanged at their meeting on Nov. 1, and a number of them have suggested that they may be done raising borrowing costs altogether.Soergel’s owners are bracing for a strong season in their store selling Christmas decorations.Ross Mantle for The New York TimesBut top officials have kept alive the possibility of one final quarter-point increase, if economic data were to remain buoyant.“We are attentive to recent data showing the resilience of economic growth and demand for labor,” Jerome H. Powell, the Fed chair, said in a recent speech, adding that continued surprises “could put further progress on inflation at risk and could warrant further tightening of monetary policy.”So far, companies offer a mixed picture on the outlook. Many are suggesting that seasonal shopping is off to a strong start. Halloween spending is expected to climb to a record $12.2 billion, up 15 percent from last year’s record of $10.6 billion, according to the National Retail Federation’s annual survey. The group is expected to release its holiday forecast this week.Walmart reported strong sales during its back-to-school season, which its chief executive noted was a good indicator for how spending would look during Halloween and Christmas.“Typically when back-to-school is strong, it bodes well for what happens with Halloween and Christmas,” Doug McMillon, the Walmart chief, said on an earnings call in August.But some companies are uncertain. The Tractor Supply chief executive, Hal Lawton, said during an earnings call last week that the retailer was stocking up on fall and winter décor — selling, for instance, a skeleton cow that was a “TikTok viral sensation.”But “we acknowledge there is a broader range of estimates for holiday, consumer spending than we’ve seen over the last couple of years,” he added.And some analysts think winter shopping could prove weak. Craig Johnson, founder of the retail consultancy Customer Growth Partners, expects holiday sales to grow at 2.1 percent, the slowest since 2012, he said in a report released Oct. 17.“The fact that people had a good Halloween doesn’t necessarily mean that they’re going to have a good holiday,” Mr. Johnson said. “It’s a different buying mentality and there’s not a carryover — you’re not going to see apparel lines from Halloween extend over into Christmas.”Retailers report that they are carefully watching how much inventory they have headed into the holidays, and a Fed survey of business experiences from around the Fed’s 12 districts referenced the word “slow,” “slower” or “slowing” 69 times.Demand at the on-site hard cider shop has been solid.Ross Mantle for The New York TimesPart of the challenge in forecasting is that consumers seem to be splitting into two groups: Wealthier consumers keep spending even as the bottom tier of shoppers either pull back or look for deals.The department store chain Kohl’s says it is seeing this type of bifurcation play out in its customer base and is adjusting its stores accordingly.Shoppers at the Kohl’s in Ramsey, N.J., were greeted with a range of already-discounted Christmas items like miniature snowmen and ornaments at the front of the store. That design was done on purpose — Kohl’s executives want the section to appeal to deal-hungry shoppers.But in a sign that higher earners could fuel growth, it has also started to stock new category items like decanters, wine glasses and electric corkscrews.“We want to make sure we’ve got the right broad breadth of assortment for the breadth of customer base that we’ve got,” said Nick Jones, Kohl’s chief merchandising and digital officer. “And that’s an element of making sure everything’s got to be great value. But great value doesn’t always mean low price.” More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A major European aluminium producer has warned that the increasing numbers of imported electric cars from China could have a big impact on regional demand. Hilde Merete Aasheim, chief executive of Norsk Hydro, said the company was paying attention to this risk. “The fear when it comes to [electric vehicles] is imports into Europe and the impact on European car manufacturers. There is quite a steep curve right now,” she told the Financial Times in an interview.“That is a threat that we are following: if European automakers start reducing their demand [for aluminium] because they are outcompeted,” she said. Her comments highlight the ripple effects from growing Chinese EV imports for businesses in Europe from the car supply chain including raw material producers.Aluminium is used in electric cars for battery pack casings and other components to help cut weight and offset the heavy battery, allowing EVs to travel further on a single charge.The average EV produced in Europe in 2022 contained 283kg of aluminium, compared with 169kg for combustion engines, according to a study commissioned by European Aluminium, a trade body.In September, the EU announced plans for an anti-subsidy probe of Chinese EVs that it said was “distorting” the European market and “flooding” global markets.China is building battery plants far beyond levels needed to meet domestic demand, backed by regional subsidies and lending, and manufacturers are seeking to channel the excess supply into overseas markets.European carmakers are responding to the threat in different ways. This week Stellantis, which owns brands including Peugeot and Jeep, said it would invest €1.5bn in a 20 per cent stake in Chinese EV start-up Leapmotor, in an attempt to profit from the influx of cheaper China-made EVs into Europe.In the first seven months of 2023, China exported $13.1bn of EVs to Europe, compared with $15.4bn in the whole of the previous year, according to Chinese customs data. However, the majority of the vehicles are China-made versions of western brands such as Tesla.The worries about aluminium demand in Europe come after the sector was hit by surging energy prices following Russia’s invasion of Ukraine last year, which forced smelters including Hydro’s Slovalco smelter in Slovakia to close. The industry also faces uncertainty over whether China, the biggest aluminium producer in the world, will maintain a 45mn tonne annual production cap.Hydro’s adjusted earnings before interest, tax, depreciation and amortisation fell short of analyst expectations on Tuesday, falling 60 per cent to NKr3.90bn ($350mn) in the third quarter compared with the same period last year because of weaker global economic activity. More

The United Automobile Workers union announced the deal with Stellantis, the parent of Chrysler, Jeep and Ram. It also expanded its strike against G.M.The United Automobile Workers union announced on Saturday that it had reached a tentative agreement on a new labor contract with Stellantis, the parent company of Chrysler, Jeep and Ram.The agreement came three days after the union and Ford Motor announced a tentative agreement on a new contract. The two deals contain many of the same or similar terms, including a 25 percent general wage increase for U.A.W. members as well as the possibility for cost-of-living wage adjustments if inflation flares.“We have won a record-breaking contract,” the U.A.W. president, Shawn Fain, said in a video posted on Facebook. “We truly believe we got every penny possible out of the company.”Shortly after announcing the tentative agreement with Stellantis, the union expanded its strike against General Motors, calling on workers to walk off the job at the company’s plant in Spring Hill, Tenn. The plant makes sport utility vehicles for G.M.’s Cadillac and GMC divisions.Under the tentative new contract with Stellantis, Mr. Fain said, the company has agreed to reopen a plant in Belvidere, Ill., to produce a midsize pickup truck and to rehire enough workers to staff two shifts of production.The union also won commitments to keep an engine plant in Trenton Mich., open, and to keep and expand a machining plant in Toledo, Ohio. According to the union, these moves will create up to 5,000 new U.A.W. jobs.The union also won the right to strike if the company closes any plant and if it fails to follow through on its promised investment plans, Mr. Fain said.“If the company goes back on their words on any plant, we can strike the hell out of them,” he said.Mr. Fain said Stellantis workers would now return to their jobs.In a statement, Stellantis said, “We look forward to welcoming our 43,000 employees back to work and resuming operations to serve our customers.”The tentative agreement with Stellantis will require approval by a union council that oversees negotiations with the company, and then ratification by U.A.W. members. The council will meet on Thursday, Mr. Fain said.The deal with Stellantis means that only General Motors has not yet reached an agreement with the U.A.W.Erik Gordon, a business professor at the University of Michigan who follows the auto industry, said the new contracts impose higher labor costs on the Detroit manufacturers as they are ramping up production of electric vehicles and are competing with rivals who operate nonunion plants.“The Detroit Three enter a new, dangerous era,” he said. “They have to figure out how to transition to EVs and do it with a cost structure that puts them at a disadvantage with global competitors.”The union’s contracts with the three automakers expired on Sept. 15. Since then, the union has called on more than 45,000 autoworkers at the three companies to walk off the job at factories and at 38 spare-parts warehouses across the country.The most recent escalation of the strike at Stellantis came on Monday when the U.A.W. told workers to go on strike at a Ram plant in Sterling Heights, Mich., that makes the popular 1500 pickup truck. The strike has halted the production of Jeep Wranglers and Jeep Gladiators at a plant in Toledo, Ohio, and 20 Stellantis parts warehouses.For decades, the union has negotiated similar contracts with all three automakers, a method known as pattern bargaining. Like the contract it hammered out with Ford, the tentative Stellantis deal would lift the top U.A.W. wage from $32 an hour to more than $40 over four and a half years. That would allow employees working 40 hours a week to earn about $84,000 a year.Stellantis, G.M. and Ford began negotiating with the U.A.W. in July. The companies have sought to limit increases in labor costs because they already have higher labor costs than automakers like Tesla, Toyota and Honda that operate nonunion plants in the United States.The three large U.S. automakers are also trying to control costs while investing tens of billions of dollars to develop new electric vehicles, build battery plants and retool factories.Stellantis, which is based in Amsterdam, was created in 2021 by the merger of Fiat Chrysler and Peugeot, the French automaker. The company’s North American business, based near Detroit, is its most profitable.Stellantis surprised analysts recently by posting much stronger profits than G.M., which is the largest U.S. automaker by sales. Stellantis earned 11 billion euros ($11.6 billion) in the first half of the year while G.M. made nearly $5 billion.Noam Scheiber More

SNB last month held its policy interest rate unchanged at 1.75%, noting that inflation – at 1.6% in August and within the central bank’s target range of 0-2% – had eased.”It cannot be ruled out that further tightening of monetary policy may be necessary,” Schlegel was quoted as saying. “This depends on how inflation develops.”The vast majority of economists polled by Reuters last month, however, said that the SNB was done with interest rate hikes. Schlegel said growth would probably be subdued next year and that unemployment was expected to rise slightly. The Swiss franc hit its strongest level since 2015 against the euro last Friday, on the back of investor risk aversion due to the war in the Middle East, as well as broad weakness in the euro.”Our country is perceived as so stable that our currency appreciates in times of crisis,” Schlegel said. “But of course this also has consequences that are less desirable. This makes it even more difficult for export companies to be successful in economically uncertain times.”Schlegel added that the central bank was drawing lessons from the government’s move to back a rescue deal for Credit Suisse in March, which rattled the Swiss banking sector and caused wider market panic. “One lesson is certainly that Credit Suisse’s liquidity flowed out significantly faster than the regulators in Switzerland and abroad had expected,” he said. He also said that AT1 bonds, which were written off as part of UBS’ takeover of Credit Suisse, should have been loss-making at an earlier stage. “Despite ongoing losses, Credit Suisse did not suspend interest payments on these instruments,” Schlegel said. “This would have meant immediate financial relief for the bank.” More