Economy

WASHINGTON (Reuters) -U.S. data due out Thursday is expected to show slower economic growth in the first quarter, mainly due to a less robust jump in business inventories, but the overall economy remains strong, a senior Biden administration official told Reuters on Wednesday.The Commerce Department’s advance reading of first-quarter gross domestic product, due out at 8:30 a.m. ET (1230 GMT), should not be interpreted as a sign that the economy is headed in a bad direction, the official said. “Businesses continue to add to their inventory, it’s just that they didn’t do as fast as they did in the previous quarter,” the official said. “If you get under the hood of the GDP number tomorrow I think you’re likely to see that economic conditions are still very, very strong.”Economists polled by Reuters expect growth to have slowed to an annualized rate of 1.1% in the first three months of 2022 from a 6.9% rate in the fourth quarter of 2021.That growth rate would be the slowest since the recession triggered by the COVID-19 pandemic, reflecting a new wave of COVID-19 cases and a surge in imports, economists say.While growth was expected to slow “quite a bit” in the first quarter, other elements pointed to continued strength in the economy, the official told Reuters, citing very strong household balance sheets, household consumption and business investment.Other data, including a 3.6% unemployment rate, strong continued job growth and the level of debt relative to household income, also pointed to continued strength in the economy, the official added.”If you look at the amount of debt that households have relative to their income, it’s never been this strong in the last 30 years,” the official said.Russia’s war in Ukraine was expected to have only a muted effect on the first quarter data, given the fairly limited exposure of the U.S. economy to Russia, although its impact on energy prices would be quite noticeable, the official said.U.S. officials were carefully monitoring the impact of the war on Europe, which are far more reliant on Russian energy and are facing sharper slowdowns in growth as a result of the war, the official said.Friday’s Personal Consumption Expenditures Price Index data for March is expected to show “quite elevated” headline inflation, but so-called core inflation is likely to have flatlined or even be a bit lower, the official said.Economists polled by Reuters estimate that growth in core PCE, excluding food and energy, decelerated a touch to a 5.3% annual increase from 5.4% in February, which was the highest since the early 1980s. That would mark the first slowdown in core PCE growth, on an year-over-year basis, since October 2020. More

India’s second-richest man Mukesh Ambani and US buyout firm Apollo Global Management are planning a joint bid for UK high street pharmacy chain Boots, according to people familiar with the matter. The buyout group is working with Ambani’s Reliance Industries on a bid that if successful would see one of Britain’s best-known retailers expand its presence into India, south-east Asia and the Middle East. Both groups would own equity stakes in Boots under the plan, one of the people said, although it is not clear whether their stakes would be the same size. Reliance is India’s largest listed company by market capitalisation and Ambani is the world’s eighth wealthiest man, according to Forbes. Boots’ US parent Walgreens Boots Alliance put the business up for sale last December to focus on healthcare in its domestic market. It has set a deadline of May 16 for bids, one of the people said. Thanks for reading FirstFT Asia. Send your feedback to [email protected] — EmilyThe latest from the war in UkraineEnergy market: European gas prices have risen by a fifth after Russia’s Gazprom suspended supplies to Poland and Bulgaria. Catch up with our explainer on Russia’s rationale for halting gas flows to the two nations.Chinese business: Shenzhen-based drone maker DJI has suspended its business in Russia and Ukraine, making it one of the first big Chinese companies to publicly halt Russian operations after the invasion.Food security: Disruption to Ukraine’s agriculture industry has shaken the “breadbasket” of Europe. Take a look at how with our immersive feature.Opinion: The Marshall Plan is no longer niche history. Ukraine experts are eyeing 1948’s postwar reconstruction programme as they chart a road map beyond the conflict, writes Gillian Tett. Five more stories in the news1. Truss warns China to ‘play by the rules’ Liz Truss, UK foreign secretary, has warned China to learn lessons from the west’s robust economic response to Russia’s invasion of Ukraine, saying Beijing will face consequences if it does not “play by the rules”.2. Archegos’ Hwang arrested on US fraud charges Bill Hwang, founder of collapsed family office Archegos Capital Management, has been charged with racketeering, fraud and market manipulation. The indictment accused Hwang and former chief financial officer Patrick Halligan of using Archegos as an “instrument of market manipulation and fraud” with “far-reaching consequences”.3. Facebook’s shares rally despite slowing revenue growth Facebook parent Meta posted its slowest revenue growth since going public, but its share price jumped as profits held up better than expected in the face of several headwinds. 4. Indian government slashes LIC IPO The Indian government has more than halved the amount it is seeking to raise from the initial public offering of state-owned Life Insurance Corporation of India to less than $3bn after testing investor appetite in jittery markets.5. US probes Chinese chipmaker over Huawei ban The Biden administration is looking into claims that Yangtze Memory Technologies Co supplied Huawei with chips for a new smartphone, in a potential violation of US export controls. State-owned YMTC is China’s largest memory chipmaker.The day aheadBank of Japan meeting Policymakers will announce their interest rate decision and share an outlook report for economic activity and prices. Retail sales figures are also due. Shareholder proposals At Moderna’s shareholder meeting on Thursday a resolution will be proposed asking its board to consider transferring Moderna’s intellectual property to the developing world. Votes on shunning fossil fuels are scheduled at Morgan Stanley and Goldman Sachs — read more on the fossil fuel votes in our Moral Money newsletter. Results Today is another big day for corporate earnings. Amazon.com, Apple, Barclays, Comcast, Eli Lilly and Co, Intel, McDonald’s, Merck & Co, Nokia, Sainsbury’s, Samsung Electronics, Swedbank, and Total are among those set to report. Join us along with leading figures from Tesla, Volkswagen, Ford Pro, Nissan, Mercedes and Vauxhall at the Future of the Car event on May 9-12. Register here.What else we’re reading China policymakers clash over how to counter property slump Policy disagreements within the Chinese government highlight the difficult choices it faces as it tries to shore up growth in the world’s second-largest economy while also pursuing a tough zero-Covid strategy and taming heavily indebted property developers.North Korea’s ‘nascent hacker underground’ A small number of tech-savvy citizens are trying to circumvent software and monitoring systems installed by the regime on their smartphones. But the North Korean hackers do so at the risk of hard labour, a lengthy spell in a political prison camp or even a death sentence.Twitter employees fear the worst, hope for the best with Musk Twitter’s workforce is divided and apprehensive over their new owner. Some see the billionaire’s influence bringing about a new era of getting things done, away from the demands of Wall Street. Others worry about what might be undone, particularly when it comes to stemming hate speech or similar content.The populist strongmen who are strangely keen on globalisation The entire idea of a “liberal international order” — a concept that sometimes seems to exist merely to have its death repeatedly prophesied — conflates political freedom with open trade. They do not always go together, writes Alan Beattie.Berkshire Hathaway needs to be broken up When Warren Buffett leaves his post after more than 50 years at the helm, no one else will be able to run the company as successfully as he has. The behemoth conglomerate should be broken up, argues Francine McKenna, editor of The Dig.ArtThe Sydney Biennale showcases artists, oceans, forests and the night sky as curator José Roca casts the natural world as a participant in his low-carbon presentation. But his biennale has its critics too.

Exhibition at the Cutaway features ‘Flow’ (2021), a bamboo ‘river’ created by Sydney mixed-media group Cave Urban © Document Photography More

Golden Pass LNG, a liquefied natural gas project Qatar Petroleum and Exxon Mobil Corp (NYSE:XOM). are building in Texas, and Glenfarne Group LLC’s Magnolia LNG project planned for Louisiana received Energy Department authorization to ship gas to countries that don’t have a free trade agreement with the U.S. That would include Europe, which has seen its gas prices surge as Russia halted flows to Poland and Bulgaria. The effort comes after Russia said it will keep supplies to Poland and Bulgaria switched off until the two countries agree to Moscow’s demands to pay for the fuel in rubles. The move caused European gas prices to soar as much as 20% before easing. As payment deadlines start falling due, governments and companies across Europe have to decide whether to meet the new rules or face the prospect of gas rationing.But Golden Pass and Magnolia won’t provide an immediate fix for Europe’s gas woes. Golden Pass is expected to produce its first drops of LNG in 2024, while Magnolia doesn’t yet have any contracts or customers. Read more: Russia to Cut Gas to Poland, Bulgaria Until Pay Demands Met“We want to signal we want to partner and make sure our restrictions in the United States of permitting for non-free trade agreement entities like the EU are not a barrier,” Energy Secretary Jennifer Granholm said in an appearance Wednesday with EU Commissioner for Energy Kadri Simson. “And so making sure we are able to allow those who intend to produce have the freedom to ship to Europe as part of that strategy.” The approvals follow authorizations granted last month to Cheniere Energy (NYSE:LNG) Inc., the largest U.S. LNG exporter, to allow the company’s existing facilities in Louisiana and Texas to increase the amount of the heating fuel they are already exporting.“U.S. fuel supplies, including LNG, continue to play a key role in global energy security, particularly due to Putin’s invasion of Ukraine,” the Energy Department said Wednesday. U.S. LNG exports have recently averaged more than 12 billion cubic feet per day and are expected to near a record 14 billion cubic feet a day as more export capacity comes online.“While it will be a few years before the additional LNG volumes actually hit the market, today’s action continues to show that the administration understands how important U.S. LNG exports are for both energy security and climate progress,” said Fred Hutchison, president of the advocacy group LNG Allies.Hutchison said he “hopes and expects” the Energy Department to approve two requests pending by Sempra Energy (NYSE:SRE) for export projects in Mexico that would get their gas from the U.S. ©2022 Bloomberg L.P. More

The measures will apply in particular to fruit and vegetables, subject to minimum price requirements, agricultural products facing quotas, and certain industrial goods, tariffs on which were only due to be phased out by the end of 2022.That phase-out, set out in the 2016 EU-Ukraine free trade agreement, applies to fertilisers, aluminium products and cars.The European Union will also exempt Ukraine from safeguard measures that limit steel imports, and lift anti-dumping tariffs the EU currently imposes on Ukrainian steel tubes, hot-rolled flat steel products and ironing boards.Ukrainian President Volodymyr Zelenskiy said he had discussed the proposal with European Commission President Ursula von der Leyen on Wednesday and expressed his gratitude.”Right now this will allow us to maintain economic activity in Ukraine, our national production, as much as possible. But this decision needs to be considered not only in the Ukrainian context,” he said in a late-night video address.”Sufficient export of our products to European and global markets will be a significant tool against crises.”The proposal will now need to be agreed on by the European Parliament and EU governments to come into force.The European Commission, which oversees trade policy in the 27-nation EU, said the unprecedented measures were designed to alleviate difficulties for Ukrainian producers and exporters in the face of Russia’s invasion.”Since the start of Russia’s aggression, the EU has prioritised the importance of keeping Ukraine’s economy going – which is crucial both to help it win this war and to get back on its feet post-war,” Commission Vice President and Trade Commissioner Valdis Dombrovskis said.Last year, bilateral EU-Ukraine trade was more than 52 billion euros ($55 billion), double its level before the 2016 free trade deal.With Ukrainian shipping via the Black Sea now cut off by the Russian navy, the EU has also moved to help land transport of Ukrainian goods, for example by easing the entry conditions for Ukrainian truck drivers.($1 = 0.9481 euro) More

WASHINGTON — Democratic lawmakers on Wednesday released a report alleging that top Trump administration officials had awarded a $700 million pandemic relief loan to a struggling trucking company in 2020 over the objections of career officials at the Defense Department.The report, released by the Democratic staff of the House Select Subcommittee on the Coronavirus Crisis, describes the role of corporate lobbyists during the early months of the pandemic in helping to secure government funds as trillions of dollars of relief money were being pumped into the economy. It also suggests that senior officials such as Steven Mnuchin, the former Treasury secretary, and Mark T. Esper, the former defense secretary, intervened to ensure that the trucking company, Yellow Corporation, received special treatment despite concerns about its eligibility to receive relief funds.“Today’s select subcommittee staff report reveals yet another example of the Trump administration disregarding their obligation to be responsible stewards of taxpayer dollars,” Representative James E. Clyburn of South Carolina, the Democratic chairman of the subcommittee, said in a statement. “Political appointees risked hundreds of millions of dollars in public funds against the recommendations of career D.O.D. officials and in clear disregard of provisions of the CARES Act intended to protect national security and American taxpayers.”The $2.2 trillion pandemic relief package that Congress passed in 2020 included a $17 billion pot of money set up by Congress and controlled by the Treasury Department to assist companies that were considered critical to national security. In July 2020, the Treasury Department announced it was giving a $700 million loan to the trucking company YRC Worldwide, which has since changed its name to Yellow.Lobbyists for Yellow had been in close touch with White House officials throughout the loan process and had discussed how the company employs Teamsters as its drivers, according to the report.Mark Meadows, the White House chief of staff, was a “key actor” coordinating with Yellow’s lobbyists, according to correspondences that the committee obtained. The report also noted that the White House’s political operation was “almost giddy” in its effort to assist with the application.The loan raised immediate questions from watchdog groups because of the company’s close ties to the Trump administration and because it had faced years of financial and legal turmoil. The firm had lost more than $100 million in 2019 and was being sued by the Justice Department over claims that it had defrauded the federal government for a seven-year period. It recently agreed to pay $6.85 million to resolve allegations “that they knowingly presented false claims to the U.S. Department of Defense by systematically overcharging for freight carrier services and making false statements to hide their misconduct.”To qualify for a national security loan, a company needed certification by the Defense Department.According to the report, defense officials had recommended against certification because of the accusations that the company had overcharged the government. They also noted that the work that the company had been doing for the federal government — which included shipping meal kits, protective equipment and other supplies to military bases — could be replaced by other trucking firms.But the day after a defense official notified a Treasury official that the company would not be certified, one of Mr. Mnuchin’s aides set up a telephone call between him and Mr. Esper.The report indicated that Mr. Esper was not initially familiar with the status of Yellow’s certification. Before the call, aides prepared a summary of the analysis and recommendations of the department’s career officials that concluded that the certification should be rejected. Before those reached Mr. Esper, Ellen M. Lord, the department’s under secretary for acquisition and sustainment who was appointed by Mr. Trump, intervened and requested a new set of talking points that argued that the company should receive the financial support “to both support force readiness and national economic security.” Ms. Lord could not immediately be reached for comment.After the call with Mr. Mnuchin, Mr. Esper certified that the company was critical to national security, and a week later the approval of the loan was announced.Mr. Mnuchin then sent an email to Mr. Meadows that included news reports praising the loan. He highlighted positive comments from James P. Hoffa, the longtime president of the Teamsters union, who according to documents in the report made a direct plea to President Donald J. Trump about the loan.Mr. Esper and Mr. Mnuchin declined to comment. A former Treasury official familiar with the process said the loan saved 25,000 union jobs during an economic crisis and prevented disruption to the national supply chain that the Defense Department, businesses and consumers had depended on. The former official said that because of the terms of the loan, taxpayers were profiting from the agreement.A spokesman for Mr. Esper said that the company met the criteria to be eligible for the loan and emphasized that the report made clear that senior staff at the Defense Department recommended that he certify it. The Treasury Department made the final decision to issue the loan, the spokesman added.The Trump InvestigationsCard 1 of 6Numerous inquiries. More

Good eveningWar in Ukraine is acting as a “multiplier of disruption in an already disrupted world” says FT chief economics commentator Martin Wolf in his latest column.Nowhere is this more true than in energy (see below) and global food markets, our two big stories today.As our Big Read details, Ukraine is known as the breadbasket of Europe for good reason. It is one of the key suppliers of agricultural commodities such as wheat and corn as well as almost a third of the world’s sunflower oil, benefiting from richly fertile soil and deep seaports to facilitate international trade.All that however has been thrown into jeopardy since Russia’s invasion, as farmlands turn into battlefields and transport infrastructure gets smashed, creating hunger across the country and global supplies left short.Food prices have increased hugely in response: “The cost is devastating, and it has consequences which are going beyond the borders of Ukraine,” commented Arif Husain, chief economist at the World Food Programme. For poorer countries already struggling with the economic impact of Covid-19, the impact is appalling as prices of fertiliser, animal food and fuel shoot up.

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There is also a growing problem of crop protectionism. Indonesia, the world’s biggest exporter of palm oil, this week banned supplies leaving the country in a bid to contain surging domestic prices. One analyst said the move was “yet another reminder of the vulnerability present across agricultural supply chains in an environment of already historically tight inventories, compounded by the indefinite loss of Ukrainian export volumes and historically high production costs.”There is hope that some of the strain may be alleviated from supplies in Latin America, but the outlook remains bleak. Surging food prices are also moving their way up domestic political agendas. We report today on tensions at the heart of the UK government over whether Britain should unilaterally cut tariffs on food imports after new data showed grocery prices have risen 5.9 per cent in the past year, equivalent to £271 a year for the average household, the biggest jump since December 2011. But in other parts of the world, the situation is much more serious. As Martin Wolf notes: “This war follows pestilence and threatens famine. Together these are three of Ezekiel’s four “disastrous” judgments of the Lord. Alas, the fourth, death, follows from the other three.”Latest newsUK government’s Covid care home policies were unlawful, High Court rulesSpotify chief plays down any similarities with Netflix as the latter loses subscribers Euro hits five-year low against dollar on expectations the ECB will take a slower path to monetary tightening than the US Federal ReserveFor up-to-the-minute news updates, visit our live blogNeed to know: the economyEuropean gas prices surged today after Gazprom cut off supplies to Poland and Bulgaria because they had failed to make payments in roubles, its new precondition. European Commission chief Ursula von der Leyen said the move was blackmail as the EU stepped in to help shore up supplies. Germany, heavily reliant on Russian gas, said it was “not nervous”.Latest for the UK/EuropeGermany, the eurozone’s biggest economy, slashed its growth forecast for this year from 3.6 per cent to 2.2 per cent because of the war and said it expected 2.5 per cent in 2023. It predicts inflation of 6.1 per cent for 2022, a rate not reached since the 1970s oil crisis and the period shortly after reunification in 1990. New data showed consumer sentiment in the country plummeting — with the same happening in France.European Central Bank chief Christine Lagarde has been trying to get across the message that the ECB will take a more “gradual” approach to curtailing inflation than the US Federal Reserve, but many investors still think the first interest rate rise in a decade could come in July. UK prime minister Boris Johnson announced a crackdown on “unacceptable behaviour” from companies that is said to be exacerbating the cost of living crisis. Official data showed many households were being forced to borrow money to pay their bills, with nine in 10 adults reporting a rise in expenses between March 16 and 27, up from 62 per cent in November.Fortunately Johnson’s chancellor Rishi Sunak has more scope to address the crisis now that government borrowing has halved as the economy springs back to life and taxes roll in. Trade news on the other hand is a lot bleaker: post-Brexit red tape, customs controls and taxes have caused many small businesses to stop trading with Europe. The government is also on the defensive about financial services jobs moving to the EU after Brexit.Freshly elected French president Emmanuel Macron faces a tricky balancing act as he attempts to keep economic recovery on track while dealing with problems ranging from surging fuel costs to pension reforms. Public finances are under pressure after the pandemic inflated France’s budget deficit to 6.5 per cent of output last year, and the government has already offered €25bn in emergency relief on energy prices.The EU’s role in health policy has been turbocharged by the pandemic, including greater use of joint procurement, plans for tackling cancer and public-private partnerships to help European pharma companies develop breakthrough drugs. Read more in our special report: Innovation in Healthcare. Global latestDespite war in Europe, the Biden administration is focused on what it sees as the US’s biggest long-term objective: working up an international framework for dealing with China. Our Big Read explains.Economic recovery in South Korea is slowing as concerns grow over inflation and falling demand from Covid-hit China. Hong Kong chief executive Carrie Lam dashed any hopes that the city’s quarantine requirements might be easing. Australian inflation hit a 21-year high of 5.1 per cent in the year to March 31 as the country prepares for next month’s general election.Need to know: businessNo sooner had Elon Musk celebrated his (likely) success at buying Twitter than Brussels sent him a warning that his “free speech” approach could be at odds with the EU’s new set of digital rules, setting up a potential high profile global regulatory battle. Shares in Musk’s Tesla business sold off as investors feared he might dilute his stake to finance the Twitter deal. Microsoft cast off worries about the macroeconomic environment by predicting strong revenue growth as customers invested in systems to increase productivity and automate operations. “In an inflationary environment, the only deflationary thing is software,” said chief executive Satya Nadella.Profits at Google parent company Alphabet fell $1.5bn in the first quarter compared with last year, as its YouTube division was hit by the effects of war in Ukraine, confirming slowing momentum in online advertising.BASF, the world’s biggest chemical company, said it would close its remaining businesses in Russia and Belarus by July. The group is one of the last big German groups to make a move since the war started.Shares dived in US industrial conglomerate GE after the company said supply chain problems were likely to worsen as a result of China lockdowns.Earnings season for European banks is in full swing. Deutsche Bank reported its highest quarterly profit in nine years of €1.2bn as its bond traders took advantage of market turmoil. Credit Suisse recorded a SFr428mn loss and management changes after a series of legal wrangles. HSBC said the war and slower growth in Asia had hit profits. Santander was lifted by economic recovery in Europe and UBS enjoyed its best first quarter in 15 years thanks to its investment banking business. Lloyds profits, however, fell 15 per cent as it took extra provisions to cater for the growing impact of inflation on the UK economy.The experience of Wall Street bankers during the Shanghai lockdown has added to a wave of regulatory reforms that could hamper the city’s ambition to become an international financial centre, writes Asia financial correspondent Tabby Kinder. PepsiCo announced $500mn in charges — the biggest hit yet for an American company from the impact of the war in Ukraine — but still expects an increase in full-year revenues. It has suspended sales of brands such as Pepsi and 7Up in Russia but continued to offer products such as milk and baby food for humanitarian reasons. Food giant Kraft Heinz forecast increased sales for this year as higher prices helped mitigate supply chain problems and rising commodity costs.Shipping giant AP Moller-Maersk said container demand — a proxy for global trade growth — could shrink this year as supply chain problems persist. The Danish group was still able to increase its guidance for full-year earnings to $30bn, up from its previous estimate of $24bn. The Lex column warned that freight rates could catch the attention of regulators if they remained at current elevated levels.What energy crisis? UK share dividends are expected to beat forecasts this year thanks to higher oil and commodity prices boosting London-listed energy and mining stocks.London’s Heathrow airport took a different view from the rest of the aviation industry’s bullish stance by saying the current surge in demand was a ‘bubble’ that will burst. Cynics argue this is posturing ahead of a decision from the UK regulator on a price cap for airline fees. However, BA has extended its flight cancellations to June because of staff shortages. The World of WorkCould training and “upskilling” be the way to retain staff in the post-pandemic workplace and counter the effects of the Great Resignation? Listen to our latest Working It podcast.IWG, the world’s biggest serviced office company, said large companies were rejecting long leases in favour of more flexible options as hybrid working grows in popularity. Get the latest worldwide picture with our vaccine trackerAnd finally…Do you have incessant arguments with your partner about money? Try our latest Money Clinic podcast for a spot of couples therapy with consumer editor Claer Barrett. More

Wage deals for UK public sector workers are falling behind those on offer in the private sector, exacerbating already acute staffing pressures in schools, hospitals and local authority services.Data from the research group XpertHR, published on Wednesday, shows the median public sector pay award was just 1.4 per cent in the year to March 2022, well behind the private sector median of 2.2 per cent for the same period. The difference is increasing. Official data show annual growth in total average earnings reached a 15-year high of 6.2 per cent in the private sector in the first three months of 2022 — while falling to a five-year low of 1.9 per cent in the public sector.This gap is likely to persist. While pay is now falling in real terms for almost all workers, with inflation at a 30-year high of 7 per cent, employers competing for staff in a tight labour market are trying to make competitive offers. The median pay award rose to 4 per cent in April, the month in which almost half of settlements take effect, according to XpertHR — whose pay and benefits editor, Sheila Attwood, described it as a “notable upturn” that would “bring some comfort for the future”.Chancellor Rishi Sunak, however, has given government departments little room to make pay offers more generous in the face of rising inflation, using the leeway afforded him by improving public finances to fund tax cuts and help with energy bills, rather than to increase spending on public services.With industrial action under way or threatened by refuse collectors and railway workers, criminal barristers and civil servants, there is mounting evidence that chronic staffing pressures in many sectors reliant on public funding, which eased during the pandemic as job security took precedence over pay, are now re-emerging.“You can drive down pay for so long . . . once you get to that point, you inevitably build up recruitment and retention problems,” said Graham Atkins, a researcher at the Institute for Government think-tank, noting that vacancies had already returned to pre-pandemic levels in many areas of public services, while an earlier flood of applications for teacher training had dried up.In the care sector, “the crisis has already happened”, he added.Meanwhile, the annual NHS staff survey reveals rising discontent among its workforce of 1.3mn, with a marked drop in the proportion who are satisfied with their pay, would recommend their workplace to others, or feel valued and able to exercise autonomy at work.But while the pay freezes imposed on many public sector workers last year are now lifting, Treasury guidance to the pay review bodies that will soon set out recommendations for 2mn public sector workers is that pay growth should retain “broad parity” with the private sector, but should also be both affordable and compatible with the 2 per cent inflation target.The Department of Health and Social Care has said this implies a headline pay award of at most 3 per cent for NHS workers. The Department for Education has set out proposals that are generous to teachers early in their careers but imply big real terms pay cuts for experienced staff.Although public sector workers still earn more on average than their private sector counterparts, a decade of pay restraint has already eroded their lead, making the gap smaller than at any point in the past 30 years, noted Ben Zaranko, at the Institute for Fiscal Studies. Unions say staff worn out by the strains of the pandemic are increasingly switching to less stressful, better rewarded roles in the private sector.Mike Short, head of local government and education at Unison, the public sector union, said last year’s pay settlement of 1.75 per cent for local authority workers had left councils struggling to retain drivers for refuse collection and road gritting, as well as higher paid white collar staff.According to Short, rapid increases in the statutory minimum wage have made it harder for public sector employers to pay a premium to attract so-called key workers. “If the best you can offer for those really challenging jobs is the national minimum wage, people will leave,” he said.Unison has seen rising numbers of hospital porters, cleaners, catering staff and care workers moving to jobs in retail, logistics and hospitality; while paramedics shift to work at sports events and on film sets; and nurses find better paid, less pressured jobs with private providers. This dynamic has led some departments to make pay rises more generous for those in lower paid roles, new recruits and those in their early careers. This is especially pronounced in education, albeit for slightly different reasons, where the government has pledged to raise teachers’ starting salaries to £30,000, to attract new graduates and career changers, and stem the outflow of new teachers who leave within a few years of qualifying.However, this implies a flatter pay scale and a continued pay squeeze for more experienced and highly qualified staff — which unions say is starting to affect their retention, and to deter middle ranking staff from seeking promotion to leadership roles carrying more career risk and responsibility.

The school leaders’ union, NAHT, has obtained government figures showing that even before the pandemic, a quarter of primary school leaders and more than a third of secondary school heads were leaving within five years of appointment. Ian Hartwright, NAHT’s senior policy adviser, said the union was now seeing a surge of inquiries about early retirement from heads and deputy heads who had felt “duty bound” to see their schools through the pandemic but were in a state of “exhaustion”.Pay is not the only issue affecting public sector workers, but it compounds other concerns around stress, increasing workloads — and in the case of civil servants, the new ministerial drive to recall staff to the office.Alex Thomas, a programme director at the IFG, said officials with the digital and data expertise targeted by civil service reform plans were “precisely those most likely to exit based on pay” and who “would expect terms and conditions to be more flexible”. He added: “I worry about the loss of . . . exactly the skills we most want to retain.” More

Emmanuel Macron has been re-elected as president of France. Elite metropolitan globalists, drinking deep from crystal goblets full of populists’ tears, are toasting the liberal international order into the still watches of the night. The authoritarian-nationalist-protectionist gatecrashers, represented in this case by Marine Le Pen, have been ejected by the bouncers of technocratic free-trade centrism. It’s time to party like it’s 1995.Or maybe it’s a bit more complicated than that. Recently I put the optimistic case that, in defiance of gathering gloom, market forces were continuing to drive forward the real-world process of economic globalisation, defined as the cross-border movement of goods, services, people, data, capital and ideas. I also contend that the idea of a global political shift against open trade has been considerably overdone, even if the trend towards authoritarian nationalists in power is all too real.Currently, trade protectionism certainly poses a threat to globalisation, particularly through the US-China tariff and tech wars and potentially (though to a lesser extent) by the EU’s shift towards unilateral intervention. But it’s highly US-centric to imagine this is a universal experience. And it’s distinctly francocentric to assume that the Le Pen combination of economic and political nationalism is a global standard.Ironically, it’s the liberal democratic administration of Joe Biden (admittedly building on Donald Trump’s inheritance) and an EU dominated by the centrist governments of France, Germany and Italy that have become more sceptical of unfettered open trade. The EU’s nationalist authoritarians in the form of Hungary and Poland aren’t particularly leading the protectionist charge.Elsewhere, a quick world tour shows resilience in the politics of open trade even in the presence of inflammatory appeals to national identity against imagined foreign or domestic enemies. Many governments seem to have drawn the conclusion from the Covid disruption to trade, and even the Ukraine war, that securing reliable access to rich markets is a better strategy than turning inwards. Vladimir Putin, as it happens, was unusual among the strongmen in slamming trade restrictions on his neighbours and adopting a full-blooded rhetoric of self-sufficiency.Xi Jinping’s “dual-circulation” strategy in China does, of course, involve a shift to domestic consumption from the country’s previous reliance on export demand. But it involves a controlled “hedged integration” with the rest of the world economy rather than a lurch towards autarky.Jair Bolsonaro’s government in Brazil has been sharply criticised for abuses of human rights. But he’s also keen to gain the imprimatur of rich-world market economy respectability by joining the OECD. He wants to cut the external tariffs of Mercosur, the South American customs union, and push through Mercosur’s trade deal with the EU, which would expose chunks of Brazilian industry to more import competition. That deal is being held up by Macron, the well-known globalist who boasted as much in his election debate with Le Pen last week. In India, prime minister Narendra Modi has created a cult of personality and his party, the Hindu nationalist BJP, has stoked communal resentment and violence against Muslims. But, despite performative troublemaking in the World Trade Organization and slogans about economic self-reliance, he has also tried to make India a serious global manufacturing exporter. As well as streamlining paper-choked customs procedures, Modi recently abandoned India’s decade-long abstention from preferential trade agreements, signing bilateral deals with Australia and the UAE and pushing for a similar pact with the UK.The contradictions between the BJP’s domestic illiberalism and Modi’s globalisation ambitions were poignantly on display last week. UK prime minister Boris Johnson, visiting India, unwisely posed on top of a digger made locally by the UK company JCB. The company’s presence in India is a sign of its openness to investment, but its bulldozers are notoriously associated with the destruction of poor Muslims’ homes.India’s deal with Australia (and no doubt any agreement with the UK) is riddled with loopholes to protect Indian farmers. But any agreement is symbolically impressive given India’s recent history. Remarkably, trade deals now seem more politically toxic in the US than in India.Similarly, Recep Tayyip Erdogan’s government in Turkey, though it’s going about it in an extraordinarily eccentric way (just look at its monetary policy strategy), maintains an export-led growth model open to foreign direct investment and wants to challenge Asia as a manufacturing hub.Even Johnson’s government has leavened its reactionary populism on asylum-seekers and tiresome attempts to ignite culture wars with quite sensible policies on globalisation. The border frictions introduced by Johnson’s inane version of Brexit inflict serious damage on trade. But that’s to do with Eurosceptic political positioning, not protectionism. His government has gone against Conservative party tradition by exposing farmers to low-cost foreign competition in bilateral deals with Australia and New Zealand, applied to join the Asia-Pacific CPTPP deal and even quietly expanded the UK’s visa programmes to attract what it deems the right kind of immigrants.Finally, generalising massively over a huge area, sub-Saharan Africa has trended in the direction of being politically less free in recent years, and yet 54 countries have signed the African Continental Free Trade Agreement (AfCFTA).The entire idea of a “liberal international order” — a concept that sometimes seems to exist merely to have its death repeatedly prophesied — conflates political freedom with open trade. They do not always go together. Le Pen would have represented a turn towards both political and economic nationalism, but much of the rest of the world shows you can have one without the other. Is a global protectionist wave sweeping all before it? Not really, but nor is Macron’s re-election particularly good evidence of its [email protected] More