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  1. #1
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    UK economy watch!

    Thought I create a thread related to UK economic news given all the political chaos in the UK.

    Start with this piece, and it is not good news!

    Britain’s debt outlook cut to negative over political chaos

    Britain’s standing in the international money markets was dealt a blow last night when the outlook on the country’s debt was downgraded.

    Moody’s, the international ratings agency, lowered its outlook for UK debt to ‘negative’ from ‘stable’ due to the country’s weaker economic strength and being “more susceptible to shocks than previously assumed.” In February Fitch, a rival ratings agency, put Britain on “negative watch”.

    Moody’s reconfirmed its Aa2 investment grade rating on Britain’s sovereign debt. A sovereign rating is a measure of a country’s financial strength and a downgrade risks raising borrowing costs for the government. The UK suffered its first setback under David Cameron’s administration when Moody’s downgraded the UK’s AAA rating in 2013, well before the 2016 Brexit referendum, and again in 2017.

    However, the agency noted last night that even if Britain negotiated a successful departure from the European Union “it would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved. ”

    Moody’s said the risk was that Britain’s 1.8 trillion of public debt, which is more than 80 per cent of annual economic output, would begin to rise. “In the current political climate, Moody’s sees no meaningful pressure for debt-reducing fiscal policies,” it said.

    It also noted the government, after taking steps to reduce the budget deficit between 2010 and 2015, had been increasingly willing to “move the goalposts” on fiscal targets in recent years.

    “Successive governments have announced large, permanent increases in public expenditures, most notably a large increase in spending on the National Health Service, outside the normal calendar for fiscal policy changes and without detailed policy plans,” it said. The main political parties have promised big spending increases ahead of next month’s election.

    Rating agencies attracted a good deal of criticism in the wake of the 2008 credit crisis for failing to spot the warning signs earlier and, for giving favourable ratings to the sub-prime mortgage loans that were one of the prime causes of the global financial meltdown.

    In its latest update on the outlook for the British economy, and its overall creditworthiness, Moody’s said: “Events in the House of Commons in recent months have revealed legislators, policymakers and administrators to be unable to arrive at the consensus needed to achieve either a broadly acceptable approach to Brexit, or the continuation of policy in other important areas, for example to address challenges relating to education, productivity, or investment in infrastructure.

    “Over the longer term, institutional weakening may also impact the UK’s economic strength, through its effect on the investment climate and on the UK’s attractiveness to skilled and unskilled foreign labor,” Moody’s said.

    “In recent years, we have already seen the negative impact this can have, and Moody’s expects this negative influence will likely endure as the exit process continues and uncertainties persist during the subsequent phase of trade negotiations with the EU and with other nations.”

    The Treasury did not respond to a request for comment.
    https://www.thetimes.co.uk/edition/n...haos-w2xrwfmps

    Well my fellow Brits, we are in for a long ride! The way I see it is that since the financial crash in 2008, the largest single market and trading bloc in the world, has utterly and miserably failed in living up to its promise of economic prosperity. This next General Election could change all that, or could make matters worse!

    The relentless QE by the BoE and ECB has completely failed to prop up any kind of stable economy in a free trade environment spanning 500 Million people. Meager growth of 1% average is not even growth when you have negative interest rates, 2% inflation, and mountain of debt!

    This clearly suggests the economic model is broken, and hopefully it will take a few reality checks in the UK to fix it!

    In before anyone starts comparing the UK economy with Pakistan/India. We get it, Pakistan's economy is on the up, and India's economy is in decline, but there are other threads for said comparisons.

    Happy weekend!

  2. #2
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    not looking great, fundamentally not enough entrepreneurialism. for a country with 3 of the top 10 universities in the world the transformation of research specialism into commercially viable businesses is disappointing.

    there needs to be some real work done on this, and maybe incentivise indigenous start ups, especially in the more speculative sectors.

    the manipulation of growth via monetary policy has reached the point of diminishing real world returns and consumerism, imo, amongst the young is on the wane. need breakthroughs in productivity, and actual productivity improving technology, not just development of superfluous means of entertainment.

  3. #3
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    Everyone wants to spend billions that the country doesn't have. In time there will be a an almighty crash of the ponzi scheme.

  4. #4
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    Quote Originally Posted by Bewal Express View Post
    Everyone wants to spend billions that the country doesn't have. In time there will be a an almighty crash of the ponzi scheme.
    Sums up how so many modern families choose to live too - everyone wants the latest car, phone, furniture, kitchen etc and thinks nothing of just putting it all on credit. Those who scrimp and save for a rainy day are punished (through things like low interest rates) yet the feckless debt junkies are bailed out time after time.

  5. #5
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    Quote Originally Posted by Gabbar Singh View Post
    Sums up how so many modern families choose to live too - everyone wants the latest car, phone, furniture, kitchen etc and thinks nothing of just putting it all on credit. Those who scrimp and save for a rainy day are punished (through things like low interest rates) yet the feckless debt junkies are bailed out time after time.
    You are not too far off the truth. The Tories are right wing but don't offer any fiscal responsibility, which is the heart of good Conservative govts, they are desperate to copy Trump's populism and irresponsible spending and low taxes neither of which are sustainable. Labour live in cloud cuckoo land and have even less credibility with tax and spend. How i long for the days of John Major and Gordon Brown( not that they didn't make mistakes)

  6. #6
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    Quote Originally Posted by Gabbar Singh View Post
    Sums up how so many modern families choose to live too - everyone wants the latest car, phone, furniture, kitchen etc and thinks nothing of just putting it all on credit. Those who scrimp and save for a rainy day are punished (through things like low interest rates) yet the feckless debt junkies are bailed out time after time.
    i partially agree with you, but the problem you have identified is not the only cause, imo bigger causes are lack of financial education and the breakdown of the family complex. a lot of people are simply caught up in keeping up with the Joneses and miss out on the economies of scale of living with their family.

  7. #7
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    Confidence falls to lowest level since 2012

    Business confidence has fallen to a seven-year low amid declining optimism in the services and manufacturing sectors, research suggests.

    An optimism index by BDO, the accounting firm, fell by 0.67 points last month to 95.59, its weakest since March 2012 and close to the 95 level that signals zero growth.

    The report is compiled for BDO by the Centre for Economics and Business Research, a consultancy, by weighting economic data from Britain’s main business surveys, covering more than 4,000 different respondents from companies employing five million people. They include the quarterly CBI industrial trends survey, the Bank of England’s agents’ summary of business conditions and the Markit/CIPS manufacturing and services purchasing managers’ index.

    The decline was because of a drop in manufacturing optimism, which fell by 3.38 points in October, and to a lesser extent by the key services sector, which fell by 0.34 points.

    Businesses are contending with uncertainty over Britain’s relationship with the European Union, the trade war between America and China and signs of a slowing global economy.

    Peter Hemington, a partner at BDO, said that the last time business confidence was so low “was when the country was staggering out of the doldrums caused by the global financial crisis . . . With an unpredictable general election looming, continued political volatility in the UK remains a key driver of falling optimism.”

    BDO also produces monthly output and inflation indices. Manufacturing output fell for a 13th consecutive month to 87.1 points, down by 0.9 from September and “well into recessionary territory”. It left the overall business output index at 96.69, down by 0.75 points. The inflation index fell by 1.11 points to 94.25 in October, its lowest level since May 2016, the month before the EU referendum.
    https://www.thetimes.co.uk/edition/b...2012-nrx0fcpjj

  8. #8
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    Quote Originally Posted by ElRaja View Post
    not looking great, fundamentally not enough entrepreneurialism. for a country with 3 of the top 10 universities in the world the transformation of research specialism into commercially viable businesses is disappointing.

    there needs to be some real work done on this, and maybe incentivise indigenous start ups, especially in the more speculative sectors.

    the manipulation of growth via monetary policy has reached the point of diminishing real world returns and consumerism, imo, amongst the young is on the wane. need breakthroughs in productivity, and actual productivity improving technology, not just development of superfluous means of entertainment.
    IMO it is time to reduce corporation tax and VAT. Stimulate the consumer market and entice businesses to setup in the UK.

    Trying to balance the books and in hope of reducing/paying national debt is a losers game. No point, instead just do what other nations do, pile on the debt!

  9. #9
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    Quote Originally Posted by Technics 1210 View Post
    IMO it is time to reduce corporation tax and VAT. Stimulate the consumer market and entice businesses to setup in the UK.

    Trying to balance the books and in hope of reducing/paying national debt is a losers game. No point, instead just do what other nations do, pile on the debt!
    There was a good reason why a country with an aging population of around 65m joined the EU.

  10. #10
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    Quote Originally Posted by Technics 1210 View Post
    IMO it is time to reduce corporation tax and VAT. Stimulate the consumer market and entice businesses to setup in the UK.
    corporate tax should be lowered, most large companies don't pay it anyway and it acts as a barrier to entry for local alternatives.

    whilst vat reductions may cause some short term stimulation, encouraging consumerism for its own sake is not the answer, we need an environment where new left field ideas can develop to the point where the efficiencies they bring render a few percentage points on VAT irrelevant.

    there's also fundamental issues in British businesses which for the most part cannot compete with the best continental or american companies, inevitably they get bought out by these firms, downsized, streamlined and absorbed into foreign multinationals.

    from the grassroots level, British entrepreneurialism needs a reboot but that would become a rather long winded post.

  11. #11
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    Quote Originally Posted by IMMY69 View Post
    There was a good reason why a country with an aging population of around 65m joined the EU.
    Yes, it was the EEC in 1973, then a referendum in 1975 to join the EEC. You will not find anyone who would argue against the economic benefits of the EEC, but over decades the EEC evolved into the EU, which is now more of a political union, then an economic one.

    The weaknesses of the Eurozone/Single Market are now more prevalent than ever before, especially after 2008. Not to mention the Euro currency itself is under pressure, and there's more QE on the horizon, and above all, the European Central Bank has interest rates set at NEGATIVE 0.40%. Unemployment is rampant, and pension pots decimated.

  12. #12
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    Retail sales figures down after shoppers tighten belts

    Retail sales fell unexpectedly last month in a sign that consumers are becoming more cautious about their personal finances.

    Sales fell by 0.1 per cent between September and October according to the Office for National Statistics, significantly below analysts’ forecasts of 0.2 per cent growth. Retail sales fell across all the main sectors, which knocked quarterly growth in the three months to October to 0.2 per cent, the slowest since April 2018.

    Consumers account for about two thirds of national output and have been the most robust sector of the economy, thanks to sustained wage growth and record employment rates.

    “October’s 0.1 per cent month-on-month fall in retail sales volumes was weaker than expected and indicates that consumer spending growth could slow in quarter four from quarter three’s 0.4 per cent.” Thomas Pugh, UK economist at Capital Economics, said.

    Annual retail sales were 3.1 per cent, below expectations of 3.7 per cent.

    The figures were driven by a 1.3 per cent drop in sales at household goods stores and slow clothing and footwear sales. Online sales rose slightly to 19.2 per cent in October, up from 19 per cent the previous month.

    Department stores recorded their strongest month-on-month sales growth this year of 2 per cent, because of promotions and an earlier than usual introduction of Christmas stock.

    Economists said the slowdown in demand might reflect emerging weaknesses in the jobs market, which suffered its biggest quarterly drop in more than four years, with the number in work down 56,000 to 32.69 million.

    “All main sectors saw falling sales, apart from food shops,” the ONS said.
    https://www.thetimes.co.uk/edition/b...ales-c5k6psxz5

    I love how the word *unexpectedly* is used. It's a no brainer, the country and its citizens are drowning in debt so it is expected that consumers are out of pocket.

  13. #13
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    Eon to cut thousands of Npower jobs following takeover

    Thousands of jobs are to go at Npower as the troubled energy supplier is taken over by its larger rival Eon.

    Executives have confirmed that Eon is preparing to cut up to 4,500 jobs from Npower’s 5,700 workforce, in what trade unions called a “body blow” for staff.

    Employees were told that the restructuring plans would mean “a significant number of job losses” over the next two years during briefings today, less than a month before Christmas.

    Npower, one of the country’s “Big Six” energy suppliers, revealed deepening losses only yesterday as it continued to shed customers and struggled under the price cap. It is owned by the German company Innogy, which was recently acquired by Eon, another German company.

    Johannes Teyssen, chief executive of Eon, said: “The UK market is currently particularly challenging. We’ve emphasised repeatedly that we’ll take all necessary action to return our business there to consistent profitability.For this purpose, we’ve put together proposals and already begun discussing them with British unions.”

    The company confirmed that it was intensifying what it called “ambitious cost-cutting efforts” without losing sight of customers, telling staff that it had to tackle an “unsustainable business situation”.

    Executives have also announced that they plan to shift more than two million Npower household customers across to Eon’s IT platform.

    Michael Lewis, chief executive of Eon UK, said: “The proposals we’ve outlined today are in no way a reflection of Npower’s people, who I know work hard to serve customers each and every day.”

    Dave Prentis, general secretary of Unison, said that the announcement amounted to a “cruel blow” for employees at Npower. “They’ve been worried about their jobs for months,” he said. “Now their worst fears have been realised, less than a month before Christmas.

    “The UK energy market is in real danger of collapse. If nothing is done there could soon be other casualties.”

    A GMB spokesman said: “Clearly this announcement will be a body blow to Npower workers across the UK. The government has to urgently wake up to the impact that the price cap is having on good and reasonably well-paid jobs in UK energy companies.

    “Npower is a poorly managed company with significant losses in the UK but it is always the workers that face the brunt of poor management coupled with regulation that sends work overseas whilst sacking energy workers in the UK.”

    Mr Prentis said that Npower’s woes made a powerful case for nationalising the country’s leading energy suppliers, a policy put forward by the Labour Party in the campaign for the general election next month. “This would preserve jobs, ensure customers get a better deal and allow the UK to meet its carbon-neutral targets,” he said. Unison is a key Labour donor.
    https://www.thetimes.co.uk/edition/n...reat-b563nfgqw

    Cannot see them blaming Brexit on this one!


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