Category Archives: Economic

Britain, Economic, Government, Politics

UK Economy: Growth stagnation following Brexit?

UK ECONOMY

Intro: Whichever way we measure it, economic growth in the UK is not looking particularly good

It would not be unassuming to believe that the UK citizen has become confused or for admitting to bafflement at the array of economic data that has been released regarding the impact of the vote to leave the European Union.

The most recent came at the end of last week from the IHS Markit’s Purchasing Managers’ Index which indicates that Britain’s decision to leave the EU has led to a ‘dramatic deterioration’ in economic activity, not seen since the aftermath of the 2008 financial crisis.

The data shows a fall in both manufacturing and service sectors and is described as the first significant set of data measuring business reaction to the referendum result. The figures displayed in PMI surveys are generally viewed as being reliable and an authoritative indicator of economic predictions.

This outlook came just after the IMF’s World Economic Outlook report slashed its growth forecasts, saying its prediction for the UK in 2017 was now a 1.3 per cent cut, down from the 2.2 per cent.

But there have been contradictory statements. The Bank of England admitted it saw ‘no evidence’ of a sharp economic slowdown and positive employment figures in the UK showed record numbers of people in work.

And perhaps in a desperate attempt to glimpse and portray a silver lining, it was reported that Britain was undergoing a staycation boom, with the tourism industry in particular set to reap the benefits of millions of people now choosing to holiday at home rather than travelling abroad thanks to the weakness of pound sterling.

The first point to consider is that predictions are just that, a prediction or an estimate on the economic outlook. And indicators only say how people think they might act; in these uncertain times such sets of data are more of a gamble than ever.

It is probably much better to concentrate on what has actually happened, although it is still very early to see all the consequences and implications coming through in the data.

In the first half of 2016, figures show that the global economy did better than expected, with stronger than forecasted growth in the Eurozone area and Japan, as well as a partial recovery in commodity prices.

The fall of the pound has already had an effect, making companies in the UK more attractive for takeover by foreign firms. ARM Holdings, one of the UK’s biggest technology companies, based in Cambridge, is to be bought by Japan’s Softbank in a £24 billion deal. Stirling-based Supaglass, the UK’s largest independent glass wool maker, is set to be purchased by one of Russia’s largest roofing and insulation groups in a deal reputedly worth around £8 million.

According to figures compiled by the chief statistician in Scotland, there was no growth in the Scottish economy in the first three months of this year. Overall, however, UK GDP grew by 0.4 per cent over the same period.

The expression ‘swings and roundabouts’ could have been coined to describe the economy. It undoubtedly varies and no-one can be certain of any set of predictions: many factors which will affect the British economy are beyond are control and not affected by Brexit at all.

Notwithstanding, though, any reasonable prudent or objective view would have to conclude that the prospects for UK growth are not looking particularly good either for the short or medium-term.

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Economic, Europe, European Parliament, European Union, Government, Politics, United States

Transatlantic Trade and Investment Partnership is proving controversial…

TTIP

Simmering tensions have surfaced within the European Parliament over the Transatlantic Trade and Investment Partnership.

Simmering tensions have surfaced within the European Parliament over the Transatlantic Trade and Investment Partnership.

Tensions have surfaced in the European Parliament over what could become the world’s biggest trade deal between Europe and the United States.

Jeering, booing and slow clapping were heard in the Strasbourg chamber after the controversial Transatlantic Trade and Investment Partnership (TTIP) was suspended.

Members of the public have also been protesting against the deal, fearing it will hand more power to large corporations at the expense of ordinary citizens.

The Transatlantic Trade and Investment Partnership is a free trade deal between the United States and Europe that has been under negotiation for almost two years. An agreement would see the dawn of the world’s biggest free trade zone, shaping the rules governing a quarter of all global trade.

It aims to cut red tape, making it easier to import and export goods, as well as to invest and set up new businesses abroad. The European Commission predicts that it would boost the size of the EU economy by €120bn and the US economy by €95bn by 2027. Supporters of the deal say these savings would filter back to individuals, who would also benefit from cheaper goods and greater choice.

Critics fear, however, that it will undermine democracy in Europe and the US by favouring the rights of large corporations and preventing governments from regulating in the public interest. The Corporate Europe Observatory, a research and campaign group, claims that 92 per cent of 560 lobby encounters with the commission have come from private sector companies, while just four per cent have come from public interest groups.

Campaigners in Europe think EU regulations on areas such as food safety, employment rights and the environment could be watered down. ‘TTIP is a huge threat to hard-fought-for standards for the quality and safety of our food, the sources of our energy, workers’ rights and our privacy,’ says a Green Party spokesperson. For example, it fears that by harmonising food standards, the UK would be forced to allow chemically washed poultry, livestock treated with growth hormones, and genetically modified crops – which are all allowed in the US. More than two million people have signed an online petition against the deal, describing it as a ‘threat to democracy, the environment, consumers and labour standards’.

Opponents say the guarantee of market access effectively outlaws state monopolies, which could pose a risk to government-run services such as the NHS. Critics have serious concerns about transparency and a clause called the Investor State Dispute Settlement (ISDS), which they claim would allow corporations to sue governments in private. 38 Degrees, an activist group campaigning against the deal, says its details are being ‘worked out in secret’ and will allow big corporations to take governments to court behind closed doors.

EU officials behind the negotiations insist TTIP would uphold current EU standards and leave governments free to run public services as they wish. Negotiators are being ‘as transparent as possible’ and have published fact sheets explaining every chapter of the TTIP, they say. Negotiators also want to tighten up existing ISDS regulation for settling disputes between foreign firms and governments, with public access to hearings. But judging by the ongoing campaigns against TTIP, it appears many don’t entirely trust the EU’s claims.

See also:

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Climate Change, Economic, G7, Government, Politics, United Nations

G7 summit: The communiqué indicates an agreement in striving for a low carbon economy…

G7 SUMMIT

At the summit on June 8 the group of seven leaders agreed to wean their economies off carbon fuels and supported a global goal for reducing greenhouse gas emissions, but they stopped short of agreeing their own immediate binding targets.

In a communiqué after their two-day summit in Bavaria, the G7 leaders endorsed the need for reducing global greenhouse gas emissions at the upper end, ranging from 40 to 70% by 2050 (and using 2010 as a basis). The range was recommended by the IPCC, the United Nations’ climate-change panel.

The leaders also backed a global target for limiting the rise in average global temperatures to two degrees Celsius compared with pre-industrial levels.

The communiqué read: ‘We commit to doing our part to achieve a low-carbon global economy in the long-term, including developing and deploying innovative technologies striving for a transformation of the energy sectors by 2050, and invite all countries to join us in this endeavour.’

The G7 host, Angela Merkel of Germany, who was once dubbed the ‘climate chancellor’, had hoped to revitalise her environmental credentials by getting the G7 nations to agree specific emission goals ahead of the United Nations climate conference in Paris at the end of the year.

Whilst the leaders stopped short of agreeing any such immediate binding targets for their economies, green lobby groups nonetheless welcomed the direction of their agreements.

A statement given by WWF Global Climate and Energy Initiative, said: ‘They’ve given important political signals, but they could have done more, particularly by making concrete national commitments for immediate action… We had hoped for more commitments on what they would do right now.’

The Europeans had pressed their G7 partners to sign up to legally binding targets for reducing greenhouse gas emissions.

Russia Sanctions

A firm stance was taken on Russia and its involvement in the Ukraine conflict. Merkel said the G7 countries were ready, if necessary, to strengthen sanctions against Russia.

The leaders want Russia and Ukraine to comply with a February 12 ceasefire agreed in the Belarus capital Minsk that largely halted fighting in eastern Ukraine between pro-Russian separatists and Ukrainian government forces.

Mrs Merkel said: ‘We are also ready, should the situation escalate, which we don’t want, to strengthen sanctions if the situation makes that necessary, but we believe we should do everything to move forward the political process of Minsk.’

The communiqué specifically addresses the issue, and the leaders said they expected Russia to stop its support for separatist forces in Ukraine and by implementing the Minsk agreements in full. The sanctions, they said, ‘can be rolled back when Russia meets these commitments.’

Greece

The Greek debt crisis was discussed by the leaders as a group and also in bilateral meetings during the summit at the foot of Germany’s highest mountain, the Zugspitze.

Mrs Merkel said there was not much time left for a debt deal to keep Greece in the Eurozone and that Europe was prepared to show solidarity if Athens implemented economic reforms:

‘We want Greece to remain part of the euro zone but we take the clear position that solidarity with Greece requires that Greece makes proposals and implements reforms.’

‘There isn’t much time left. Everyone is working intensively… Every day counts now,” Mrs Merkel said.

Greece’s leftist government last week rejected proposals for a cash-for-reforms deal put forward by European lenders and the International Monetary Fund, but has yet to put forward its own alternative to unlock aid funds that expire at the end of June.

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