Category Archives: Government

Britain, Business, Economic, Government, Politics, Society

Budget 2018: ‘A shot in the arm’ for British businesses

BUDGET

BUSINESS leaders have welcomed a shot in the arm for the British economy following the Chancellor’s pro-enterprise Budget.

In the final Budget before Brexit, Philip Hammond announced a raft of fresh tax reliefs and spending pledges to help solve the UK’s ongoing productivity problem.

The plan included extra funding for research and development “to secure the UK’s position as a world leader in new and emerging technologies such as artificial intelligence, nuclear fusion and quantum computing”.

Seeking to exploit concerns about how the economy would operate under a Labour government, the Chancellor said: “We will always back enterprise. As we finalise our departure from the EU, we must unleash the investment that will drive our future prosperity.

“So I can announce a package of measures to stimulate business investment and send a message loud and clear to the rest of the world: Britain is open for business.”

Among the policies Mr Hammond announced were:

. An increase in the annual investment allowance (AIA) from £200,000 to £1m for two years, giving extra relief to firms that invest in machinery;

. Tax breaks to encourage businesses to invest more in factories, offices and other places of work;

. £1.6bn for R&D to promote science and tech innovation;

. £50m for artificial intelligence fellowships;

. A two-year freeze on the VAT threshold.

The measures were welcomed by business.

The director general of the British Chambers of Commerce, Adam Marshall, said: “Philip Hammond has sent important and positive signals to businesses across the UK, many of whom have been wavering on investment and hiring.”

On the increase in the AIA, he added: “This will be a huge shot in the arm for businesses across the country, giving many thousands of firms renewed confidence to invest and grow.”

Among the science-friendly measures, the Government will plough £50m in new Turing AI Fellowships to lure artificial intelligence researchers to the UK, £235m to support the development of quantum technologies and increased funding to explore distributed ledger technologies such as blockchain.

Under the Industrial Strategy, total R&D investment is due to hit 2.4pc of GDP by 2027.

One of Mr Hammond’s headline business policies was a change to the Annual Investment Allowance. While business groups were mostly supportive of the move – with the allowance rising from £200,000 to £1m for two years starting in January 2019 – analysts added that firms might choose to delay investment plans to coincide with when the higher rate of relief will come into force.

A real estate tax partner at PwC said: “Longer term, this should encourage much more investment, but short-term there may be a lag while businesses wait for January.”

Entrepreneurs were directly targeted through an extension to the British Business Bank’s start-up loans programme, which will run until 2021, and amendments to a policy called Entrepreneurs’ Relief – which had been in the line to be scrapped.

They pay a lower rate of tax at 10pc, compared with the standard rate of 20pc on capital gains when they sell off some or all of their business assets.

Mr Hammond has now doubled the minimum qualifying period from 12 months to two years and shareholders will now have to hold a 5pc economic stake in the company to receive the relief.

The Chancellor also announced smaller-scale measures, such as £20m of skill-training pilot schemes.

In a Budget that was welcomed for supporting smaller and more risky start-up businesses, the Chancellor said he would help UK pension funds invest in such firms.

The Treasury will consult next year on the pension charges cap, which restricts the amount some pension providers can charge in fees.

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Britain, Government, National Security, Society, Terrorism

Right-wing extremists to be monitored by MI5

BRITAIN

BRITISH intelligence is to take responsibility for tackling the terror threat from Right-wing extremists as part of a major overhaul.

Amid increasing concern that white supremacists are trying to stir up a racial and religious war on UK streets, MI5 will for the first time take the lead in combating the problem.

In the past, the police have been directly tasked with monitoring far-Right groups. It means the ideology will sit in the same security service portfolio as Islamist terrorism.

Extreme Right-wing activity will be designated as posing a key threat to national security.

Four far-Right terror plots have been thwarted in Britain since 2017, compared to 13 involving Muslim fanatics. The authorities have expressed fears about a resurgence from neo-Nazi groups, especially since the murder of Labour MP Jo Cox by white supremacist Thomas Mair in 2016.

In February, Darren Osborne was jailed for life for attacking Muslim worshippers with a van in Finsbury Park, North London, in June 2017.

And, in the past week, a man has been charged with sending 13 pipe bombs to opponents of President Donald Trump. A second man was arrested for murdering 11 Jewish worshippers during an anti-Semitic gun attack at a synagogue in the US city of Pittsburgh.

In the UK, there are about 100 live investigations into extreme Right-wing individuals and groups. Although the threat is not assessed to be of the same magnitude as that posed by Islamic State or Al-Qaeda, security chiefs are aware that extreme Right-wing organisations are attempting to provoke violence and by sowing discord.

MI5’s techniques and greater powers of surveillance will allow intelligence agents to discover more about threats posed by the extreme right than the police are able to.

It will formally take responsibility for identifying suspects, assessing their danger, analyse networks of extremists and rank threats.

Police will stay in charge when it comes to launching an operation to disrupt a plot or by making arrests.

Last month, Home Office figures revealed the number of white terror suspects being apprehended or arrested was higher than those who were Asian for the first time since the July 7 bombings in 2005. In the year to June, 133 were white and 129 were Asian ethnic background.

Neil Basu, Britain’s top counter-terrorism police officer, told the home affairs select committee that the extreme Right-wing was growing across Europe. He said: “There is no doubt that crosses the border into the UK and there have been attempts by groups here to coordinate with European partners as well.”

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Britain, Economic, Financial Markets, Government, Society

Brexit, oil prices and global trade: factors hindering economic recovery

ECONOMIC

DESPITE the uncertainties surrounding Brexit the range of expectations for UK growth for 2019 is relatively narrow – between 1 per cent and 2 per cent. A recent poll found that no economist expected an outright contraction next year; nor did any expect a boom. Rather, the most likely scenario is for growth of 1.5 per cent, which, the Bank of England believes, is around the UK’s new lower trend rate. The International Monetary Fund (IMF), which has also refreshed its global forecasts, expects roughly this same rate of growth in Britain to persist over the next five years.

The Brexit saga is probably the most obvious risk facing the economy. Whatever one’s view of the longer-term Brexit effect, a “no-deal” outcome could lead to the economy plunging into recession, while a “good deal” could boost confidence, investment and consumer spending and thereby economic growth. But Brexit is far from the only risk in town.

Indeed, there are plenty more global concerns that may yet scupper the recovery. After all, the British economy – unlike the United States and other relatively “closed” economies – is highly dependent on the outlook for global growth. And across much of the world forecasters see growth slowing over the coming years, even without some of the more disastrous risk scenarios crystallising.

What are the key global risks that might come back to bite the UK? First, there’s China. Many think of China as being a source of cheap imports but it is also Britain’s sixth largest goods export market. On one measure, published by the IMF, China overtook the US as the world’s largest economy in 2014, so attempts to reduce its debt pile after many years of spending could present a significant threat to global growth.

Fiscal largesse in the US is boosting growth there, but as President Trump’s splurge comes to an end the economic hangover could spread far beyond its shores. On this side of the Atlantic, the European Commission is likely to complain about the high budget deficits planned by Italy’s populist government, providing another source of market stress. Then there’s the issue of protectionism. Global tariffs have fallen significantly since the interwar period and remain low even after recent increases between the US and the EU/China. Even if these moves do not directly affect Britain, an escalation in trade disputes could yet be the precursor to weaker global confidence and exports, both to the UK’s detriment.

Oil prices could become a destabilising global force. Prices have fallen a little over the past few weeks but remain high at above $80 per barrel. Had strong global demand been the cause, that might have provided a counterbalance. But when prices rise because of supply constraints net oil importers such as the UK suffer increased costs with no improvement in demand conditions.

Higher energy prices also tend to leak into general price inflation. For now the inflation genie remains in the bottle, with rates of inflation across the G7 in a tight 1 per cent to 3 per cent range. But past above-trend rates of economic growth alongside unemployment rates at their lowest in a generation suggest upside risks to inflation. If not met with rising wages, that would reduce household spending power and could also prompt central banks to raise interest rates more quickly. Not only does that directly curtail domestic spending but for those countries that have taken out foreign currency loans (such as Turkey or Argentina) rising global interest rates push up their repayments and the risk of more widespread emerging market panic.

Recent moves in equity prices reflect all of these concerns; the FTSE 100 index fell to below 7,000 to a six-month low earlier this month. Investor concerns relate to the fact that neither central banks nor government exchequers can be sure their armoury is sufficient to deal with another crisis, should one arise. Banks may be more resilient now but they may not be the source of the next economic downturn.

Brexit is one of many global concerns that have increased the risks of another downturn in Britain and beyond. These risks will require careful navigation by policymakers if another downturn is to be avoided.

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