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Brexit ‘to blame for austerity budget’, as London stock market overtaken by Paris – business live | Business

Brexit ‘permanently damaged’ UK economy, Michael Saunders says

Britain’s exit from the European Union is one of the reasons why the UK is now entering a period of austerity, a former Bank of England policymaker has said.

Michael Saunders, who left the Bank’s Monetary Policy Committee this summer, told Bloomberg TV that leaving the European Union had created permanent damage.

Saunders said the last six years of government had been a ‘chaotic period’, with five prime ministers and seven chancellors.

This upheaval has included the Brexit vote, the depreciation of sterling, a period of political uncertainty, the pandemic, and then renewed political uncertainty, says Saunders, now senior adviser at Oxford Economics.

And the legacy of this period is that the economy’s potential output “has been weak”.

Q: So has the City of London has been damaged, as it loses its crown as the biggest European stock market to Paris?

Saunders says the impact has been wider:

“The UK economy as a whole has been permanently damaged by Brexit.

It’s reduced the economy’s potential output significantly, eroded business investment.

If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week.

The need for tax rises [and] spending cuts wouldn’t be there, if Brexit hadn’t reduced the economy’s potential output so much.

The key is to raise potential output, Saunders concludes, saying that Liz Truss was right to diognose this as the problem.

But, cutting taxes and deregulating was the wrong solution.

Instead, Saunders says the government should focus on improving trade links with the EU, strengthening education and trading, and tackling the worrying rise in long-term sickness that has reduced the UK’s workforce.

Michael Saunders’ advice to Jeremy Hunt on Thursday?
Focus on measures that avoid hurting the economy more & boost productivity — education and training, better trade ties with the EU and fixing the rise in long-term sickness that has prompted many to drop out of the workforce.

— Lizzy Burden (@lizzzburden) November 14, 2022

Chancellor Jeremy Hunt warned on Sunday that everyone will be paying “a bit more tax” after the autumn budget, while public services are expected to face severe cuts.

Last Friday we learned that the UK was the only major advanced economy to shrink in the last quarter…..

…with business investment now 8.4% below its pre-pandemic levels.

UK GDP

Key events

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Austerity is not inevitable, despite the need to reassure the markets following the disastrous mini-bdget of September.

Some investors believe taking money from the rich and giving it to the poor would be ‘fine’ with the bond market.

My colleague Anna Isaac, who has examined the choices facing the chancellor, reports:

Bond market “vigilantes” as they are sometimes termed, thanks to their history of forcing fiscal U-turns around the world, are more concerned that inflation is not fanned by a huge stimulus, and that the budget is funded, rather than advocating austerity for its own sake.

“It is important that it is funded. As long as it is funded the bond market vigilantes are completely fine with it,” says Kaspar Hense, a senior portfolio manager at BlueBay Asset Management, an investment company which focuses on bonds.

“If you take the money from the rich and give it to the poor that is completely fine for the bond market. The bond market is not too antagonistic in that sense.”

But investors are still warier of UK assets, following this autumn’s turmoil:

After recent wild yields on UK government bonds this debt comes with a riskier profile. The government will have to tread carefully for months, if not years, to avoid the prospect of a sell-off.

“You can’t unburn toast,” says Toby Nangle, an independent economic and markets analyst.

“It’s more technical than people may realise, but in basic terms, data informs the quantitative strategy that investors take. That data is now in the machine. It’s baked into the maths. It frames future decisions.”

Zoe Wood

Brexit has also left UK companies struggling to hire staff – last week, the Brexiteer boss of Next warned that current immigration policy was holding back economic growth.

And today, Britain’s foremost business lobby group urged Jeremy Hunt to use this week’s autumn statement to shake up immigration rules to support companies struggling with chronic staff shortages and a looming recession.

The head of the Confederation of British Industry (CBI) said urgent action was required from the chancellor on Thursday to bolster the economy, including “tough political choices” to allow more overseas workers in Britain as employers struggle with a desperate lack of staff.

CB director Tony Danker said:

Not matching action on spending and tax with measures to tackle labour shortages and productivity is likely to be damaging in the short and long term.

A desperate lack of workers is inflating wages and stopping firms growing.”

As well as permanent damage from Brexit, the UK also faces stubbornly high inflation.

Deutsche Bank predict that inflation rose again in October to 10.9% (we get the data on Wednesday), from September’s 40-year high of 10.1%.

And worryingly for households, Deutsche reckons inflation will average 8.2% through 2023 – or four times the Bank of England’s target – before dropping to 3.4% in 2024.

The weakness of the pound, which is down 13% against the US dollar this year, has pushed up the cost of imported goods.

Here’s a chart showing how the UK’s stock market has now been overtaken by Paris (see earlier post for details), due to the pound’s weakness, and concerns over Britain’s economic health.

Brexit ‘permanently damaged’ UK economy, Michael Saunders says

Britain’s exit from the European Union is one of the reasons why the UK is now entering a period of austerity, a former Bank of England policymaker has said.

Michael Saunders, who left the Bank’s Monetary Policy Committee this summer, told Bloomberg TV that leaving the European Union had created permanent damage.

Saunders said the last six years of government had been a ‘chaotic period’, with five prime ministers and seven chancellors.

This upheaval has included the Brexit vote, the depreciation of sterling, a period of political uncertainty, the pandemic, and then renewed political uncertainty, says Saunders, now senior adviser at Oxford Economics.

And the legacy of this period is that the economy’s potential output “has been weak”.

Q: So has the City of London has been damaged, as it loses its crown as the biggest European stock market to Paris?

Saunders says the impact has been wider:

“The UK economy as a whole has been permanently damaged by Brexit.

It’s reduced the economy’s potential output significantly, eroded business investment.

If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week.

The need for tax rises [and] spending cuts wouldn’t be there, if Brexit hadn’t reduced the economy’s potential output so much.

The key is to raise potential output, Saunders concludes, saying that Liz Truss was right to diognose this as the problem.

But, cutting taxes and deregulating was the wrong solution.

Instead, Saunders says the government should focus on improving trade links with the EU, strengthening education and trading, and tackling the worrying rise in long-term sickness that has reduced the UK’s workforce.

Michael Saunders’ advice to Jeremy Hunt on Thursday?
Focus on measures that avoid hurting the economy more & boost productivity — education and training, better trade ties with the EU and fixing the rise in long-term sickness that has prompted many to drop out of the workforce.

— Lizzy Burden (@lizzzburden) November 14, 2022

Chancellor Jeremy Hunt warned on Sunday that everyone will be paying “a bit more tax” after the autumn budget, while public services are expected to face severe cuts.

Last Friday we learned that the UK was the only major advanced economy to shrink in the last quarter…..

…with business investment now 8.4% below its pre-pandemic levels.

UK GDP

SpaceX buys ad campaign on Twitter for Starlink

It’s been a tough few weeks for Twitter’s ad sales department, since Elon Musk’s takeover prompted a clutch of major companies to pause activity on the site.

But they can celebrate a win – from Musk’s aerospace business SpaceX.

According to CNBC, SpaceX has ordered one of the larger advertising packages available from Twitter.

The campaign will promote the SpaceX-owned and -operated satellite internet service called Starlink on Twitter in Spain and Australia, according to internal records from the social media business viewed by CNBC.

Musk has said that the package is ‘tiny’, though – to test the effectiveness of Twitter advertising.

JUST IN: SpaceX purchases large advertising package from Twitter.

— Watcher.Guru (@WatcherGuru) November 14, 2022

SpaceX Starlink bought a tiny – not large – ad package to test effectiveness of Twitter advertising in Australia & Spain. Did same for FB/Insta/Google.

— Elon Musk (@elonmusk) November 14, 2022

Last week, advertising and marketing conglomerate Omnicom advised clients to pause their spending on Twitter in the short term.

Musk, who sacked half of Twitter’s staff this month, also says he’s overworked.

He told a business conference in Bali that:

“I have too much work on my plate, that’s for sure.”

“I’m working the absolute most that I can work — morning to night, seven days a week.”

Opec cuts oil demand forecast again

Oil cartel Opec has revised down its predictions for oil demand this year, partly due to the slowing global economy.

Forecast oil demand this year has been revised down by 100,000 barrels per day, to 2.5m barrels per day.

The revision is due to China’s zero-Covid policy, ongoing geopolitical uncertainties and weaker economic activities.

Opec says:

The significant uncertainty regarding the global economy, accompanied by fears of a global recession contributes to the downside risk for lowering global oil demand growth.

In addition, China’s strict adherence to the “zero COVID-19 policy” adds to this uncertainty, making the country’s recovery path even more unpredictable.

It has also cut its forecast for global oil demand growth in 2023, again by 0.1 mb/d.

#OPEC Nov oil market report
oil demand growth
2021 cut by 0.1 to 2.55mbpd
2022 cut by 0.1 to 2.24mbpd
non-OPEC supply growh
2021 cut by 0.03 to 1.90mbpd
2022 raised by 0.02 to 21.54mbpd#oott

— Giovanni Staunovo🛢 (@staunovo) November 14, 2022

Back in Europe, eurozone factories performed better than expected in September.

Eurozone industrial production rose by 0.9% in September, thanks to an easing of supply chain problems that cushioned the damage from higher energy prices.

September’s industrial production in the Eurozone stood at 0.9% m/m, above consensus. Considering this result and revisions to previous months, the level of activity in the sector stands at its strongest since the end of 2017

— Alejandro Padilla (@alexpadillasan) November 14, 2022

CNN: Jeff Bezos says he will give most of his money to charity

Jeff Bezos
Photograph: John Locher/AP

Amazon founder Jeff Bezos plans to give away the majority of his $124bn net worth during his lifetime.

Bezos has told CNN he will devote the bulk of his wealth to fighting climate change, and to supporting people who can unify humanity in the face of deep social and political divisions.

Bezos’ pledge is light on specifics, though.

He has been criticised in the past for not signing the Giving Pledge, under which some of the world’s richest people promise to donate the majority of their wealth to charitable causes – including his ex-wife, MacKenzie Scott.

CNN reports:

In a sit-down interview with CNN’s Chloe Melas on Saturday at his Washington, DC, home, Bezos, speaking alongside his partner, the journalist-turned-philanthropist Lauren Sánchez, said the couple is “building the capacity to be able to give away this money.”

Asked directly by CNN whether he intends to donate the majority of his wealth within his lifetime, Bezos said: “Yeah, I do.”

Bezos adds that the hard part is working out how do in a levered way.

“It’s not easy. Building Amazon was not easy.

It took a lot of hard work, a bunch of very smart teammates, hard-working teammates, and I’m finding — and I think Lauren is finding the same thing — that charity, philanthropy, is very similar.”

Here’s a video clip of the interview:

Bezos has also awarded a $100m (£84.8m) prize to country music star and philanthropist Dolly Parton, to spend on any charitable donations of her choice

Over in the US, there are hopes that inflation may be heading lower.

Goldman Sachs have predicted that the Federal Reserve’s preferred measure of inflation, called core PCE, will fall below 3% by the end of next year as supply constraints ease, the cost of housing falls and the labor market cools.

Last week, the US consumer prices index dropped by more than expected, to 7.7% in October from 8.2% in September, which triggered a market rally.

GOLDMAN SACHS SEES SIGNIFICANT DECLINE IN INFLATION IN 2023, SEES CORE PCE MEASURE FALLING TO 2.9% FROM 5.1% CURRENTLY BY DECEMBER 2023.

— Breaking Market News ⚡️ (@financialjuice) November 14, 2022

But, Fed governor Christopher Waller did urge caution over the weekend, warning that the endpoint for rising rates was still “a ways off”.

London loses crown of biggest European stock market to Paris

A trading floor in the City Of London.
A trading floor in the City Of London. Photograph: Paul Painter/Alamy

Britain lost its title of Europe’s largest equity market to France, Bloomberg reports.

The City was overtaken by Paris as economic growth concerns hit UK assets, while China’s relaxation of Covid rules has boosted French luxury shares.

Bloomberg has the details:

The combined market capitalization of primary listings in Paris overtook that of the London in US dollar terms, according to an index compiled by Bloomberg.

Domestically-focused UK shares have slumped this year, while French luxury goods-makers like LVMH and Gucci owner Kering have recently been boosted by optimism over a potential easing of China’s Covid Zero policy.

Currency movements have also worked in Paris’s favor. Former UK Prime Minister Liz Truss’s mini-budget of unfunded tax cuts in September and subsequent storm in UK financial markets sank sterling to the lowest level since 1985 against the greenback.

UK midcaps have been crushed this year on predictions that Britons would be squeezed harder by rising energy costs than elsewhere, while British homeowners are facing a surge in interest payments given the widespread issuance of flexible-rate mortgage loans in the country.

Within about three weeks of Truss becoming prime minister, UK’s stock and bond markets had lost roughly $500bn in combined value, with investor confidence shattered by the tax-cutting budget.

The Paris all-share index over the last 5 years
The Paris all-share index over the last 5 years Photograph: Refinitiv
The FTSE All-Share index since 2016
The UK’s FTSE All-Share index over the last five years Photograph: Refinitiv

The drop in the pound has also eroded the value of UK shares in dollar terms.

Bloomberg adds that the market cap gap between the UK and French stock markets has been narrowing from about $1.5trn since the Brexit vote in 2016.

British equities are now worth about $2.821trn compared with about $2.823trn for French equities, by Bloomberg’s calculations.

Joules’s failure to move with the times helped to push it to appoint administrators, says Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Streeter explains:

The apparel retailer, once the darling of the outdoor set, had become stuck in a rut – as athleisure wear took over as the casual clothes for the younger generation and even Joules’ core customers, started falling out of love with the staples of its floral and fashion ranges.

It can be hard for a brand based on British heritage to move with the times, but Joules’ demise shows, fast moving fashion trends can cause serious damage to slow coaches.

The effect of consumers tightening their belts will have caused deeper damage to the company’s furniture and accessories business Garden Trading, as spending on revamped rooms and outdoor spaces has been cut back.

But despite its problems, there is likely to be “significant interest” in acquiring the Joules brand, and its intellectual property, Streeter adds.

The Joules brand is still strong, and although it will need a modern twist to help it survive longer term, there is likely to be significant interest in the name and the intellectual property. ‘’



https://www.theguardian.com/business/live/2022/nov/14/joules-administrators-cost-of-living-business-confidence-recession-rightmove-business-live Brexit ‘to blame for austerity budget’, as London stock market overtaken by Paris – business live | Business

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