Connect with us

Published

on

Rishi Sunak has claimed his budget will deliver a stronger economy “fit for a new age of optimism”.

In comments released by the Treasury ahead of the chancellor’s address to MPs in the Commons on Wednesday, Mr Sunak said the budget will commence the “work of preparing for a new economy post-COVID”.

“An economy of higher wages, higher skills, and rising productivity. Of strong public services, vibrant communities and safer streets,” he said.

Chancellor Rishi Sunak works on his Budget speech. Pic: HM Treasury/Flickr
Image:
Critics have said the wage increases announced by the chancellor will not be enough amid a cost of living crisis

“An economy fit for a new age of optimism. That is the stronger economy of the future.”

Much of the contents of the chancellor’s economic set piece are already known, following a raft of announcements in recent days.

Extra funding for the NHS, more money for local transport, an end to the public sector pay freeze and rises in the national living wage and minimum wage have all been pre-trailed.

Other measures announced already include:

More on Budget 2021

• £1.4bn to encourage foreign investment into UK businesses and attract overseas talent
• £700m to be spent mainly on the new post-Brexit borders and immigration system, as well as a new maritime patrol fleet
• £435m for victims services, crime prevention and the Crown Prosecution Service
• £560m for adult maths coaching to help increase numeracy
• A six-month extension to the COVID recovery loan scheme to June 2022

The announcements on pay, which will take effect in April, are the most high-profile so far.

Please use Chrome browser for a more accessible video player

Sky’s Ed Conway previews the budget

However, critics have pointed out that the end of the Universal Credit uplift, an upcoming 1.25% rise in National Insurance and continuing cost of living pressures, including rising petrol prices and soaring energy bills, will mean that many of those who see their salaries bumped up will not be much better off in real terms, if at all.

Labour’s shadow chancellor Rachel Reeves said the chancellor has to “create a more resilient economy and take the pressure off working people” amid continuing cost of living pressures.

Setting out the party’s approach, she continued: “Labour would grow our economy, with our plan to buy, make and sell more in Britain, and a Climate Investment Pledge to create the jobs of the future.

“With costs growing and inflation rising, Labour would ease the burden on households, cutting VAT on domestic energy bills immediately for six months.

“And we would not raise taxes on working people and British businesses, while online giants get away without paying their fair share.”

Please use Chrome browser for a more accessible video player

Minister: Chancellor is ‘keen to give a pay rise’

Meanwhile, the Liberal Democrats said Mr Sunak was treating education as an “afterthought”.

“Rishi Sunak is setting up our children to fail, while hammering families with tax hikes and a cost of living crisis,” party leader Sir Ed Davey said.

“We need an emergency children’s budget, with £15bn for schools catch-up funding as recommended by the government’s own adviser.

“Parents and children who have sacrificed so much during the pandemic deserve a fair deal.

“Instead this budget looks set to treat education and our children’s future as an afterthought.

“You can’t build a strong economy without investing in younger generations and allowing them to fulfil their potential.”

Ian Blackford, Westminster leader of the SNP, warned the chancellor he must not “short-change” Scotland, calling for a “multi-billion-pound Brexit Recovery Fund – to provide Scotland with compensation and to ensure proper financial support for struggling businesses and industries.”

“With Brexit playing a major role in the ongoing severe staffing shortages, rotting food in the fields, empty supermarket shelves, plunge in UK exports, and rising cost of goods and services, the chancellor must wake up and smell the coffee before that also ends up running out in our stores,” he said.

The series of pre-announcements ahead of the budget has angered Commons Speaker Sir Lindsay Hoyle, who allowed a second urgent question in as many days on Tuesday to compel ministers to appear before MPs to answer questions on the budget.

“I was disappointed to see more stories in the media today with apparently very well-briefed information about what will be in tomorrow’s budget,” the speaker told the Commons.

Please use Chrome browser for a more accessible video player

Speaker angry at government ignoring Commons

Accusing ministers of treating parliament in a “discourteous manner”, Sir Lindsay added: “This house will not be taken for granted, it’s not right for everybody to be briefed, it’s not more important to go on the news in the morning, it’s more important to come here.

“Let us get the message across that these elected members represent this United Kingdom. It is not done through Sky TV.”

Follow budget coverage live on Sky News on Wednesday with the chancellor’s announcement from 12.30pm

Continue Reading

Business

Trump trade war escalation sparks global market sell-off

Published

on

By

Trump trade war escalation sparks global market sell-off

Donald Trump’s trade war escalation has sparked a global sell-off, with US stock markets seeing the biggest declines in a hit to values estimated above $2trn.

Tech and retail shares were among those worst hit when Wall Street opened for business, following on from a flight from risk across both Asia and Europe earlier in the day.

Analysis by the investment platform AJ Bell put the value of the peak losses among major indices at $2.2trn (£1.7trn).

The tech-focused Nasdaq Composite was down 5.8%, the S&P 500 by 4.3% and the Dow Jones Industrial Average by just under 4% at the height of the declines. It left all three on course for their worst one-day losses since at least September 2022 though the sell-off later eased back slightly.

Trump latest: UK considers tariff retaliation

Analysts said the focus in the US was largely on the impact that the expanded tariff regime will have on the domestic economy but also effects on global sales given widespread anger abroad among the more than 180 nations and territories hit by reciprocal tariffs on Mr Trump‘s self-styled “liberation day”.

They are set to take effect next week, with tariffs on all car, steel and aluminium imports already in effect.

Price rises are a certainty in the world’s largest economy as the president’s additional tariffs kick in, with those charges expected to be passed on down supply chains to the end user.

The White House believes its tariffs regime will force employers to build factories and hire workers in the US to escape the charges.

Please use Chrome browser for a more accessible video player

The latest numbers on tariffs

Economists warn the additional costs will add upward pressure to US inflation and potentially choke demand and hiring, ricking a slide towards recession.

Apple was among the biggest losers in cash terms in Thursday’s trading as its shares fell by almost 9%, leaving it on track for its worst daily performance since the start of the COVID pandemic.

Concerns among shareholders were said to include the prospects for US price hikes when its products are shipped to the US from Asia.

Other losers included Tesla, down by almost 6% and Nvidia down by more than 6%.

Please use Chrome browser for a more accessible video player

PM: It’s ‘a new era’ for trade and economy

Many retail stocks including those for Target and Footlocker lost more than 10% of their respective market values.

The European Union is expected to retaliate in a bid to put pressure on the US to back down.

The prospect of a tit-for-tat trade war saw the CAC 40 in France and German DAX fall by more than 3.4% and 3% respectively.

The FTSE 100, which is internationally focused, was 1.6% lower by the close – a three-month low.

Financial stocks were worst hit with Asia-focused Standard Chartered bank enduring the worst fall in percentage terms of 13%, followed closely by its larger rival HSBC.

Among the stocks seeing big declines were those for big energy as oil Brent crude costs fell back by 6% to $70 due to expectations a trade war will hurt demand.

The more domestically relevant FTSE 250 was 2.2% lower.

A weakening dollar saw the pound briefly hit a six-month high against the US currency at $1.32.

There was a rush for safe haven gold earlier in the day as a new record high was struck though it was later trading down.

Sean Sun, portfolio manager at Thornburg Investment Management, said of the state of play: “Markets may actually be underreacting, especially if these rates turn out to be final, given the potential knock-on effects to global consumption and trade.”

He warned there was a big risk of escalation ahead through countermeasures against the US.

Read more:
Trump tariff saga far from over
‘Liberation Day’ explained
What Sky correspondents make of Trump’s tariffs

Sandra Ebner, senior economist at Union Investment, said: “We assume that the tariffs will not remain in place in the
announced range, but will instead be a starting point for further negotiations.

“Trump has set a maximum demand from which the level of tariffs should decrease”.

She added: “Since the measures would not affect all regions and sectors equally, there will be winners and losers as in 2018 – although the losers are more likely to be in the EU than in North America.

“To protect companies in Europe from the effects of tariffs, the EU should not respond with high counter-tariffs. In any case, their impact in the US is not likely to be significant. It would be more efficient to provide targeted support to EU companies in the form of investment and stimulus.”

Continue Reading

Business

British businesses issue warning over ‘deeply troubling’ Trump tariffs

Published

on

By

British businesses issue warning over 'deeply troubling' Trump tariffs

British companies and business groups have expressed alarm over President Donald Trump’s 10% tariff on UK goods entering the US – but cautioned against retaliatory measures.

It comes as Business Secretary Jonathan Reynolds launched a consultation with firms on taxes the UK could implement in response to the new levies.

Money blog: Pension top-up deadline days away

A 400-page list of 8,000 US goods that could be targeted by UK tariffs has been published, including items like whiskey and jeans.

On so-called “Liberation Day”, Mr Trump announced UK goods entering the US will be subject to a 10% tax while cars will be slapped with a 25% levy.

The government’s handling of tariff negotiations with the US to date has been praised by representative and industry bodies as being “cool” and “calm” – and they urged ministers to continue that approach by not retaliating.

Please use Chrome browser for a more accessible video player

The latest numbers on tariffs

Business lobby group the CBI (Confederation of British Industry) said: “Retaliation will only add to supply chain disruption, slow down investment, and stoke volatility in prices”.

Industry body the British Retail Consortium (BRC) also cautioned: “Retaliatory tariffs should only be a last resort”.

‘Deeply troubling’

While a major category of exports, in the form of services – like finance and information technology (IT) – has been exempted from the tariffs, the impact on UK business is expected to be significant.

Mr Trump’s announcement was described as “deeply troubling for businesses” by the CBI’s chief executive Rain Newton-Smith.

Read more:
US tariffs spark global market sell-off

Do Trump’s numbers add up?
Island home only to penguins hit by tariffs

The Federation of Small Businesses (FSB) also said the tariffs were “a major blow” to small and medium companies (SMEs), as 59% of small UK exporters sell to the US. It called for emergency government aid to help those affected.

“Tariffs will cause untold damage to small businesses trying to trade their way into profit while the domestic economy remains flat,” the FSB’s policy chair Tina McKenzie said. “The fallout will stifle growth” and “hurt opportunities”, she added.

Companies will need to adapt and overcome, the British Export Association said, but added: “Unfortunately adaptation will come at a cost that not all businesses will be able to bear.”

Watch dealer and component seller Darren Townend told Sky News the 10% hit would be “painful” as “people will buy less”.

“I am a fan of Trump, but this is nuts,” he said. “I expect some bad months ahead.”

Industry body Make UK said the 25% tariffs on cars, steel and aluminium would in particular be devastating for UK manufacturing.

Cars hard hit

Carmakers are among the biggest losers from the world trade order reshuffle.

Auto industry body the Society of Motor Manufacturers and Traders (SMMT) said the taxes were “deeply disappointing and potentially damaging measure”.

“These tariff costs cannot be absorbed by manufacturers”, SMMT chief executive Mike Hawes said. “UK producers may have to review output in the face of constrained demand”.

The new taxes on cars took effect on Thursday morning, while the measures impacting car parts are due to come in on 3 May.

Continue Reading

Business

Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Published

on

By

Trump trade war: The blunt calculation that should have spared UK from reciprocal tariffs

Economists immediately started scratching their heads when Donald Trump raised his tariffs placard in the Rose Garden on Wednesday. 

On that list he detailed the rate the US believes it is being charged by each country, along with its response: A reciprocal tariff at half that rate.

So, take China for example. Donald Trump said his team had run the numbers and the world’s second-largest economy was implementing an effective tariff of 67% on US imports. The US is responding with 34%.

Trump latest: UK considers tariff retaliation

How did he come up with that 67%? This is where things get a bit murky. The US claims it studied its trading relationship with individual countries, examining non-tariff barriers as well as tariff barriers. That includes, for example, regulations that make it difficult for US exporters.

However, the actual methodology appears to be far cruder. Instead of responding to individual countries’ trade barriers, Trump is attacking those enjoying large trade surpluses with the US.

A formula released by the US trade representative laid this bare. It took the US’s trade deficit in goods with each country and divided that by imports from that country. That figure was then divided by two.

More on Donald Trump

So, in the case of China, which has a trade surplus of $295bn on total US exports of $438bn, that gives a ratio of 68%. The US divided that by two, giving a reciprocal tariff of 34%.

Please use Chrome browser for a more accessible video player

PM will ‘fight’ for deal with US

This is a blunt measure which targets big importers to the US, irrespective of the trade barriers they have erected. This is all part of Donald Trump’s efforts to shrink the country’s deficit – although it’s US consumers who will end up paying the price.

But what about the small number of countries where the US has a trade surplus? Shouldn’t they actually be benefiting from all of this?

Read more:
Trump tariff saga far from over
‘Liberation Day’ explained
What Sky correspondents make of Trump’s tariffs

That includes the UK, with whom the US has a surplus (by its own calculations) of $12bn. By its own reciprocal tariff formula, the UK should be benefitting from a “negative tariff” of 9%.

Instead, it has been hit by a 10% baseline tariff. Number 10 may be breathing a sigh of relief – the US could, after all, have gone after us for our 20% VAT rate on imports, which it takes issue with – but, by Trump’s own measure, we haven’t got off as lightly as we should have.

Continue Reading

Trending