Economy is almost certainly in recession and the picture ahead is murky

Published

2 years ago

November 3, 2022

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Let’s start with what we do know.

The economy is now almost certainly in recession. It will not be pleasant. This is a recession which will be felt in most households’ pockets – both through the rise in energy prices and shop prices and the rise in the cost of borrowing.

And when it comes to the cost of borrowing, things are certainly getting tougher. Today the Bank of England raised its official interest rates by 0.75 percentage points, meaning if you’re on a floating rate loan tied to Bank rate the increase will be immediately reflected in your monthly repayments.

In a sense, the Bank is merely doing what most people had expected and what markets had already priced in: in other words, the current fixed rate loans out there on the market already assumed something like this happening.

Remember that point: we’ll come back to it.

So we know the economy is in recession. We know prices are very high and times are looking tough – especially if you have a mortgage which needs to be re-fixed soon. But here’s where the certainty ends and the murkiness begins.

Normally the Bank of England produces one main forecast in its Monetary Policy Report – the quarterly document in which it gives its sense of the state of the economy. But this time around it did something unusual: it produced two, and gave quite a lot of prominence to both of them.

A money market rollercoaster

Why? Well, it comes back to the fact that money markets have been on a rollercoaster recently. As you’ll recall if you’ve followed the ride, in the wake of the mini-budget, expectations for where the Bank’s interest rate was going next year leapt up to over 6%. Since Liz Truss‘s exit, those expected rates have begun to fall, to the extent that as of this week they were expecting a peak of 4.75%. That’s a big change.

And these numbers matter enormously: the higher the rates, the more households who will struggle to make their repayments and the tougher life will get for businesses, many of which will struggle to operate. So even a change of a few fractions of a percentage point will make a big difference.

Eight successive quarters of contraction

That brings us back to the Bank’s latest forecasts. It has to base those forecasts for the state of the economy off an assumption of what’s happening to those interest rates. So it typically takes a two week “snapshot” of what money markets expect for borrowing rates and then builds a forecast around it. Normally that’s a pretty uncontroversial exercise, but not this time. Because as we all know, those rates were all over the place following the mini-budget and the ensuing gilt market meltdown.

The upshot is that the Bank’s central forecast – the one we usually look at – is particularly bad. It involves eight successive quarters of contraction: that would be the single longest recession since comparable records began in the early 20th century – though it would be much less deep than nearly all of those downturns. It would see the economy shrink by nearly 3% and unemployment get up to 6.5%.

But here’s the thing: that forecast is based on market expectations that Bank rate would get up to 5.25% next year. And the Bank is unusually explicit today that it thinks that is very unlikely. So that recession forecast is a little bit of a chimera: it is based on a scenario which will probably not happen.

So here’s where that other forecast comes in. The Bank produced a separate set of figures which ignore all that market mayhem and just imagine rates stay where they are, as of this afternoon, at 3% in perpetuity. On the basis of that forecast, there is still a recession, but it is barely more than half the depth of its central forecast and doesn’t last half as long. Unemployment doesn’t peak as high. Household income isn’t quite as badly hit. It’s tough, but not awful.

More rate rises

So: is that forecast a more reliable picture of the impending months? Well, not necessarily, for two reasons. First, the Bank said explicitly today that it thinks it will have to raise interest rates again, albeit not as high as markets were expecting a few weeks ago. What that means is anyone’s guess, but the signal is that they might not even have to rise as high as the 4.75% markets are currently pricing in. But that does mean a slightly worse outlook.

Second, the Bank’s forecast doesn’t make any assumptions about what the government’s Autumn Statement is going to do to the economy. And given everyone expects the government to cut spending and/or raise taxes, it’s a fair assumption that that could also bear down on economic activity.

It’s complicated

So, as you can see: it’s complicated. I know that’s not especially helpful if you’re after a quick summary. But it’s a fairer reflection of where we are. The UK is in recession, but it’s worth being a little wary of the more lurid headlines out there about how it’s the “longest in history”. The Bank is saying that’s a possibility if rates went higher (and it doesn’t currently think they will).

But there is another interesting thing going on here, which comes back to that point I made at the start – that when the Bank moves its rates it is, in a sense, reflecting what people out there in the market are expecting it to do. Those expectations matter – and the Bank can often influence them itself.

Today’s Monetary Policy Report contains some pretty heavy hints that the market has overshot its expectations about where Bank rate will go in the future. In other words, the report itself could plausibly persuade investors to notch down their expectations for where interest rates are heading next year.

If that happened, we would be left with an interesting paradox: that even as it raises interest rates even more than it has ever done since it became independent in 1997, the Bank could actually push down what markets expect that eventual peak to be.

In other words, this interest rate increase could be reducing the real-life cost of borrowing in the mortgage markets. Fixed rate loans could get cheaper as a result of today’s events, not more expensive.

Perhaps that sounds topsy-turvy, but then it’s no more weird than many of the other turns of this rollercoaster in recent weeks.

UK

Man holding Palestinian flag seen climbing up Palace of Westminster

Published

15 hours ago

March 8, 2025

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Man holding Palestinian flag seen climbing up Palace of Westminster

Police have been called to the Palace of Westminster after a man was seen climbing up the tower which houses Big Ben.

Video on social media shows a barefoot man stood on a ledge several metres up the Elizabeth Tower holding a Palestinian flag.

Police said they were called to the scene at 7:24am this morning.

A fire engine has now raised a cherry picker to the same height as the man’s position on the tower.

Three people standing on the crane are engaging with the man who is several feet away.

The protester has been sharing videos on Instagram from his viewpoint on the tower as a woman in plain clothes speaks to him from the cherry picker.

The woman says: “At some point you have to come down, how long do you think you are going to be there, how long do you think you are able to be there?”

Her voice is then barely audible as she appears to say “your message was to say ‘Free Palestine'” before she encourages to him come down.

A large red stain which appears to be blood can be seen on the side of the tower around the protester’s feet.

A Met Police spokesperson said: “At 7.24am on Saturday March 8 officers were alerted to a man climbing up the Elizabeth Tower at the Houses of Parliament.

“Officers are at the scene working to bring the incident to a safe conclusion. They are being assisted by the London Fire Brigade and the London Ambulance Service.”

Bridge Street, which is at the north end of Westminster Bridge, has been closed to allow the emergency services to deal with the incident, police confirmed.

A spokesman for London Fire Brigade (LFB) said crews from Lambeth, Chelsea, Soho and Islington fire stations have been deployed.

At least nine emergency service vehicles have lined the street in central London as crowds look on from beyond a police cordon.

The protest in Westminster comes as the Palestine Action group said it had sprayed “Gaza is not for sale” on Donald Trump’s Turnberry golf course in Scotland.

Sharing an image of the vandalism on Saturday morning, the group wrote on X: “Whilst Trump attempts to treat Gaza as his own property, he should know his own property is within reach.”

The Turnberry protest comes after the American president claimed the US will “take over the Gaza Strip and we will do a job with it too”.

UK

Five years on from COVID, one survivor reflects on having to fight for his life

Published

20 hours ago

March 8, 2025

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Five years on from COVID, one survivor reflects on having to fight for his life

Mark Hammersley is a survivor. Standing in the Welsh sun, smiling broadly with an outreaching hand to welcome me, he looks the picture of good health.

There is no sign of the trauma. Or the desperate battle for life he fought and won.

I first met Mark as he gasped for air in Warrington Hospital’s intensive care unit. It was October 2020 and the country was in the grip of the second wave of the COVID pandemic.

“The first 24 hours was critical. I was unconscious really in many ways,” Mark reminds me.

He doesn’t need to. The image of Mark wearing a breathing mask attached by a tube to a CPAP machine will stay with me for a very long time.

He had been admitted after becoming poorly while moving house. Mark was 57 then and his underlying health conditions put him at serious risk.

His raspy voice was barely audible over the constant bleeping of the ICU’s life-saving diagnostic machines.

“I’ve got diabetes and I’m overweight so they’re my risk factors. So to be honest for me it’s still early days,” he told me at the time. His underlying health issues meant Mark had to shield for most of the year. And until then it had worked.

Standing next to his bed I asked Mark if he was concerned about his health, about the possible outcome.

“I’m worried yes,” he replied. “But I’m feeling safe if that makes sense.”

Mark tells me now that the doctors treating him were not sure he would make it through the night. They had warned his wife that he was not likely to survive. But instead of inducing Mark into a coma and putting him on life support using a ventilator, the doctors gambled by using a CPAP machine.

The Continuous Positive Airway Pressure unit crucially keeps airways from narrowing or collapsing.

And that decision, Mark is convinced, ultimately saved his life. He is aware that the outcomes for COVID patients put on ventilators were not good.

Five years on and Mark is still feeling the impact of that devastating infection. But he is a relieved man.

“I have been told that I have scarring on my lungs but it’s not affecting their functionality, whether it will later on in life I don’t know,” he says.

“So at the moment it’s still a process but I’m a lot better than I was certainly five years ago and it affects you in different ways. When I was in hospital and afterwards I had a lot of muscular pain so for about 18 months I probably couldn’t even put a shirt on properly.”

In the ICU bed next to Mark’s I also interviewed a young grandmother. She was sat upright and also breathing with the help of a CPAP machine. But she was much more talkative and alert compared to Mark. She was confident her treatment was going well.

But when I returned to the hospital a few weeks later to follow up with both patients I was told she had died shortly after filming.

Mark was aware. He knows that he will live with the long-term health complications from COVID for the rest of his life. But he’s still thankful, every single day for that opportunity.

The UK will mark the five-year anniversary of the start of the COVID pandemic on Sunday.

The deadly virus shut down the world after it spread from Wuhan in China at the start of 2020.

Between March of that year and July 2022, an estimated 180,000 people died after contracting COVID in England and Wales, according to figures published by The King’s Fund thinktank.

The UK government said Sunday’s day of reflection will be an opportunity for the public to remember those who lost their lives, as well as reflect on the impact the virus had on everyday life and pay tribute the frontline workers.

UK

Reform UK MP Rupert Lowe reported to police over alleged threats towards party chairman

Published

1 day ago

March 8, 2025

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Reform UK MP Rupert Lowe reported to police over alleged threats towards party chairman

Reform UK has suspended MP Rupert Lowe and reported him to the police over alleged threats of physical violence towards the party’s chairman.

A statement from chair Zia Yusuf and chief whip Lee Anderson MP also said the party has received complaints from two female employees about alleged serious bullying in Mr Lowe’s offices.

Mr Yusuf and Mr Anderson said “we understand complaints have been made to parliamentary authorities”.

Mr Lowe, 67, has released a statement saying the allegations were “untrue and false”, the accusations of physical threats were “outrageous and entirely untrue”, and he referenced a “vexatious complaint” made by another staff member.

Mr Lowe, the MP for Great Yarmouth, has had the whip suspended, meaning he will sit as an independent MP in the House of Commons.

Mr Yusuf and Mr Anderson said in their statement that Mr Lowe had “on at least two occasions made threats of physical violence against” Mr Yusuf.

The statement said: “It is with regret that we feel obligated to disclose that the party received complaints from two female employees about serious bullying in the offices of the member of parliament for Great Yarmouth, Rupert Lowe.”

Claims of ‘disturbing pattern of behaviour’

It added: “Evidence was provided to us of workplace bullying, the targeting of female staff who raised concerns, and evidence of derogatory and discriminatory remarks made about women, including reference to a perceived disability.

“We feel we have a duty of care to all our staff, whether employed directly or indirectly. Accordingly, we appointed an independent King’s Counsel to conduct an investigation into the veracity of these complaints. To date, Mr Lowe has yet to cooperate with this investigation.

“In addition to these allegations of a disturbing pattern of behaviour, Mr Lowe has on at least two occasions made threats of physical violence against our party chairman. Accordingly, this matter is with the police.

“Reform stands for the highest standards of conduct in public life, and we will apply these standards without fear nor favour, including within our own party.”

Rumblings of leadership challenge

Earlier this week, Mr Lowe appeared to question Nigel Farage’s leadership of Reform UK.

In an interview with the Daily Mail, Mr Lowe said: “Nigel is a fiercely independent individual and is extremely good at what we have done so far. He has got messianic qualities.

“Will those messianic qualities distil into sage leadership?

“I don’t know.”

He added: “I’m not going to be by Nigel’s side at the next election unless we have a proper plan to change the way we govern from top to bottom.”

During Mr Farage’s online falling out with Elon Musk, in which the Tesla businessman said Reform needed a new leader, Mr Lowe drew praise from Mr Musk.

And in the interview with the Daily Mail, Mr Lowe noted that he was “barely six months into being an MP” and “in the betting to be the next prime minister.”

‘Disappointed but not surprised’

In his response to the allegations, Mr Lowe said on Friday the party leadership had a “complete inability to accept even the most mild constructive criticism without such a malicious reaction”.

He said in a statement posted on X: “I am disappointed, but not surprised, to read Reform’s untrue and false allegations. Let me be abundantly clear – this investigation is based on zero credible evidence against me, as has been repeatedly stated by the neutral investigator. None has been provided.

“I have cooperated and spoken at length with the KC they instructed, at great cost to the party, to investigate a minor staff matter.”

He claimed the lawyer was “dismayed” the statement from Reform UK had been published – and that the investigation had not even started.

Mr Lowe claimed the lawyer told him that “no credible evidence has been given”.

The MP added that he was sent an initial letter of complaint last Friday from the party with “no evidence provided”.

“I have never made any derogatory comments about women, or those with disabilities. This is a lie. These allegations are not even referring to me. I will be seeking legal advice immediately,” he added.

Analysis: Could Musk have triggered mess within Reform?

Liz Bates

Political correspondent

@wizbates

It sounds too weird to be true, but Elon Musk may very well be the reason that Reform UK is embroiled in a messy public battle with one of its five MPs.

Detailed and damning statements released on Friday look to be the culmination of months of growing division between Nigel Farage and Great Yarmouth MP Rupert Lowe.

The allegations against him are serious, numerous and have triggered three possible investigations – from the party, the parliamentary authorities and the police.

His rebuttal is equally robust, indicating he will fight hard to clear his name.

But is this battle just about his behaviour? Or is it because of his leadership ambitions? And were they ignited after a bizarre intervention from across the pond?

In January, Musk posted on X, calling for Farage to step down, saying he wasn’t up to the job, and later suggested Lowe could step up as he ‘makes a lot of sense’.

Two months later and relations had broken down beyond repair, with a war of words erupting this week in the papers, in which Lowe called Farage messianic and he responded saying the MP probably wanted to be prime minister.

There is no doubt that an endorsement from the world’s richest man would flatter the ego of any aspiring politician.

But given Friday’s revelations, it seems that instead of kick-starting his rise to the top of Reform, Musk’s meddling has instead severed his ties with the party for good.

When it comes to his parliamentary career, salvaging his reputation could also prove difficult as other critical accounts of his character emerge.

Sky News has heard from Labour MP Mike Kane about an incident which took place in the Commons last December, during which he says he was “manhandled” by the then Reform MP.

The Transport minister described an angry scene in which Lowe had to be restrained by Reform’s deputy leader, Richard Tice, and eventually broken up by the Sergeant at Arms.

Mr Lowe did not wish to comment on the claim, but it adds yet another obstacle in the fight for his political future.

‘Vexatious’ complaint

Mr Lowe continued: “It is no surprise that this vexatious statement has been issued the day after my reasonable and constructive questions of Nigel and the Reform structure. It was issued on X late on a Friday afternoon, with no prior warning.

“All I stated was that communication needs to improve, delegation needs to improve, structure needs to improve – these are all reasonable requests of a party looking to form the next government. I stand by everything I said.”

His response added: “I do not believe that Reform members will be pleased to know that their membership fees are being spent on instructing expensive lawyers to investigate their own MPs, over matters that are entirely baseless and have been dealt with in the correct Parliamentary procedure, with HR’s full involvement and support.

“The staff member in question only raised a vexatious complaint once disciplinary proceedings had been initiated against them for serious wrongdoing. The other individual mentioned, dropped her appeal.”

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Mr Lowe said he had been trying to change the way Reform is run “behind the scenes” for many months, and urged his supporters to “stay with the party”.

He said: “This is our party as much as it is Nigel’s.”

A Metropolitan Police spokesperson said: “On Thursday, 6 March we received an allegation of verbal threats made by a 67-year-old man on Friday, 13 December.

“Officers are carrying out an assessment of the allegations to determine what further action may be required.”