A massive election – well, two massive elections on either side of the Atlantic, and more elsewhere around the planet – followed by changes of government and plenty of economic milestones along the way. So let’s remind ourselves of some of the big moments of the year, in chart form.
We begin with the big economic picture. Growth. This time last year, the UK was (unbeknownst to us at the time) actually in recession. The news was only confirmed in the spring of this year, but for two successive quarters in the second half of last year, economic growth fell.
What’s equally intriguing is what happened next: a rapid bounce-back as gross domestic product increased by more than expected in the first two quarters of the year. Since then, it has tailed off markedly, causing some consternation in the Treasury.
Indeed, an initial estimate of 0.1 per cent growth in the third quarter of 2024 was revised down to zero growth – stagnation.
Still, interest rates are now finally on the way down. They were cut in August for the first time following the cost of living crisis, and are expected to fall further next year. However, the scale of those expected falls is considerably smaller now than before the Budget. Why? Because the government is planning to borrow and spend considerably more next year.
And while Labour insists this will not be visible on your pay check – and hence isn’t breaking their pre-election pledge – we will, as a nation, be paying considerably more in taxes as a result. Indeed, the tax burden, the total amount of tax incurred by the population as a percentage of GDP, is now heading up to the highest level on record. This is, it’s worth saying, a stark contrast with the costed measures Labour put in their manifesto.
Image: *There were two general elections in 1974 – in February and October
That brings us to the election itself – an election in which Labour rode to an extraordinary landslide, winning more than 400 seats for the first time since the glory days of Tony Blair. It represented an immense comeback for the party, following such a drubbing in 2019. However, there are some important provisos to note.
Chief among them is the fact that the party won the smallest share of the vote of any winning party in the modern era. This was not a landslide victory in terms of overall popular support.
Among the issues that has resounded this year, both before the election and after, was migration. This time last year the data suggested that net migration into the UK had peaked at just over 750,000.
But then, last month, new data brought with it a shocking revision. In fact, the Home Office had both undercounted the number of people coming into the country and overcounted the number leaving. The upshot was a new figure: in fact 906,000 more people had entered than departed in the year to last summer. Not just a new record – a totally gobsmacking figure.
The vast, vast majority of that migration was not the “small boats” so much has been made of but legal migration, more or less equally divided between work and study. It was to some extent the consequence of the post-COVID bounceback and, even more so, changes in government policy as post-Brexit migration rules came into force.
Another issue which came to light throughout the year was something else: the leakiness of Britain’s sanctions regime with Russia. While government ministers like to boast about how this is the toughest regime on Russia in history, our analysis found that sanctioned British goods are routinely being shipped into Russia via its neighbours in the Caucasus and Central Asia.
In a series of investigations, we tracked how this carousel works for the trade of cars, which get sent to countries like Azerbaijan before being shuffled around the Caucasus and entering Russia via Georgia and other routes. But that same carousel is likely being used for equipment like drone parts and radar equipment. We know it’s being sent to Russian neighbours. We know it’s ending up on the battlefield. The data tells a stark story about the reality of the sanctions regime – and helps illustrate how Russia is continuing to keep its forces armed and equipped with components from the West.
Hiscox, the London-listed insurer, is close to naming a new chairman nearly eight months after the drowning of Jonathan Bloomer on the luxury yacht of technology tycoon Mike Lynch.
Sky News has learnt that Hiscox has narrowed its search to candidates including Richard Berliand, who chairs the interdealer broker TP ICAP.
Insurance insiders said that Mr Berliand was among fewer than a handful of potential successors to Mr Bloomer.
The sinking of the Bayesian off the Sicilian coast last August claimed the lives of Mr Lynch and his daughter, along with five other passengers, including Mr Bloomer.
A former boss of Prudential, Mr Bloomer was a well-liked figure in the City.
He had chaired Hiscox for just a year when he died.
The identities of the other candidates being considered by the company were unclear on Monday.
Asian stock markets have fallen dramatically amid escalating fears of a global trade war – as Donald Trump called his tariffs “medicine” and showed no sign of backing down.
Hong Kong’s Hang Seng index of shares closed down 13.2% – its biggest drop since 1997, while the Shanghai composite index lost 7.3% – the worst fall there since 2020.
Taiwan’s stock market was also hammered, losing nearly 10% on Monday, its biggest one-day drop on record.
Elsewhere, Japan’s Nikkei 225 lost 7.8%, while London’s FTSE 100 was down 4.85% by 9am.
US stock market futures signalled further losses were ahead when trading begins in America later.
At 4am EST, the S&P 500 futures was down 4.93%, the Dow Jones 4.32% and the Nasdaq 5.33%.
Markets are reacting to ongoing uncertainty over the impact of President Trump’s tariffs on goods imported to the US, which he announced last week.
Image: A screen showing the Hang Seng index in central Hong Kong. Pic: Reuters
Speaking on Air Force One on Sunday, Mr Trump said foreign governments would have to pay “a lot of money” to lift his tariffs.
“I don’t want anything to go down. But sometimes you have to take medicine to fix something,” he said.
The US president said world leaders were trying to convince him to lower further tariffs, which are due to take effect this week.
“I spoke to a lot of leaders, European, Asian, from all over the world,” Mr Trump told reporters.
“They’re dying to make a deal. And I said, we’re not going to have deficits with your country.
“We’re not going to do that because to me, a deficit is a loss. We’re going to have surpluses or, at worst, going to be breaking even.”
Mr Trump, who spent much of the weekend playing golf in Florida, posted on his Truth Social platform: “WE WILL WIN. HANG TOUGH, it won’t be easy.”
President Trump believes his policy will make the US richer, forcing companies to relocate more manufacturing to America and creating jobs.
However, his announcement has shocked stock markets, triggered retaliatory levies from China and sparked fears of a global trade war.
Reality hits that trade war no longer just a threat
China’s announcement of its tariff retaliation came late afternoon on Friday local time.
Most Asian markets closed shortly after – and markets in China, Hong Kong and Taiwan were closed for a public holiday – meaning the scale of the hit did not play out until today.
This morning we are getting a sense of the impact. Dramatic falls across all Asian markets clearly signal a realisation a global trade war is no longer just a threat, but a reality here to stay, and a global recession could yet follow.
Up until Friday, China’s response to Donald Trump’s tariffs had been perceived as restrained and designed to avoid escalation, the markets had reacted accordingly.
But that all changed last week when Mr Trump’s new 34% levy on all Chinese goods was matched by China with an identical tax. Both sit on top of previous tariffs levied, meaning many goods now face rates in excess of 50%.
These are numbers that make most trade between the world’s two biggest economies almost impossible and that will have a global impact.
China has clearly decided any forthcoming pain will have to be managed, and not being seen to be cowed and bullied by Mr Trump is being deemed more important.
But the scale of the retaliation will have further spooked the markets as it makes the prospect of negotiation and retreat increasingly unlikely.
Mr Trump added to the atmosphere of intransigence when he told the media on Sunday the trade deficit with China would need to be addressed before any deal could be done. The complete lack of concern from the White House over the weekend will also not have helped.
While smaller economies like Japan, South Korea, Cambodia and Vietnam are all lining up to attempt to negotiate, there are a lot of nations in that queue.
There is a sense none of this will be easily rectified.
US customs agents began collecting Mr Trump’s baseline 10% tariff on Saturday.
Higher “reciprocal” tariffs of between 11% and 50% – depending on the country – are due to kick in on Wednesday.
Investors and world leaders are unsure whether the US tariffs are here to stay or a negotiating tactic to win concessions from other countries.
Richard Flax, chief investment officer at wealth manager Moneyfarm, said: “I guess there was some hope over the weekend that maybe we would see this as part of the start of a negotiation.
“But the messages that we’ve so far seen suggest that the President Trump is comfortable with the market reaction and that he’s going to continue on this course.
Goldman Sachs has raised the odds of a US recession to 45%, joining other investment banks that have also revised their forecasts.
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In the UK, Sir Keir Starmer has promised “bold changes” and said he would relax rules around electric vehicles as British carmakers deal with a new 25% US tariff on vehicles.
The prime minister said “global trade is being transformed” by President Trump’s actions.
KPMG has warned tariffs on UK exports could see GDP growth fall to 0.8% in 2025 and 2026.
The accountancy firm said higher tariffs on specific categories, such as cars, aluminium and steel, would more than offset the exemption on pharmaceutical exports, leaving the effective tariff rate around 12%.
Yael Selfin, chief economist at KPMG UK, said: “Given the economic impact that tariffs would cause, there is a strong incentive to seek a negotiated settlement that diminishes the need for tariffs.
“The UK automotive manufacturing sector is particularly exposed given the complex supply chains of some producers.”
Traders called this morning a complete bloodbath as the UK’s FTSE 100 joined world indexes in turning red as uncertainty over Donald Trump’s tariffs continued to batter stock markets.
The cause is not just the imposition of those tariffs (the largest the US has inflicted since the 1930s) and the very obvious drag this will have on global trade and growth, but also the uncertainty of ‘what next?’.
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Investors cannot work out if the Trump administration is genuinely wedded to tariffs on this scale, on the proviso that they will help re-shore companies and millions of jobs to the United States.
They don’t know if they are permanent or merely part of a negotiating tactic to address trade imbalances, and for America to use its economic heft to strike better deals.
If Mr Trump is open to deals (the first test comes later in a meeting with the Israeli prime minister), markets will calm, even if the midst of uncertainty hasn’t fully cleared.
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17:21
Time to change tactics with Trump?
However, if this is a genuine rewiring of global trade and the end of globalisation as we know it, markets and economies will continue to get battered.
As one Trump supporter, billionaire Bill Ackman – who opposes the tariffs – put it, President Trump has launched a “global economic war against the whole world” that will usher in an “economic nuclear winter.”