Why the economy is not yet listening to the chancellor’s battle cry

Published

4 months ago

March 15, 2025

admin

Since the turn of the year, Chancellor Rachel Reeves has had a single priority, repeated loud and clear at every opportunity; growth.

It was a battle cry repeated from Beijing to Cape Town via Davos and repeatedly at home but, judging by figures for January, the economy is not yet listening.

A contraction in GDP of 0.1% was below economists’ consensus of a similar amount of growth in the first month of the year. Following a larger than expected positive bump of 0.4% in December, it confirms the trend established in the second half of 2024 of an economy bumping along at around zero.

Money latest: Boost for Brit holidaymakers over £6 ‘euro-visa’

The causes were a significant decline in production and manufacturing of metals, pharmaceuticals and oil and gas that a small increase in services growth, the engine of the British economy, could not offset.

Accommodation and pub and restaurant sales were down, with an increase in food sales indicating even more people than in a typically parsimonious January chose to entertain themselves at home.

There are caveats. This is just a single month’s data (and missing trade figures that the ONS has delayed after discovering “errors”) but both moves are cause for concern.

These numbers only cover the first 10 days of Donald Trump’s second term and the impacts of his tariffs regime will not show up in the data for a few months yet, but it is safe to say increased costs on metals exports will be unhelpful.

The slowdown in hospitality also highlights the impending impact of Rachel Reeves‘ first budget, which takes effect next month. Business groups say the increase in employee National Insurance rates and thresholds, undeniably a cost to business, has had a chilling effect on plans for investment and the growth it might generate.

Ms Reeves knows this, and the negative sentiment in part explains a mantra that has seen support for a third runway at Heathrow and a second at Gatwick, and every area of public policy, from planning to clean power to defence spending, yoked to her growth mission.

The challenge for the chancellor is that these are strategic policy choices that will be judged over years not months, and she has only 12 days until she has to deliver a spring statement expected to show all her room for manoeuvre squeezed by low growth and higher borrowing costs.

Politics

Crypto’s path to legitimacy runs through the CARF regulation

Published

14 hours ago

July 5, 2025

admin

Crypto’s path to legitimacy runs through the CARF regulation

The CARF regulation, which brings crypto under global tax reporting standards akin to traditional finance, marks a crucial turning point.

Politics

Tokenized equity still in regulatory grey zone — Attorneys

Published

14 hours ago

July 5, 2025

admin

Tokenized equity still in regulatory grey zone — Attorneys

The nascent real-world tokenized assets track prices but do not provide investors the same legal rights as holding the underlying instruments.

Politics

Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

Published

20 hours ago

July 5, 2025

admin

Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

Rachel Reeves has hinted that taxes are likely to be raised this autumn after a major U-turn on the government’s controversial welfare bill.

Sir Keir Starmer’s Universal Credit and Personal Independent Payment Bill passed through the House of Commons on Tuesday after multiple concessions and threats of a major rebellion.

MPs ended up voting for only one part of the plan: a cut to universal credit (UC) sickness benefits for new claimants from £97 a week to £50 from 2026/7.

Initially aimed at saving £5.5bn, it now leaves the government with an estimated £5.5bn black hole – close to breaching Ms Reeves’s fiscal rules set out last year.

In an interview with The Guardian, the chancellor did not rule out tax rises later in the year, saying there were “costs” to watering down the welfare bill.

“I’m not going to [rule out tax rises], because it would be irresponsible for a chancellor to do that,” Ms Reeves told the outlet.

“We took the decisions last year to draw a line under unfunded commitments and economic mismanagement.

“So we’ll never have to do something like that again. But there are costs to what happened.”

Meanwhile, The Times reported that, ahead of the Commons vote on the welfare bill, Ms Reeves told cabinet ministers the decision to offer concessions would mean taxes would have to be raised.

The outlet reported that the chancellor said the tax rises would be smaller than those announced in the 2024 budget, but that she is expected to have to raise tens of billions more.

It comes after Ms Reeves said she was “totally” up to continuing as chancellor after appearing tearful at Prime Minister’s Questions.

Criticising Sir Keir for the U-turns on benefit reform during PMQs, Conservative leader Kemi Badenoch said the chancellor looked “absolutely miserable”, and questioned whether she would remain in post until the next election.

Sir Keir did not explicitly say that she would, and Ms Badenoch interjected to say: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”

In her first comments after the incident, Ms Reeves said she was having a “tough day” before adding: “People saw I was upset, but that was yesterday.

“Today’s a new day and I’m just cracking on with the job.”

Sir Keir also told Sky News’ political editor Beth Rigby on Thursday that he “didn’t appreciate” that Ms Reeves was crying in the Commons.

“In PMQs, it is bang, bang, bang,” he said. “That’s what it was yesterday.

“And therefore, I was probably the last to appreciate anything else going on in the chamber, and that’s just a straightforward human explanation, common sense explanation.”