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Britain’s economic reputation has been dealt a further blow after the International Monetary Fund (IMF) forecast that this year the UK economy will fare worse than any other country in the developed world – including Russia.

In the latest update of its economic forecasts, the IMF said that it expected the UK’s gross domestic product (GDP) to contract by 0.6% in 2023.

To add further humiliation for the chancellor and prime minister, even as Britain’s outlook was downgraded, most other countries around the world saw their forecasts upgraded.

But the Fund said that while the broader global economy was doing better than expected, with inflation having peaked and investment beginning to turn around, the UK economy would face a downgrade “reflecting tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets.”

The UK had previously been forecast to grow by 0.3% this year and 0.6% next year.

Now, said the Fund, it should expect -0.6% this year and 0.9% growth in 2024.

The comments are especially awkward for the Treasury, which has been criticised by some for its plans to raise taxes and reduce the budget deficit in coming years, resulting in an increase in costs for businesses and households, even as they continue to battle a cost of living crisis.

Up until recently, chancellor Jeremy Hunt had contextualised the UK’s relatively weak growth by pointing to the fact that the IMF’s recent forecasts projected that a third of countries were facing a recession.

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However, the Fund has now upgraded its growth projections for Italy and Germany, with the result that both will now grow more than the UK in 2023.

Indeed, Britain’s -0.6% GDP is the worst of any economy included in its latest forecast update, including Russia – which despite facing sanctions from most of the West is projected to grow by 0.3%.

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Why EY sees weaker 2023 outlook

Chancellor says UK ‘not immune’ from pressure

Mr Hunt said of the forecast: “The governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.

“Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”

The IMF said it now expected the global economy to expand by 2.9% in 2023.

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UK ‘could be in for first quarter contraction’

Although this is down from the 3.4% in 2022, it is nonetheless 0.2 percentage points faster than the Fund previously forecast in October.

It said: “Adverse risks have moderated since the October 2022 [World Economic Outlook].

“On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation are plausible.

“On the downside, severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate, and tighter global financing conditions could worsen debt distress.”

After China’s decision to open up its economy and ditch its zero-COVID policy, the Fund upgraded its GDP projection from 4.4% to 5.2% this year.

It said the US would grow by 1.4%, rather than its previous projection of 1%.

Germany, which was previously forecast to shrink by 0.3%, is now slated to grow by 0.1%.

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Shellfish industry on a ‘knife edge’ as sewage dumped in designated waters for 192,000 hours last year

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Shellfish industry on a 'knife edge' as sewage dumped in designated waters for 192,000 hours last year

Untreated sewage was released into designated shellfish waters for 192,000 hours last year, new research has found.

The dirty water pouring into English seas was a 20% jump from 159,000 hours in 2022, according to the analysis of Environment Agency data by the Liberal Democrats, shared with Sky News.

The hours of sewage dumping were spread across 23,000 separate incidents – a slight fall from the previous year, but still an average of 64 times a day.

Some fishing waters in Cornwall were forced to close last year after high levels of e.coli were found in oysters and mussels, and norovirus can also be transported via human waste.

While the fishing industry can usually clean its catch before it reaches the plate, it has branded the situation a “stitch-up” because it foots the bill for the process.

Liberal Democrat environment spokesperson Tim Farron MP said: “This environmental scandal is putting wildlife at risk of unimaginable levels of pollution.

“The food we eat, and the British fisheries industry, must be protected from raw sewage.”

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The Lib Dems are calling for an investigation into shellfish water quality – which should be protected from deterioration under the Water Framework Directive – and a government clampdown on polluting companies.

“It is getting worse on their watch and there will be real concerns for the fishing industry if this trend continues,” added Mr Farron, whose party is targeting many rural seats in the upcoming general election.

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Why are some forced to live with bad smells and trails of sludge?

The worst offender was South West Water, responsible for 13,000 sewage discharges, totalling 98,000 hours, followed by Southern Water, which released sewage 7,000 times for 73,000 hours.

Southern Water pointed to the fact 2023 fell in the wettest 18-month period on record, while South West Water said it has a high proportion of shellfish waters across its vast West Country coastline.

Just 9% of shellfish waters in England reach the top “class A” status – clean enough that shellfish harvested from them can be sold without being purified first.

Anything caught from lower quality waters must be cleaned first in depuration tanks, where the molluscs purge themselves with sterile water, or cannot be sold at all.

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Martin Laity, of Sailors Creek Shellfish, and his son. Pic: Martin Laity
Image:
Martin Laity, of Sailors Creek Shellfish, and his son. Pic: Martin Laity

Fishing industry on a ‘knife edge’

Martin Laity, of Sailors Creek Shellfish, has been catching native oysters from the waters of Cornwall for 34 years.

He tracks alerts on the latest sewage discharges, so he can avoid fishing in those waters, and sometimes soaks the oysters in purification tanks for days longer than mandated just to be safe.

He calls the situation a “stitch-up” because it pushes up producers’ electricity and labour costs, and reduces the value of their catch, for which they receive no compensation.

Joe Redfern from the Shellfish Association Of Great Britain said producers “live on a knife edge”.

“Just one bad result can shut down their business overnight, leading to huge impacts to their business. It is a desperate situation and one that seems to be getting worse, with some businesses shutting for good,” he said.

It wants compensation for producers from the fines the government imposed on water companies for excessive sewage releases.

A spokesperson for industry body Water UK said: “Water companies understand and sympathise with the issues these businesses and coastal communities are facing, which is why we are proposing to spend £11bn to reduce spills as quickly as possible, halving spills into shellfish water by 2030.”

An environment department (Defra) spokesperson said: “We’re already taking action to clean up shellfish sites by driving the water industry to deliver the largest infrastructure programme in history – £60bn over 25 years – to cut spills by hundreds of thousands each year.

“Shellfish sites will be prioritised alongside bathing waters and sites of ecological importance.”

Defra is also increasing inspections and regulator funding, and considering banning some water company bonuses, they added.

South West Water said its plans will ensure all shellfish sites in its area meet the government’s target of less than 10 spills per year by 2030, and Southern Water said shellfish can also be infected by farming, run off from roads, boats, marine life and pesticides.

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Wait for interest rate cut leads to surprise dip in house price growth

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Wait for interest rate cut leads to surprise dip in house price growth

Shifting expectations for UK interest rate cuts have contributed to a dip in house price growth, according to a closely watched measure.

Nationwide reported a 0.4% fall in average property costs last month compared with March, taking the annual rate of growth to 0.6% from 1.6%.

Economists polled by the Reuters news agency had expected month-on-month growth of 0.2%.

The lender’s report said the easing reflected “ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year”.

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The cost of fixed rate mortgage deals has risen due to market expectations that a Bank of England interest rate cut is looking further away than had been anticipated at the start of the year.

According to the latest data from the financial information service Moneyfacts, the average two-year fixed residential mortgage rate is still creeping back up towards the 6% mark last seen since December.

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It charted a figure of 5.9% on Monday – up from 5.87% seen last Friday.

The average five-year rate is nearing 5.5%.

The increases reflect rising borrowing costs for lenders themselves.

It is all based on market expectations that a UK interest rate cut will now not take place until August.

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Interest rate cut hopes pushed back

Earlier bets had been on May but the Bank has recently signalled no let up in its concerns about the outlook for inflation, with those including the pace of wage growth remaining too high.

Nationwide said wider cost of living pressures continued to weigh on buyers during April, despite the pace of wage growth standing at almost double that for price growth.

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Robert Gardner, Nationwide’s chief economist, said: “Recent research carried out by Censuswide on behalf of Nationwide found that nearly half (49%) of prospective first-time buyers (those looking to buy in the next five years) have delayed their plans over the past year.

“Among this group, the most commonly cited reason for delaying their purchase is that house prices are too high (53%), but it is also notable that 41% said that higher mortgage costs were preventing them from buying.

“Coupled with this, 84% of prospective first-time buyers said that the cost of living has affected their plans to buy, for example through having less money each month to save for a deposit.”

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Premier Inn owner Whitbread to axe 1,500 jobs as it looks to expand hotel business

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Premier Inn owner Whitbread to axe 1,500 jobs as it looks to expand hotel business

Premier Inn owner Whitbread is set to axe around 1,500 UK jobs as part of plans to build more hotel rooms and slash its chain of branded restaurants by more than 200.

The company said, while announcing a 36% hike in annual profits to £561m, that it was to begin a consultation on cutting roles under an “accelerating growth plan”.

That was to focus on hotel investment, Whitbread explained, that could see some of the jobs saved through redeployment.

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The group’s restaurant arm includes the Brewers Fayre and Beefeater brands.

The division has dragged on Whitbread’s performance since the pandemic, with the end of public health restrictions being followed by the energy-led cost of living crisis that has raised costs and damaged consumer spending power.

The company, which employs 37,000 staff in the UK, said it was to “optimise” its food and drink offering to add more than 3,500 hotel rooms across its estate and increase “operational efficiencies”.

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Whitbread said it wanted to sell 126 of its less profitable branded restaurants, with 21 sales already having gone through.

Brewers fayre sign next to Premier Inn
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Brewers Fayre, the pub/restaurant chain, is among Whitbread’s brands

It will also convert 112 restaurants into new hotel rooms.

The company revealed a 2% dip in sales across its food and beverage arm in the first seven weeks of its financial year to date.

Dominic Paul, Whitbread’s chief executive, said: “We recognise that our transition will impact some of our team members so we will be providing support throughout this process and we are committed to working hard to enable as many as possible of those affected to remain with us.”

Shares were down almost 15% in the year to date ahead of the company’s announcements.

They rose by 1.7% at the open.

Analysts said it reflected the focus on achieving more profitable growth in the UK core market and a rise in awards covering the year to 29 February.

They included plans for a share buyback of £150m on top of a £110m final dividend.

The latter award was 26% up on the previous year’s payout.

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