Michael Sanders, who left the Bank’s Monetary Policy Committee this summer, told Bloomberg TV that leaving the European Union had created lasting damage. Sanders said the last six years in office had been a “chaotic period”, with five prime ministers and seven chancellors. That turmoil included the Brexit vote, the devaluation of sterling, a period of political uncertainty, the pandemic and then renewed political uncertainty, says Saunders, now a senior adviser at Oxford Economics. And the legacy of this period is that the economy’s potential output “was weak.” Q: So, is the City of London damaged, losing its crown as Europe’s largest stock exchange to Paris? Sanders says the impact was broader: “The UK economy as a whole has been permanently damaged by Brexit. It has significantly reduced the potential output of the economy, eroded business investment. If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week. The need to raise taxes [and] The spending cuts would not exist if Brexit had not reduced the economy’s potential output so much. The key is to increase potential output, Saunders concludes, saying Liz Truss was right to diagnose this problem. But cutting taxes and deregulation was the wrong solution. Instead, Sanders says the government should focus on improving trade links with the EU, boosting education and trade and tackling the alarming rise in long-term illness that has decimated the UK workforce. Michael Sanders’ advice to Jeremy Hunt on Thursday? Focus on measures that avoid further damaging the economy and boost productivity — education and training, better trade ties with the EU and fixing the rise in long-term illness that has pushed many to leave the workforce. — Lizzy Burden (@lizzzburden) November 14, 2022 Chancellor Jeremy Hunt warned on Sunday that everyone will pay “a bit more tax” after the Autumn Budget, with public services expected to face severe cuts. Last Friday we learned that the UK was the only major advanced economy to contract in the last quarter…. …with business investment now 8.4% below pre-pandemic levels. UK GDP Updated at 15.04 GMT Important events BETA filters Key events (18) United Kingdom (20) Joules Group (12) Garden Trading Company (6) USA (4) Paris (4)
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Time to end, after a day in which Joules joined companies at risk of collapse, Brexit was blamed for the UK’s second period of austerity and Paris claimed the title of Europe’s biggest stock market. Here are today’s main stories, first on the Autumn Statement and the impact of Brexit: Problems in the UK economy: Cost of living crisis: The Crisis in the Cryptocurrency World: And in other news…
The UK is delaying the end of the European Union’s CE marking by two years
Another Brexit development – companies are being given two extra years to switch from European product safety labeling to a new UK system. Business Secretary Grant Shapps has announced that companies have until the end of 2024 to switch to UKCA marking for products sold in the UK. The UKCA was introduced after Brexit, to show that products comply with UK product safety regulations. Its purpose is to replace the CE marking, which indicates that products comply with European Union standards. The UK had planned to end CE mark recognition at the end of this year. However, following warnings that some companies would stop selling in the UK, the deadline was pushed back to the end of 2024. Therefore, businesses can use any markup until then. We know this is a difficult time for business. That’s why we’re giving companies more time to adopt the new UKCA product labeling system – so they can focus on growth, job creation and financial success.https://t.co/NCxGklUVXP — Rt Hon Grant Shapps MP (@grantshapps) November 14, 2022 The Business Department explains that… …given the difficult economic conditions created by shifting shifts in demand and supply, alongside Putin’s war in Ukraine and associated high energy prices, the government does not want to burden businesses with the requirement to meet the original deadline ( 31 December 2022). The government will continue to recognize CE marking for 2 years, therefore allowing businesses until 31 December 2024 to prepare for UKCA marking. Businesses can also use the UKCA mark, giving them flexibility to choose which mark to apply. The irony. The UK government admits it is causing Brexit red tape for UK businesses. So, instead of scrapping her own silly dual system, she’s just giving stressed and misguided UK companies a little more time to comply. Talk about shooting yourself in the foot. — Chris Shaw (@The_ChrisShaw) November 14, 2022 Business Sec Shapps delays for another 2 years reducing recognition of EU ‘CE’ marking – plan to make UKCA marking mandatory post-Brexit from next month has caused particular concern among some small businesses… some CE marking procedures apply also until 2027: https://t.co/45pZesE9bq — Faisal Islam (@faisalislam) November 14, 2022
Full story: Brexit is major cause of UK return to austerity, says senior economist
Anna Isaac Brexit is the ultimate reason why the UK is now facing a new round of austerity, a former Bank of England rate regulator has said. “The UK economy as a whole has been permanently damaged by Brexit,” Michael Saunders, a former external member of the central bank’s Monetary Policy Committee, told Bloomberg TV in an interview. “It has significantly reduced the potential output of the economy, eroded business investment,” he said, adding: “If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week.” “The need for tax increases, spending cuts would not exist if Brexit had not reduced the potential output of the economy so much.” Sanders joined the rate-setting committee shortly after the 2016 Brexit referendum result and left the role in August this year. He said the “main legacy of that period” was weak economic output. More here: Austerity is not inevitable, despite the need to reassure markets after September’s disastrous mini-budget. Some investors believe that taking money from the rich and giving it to the poor would be “good” by buying bonds. My colleague Anna Isaac, who has considered the options facing the chancellor, says: Bond market “vigilantes,” as they are sometimes called thanks to their history of imposing fiscal upheavals around the world, are more concerned that inflation is not fueled by a huge stimulus and that the budget is financed, rather than advocating austerity for thanks to him. “It is important that it is funded. As long as it’s funded, bond market watchers are absolutely fine with it,” says Kaspar Hense, senior portfolio manager at BlueBay Asset Management, an investment firm that focuses on bonds. “If you take the money from the rich and give it to the poor, it’s perfectly fine to buy bonds. The bond market is not very competitive in that sense.” However, investors are still more cautious about UK assets, following this autumn’s turmoil: Following the recent wild returns on UK government bonds, this debt has a riskier profile. The government will have to tread carefully for months, if not years, to avoid the prospect of a sell-off. “You can’t burn toast,” says Toby Nangle, an independent financial and market analyst. “It’s more technical than people may realize, but in basic terms, data informs the quantitative strategy that investors follow. This data is now on the machine. It’s baked in math. It frames future decisions.” Zoe Wood Brexit has also left British companies struggling to recruit staff – last week Next’s Brexiteer boss warned that current immigration policy was holding back economic growth. And today, Britain’s top business lobby urged Jeremy Hunt to use this week’s Autumn Statement to overturn immigration rules to support companies struggling with chronic staff shortages and a looming recession. The head of the Confederation of British Industry (CBI) said urgent action was needed from the chancellor on Thursday to boost the economy, including “tough policy choices” to allow more foreign workers into Britain as employers struggle with desperate staff shortages. CB director Tony Danker said: Failure to match spending and tax measures with measures to address labor shortages and productivity is likely to be detrimental in the short and long term. The desperate lack of workers inflates wages and stops business growth.” Updated at 14:34 GMT In addition to the permanent damage from Brexit, the UK also faces stubbornly high inflation. Deutsche Bank forecasts that inflation rose again in October to 10.9% (we get the data on Wednesday), from September’s 40-year high of 10.1%. And worryingly for households, Deutsche estimates that inflation will average 8.2% through 2023 – or four times the Bank of England’s target – before falling to 3.4% in 2024. The weakness of the pound, which has fallen 13% against the US dollar this year, has pushed up the cost of imported goods. Here’s a chart showing how the UK stock market has now been outperformed by Paris (see previous post for details), due to the weakness of the pound and concerns about Britain’s financial health. Updated at 13:54 GMT
Brexit has ‘permanently damaged’ the UK economy, says Michael Saunders
Britain’s exit from the European Union is one of the reasons why the UK is now entering a period of austerity, a former Bank of England policymaker has said. Michael Saunders, who quit the Bank’s Monetary Policy…
