Haldane explains why the UK economy is not performing as well as other countries:
We’ve seen many businesses falter, they’re just getting through Covid and the cost of living, but are vulnerable to any shock that might come along.
Think of it as a weakened society’s immune system, we’ve depleted our defenses, making us especially vulnerable.
It seems that the shocks we’ve had recently have been global, from Covid to the cost of living, but the UK always seems to be coping disproportionately with the fallout in terms of shocks to incomes and lives that come down to us not investing enough in our systems, Be it health, education or charity.
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Andy HaldaneThe former chief economist of the Bank of England, now chief executive of the Royal Society of Arts and adviser to government upgrades, predicts that real wages will fall again this year as higher mortgage costs continue to have an impact. He also warned that the recent political turmoil had caused the UK economy to underperform. But he also said that with inflation having peaked, the central bank could raise rates more slowly and see “a glimmer of light in the economy”.
Speaking on BBC Radio 4’s Today programme, Haldane argued that the UK economy was less resilient to economic crises due to underinvestment and poor coordination between the public, private and philanthropic sectors.
First the terrible double whammy of Covid and then the cost of living crisis has and is putting enormous financial pressure on many businesses, many families and of course many charities.
We’ve lost fifteen years in terms of inflation-adjusted raises. Last year we saw real wages fall and we are likely to see the same happen again, which is causing serious financial stress, indeed mental stress, for many families, which is one of the results of the lack of growth, or certainly We think growth is anemic ‘seen.
Asked whether political instability had contributed to the UK’s recent economic underperformance, he said:
When you do have a ministerial merry-go-round, that increases the likelihood that measures are not being followed through and programs that are working are not being scaled up. We still haven’t got a medium-term growth plan for the country so we can stick to whatever government and ministers are in place.
Asked if he regrets that the Bank of England has raised rates at the same time as massive energy price increases and inflation:
It’s been painful, and I fear there will be more pain as last year’s rise in mortgage rates starts hitting people’s bank accounts this year. I would prefer the BoE and other central banks to start raising rates sooner. That will help nip inflation in the bud and mean we won’t be doing those quick rate hikes while the economy hits a buffer. But in general, such global shocks will always bring a large degree of pain, including through higher interest rates.
My hope is that with headline inflation now peaking, there’s a good chance the central bank will slow down over the course of the year and not put too much of a damper on the recovery, and the early signs of this are some flashes of economic life point.
The Bank of Canada said yesterday it would pause rate hikes after raising rates for the eighth time to 4.5%, and some expect the Fed to do the same.
The focus of today’s market is on US GDP data In the fourth quarter, economic growth is expected to slow to 2.6% from 3.2% in the previous quarter.
Asian stocks MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9 percent to a fifth day of gains after retreating again, hitting a seven-month high. Trading was light, however, as Australia was closed for a holiday while parts of Asia, including China, were still celebrating the Lunar New Year. European market Expected to open higher ahead of US GDP release.
9am GMT: Italy business and consumer confidence for January
11am GMT: UK CBI retail sales survey for January
1.30pm GMT: US Q4 GDP (forecast: 2.6%, previous: 3.2%)
1.30pm GMT: US Durable Goods Orders for December
1.30pm GMT: US weekly jobless claims