A six-year freeze on income tax thresholds by Chancellor Rishi Sunak in 2022 is expected to raise an additional £78bn and pull four million people into paying more than 40% of their earnings in tax by 2028. This put pressure on households struggling with a cost of living crisis and will disincentivise work, according to the Institute for Fiscal Studies. Pension contributions are free from tax and workers impacted by the tax grab should plan to increase their contributions, according to Interactive Investor.
The UK’s pledge of £1bn ($1.4bn) to boost its semiconductor industry over the next decade has been criticised as “insignificant” by industry figures, compared to the $50bn promised by the US and €43bn pledged by the EU. The boost is intended to expand the domestic industry, protect national security and reduce the risk of supply chain disruption. However, the UK currently has to import critical silicon chips from Taiwan. Simon Thomas of UK start-up Paragraf described the announcement as “quite frankly flaccid” and Garner consultant Gaurav Gupta said it would not create a UK company capable of competing with major chip producers.
Food prices have overtaken energy costs to become the biggest driver of the UK’s cost-of-living crisis, increasing by a fifth in the year to March and set to increase by £1,000 ($1,390) per family on 2020 figures by July, according to think-tank The Resolution Foundation. Around 56% of UK families, some 16 million households, are set to feel the impact worst with those on low-to-middle incomes particularly affected. Supermarkets have argued that rising costs from fertiliser, energy prices and higher wages has driven the increases, while critics including Liberal Democrat leader Ed Davey accuse them of profiteering.
Chinese ambitions to dominate the world put all nations who challenge its rule at risk, according to The Telegraph. The Chinese Communist Party’s support of the Russian invasion of Ukraine distracts leaders from subversive efforts to actively undermine global democracies, free trade, and liberal order. Xi Jinping is reportedly preparing his military to forcibly annex Taiwan if necessary, although there is no credible model to achieve this without violence. The CCP’s actions during the pandemic have damaged trust at home, while parties such as Germany remain reliant on China’s market. The West must forge new alliances, strengthen supply chains, and impose sanctions to achieve credible economic deterrence and resist global tyranny.
Bank of England Governor Andrew Bailey has claimed that wage demands are contributing to continued inflation, warning of the possibility of a wage-price spiral. However, critics argue that targeting wage growth disregards the actual cause of inflation, namely the hundreds of billions of pounds of money-printing during the pandemic, which led to a significant increase in the money supply, boosting aggregate demand. The Cato Institute's Ryan Bourne suggests that blaming wage growth after record expansion of the money supply is like lamenting gravity as the cause of hurtling to the ground after being thrown from a plane. Moreover, today's wage increases fall behind the rate of inflation, meaning 7% pay boosts on average are being negated by price hikes, so wages are falling in real terms. Bailey's latest efforts to find a scapegoat to justify his institution's failure to keep inflation in check may not be enough to stave off criticism, as the Bank has repeatedly underestimated inflation in its forecasts and struggles to get prices under control.
Labour's recent spending pledges ahead of the 2024 general election are uncosted, according to The Telegraph. Sir Keir Starmer is putting more promises for major public expenditures, among them £200bn to match US President Joe Biden's per capita expenditure and £100bn of Blair-era healthcare investment. However, estimates on costs for raising revenue from additional taxes, such as non-dom and VAT on private schools, are likely to be overoptimistic, while windfall taxes are likely to deter investment, the paper said. This leaves the party's most logical option as a mix of wealth taxes, which other countries have shown can prove counterproductive and encourage avoidance, evasion, and capital flight.
Nadhim Zahawi, the UK minister for vaccine deployment, has joined thinktank the Adam Smith Institute (ASI). Zahawi said many solutions to modern challenges can be found through the wisdom of Adam Smith, and that political organisations needed to move away from "ever more government intervention". He added he wanted entrepreneurs to be liberated from bureaucratic restrictions, particularly in the growing fields of AI, quantum computing and life sciences. Zahawi helped the UK introduce free ports, which was inspired by ASI research from the 1980s.
The UK government’s legally binding commitment to reach net zero emissions by 2050 may now cost consumers more than had been thought as details of the scheme begin to emerge, according to a commentary in The Telegraph by Ross Clark. Subsidising the government’s hydrogen plans could add an extra £120 ($164) to annual energy bills. Such a policy is unlikely to involve the installation of low-cost hydrogen boilers in homes, as had been previously hoped. The government prefers to promote the use of heat pumps, which cost between £7,000 and £14,000 even for a modest home, plus up to £10,000 to insulate an old house.
The UK economy is feeling the impact of the millions of people who stopped working during the pandemic and never returned, as growing numbers of work-limiting health conditions are keeping people out of the workforce. Economic productivity is suffering as one person is sick or unable to work long term for every 13 people working. The director of economic statistics at the Office for National Statistics says absenteeism is more serious than presenteeism, or working while ill, as it means people remain ill for longer. A report released earlier this year showed that by 2020, the first year of the pandemic, 18.1% of 16- to 64-year-olds had work-limiting health problems, amounting to over 7.5 million people. The number of those not in employment or seeking it is up by around 400,000 since the start of the pandemic. The knock-on effects of long-term absence from work continue to grow, with senior economists warning that the economy and businesses will both suffer as a result.
UK Chancellor Rishi Sunak has launched a £1bn ($1.35bn) semiconductor strategy, designed to create jobs and boost economic growth, but questions remain about whether the sum is enough compared to the support offered by other nations. Fresh questions over a key player were raised after Alphawave announced that its annual profits had been overstated by £6m and its finance chief was leaving, though it remains the most valuable semiconductors firm on the London Stock Exchange. Critics described the UK package as "flaccid" and "insignificant", pointing to the €43bn ($50bn) in aid provided by Brussels, and $50bn by Washington.
Services exports from the UK have grown by 17.8% from 2016 to 2022, according to data from the Organisation for Economic Co-operation and Development, marking the strongest growth in the G7. While goods exports fell in the last quarter of 2022, leading economist Sophie Hale has labelled the rise in services export as a "boom" and equating the UK's growing ability to provide high-skilled professional and business services. The Bank of England has also revealed that approvals by banks to households for house purchase loans were at the highest in February since April 2015. This activity shows signs of stability for the UK's economy, with market experts stating that the growth reflects the value of the country’s service-based industries, including travel, education and banking.
The UK's Financial Conduct Authority (FCA) plans to relax regulations on pay for financial firms with assets of less than £4bn ($5.6bn), following fears that London is falling behind other financial hubs in the post-Brexit world. The FCA will also reduce costs for companies with assets between £4bn and £20bn on a proportional basis. Performance adjustment remuneration rules known as “malus and clawback” are designed to enforce risk management by reducing bonuses or asking employees to repay previous bonuses in the event of poor performance or misconduct.
The UK's Financial Conduct Authority (FCA) plans to relax regulations on pay for financial firms with assets of less than £4bn ($5.6bn), following fears that London is falling behind other financial hubs in the post-Brexit world. The FCA will also reduce costs for companies with assets between £4bn and £20bn on a proportional basis. Performance adjustment remuneration rules known as “malus and clawback” are designed to enforce risk management by reducing bonuses or asking employees to repay previous bonuses in the event of poor performance or misconduct.
The UK is imposing the largest tax hike since the 1970s with the government's decision to freeze personal tax thresholds for the next five years, thereby dragging millions of middle-income earners into the 40% tax bracket. Sunak and Hunt have locked the starting and higher-rate thresholds at £12,570 and £50,270 respectively until 2028. As such, the share of adults paying tax at 40% will soar to 14% over the next five years, according to an Institute of Fiscal Studies report released last week. The extended threshold freeze will raise £26bn a year, equivalent to hiking the basic rate of income tax from 20p to 24p in the pound. However, this extended threshold freeze will severely hinder economic growth, and few policies are more likely to discourage investment than hiking corporation tax from 19% to 25%, which will cost the Treasury money, not raise revenue.
All the UK-based tech, media and telecoms analysts at Berenberg have joined rival Cantor Fitzgerald amid a difficult period for Berenberg, which has already lost its UK investment banking chief. The move leaves Berenberg with only a handful of equity research analysts in London, down from more than 20 less than two years ago. Last year the bank cut its UK and US headcount by 25% and 50% respectively due to a dearth of stock market listings and equity raises caused, in part, by Russia’s invasion of Ukraine.
The chairman of the UK's Treasury Select Committee, Harriet Baldwin, has urged Chancellor Rishi Sunak to reform the tax system, which she claimed was riddled with punishing levies and "perverse incentives". She said "horrible cliff edges" in the present tax framework had left many people questioning the value of working an extra hour. Baldwin also said it was only individuals who earned over £250,000 who could escape the current system's web of thresholds and levies, with some middle-class families facing marginal tax rates of above 100%. She added that there needed to be a focus on eliminating "quirks" in the system so that work pays. Baldwin also argued that high street banks were failing to deliver the returns to savers they deserve.
China's Cyberspace Administration has banned US semiconductor company Micron in its technology battle with the United States. The state cyber agency claimed that Micron's components posed significant security risks to China's critical information infrastructure supply chain, thereby affecting national security. The US Commerce Department responded by saying that there was no basis in fact for Beijing's claim and that it would continue to try to limit industry disruptions with its allies. Micron has yet to identify the products that have been barred. China has previously blacklisted US technology companies, cut off the flow of processors and barred Americans from helping the Chinese chip industry.
Pay for staff working in UK restaurants and pubs has increased at a faster rate than the national average as curbs on immigration introduced since Brexit and near-full employment put pressure on the hospitality sector. Pub wages were reported to have grown by 11.3% in the sector, compared with an average increase of 9.5%, according to research by online headhunter Caterer.com. The report also revealed that more than 1,700 jobs offering salaries of at least £50,000 ($66,640) a year were being advertised in the sector.
China's Cyberspace Administration has banned US semiconductor company Micron in its technology battle with the United States. The state cyber agency claimed that Micron's components posed significant security risks to China's critical information infrastructure supply chain, thereby affecting national security. The US Commerce Department responded by saying that there was no basis in fact for Beijing's claim and that it would continue to try to limit industry disruptions with its allies. Micron has yet to identify the products that have been barred. China has previously blacklisted US technology companies, cut off the flow of processors and barred Americans from helping the Chinese chip industry.
The Great Exhibition of 1851, which more than two million people visited six million times over five and a half months, was a celebrated series of industry fairs aimed at promoting technological progress that in turn enabled global commerce, prosperity and peace. Today, specialist industry fairs and academic conferences replace these mass exhibitions, but like their predecessors, are a vehicle for industry innovation and are “a vital tool of innovation strategy”, according to Anton Howes, of The Entrepreneurs Network. He proposes that a modern Great Exhibition for the 21st century could showcase the drone deliveries in action, lifts in driverless cars, industrial manufacturing robots, lab-grown meat and the latest in fashion, art and architecture, powered by the cutting edge of energy technology. The event could also generate inspiring and creative opportunities and perhaps even unforeseeable advances that investors could then seek to capitalise on.
