Tag: UK

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Tax cuts are coming, it must be election time again

Tax man

Spinning the benefits of a tax cut scenario as Chancellor Jeremy Hunt hints at further tax cuts

The Chancellor, Jeremy Hunt, has given strong hints that he wants to cut taxes in the spring Budget.

Mr Hunt reportedly said that countries with lower taxes have more ‘dynamic, faster growing economies.‘ Didn’t Liz Truss say something like that too? But of course, she didn’t ‘cost it out’ in her mini budget apparently – but she also wanted lower taxes for growth none-the-less.

Autumn statement

In the Autumn Statement, the chancellor reduced national insurance for workers by 2% and announced tax relief for businesses. If inflation falls, followed by lower interest rates, Mr Hunt may consider he has scope for further tax cuts.

At the World Economic Forum, in Davos, Switzerland – he was also reported to have said that the: ‘direction of travel’ indicates that economies growing faster than the UK, in North America and Asia tend to have lower taxes. ‘I believe fundamentally that low-tax economies are more dynamic, more competitive and generate more money for public services like the NHS,’ he reportedly said.

It is widely expected that the chancellor will focus on income tax in the upcoming Budget due on 6th March 2024

Lower than expected government borrowing last month has increased the possibility of tax cuts in the Budget, analysts say.

UK Borrowing fell to £7.8bn in December 2023, the Office for National Statistics (ONS) indicated. Interest payments dropped sharply due to a faster than expected decline in inflation. Analysts said the latest figures could give the chancellor more wiggle room for tax cuts.

December’s borrowing figure was £8.4bn less than a year earlier, and the lowest figure for the month since 2019.

Interest payments on government debt fell to £4bn, down by £14.1bn from December 2022.

Tax man
‘I hope you have some juicy tax cuts for me?’
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UK retail sales fall. Sharpest rate since Covid lockdowns

UK retail

Retail sales volumes fell by 3.2% in December in the sharpest drop since the UK was in a Covid lockdown says the ONS.

Official figures revealed a sharp decline in demand for goods, but surprisingly food sales also declined in the run-up to Christmas.

The Office for National Statistics (ONS) said it appeared people did their shopping earlier in November, taking advantage of Black Friday sales.

The latest ONS data indicates that sales tumbled at the fastest rate since January 2021.

Monthly change in UK retail sales 2019 – 2023

UK retail sales fall at sharpest rate since Covid lockdowns
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UK inflation ticks up slightly in January 2024

Beer inflation

Inflation, rose marginally to 4% in December, up from 3.9% in November 2023.

Economists had forecast a slight fall but unexpected rises in alcohol and tobacco prices were behind the surprise rise.

However, with energy bills predicted to come down in 2024, there are still expectations of interest rate cuts later this year.

On target still for 2%?

As we have seen in the Germany, the U.S., and France, inflation does not fall in a straight line, ‘but our plan is working and we should stick to it,‘ Jeremy Hunt reportedly said in a statement.

UK inflation from April 2019 to December 2023

UK inflation from April 2019 to December 2023

Unprepared for both the start and the end of the pandemic

Increases in the cost of energy and food costs, started by pandemic lockdowns ending exasperated further by Russia’s invasion of Ukraine and more recently the conflict in Israel have put household finances under extreme pressure.

The UK and other countries were woefully underprepared for all of these events as they ‘began’ and at the ‘end’. We did not prepare to come out of them – there was no exit plan!

Markets and traders are still expecting BoE to cut its base rate in 2024 due to the fast-falling inflation rate. It peaked at 11.1% in October 2022 – and now sits at 4%.

The question is: will the economic recovery be good enough to allow the Bank of England to start cutting rates?

The UK interest rate currently sits at 5.25%.

Beer inflation
‘What’s inflation?’ ‘Dunno, but my beer’s gone up!’
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Congratulations to NEXT

UK High Street

The bumper festive period led to the High Street giant to raise its profit forecast by 5% to £960m for 2024. NEXT has about 460 outlets in the UK and Ireland.

The company also expects sales to grow by 3% in 2024/25 but warned that attacks on shipping in the Red Sea could cause delays and disruptions to its stock supply.

NEXT’s full price sales were up 5.7% in the nine weeks to 30th December, £38 million ahead of its previous guidance of 2%.

The company’s share price closed at: 8146.00 on 29th December 2023, as of 4th January 2024 the share price was: 8550.

Three months share price data for NEXT.

Is this an indication of better news for the UK high street in general?

Congratulations NEXT.

UK retail sales hit 2023 low – see report.

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Wind power is being wasted adding £40 to household energy bills, according to think tank

Wind turbine and battery

Wasted wind power will add £40 to the average UK household’s electricity bill in 2023, according to a think tank.

That figure could increase to £150 in 2026, Carbon Tracker has estimated.

When it is very windy, the grid cannot handle the extra power generated. So, wind farms are paid to switch off and gas-powered stations are paid to fire up. The cost is passed on to consumers.

The government said major reforms will halve the time it takes to build energy networks to cope with extra wind power. Energy regulator Ofgem announced new rules in November 2023, which it said would speed up grid connections.

Bottleneck

Most of the UK’s offshore wind farms are in England. Dogger Bank, off the coast of Yorkshire is the largest in the world. Meanwhile, around half of onshore wind farms are in Scotland but most electricity is used in south-east England.

Carbon Tracker said the main problem in getting electricity to where it is needed is a bottleneck in transmission.

Wind curtailment

The practice of switching off wind farms and ramping up power stations is known as wind curtailment. This cost is passed on to consumers, it said. Carbon Tracker researches the impact of climate change on financial markets. It said since the start of 2023, wind curtailment payments cost £590m, adding £40 to the average consumer bill.

It warned the costs were set to increase adding £180 per year to bills by 2030. Wind farms are being built faster than the power cabling needed to carry the electricity.

Cable issue

‘The problem is, there are not enough cables. The logical solution would be to build more grid infrastructure,‘ said an analyst at Carbon Tracker. ‘It’s not even that expensive,’ he added, compared with mounting wind curtailment costs.

Industry group RenewableUK reportedly said that grid constraints, ‘reflect a chronic lack of investment in the grid.’

‘We need to move from a grid which is wasteful, to one that’s fit for purpose as fast as possible.’

However, historically it has taken between 10 and 15 years for new transmission cables to be approved.

Maybe more battery storage plants around the UK would help reduce the bottlenecks? As renewable power continues to expand, this would enable the extra power to be stored to use later.

This would be better than firing up antiquated fossil fuel power plants.

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New HMRC UK tax rules for online sellers

Tax

Are you selling online and making a little extra income?

Well, if you are, as from 1st January 2024 you will now fall foul of UK tax rules if you do not declare the income generated from these sales.

Companies like Etsy, eBay, Vinted, Airbnb etc. are obliged to collect and share details of such transactions with the tax authorities. That will allow HMRC to zero in on anyone who should be declaring the extra income but isn’t.

While HMRC was already able to request information from UK-based online operators, from the start of this year there are new rules that the UK has signed up to in cooperation with the OECD – Organisation for Economic Cooperation and Development, as part of a global effort to clamp down on tax evasion.

New rules

The new rules require digital platforms to report the income sellers are getting through their site on a regular basis.

It will apply to sales of goods such as second-hand clothes and items that have been handcrafted, but also services such as: food delivery, taxi hire, freelance work and accommodation lets or even renting out your driveway for parking.

Rule summary

  • Online sellers already paying tax do not need to alter what they are already doing.
  • Individuals have a £1,000 tax-free allowance for money made through property.
  • There is also a £1,000 allowance for trading income – for example, if you offer tutoring or gardening, or if you are selling new or second-hand items online.
  • People earning below those thresholds may not have to fill in a tax return, but should keep records in case they are asked for them.

The information will be shared between countries that have signed up to the OECD tax rules.

The UK government said the new rules would help it ‘bear down on tax evasion’, as sellers on digital platforms would now be treated more like traditional businesses.

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UK house prices 1.8% lower in 2023, says Nationwide

House prices down in 2023 says Nationwide

House prices have ended the year 1.8% lower in the UK, according to Nationwide Building Society

The Nationwide forecasts no growth or a further fall in 2024.

The lender said the average house price across the UK was £257,443 in December 2023. This was flat compared to November 2023 but down compared to December 2022.

The lender reportedly said that consumer confidence ‘remains weak’, despite some mortgage rates falling in anticipation for Bank of England (BoE) to cut borrowing costs in the months ahead.

The number of housing transactions has been running at around 10% below pre-Covid levels, Nationwide reported. The fall was more pronounced for those buying a house using a mortgage – down 20% compared to before the pandemic.

However, the volume of cash deals continues to run above the levels recorded before Covid hit.

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UK recession risk

UK recession risk!

The UK is at risk of recession after revised figures indicate the economy shrank between July and September 2023.

A recession is defined as when the economy shrinks for two three-month periods in a row.

Gross Domestic Product (GDP), which measures the health of the economy, contracted by 0.1% after previous estimates suggested growth has been flat. There was no growth between April and June 2023, after it was first calculated to have risen by 0.2%.

There have been concerns over the UK’s weak economic growth for a while now, but the UK has managed to avoid a recession so far. Whether or not there is a small recession, the bigger picture for analysts is that they expect real GDP growth to remain subdued throughout 2024. However, bear in mind that projections and forecasts do change, as already demonstrated.

Earlier this week, data showed that inflation, which measures the rate of price rises, slowed by more than expected to 3.9% in the year to November 2023, down from 4.6% in the previous month.

Forecasts do change…

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UK inflation down again

THERE ARE TWO I'S IN INFLATION!

UK inflation fell by more than expected in November 2023, driven largely by a drop in fuel prices.

Inflation dropped to 3.9% in the year to November 2023, down from 4.6% in October 2023. Other than fuel, slowing food and household items were also behind the drop.

Inflation has fallen a long way from its peak in 2022, it is still almost double the Bank of England’s 2% target.

The Bank has put up interest rates 14 times since December 2021 to try to slow price rises, pushing up savings rates but also borrowing costs.

The Bank of England Interest rate is currently at 5.25%, a 15-year high.

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UK economy declines more than expected in October 2023

UK growth

The economy fell by 0.3% October, after growth of 0.2% in September 2023.

UK GDP is 0.0%

The UK economy shrank more than expected in October 2023, as higher interest rates hit consumers. The bad weather didn’t help either.

Household spending has been dented by rate rises as the Bank of England tries to tackle inflation. It is due to make its next rate decision on Thursday 14th December 2023. Retail and tourism were hit by severe weather hit the UK in October 2023.

Analysts had predicted that the economy would fall by just 0.1% but services, manufacturing and construction sectors all contracted more than expected.

The UK economy has been stagnating and the Prime Minister has promised to speed up economic growth. But no significant recovery is expected until January 2025.

Chancellor’s spin

Commenting on the latest figures, Chancellor Jeremy Hunt said it was ‘inevitable economic growth would be subdued, whilst interest rates are doing their job to bring down inflation.’

The figures underline the ongoing impact of the cost-of-living crisis and the tools employed by our ‘decision’ makers on our behalf.

Information from ONS

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Britcoin the new UK digital pound planned

Digital pound

Britcoin is a potential British digital currency that would be issued by the Bank of England and backed by the Government.

It would be tied to the pound and have a stable value, unlike cryptocurrencies such as Bitcoin. It would be accessible through digital wallets and interchangeable with cash and bank deposits. The Treasury and the Bank of England are consulting on its launch, which could take place by 2030.

Britcoin could be used for everyday transactions, both in-store and online, and could make payments more efficient and enable innovation. However, some MPs have warned that Britcoin could cause severe financial damage and undermine the role of banks.

Some MPs have warned that Britcoin could cause severe financial damage and undermine the role of banks for several reasons.

Concerns about introducing a digital pound

  • Britcoin could increase the chance of bank runs, if customers were able to quickly and easily switch their bank deposits into digital pounds, especially during times of financial stress or panic. This could reduce the liquidity and solvency of banks and make them more vulnerable to failure.
  • Britcoin could also raise the cost of borrowing for banks and consumers, as banks would need to replace the funding that they would lose from deposits with more expensive sources. The Bank of England estimated that if 20% of bank deposits turned digital, it could result in a rise in interest rates on commercial loans.
  • Britcoin could pose risks to data privacy and security, as the government or third parties could potentially access, track, or control how users spend their digital funds. This could raise ethical and legal issues and require robust regulation and protection.
  • Britcoin could also have unintended consequences on the wider economy and society, such as affecting monetary policy, financial inclusion, innovation, and competition. The MPs said that the benefits and costs of Britcoin should be clearly evidenced before any decision is taken to introduce it.
Digital £ pound
Art illustration: Digital £ pound proposal – Britcoin

The development of a state-backed ‘digital pound’ should proceed with caution, MPs have warned.

The benefits of the currency are still unclear and there must be systems in place to protect cash access and privacy, the Treasury Committee said in a report.

The Bank of England (BoE) and the Treasury have been consulting on the idea since February 2023. They are currently designing what such a system could look like. The CBDC would be directly issued by the Bank of England (BoE), just like banknotes.

This means people would have all the same safety and security that they have with their cash currently, which is different to cryptocurrencies that fluctuate in value and are generally run by private companies.

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UK economy growth forecasts cut for next two years

UK economy growth

The UK economy will grow much more slowly than expected in the next two years as inflation takes longer to fall, the Office for Budget Responsibility (OBR) says.

Are we locked in a never-ending austerity cycle?

Living standards are also not expected to return to pre-pandemic levels until 2027-28, the Office for Budget Responsibility (OBR) said. It comes as the chancellor announced tax cuts and a rise in benefits in his 2023 Autumn Statement.

The OBR publishes two sets of economic forecasts a year, which are used to independently predict or guess what may happen to government finances. These are based on its best guess calculations about and are subject to ‘change’.

It’s just a forecast – so should we take any notice?

According to the OBR, the UK will grow by 0.6% in 2023 – much better than previous predications last autumn, when it calculated the economy would fall into recession and shrink.

However, it slashed its growth outlook to 0.7% in 2024 and 1.4% in 2025 – down from a previous forecast of 1.8% and 2.5%.

The OBR warned that inflation – currently 4.6% – will only fall to 2.8% by the end of 2024, before reaching the Bank of England’s 2% target in 2025. Previously it forecast inflation would easily beat the target next year.

OBR & ONS data set

These gloomy predictions put the Government on a collision course with the Bank of England and Britain’s budget watchdog as they clash over whether or not the UK economy is on the up.

The Governor of the Bank warned the UK was facing years of low growth, while the Office for Budget Responsibility (OBR) said the Chancellor’s ‘vague’ plans to cut spending put the public finances at risk.

Let’s re-visit these predictions this time next year and see how close or how far off the mark they were.

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Office for Budget Responsibility says UK government spending plans ‘a very big risk’

Hopeful

Spending plans outlined in the chancellor’s Autumn Statement represent ‘a very big fiscal risk’, according to the UK’s OBR.

Mr Richard Hughes, chair of the Office for Budget Responsibility (OBR), told MPs on the Treasury Select Committee that spending plans carried a level of ‘uncertainty’. He suggested that much of the promised spending is funded by projected savings rather than income already received.

Last week, the OBR slashed its forecast for UK economic growth.

In March, the OBR said it expected GDP – a measure of the size and health of a country’s economy – to grow by 1.8% in 2024 and 2.5% in 2025.

Predications cut

Those predictions have now been cut, with a new forecast suggesting the UK economy will grow by 0.7% in 2024 and 1.4% in 2025.

‘It is very difficult to assess the credibility of the government’s spending plans, because after March 2025 the government doesn’t have any spending plans,’ Mr Hughes said, as he and other members of the OBR faced questions on the Autumn Statement.

Tax by stealth

Even though the chancellor announced a cut to NI rates, he opted to leave NI and income tax thresholds untouched, meaning they remain frozen until 2028. By doing this, more workers will fall into the higher tax bracket thus creating larger than expected tax revenue for the treasury. And, as workers secure pay rises, they may end up paying more tax if they are dragged into that higher tax band.

Some 2.2 million more workers now pay the basic rate income tax of 20% compared with three years ago, according to official figures, while 1.6 million more people have found themselves in the 40% tax bracket in the same period.

Just a thought, wasn’t the former UK prime minister ousted because of unfunded projections or was that unfunded tax cuts?

Only saying…

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Bank of England governor worried over UK growth outlook

Central Banks are struggling to catch-up with inflation

The governor of the Bank of England, Andrew Bailey has raised concerns over economic growth as he warned again that interest rates will not be cut in the ‘foreseeable future’.

The bank boss said he was concerned over the UK economy’s potential to grow. It comes after the government’s forecaster cut its growth outlook for the UK, due to high inflation, interest rates, energy and food price increases which were exacerbated by the Covid pandemic and Russia’s invasion of Ukraine.

Inflation, which is the rate consumer prices rise at, has dropped sharply in recent months, falling to 4.6% in the year to October largely as a result of lower energy prices.

However, it is still more than double the Bank of England’s 2% target and Mr Bailey warned lowering inflation further would be ‘hard work’.

Interest rates are currently at 5.25%, a 15-year high, which has pushed up borrowing and mortgage costs.

The Bank of England (BoE) failed abysmally to maintain inflation at 2%.

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HSBC down online banking outages

Bank online outage

It is widely reported that HSBC‘s online banking system is experiencing some problems today, 24th November 2023. 

According to the news reports, many customers are unable to access the app or the website or make payments. 

The bank has acknowledged the issue and said it is working hard to fix it as soon as possible. Some users have also reported missing money from their accounts.

Downdetector, which tracks websites, showed more than 4000 people reported they could not access HSBC services.

‘It is impacting HSBC UK customers only – there is no impact to First Direct or M&S Bank customers’, a spokesperson for the bank said.

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UK autumn statement, in a nutshell

UK autumn statement

Some of the main takeaways from the chancellor’s autumn statement November 2023

National Insurance rate cut from 12% to 10% from 6 January, affecting 27 million people.

The 75% business rates discount for retail, hospitality and leisure firms in England extended for another year.

Class 2 National Insurance – paid by self-employed people earning more than £12,570 – abolished from April.

Class 4 National Insurance for self-employed – paid on profits between £12,570 and £50,270 – cut from 9% to 8% from April.

Full tax break permitting companies to deduct spending on new machinery and equipment from profits – now made permanent.

Funding of £4.5bn to attract investment to strategic manufacturing sectors, including aerospace, green energy, aerospace, life sciences and zero-emission vehicles.

Some £500m over the next two years to fund artificial intelligence (AI) innovation centres.

New premium planning services for England, with faster decision times for major business applications and fee refunds when these are not met.

Defence spending to remain at 2% of national income – a Nato commitment.

Overseas aid spending kept at 0.5% of national income, below the official 0.7% target.

Reaffirms previous commitments made last autumn to provide £14.1bn for the NHS and adult social care in England, as well as an extra £2bn for schools, in both 2023‑24 and 2024-25.

All alcohol duty frozen until 1 August next year.

Tobacco products duty increases by 2% above RPI inflation; hand-rolling tobacco rises 12% above RPI.

Fuel duty remains 52.95p per litre for petrol and diesel, after the chancellor announced a 5p per litre cut for 12 months in March 2023

State pension payments to increase by 8.5% from April, in line with average earnings.

Claimants in England and Wales deemed able to work who refuse to seek employment to lose access to their benefits and extras like free prescriptions.

UK autumn statement – art illustration of office worker preparing data

Further £1.3bn to help people who have been unemployed for over a year.

National Living Wage – to increase from £10.42 to £11.44 an hour from April.

Funding of £1.3bn over the next five years to help people with health conditions find jobs.

OBR Stats

Independent Office for Budget Responsibility (OBR) expects the economy to grow by 0.6% this year and 0.7% next year, rising to 1.4% in 2025; then 1.9% in 2026; 2% in 2027 and 1.7% in 2028.

Living standards not expected to return to pre-pandemic levels until 2027-28.

Underlying debt forecast to be 91.6% of GDP next year; 92.7% in 2024-25; 93.2% in 2026-27; before declining to 92.8% in 2028-29. (One to watch)

OBR forecasts that inflation – the rate prices are rising – will fall to 2.8% by the end of 2024, before reaching the Bank of England’s 2% target rate in 2025. (One to watch)

The OBR says higher inflation means real value of departmental budgets will be £19bn lower by 2027/28 compared with March 2023 forecasts.

Borrowing forecast to fall from 4.5% of GDP in 2023-24; to 3% in 2024-25; 2.7% in 2025-26; 2.3% in 2026-27; 1.6% in 2027-28 and 1.1% in 2028-29. (One to watch)

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UK inflation falls sharply to 4.6% October 2023

UK inflation drops

UK inflation fell to 4.6% in October 2023, down from 6.7% in September 2023. 

This is the lowest rate of price increases since 2021 and the bigger than expected fall should provide some relief to UK households gripped by the cost-of-living crisis. 

The main factors that contributed to the drop in inflation were largely due to lower energy prices, food and non-alcoholic drink prices, and airfares. Economists suggested that the main reason inflation fell from its peak of 11.1% in October 2022 was due to the fall in the energy price cap, which limits what suppliers can charge consumers per unit of energy.

Office for National Statistics Data (ONS)

Office for National Statistics Data

However, the UK still has the highest inflation rate of any G7 country, and some economists warn that the Bank of England (BoE) may need to raise interest rates to prevent inflation from rising again.

Target hit

The UK government will no doubt rejoice today as the end-of-year 5% has been achieved earlier than expected. But don’t party too early, the actual target is 2%. There is a limit to how much credit ministers can take for the fall as energy prices settle.

The FTSE100 was happy, it climbed some 100 points in morning trade.

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UK pay outstrips inflation by highest amount for two years

UK pay up

Pay growth has outstripped inflation by the most since 2021, in a further sign that the pressure on living costs may be starting to ease.

Regular pay rose at an annual rate of 7.7% between July and September 2023, official figures show; higher than average inflation over the same three months.

But job vacancies fell for the 16th month in row, in a worrying sign that the jobs market is weakening. Between August and October 2023, the estimated number of vacancies in the UK fell to 957000, down 58000 – although the Office for National Statistics (ONS) said the total remains well above pre-pandemic levels.

Data Source: Office for National Statistics Data

UK pay outstrips inflation by highest amount for two years

The UK’s unemployment rate was largely unchanged between July to September 2023 at 4.2%, according to ONS data.

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UK economy flatlines

UK flatlined

The U.K. economy flatlined in the third quarter, initial figures showed Friday 10th November 2023.

Gross domestic product (GDP) showed zero quarterly growth in the three months to the end of September 2023, following an increase of 0.2% in the previous quarter. In annual terms, the UK’s Q3 GDP was 0.6% higher than in the same period in 2022.

Services sector output dropped 0.1% on the quarter, but the decline was offset by a 0.1% increase in construction performance, while the production sector flatlined.

U.K. Chancellor of the Exchequer Jeremy Hunt said high inflation remains the ‘single greatest barrier to economic growth’ in the country, with the consumer price index remaining at 6.7% year-on-year in September 2023.

UK economy flatlines as inflation sticks at 6.7% year-on-year as at September 2023.

‘The best way to sustainably grow our economy right now is to stick to our plan and knock inflation on its head’, Hunt reportedly said.

It’s useful to know the government have a plan, even though they were very late to the inflation party! Guess they were sidetracked with all the other parties at No.10!

‘The Autumn Statement will focus on how we get the economy growing healthily again by unlocking investment, getting people back into work and reforming our public services so we can deliver the growth our country needs’.

Up until September 2023, the Bank of England (BoE) raised interest rates 14 consecutive times to try to influence the UK ‘product and service’ price climb.

Red flags

Interest rates are now at a 15-year high of 5.25%, and are expected to remain high for some time to come. Bank Governor Andrew Bailey reportedly said last week it was ‘much too early’ to be considering rate cuts.

Thank you Governor Baily – it so comforting and reassuring to know that the very people who missed the red inflation flags are still in charge of policy.

Transitory?

Remember, the BoE and others originally suggested inflation would be transitory – I suppose it is, if given years to move back down. What did you think was going to happen after all that borrowing and the country crawling back to work after the pandemic.

Nice job guys! Don’t forget to collect your paycheque on the way out!

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U.S. announces global action on AI safety as UK hosts AI summit

AI robot and human

The White House has announced what it is calling ‘the most significant actions ever taken by any government to advance the field of AI safety’.

Oh really! Coincidence or deliberate attempt to undermine the UK AI safety drive?

This news comes as the UK draws attention hosting a UK led AI summit. The U.S. wants to police and control the AI arena too as it does most other aspects of our life.

Biden order

An executive order from President Biden requires Artificial Intelligence AI developers to share safety results with the U.S. government. It is an attempt to place the U.S, at the centre of the global debate on AI governance.

However, this is a position the UK government has already engineered as the UK AI safety summit gets underway this week. The UK desires to place itself at the centre of AI governance.

U.S. executive order

The U.S. executive order from Biden suggests the U.S. fancies itself as the leader of global AI governance in terms of how to address such threats or does it simply want to stamp its authority in the AI world. It tried to do the same with cryptocurrencies but fundamentally failed.

U.S. measures include

  • Creating new safety and security standards for AI, including measures that require AI companies to share safety test results with the federal government.
  • Protecting consumer privacy, by creating guidelines that agencies can use to evaluate privacy techniques used in AI.
  • Helping to stop AI algorithms discriminate and creating best practices on the appropriate role of AI in the justice system.
  • Creating a program to evaluate potentially harmful AI related healthcare practices and creating resources on how educators can responsibly use AI tools
  • Working with international partners to implement AI standards around the world.

UK AI summit

The UK summit is referenced in the executive order. But it’s mentioned under the heading of ‘advancing American leadership abroad’ – indicating that the U.S. very clearly knows that it is the big player here alongside China.

The UK is determined to position itself as a global leader in the space of trying to minimise the risks posed by this powerful technology.

However, U.S. Vice President Kamala Harris and top executives from the U.S. tech giants are arriving in the UK this week to discuss AI safety at the UK government’s AI Summit, which it has billed as a ‘world first’.

The summit, hosted by UK Prime Minister Rishi Sunak, will focus on the growing fears about the implications of so-called frontier AI. President of the EU Commission Ursula von der Leyen and UN Secretary-General Antonio Guterres will also be in attendance.

The UK is determined to position itself as a global leader in the space of trying to minimise the risks posed by this powerful technology.

But the U.S. as usual, will want to be in control…

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UK plans to regulate crypto industry

Crypto

The UK government said it intends to bring a number of crypto asset activities under the same regulations that govern banks and other financial services firms.

The U.K. government has recently announced its plans to regulate the crypto industry with formal legislation by 2024. The government aims to protect consumers and grow the economy by ensuring robust, transparent, and fair standards for crypto activities. Some of the proposed measures include:

Regulating a broad suite of crypto activities, such as trading, lending, and custody services.

Strengthening rules for crypto trading platforms and requiring them to have admission and disclosure documents.

Introducing a crypto market abuse regime to prevent manipulation and fraud.

Enhancing oversight of stablecoins, which are digital tokens pegged to fiat currencies or other assets.

The government’s consultation paper is open for feedback until January 31, 2024. 

The government said it is committed to embracing technological change and innovation, while mitigating the most significant risks posed by crypto-assets.

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Moody credit agency upgrades UK

UK credit worthiness improves

Moody’s is a credit rating agency that evaluates the creditworthiness of countries, companies, and other entities. 

It recently upgraded the UK’s credit outlook from negative to stable, citing policy predictability, softer EU trade stance, and tax reversals.

This means that Moody’s expects the UK to have a lower risk of defaulting on its debts and to have a more stable economic outlook. Moody’s also noted some challenges for the UK, such as low growth prospects, high inflation, and the need for large investments in water and energy sectors.

It follows S&P, which dropped its negative outlook in April this year.

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London regains Europe’s stock market crown

FTSE100 crown

London has regained its status as Europe’s largest stock market from Paris, boosted by rising crude oil prices.

The combined market capitalization of primary listings in London but excluding ETFs and ADRs, is now $2,888.4 billion versus Paris’s $2,887.5 billion, as of 19th October, 2023.

London had lost its position as Europe’s biggest stock market in November 2022, extending a decline that started with Britain’s vote to leave the European Union in 2016.

London market

The London market, which has a large exposure to commodity stocks, such as Shell and BP, has outperformed recently due to the surge in oil prices, which reached a seven-year high this month.

Paris, on the other hand, has been weighed down by the slump in luxury stocks, such as LVMH and Kering, which have been hit by China’s crackdown on consumption and corruption.

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UK inflation sticks at 6.7%

Chart

The UK rate of inflation is stuck at 6.7% for September 2023, the same rate as August 2023, according to the Office for National Statistics (ONS).

It means prices are still rising at the same rate as the previous month.

Petrol and diesel costs kept inflation up, the Office for National Statistics (ONS) says, but food and non-alcoholic drink prices fell for the first time since September 2021.

Food inflation falls the most

Milk, cheese and eggs are among the products that went down the most; the price of household appliances and airfares fell to.

In response to the latest figures, Chancellor Jeremy Hunt said, ‘inflation rarely falls in a straight line’. He pledged to stick to the government’s promise to get the main rate of inflation down to 5% by the end of the year.

Thank you for that enlightening comment, Mr Hunt. May I remind you that even if you hit the target the government set of 5% by the end of the year; inflation will still be a whopping 3% above the Bank of England (BoE) original target!

Targets! Targets! Targets!

Thank you for that enlightening comment, Mr Hunt. May I remind you that even if you hit the target the government set of 5% by the end of the year; inflation will still be a whopping 3% above the Bank of England (BoE) original target!

Come on – get your act together! You really should have prepared batter and seen this coming.

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UK debt costs now at 20 year high!

UK Gilts

The interest the government pays on national debt has reached a 20-year high as the rate on 30-year bonds touches 5.05%.

A rise in the cost of borrowing comes at a difficult time for the chancellor, Jeremy Hunt, as he prepares for the autumn statement on 22nd November 2023. The chancellor has already made clear that tax cuts will not be announced in the autumn statement.

National debt £2,590,000,000,000

The total amount the UK government owes is called the national debt and it is currently about £2.59 trillion – £2,590,000,000,000.

The government borrows money by selling financial products called bonds. A bond is a promise to pay money in the future. Most require the borrower to make regular interest payments over the bond’s lifetime.

UK government bonds – known as ‘gilts’ – are normally considered very safe, with little risk the money will not be repaid. Gilts are mainly bought by financial institutions in the UK and abroad, such as pension funds, investment funds, banks and insurance companies.

QE

The Bank of England (BoE) has also bought hundreds of billions of pounds’ worth of government bonds in the past to support the economy, through a process called quantitative easing or QE.

A higher rate of interest on government debt will mean the chancellor will have to set aside more cash, to the tune of £23 billion to meet interest payments to the owners of bonds. This in-turn means the UK government may choose to spend less money on public services like healthcare and schools at a time when workers in key industries are demanding pay rises to match the cost of living.

Double debt

The current level of debt is more than double what was seen from the 1980s through to the financial crisis of 2008. The combination of the financial crash in 2007/8 and the Covid pandemic pushed the UK’s debt up from those historic lows to where it stands now. However, in relation to the size of the economy, today’s debt is still low compared with much of the last century.

UK debt £2,590,000,000,000

The U.S, German and Italian borrowing costs also hit their highest levels for more than a decade as markets adjusted to the prospect of a long period of high interest rates and the need for governments around the world to borrow.

It follows an indication from global central banks, including the United States Federal Reserve and the Bank of England (BoE), that interest rates will stay ‘higher for longer’ to continue their jobs of bringing down inflation.

£111billion on debt interest in a year

During the last financial year, the government spent £111 billion on debt interest – more than it spent on education. Some economists fear the government is borrowing too much, at too great a cost. Others argue extra borrowing helps the economy grow faster – generating more tax revenue in the long run.

The Office for Budget Responsibility (OBR), has warned that public debt could soar as the population ages and tax income falls. In an ageing population, the proportion of people of working age drops, meaning the government takes less in tax while paying out more in pensions, welfare and healthcare services.

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UK GDP grew in August 2023

GDP

U.K. Gross Domestic Product (GDP) grew by 0.2% in August, the Office for National Statistics (ONS) reported Thursday 12th October 2023, slightly recovering from a downwardly revised 0.6% contraction in July 2023.

Services output was the main contributor to growth in August 2023, adding 0.4% on the month to offset a fall in production output of 0.7% and a decline in construction output by 0.5%.

This data shows early signs of a cooldown in the labour market and thus, lower inflation further down the economic road.

Bank outlook

The data and outlook for the Bank of England (BoE) suggests that Bank rate increases do not have much upside from here and will most likely remain at current levels, but for a longer period.

The UK economy returning to growth in August 2023 has re-kindled expectations that interest rates will be left unchanged again in Novemeber 2023.

The economy grew marginally by 0.2% in August following a sharp fall in July 2023.