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.
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!
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…
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.
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.
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.
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.
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.
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.
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.
Utterly shocking eye watering covid fraud related losses incurred through government incompetence.
The UK covid fraud amount is not a single figure, but rather a sum of various losses due to fraud and error across different government schemes and programmes.
List of government failures and waste
£21bn of public money lost in fraud since COVID pandemic began and most will never be recovered.
£34.5m stolen in pandemic scams by more than 6,000 cases of Covid-related fraud and cyber-crime.
£16bn lost due to fraud and error in Covid loans schemes.
£4.5bn in Covid-19 support lost to error and fraud since 2020.
Breathtaking incompetence
These figures are based on the reports and audits by the National Audit Office, the Action Fraud team, the HMRC, and other sources. However, they may not reflect the full extent of the problem, as some fraud cases may not be reported or detected.
The UK government has taken some measures to tackle fraud and recover the losses, such as creating the Public Sector Fraud Authority, the taxpayer protection taskforce, and the Dedicated Card and Payment Crime Unit.
The incompetence shown by the UK government is utterly breathtaking.
Metro Bank shares have plunged by 25% after reports emerged that the bank is urgently seeking to raise millions to bolster its finances.
The bank is in talks with investors about raising £250m in equity financing and £350m in debt, while asset sales are also being considered to strengthen the lender’s balance sheet.
The bank’s shares have already suffered substantial falls in September after regulators refused to approve a request to lower the capital, or cash, requirements attached to its mortgage business.
It has been reported that the Metro Bank share price has dropped by 70% so far this year.
As of now, it’s unclear whether the bank will be able to secure the funding it needs. As much as £600 million has been muted as need in in some reports.
Is this a worrying sign of worse to come, or just a one-off?
He was a British statesman, soldier, and writer who served as Prime Minister of the United Kingdom twice, from 1940 to 1945 during the Second World War, and again from 1951 to 1955.
Great statesman
He is considered one of the best-known, and some say one of the greatest statesman of the 20th century. He was also a Nobel Prize winner in literature for his speeches and books.
He is famous for his inspiring quotes, such as ‘Never give in, never give in, never, never, never, never—in nothing, great or small, large or petty—never give in except to convictions of honour and good sense.‘
The Xlinks Morocco-UK Power Project is a proposal to create a large-scale renewable energy complex in Morocco and feed the electricity to the UK via a long underwater cable.
Key facts
12 million solar panels, 530 wind turbines over 62 square miles.
The project aims to produce 10.5 GW of clean power from solar and wind facilities in Morocco’s Guelmim Oued Noun region. This is equivalent to about 10% of the UK’s electricity demand.
The project also plans to build a 20 GWh/5 GW battery storage facility to ensure a stable and reliable supply of electricity.
The project will use proven high-voltage direct current (HVDC) interconnector technology to transmit the electricity to the UK via a 3,800 km route under the seabed. The cable will connect to two locations in Devon and Wales, each with a capacity of 1.8 GW.
The project will create over 11,000 new green jobs in the UK and Morocco, and contribute to their renewable industrial ambitions. It will also diversify the UK’s energy sources and reduce its dependence on EU interconnectors, LNG imports, and biomass from North America.
The project is seeking a 25-year contract with the UK government to guarantee a fixed electricity price and secure financing for the £20 billion investment.
It hopes to start construction in 2024 and deliver power to the UK by 2028.
Entirely powered by sun and wind
The Xlinks Morocco-UK Power Project will be a new electricity generation facility entirely powered by solar and wind energy combined with a battery storage facility. Located in Morocco’s renewable energy rich region of Guelmim Oued Noun, it will be connected exclusively to Great Britain via 3,800km HVDC sub-sea cables.
Zero carbon power generation
When domestic renewable energy generation in the United Kingdom drops due to low winds and short periods of sun, the project will harvest the benefits of long hours of sun in Morocco alongside the consistency of its convection Trade Winds, to provide a firm but flexible source of zero-carbon electricity.
It has been suggested Rishi Sunak and Boris Johnson have overseen biggest tax rises since the Second World War
‘Fiscal responsibility’ – code words for ‘cock-up!’
Chancellor Jeremy Hunt and Prime Minister Rishi Sunak have stressed the need for ‘fiscal responsibility’ amid still-high inflation and rising debt costs.
According to the Institute for Fiscal Studies (IFS), by the time of the next general election, taxes will likely have risen to around 37% of national income, which is the highest level since comparable records began in the 1950’s.
The IFS said that this is equivalent to around £3,500 more per household, but it will not be shared equally across income group.
Health and Welfare massive tax burden
The IFS also said that this is not a direct consequence of the pandemic, but rather a result of decisions to increase government spending on health and welfare, and some unwinding of austerity. They predicted that this parliament would mark a decisive and permanent shift to a higher-tax economy.
Other think tanks, such as the Nuffield Foundation, have echoed this view and said that there will be strong pressure in future parliaments to raise taxes further to meet growing demand for public services.
Dissatisfied
Some Conservative MPs have expressed their dissatisfaction with the lack of tax cuts from the government, as they believe that reducing taxes is a key part of the party’s philosophy. Chancellor Jeremy Hunt and Prime Minister Rishi Sunak have stressed the need for fiscal responsibility amid still-high inflation and rising debt costs.
Lurching from one problem to the next
We saw this type of response under George Osborne during the ‘austerity’ period after the financial crisis of 2008. And now again, after Brexit and the pandemic. They were all Conservative governments.
Hunt has reportedly said it would be virtually impossible to cut taxes at the moment – no surprise there then!
Labour has criticised the government for clobbering the general public with tax rises and failing to deliver growth and wages.
The Rosebank oil and gas field is a controversial project that has been approved by the UK government despite the concerns of environmental activists and some politicians.
It is located about 80 miles west of Shetland in the North Sea and is estimated to contain 500 million barrels of oil. It is operated by Equinor, a Norwegian state-owned energy company, with its partners Ithaca Energy and Suncor Energy. The development of the field is expected to cost £6 billion and create 2,000 jobs.
Carbon conflict
It is also expected to produce 200 million tonnes of carbon dioxide over its lifetime, which is equivalent to the annual emissions of 40 million cars.
The approval of the Rosebank field has sparked a debate over the role of fossil fuels in the UK’s energy transition and its commitment to net zero emissions by 2050. Critics argue that the project is incompatible with the UK’s climate goals and that it will undermine its credibility. They also claim that most of the cost of the development will be borne by the taxpayers through tax reliefs and subsidies.
UK not yet ready to turn off the oil and gas
However, some supporters of the project contend that it will provide a reliable source of energy and revenue for the UK, as well as support thousands of jobs in the oil and gas sector. They also point out that the UK still relies on fossil fuels for most of its energy needs and that it will need to import more oil and gas from abroad if it does not develop its own resources.
‘Didn’t expect to see you here again, thought you’d retired’. ‘Yeah, me too!’
They argue that the Rosebank field will be developed with high environmental standards and that it will contribute to the UK’s transition to a low-carbon economy by investing in renewable energy and carbon capture technologies.
Contentious
The Rosebank oil and gas field is a complex and contentious issue that reflects the challenges and trade-offs involved in balancing economic growth, energy security, and environmental protection. It is likely to remain a topic of heated discussion.
The field is expected to start producing oil from 2026
If drilling starts on time, Rosebank could account for 8% of the UK’s total oil production between 2026 and 2030.
Roughly 245 million barrels will be produced in the first five years of drilling, with the remaining being extracted between 2032 and 2051.
Though oil is the main product, the site will also produce gas.
About 1,600 jobs are expected to be created during the peak of construction. Long term, the operation will create 450 jobs.
Will it mean lower energy bills in the UK?
No! Oil and gas from UK waters is not necessarily used here – it is sold to the highest bidder on global markets.
What Rosebank produces will be sold at world market prices, so the project will not cut energy prices for UK consumers.
The Norwegian state oil company Equinor – which is the majority owner of Rosebank – has confirmed this.
Oil also tends to be sent around the world to be refined – the UK does not have the capacity to refine all its own oil-based products.
According to the latest data, 1.00 GBP is equal to 1.22 USD
This means that one British pound can buy 1.22 U.S. dollars at the current market rate. The exchange rate fluctuates depending on various factors such as supply and demand, interest rates, inflation, trade balance, and political stability.
Weak against U.S. dollar
The British pound has been weakening against the U.S. dollar since the Brexit referendum in 2016, when the UK voted to leave the European Union. The uncertainty and instability caused by the Brexit process have reduced the confidence and attractiveness of the British currency in the global market. The U.S. dollar, on the other hand, has been strengthening due to its status as a safe haven and a reserve currency in times of crisis.
In September 2022 the pound fell to its lowest level against the U.S. dollar
Excessive government spending and tax cuts that undermined confidence in the UK economy.
Price caps and record high inflation that eroded the purchasing power of the pound.
The strength of the dollar as a safe haven currency amid global uncertainty.
The prospect of a new Scottish independence referendum that increased political risk.
The impact of the Covid pandemic and the Russia-Ukraine conflict on supply chains and trade.
Artwork of GBP
UK pound closes in on a six month low
September 2022
The pound reached $1.0327 at one point in late September 2022, its lowest since Britain went decimal in 1971. It also fell more than 1% against the euro to about 86.80p, its lowest level since May 2020.
Today, 22nd Septmber 2023
The current exchange rate of 1.22 USD per GBP is near the lowest point in the last 30 and 90 days, which was 1.2383 USD per GBP.
The highest point in the same period was 1.3128 USD per GBP. The average exchange rate in the last 30 days was 1.2563 USD per GBP, and in the last 90 days was 1.2721 USD per GB pound.
‘Have you noticed everytime the government needs to persuade the public that their ‘message’ is so super important – they roll out the magic message lectern”.
Introducing the UK magic message government lectern
Other important messages
And this…
And this one…
The latest government slogan… ‘LONG-TERM DECISIONS FOR A BRIGHTER FUTURE’
Let’s roll out the advertisements to persuade the UK public the government knows best… again.
They convinced me!
Not!
It’s a joke!
The UK government is trying to peruade the public that the recent Sunak climate rollback decision is a good thing… ‘LONG-TERM DECISIONS FOR A BRIGHTER FUTURE’
According to the Office for National Statistics (ONS), the UK’s inflation rate dropped unexpectedly in August 2023 to its lowest level since the start of Russia’s invasion of Ukraine, which led to sharp rises in energy and food costs which were already on the rise due to the pandemic.
The Consumer Prices Index (CPI) rose by 6.7% in the 12 months to August 2023, down from 6.8% in July. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 6.3% in the 12 months to August 2023, down from 6.4% in July.
The ONS said that the main factors behind the fall in inflation were lower prices for clothing, footwear, and second-hand cars, partly offset by higher prices for transport services and recreational goods.
UK Inflation 1989 – 2023 (ONS data)
The ONS also said that the inflation rate was still high compared with historical levels, and that it expected it to rise further in the coming months due to increases in energy bills and supply chain pressures.
Chancellor Jeremy Hunt said the news showed ‘the plan to deal with inflation is working’. Well Jeremy, your comments are encouraging – if you truly believe a 0.1% fall in inflation is ‘working‘. Where were you when the Bank of England lost control of the ‘2% inflation remit’.
‘Don’t worry – the money is being printed as we speak. Come and get your share now!’
Where were you when the excessive ‘uncontrolled’ government borrowing infected the UK’s economy? With all that ‘free’ money sloshing around the system, what did you really expect would happen..?
The FTSE 100 is the index of the 100 largest companies listed on the London Stock Exchange by market capitalization. It is one of the most widely used indicators of the UK economy and the performance of British businesses.
The FTSE 100 had its best week of the year in the week ending 15th September. The index closed at 7,711 points on 15th September 2023. This was the highest weekly gain of 2023.
Investors gobbled up UK microchip designer Arm Holdings at its U.S. debut on the Nasdaq on 14th September 2023, sending its market value soaring to $60 billion (£48.3 billion).
The shares ended the day worth more than $63 each, after climbing by almost 25% from the high end start of $51 per share set by Arm.
The sale was the biggest initial public offering of the year, raising $4.87 billion for owner Softbank Group.
Despite some concerns surrounding the company’s exposure to risks in China and a potential AI slowdown – the shares soared.
British tech
A star of the British technology industry, Arm designs microchips for devices including smartphones and game consoles. It estimates that some 70% of the world’s population uses products that rely on its chips, including nearly all of the world’s smartphones. And with AI nestling in on the horizon, the future potential for Arm is massive.
Arm stock chart 14th September 2023
Arm said it expects the total market for its chip designs to be worth about $250 billion by 2025, including new growth areas such as data centres and cars.
Legacy
Many of Arm’s royalties come from products released decades ago. About half of the company’s royalty revenue of $1.68 billion in 2022, came from products released between 1990 and 2012.
Bright Future
The future looks bright for Arm but the company is trading at more than 25 times its most recent full year of revenue, and at more than 100 times profit.
And that could be where things get tricky for Arm in the not too distant future. Projections for future profits will be interesting, esecially if it’s to keep up with Nvidia for instance.
The value of UK mortgage arrears jumped by almost a third in April to June 2023 compared with the same period last year, according to the Bank of England (BoE).
Outstanding mortgage debt is now £16.9bn, the highest since 2016, it said.
Mortgage costs have risen for millions as the Bank has repeatedly hiked interest rates to slow soaring prices.
Some experts warn defaults will rise, but others say the number unable to repay remains relatively low.
According to the BoE, in April-June 16% of mortgages in arrears were new cases, which it said ‘was little changed compared to the previous quarter’.
It added that the proportion of mortgages in arrears was the highest since 2018.
The UK superfund plan is a new initiative launched by the Prime Minister and the Technology Secretary on 6 March 2023, with the aim of making the UK a global science and technology superpower by 2030.
The plan outlines key actions that will involve every part of the government
Identifying and pursuing strategic advantage in the technologies that are most critical to achieving UK objectives
Showcasing the UK’s S&T strengths and ambitions at home and abroad to attract talent, investment and boost our global influence
Boosting private and public investment in research and development for economic growth and better productivity
Building on the UK’s already enviable talent and skills base
Financing innovative science and technology start-ups and companies
Capitalising on the UK government’s buying power to boost innovation and growth through public sector procurementSshaping the global science and tech landscape through strategic international engagement, diplomacy and partnerships
Ensuring researchers have access to the best physical and digital infrastructure for R&D that attracts talent, investment and discoveries.
Government funding
The plan is backed by over £370 million in new government funding to support infrastructure, investment and skills for the UK’s most exciting growing technologies, such as quantum and supercomputing, AI, biotechnology, clean energy, space and robotics. The plan is expected to create high-paid jobs of the future, grow the economy in cutting-edge industries, and improve people’s lives from better healthcare to security.
Government funding for Superfund
The funding sources for the UK superfund plan are mainly from the government’s budget allocation for science and technology, which has increased by 50% since 2020 to reach £22 billion per year by 2024/25. The government has also committed to increase public spending on R&D to 2.4% of GDP by 2027, which is expected to leverage additional private sector investment. Moreover, the government has established a new agency called Advanced Research & Invention Agency (ARIA), which will have a budget of £800 million over four years to fund high-risk, high-reward research projects that could lead to breakthroughs in science and technology.
Foreign investment
The UK superfund plan also aims to attract more foreign direct investment (FDI) into the UK’s science and technology sector, by promoting the UK as a leading destination for innovation and showcasing its world-class research facilities, talent pool, regulatory environment and market opportunities. The government has set a target of increasing FDI stock in R&D from £45 billion in 2018 to £67 billion by 2025.
The UK superfund plan is a separate initiative from the superfund consolidators for defined benefit (DB) pensions, which are a new innovation in the UK pension industry. Transferring a DB pension scheme to a superfund can improve the security of members’ benefits by replacing a weak employer covenant with a capital buffer. The Pensions Regulator (TPR) has published guidance for trustees and sponsoring employers of UK DB pension schemes considering transacting with a superfund.
GB Savings One Fund
The GB Savings One Fund is a proposal by the Tony Blair Institute (TBI) to create the country’s first superfund for pensions. According to the TBI, the superfund would be an expansion of the Pension Protection Fund (PPF), which is a statutory fund that provides compensation to members of eligible defined benefit (DB) pension schemes in the UK when their employers become insolvent.
The UK Superfund
The Tony Blair Institute suggests that sponsors of the smallest 4,500 UK DB schemes would be offered the voluntary option of transferring to the PPF on a benefit preserving basis, which would improve the security and efficiency of their pensions.
The institute also proposes that the PPF model should be replicated and rolled out throughout the UK in a series of regional, not-for-profit entities that sit within a master governance structure under the existing fund or participate in consolidation in parallel with and modelled on the original GB Savings.
The TBI argues that this approach would result in a modernised pension system that would generate better returns for pensioners, attract more investment and talent, and strengthen pensions for the entire generation stuck with inadequate provision since the closure of the DB funds over the past two decades.
GB Bank
The GB Savings One Fund is not related to GB Bank, which is a bank that offers competitive savings accounts that support residential and commercial developments in communities that need them most. GB Bank has a full UK banking licence and offers the same level of protection as the traditional high street banks.
When you save with GB Bank, your money is protected up to £85,000 by the Financial Services Compensation Scheme (FSCS).
Slow-Growing UK Faces Over £2.6 Trillion Debt Pile
£2,600,000,000,000 in debt
The amount the UK owes exceeds GDP for first time since 1961. Inflation-linked bonds mean the UK is paying more than its peers.
From the financial crisis to Russia’s invasion of Ukraine, the UK has borrowed and spent its way out of every jam. The bill for that is becoming a massive concern for the UK treasury and for the economy.
£2.6 trillion public debt
The UK’s public debt has soared by more than 40% to almost £2.6 trillion ($3.3 trillion) since the pandemic struck, leaving the country owing more than its entire annual economic output for the first time since 1961. A heavy reliance on index-linked bonds, at a time of high inflation, also means Britain will pay more to service the debt.
The high level of debt poses a risk to the UK’s credit rating, which could affect its borrowing costs and fiscal credibility. The three main credit-rating firms are due to update their assessments of the UK over the next four months in 2023, and some analysts are concerned that the UK could face a downgrade, especially after the U.S. lost its AAA status from Fitch.
A downgrade could undermine Prime Minister Rishi Sunak’s effort to rebuild Britain’s fiscal reputation after his predecessor, Liz Truss, triggered a bond-market crash in 2022 by promising huge unfunded tax cuts.
Bond sell-off pressure
The pressure on the UK’s finances is also being compounded by a selloff in bonds amid aggressive rate hikes by the Bank of England to quell inflation. The yield on the 10-year benchmark this week rose above 4.70% to its highest since 2008.
UK debt higher than UK GDP March 2023
The UK bond market is among the developed world’s worst performers this year. The rise in yields could increase the cost of servicing the debt, which is already high due to the UK’s heavy reliance on index-linked bonds that adjust with inflation.
The UK’s economic growth is forecast to remain flat through next year, which limits the scope for reducing the debt through higher revenues or lower spending. The National Health Service is stretched to breaking point and the tax burden is already at a 70-year high. The ONS warned that debt could balloon to more than three times GDP over the next half century without action.
ONS data
According to the latest data from the Office for National Statistics (ONS), the UK’s gross domestic product (GDP) grew by 0.2% in the second quarter of 2023 (April to June), following a revised growth of 0.1% in the first quarter of 2023 (January to March). This means that the UK’s GDP growth rate for the whole year of 2023 is estimated to be 0.3%, which is lower than the previous forecast of 0.5%.
ONS data to March 2023
The main factors that contributed to the weak GDP growth in the second quarter were the slowdown in consumer spending, the decline in business investment, and the negative impact of the additional bank holiday in May due to the King’s Coronation. The services sector, which accounts for about 80% of the UK’s economy, grew by only 0.1% in the second quarter, while the production sector grew by 0.7%, and the construction sector fell by 0.2%.
Uncertain outlook in uncertain times
The outlook for the UK’s economy remains uncertain, as it faces several challenges such as high inflation, rising interest rates, a slowing global economy, and the ongoing effects of Brexit and the effects of the war in Ukraine.
ONS data for EU countries
Some economists have warned that the UK faces a ‘very real risk’ of recession due to higher interest rates, which could dampen consumer and business confidence and increase the cost of servicing the debt.
The OECD has projected that the UK’s GDP growth will improve moderately to 1.0% in 2024, but still remain below its pre-pandemic level.
The 89 threats to life in the UK are listed in a recent report called the National Risk Register (NRR), which was published by the Deputy Prime Minister Oliver Dowden on 3rd August 2023.
The NRR is an assessment of the risks facing the UK that would have a significant impact on the UK’s safety, security or critical systems at a national level. The NRR is based on the government’s internal, classified risk assessment and offers more detail on the potential scenarios, response and recovery options relating to the risks.
The 89 threats are divided into four categories: natural hazards, malicious attacks, accidents and system failures, and global events.
Some of the threats
Natural hazards: These include extreme weather events, such as heatwaves, floods, storms, droughts, and wildfires; geological hazards, such as earthquakes, tsunamis, volcanic eruptions, and landslides; biological hazards, such as pandemics, animal diseases, plant diseases, and invasive species; and space weather events, such as solar flares and geomagnetic storms.
Malicious attacks: These include terrorism, such as bombings, shootings, chemical weapons, biological weapons, radiological weapons, cyberattacks, and drones; espionage and sabotage, such as interference with critical infrastructure, communications, or data; and conflict and instability, such as war, nuclear weapons, state-sponsored attacks, civil unrest, and violent extremism.
‘Cyber security hack – just one of the potential risks facing the UK’.
Accidents and system failures: These include industrial accidents, such as explosions, fires, spills, or leaks; transport accidents, such as plane crashes, train derailments, ship collisions, or road collisions; infrastructure failures, such as power outages, water shortages, gas leaks, or internet disruptions; and technological failures, such as software bugs, hardware malfunctions, or AI errors.
Global events: These include economic crises, such as recessions, inflation, debt defaults, or trade wars; political crises, such as coups, revolutions, sanctions, or human rights violations; social crises, such as migration flows, refugee crises, humanitarian emergencies, or famines; and environmental crises, such as climate change, biodiversity loss, pollution, or resource depletion.
Threat level
The NRR also provides information on how likely each threat is to occur in the next five years (from very low to very high), how severe the impact would be on the UK (from minor to catastrophic), and what actions the government and other stakeholders are taking to prevent or mitigate the risks.
The NRR is intended to help the public and businesses better understand and prepare for potential threats facing the country now and in the future.
