Latest news with #SpringForecast
Fibre2Fashion
22-05-2025
- Business
- Fibre2Fashion
EU to see GDP growth of 1.1%, euro area 0.9% in 2025: Spring Forecast
The European Commission's Spring Forecast for the European Union (EU) released recently projected 2025 real gross domestic product (GDP) growth at 1.1 per cent in the EU and 0.9 per cent in the euro area—broadly those seen in 2024. This is a considerable downgrade compared to the Autumn 2024 Forecast. EU growth is likely to rise to 1.5 per cent in 2026, backed by continued consumption growth and a rebound of investment. Growth in the euro area is projected to reach 1.4 per cent in 2026. Exports from the EU are expected to grow by a modest 0.7 per cent this year and by 2.1 per cent in 2026, in line with the lower global demand for goods, the Forecast notes. This marks a significant downward revision from the autumn projections—at 2.2 per cent and 3 per cent respectively. The EU Spring Forecast has projected 2025 real GDP growth at 1.1 per cent in the EU and 0.9 per cent in the euro areaâ€'broadly those seen in 2024 and a considerable downgrade from the Autumn 2024 Forecast. Growth in EU and the euro area are likely to rise to 1.5 per cent and 1.4 per cent respectively in 2026. EU exports are expected to grow by 0.7 per cent in 2025 and by 2.1 per cent in 2026. Weakness in exports is amplified by competitiveness losses, as well as heightened trade uncertainty. Although EU firms are adapting their trade strategies in response to geopolitical tensions and trade fragmentation, many might hesitate to bear the high fixed costs associated with product adaptation, regulatory compliance and finding new distribution networks, necessary to enter new export markets, the Forecast says. Growth in imports was also revised down, in line with lower export growth and weaker domestic demand, although the re-routing of some Chinese exports and the euro's appreciation lend some support to import growth. Consequently, in 2025, net external demand is set to subtract nearly 0.5 per cent from growth, but this drag is expected to fade in 2026, the Spring Forecast says. Despite adverse trade volume developments, the sharp drop in energy commodity prices, cheaper industrial goods imports and a stronger currency will enhance the terms of trade further. These movements in terms of trade help maintain a largely unchanged inflow of income from the rest of the world. Disinflation is anticipated to proceed more swiftly than expected in autumn, with new disinflationary factors from ongoing trade tensions outweighing higher food prices and stronger short-term demand pressures. After averaging 2.4 per cent in 2024, headline inflation in the euro area is expected to meet the European Central Bank (ECB) target by mid-2025—earlier than previously anticipated—and to average 1.7 per cent in 2026. Starting from a higher level in 2024, inflation in the EU is projected to continue easing to 1.9 per cent in 2026. The current account surplus is expected to fall only slightly from 4.4 per cent of GDP in 2024 to 4.2 per cent in both this year and the next. Following a 1.9-per cent contraction in 2024, EU gross fixed capital formation is expected to expand over the forecast horizon. With a growth rate of 1.5 per cent in 2025 and 2.4 per cent in 2026, the expected rebound and acceleration are significantly less pronounced than projected in autumn. As the labour force expands more modestly, the EU unemployment rate is projected to decline to a new historic low of 5.7 per cent in 2026. Tight labour markets and improving productivity are set to drive further wage growth. After increasing by 5.3 per cent in 2024, growth in nominal compensation per employee is expected to slow to 3.9 per cent in 2025 and 3 per cent in 2026. On aggregate in the EU, this year, real wages should fully recover the purchasing power losses accrued since mid-2021, though in a few member states the recovery in real wages is still lagging behind, the report adds. Fibre2Fashion News Desk (DS)
Zawya
17-03-2025
- Business
- Zawya
Sterling moves up traders' agenda, strengthens versus dollar and euro
Sterling gained against a broadly weaker dollar on Monday, as traders' attention turns back towards Britain and the pound ahead of this week's Bank of England meeting and next week's update on the country's public finances. The pound gained 0.27% to $1.2973, just shy of last week's four-month high, but the move was largely in line with other European currencies as worries about U.S. growth continue to weigh on the dollar. Versus the euro, the pound was a fraction stronger at 84.05 pence, having weakened sharply from around 82 pence per euro in early March, on the back of Germany's massive spending plans. The pound has largely been buffeted by developments in Europe and the United States but the next few weeks will offer some important local drivers. "It would be fair to say that GBP has not been top of mind for investors since the February BoE meeting. Tariff talk, trade uncertainty and the German fiscal bazooka have dominated price action in both rates and FX," BofA analysts said in a note. "Heading into the (next) BoE meeting, GBP should find some focus with a heavy schedule of events, culminating in the Spring Forecast on 26 March." They added that the pound's weakening against the euro has been "excessive" and the currency is ripe for a comeback. The Bank of England meets on Thursday when it is expected to hold rates, leaving investors' focus on whether official remarks disrupt market expectations of two more 25 basis point rate cuts by year end. Wage data is also released on Thursday and will feed into that assessment. The following week finance minister Rachel Reeves will give an update on the public finances, a moment that investors say could prompt another market shock to an economy that is increasingly reliant on fickle foreign funds. (Reporting by Alun John; Editing by Kirsten Donovan)
Reuters
17-03-2025
- Business
- Reuters
Sterling moves up traders' agenda, strengthens versus dollar and euro
LONDON, March 17 (Reuters) - Sterling gained against a broadly weaker dollar on Monday, as traders' attention turns back towards Britain and the pound ahead of this week's Bank of England meeting and next week's update on the country's public finances. The pound gained 0.27% to $1.2973 , just shy of last week's four-month high, but the move was largely in line with other European currencies as worries about U.S. growth continue to weigh on the dollar. Versus the euro, the pound was a fraction stronger at 84.05 pence, having weakened sharply from around 82 pence per euro in early March, on the back of Germany's massive spending plans. The pound has largely been buffeted by developments in Europe and the United States but the next few weeks will offer some important local drivers. "It would be fair to say that GBP has not been top of mind for investors since the February BoE meeting. Tariff talk, trade uncertainty and the German fiscal bazooka have dominated price action in both rates and FX," BofA analysts said in a note. "Heading into the (next) BoE meeting, GBP should find some focus with a heavy schedule of events, culminating in the Spring Forecast on 26 March." They added that the pound's weakening against the euro has been "excessive" and the currency is ripe for a comeback. The Bank of England meets on Thursday when it is expected to hold rates, leaving investors' focus on whether official remarks disrupt market expectations of two more 25 basis point rate cuts by year end. Wage data is also released on Thursday and will feed into that assessment. The following week finance minister Rachel Reeves will give an update on the public finances, a moment that investors say could prompt another market shock to an economy that is increasingly reliant on fickle foreign funds.
Telegraph
11-03-2025
- Business
- Telegraph
Spring Statement 2025: when is it and what taxes could Rachel Reeves raise?
Rachel Reeves unveiled a record breaking £40bn of tax rises in her first Budget last autumn. As businesses, farmers and the everyday person continue to lick their wounds, the Chancellor will this month return to the dispatch box to lay out plans for the next six months. Telegraph Money delves into what's on the cards for March 26. What is the Spring Statement? It technically isn't a Budget, and this year it's going by the official name of a Spring Forecast. This is the Autumn Budget's little brother. Rather than being a full-blown Budget, this month's event is a smaller affair. It is to provide an update on the Government's plans for the economy based on the latest forecasts from the Office for Budget Responsibility (OBR). These forecasts, which look at the future performance of the economy, are published twice a year. March 26 will see Ms Reeves address the latest OBR forecast. It's not necessarily about setting new taxation plans, but they aren't completely off the table. What taxes could Rachel Reeves increase? Economists have warned that Rachel Reeves has wiped out the £9.9bn headroom she left herself in last year's Budget. As a result, she needs to take action – whether by enforcing tax rises or introducing spending cuts. It is believed the Chancellor favours the latter, with the Spring Forecast reportedly containing £6bn pounds of public spending cuts. Since Labour gained power, economic conditions have deteriorated, exacerbated by global trade disruptions, higher inflation and increasing borrowing costs. With economic growth stagnating and inflationary pressures persisting, significant cuts are needed to restore financial stability. Ms Reeves is planning the 'politically painful' cuts to curb the ballooning sickness and disability benefits bill which is forecast to rise from £65bn to £100bn by the end of this decade. It comes after she hinted that ministers will prioritise making efficiency savings over tax rises as part of the Government's pledge to boost defence spending. Disability benefit changes Some £5bn of the savings will be made through tougher tests on a disability benefit called personal independence payments (Pip), which is not linked to work, but designed to help with extra costs caused by the disability. These payments will also be frozen in the next financial year, and not rise with inflation as usual. Pips can be worth up to £9,600 a year, and are designed to cover extra costs for people with disabilities and other health issues. Since they were introduced in 2013, the number of people using them has increased, especially for those citing mental health and anxiety issues. Louise Murphy, senior economist at think-tank, the Resolution Foundation, said: 'Freezing Pip next year will result in a real-terms income loss for about four million people, 70pc of whom are in low-to-middle income households. 'The scale of eligibility restrictions required to save £5bn will change who the Government considers to be disabled. It must tread very carefully on this.' Out-of-work benefits cuts The Government will also overhaul worklessness benefits by increasing payments for those actively looking for jobs, while slashing those for people unfit to work, ITV News reported. The expected changes would also raise the basic rate for Universal Credit paid to those searching for work, or in work, while cutting the rate for those judged as unfit for work. Work and pensions secretary, Liz Kendall, announced plans last week to get rid of the binary 'can versus can't work' divide, which does not take account of the reality of fluctuating health conditions. She said that instead of being dismissed as unable to work, disabled or sick people would receive follow-up assessments to help them return to employment. Under the plans, even those with extreme disabilities and unlikely to ever be fit enough to work could lose money. Tax threshold deep freeze One option the Government could explore is to extend the freeze on tax thresholds which are currently set to expire in April 2028. Workers pay the 20p rate of tax on income over £12,570, the 40p rate above £50,271, and 45p above £125,140. These thresholds are meant to rise in line with inflation so that workers' income does not fall in real terms. By freezing them, the Government gets to keep a larger share of workers' rising wages. The threshold freeze, which was originally brought in at the height of the Covid pandemic in 2021 by Rishi Sunak, is planned to end in three years' time. But in a further blow to workers, Ms Reeves is thought to be favouring a deeper freeze, keeping the thresholds level until 2030. Without having to explicitly raise taxes on 'working people' – which the Labour manifesto promised not to do – fixing thresholds for longer sees growing numbers of workers dragged into paying higher rates through wage growth alone. Taxpayers on an estimated median income of £39,000 would see an extra £810 added to their income tax bills if the freeze was extended by a year, Telegraph analysis found. Meanwhile, extending the freeze on both income tax and National Insurance contributions for two years would raise £5bn in 2028-29, according to analysis of current Bank of England inflation predictions by the Institute for Fiscal Studies (IFS). It would also raise a further £10.1bn in 2029-30, unless inflation is higher than expected, in which case it will raise even more. Paul Johnson, the head of the IFS, said a deeper freeze would be 'relatively politically painless', given that Ms Reeves could announce the change now but reverse it later if the economy improves. Ripping up the cash Isa Speculation is rife over the future of the cash Isa, with fears its tax-free saving power could be significantly reined in. Senior City executives met with Rachel Reeves in February to discuss economic growth, and how to encourage more investment from UK savers. The meeting proposed the simplification of tax-free savings, including limiting the cash Isa allowance to just £4,000 a year. Treasury officials said the Chancellor was 'listening to ideas'. Currently, savers can open multiple Isas each year, and pay in £20,000 annually without generating any tax bills on their returns, whether or not they have invested the money. Critics argue this holds back British investment potential, with cash Isa savers preferring to squirrel money away in risk-free accounts. Analysis by The Telegraph and accountancy firm Blick Rothenburg revealed that the changes would bring in just £202m for the Treasury. James Blower, of the Savings Guru, said: 'For the upset and rancour this will cause, it really doesn't make any sense for the Treasury to do. I think the danger, with such a low allowance, is savers don't value it at all and small ones don't bother because it isn't perceived to be worth the hassle.'
The Independent
14-02-2025
- Business
- The Independent
Spring Forecast: When is it and what can we expect?
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. Just months after her Autumn Budget announced £40bn of tax rises, Chancellor Rachel Reeves is preparing to update Parliament on the state of the nation's finances in her first Spring Forecast. While the previous Tory government often set out a Spring Budget, the Treasury has said it will only produce one 'fiscal update' per year in the autumn 'to give families and businesses stability and certainty on upcoming tax and spending changes.' The Office for Budget Responsibility (OBR) has still been commissioned to produce an economic and fiscal forecast for the government in the spring and autumn though. That means the Spring Forecast hopefully won't be too eventful. But there may also be pressure on the chancellor to make changes amid the currently low levels of economic growth in the UK and concerns about tax rises and wealthy people exiting the country. When is the Spring Forecast? The Spending Forecast will take place on 26 March. The OBR will publish its outlook for the nation's finances on the same day and Reeves will provide a statement to Parliament. The Treasury has said there won't be any policy announcements but the government has changed its mind in the past and may face pressure to do something to boost the economy as it attempts to stimulate growth. The OBR has already downgraded the UK's growth forecast, wiping out the £10bn of budgetary headroom Reeves had allowed herself in her previous budget. Meanwhile, while the Bank of England cut interest rates this month, it expects inflation to remain high and halved its economic growth forecast for the UK this year from 1.5 per cent to 0.75 per cent. That could keep interest rates higher for longer. Keith Church, head of economic modelling at consultancy 4most, said: 'The last thing the Chancellor will wish to do in the coming Spring Statement is rock the boat. This is intended to be a non-event in fiscal terms, with the big decisions taken in the Autumn Budget. But the OBR forecasts that sit at the centre of the statement could knock these plans off course.' Start investing with Trading 212. Capital at risk. The growth challenge The government claims it will fix the country's finances through economic growth. But Emma Moriarty, portfolio manager at CG Asset Management, warned the Chancellor is in a precarious position. She said: 'Having loosened the fiscal rules to create room for more borrowing to invest, she is now faced with lower growth and higher interest rates than expected. 'Several of the reasons for this – US tariffs, weak growth in Europe – are beyond the chancellor's control.' Matthew Parden, chief executive of money management app Marygold & Co, said the difficulty is that consumer spending drives significant growth, and depends on high levels of disposable income in households and a strong labour market with rising wages. He said: 'The data doesn't indicate that this is in place. Business investment can drive growth; however, businesses have been hit with higher employment taxes to generate £25bn of much-needed tax receipts. 'The government can spend more on infrastructure, such as roads, rail, and housing and this would increase employment and help stimulate the economy - but it needs to be paid for either by raising taxes, not likely, or issuing more debt, which will have wider consequences.' Moriarty adds that in immediate fiscal terms, Reeves has only two options. She said: 'The first, to cut spending, is politically difficult and practically impossible. Public investment is central to the Labour manifesto, and day-to-day departmental spending is already visibly very stretched. 'The second, to raise taxes, will almost inevitably need to happen but would mean breaking a campaign promise not to raise taxes on working people. This situation is made more immediate by the gilt markets: if it is not dealt with quickly, the fiscal rules become harder to meet. As the UK's fiscal condition deteriorates, the markets will demand increasingly higher interest rates from the government.' How can the chancellor boost the economy? Over the longer term, said Moriarty, the single most effective measure to raise growth rates in the UK economy is supply-side reform, enabling faster housebuilding and transport infrastructure among other things. Parden adds that cutting red tape and regulation could also help, making it easier for firms to succeed - and indeed fail if required. He said: 'One thing the government has already recognised is that increasing productivity stimulates the right sort of growth - growth with lower inflation and higher wages and living standards. That's why they've already put a lot of political capital into artificial intelligence, which has the potential to deliver much-needed productivity gains." James Igoe, head of the Manchester office at investment management firm Redmayne Bentley, suggested there are likely to be some efficiency savings where government departments will be instructed to identify savings as part of a spending review. Infrastructure projects that had been allocated funding may even be cancelled to support cutbacks, he said. 'Better connectivity can be achieved through infrastructure projects, which appear to be in planning, such as Heathrow Airport's third runway and the Oxford-Cambridge Arc. 'International relations will also be a driver of economic outcomes for the UK. Having relationships with the European and US economies which allow for import/export trade to support UK businesses is another driver of productivity and something that the chancellor will be keen to support.' Will the chancellor raise taxes again? Despite the Treasury stating there won't be any fiscal changes in the Spring Forecast, there are fears that more tax rises could be on the cards to plug gaps in public finances. The chancellor clamped down on inheritance tax reliefs for farms and businesses in the Autumn Budget and gifting rules could be next on the agenda. Ingrid McCleave, partner at law firm DMH Stallard, said: "Gifting during one's lifetime has for many years been a successful way of reducing inheritance tax on death. Provided the person making the gift survives for seven years after making the gift, the gift falls outside of their estate on death for inheritance tax purposes. "Reeves is likely to extend the seven years survival period required to 10 to 15 years, in the expectation that individuals tend to gift in their latter years to avoid paying inheritance tax and a greater number will fail to survive.' If Reeves wanted to cut taxes to stimulate the economy instead, Miles Dean, head of international tax at Andersen LLP suggests reducing corporation tax and the additional rate of income tax to 15 per cent and 40 per cent respectively could 'fire up the entrepreneurial sector.' Jordan Burnard, tax associate at law firm Freeths, acknowledges there is little scope for tax cuts but added: 'To help those on lower incomes, lifting the freeze on personal allowances and raising tax-free thresholds could provide relief. 'The nation waits with bated breath to see if meaningful action will be taken to address these pressing economic issues. The budget will likely be surrounded by noise and speculation, but we expect a statement which doubles down on the announcements made in October without any substantive changes.' When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
