Latest news with #UKeconomy
Daily Mail
12 hours ago
- Business
- Daily Mail
Reeves told to act with 'prudence' on public finances as OECD downgrades its UK growth outlook
Rachel Reeves was yesterday given a fresh growth headache as the OECD downgraded its UK outlook and warned the Chancellor to act with 'prudence' on the public finances. Britain's economy is expected to grow by just 1.3 per cent this year, down from a previous forecast of 1.4 per cent, according to the Paris-based Organisation for Economic Cooperation and Development. And growth for next year is pencilled in at 1 per cent, down from 1.2 per cent. 'Momentum is weakening, with business sentiment rapidly deteriorating,' the OECD said, adding that the state of the public finances posed a 'significant downside risk'. It urged Ms Reeves not to loosen the purse strings, cautioning that she only had a 'very thin' amount of wiggle room left to balance the books. The OECD also warned that stubborn inflation – fuelled by Labour's national insurance and minimum wage hikes – could force the Bank of England to leave interest rates higher for longer. It came as Bank governor Andrew Bailey cast doubt on official figures showing that Britain enjoyed the strongest start to the year of any member of the G7 group of advanced economies. Mr Bailey told MPs that evidence from businesses painted a much weaker picture Office for National Statistics data pointing to growth of 0.7 per cent in the first quarter of 2025. 'The surveys are nothing like as strong as that,' he told the Treasury select committee. 'My own visits around the country are somewhat supporting the survey evidence.' The darkening outlook will add to speculation that Ms Reeves will stage another big tax raid. Yesterday, analysts at Deutsche Bank said they expected 'upwards of £10billion in tax rises to be announced in the autumn Budget '. It comes as the Chancellor comes under intense pressure from Cabinet colleagues and Labour's Left ahead of the government's spending review this month. The government is being urged to reverse winter fuel payment and child benefit cuts and dole out big spending rises, notably for defence. But Ms Reeves was urged by the OECD to stand firm. It pointed to the 'substantial' interest payments on Britain's debt pile that are weighing further on the public finances. In its latest global economic outlook, the OECD said: 'Fiscal prudence is required… strengthening the public finances remains a priority.' The report said that Britain's 'currently very thin fiscal buffers' could prove 'insufficient' if the Chancellor wanted to stimulate the economy in the event of fresh shocks. It called for 'targeted spending cuts' as well as tax reforms. The report comes just a week after a similar call from the International Monetary Fund (IMF) to 'stay the course' in bringing the public finances under control.
Daily Mail
13 hours ago
- Business
- Daily Mail
Raise council tax, says OECD, as it gives Rachel Reeves a headache with cut to UK growth forecast
Rachel Reeves has been given a fresh growth headache as the OECD downgraded its UK outlook and warned the Chancellor to act with 'prudence' on the public finances. The OECD called for the Chancellor to target tax loopholes and even highlighted council tax rises as a potential way to raise revenue. It said Britain should re-evaluate council tax bands, which could see households hit with bigger bills, particularly those living in larger homes, or expensive parts of the country, such as the South East. Britain's economy is expected to grow by just 1.3 per cent this year, down from a previous forecast of 1.4 per cent, according to the Paris-based Organisation for Economic Cooperation and Development. And growth for next year is pencilled in at 1 per cent, down from 1.2 per cent. The OECD's gloomy outlook painted a picture of UK growth continuing to be below par 'Momentum is weakening, with business sentiment rapidly deteriorating,' the OECD said, adding that the state of the public finances posed a 'significant downside risk'. It urged Reeves not to loosen the purse strings, cautioning that she only had a 'very thin' amount of wiggle room left to balance the books. Economists have warned that Reeves may have to raise taxes in her next Budget if the UK's finances do not improve. But after promising not to raise income tax, national insurance, or VAT, the Chancellor is in a tricky position. The OECD said: 'A balanced approach should combine targeted spending cuts, including closing tax loopholes; revenue-raising measures such as re‑evaluating council tax bands based on updated property values; and the removal of distortions in the tax system.' The darkening outlook will add to speculation that Ms Reeves will stage another big tax raid. Yesterday, analysts at Deutsche Bank said they expected 'upwards of £10billion in tax rises to be announced in the autumn Budget ' The OECD also warned that stubborn inflation – fuelled by Labour's national insurance and minimum wage hikes – could force the Bank of England to leave interest rates higher for longer. It forecasts that rates will fall by a further 0.75 percentage points in this cycle but not reach that level for a year. The report said: 'Bank Rate is projected to be lowered gradually from its current value of 4.25 per cent and reach a terminal value of 3.5 per cent in the second quarter of 2026, as inflation continues to converge towards target and growth slows below potential.' It came as Bank governor Andrew Bailey cast doubt on official figures showing that Britain enjoyed the strongest start to the year of any member of the G7 group of advanced economies. Mr Bailey told MPs that evidence from businesses painted a much weaker picture Office for National Statistics data pointing to growth of 0.7 per cent in the first quarter of 2025. 'The surveys are nothing like as strong as that,' he told the Treasury select committee. 'My own visits around the country are somewhat supporting the survey evidence. The Chancellor is under intense pressure from Cabinet colleagues and Labour's Left ahead of the government's spending review this month. The government is being urged to reverse winter fuel payment and child benefit cuts and dole out big spending rises, notably for defence. But Ms Reeves was urged by the OECD to stand firm. It pointed to the 'substantial' interest payments on Britain's debt pile that are weighing further on the public finances. In its latest global economic outlook, the OECD said: 'Fiscal prudence is required… strengthening the public finances remains a priority.' The report said that Britain's 'currently very thin fiscal buffers' could prove 'insufficient' if the Chancellor wanted to stimulate the economy in the event of fresh shocks. It called for 'targeted spending cuts' as well as tax reforms. The report comes just a week after a similar call from the International Monetary Fund (IMF) to 'stay the course' in bringing the public finances under control.
Telegraph
18 hours ago
- Business
- Telegraph
Trump is testing the dollar to destruction
The peace dividend of the post-Cold War era has gone. Yet Sir Keir Starmer, the Prime Minister, still can't say when the UK may be in a position to spend the prescribed 3pc of GDP on defence, let alone the 3.5pc widely thought necessary among Nato allies. Nor does he have any answers for how even the 3pc target will be paid for. Similarly with his screeching reversals on the winter fuel allowance and disability benefits. Meanwhile, Rachel Reeves, the Chancellor, is on track to breach her own fiscal rules by a staggering £57bn, according to one eminently plausible analysis by an outside forecaster, making the £22bn 'black hole' she claims to have inherited from the previous government seem like an irrelevance. In any case, the public finances are continuing to deteriorate at pace, regardless of a tax burden poised to rise to a post-war record high (or, perhaps, because of this fact). External analysis further suggests that roughly 10pc of Britain's non-doms have already left the country in response to the Government's tax crackdown, with more to go. In its modelling of the additional revenues expected to be raised, the Office for Budget Responsibility (OBR) assumed around 12pc would leave, so already we are perilously close to the stage where the measures become counter-productive. Economic growth in the first quarter of this year was admittedly surprisingly strong, somewhat counteracting the presiding narrative of doom and gloom. But hardly anyone thinks it will last. Among most business leaders, the story is one of, at best, grinding stagnation compounded by higher taxes and increasingly burdensome regulatory demands. Nor is much else looking up. The City, a one-time dynamo of UK wealth creation, has lost its lustre, and the London stock market seems to be in free-fall as a place where companies want to list. But what's this? The pound sterling is close to a three-year high against the dollar, and although this is more a story of dollar weakness than pound strength, even on a trade-weighted basis the pound is slightly higher than it was when Labour came to power. Judged by its currency, the UK remains a reasonably good bet. Sadly, this seeming ray of sunshine amid the gathering darkness is not much of a reason for celebration. The main cause is stickier inflation than we are seeing throughout much of the rest of Europe, and consequently higher for longer UK interest rates.
Bloomberg
a day ago
- Business
- Bloomberg
OECD Says Reeves ‘Thin Fiscal Buffer' Poses Risks to UK Economy
UK Chancellor of the Exchequer Rachel Reeves will expose the economy to 'significant downside risk' if she does not give the government more room to maneuver within her fiscal rules, the Organisation for Economic Cooperation and Development said. Reeves' 'very thin fiscal buffer' against her main rule that taxes must cover day-to-day spending in 2029-30 is not enough to safeguard against 'adverse shocks,' the group said as it cut its estimate for UK growth in both this year and next due to the US-led trade war. The Office for Budget Responsibility, the fiscal watchdog, judges she will meet her rule with just £9.9 billion ($13.4 billion) to spare.
Bloomberg
2 days ago
- Business
- Bloomberg
Stamp Duty Deadline Dents The UK Housing Market
Can we expect a rapid rebound, or stagnation later this year? By Save Welcome to the award-winning Money Distilled newsletter. I'm John Stepek. Every week day I look at the biggest stories in markets and economics, and explain what it all means for your money. The UK housing market is behaving roughly as you'd expect, given that the cost of buying a home has recently shot up.
