The latest production data for the UK economy is almost certainly wrong if recent history is any guide.
Confidence in the numbers is at a low ebb following the Office for National Statistics under-reporting output by 2 per cent (about £50bn) in the wake of the pandemic, and the failure to collect reliable employment and wages statistics from the Bank of England.
One need not be a Pollyanna to realize that official forecasters at the Bank, the Office for Budget Responsibility and the International Monetary Fund have been consistently pessimistic about the UK.
After the rapid tightening of monetary policy and raising interest rates to 5.25 percent, it would be surprising if the economy did not slow down. High borrowing costs have led to a rise in insolvencies and a slowdown in the housing market.
But as the latest production data shows, Britain’s lean economy, with a dynamic services sector, is better able to weather the current global uncertainty than manufacturing and export-based countries such as Germany.
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How can this money help?
UK consumers continue to spend as upbeat sales and profit forecasts emerge from the retail sector, with M&S, Next, Primark and Sainsbury’s all enjoying success.
The housing market is not collapsing under the weight of mortgage costs, with the Nationwide and Halifax newspapers reporting a slight rise in prices.
The trade impact of Brexit was minimal and nowhere near the 4 per cent loss expected by the Office for Budget Responsibility.
Business investment is booming thanks to very favorable tax breaks for spending on IT, plant and equipment.
The country should not allow itself to believe the Labor and Lib Dem narrative that it was the Tories who wrecked the economy.
All this does is create a negative feedback loop that undermines consumer and business confidence.
The truth is that the economy stabilized in the third quarter, but it was better than most forecasters expected. The UK resumed growth in September, rising by 0.2 percent, supported by a resilient services sector that accounts for about 80 percent of British output.
This is despite rampant inflation (which is now on the verge of falling with a jolt) and more realistic interest rates. The Chancellor must support this existing momentum by providing focused tax cuts for the benefit of struggling people and businessmen in Britain.
safety net
With the government watching it, NatWest’s board had no choice but to redeem its stake and pay compensation to its former chief executive, Dame Alison Rose.
Her disclosure of Nigel Farage’s banking arrangements may not have constituted a breach of databases, as the Information Commissioner admitted this week, but it was ill-advised.
The government, as a 38 per cent shareholder, was right to insist on her resignation because of the reputational damage not only to NatWest and Cutts, but to all UK banking. Rose’s misstep hurt the share price, undermining already weak confidence in relationships between banks and clients. It’s an expensive mistake for Rose, costing her £7.6m.
And it will not leave NatWest poor, as it will raise around £2.4m for its work in 2023, plus a further £800,000. No doubt she could look forward to a healthy pension if her £500,000-a-year predecessor Fred “The Shred” Goodwin offers guidance.
Latin lapses
Diageo CEO Debra Crowe isn’t having the best start to her career.
The Johnnie Walker group rose to the top early, as a result of the death of its predecessor, Ivan Menezes, to a commercial setback.
Traditionally, spirits have served as a great hedge against uncertainty. Diageo, with its impressive portfolio of luxury brands, has thrived through the recession and pandemic, generating strong profits and buybacks as well as investment in new products.
The revelation of the problems in Latin America, where 11 per cent of the group’s sales were generated, came as a thunderbolt at the time and sent the share price sliding by as much as 16 per cent: the biggest single-day decline since 1987.
No one can be at all surprised by the indiscriminate deflation in Latin America, which finds democracy and living within its means difficult. Something practical must have gone wrong.
Fortunately for Crow, its native North America is performing strongly and Europe is holding up well amid economic recession and geopolitical conflicts.
Investors may fear that a rare crack could cause the bottles to shatter.
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