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Reports

Are tax increases starting to suffer from the law of diminishing returns?
January 22, 2024

The September UK borrowing figures indicated to the OBR that borrowing was running £19.8 billion below forecast. Just two months later, the November data showed borrowing £6.3 billion above forecast. A £26 billion turnaround in two months is quite a change. At first sight the financial turnaround suggested a dramatic collapse in public finances. But

More generous childcare support would make the UK more attractive to international talent
January 12, 2024

Arguments in favour of government childcare support are often built on emotional pillars, pleading to one’s sense of righteousness – we should help parents with childcare because it is the fair thing to do, the nice thing to do. It is the fair and nice thing to do, but it is also the economically sensible

An expected recovery in disposable income might encourage a late election but is unlikely to change its result
January 8, 2024

We are predicting a recovery in disposable income which might encourage a late election but is unlikely to be sufficient to change the result. The Prime Minister has announced that it is his working assumption that the next UK General Election will be held in the second half of 2024. Given the predictions in Cebr’s

The cost of Christmas is up nearly a quarter in three years
December 11, 2023

Last year’s Christmas season was the weakest for retailers since 1998, with elevated inflation and reduced consumer spending power leading to a significant cutback in festive expenditure. This continued a trend of problematic recent festive periods for retailers. Christmas 2020 was significantly impacted by pandemic-related restriction measures, which reduced retail sales. 2021 was on the

Failing to plan for migration means many of its significant benefits are lost
December 4, 2023

At the time of Brexit, few thought it would be followed by a two- to three-fold increase in net migration INTO the UK. Yet new migration data have recently been released that seem to suggest that this is, in fact, the case. Compared to a pre-Brexit average of around 250,000 a year, net migration into

National Grid’s optimistic approach leaves our energy system vulnerable to black swan events
November 20, 2023

With the clocks going back and the nights drawing in, once again it is time to assess the likelihood of the lights going out this winter.  Each Autumn National Grid, the Electricity System Operator (ESO), publishes its annual Winter Outlook report – its own assessment of this issue. In the past few years, we have

Bank of England review into forecast failings must focus on the people, not just the models
November 13, 2023

“Central banks have come under fire for missing their inflation targets, but at least as much because their inflation forecasts have really missed outturns.” This is a quote from a recent speech by Catherine Mann, Monetary Policy Committee (MPC) member. It is a position that seems to be shared across the Bank, given the terms

Covid lockdowns cost at least £118 billion in lost GDP, but what did it save?
November 6, 2023

Our conservative estimates are that lockdowns cost £118 billion in lost GDP, and possibly more than that in additional public spending. The current Covid Inquiry under Baroness Hallett is expected to cost £200 million[1]. While it is right that it covers medical outcomes, we must also account for the economic impacts and ask – was

The new normal – interest rates are likely to settle well above zero
October 30, 2023

Over the past few years, the world economy has faced a number of shocks that can be described as anything but ‘normal’. Global GDP fell by 2.8% in 2020, then bounced back from its Covid-induced recession, growing by 6.3% in 2021 (the highest since IMF records started in 1980) as vaccines became widely available. The

Cloud of uncertainty darkens over the Bank of England amidst doubts over ONS data
October 20, 2023

We expect the Bank of England’s (BoE) Monetary Policy Committee (MPC) to hold interest rates steady when they meet early next month, following confusing signals sent by the Office for National Statistics (ONS). The ONS has recently made headlines with its decision to delay the release of critical labour market data. This move has raised concerns

Despite their differences the French and the UK economies have achieved remarkably similar growth
October 16, 2023

The British and the French like to think of themselves as belonging to two very different countries, both culturally and economically. Looking at the data, this seems to hold some true across some key variables. For example, the French public sector plays a substantially larger role in the domestic economy compared to the UK. This

A rise in bond yields could stop the MPC raising rates further – yet another example of the Law of Self Contradicting Expectations
October 5, 2023

In an eerie repetition of the bond squeeze a year ago, which was caused by a combination of Bank of England failures and a bad market reaction to Liz Truss’s mini-budget, the yield on the UK government 30-year bond rose 21 basis points in the week to Wednesday 4 October to reach 5.00%, its highest

HS2 northern cancellations are a no brainer economically, if not politically
September 29, 2023

The UK Prime Minister is considering cancelling or delaying northern sections of HS2. This has been motivated by rising costs, with the scheme now potentially costing upwards of £100bn. These rising costs are not a surprise – it has long been clear that it is hard to justify HS2 on value for money grounds alone,

The delayed ban on the sale of petrol and diesel cars shows that the UK Prime Minister is now dancing to the beat of the evidence
September 22, 2023

The UK Prime Minister, Rishi Sunak, has this week pushed back the date of the forthcoming ban on petrol and diesel vehicles from 2030 to 2035. He argues that this is a pragmatic move, that helps prevent UK households bearing large costs in the process of meeting the objective to deliver substantial carbon savings in

The recent rise in the oil price shows that central bankers cannot rely on endlessly falling energy prices to bring inflation back to target
September 18, 2023

Central bank policymakers are once again finding themselves in a balancing act as they head into the September round of rate setting meetings, hoping to bring inflation down to the 2% target while minimising damage to the economy. Rising oil prices mean that their job has got considerably more difficult. For most of the year,

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