UK News

Insights from the UK and beyond

from Breakingviews:

UK’s strong GDP has a soft centre

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Fly the flag. The headlines will be about the solid milestone. The UK finally replanted its flag on its 2008 GDP growth peak, three years after Germany and the United States reclaimed theirs and after a mere five years of ultra-low interest rates. But the landscape – the details of the second-quarter GDP – has its uncomfortably rocky side.

The Bank of England’s Monetary Policy Committee will see some grounds for concern. The 0.8 percent growth from the first quarter was generated almost entirely by the dominant services sector, which sprinted up by 1 percent. The rate of growth of industrial production slipped from 0.7 percent in the first quarter to 0.4 percent - equivalent to a meagre annualised rate of just 1.6 percent. Construction output contracted by 0.5 percent, bad news in a country needing houses.

The UK’s ascent, as in the past, is a straggling one, with services showing signs of leaving industry and manufacturing lagging behind. The UK’s close-to-record external current account deficit of over 4 percent of GDP is more evidence of that. Weak international competitiveness still looks like a big British growth-inhibiting problem, not helped by the fast recent rise in the pound.

from Breakingviews:

UK banks have much to fear from latest probe

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The latest competition review of UK banking should aim to be the last. An antitrust probe in 2000 led to limited price controls after concluding that British lenders made excess profit. There were two more big investigations after the financial crisis. Yet concerns about market inefficiencies persist. That suggests the Competition and Markets Authority should do something radical this time.

from Breakingviews:

London real estate at an inflection point

By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Most real estate valuers in London think property prices in the UK capital are about to fall. That prediction has been easy to make and easier to get wrong in the last five years. This time, the evidence that global investors’ favourite housing market has peaked is looking credible.

from The Great Debate:

Meet the Tea Party — European edition

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Europe finally has its own Tea Party. Or something like it.

Last weekend, citizens of 21 nations elected members of a new European parliament. The result? An outpouring of rage.

Angry voters across the continent and Britain cast ballots for protest parties, mostly on the far right, which doubled their number of seats and now account for close to one third of the parliament. French Prime Minister Manuel Vallis called the vote “more than a news alert . . . it is a shock, an earthquake.”

from The Great Debate:

Europe is under siege from both the left and right

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Elections will begin on Thursday across the 28 European Union member states to elect national representatives to the European Parliament, which regulates trade, borders and some elements of foreign policy. Though this is a continent-wide election, voters historically use it to send a message to their own nation’s governing party. With the meteoric rise of anti-European populism on the political left and right, however, things promise to buck that trend this time.

This was not how things were supposed to be. Five years ago, at a meeting of the European Union’s heads of state and government in Lisbon, Portugal, European leaders signed a treaty that foresaw these elections as defining the political direction of the European Union. This week’s elections are supposed to mark a turning point, as competing progressive, liberal, green and conservative visions of Europe’s future vied for popular support.

from Nicholas Wapshott:

Fighting for the future of conservativism

Britain's Prime Minister David Cameron delivers a speech to placard waving Conservatives during an European election campaign rally at a science park in Bristol

Establishment Republicans have been delighted by the victory of Thom Tillis, their favored candidate in last week’s North Carolina primary. After expensive advertising campaigns by establishment bagmen like the U.S. Chamber of Commerce and Karl Rove’s American Crossroads, mainstream conservatives believe they have a candidate who can beat Democrat Kay Hagan to win a valuable Senate seat in November.

Some commentators see Tillis’s triumph as a sign that other impending GOP primary races will also deliver electable candidates. Having watched the Senate slip from Republican grasp in 2012, as Tea Party candidates such as Todd Akin in Missouri, Christine O’Donnell in Delaware and Richard Mourdock in Indiana depicted the party as too extreme, they say the Tea Party is in retreat.

from Lawrence Summers:

Britain and the limits of austerity

The Bank of England is seen in the City of London

The British economy has experienced the most rapid growth in the G7 over the last few months. It increased at an annual rate of more than 3 percent in the last quarter -- even as the U.S. economy barely grew, continental Europe remained in the doldrums and Japan struggled to maintain momentum in the face of a major new valued added tax increase.

Many have seized on Britain’s strong performance as vindication of the austerity policy that Britain has followed since 2010, and evidence against the secular stagnation idea that lack of demand is a medium-term constraint on growth in the industrial world.

from John Lloyd:

The UK’s paradox of faith

When David Cameron recently proclaimed in the Church Times -- the organ of the Church of England -- that he was a Christian, that his faith helped guide him through life and work and that Britain is a Christian country and should be proud of it, he was met with a wall of disapproval.

When a European leader says he's a Christian and that he lives in a Christian country, he's asking for trouble. The approved political position in Europe is that religion should be commended for its sterling values when it cares for the poor and condemned when it is used as a rationale for terrorism. Otherwise, politicians should steer clear and leave it to the clergy.

from The Great Debate:

How to trust BP again

The Environmental Protection Agency is allowing BP to once again bid on new leases in the Gulf of Mexico -- which could happen as early as Wednesday.

As a condition of lifting its ban, the E.P.A. last week issued 53 pages of requirements for the company, which now must create a beefed-up code of conduct for employees; establish a zero tolerance policy for retaliation against whistleblowers; train senior leaders in ethics, and dole out bonuses related to issues like safety and environmental sustainability.

from The Great Debate UK:

Budget day: Politics not economics

--Sam Hill is Senior UK economist at RBC. The opinions expressed are his own.--

The headlines generated by the forthcoming UK budget are likely to be political rather than economic; the general election is next year. Despite a faster than expected fall in unemployment and inflation, macroeconomic developments since the December autumn statement present limited scope for forecast revisions to government borrowing. But come the post-budget analysis, some of the seemingly esoteric revised economic assumptions may have important consequences for how the budget is perceived politically.

The modest changes we do expect to the economic forecasts would be seen as positive in essence. Small upgrades to the growth outlook should translate into borrowing reductions of  between £3 billion and £6 billion per year throughout the five-year horizon. That would leave the underlying measure of borrowing at £332 billion for the six years to 2018-19, down from £358 billion in the existing forecast from December, which itself represented a significant improvement on last year’s budget.

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