The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
Christmas quiz
Our Christmas quiz covers an eclectic mix of topics, many related to economics and business. The answers and a brief explanation of the factors at work are below each question.
Omicron assessed
It will take weeks to establish how great a risk the Omicron variant poses. The hope is that, like the Beta (first documented in South Africa) and Gamma (Brazil) variants before it, Omicron will fail to become dominant. Those earlier variants were unable to outcompete the Alpha (UK/Kent) and now the dominant Delta (India) variant.
A slower-growth China
A New Winter of Discontent? Join us for a webinar this Wednesday morning where I’ll be discussing with a panel of Deloitte specialists, along with Jaguar Land Rover’s finance director, Chris Tye, whether rising inflation, supply bottlenecks and labour shortages mean we are heading for a new Winter of Discontent.
Timing: Wednesday, 24 November 2021, 08:30-10:00 GMT
Register at: https://deloitte.zoom.us/webinar/register/WN_oJT4MeihSA6gSlgBFHVAKw
Interest rate rises, slowly does it
A year, to paraphrase Harold Wilson, is an eternity in economics. This time last year inflation was on its back and Central Banks were fretting about the risk of deflation. Now Central Banks have the opposite problem, with supply shortages and energy prices propelling inflation to uncomfortably high levels. As with so many trends, good and bad, America leads. Last week financial markets were shaken by news that US inflation had risen to 6.2%, the highest level in 30 years.
O worker, where art thou?
A New Winter of Discontent? Join us for a Deloitte Academy webinar where I’ll be discussing with Deloitte specialists, Raoul Ruparel and Jurga McCluskey, and Jaguar Land Rover’s finance director, Chris Tye, whether rising inflation, supply bottlenecks and labour shortages presage a new Winter of Discontent – and what organisations can do about it.
Timing: Wednesday, 24 November 2021, 08:30-10:00 GMT
Register at: https://deloitte.zoom.us/webinar/register/WN_oJT4MeihSA6gSlgBFHVAKw
From neo-liberalism to neo-statism
Last week’s UK Budget was one of the most consequential of recent decades. The small state, low tax approach of successive Conservative chancellors has gone into reverse. This is a policy choice, not something forced on the government by the demands of the pandemic. The government has made a decision to opt for a bigger state funded by raising taxes’ share of GDP to the highest levels since the post-war Atlee government.
The ripple effects of electric vehicles
Mass adoption of new technologies creates ripple effects across economies and societies, often in unexpected ways. British time had to be standardised across the country in the early nineteenth century to create national timetables. The car paved the way for America’s population to shift from cities to the new suburbs. Standardised shipping containers collapsed freight costs and helped spur the globalisation of the last half century.
Investment is the focus
Deloitte’s latest survey of UK Chief Financial Officers, released overnight, shines light on the plans of Britain’s largest corporates. The full report is available at:
https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html
Liquidity and change drive M&A
The return of risk appetite to the boardroom, boosted by vaccine rollouts and strong growth over the summer, has led to a surge in global mergers and acquisitions activity. Around $4tn of deals have been announced since the start of the year, putting 2021 on track to break the previous record set shortly before the financial crisis (strong though these numbers are, the volume of activity, if adjusted for growth in equity values, is below the previous peak).
Pandemic update
Join me tomorrow, Tuesday, 5 October, at 08:30 BST when I will be in conversation with George Magnus, veteran City economist and China watcher, on the topic of “The inevitable rise of China - and why it may not happen”. We'll be discussing whether China is destined to eclipse the US as the world's economic and geopolitical superpower – and what obstacles it needs to overcome to get there. George, formerly chief economist at UBS and a research fellow at the China Centre, University of Oxford, is author of “Red Flags: Why Xi’s China is in Jeopardy”. To join please register at: https://bit.ly/2Y5tDs1
Gas crunch – higher prices, lower growth
The economic dislocations caused by the pandemic show no sign of abating. After a summer of eye-watering used car prices, milkshake and chicken shortages, now come soaring gas and electricity costs.