The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
CFOs turn more positive on the UK
Deloitte’s second quarter CFO Survey, conducted in the second half of June, shows a surprising degree of resilience among the largest corporates in the UK. Despite the conflict between Israel and Iran, volatility in oil prices and the threat of US tariffs, CFO sentiment and risk appetite have edged up slightly. The survey is available at:
https://www.deloitte.com/uk/en/services/consulting-financial/perspectives/deloitte-cfo-survey.html
Remaking supply chains
Global supply chains have come under strain in recent years from geopolitical tensions and a series of shocks, including the pandemic and the Russian invasion of Ukraine.
The growth of the state
The last 125 years have seen a significant expansion in the size and role of government. Growth has not been linear, with wars, crises and politics, creating swings in the size of the state. The post-war Labour government created the welfare state, permanently expanding the role of government. Under prime minister Margaret Thatcher, privatisation and the winding down of cold war defence spending shrank the state.
Graduate prospects
We start with three facts about UK higher education. UK graduates earn far more than non-graduates over their lifetime, are more likely to be in work and are far more likely to work later in life.
Oil prices spike on Middle East conflict
The outbreak of hostilities between Israel and Iran last Friday has lifted the oil price to $75 a barrel, up 19% since the start of this month. By the standards of recent years’ oil prices, which hit a peak of $129 a barrel three years ago, these are still subdued. Still, with both sides talking of escalation, the risks to energy prices lie squarely on the upside.
UK growth – OK, all things considered
For all that’s been thrown at it, the UK economy has not done too badly so far this year.
UK migration nation
The UK has been a major net ‘importer’ of people since the 1990s, with immigration running well ahead of emigration. The UK’s foreign-born workforce increased by an average of 5% a year between 1998 and early 2020, roughly ten times the annual growth rate in the UK-born workforce.
The bond vigilantes are back
Last Thursday the US House of Representatives passed president Trump’s tax-cutting budget bill by a single vote. The bill now goes to the Senate for ratification.
America’s growing debt mountain
After a sell-off following the announcement of sweeping US tariffs early last month, equities have rallied on hopes that the US will strike trade deals. The US and UK settled on a framework agreement on trade earlier this month and last week the US and China agreed to cut tariff rates and to open trade negotiations. Press reports suggest that other outline agreements may be in the offing. US equities have risen 20% since 8 April, more than making up losses on the initial tariff announcements.
Bank of England cuts interest rates despite expected pickup in inflation
Last week the Bank of England (BoE) cut interest rates from 4.5% to 4.25%, the fourth reduction since last summer when rates stood at 5.25%. The interest rate decision was not unanimous with five of the nine Monetary Policy Committee members voting to cut rates, two voting to keep rates on hold, and two voting for a larger cut to 4.0%.
The China technology challenge
In January, Chinese company DeepSeek stunned financial markets with the release of its generative artificial intelligence model R1. It matched the efficacy of market leading US firm OpenAI’s most advanced models but was produced at a fraction of the cost.