The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
Defending Europe
For the last 80 years, Europe’s security has been underpinned by the US. With America’s support now in doubt, Europe is scrambling to rearm. As Sir Keir Starmer put it earlier this month, “the great post-war order” is being redrawn. This week’s briefing examines the scale of the task facing Europe.
American spending on defence far exceeds Europe’s. The US spent about 3.2% of GDP on defence in 2023 compared with an average of 1.8% in European NATO members, below NATO’s 2.0% target. Almost all European NATO states have raised defence spending in the last decade in response to Russia’s invasion of Ukraine and rising levels of geopolitical risk. Countries closest to Russia – Poland, the Nordics and the Baltic states – have stepped up spending the most and have the highest military spending as a share of GDP.
Europe - the search for security and growth
Europe is gearing up for rearmament. Two major announcements last week are likely to open the door to higher defence spending.
The barbarous relic booms
Which asset has provided the best return in the last 5, 10 and 20 years: global equities, global government bonds or gold?
The answer is gold. Its price has risen by 80% in the last 5 years, 134% in the last 10 years and a 552% in the last 20 years, outpacing, in each case, the returns from global equities or government bonds.
No return to cheap money
Interest rates reached the highest levels in over 15 years in the US and Europe in 2023 as central banks sought to squeeze inflation out of the system. The peak in rates was short-lived. The European Central Bank made its first rate cut in May of last year, followed by the Bank of England in July and the US Federal Reserve in August. US rates now stand 100bp below their peak; euro area and UK rates have dropped by 75bp.
On ageing, migration and growth
Earlier this year, the UK’s Office for National Statistics (ONS) updated its estimates for UK population growth. The ONS expects the UK’s population to rise from 67.6m in 2022 to 72.5m by 2032. The increase comes entirely from net migration, while the natural change, the difference between births and deaths, is thought likely to be flat.
Who made money in 2024?
2024 was a pretty good year for equities. The global market benchmark returned 14.9% following a 20.6% gain in 2023.
Six energy themes for 2025
Energy is a fundamental determinant of growth and prosperity. Here are six energy-related themes that we think merit attention.
Deglobalising, fast and slow
The financial crisis of 2008-09 brought an end to a long period of rapid globalisation. In its place has emerged protectionism, heightened focus on national security, and increasingly strained international relations.
The global economy in 2025
It may not feel like it, but 2024 was a pretty good year for the global economy. Inflation receded, central banks cut interest rates and growth came in as expected and at around trend, or normal levels. Risks that were widely discussed a year ago – persistent inflation, an economic hard landing and geopolitical shocks that hit growth – failed to materialise.
UK CFOs focussed on cost control
The latest Deloitte CFO Survey, conducted between 3 and 16 December, among chief financial officers of the UK’s largest companies shows a decline in business optimism although it remains well above the lows seen in 2020 and 2022.
Christmas reading list
We are publishing our annual Christmas reading list today, which includes eight articles (and, despite it being a reading list, one podcast). All are available for free online, although some websites restrict the number of articles that can be accessed without charge each month. I hope they offer a break from the rigours of Christmas.