The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
Britain’s minimum wage at 20
The introduction, just over 20 years ago, of the UK’s National Minimum Wage (NMW) counts as one of the most significant policy innovations of the period. As it enters its 21st year we assess whether Britain’s NMW has achieved its aims and examine its prospects.
Supporters of the NMW saw it easing poverty and, in doing so, reducing the cost to the exchequer of in-work benefits. There were hopes too that a minimum wage would encourage employers to invest more and increase spending on training, so boosting productivity. Perhaps most daunting was balancing higher pay for low-income workers with preserving jobs.
The overall verdict for Britain’s NMW is positive. It is a sign of its success that the Conservatives, who opposed it in opposition, embraced it in government and have raised it substantially. The renamed National Living Wage (NLW) has become an established feature of the UK economy.
Assessing the outlook for global growth
Economists went into 2019 forecasting a slowdown in global growth. That slowdown has come faster than expected. Alarmed by the speed of the downturn, the US Federal Reserve and European Central Bank have switched from tightening monetary policy to easing.
The combination of slower growth and easier policy has elicited very different responses from business and financial markets.
Corporate caution, financial market optimism
Today we are launching our quarterly “UK corporate environment” chart book, which is available here: https://blogs.deloitte.co.uk/mondaybriefing/
2019/07/uk-corporate-environment.html. The report aims to provide a graphical summary of the key trends and themes shaping the UK corporate sector, setting the context to the CFO survey. We will be developing and refining the chart book and welcome your feedback. Do feel free to use any of the charts in your own presentations and drop my colleague Tom Simmons a line at tsimmons@deloitte.co.uk with ideas and comments.
UK corporate environment
Equities rally on prospect of cheaper money
At the beginning of this year equity markets were reeling from a sell-off driven by fears over global growth and rising US interest rates.
Are we doing better than we think?
It is commonplace to say that the pace of technological change is speeding up. From Twitter to online shopping our everyday lives are, apparently, being transformed.
Central banks to the rescue – again?
This morning we are launching our second quarter “Global Economy in Charts” report, available here - https://blogs.deloitte.co.uk/mondaybriefing/2019/
06/global-economy-in-charts-q2-2019.html
China’s Belt and Road Initiative
China’s growth rate has slowed in recent years. Its sustainable growth rate has almost halved, to around 6.0% in a decade or so.
By Western standards this is an unattainably rapid growth rate. It would enable China’s economy to double in size every 12 years. China is still a fast-growing country, and one that exercises growing authority on the world stage. From technology to overseas investment and geopolitical influence China increasingly matters.
Modern Monetary Theory – or alchemy?
For centuries governments have taxed, borrowed or created money to pay for public spending. All carry risks. Heavy taxes dampen growth and upset voters. Excessive public borrowing triggers financial crises. Printing money to pay for public spending can look tempting. But, as rulers from Henry VIII to Venezuela’s Nicolás Maduro have discovered, creating money out of thin air and spending it tends to destroy confidence and send inflation rocketing.
Safe as houses
To outsiders the British can seem slightly obsessed with house prices. Yet it is an asset that matters. Two-thirds of UK households are owner occupiers and 35% of household wealth is tied up in property.