Deficits, debt in The Monday Briefing

Debt and taxes


The government response to COVID-19 has involved vast, debt-financed increases in public expenditure. The spending has been on a far greater scale than during the financial crisis. With interest rates close to zero fiscal policy is firmly in the driving seat.

That leaves governments, rather than central banks, with the task of securing growth. Instead of raising taxes and reducing public spending as many did after the last recession, governments are now planning the next stage of fiscal easing. Policy is pivoting from countering recession to bolstering the recovery. High levels of public borrowing are likely to be here for some time to come.

Last Wednesday’s UK budget illustrated these trends. The response to COVID-19 has cost about £160bn since March, equivalent to 20% of existing public spending or 7% of GDP. New measures announced last week add about £30bn to this tally through measures to support jobs, the hospitality sector and the housing market. The government has also granted tax deferrals and loan guarantees worth £123bn, some of which will never be recovered.

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Posted on 13/07/2020

Climate: the next great challenge


The COVID-19 crisis has collapsed global economic activity, and with it, greenhouse gas emissions. The pandemic has brought cleaner air and skies across the world’s cities, but it also offers a glimpse of the scale of changes needed to mitigate the worst impacts of climate change.

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Posted on 06/07/2020

Approaching the Brexit endgame


COVID-19 has monopolised the business headlines for the last three months. But now, with the negotiations stepping up a gear and the transition set to end by December, Brexit is moving back into the limelight.

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Posted on 22/06/2020

Is it time for negative interest rates?


Data released on Friday showed that the UK economy contracted by more than 26% in March and April as the lockdown collapsed activity. The governor of the Bank of England (BoE), Andrew Bailey, responded by saying that the Bank stood “ready to take action” to help the economy as it emerges from the lockdown. This week we consider whether the time has come for the Bank to deploy the big gun in its arsenal, negative interest rates.

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Posted on 15/06/2020

Growth: Stirring not bouncing


As the lockdown eases the global economy is starting to come back to life. Last week’s better than expected US jobs numbers, and a surge in private sector activity in China, reinforced the view in equity markets that the worst is past. On Friday the US S&P500 equity index closed up almost 40% on its March lows.

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Posted on 08/06/2020

The outlook for UK growth


Last week’s UK GDP data underscored the scale of the economic damage wrought by the COVID-19 lockdown. The economy contracted by 2% in the first quarter of 2020, the sharpest quarterly contraction since the 2008 financial crisis.

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Posted on 18/05/2020

Deloitte CFO survey: Crash, slow recovery, lasting change


Today’s briefing summarises the findings of the latest Deloitte survey of Chief Financial Officers which was released overnight. The full report is available at:

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Posted on 04/05/2020

Growth beyond the downturn


The world faces a major contraction in economic activity. The scale of the likely decline, and the timing and magnitude of any upturn, are hotly debated. But of even greater importance are the long-term effects of the crisis.

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Posted on 27/04/2020

Equities rally into the downturn


The latest release of our chart book “The COVID-19 crisis: Economic impact and policy responses”, is available here:
. The report aims to provide a graphical overview of the key economic developments of the COVID-19 crisis. Do feel free to use any of the charts in your own presentations.

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Posted on 20/04/2020

2020 on a 100-year view


Every generation has its own reference points, the big events through which lives are lived. The same is true of economists. For them the lows of the economic cycle are remembered by shorthand – the GFC, the dotcom boom, the early-90s recession and so on. As economists contemplate the economic effects of COVID-19 they are having to look much further back in history for precedents. This week’s briefing assesses how UK growth through to the end of next year is likely to compare with the ups and the downs of last 120 years.

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Posted on 14/04/2020