The FT has produced an interactive graphic that looks at the local effects of the global slowdown.It shows you how the different regions of the UK are coping, highlighting the declines in house prices, the rise in unemployment and the escalating numbers of corporate insolvencies. (Link) 
The Observer reported that Britain is poised to expand its coal mining industry, despite fears that the move will lead to a rise in climate change emissions and harm communities and the environment. In the past 18 months 14 companies have applied to dig nearly 60 million tonnes of coal from 58 new or enlarged opencast mines. At least six coal-fired power stations are planned. If all the applications are approved, the fastest expansion of UK coal mining in 40 years could see southern Scotland and Northumberland become two of the most heavily mined regions in Europe.
Geoff Riley highlighted the 'menu costs' associated with the cut in VAT. (Link) The FT carries a similar article where retailers, whilst broadly welcoming the chancellor's cut in the rate of value added tax, warned that the reduction was difficult to implement and would be eclipsed by clearance sales in the next few weeks. With many retailers already cutting prices by about 20 per cent to stimulate spending in the run-up to Christmas, the cut from 17.5 per cent to 15 per cent in the rate of VAT comes into force on December 1 and lasts until the end of next year. As retailers privately warned of a "logistical nightmare" in adjusting prices, the pre-Budget report acknowledged that overall prices would be "reduced progressively rather than immediately". The difficulty of physically changing the price of thousands of product lines at the busiest period of the retail year will be a substantial challenge for those retailers that choose to move on December 1. (Link)
Speaking to the Treasury Select Committee about inflation, Mervyn King, Governor of the Bank of England, warned that the risk it could fall below 2% in the medium term has "increased significantly" in recent weeks. He said this was due to the sharp fall in global oil and commodity prices, and declining consumer demand. UK inflation fell to 4.5% from 5.2% in October. The government wants inflation to be as close as possible to 2%. and Bank of England targets the Consumer Price Index, which excludes the effects of mortgage interest payments. "We will take whatever action is necessary to ensure that inflation is close to target in the medium term," Mr King said.
As to be expected there is wide coverage of the details of Alistair Darling's statement to the Commons. BBC News offers its usual broad coverage with some analysis and reaction. The details of the measures are summarised in the following link. (Pre-Budget details: at a glance) Much more analysis in the FT (Details plus short video analysis) and a more detailed analysis (Link) Jonathan Freeland in The Guardian narates a short video comparing the UK package with that announced by Barack Obama. (Link)
As we await the Autumn Statement, speculation is rife as to the ways in which the planned spending increases and tax cuts will have to be paid for in the future. The BBC reports that the top rate of tax will be increased from 40p to 45p in the pound after the next election for those earning over £150,000 per year. This appears to be a reverse in Labour's policy, reierated in their 2005 General Election manifesto, not to increase the top rate of tax. Also, it highlights differences that are starting to emerge between Labour and the Conservatives over future tax and spending policy; the Conservatives have said they would pay for any increase in government borrowing by scrapping planned rises in expenditure. (Link to BBC for details) and (FT)
The BBC News reports on the possibility of major blackouts in the next 10 years due failure to secure sufficient energy supplies to meet expected demand. Highlights the importance of investment, especially in an industry expected to address serious environmental concerns as well as ensuring supply. Link to BBC News video)
The Bank of England says the UK entered a recession in the middle of 2008 which will continue through 2009. In its quarterly inflation report, the Bank warns that the economic landscape has changed dramatically since August. It now expects inflation to decline to 1% by 2010, below its 2% target, in a dramatic change to its last forecast. This could open the way for further interest rate cuts if the Bank is to maintain inflation at its target rate in two years' time. "We are certainly prepared to cut bank rate again if that becomes necessary," said Mervyn King, the Bank of England's governor. 
The rapid rise in unemployment was confirmed with the publication of figures that show the total to be the highest for 11 years. The number of people out of work in the UK in the three months to September jumped by 140,000 to 1.82 million - the highest in 11 years. The unemployment rate rose to 5.8%, up from 5.4% in the previous quarter, according to official figures. The number of people claiming the Jobseeker's Allowance rose by 36,500 to 980,900 in October - the highest monthly increase since 1992. Many economists believe that the number out of work will rise to 2 million by Christmas. (Link to BBC News)
As the leaders of the main political parties announce proposed tax changes to deal with the impending recession, Larry Elliott in the Guardian explains the likely effects of tax cuts and highlights the fact that '... Keynes never saw tax cuts or increases in public spending as a panacea for ending slumps. He believed fiscal policy should only be used once every other economic tool had been exhausted; his remedy for the Great Depression was a mixture of devaluation, protectionism and cheap money, with public works only to be wheeled out as a last resort.' The recent experience of Japan, with a series of tax cuuting measures and the USA, highlights a risk, namely that tax cuts have to be large-scale to be effective and, even then, may only have a temporary impact, which can be limited if consumers believe that tax cuts now mean tax increases later. 
BBC News has coverage of call by MPs to ban 'Happy Hours' and possibly regulate the price of alcohol, through the imposition of a minimum price The Select Committee report evidence showed the biggest problem faced by police forces was violence and disorder caused by excessive drinking of cheap alcohol. Other official figures on the cost of goods over time show alcohol has become much more affordable in the last three decades. Many of the negative externaliies associated with excess drinking are detailed in the article. (Link to BBC News) 
The public finances lurched to a record deficit last month driven by a weakening economy and overspending by the government, and analysts say much worse is yet to come as the economy tips into recession.The Office for National Statistics said that public sector net borrowing came in higher than expected at £8.1bn, a record for a September and way above the £4.8bn shortfall seen in September last year. That left the cumulative PSNB for the first half of the 2008/09 fiscal year at £37.6bn versus £21.5bn in the same period a year ago and the highest since records began in 1946. An interesting graphic showed Debt as a % of GDP and despite the current figures the UK remains near the bottom of the table with a figure of 43.6%. For the US it is 60.8%, France 63.9%, Germany, 64.9%, Italy 104% and Japan 170%. If the support for Northern Rock is removed the figure for the UK stands at 38%. There is a view that the the National Debt will reach 100% of GDP by 2010/11 and whilst it is acceptable to borrow during a recession, these higher borrowing figures have emerged before the recession has really started. Link
The Bank of England governor and an influential think tank have predicted that the UK economy is likely to sink into recession in 2009. Mervyn King told business leaders in Leeds he was concerned about rising unemployment and falling house prices. Economic fears sent the pound plunging to a five-year low against the dollar. Meanwhile, the National Institute of Economic and Social Research says the UK is on the brink of its first full year of recession since 1991. The Bank of England has also been criticised for being too slow to cut interest rates in response to the UK's worsening economic situation.
Geoff Riley on tutor2u highlights the focus on Keynes this weekend in his article on the blog. (Mr Keynes makes a return) As well as putting government policy into a Keynesian context, it includes links to a selection of the comment this weekend. The Guardian published the cartoon above together with the article 'Darling invokes Keynes as he eases spending rules to fight recession.'
The gap between rich and poor in the UK has decreased since 2000, an international survey has concluded. The Organisation for Economic Co-operation and Development (OECD) says the decline in inequality in Britain has been "remarkable". The report's author told the BBC: "...the poor have been getting richer more rapidly than the rich since 2000." But the report says the UK still has one of the highest levels of income inequality in the developed world. 
Numerous articles in The Observer today about UK economic prospects ... namely that the recession is upon us. The Ernst and Young Item Club will warn this week that we are in the grip of a severe economic slowdown at the same time as GDP figures are widely expected to confirm that a recession is already underway. Item expects GDP to decline outright next year by 1% - the first full year of decline since 1991. It predicts a gradual recovery in 2010, with the economy recording growth of just 1%. Consumer spending would be hard hit over the next two years, as households try to rebuild their finances in the face of sickly income growth and plunging property prices. Link to Ernst and Young There isa good report of the forecast on the BBC News site. Link
On the day that the UK government took a substantial stake in a number of banks the BBC News site provides an excellent overview of curent developments and background to the financial crisis. Link to Global Financial Crisis
Really good supplement in yesterday's Observer on The 2008 Crash. 
Continued focus this morning on the financial markets following the failure of the US Congress to agree the financial rescue package. Tutor2u highlights some of the reaction and the detailed press coverage (all worth a read!).
The Guardian highlights the fact that Britain attracted the most foreign direct investment (FDI) in Europe in 2007 according to the United Nations, but the financial turmoil in the global markets will have a detrimental effect on investment next year. In its annual World Investment Report, the UN Conference on Trade and Development (Unctad) said that the UK was the number one destination for inward investment in Europe in 2007, attracting more than $1tn (£540bn). Globally, the UK was second only to the US. The main reason for the growth appears to be the increase in merger and acquisition activity. (Link to article)
With all attention on the UK and US economies at the moment it is easy to ignore developments elsewhere. It is reported thet the Irish Republic's economy has fallen into recession after shrinking for a second quarter in succession. The Central Statistics Office (CSO) said gross domestic product (GDP) had contracted by 0.5% in the three months to the end of June. The economy had shrunk by 0.3% in the first quarter of the year. It is the first time Ireland has experienced a recession since 1983. The economy is now facing its most difficult period since high unemployment and emigration hit in the early 1980s. Links: Irish economy goes into recession
New Zealand slips into recession
What is the technical definition of a recession? What key features characterise a rescession?
As uncertainty about the effects and details of the financial rescue plans continue to affect world share markets (Shares slide amis bail out fears), Geoff Riley provides a good reflective piece on the tutor2u blog. In his view 'We shouldn’t for a moment think that the worst is over. My fear is that the UK economy and the UK government remains vulnerable to a fresh wave of negative speculation as the markets test the British government’s resolve to protect our leading financial institutions. ' He also provides some excllent links to articles that explain what has been happening and possible implications. I particularly like the piece by Roger Bootle in the Daily Telegraph where he focuses on the financial crisis to highlight the limits of the free market - well worth a read. Link to Geoff Riley's piece
The annual rate of UK inflation rose to 4.7% in August from 4.4% the month before, a higher-than-expected jump. Inflation as measured by the Retail Prices Index (RPI) - often used in pay negotiations - fell to 4.8% from 5%. The biggest contributor to this rise was the increase in energy prices which outweighed a number of prices falls. For the third time the Governor of the Bank of England, Mervyn King, was forced to write a letter to the Chancellor explaining why the inflation target had not been met. The BBC site as a nice video feature looking at the content of the Governor's letter. (Link)
The Lloyds TSB-HBOS proposed takeover highlights a number of the issues we have been focusing on during the first few sessions of the A2 course. Links:
Black Horse becomes White Knight - good graphic showing decline in HBOS share price price
Lloyds TSB unveils HBOS takeover
Profile: Lloyds TSB and HBOS
The CBI has become the latest organisation to predict that the UK will fall into recession this year. The business group estimates that the economy will shrink by 0.2% between July and September, and then by a further 0.1% from October to December. Its report follows similar warnings from the European Commission and the British Chambers of Commerce. An economy is generally considered to be in recession after two successive quarters of declining output. (Link)
UK manufacturing output declined for a fifth straight month in July, official figures showed, underscoring the weak state of the UK economy. The Office for National Statistics said that manufacturing fell by 0.2% between June and July, more than the 0.1% analysts had expected. Economists said that the figures were further evidence that the UK economy was likely to enter a recession. (BBC link)
The BBC reports that food prices in UK supermarkets and shops have risen by 8.3% since January. Meat and fish - up 22.9% - registered the biggest price increases for any one category in the survey, with fresh fruit and vegetables up 14.7%. Retail analysts Verdict Research also found price rises of nearly 50% for some individual food items. The figures come amid growing concern about the high cost of food, which is exceeding the official inflation rate. On Wednesday, the British Retail Consortium (BRC) said that food price inflation over the past year amounted to 10% - more than twice the official Consumer Prices Index (CPI) inflation rate of 4.4%. Other research has shown that prices of many other items (e.g. energy) have risen by significantly more than the headline rate of inflation. Link to BBC report
The UK is facing a serious risk of recession within months, the findings of a survey of almost 5,000 small, medium and large businesses suggest. The British Chambers of Commerce's (BCC) quarterly report found the credit crunch and rising costs had dented the most important sectors of the economy. BBC News has an interview with David Frost, Director General of the BCC, where he talks about the changing mood of small/medium sized businesses. (Link to BBC News)
A single person in Britain needs to earn at least £13,400 a year before tax for a minimum standard of living, the Joseph Rowntree Foundation (JRF) says. A couple with two children need to spend £370 a week and a pensioner couple need £201 excluding housing and childcare costs, the charity says. Film tickets, a bottle of wine and a bird feeder were on the list of goods people need to participate in society. There is a graphic on the BBC News site showing the varying amounts for different groups broken down by category of expenditure. (BBC News)
UK house prices fell by 0.9% on average last month, according to the latest survey from the Nationwide. The decline was less severe than the record 2.5% fall seen in May, but prices were now 6.3% lower than a year ago. The Nationwide survey found that the housing market in Scotland had been more resilient than elsewhere. Although prices in the three months to June had fallen in Scotland by 1.8% compared with the previous quarter, it was the only area to see an annual growth, up 0.6%. (Further details here)
The Bank of England had warned the UK was heading for difficult times and it would act to rein in inflation. The Bank of England's governor, Mervyn King, said the UK was facing its "most difficult economic challenge for two decades". (View video of speech) The following day a record level of retail spending in May provided a respite from gloomy economic predictions, but it also fanned fears of higher interest rates. Sales rose by 3.5% during May, the strongest monthly growth since January 1986, statistical office figures show. Shocked analysts said the figures ran contrary to signs of a slowing economy and weak consumer confidence. (Details here)
Both official measures of UK inflation rose in May. CPI was up to 3.3% from 3% and RPI to 4.3% form 4.2%. Rising food and energy prices could push UK consumer inflation above 4% this year, the governor of the Bank of England has warned. This month's rise meant that he has had to write the dreaded letter to the Chancellor explaining what measures are being taken to bring inflation under control. In it he says "As things stand, inflation is likely to rise sharply in the second half of the year, to above 4%... (but) there are considerable uncertainties, in both directions, around this, and any such projection is particularly sensitive to changes in domestic gas and electricity prices." British households must learn to live with higher prices and without increased wages, Mervyn King warned. (Link to BBC News) (Link to The Guardian article)
Numerous reports overthe past few days have confirmed a significant economic slowdown. The Chancellor, Alistair Darling, has said that there is "no doubt" the UK economy is slowing and has warned it will be a "difficult year" ahead. He warned of the dangers of allowing inflation to increase, calling for pay restraint to prevent the development of a wage-price sprial, so familiar to economics students of my generation. He pointed out that fuel and food price increases were hitting consumers. (Link to details)
The Economist reports that the biggest investment boom in history is under way. Over half of the world's infrastructure investment is now taking place in emerging economies, where sales of excavators have risen more than fivefold since 2000. In total, emerging economies are likely to spend an estimated $1.2 trillion on roads, railways, electricity, telecommunications and other projects this year, equivalent to 6% of their combined GDPs—twice the average infrastructure-investment ratio in developed economies. Largely as a result, total fixed investment in emerging economies could increase by a staggering 16% in real terms this year, according to HSBC, whereas in rich economies it is forecast to be flat. Such investment will help support economic growth this year as America's economy stalls—and for many years to come.
The world needs to spend $45,000bn on green technologies in the next 40 years, or 1.1 per cent of annual global economic output, to halve greenhouse gas emissions by 2050, the International Energy Agency said. The investment – much of it needed to accelerate development of new technologies such as hydrogen fuel cells and carbon storage – is roughly equivalent to the gross domestic product of Italy, though the IEA said it represented “a re-direction of economic activity and employment, and not necessarily a reduction of GDP”. (FT article) 
The Organisation for Economic Co-operation and Development (OECD) has said inflation remains a danger, as oil prices have shown a sharp increase. "Ministers were concerned about inflationary pressures and indications inflationary expectations may be drifting upwards," the OECD said. They also said attention should be paid to fiscal balances, especially where inflationary pressures remained high. It also believes that the British economy is entering a period of "significant down-swing" that will see it grow even more slowly in 2009 than this year and house prices will fall further.
Many good articles about the housing market in the past few days. Further evidence of falling prices from the Halifax (Click here for details). It said the annual fall in prices was the biggest it had seen since 1993. If prices continue falling at the rate seen since the start of the year then they will fall by 16% over the course of 2008.
A number of example this week of potential shareholder power: HSBC is likely to face a significant protest vote againt its renumeration policy believing that the prosed payout is excessive and the performance criteria insufficiently stretching. Last week, almost half of Royal Dutch Shell's investors refused to approve its remuneration report because of concern about retention bonuses for three directors, while almost 40 per cent of shareholders in GlaxoSmithKline also abstained or voted against its report for the same reason. The internet company Yahoo has postponed its annual meeting as its board struggles to escape a shareholder uprising led by the billionaire corporate raider Carl Icahn. The potentially rowdy gathering in California was due to be held on July 3 but Yahoo has put it off to an unspecified date. Shareholders are unahappy with Yahoo's failure to agree to the takeover by Microsoft.
A superb article by John Kay (Full article here) on the differences between the official rate of inflation, as measured by the CPI (currently 3%) and perceptions of inflation. 'There has always been scepticism about official measures of inflation, but the gap between popular perceptions and the government’s statistics has never been so wide.The popular newspapers have sent intrepid reporters down to the shops to discover the truth, by filling a typical shopping basket. The results are “alarming”, “the most savage increase in living costs for a generation”. The Daily Express found an 11½ per cent increase in prices, the Daily Mail put it at 15 per cent.Yet what the Office for National Statistics does is just what the Express and Mail did, except that the ONS does it much more carefully. 
The Guardian reported that the number of people admitted to hospital in England due to drinking alcohol has more than doubled in the past 12 years, NHS figures revealed today. In 2006-07, 207,800 people were admitted to hospital because of their drinking. This included people who were drunk, had liver cirrhosis or an alcohol-related illness such as heart disease, as well as those injured or assaulted while drunk. This is more than double the amount in 1995-96, when 93,459 people were admitted to hospital, and a 7% rise on the 193,637 admissions in 2005-06. Almost one in 10 (4,888) of those admitted to hospital last year were children under 18, the study, by the NHS Information Centre for health and social care, found.
Britain's electricity and gas supply industry is a "comfortable oligopoly" that feels little need to innovate or compete, an industry watchdog told MPs yesterday. Allan Asher, chief executive of Energywatch, said that over the last decade the number of gas and electricity suppliers had fallen from 20 to six, while in some areas only two or three firms competed. "There is a myth that there is vigorous price competition between them [the suppliers]. For the main product they most actively sell - direct debit for dual fuel, gas and electricity - the price difference between the cheapest and most expensive is £30 a year; it's just a few pence a week." 
The government should completely rethink its aviation policy and shelve plans to expand Heathrow and Stansted airports, according to an influential advisory body.The Sustainable Development Commission, chaired by Sir Jonathon Porritt, said there were big question marks over the environmental and economic arguments underpinning the proposals for British airport expansion. It warned that the government faced a wave of legal challenges if it did not hold an independent review of its 2003 aviation white paper, which sanctioned new runways at Heathrow, Stansted and other airports. It believes that a full cost benefit study should be undertaken to consider the full implications of the expansion of air travel. Read further details.
It is generally assumed that the demand for petrol is relatively price inelastic, hence the increasing duty that has been imposed over the years. But we may now have reached a price that is startring to encourage some motorists to reconsider their transport options if a report by the AA is to be believed. High prices of petrol and diesel are making UK drivers think twice about travelling by car, a survey suggests. The AA polled 17,500 members, and found 27% had cut back on other areas of spending, 16% had decided to travel less by car, and 21% had done both. Petrol prices have risen sharply this year, although government figures have only shown car traffic falling 2%. The Petrol Retailers Association says that average prices could go up as much as 5 pence a litre by the weekend. Link to BBC News.
The UK is "more exposed" to rising food price rises than its peers, adding to recessionary fears, according to a report by Ernst & Young. Its Item Club says "the implications for business are profound" - making it more likely firms will raise prices. Unlike the US which has a balance of food and France which has a surplus, the UK has a trade deficit in food. The Item Club report says that as food prices keep rising, this reduces the chance of an interest rate cut in the UK. "The danger now is that rising food world prices and energy prices will lead to excessively tight monetary policy", it says, as the government seeks to counter the rise by "squeezing domestic costs". As food and energy prices contribute 1.7% to Consumer Prices Index Inflation - which recently reached 3% - this leaves "little room" for price rises elsewhere. Input costs have risen by nearly a quarter in the 12 months to April, eating into consumers' disposable incomes. Link to article. The government's 2% inflation target will require a 1.5 percentage-point premium on interest rates because of spiralling food and energy prices. This will lead to sharply lower growth and rising unemployment, as many as 60,000 jobs lost, according to the Item club report, which uses the Treasury model to forecast the economy. It urged the chancellor, Alistair Darling, to exclude food and energy from the inflation target or risk excessive pain for voters in the run-up to the election. Read the Guardian article.
In his article 'Farewell prudence, hello £2.7bn slush fund', Larry Elliot reflects on Labour's efforts to deal with the criticism of the abolotion of the 10p tax band and the political uproar it has caused. It is a solution that is too late...' The trouble is that it has taken 14 months to find this solution and it came only after the government first insisted there was no problem and then said the poor state of public finances meant only a far less generous package was affordable.' Does it stand as a credible economic policy?
According to an article in today's FT, 'the increase in consumer prices index inflation since mid-2007 can be largely explained by rising global prices for food and energy. The deeper question, however, is why these have not been offset by slower rises or falls for other products and services, as would be expected if monetary policy had been correctly calibrated to meet the inflation target.' The MPC ' allowed excessively loose monetary conditions to develop between 2005 and 2007. Bank rate was cut inappropriately in 2005 and maintained below its neutral level until 2007. During this period, investors’ risk appetites significantly increased. The result was a prolonged period of buoyant money and credit expansion.' They discussed rapid money and credit growth in 2006 and 2007 but'played down the dangers'. The upshot is that official neglect of monetary warning signals has once again been followed by 'an unexpectedly large rise in inflation although the details of the transmission mechanism differ. In effect, loose domestic monetary conditions have accommodated or even supplemented the inflationary impact of rising global costs.' It is also suggested that there is liitle scope for further interest rate cuts in the near future. Read the article.
Consumers will be "crucified" unless the government changes its inflation target, a leading economist has warned. Peter Spencer from the influential Ernst & Young Item Club is urging ministers to change the 2% inflation target used by the Bank of England. He warned that interest rates would have to stay at 5% if inflation is to be brought down to 2%. He added that keeping interest rates at their current level would hurt hard-pressed households. Professor Spencer said consumers were paying the price for an inflation target that had become unrealistic given the volatility of oil and food prices. He called for the Bank of England's remit to change so it focused on "core inflation", a measure that excludes food and energy prices and is used in the US. Read details here.
Greater competition, lower prices, must be welcomed by consumers. Not necessarily so, if the example of France is anything to go by. Many French consumers, unhappy at rising prices, inflation at a 17 year high and lower prices elsewhere in Europe, have reacted unfavourably to a proposed new law enabling more hypermarkets to be built to challenge local monopoplies and greater freedom for them to negotiate prices with suppliers. A poll showed that less than half favoured more competition as a solution to their concerns but rather a reduction in sales tax and a rise in the minimum wage.
