- Economy boost too late for Sunak?
- Traders see little market impact
- What happened last week
Sunak gets a boost but is it too late
It is almost certainly too late, and cold comfort, but Rishi Sunak can at least claim he won the economic argument if , as seems nailed on, he packs up and departs Number 10 next week.
Having been ticked off for repeating a phrase that the economy was going “gangbusters”, official data has confirmed it was going even better than he thought.
GDP rose by 0.7% in the first quarter, according to the Office for National Statistics (ONS), up slightly from the original gangbuster estimate of 0.6%.
Sunak reportedly called the election on the basis that economically things were turning up and he could convince the electorate that they would continue to do so under his guidance.
Alas, even though Rob Wood, at Pantheon Macroeconomics, said Britain “is on a robust recovery path” unless a political miracle occurs it will be a nice welcome present for Keir Starmer next Friday.
No market panic over likely change of government
Market traders seem pretty sanguine about a change of government.
Based on the Bank of England’s financial policy report this week, the biggest risk from this election is that the party that wins power overspends, which causes bond markets to revolt and bond yields to move higher, said Kathleen Brooks at XTB.
“The bond market is wary of spendthrift fiscal plans, and if the winning party looks like they are pushing the boundaries of fiscal prudence, the market will punish them, as it did Liz Truss,”
Saxo’s head of FX strategy, Charu Chanana, says markets may be “too complacent” about the UK election.
While the Labour manifesto suggests that leader Keir Starmer and shadow finance minister Rachel Reeves are likely to maintain fiscal conservatism in early years, Chanana says if the election result shows a commanding lead, it “could leave room for some bold policy moves”.
“Sterling has been the top performer in the G10 FX space due to a stabilizing economy, high yield, the Bank of England's lack of urgency to cut rates, and expectations of political stability. However, this sense of complacency might be challenged if Labour's victory isn't as strong as anticipated.”
Thursday: Labour set for cash boost
Labour could be set for a huge cash boost if it wins the election, according to one economic consultant.
Capital Economics estimates that up to £16 billion might be available or almost double the previous forecast from the Office for Budget Responsibility after the Budget in March
Lower borrowings due to a £5bn boost to tax revenues from the jump in wages are the reason and will give the new government scope to “reverse some of the scheduled spending restraint, or the freeze on personal tax thresholds, but not both”.
The amount available could even be as much as £27bn if interest rates fall more than expected and house and equity prices pick up again, added Capital Economics.
Ruth Gregory, CE's deputy chief economist, said: “Overall, as things stand, we suspect the next government may be handed a bit more fiscal space by the OBR.”
Battle royal over North Sea policy
Labour’s policies for the North Sea have sparked an outbreak of open letters and calls for action.
Keir Starmer has said it will allow existing licences to continue but will not issue new permits while tax will rise to an effective rate of 78%.
A joint letter signed by Unite and 200 local firms was unveiled today in Aberdeen highlighting there is no plan to retrain workers laid off or replace the oil and gas that will be left in the North Sea if the policy goes ahead as planned without changes.
Another open letter, this time from advocates of the policy, has called on the next government to provide a jobs guarantee to ensure every oil and gas worker can find equivalent, alternative employment or funded retraining.
And in an RNS statement, one of the firms operating North Sea fields, Serica Energy. said it would start to look abroad for opportunities due to the tax regime.
"I wish to be crystal clear that reducing tax relief for capital expenditure below the rate at which tax is payable would invest the vast majority of UK North Sea projects unprofitable, meaning that these projects, and the jobs and tax revenues they would generate, simply will not happen, “ said chief executive David Latin.
Lib Dems confirm cannabis plans
Liberal Democrat leader Ed Davey has outlined what his policy to legalise cannabis would entail.
Davey said he wants a "regulated market for cannabis" with low-strength products available for adults to buy from retailers with a licence.
The Lib Dems also want a new levy on tobacco company profits which it would put towards funding for healthcare.
Wednesday: More Tories investigated in betting row as Labour suspends candidate
Betting by politicians on the election date and the result has suddenly exploded into a main story of the campaign.
After news that five Tories are under investigation by the Gambling Commission, Labour has suspended Kevin Craig, its candidate for Central Suffolk and North Ipswich, after he bet against himself in the upcoming vote.
Craig said in a statement: “Throughout my life I have enjoyed the odd bet for fun whether on politics or horses.”
Labour's Liz Kendall told the BBC it was right the party took action over Craig.
The shadow work and pensions secretary said: "If there are rules, politicians should abide by them.
Overnight, Liberal Democrat leader Ed Davey also admitted he liked a flutter and had bet on the 2010 election.
The Lib Dem said he had placed a (losing) wager on how well his party would do but claimed this differed from acting with inside information.
Tory losses grow in latest poll
A new voting intentions poll from Ipsos showed the Conservatives at their joint record lowest share since 1978.
Labour was found to have a 42% share of the vote, down one percentage point from the previous poll at the start of the month, but the centre-left party's lead grew to 23 points over the Tories, which fell four to 19%.
Of those polled, 72% say they dislike the Conservatives, a record high.
Reform UK had a 15% share of voting intentions, up six percentage points to its highest share with Ipsos,
Lib Dems had a share of 11%, up three, and the Greens 7%, down two.
The telephone poll asked 1402 adults who they will vote for at the upcoming general election, carried out between Friday and Monday, with the previous poll carried out - 4 Jun
Tuesday: Vauxhall ratchets up zero emissions pressure with closure threat
Even with the election still over a week away, Keir Starmer is getting a taste of what power is going to be like if, as seems inevitable, he forms the next government.
The latest cab, or should that be e-taxi, off the lobbying ranks is Vauxhall car maker Stellantis, owner of the Ellesmere Port and Luton auto plants.
Having seemingly got no joy with repeated threats to Rishi Sunak about his net zero policies, the warning now is seemingly being aimed at the incoming government (which has an even tougher policy than the Tories).
UK managing director Maria Grazia Davino said new rules forcing it to phase out petrol cars in favour of electric cars would cost it a lot of money and it might shut factories here as a result.
Sunak's zero emission rules mean 22% of cars sold by big manufacturers must be electric from this year, a percentage that rises 80% by 2030 and nil by 2035.
Labour wants the nil part brought down to 2030, the date it was originally before Sunak relented slightly.
Every car sold outside the quota incurs a £15,000 fine.
In the face of a Europewide slowdown in EV demand, Davino argues that the mandate’s targets now look impossible to meet
Speaking at a conference, Davino said: “We have undertaken big investments in Ellesmere Port and in Luton, with more to come.
“But if this market becomes hostile to us, we will enter an evaluation for producing elsewhere.”
Asked how long Stellantis would wait for a decision from the Government, she told reporters: “Less than a year.”
Tories withdraw support for betting scandal candidates
Despite a subdued feeling in the market, there appears to be little quiet on the campaign trail for Tories and Labour, with the former currently embroiled in a betting scandal.
Both Craig Williams and Laura Saunders, two Conservative candidates, have had their support pulled by the party after a probe was launched into allegations of betting on the date of the election.
The two will remain on the ballot as Tory but will become independent if elected.
Scotland Yard was accused of leaking the identities of the two, with reports indicating a further five police officers are also under investigation by the Gambling Commission.
Monday: Challenging times ahead for election winner, says CBI
Under two weeks to go and lobby groups have been lining up today to warn that whoever wins the election some tough yards lie ahead.
Ben Jones, the CBI's economist, says: "We’ve seen a stop-start recovery in manufacturing output in recent months, with higher activity over the last quarter concentrated in a relatively small number of manufacturing sub-sectors.
"One note of caution is that order books remain soft. The sharp deterioration in export order books is particularly striking and is something to keep an eye on in the coming months."
The next government general election "will be inheriting a challenging economic environment" he adds.
Main parties hoodwinking electorate suggests IFS
More forceful was the Institute of Financial Studies, which argued that the policies to deal with Britain's looming financial crunch are the same from both Labour and the Tories – ignore it.
According to the IFS, the only uncertainty is the specific taxes that are going rise with debt interest and commitments to healthcare and defence spending adding to pressure on already-strained public finances.
Paul Johnson, the think tank’s director, said both Labour and the Conservatives are guilty of refusing to talk about the reality facing the country.
“These raw facts are largely ignored by the two main parties in their manifestos,” he says with both committing to no rises in income tax, VAT or National Insurance.
Shein meets Labour
Bosses at Shein, the Chinese fast-fashion giant, meanwhile have met with shadow business secretary Jonathan Reynolds to discuss details about its potential listing in London.
The Labour Co-op MP said that if Britain wants to allow new companies into the country then “We should seek to regulate them in the UK”.
He claimed that regulating them here would allow the highest standards to be enforced, pointing out that London-listed businesses have a "pretty extensive set of compliance standards applied to them”.
Current business secretary Kemi Badenoch has avoided meeting with the clothing group as she holds concerns about its ability to avoid customs duties and the reports of slave labour in Xinxiang.
Shein, if it does list, would be the UK's largest-ever IPO, if based on its £52 billion valuation last year.