Data published by the Office for National Statistics (ONS) has revealed that the UK economy grew at a faster pace than expected in the three months to September – sparking concerns over a potentially imminent rise in interest rates.
Gross Domestic Product (GDP) for the three months to September grew by 0.4%, up from 0.3% in the previous quarter – constituting a bigger rise than many economists had anticipated.
Experts have stated that the growth in GDP serves as the ‘go ahead’ for an interest rates rise. The Bank of England’s Monetary Policy Committee (MPC) is due to decide whether interest rates will rise when it meets next week.
A decision to raise interest rates will mark the first rise in just over a decade.
Responding to the news, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), commented: ‘With the latest GDP data confirming that the UK economy is still in a challenging period, these figures are likely to weigh on whether the MPC will raise interest rates next month.
‘We would urge the MPC to proceed with caution on raising rates, as tightening monetary policy amid the current economic and political uncertainty could weaken growth.’
A ‘hard Brexit’ could cost the UK up to £400 billion by 2030, a study carried out by Rabobank has suggested.
18% of Gross Domestic Product (GDP) growth could be lost by 2030 if the UK leaves the EU without a trade agreement. The study also suggested that British residents could be out of pocket to the tune of £11,500 as a result of a hard Brexit.
The bank analysed the consequences of three separate Brexit scenarios, including where Britain leaves the EU with a trade agreement, where it leaves without a trade agreement and where it obtains a so-called ‘soft Brexit’ and leaves the Single Market, but not the customs union.
If the UK leaves the EU without a trade deal in 2019, Britain could enter a two-year recession, and GDP would fall to 2.4%, Rabobank suggested.
However, a recession would be inevitable. If Britain leaves with an agreement, or experiences a soft Brexit, then a ‘milder and much more short-lived’ recession would take place.
Hugo Erken, Senior Economist at Rabobank, commented: ‘By looking at dynamics such as innovation, competition, knowledge and human capital, how they will change and what effects this will have on the structural makeup of the UK and European economy, our research shows that the long-lasting impact of Brexit is likely to be more severe than initially anticipated.’
Research carried out by domain registrar GoDaddy has suggested that a significant number of UK workers are considering setting up a business in addition to working their usual day job.
Nearly a fifth of those surveyed have contemplated starting up a business on the side, GoDaddy revealed.
The survey found that ‘side businesses’ help individuals to top up their income, with some entrepreneurs reportedly earning between £500 and £5,000 on top of the salary from their day job.
48% of those who start up a side business do so to make money from a passion or a hobby, the research revealed.
However, some experts have warned that many have set up side businesses in order to make ends meet. Annie Quick, Subject Lead in Inequality and Wellbeing at think tank the New Economics Foundation, commented: ‘For many more people, this is something they’re being forced to do.
‘We’ve had a decade now of stagnating wages, benefit cuts and increasing prices, so many people are finding that a full-time job is no longer enough to put food on the table and are often having to turn to often poorly paid, insecure employment to top up their income.’
Figures published by the Organisation for Economic Co-operation and Development (OECD) have suggested that the UK has the ‘highest rate’ of inflation amongst top economies around the world.
Rising food and fuel costs have helped to increase prices in the UK, with inflation rising at a faster rate than inflation in other G7 countries, including the US, Germany, France and Japan.
The latest figures from the OECD show that the UK’s rate of inflation reached 2.9% in August, up from 2.6% in July. Experts in the UK have warned that inflation is outpacing wage growth.
Of the 35 developed OECD nations analysed, the UK’s inflation rate is only marginally lower than the rates of inflation in Turkey, Mexico, Latvia and Estonia.
Since the Brexit vote, sterling has steadily depreciated, helping to increase the costs of imports, energy and services.
Meanwhile, inflation across all OECD nations remained stable at 1.8%.
Confidence amongst UK small firms has fallen to its lowest level since the aftermath of the EU referendum, data published by the Federation of Small Businesses (FSB) has revealed.
According to the FSB’s latest Small Business Index (SBI), confidence fell to +1 during the third quarter of 2017, down from +15 in the second quarter.
63% of small firms identified the domestic economy as being a ‘barrier to growth’, whilst 35% highlighted consumer demand as being an obstacle to growth.
The SBI also revealed that 13% of small firms now expect to either downsize, hand on or close their business. Meanwhile, 70% of businesses have reported an increase in operating costs: labour, taxation and rent have all been cited as having contributed to this rise.
Mike Cherry, National Chairman of the FSB, commented: ‘Rising inflationary pressure and a weakening domestic economy are the twin drivers of plummeting confidence among small firms and consumers alike.
‘With conference season and the Autumn Budget approaching, policymakers have an opportunity to restore optimism.
‘Small firms will be looking to the Chancellor to extend a lifeline at the Budget. In such a difficult trading environment, any new tax grabs or loss of relief for entrepreneurs would exacerbate existing challenges.’
Paper identification documents, such as passports, should be replaced with a digital alternative, the Social Market Foundation (SMF) has stated.
According to research carried out by the think tank, moving to a digital form of identification could help to reduce cybercrime.
The SMF found that the number of identity fraud cases in the UK has risen significantly: an analysis of data published by fraud prevention service Cifas revealed that between 2010 and 2016, the number of identity fraud cases increased by 68%. The decade to 2020 will see around 1.5 million cases of fraud in the UK ‘if current trends persist’, the SMF predicts.
It also revealed that a correlation exists between economic deprivation and access to photographic identification. Individuals living in ‘relatively deprived areas’ are less likely to be able to access a passport or driving licence, the Foundation suggested.
Other countries around the world have already begun to use digital identification methods, and are ’embracing the opportunities’ they offer, according to the think tank.
In order to bring the UK up to speed, the SMF has recommended an ‘intuitive and secure’ smartphone app, which would store an individual’s biometric data for identification purposes.
It is also calling for the UK to become the ‘world leader’ in identity verification and authentication services.
A report published by the Institute for Public Policy Research (IPPR) has suggested that the UK’s economic model requires ‘radical reform’.
Living standards for the ‘majority of the population’ are no longer rising, the IPPR’s Commission on Economic Justice discovered. It also found that the UK is in the midst of the ‘longest period of earnings stagnation for 150 years’, with young people set to be ‘poorer than their parents’.
Productivity in the UK is 13% below the average for the richest countries in the G7, the report highlighted.
In addition, a ‘fiscal gap’ is growing between tax revenues and expenditure, which the IPPR believes will worsen as workers age and the proportion of employees declines.
The IPPR stated that the British economy needs ‘fundamental reform’, and has called for a debate on taxation, the role of the UK’s financial sector, the dominance of digital companies in their marketplace and the power held by UK trade unions.
Tom Kibasi, Director of the IPPR and Chair of the Commission, commented: ‘The British economy needs fundamental reform. We don’t have a British economic model. We have an economic muddle. The persistent economic problems we have experienced since the 2008 financial crash won’t be fixed with a bit of tinkering.
‘There is a growing consensus across business, trade unions and civil society that a radical new approach is now needed. Change should be guided by a new vision for the economy, where long-term prosperity is joined with justice for all.’