11. Weekly Newsletter
UK Economy Rebounds
The UK economy beat forecasts for GDP growth in January with a 0.3% expansion (ahead of 0.1% forecast) as a result of the service sector rising 0.5% due to strong performances from the education, transport and health activities sectors. PM Sunak, from Paris, described the result as “showing encouraging signs that things are better than people feared, that sentiment is improving, confidence is returning and that is partly because of the plan we have put in place”.
However, manufacturing and construction declined 1.7%– partially driven by reduced housing demand. Economists also fear that strike action in February will have reduced economic output during the month. The chief UK economist at KPMG stated, with regards to future growth, that lower wholesale energy prices would help boost the economy but that this “may not be sufficient” to avoid a recession in the first half of 2023.
Newspapers & The Spring Budget
The UK’s front page news cycle over the last seven days has covered a wide range of topics with politics shifting focus towards the issue of illegal migration across the English Channel with a resultant £478m deal being agreed with France and new legislation in parliament. Additionally, the government’s most expensive project, HS2, faces delays due to rising construction costs which will mean the faster London (Euston) to Birmingham route is not expected to be completed before 2035. Some of the newspaper front pages over the last week were:
- Daily Express: Rishi’s £478m Deal: I Said We Would Stop Boats
- Financial Times Weekend: Collapse of US tech bank SVB shakes sector
- The Times: HS2 will be delayed by another two years
- The Guardian: Sunak facing clash with EU on ‘unlawful’ asylum plans
- Financial Times: Drive to increase overseas worker numbers to begin with construction
- The Times: PM plans annual cap on number of refugees
- The Independent: Budget 2023- Hunt and Sunak head for new tax clash with Tory backbenches
On Wednesday (15th March) the chancellor, Hunt, will present his first budget. This will outline the government’s plans for spending and tax policy. Simultaneously, the Office for Budget Responsibility (OBR) will publish their fiscal and economic outlook for the next five years. Analysts expect the government to announce further action on energy prices (including another fuel duty freeze), getting early retirees back to work (with tax incentives), the expected rise in corporation tax (from 19% to 25%) and possible public sector pay increases.
English Channel Migration Deal
PM Sunak and France’s President Macron, on Friday (10th March), agreed a ‘new chapter’ in their relationship following the signing of a £478m three year deal to curb illegal migration across the English Channel. The deal will contribute to the construction of a new detention centre (in France), expanded drone surveillance across French beaches and a 40% increase in police patrols. The PM stated that he “made it one of [his] priorities to stop the boats. We are delivering on that priority to stop people coming to the UK illegally”.
At the conclusion of this first Franco-British summit in five years, the two leaders demonstrated their commitment to move past tensions caused by Brexit with Macron referring to Sunak as “mon ami”. However, the PM was unsuccessful in achieving his policy on returning migrants to France but now boasts new co-operation on defence and energy. Both leaders also expressed their shared commitments to expanding nuclear and renewable energy to battle climate change.
