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The OECD has indicated that UK Chancellor Rachel Reeves must implement further tax increases to ensure sustainable public finances. Following significant tax hikes and borrowing in her October budget, the organization emphasized the need for a prudent fiscal policy to prepare for potential economic shocks, such as rising energy prices and trade tensions.
Chancellor of the Exchequer Rachel Reeves faces the risk of breaching her fiscal rules early next year, as the Office for Budget Responsibility may declare a fiscal shortfall in her spring economic update. This situation could compel Reeves to deliver an unscheduled mini-budget amid volatile bond markets, following a challenging reception to her previous budget.
The Bank of England has warned that rising global trade barriers could negatively impact growth and increase inflation uncertainty, leading to financial market volatility and higher borrowing costs. Governor Andrew Bailey highlighted the risks of reduced international cooperation and the potential for a fragmented global economy, while emphasizing the resilience of the U.K. banking sector. The BoE plans to conduct full stress tests on banks every two years starting in 2025 to enhance competitiveness and address emerging financial risks.
UK Chancellor Rachel Reeves' £26 billion tax hike on businesses could lead to the loss of up to 130,000 jobs, according to Bloomberg Economics. The analysis suggests that the unemployment rate may increase by 0.4 percentage points if companies respond by cutting hours worked.
UK tech firms, including Revolut and Atom, have urged the government to enhance access to capital to support growth. In a meeting with Chancellor Rachel Reeves, they discussed recent reforms aimed at facilitating stock market listings and improving the competitiveness of UK businesses.
The UK government plans to enhance economic growth by pooling £1.3 trillion of pension savings into large "megafunds." Chancellor Rachel Reeves aims to channel more private capital into infrastructure projects and startups, addressing the country's low investment levels.
In a lively session of Prime Minister's Questions, Kemi Badenoch challenged Keir Starmer on Labour's budget and tax policies, citing a significant petition for a new general election. Starmer countered by highlighting the Conservatives' lack of a coherent plan and reminded Badenoch of the previous government's EV mandates amid job losses in the auto industry. Ultimately, Starmer edged the debate, scoring 8/10 to Badenoch's 7/10, as he framed the Tories as out of touch while Labour focuses on governance.
Virgin Atlantic CEO Shai Weiss criticized the U.K. Labour government's budget as a "tax on growth," highlighting increased Air Passenger Duty (APD) rates that could hinder the aviation sector's contribution to the economy. The budget, which includes significant tax hikes aimed at businesses, has raised concerns among corporations about expansion and investment. Despite challenges, Weiss expressed optimism for Virgin Atlantic's return to profitability in 2024, despite ongoing issues with Rolls-Royce Trent 1000 engines affecting operations.
British business output has contracted for the first time in over a year, with the S&P Global Flash Composite PMI falling to 49.9 in November. Tax increases from the new government’s budget have dampened hiring and investment plans, leading to job cuts and a pessimistic outlook, particularly in the manufacturing sector. The services sector also showed weakness, with inflation concerns prompting caution from the Bank of England.
The UK private sector has shifted from solid growth to stagnation following a budget tax hike, as indicated by a significant drop in the S&P Global composite PMI from 51.8 to 49.9 in November. This reading fell below the 50 mark, signaling contraction and was notably worse than the anticipated 51.7. Firms have expressed strong disapproval of Chancellor Rachel Reeves' fiscal plans.
Rachel Reeves
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OECD Urges UK to Implement Further Tax Increases for Fiscal Stability
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