The long and the short of Johnson’s Brexit deal
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

The shift from extreme pessimism to optimism in recent days over an early agreement on the terms of Brexit was as sudden as it was welcome. Sterling, that reliable Brexit barometer, led the celebrations, with tis best two-day performance in a decade, though I note it is only back to where it was when Boris Johnson succeeded Theresa May as prime minister.

A lot has changed. It seems there will be a customs as well as regulatory border in the Irish Sea, though complex arrangements will still allow Northern Ireland to benefit from an tariff reductions negotiated by the UK in

This deal isn’t flying, but no-deal still has to be grounded
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

By now you will be pretty fed up of hearing about the Irish backstop, and I do not intend to prolong the agony for too long today. Boris Johnson promised to get rid of it but, as was always likely, has instead suggested a revised version of it.

The government’s proposals are thoughtful, and in some respects ingenious, and when the inevitable general election comes will be regarded by many voters in the UK as reasonable, and any rejection of them by Ireland and the EU as unreasonable, which is perhaps the intention, but it is also pretty obvious what the

Corbyn’s not popular, but many of his ideas are
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Boris Johnson and Jeremy Corbyn are, on the face of it, about as far apart as it is possible for two political leaders to be. There is no love lost, and very little common ground. Or perhaps not. People say to me that we have prime minister and worst opposition leader, simultaneously, in living memory.

Whether that is true or not, the similarities could be greater than the differences. Neither, for example, has a credible or workable plan for leaving the European Union.

The Johnson plan, or non-plan, began with a demand that the EU remove the Irish backstop from the

Let’s get fiscal, but avoid the mistakes of the past
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

This has been a busy month for central banks. A few days ago America’s Federal Reserve cut official interest rates by a quarter of a point, citing weaker business investment and exports. A few days before that, the European Central Bank (ECB) announced what its chief economist described as a comprehensive package of measures, which included a cut in one of its rates, the deposit rate, from -0.4% to -0.5% and the resumption of quantitative easing (QE) at €20bn (£17.7bn) a month from November.

Neither decision was without controversy. The Fed split three ways, with one

Some good news – but we’re not out of the woods yet
Posted by David Smith at 09:00 AMCategory:

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Many things might be going wrong for the government at the moment but, so far at least, it appears to be being spared the prospect of an immediate recession. We will not know for sure until November whether the economy has avoided two successive quarters of falling gross domestic product (GDP), the usual definition of recession, and who knows who will be in power then. But so far, so good.

So far, so good, for the Bank of England too, which is now unlikely to be called into action this week, following Mario Draghi’s parting shot at the European Central Bank on Thursday. The highlights of his

The record pay squeeze is over – but maybe not for long
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Plenty of crazy and alarming things are happening in British politics but, leaving those to others for now, and turning to a slightly happier story, we are on the cusp of a rather different and significant moment, and it has been a long time coming. Within the next few weeks regular pay in Britain, in real terms, should finally move above pre-crisis levels. The longest pay squeeze in modern times – even exceeding one during the Victorian era – will be over. Bring out the bunting.

Currently, regular pay in Britain, adjusted for inflation. Is just 0.8% below the

Scrapping HS2 would derail Javid’s infrastructure plan
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Sajid Javid is a man with a plan, and he is not keeping it secret. The chancellor may only have been in office for a month, but a month can be a very long time in politics, and he has already made clear when asked that his ambition is to undertake a big increase in infrastructure spending, irrespective of the Brexit outcome.

During the Tory leadership contest he talked of creating a £100bn national infrastructure fund, probably to be spent over five years and, while he did not win that contest, he has taken that ambition to the Treasury with him.

Nor is this a

The top 1% pay a lot of tax – will they stay or go?
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Today I want to lift my sights high. So high, in fact, that it takes me to the very top of the income distribution. These are the people who earn many times the average salary, are mainly not Premier League footballers (though they clearly do), and who are endlessly fascinating.

I do so for three reasons. The very well-off, the top 1%, and even more so the top 0.1% will become even more important as a source of income tax revenues if Boris Johnson carries out his leadership pledge to reduce the tax burden on those slightly lower down the income scale.

That pledge,

This sterling slide has logic on its side
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

The new government is less than a fortnight old but already we have seen a flurry of announcements and, it seems, cash pouring out of the Treasury as if there is no tomorrow. So, on your behalf, I have been trying to make some sense of this, by reading Boris Johnson’s speeches and pronouncements since he became prime minister. Somebody had to.

He has, as you would expect, a nice rhetorical flourish. Whether that is all he has, we will find out in coming months. So, he suggests, “we will look back on this period as the beginning of a new golden age for our United Kingdom”.

He

Tricky times call for a lucky chancellor
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

There are three ways of viewing Boris Johnson’s first few days as prime minister, and in particular his “fire and hire” approach to his new cabinet. Apart from demonstrating that no job is as insecure as that of a cabinet minister and their special advisers, it was curious man and woman management from a new leader apparently committed to Tory unity, and needing the loyalty of his MPs in coming weeks.

The smart money in the markets and the view of many in Westminster is that stepping up no-deal preparations and insisting that the Irish backstop be removed from the withdrawal

Counting the cost of a Johnson government
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

When a new prime minister is about to take over, there is normally a sense of excitement, even optimism. In the case of Boris Johnson, however, assuming the polls are right and he is duly elected by Tory party members this week, there is also a powerful sense of trepidation.

New prime ministers normally take office as a result of a general election. On the road to victory, their policies, as set out and costed in manifestos, will have been subject to the closest scrutiny, from the opposition and from the media. Before even making it into the manifesto, they will have been

Friendless pound needs the kindness of strangers
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Even before Sir Richard Branson offered his opinion on the pound, I was intending to write about sterling this week. This is a time of year when many people think about the exchange rate more than at other times and encounter the reality that businesses and the markets have been dealing with for the past three years. The pound, unsurprisingly in the light of the current uncertainty, has taken on a weaker tone recently.

Branson thinks sterling will go to one-for-one parity with the dollar in the event of a no-deal Brexit this autumn, from $1.25 now, and, while that is a

Brexit bluster comes home to roost as growth hits the buffers
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Sometimes a figure comes out which really pulls you up short. Just such a figure was published a few days ago. The purchasing managers’ index (PMI) for Britain’s construction sector slumped last month. Already weak at 48.6 in May (levels below 50 signal a decline in output), it plunged to 43.1 last month. Not only was this exceptionally weak, but it represented the biggest fall in output since April 2009, when the economy was still mired in the 2008-9 recession, the worst since the Second World War.

The details of what IHS Markit,, which compiles the survey,

Ten years of recovery, yet not a happy anniversary
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

This is an important moment. Ten years ago, 10 years tomorrow to be precise, Britain’s economy began to crawl, bleary-eyed, out of the deepest recession since the Second World War. The anniversary brings with it questions. How strong, or weak, has the recovery been? What kind of recovery, in terms of sectors of the economy, was it? And, the question I get asked most often, how long can it last?

The recovery itself was slow to get going. I well remember the concern, in those dark days of 2009, when it appeared that other economies had begun their post-crisis recoveries

Our export prospects can burn bright – as long as we dodge a no-deal Brexit
Posted by David Smith at 09:00 AMCategory:

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

What will lift us out of the doldrums, this period of very weak growth and flatlining productivity Britain’s economy is stuck in? It will not, I judge, anything to do with Brexit. A survey of economists by Consensus Economics shows an average expectation of 1.35% growth this year and next, even in the context of a “smooth” Brexit; leaving under a withdrawal agreement,

A no deal Brexit would see growth drop below 0.5% next year, according to the survey, which was carried out among the 37 economists on Consensus’s UK panel, a prediction that is likely to encompass a

Johnson’s dead cat tactics on tax and a no-deal Brexit
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Now that Boris Johnson has decisively won the first round of the contest among Tory MPs, and is runaway favourite to win among the membership, we have to take seriously the prospect of a Johnson premiership. In this strange tribal mating contest, in which those who have the biggest and most colourful tail feathers to shake do best, he will be hard to beat.

There are two things that, so far, define the Johnson pitch. One is a stonking great tax cut for higher-rate taxpayers, by means of raising the basic rate limit, the higher rate threshold, from £50,000 to

As growth stagnates, we yearn for the go-go days of the 80s
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Sometimes these days it feels a bit like the 1980s. Younger readers will not know, and older readers need reminding, that back then the toll of jobs being lost, mainly in industry, was sufficient for ITN’s News at Ten, to be able to run a nightly map.

The headlines for manufacturing jobs are bad again. Ford’s announcement of the closure of its engine plant at Bridgend, a town I know, will be devastating for the up to 1,700 people whose jobs are directly affected and the thousands more in the supply chain.

Similar considerations apply to the 4,000 jobs

London bankrolls the rest of the UK – and that’s not healthy
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Today I want to talk about something, based as always on statistical fact, that is guaranteed to raise the hackles. If you live in London and the southeast you will be even more convinced that your taxes are subsidising the ne’er do wells in the Midlands, the North, Scotland, Wales, Northern Ireland and even parts of the South.

If, on the other hand, you live in those other regions and countries, you will be confirmed in your view that the UK economy is dangerously London-centric and tilted towards the gilded south-eastern corner of the country, a situation

When China sneezes, the world catches a cold
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

It is said that we owe to Metternich, the distinguished 19th century diplomat, one of the most famous phrases used about the global economy. In an era when Europe dominated the world economy, he came up with: “When France sneezes. Europe catches a cold.” That was easily adapted, with the rise of the United States, to: “When America sneezes, the world catches a cold.”

It remains true today. The sneezing fit that began in America’s housing market in the 2000s gave us the global financial crisis of 2008-9.

There is, however, another country we should worry about in the

EU workers are returning – but maybe not for long
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Every so often some figures come along which change your perceptions. This happened a few days ago. We have got used to the idea that the number of European Union nationals working in Britain has been falling. Indeed, this fall has contributed to a tight labour market and recruitment difficulties across many sectors.

So, for example, during the course of 2018 there was a 61,000 drop in the number of EU nationals working in Britain, and the total was down by almost 90,000 from its 2017 peak. Having risen by an average of nearly 140,000 a year since 2004, this drop in the

There’s no need to sacrifice growth to save the planet
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

It is hard to get away from climate change these days. Most people would agree that it is a bigger issue, certainly for the long-term, than the one that has been unnecessarily preoccupying us for the past three years. Parliament has trouble agreeing on much these days but it has this month declared “a climate emergency”. The Environment Agency has warned that entire communities may have to be moved because of flooding and coastal erosion.

Climate change is also actively affecting policy. The Scottish government has just cancelled a planned cut in air passenger

Robots aren’t destroying jobs, but nor are they boosting productivity
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

The future is, by its nature, something that is yet to happen. In some ways though, what we think of as the future – things like artificial intelligence (AI) and robots – are already with us. So, without wanting to sound like some terrible advertising slogan, the future is now, and that allows us to make an early assessment of its impact.

To pessimists, new technologies like AI and robotics are always going to be a destroyer of jobs on a vast scale. People will be replaced by machines that, in many cases, will be a lot smarter than they are.

I have

This may be as good as it gets for the public finances
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

A few days ago we had an object lesson in how official figures can be simultaneously disappointing and very good. Not that many people follow these things closely, but for those who do, last month’s data for public borrowing – the budget deficit – represented a bit of a setback.

March’s borrowing total of £1.7bn was £0.9bn up on a year earlier, breaking a run in which the latest figures have tended to be lower. It was also more than £1bn above City expectations.

Thus, instead of coming in at or below the latest official forecast from the Office for Budget

The trade deficit soars, in a terrible time to be an exporter
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Now that the Brexit process is guaranteed to stretch on for many more months, if not years, there is a limit, which may be close to being reached, on how much new there is to say. I shall bear that very much in mind in my choice of topics. We may be neither properly in, nor out, for a very long time, and most probably beyond October 31, the latest departure date.

Business is relieved that a no-deal Brexit has been avoided, and will continue to be avoided. But it is alarmed that the limbo could go on fo0r a very long time. Make UK, which represents Britain’s

Britain’s minimum wage, 20 years old, is an unlikely success story
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Today, to take your mind off other things, which will do us all some good, let me talk about a British success story. It has helped prevent low-paid workers being exploited by the minority of unscrupulous employers, it has put a brake on rising inequality and it has not prevented a strong and sustained rise in employment.

It is also celebrating an important milestone; 20 years old this month. I refer to the national minimum wage, now the national living wage for those aged 25 and over. It has just risen, on April 1, to £8.21 an hour, with lower rates

A customs union beckons – and it won’t stop trade deals
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Another week on in the Brexit process and I am worried. I may have used up all my best adjectives too soon. This thing could get even madder. And, in a few weeks’ time, the short rein of Theresa May as prime minister will soon be over; the only former Bank of England official, as far as I know, to have made it to the top job. She lost heavily again on Friday.

For all her faults, there was always an element of “cling on to nurse for fear of something worse” about Theresa May. Who knows who the 100,000 members of the Tory party, one of the least representative

Britain shouldn’t be too glad to be grey
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

In recent days we have had another stunning demonstration of the potency of the job-creating machine that is the British economy. While surveys have suggested that employers are beginning to cut back on recruitment, there was no evidence of this in the official figures.

Overall employment rose by 222,000 in the latest three months for which data are available, November-January, and the employment rate for the 16-64 age group rose to 76.1%, a new record. The unemployment rate dropped to 3.9%, its lowest since November-January 1974-5. And, while only a minority of the net new

Views from the brink: how slow growth and uncertainty leave firms on the edge
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

What, amid the Brexit chaos – which grows ever more chaotic by the week – have we learned about the economy? Alongside Philp Hammond’s spring statement, the Office for Budget Responsibility (OBR), revised down its growth forecast to 1.2% for this year, the weakest since the crisis, and predicted that the economy will expand by an average of about 1.5% over the following four years.

That assumes a smooth Brexit, a brave but necessary assumption (the OBR is required to forecast on the basis of government policy) and reaffirms that, even if we get over the short-term hurdle, the challenge of lifting Britain’s growth rate to something like

Quantitative easing worked, just don’t make a habit of it
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

How time flies. It is hard to believe that it is 10 years since the Bank of England brought an entirely new type of monetary policy, for Britain at least, blinking into the sunlight. Quantitative easing (QE), a complicated name for something that many people do indeed find complicated, was launched then and is still with us.

The misunderstandings then were considerable. When the policy was launched in March 2009 Mervyn King, now Lord King, did a television interview with the then BBC economics editor Stephanie Flanders, to try to explain it.

His mission to

This sterling rally was built on shaky foundations
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

For those of you who like a fact to kick off the day, how did sterling, as in pound sterling, get its name? The answer, which is shrouded in the mysteries of Middle English, is that it could have come from starling, as in bird, which featured on early coinage, or “sterre”, Middle English for star, which was on some Norman coins in circulation in Britain.

I mention this because sterling has been in the news. Though it slipped a little towards the weekend, It has had a good week. Currency dealers have been watching the parliamentary shenanigans very closely, and decided