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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Hunt denies planning to lift fuel duty; pound higher despite grim outlook – as it happened

United States Jeremy Hunt GfK Darren Morgan Inflation Office for National Statistics
A petrol service station garage at Atherstone, Warwickshire.
A petrol service station garage at Atherstone, Warwickshire. Photograph: Justin Kase zsixz/Alamy

Summary

Time to recap – here are today’s main stories, as economists give their verdict on the UK’s troubling economic situation:

Our ever-brilliant Politics Live blog has more coverage of the reaction to the autum statement, by my colleagues Rachel Hall and Fran Lawther.

Have a lovely weekend, see you on Monday. GW

Updated

Twitter is experiencing a rise in outages, as the crisis gripping the social media company deepens.

Twitter has temporarily closed its offices to staff, after hundreds of employees were reported to have rejected Elon Musk’s ultimatum to keep working for the business.

This has fuelled fears over Twitter’s ability to keep operating, as my colleague Josh Taylor reports:

On Thursday evening, the version of the Twitter app used by employees began slowing down, according to one source familiar with the matter, who estimated that the public version of Twitter was at risk of breaking during the night. Website DownDetector reported a significant uptick in user reports of issues on the site.

“If it does break, there is no one left to fix things in many areas,” the person said, who declined to be named for fear of retribution.

Elsewhere in the markets, oil has fallen as traders fear rising Covid-19 cases in China, and a slowing global economy.

Brent crude is down 2% at $87.89 per barrel, its weakest point since the start of October.

Cheaper energy could help ease the pressure on households and businesses, especially if Jeremy Hunt doesn’t raise fuel duty in March…

CGT changes could cause 'fire sale' of second homes

There could be a ‘fire sale of second homes’ in the next few months, as people try to avoid the cut to the capital gains threshold coming in April.

So predicts Jamie Mathieson, head of private client in London at JMW Solicitors:

“It is estimated that in the current tax year CGT will raise £15 billion, a figure which will increase by approximately £1.2 billion from April 2025 due to new measures. CGT Annual Exempt Amount will be reduced from £12,300 to £6,000 in April 2023 and £3,000 in April 2024. This will be legislated for in the Autumn Finance Bill 2022.

“Not mentioned in the Budget is the knock-on effect this change will have to Trustees, who currently benefit from a CGT allowance of half that of an individual. Unless substantial changes are made to primary legislation, this announcement will eventually reduce Trustees’ CGT allowance to just £1,500.

That could add to the downward pressure on the housing market, with prices already expected to fall by 9% over the next two years, and only recover slowly afterwards:

It will be hard for the pound (currently $1.1905) to break through the $1.20 mark, given the economic gloom.

So argues Fawad Razaqzada, market analyst at City Index and FOREX.com

Granted, we saw some slight improvement in UK data, with retail sales topping estimates with a gain of 0.6% month-over-month and jobless claims beating expectations earlier in the week, along with wages. However, the big worry is the still-rising inflation, which remains in double digits.

Usually, rising inflation tends to provide support for currencies as central banks normally hike rates to bring inflation back under control. Although that is also the case with the Bank of England, it is just that the economy is so bad right now that further sharp rate increases might do more damage than going at a steadier pace.

We learned this week that annual inflation surged to a new multi-decade high of 11.1% from 10.1% previously. Consumer spending is thus likely to remain subdued with prices of everything rising while real wages continue to fall. Many economists believe the UK is heading into a prolonged recession.

With UK Chancellor Jeremy Hunt announcing £55 billion worth of tax rises and spending cuts, Britons face more pain for months, or even years, to come.

It’s pretty clear today that Britain’s ‘squeezed middle’ earners will suffer badly from the autumn statement.

Resolution Foundation show that Hunt’s sneaky use of income tax threshold freezes, to drag more people into higher tax bands, isn’t very fair:

Higher-income households will face higher tax hikes as a proportion of their income: 70 per cent of the new taxes for individuals announced yesterday will be paid by the richest fifth of households.

However, relying on stealthy threshold freezes rather than more visible rate rises does raise some fairness questions. For example, someone on £62,000 loses as much from threshold freezes as someone on £124,000 in cash terms (£1,600) but twice as much as a share of income (2.6 versus 1.3 per cent).

Average real household disposable incomes are forecast to fall by 7.1% over this year and next – equivalent to £1,700 per household – as living standards tumble back to 2014 levels.

Resolution point out that the ‘squeezed middle’ get less help than other groups:

That is despite government policy offering significant support, with uprating of all benefits in line with inflation (10.1%), and measures announced since the spring providing an average £1,300 boost to the lowest income households (mainly via targeted Cost of Living Payments) and highest income households (driven by the scrapping of the Health and Social Care Levy, partially offset by the lowering of threshold for the 45p rate of income tax to £125,000).

The squeezed middle will receive less support, at £950 per household.

Updated

Hunt’s changes to capital gains tax could lead to thousands of Brits breaking the law without realising, experts warn.

Once the CGT allowance is cut from £12,300 to £6,000 from April 2023, then £3,000 from April 2024, small gains will be taxable.

From April 2023, buying some shares for £5,000 and selling them a few years later for £11,000 will trigger a gain and leave you with a tax bill.

Alice Guy, personal finance editor at interactive investor, explains:

“The CGT rules mean that you’ll need to report a gain through your tax return or by using the Capital Gains Tax Service, or you could end up breaking the law and potentially paying a penalty.

If you sell a second home, you’ll need to report CGT gain even sooner, within 60 days of the sale to avoid a penalty.

Inheriting a house could also lead to a CGT bill, Guy adds, if prices rise before it’s sold.

The taxable gain is the amount the house was worth on death compared to when it’s sold.

There’s often a time lag when people come to sell a home, following a death, leaving them with a CGT bill on top of inheritance tax.”

Nationwide Building Society is bracing itself for a rise in bad loans and a drop in mortgage lending as borrowers grapple with the impact of surging living costs and a long recession.

The UK’s second-largest mortgage lender said that while few borrowers had fallen behind on loan payments so far, it put aside £108m to cover potential defaults in the first half of the year. That compared with the £34m it released due to improving conditions during the same period in 2021, when the country was recovering from the Covid pandemic.

Nationwide said:

“The transition to higher interest payments is a challenge for households as they adjust their expenditure priorities.”

While it pledged to support borrowers struggling to repay their debts, it warned that “an increase in arrears from current levels is expected”.

The IPPR thinktank has calculated that the government could raise tens of billions of pounds if it taxed income from wealth at the same rate as income from work.

It says this would raise up to £50bn of tax revenue over the next four years.

Capital gains tax is paid if you sell an asset, such as stocks, bonds, and property, for more than you paid – but at a lower rate than income tax (at 10% for basic rate tax-payers, or 20% for those on the higher rate).

IPPR explains:

In his autumn statement, the chancellor reduced the annual exempt allowance on capital gains from £12,300 to £6,000 in 2023, then £3,000 in 2024.

Yet the chancellor’s reform is forecast to raise just £435 million in 2026/7, dwarfed by the £12 billion that could be raised in the same period if the government embraced taxing capital gains at the same rate as the income tax schedule.

How reforms to capital gains tax reforms could raise more money
How reforms to capital gains tax reforms could raise more money Photograph: IPPR

Such reforms would bring in less if those capital gains were adjusted for inflation, as the chart shows, but could still be handy to the chancellor.

Our Politics Liveblog is also covering the fallout from the mini-budget, including a warning that taxes won’t fall back to pre-Covid levels for decades, following a ‘series of economic own goals’.

The latest market reaction:

Arun Advani, associate professor of economics at the University of Warwick, has analysed the autumn statement, and found that Jeremy Hunt ducked the opportunity to reform taxation of the wealthy.

For example, Advani explains:

Despite repeated mentions of the former chancellor Nigel Lawson during his budget speech, Hunt did not follow his example and equalise the tax rates on income and on capital gains. Currently, someone earning an income of £1m as an employee will pay 47% tax on every additional pound they earn, and their employer has to put in another 13.8% on top. If they can instead take their pay through a company they own and manage, they can take the money out as a capital gain. This allows the first £1m to be taxed at a rate of only 10%, after which the rate is still only 20%.

Capital gains are particularly unequally distributed, with more than half of taxable gains going to only 5,000 people. A budget seriously aimed at focusing tax rises on those with the broadest shoulders would have corrected this anomaly.

Here’s the full piece:

IFS: Big rise in higher rate taxpayers

The IFS also show how the structure of income tax is changing – meaning more people are paying more.

When the additional rate (the top one) was introduced in 2010 only around 200,000 people paid it, they explain.

Now anyone earning over £100,000 will pay at 60% on incomes up to £125,140, and at 45% over that. Altogether 4% of adults, around 2 million people, will be paying income tax at 60% or 45% by 2027-28. That’s more than were paying the higher 40% rate back in 1990.

Meanwhile the IFS expects there to be nearly 8 million people paying at that 40% rate.

The IFS have lambasted the government’s decision to delay introducing a cap on social care costs for another two years.

Paul Johnson fears this could sink the plans:

First, it is awful that the social care reforms will not now be implemented next year as planned. I rather fear that another two-year delay amounts to a death knell for these vital changes.

Government should not be making and then reneging on promises like this which matter so much to vulnerable people.

Sir Andrew Dilnot, the economist behind the plan, yesterday said he was “astonished, puzzled and deeply disappointed” at the delay until October 2025.

The IFS says Hunt’s statement was progressive – but we’re almost all going to be poorer.

Yesterday, the Treasury published distributional analysis of the measures in the autumn statement which showed the measures were reasonably fair.

The poorest households gain the most, proportionally and in cash terms, while everyone else loses – but by roughly the same amount, as a share of household income (see yesterday’s liveblog for details).

Updated

IFS chief Paul Johnson adds that the UK is reaping the costs of a long-term failure to grow the economy, the effects of population ageing, and high levels of past borrowing.

After years of stagnation household incomes are set to fall and then recover only gradually, while taxes rise and public services continue to struggle.

The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous that it might have been by a series of economic own goals. Mr Hunt appears to have recognised this.

After years of cakeism, his colleagues, the opposition, and we the voters need to take that fact on board too.

IFS: Hunt delays "properly tough" budget decisions

The Institute for Fiscal Studies is presenting its assessment of the autumn statement now.

IFS director Paul Johnson is outlining how Jeremy Hunt appears to have delayed the “properly tough” decisions needed to balance the public finances.

The chancellor may be hoping that an economic upturn will reduce the need for a painful squeeze.

Or possibly a general election might mean Labour face the tough task of repairing the nation’s finances.

As Johnson puts it:

“Hemmed in by rising interest payments and poor growth prospects, the chancellor decided to allow borrowing to rise, and to put off properly tough decisions for another couple of years,”

“He may hope that things will look better by then, or perhaps that it will be somebody else’s problem.”

The London stock market has also risen this morning, alongside the pound.

The blue-chip FTSE 100 index has gained 50 points or 0.7% to 7398 points, with the smaller (more UK-focused) FTSE 250 also up 0.5%.

But even so, the short-term outlook for investors “remains dour”, says Ed Caswell, investment manager at MHA Caves Wealth.

“The UK faces a triple threat for investors in 2023 with the recession due to shrink the economy by 1.4%, unemployment to reach 4.9% and inflation to remain at 7%. Furthermore, with Corporation Tax to hit 25% and capital gains/dividend tax-free allowances halving in both 2023 and 2024, global investors have little reason to revisit their UK investment case next year.

“Still reeling from the (not so) mini-budget 8 weeks ago, a muted market response to an announcement of yesterday’s magnitude will undoubtedly be considered something of a success by the government, as their £55bn fiscal consolidation seeks to restore credibility and return the UK to long-term prosperity.

However, for domestic and internal investors, the picture remains bleak.”

European markets are also higher this morning:

Pound rallies despite mounting gloom

Sterling is bouncing back from some small losses yesterday, despite the clouds of gloom over the economy.

The pound has risen by three quarters of a cent this morning to $1.193, and is also up half a eurocent to €1.15.

This chart shows how the pound is near a three-month high, having hit a record low around $1.03 after the mini-budget chaos.

The pound vs the US dollar
The pound vs the US dollar Photograph: Refinitiv

But…Ipek Ozkardeskaya, senior analyst at Swissquote Bank, warns that the outlook for the pound remains bearish:

From the economic lenses, both the U-turn on spending cuts, and higher energy bills will boost inflation, and that could be negative for the pound, if the Bank of England doesn’t compensate with higher interest rate hikes. And the BoE said last time that it won’t go crazy hawkish to avoid a complete economic meltdown in the UK.

And indeed, what was really scary for sterling traders yesterday was the gloomy growth forecast. Jeremy Hunt said that the UK is already in recession – stating the obvious. But he also said that growth will fall 1.4% next year, versus a 1.8% expansion printed previously, and recession will last over a year, while the BoE will probably be raising rates to fight inflation during this period.

Hunt: No decision on raising fuel duty

Jeremy Hunt has insisted that he hasn’t decided to raise fuel duty by 12p per litre next year.

Yesterday’s report from the Office for Budget Responsiblity anticipated that Hunt would raise the tax on petrol and diesel by 23% in March.

That would more than reverse the 5p/litre temporary cut made by Rishi Sunak earlier this year, and bring in £5.7bn in extra tax receipts next year,

But Hunt told broadcasters this morning that a decision hasn’t been made, saying:

Let me clear that up, that is not government policy.

We will make a decision on that at the next budget in the Spring.

That was just an assumption that the OBR made – they’re an independent organisation, they make assumptions.

We have made no decision on that at all.

Online shopping deliveries in the run-up to Christmas could be disrupted by the latest strike action at Royal Mail.

Postal workers will stage six more days of strike action in December, including on Christmas Eve, as part of the latest walkouts to affect the service in a row over pay and conditions.

Members of the Communication Workers Union (CWU) at the service will go on strike on 9, 11, 14, 15, 23 and 24 December.

Four other strike days are already planned, including around Black Friday next week.

Victoria Scholar, head of investment at interactive investor, says tensions between the two sides are ramping up again.

Only yesterday, International Distribution Services said talks would cease if further strike action goes ahead, implying workers are taking a more aggressive approach, perhaps after their intensive talks failed to progress.

Royal Mail and its workers appear to be in a stalemate over pay and conditions, with workers frustrated with the cost-of-living crisis as wages fail to keep up with inflation.

Royal Mail’s parent company, IDS, recently announced 10,000 job cuts last month. It posted a £219m loss for the first half of the financial year yesterday, and asked the government to let it stop delivering letters on Saturdays.

Scholar points out that strike action will worsen its financial position:

The additional walkout days with cause extra chaos and financial pain for the business, potentially leading to an even bigger full-year loss than anticipated.

Retail sales: what the experts say

The UK retail sector faces a bleak outlook, despite the small pick-up in demand in October, experts are warning.

Jacqui Baker, head of retail at audit, tax and consulting firm RSM UK, predicts that next week’s Black Friday sales may be disappointing for retailers hoping to shift stock.

‘Although there was an uptick in retail sales last month, driven by clothing up 2.5%, it’s hard to ignore what’s likely to be a bleak winter ahead. Consumers are looking at how they can tackle the fallout from the cost-of-living crisis in their spending decisions; even essential spend on food was down 1%, with shopping baskets getting smaller as inflation takes a hold.

‘Despite the cost-of-living allowance given to consumers last month to offset the energy price cap increase, there’s still little sign of early Christmas cheer for retailers. This has led to many not being able to hold their nerve and starting offers early.

Spending was hit by the mini-budget turmoil, which spooked consumers, and rising inflation, says Paul Donovan, chief economist at UBS Global Wealth Management.

UK October retail sales were weak.

The market debacle following the Truss government’s fiscal plans created news headlines that affected consumer’s willingness to use savings and borrowings to support consumption.

With wage bargaining power weak and real wages negative, this softened consumer spending.

Kevin Bright, global leader of McKinsey’s consumer pricing practice, says shoppers are determined to cut back:

The slight uptick in October spend should not be a source of optimism, as it is well within the monthly volatility of this overall downward trend in retail spend.

“The decrease that we see in the food sales in October, are likely to be mirrored in non-food categories.

Our latest consumer research shows that UK consumers intend to spend significantly less on certain non-food categories. 52% of consumers say they plan to spend less over the next three months on footwear and consumer electronics and 50% say they will spend less on apparel.

Hunt: We can compensate for not being in single market

Hunt was also quizzed about whether rejoining the single market would boost growth and improve the economic outlook.

Hunt says it wouldn’t be “the right way to boost growth”, as it would go against what Brexit supporters voted for – which was to have control of our borders.

Membership of the single market requires free movement of people, as well as goods, services and capital.

The chancellor doesn’t deny that the single market has economic advantages, but insists:

I think we can find other ways that will more than compensate for those advantages.

Hunt also says he’s confident that most of the trade barriers with the European Union could be removed without re-joining the bloc’s single market.

“I have great confidence that over the years ahead we will find outside the single market we are able to remove the vast majority of the trade barriers that exist between us and the EU.

Hunt suggests that in the long-term we can turn the UK into the next Silicon Valley, using the strength of its universities and the genius of UK innovation.

Hunt: Non-doms are good for growth

Q: Why haven’t you done anything about non-doms?

These non-doms are extremely wealthy people with non-domicile tax status, meaning they don’t have to pay any tax on their offshore income.

Hunt claims that having non-doms spending money in the UK is good for the economy, telling the Today programme.

I would rather wealthy foreigners spent their money in Britain, because that supports jobs in our shops, in our restaurants, in our hotels.

In the end I have tried to avoid anything that damages long-term growth.

Q: So did the Treasury tell you that abolishing non-dom status would be bad for growth?

Hunt says the Treasury told him they were “very unsure about the figures that were being banded around” for the savings from abolishing non-dom status.

Like me, they wanted to be very sure that we weren’t doing things that damaged the UK’s attractiveness.

These foreigners could live easily in Ireland, France, Portugal or Spain, which also have non-dom schemes, he adds.

Q: So did you not have your own figure for what taxing non-doms would raise?

No, Hunt says, because the government doesn’t agree with Labour’s figure [Rachel Reeves has said scrapping the tax break in full would raise £3.2bn a year].

Hunt says:

The Treasury did not tell me that it would help the economy to do this.

The Guardian reported earlier this month that Treasury officials were examining whether the autumn statement could include changes to non-dom status.

Experts have suggested that cutting the duration that wealthy people could avoid paying tax on their global income from 15 to five years could raise an additional £1.6bn a year.

Updated

Jeremy Hunt is now on the Today programme.

The chancellor denies that he has launched a raid on millions of working people, saying his plan will “get us through very difficult times”, and gives people certainty.

He points to some glimmers of hope in the OBR’s economic forecasts – including a sharp drop in inflation at the end of next year, and “quite heathy growth” after the recession.

Q: But more middle earners will be paying more tax – a vast swathe of middle income will feel incredibly squeezed.

Hunt says it’s not possible to raise £25bn of taxes by only focusing on a very small group of very rich people.

What we’re doing with this very balanced package is asking people who have more to contribute more.

Hunt says there’s also help for poorer households (through increases to the living wage, the pensions triple-lock, and help on energy bills).

The chancellor says:

We want to take these difficult decisions in a fair way, that shows people we’re doing what we need to do to right the ship in a very difficult storm.

But we’re also looking after the most vulnerable people, our very important public services as well.

Jeremy Hunt has also defended pencilling tough cuts to public spending after the next election.

He told BBC television that making cuts now would worsen the downturn.

“I think it’s important to support the economy, to support families and businesses through a difficult period. So I think it’d be the wrong thing to make that recession worse.

UK's two-decade wage stagnation costs workers £15,000

British workers are living through a two-decade wage stagnation costing £15,000.

That’s the overnight verdict from the Resolution Foundation, which also warn that Jeremy Hunt has added to the pressure on the ‘squeezed middle’ through his tax rises.

Resolution has calculated that real wages are now not expected to return to their 2008 level until 2027.

Had wages instead continued to grow at their pre-crisis rate during this unprecedented 19-year pay downturn, they would be £292 a week – or £15,000 a year – higher.

James Smith, Research Director at the Resolution Foundation, said:

“As an energy importer during an energy price shock, Britain is getting poorer. Deciding how we do so was, to a significant extent, the choice facing the Chancellor.

He has decided that households will do so with higher energy bills, higher taxes, and worse public services than previously expected.

Whether or not making the choices was tough, the reality of living through the next few years will be.”

Hunt insists autumn statement was 'very conservative'

Jeremy Hunt also tries to soothe concerns within his own party that he is putting up the tax burden to its highest level since the second world war.

The chancellor tells Sky News that the autumn statement was a “very conservative package” that will sort out the economy, making the recession shallower, and save jobs.

Hunt says:

What I would say to my Conservative colleagues is, there is nothing conservative about spending money that you haven’t got.

There is nothing conservative about not tackling inflation.

There’s nothing conservative about ducking difficult decisions that put the economy on track.

Hunt: next two years will be challenging

Finance minister Jeremy Hunt is facing the media this morning after yesterday’s mini-budget.

The chancellor has told Sky News that Britain faces a very challenging time over the next two years but that his budget would help to tackle inflation and put the economy on a stronger footing.

“Over the next two years it is going to be challenging, but I think people want a government that is taking difficult decisions, has a plan that will bring down inflation, stop those big rises in the cost of energy bills and the weekly shop,”

Hunt also defended his decision to maintain the pensions triple-lock, which means pensioners will get a 10% increase next April – even wealthy ones.

He explains that all pensioners, not simply the poorest, are feeling the squeeze.

‘You’ve never had it so bad’: what the papers say

Jeremy Hunt may not have enjoyed reading today’s front pages over his morning cornflakes.

The newspapers have given a damning verdict on yesterday’s autumn statement, with many right-leaning organs particularly critical about the tax rises heading our way.

The Daily Mail have accused the government of hitting workers, with a headline of “Tories soak the strivers”.

While the Telegraph says the chancellor has protected benefit claimants and pensioners from soaring inflation “with a raid on workers”, in a return to Gordon Brown’s fiscal policies.

The Mirror’s verdict is brutally clear – warning of ‘carnage’ as millions face deep pain after a ‘Tory Hell Budget’, and the worst drop in living standards on record.

And the Times – which uses one of the brilliant photos from Hunt’s trip to a school yesterday – flags there will be “Years of tax pain ahead” as the chancellor seeks to balance the books.

Here’s our full round-up:

This morning’s retail sales report also shows a shift back into shopping in stores – as consumers seek out bargains.

Richard Lim, CEO of Retail Economics, explains that some shoppers are keen to avoid paying delivery charges on online purchases:

The proportion of spending online remains down on levels seen last year and it seems that consumers feel more in control of their budgets in a physical environment, looking for end-of-aisle discounts and keeping a tighter grip on finances.

But the rebalance towards stores is also likely to have been driven by avoidance of online delivery costs, an increasing number of retailers charging for returns and the squeeze on budgets discouraging over ordering with the intention of returning unwanted products.”

Resolution: UK getting poorer

Britain is getting poorer, warns Torsten Bell of Resolution Foundation, in his early analysis of the autumn statement.

And the public will pay the price, with higher energy bills next year, higher tax bills and worse public services in the years ahead.

But Bell also questions whether some of the deep spending cuts, pencilled in for after the next election, will actually happen:

IFS's Johnson: It all looks a bit grim

“It all looks a bit grim, doesn’t it.”

That’s the verdict of Paul Johnson, director of the Institute for Fiscal Studies, following yesterday’s autumn statement.

Speaking to Radio 4’s Today programme, Johnson explains that while Hunt appeared to be returning to fiscal orthodoxy (with tax rises and spending cuts), he’s actually being quite fiscally loose.

He’s junked the fiscal rules, he’s got rid of the idea that we have to balance the current budget – in other words, borrow only for investment – he’s accepted most of the additional borrowing that the OBR said the poor economic performance is going to give us.

And yet, we’re still going to have a big increase in taxes.

If you put those two together – lots of borrowing and lots of taxes, you’d think there must be lots of spending, Johnson adds.

Well there is quite a lot more spending, actually, over the next year or two. But looking forward post the next election, he’s got some big spending squeezes in there.

So how does that add up? Well, all the borrowing racked up by the UK over recent years is ‘coming home to roost’, Johnson says.

We are going to be stuck at £100bn a year being spent on debt interest into the medium term.

And of course, when the economy’s growing so dreadfully badly, there’s just much less money around.

Updated

UK consumer confidence near record low

In another blow, British consumer confidence remains close to record-low levels, despite a small rise this month after the financial market turmoil triggered by September’s mini-budget faded.

And soaring inflation and the spectre of recession make a sustained improvement unlikely, market research firm GfK has reported.

GfK’s monthly consumer confidence index, which dates back to 1974, rose in November to -44 from -47 in October, having struck an all-time low of -49 in September.

GfK said the improvement likely reflected relief among the British public that the country’s financial outlook had stabilised following the departure of Prime Minister Liz Truss’s government, whose fiscal plans triggered meltdown in British markets.

Updated

Introduction: Retail sales still weaker than pre-pandemic

Good morning, and welcome to our rolling coverage of business, the financial markets and the economy.

Britain’s retail sales remain below their pre-pandemic levels, as the UK heads into a painful recession and inflation takes a big bite out of incomes.

Sales volumes at shops across Britain have shrunk by 2.4% over the last three months, new data from the Office for National Statistics show, despite a small pick-up in October after September’s trading was disrupted by Queen Elizabeth’s State Funeral.

That continues the downward trend seen since summer 2021, as the cost of living squeeze has gripped households.

Food store sales volumes fell by 1.0% in October 2022 and were 4.1% below their pre-coronavirus levels of February 2020 levels – as some people were unable to afford as much to eat.

The ONS says:

Food sales volumes have followed a downward trend since summer 2021 following the lifting of restrictions on hospitality.

In recent months, supermarkets have highlighted that they are seeing a decline in volumes sold because of increased cost of living and food prices.

But there was strong growth in second-hand goods stores (particularly auctioning houses).

The slowdown in retail sales has already forced some retailers to the wall, with Made.com and Joules both filing for administration this month.

In October alone, sales picked up by 0.6% after a 1.5% tumble in September when many shops closed out of respect.

But compared to October 2021, people actually bought 6.1% less stuff – but had to spend 4.8% more to get it, due to inflation.

And compared to before the pandemic, retail sales are still down 0.6%.

Lynda Petherick, head of retail at Accenture in the UK & Ireland, says retailers face a difficult Christmas.

“Despite Black Friday coming up next week, it’s unlikely that retailers will be in celebration mode as we head into the festive season this year.

Rising inflation and the fall in real wages will only be adding to the sense of unease over whether this will be a “golden quarter” after all.

Retailers and shoppers alike face more pain in the next few years, with households set for the steepest fall in living standards on record and the highest tax burden since the second world war.

The £30bn of spending cuts and £25bn of tax rises laid out yesterday by chancellor Jeremy Hunt will chill the economy, with record falls in living standards over the next two years that will wipe out eight years of growth.

And we’re in recession, according to the Office for Budget Responsibility, which forecasts GDP will actually shrink by 1.4% during 2023, and not regain pre-pandemic levels until late 2024.

In a sobering near-Budget, Hunt trimmed the budgets of Whitehall departments, broadened the scope of the windfall tax on energy companies, extended the freeze on tax allowances, reduced the threshold for paying the 45% rate of income tax to £125,100, gave local authorities the go-ahead to raise council tax, and raised more from capital gains tax and inheritance tax as part of a plan to convince the financial markets of the government’s intention to reduce its budget deficit.

But Hunt increased spending on the NHS and schools, and deferred most of his tough measures until 2024-25 and beyond, as he stressed the need to avoid a “doom loop” of rising taxes and lower growth.

The agenda

  • 7am GMT: UK retail sales for October

  • 8.30am GMT: ECB president Christine Lagarde gives keynote speech at Frankfurt European Banking Congress

  • 10.30am GMT: Institute for Fiscal Studies holds post Autumn Statement analysis event

  • 3pm GMT: US existing home sales for October

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Louder
'Stranger Things' cast pens emotional notes after final season production wraps
Netflix recently announced that the production of Stranger Things season five has officially wrapped. Read further on Dynamite News:
Dynamite News
Dynamite News
Mufasa: The Lion King review – technically dazzling Disney origin story lacks soul
Moonlight director Barry Jenkins’s all-action tale boasts uncanny CGI effects and songs by Lin-Manuel Miranda, ​​but the screenplay is schmaltzy and derivative
The Guardian - UK
The Guardian - UK
How to watch or stream Sunday’s Week 16 games of the NFL’s 2024-2025 football season live, online, and free without cable
It’s a holiday feast of football!
Fortune
Fortune
Tina Fey and Tom Hanks among stars to induct Martin Short into Saturday Night Live's Five-Timers Club
Tom Hanks, Tina Fey, Alec Baldwin and Scarlett Johansson were among the stars to induct Martin Short into the 'Saturday Night Live' Five-Timers Club on Saturday (21.12.24).
BANG Premier
BANG Premier
FDA restricts psychoactive mushroom used in some edibles
The regulator warned food manufacturers that Amanita muscaria –  more commonly known as the fly agaric – and the compounds it contains are not authorized to use
The Independent UK
The Independent UK
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