UK Business and Economics Update (Jan 2023)

There has been a flurry of business and economic policy stories floating around recently. Here is a quick take on them plus links for student reading.

The UK needs a growth plan

Fictional 'heroes' of the 1980s the A-Team used to invariably reach a moment when a plan came together. It seems that the government is also desperate seeking that.

Certainly the CBI's Tony Danker's speech yesterday suggested that the business community wants greater certainty regarding green investment and corporate taxation among other things. They would argue that they've seen no signs of coherent policy emerging; they may well be right.

Read: The CBI is right. The UK needs a growth plan

Tesco boss in ‘parallel universe’ over price rises, says farmers’ union

Food suppliers have responded to the allegations of Tesco boss, John Allan, that they are using the current cost of living crisis to hike food prices.

Their response re-arranges the words pot, kettle and black, pointing out the extent to which energy prices, fertiliser prices and other costs have increased. I wonder whether we'll see Tesco's profits drop as a result (or its prices). I suspect we all know what the answer to that will be.

Read: Tesco boss in ‘parallel universe’ over price rises, says farmers’ union

Poorest in UK have £40 a month less to spare than a year ago, study finds

Looking at the data provided by Retail Economics, you could be forgiven for thinking that this is part of a zero sum game: it seems that poor consumers are spending £40 less per month than a year ago, whereas the rich are spending approximately the same amount more.

However, even though net spending might not have changed much national income could still change. You might think about whether rich or poor consumers have a higher marginal propensity to import.

Read: Poorest in UK have £40 a month less to spare than a year ago, study finds

Energy bill help pushes UK government borrowing to 30-year high

There was a record figure for December 2022 borrowing, with government borrowing reaching £27.4bn in December, the highest since record began (i.e. in 1993). Notably, "Interest on government debt hit £17.3bn" - twice last year's figure.

The figure also allows us to see the cost of the government's energy support package, which cost £7bn in December. Without it, borrowing would have almost matched last December's £16.7bn.

Read: Energy bill help pushes UK government borrowing to 30-year high

Government to offer £600m for green steel switch

Well, well. What a dilemma: it seems as though the government's intervention in the steel market might be contingent on a transition to 'green steel' and environmentally-friendly methods of production. Equally, the cost of such help is likely to be above the £300 million already offered. That's quite an opportunity cost.

Try selling that to striking public sector workers who've been told that there's no money to fund public sector pay increases.

Read: Government to offer £600m for green steel switch

The Observer view on the free market thinking that failed Britishvolt

Is the collapse of Britishvolt indicative of the shortcomings of the free market, and ideologues being unable to grasp the need for a coherent and more interventionist industrial policy. Certainly, the Observer seems to think so.

Read: The Observer view on the free market thinking that failed Britishvolt