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In the News

UK Economy Update: Inflation, Brexit Trade Barriers and hopes for a Giga Factory

Graham Watson

25th May 2023

Here is a wide-ranging selection of topical news items on the UK economy from recent days. So much happening that is of direct relevance to students of this great subject!

LSE research suggests that Brexit related food trade barriers have cost each UK household an average of £250, or £7bn in total.

Please read: Brexit food trade barriers have cost UK households £7bn, report finds

A new energy price cap of £2,074 has been announced, over £400 lower than the previous one, with the expectation that it will fall further in the Autumn. Ostensibly, this should be good news, but at the same time, the government is getting rid of the £400 discount applied to bills in the winter, so it's estimated that 6.5 million people will still be in fuel poverty.

Please read Energy bills set to stay high despite price cap cut

Despite the news that the energy price cap is going to fall to around £2,000 from July according to industry analysts, this is still going to leave 6.5 million people in fuel poverty according to National Energy Action, not least because although the bills are falling, so too is the level of government support for the most vulnerable.

Please read: Millions will face fuel poverty despite Ofgem move to cut energy price cap

Word on the street is that Jaguar's owners Tata Group are planning to choose to invest in building a gigafactory the UK, rather than Spain. The plant is going to manufacture electric car batteries, and is described as the "the most significant investment in the sector since Nissan came to Britain in the 1980s".

All of which would suggest that there's going to be a significant regional multiplier effect. However, I'm going to suggest that all of this alone doesn't necessarily mean that it's a good thing. How much is this going to cost the government in subsidies in the first place? Secondly, what the the lifetime of the plant, and will it continue to be competitive in the future without the subsidies.

So,, cautious optimism for now - but a hint of caution too.

Please read: Jaguar Land Rover-owner to pick UK over Spain for giant car battery plant

And finally....

Not so much an article as a trailer for a BBC programme looking at the recent rise in strikes, and the role of trade unions in the modern workplace.

It might get you thinking about the labour market theory associated with this - the notion of a bilateral monopoly and what this is likely to mean for equilibrium wage and employment levels, as well as those things that determine the relative strength of both employers and the trade unions that they are dealing with.

Please read: Is the past year's spike in strike action here to stay?

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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