Contribution to FT’s annual UK economic survey

Phil was one of more than 100 economists and analysts asked to submit their answers to three questions about the outlook for the UK economy in 2023. The questions and (edited) answers were:

(1) Will the UK economy outpace or lag behind other developed economies in 2023 and how will it feel for households?

(A) The British economy will likely lag most of its developed peers in 2023 and will fall into recession. One reason is a continued fall in real household income. Real wage growth in 2022 fell at the fastest rate for some 50 years and, thanks to high inflation and Brexit, will continue to cause severe pain for households next year.

(2) How tough will the Bank of England need to be in 2023 to curb inflation?

(A): The Bank has already been tough and needs to stop raising Bank rate when it gets to 4 per cent — if not before. The danger is now more that it will tighten policy more than is needed and depress economic growth even further than is needed to hit the 2 per cent target than it fails to counter inflationary pressures that are receding.

(3) Will the government need to announce further tax raises in 2023 to maintain sound public finances?

(A) No. It has already enacted steep taxes and heralded cuts in spending that risk a repeat of the damaging austerity programme of 2010. These will depress growth and affect the poorest households the most. The government is probably prevented from allowing borrowing to rise to cater for greater public spending (as it did during Covid-19) because of the echoes of the disastrous economic programme of Liz Truss that undermined the confidence of the financial markets in the current administration.

(4) Will we see green shoots of recovery starting by the end of 2023?

(A): Hardly. The fiscal tightening will exert a large drag on the economy through 2024. Growth may return towards the end of the year but this will etiolated strands of grass rather than a lush meadow.

(5) What is the best historical comparison for the downturn the UK faces in the year ahead?

(A): The 2009-10 recession and anaemic recovery probably give the best road map. The downturn has not been as severe but the recovery will be as lacklustre. This time, rather than from financial sector failures, it will be the after-effects of a hard Brexit that will hang over the economy for years. A likely housing market correction or crash will not help either.

(6) Is there anything else you would like to tell us?

(A): The British economy will likely lag most of its developed peers in 2023 and will fall into recession. One reason is a continued fall in real household income. Real wage growth in 2022 fell at the fastest rate for some 50 years and, thanks to high inflation and Brexit, will continue to cause severe pain for households next year.

The full responses are here


Covering EBRD annual meetings for Global Markets


Phil contributed analysis pieces to the coverage of the annual meetings of the European Bank for Reconstruction and Development in May by Global Markets magazine. The meetings were held in May 2022 as the military attacks by Russia on Ukraine were well into their third month.

One piece looked at the likely negative impact that the conflict would have not only on Russia and Ukraine but on the EBRD’s central and eastern European (CEE) region. A partner piece examines the impact on inflation and interest rates in the region.

A key element of that is the likely disruption to regional and global oil markets which this piece looked at. While oil price rises will cause problems for many CEE countries, Russia and Ukraine’s place in global food markets will cause major problems and misery for countries on the North African fringe of operations. This piece looks at that.

The EBRD is one of many international financial institutions to have offered to increase funding for projects in Ukraine: this piece looked at who has given what, and how much the likely final bill will be.

Finally, there may be some glimmer of hope from the unity that the conflict seems to have inspired within the European Union and NATO. This piece looks at how this might bring together the EBRD’s shareholders and recipient countries 31 years after its foundation in the wake of the collapse of the Soviet Union.

Writing and editing at the virtual IMF/ World Bank annual meetings

Phil helped organise the coverage by the magazine GlobalMarkets of the annual meetings of the IMF and World Bank that were held in October 2021. First the second time the annual meetings had to be held virtually because of the coronavirus. This means that the newsroom existed only on Microsoft Teams with editors and journalists reporting from various locations. We built on our experience of 2020 to interact with the organised events through virtual platforms. The newspaper was published as a PDF rather than printed and distributed manually.

He wrote two features analysing key issues that came up at the meetings of the finance ministers and central bankers of the 187 member countries. The first look at the future that surrounded accusations that IMF chief Kristalina Georgieva had put pressure on staff to alter data on China when she was CEO at the World Bank. The feature was converted into a news story as the issue was resolved in Georgieva’s favour on the eve of the start of the meetings. The story is here.

The other looked at the agenda that experts believe that World Bank president David Malpass should pursue to ensure that the multilateral lender remains relevant in the post-Covid era. At its heart is the need for a massive replenishment of the finances of the International Development Association, its arm that gives grants and makes loans to the poorest countries. The story is here.

Focus on Japanisation

Business Life, a Channel Islands-based magazine aimed at the financial sector, commissioned Phil to look at whether Europe was suffering from Japanisation – a structural shift to a low growth, low inflation near-zero interest rates that the Asian superpower has seen for almost 30 years.

He spoke to many analysts including Holger Schmieding at Berenberg Bank who disputed the idea that Japan was “suffering”, Andrew Milligan at Aberdeen Standard Investments looked at the impact on banks and advisers to high wealth individuals and Amit kara at the National Institute of Economic and Social Research highlighted the challenge that investment managers will face to secure higher yields in Europe and other Japanised economies.

The article is here.

Contribution to Financial Times 2018 survey

We were asked by the Financial Times to contribute our views on a range of issues which have the potential to affect the UK economy during 2018. On overall growth, we said the economy will slow in 2018 as the uncertainty created by the stop-start Brexit negotiations nags at consumer and business confidence and at investment intentions. A drop to 1.5% from 1.8% in 2017 seems likely. The interesting comparison is with the eurozone, which could post growth as high as 2.4 per cent. Those data will be confirmed in spring just as the UK will leave the EU — a timely reminder of the damage that the UK is doing to itself by leaving.

On Brexit we said that it will either be possible to stay within a/the single market and a/the customs union or even that opposition to Brexit itself is starting to grow. Either there are now hopes that the UK will get as bad a deal as feared a year earlier.

On the consumer economy, we said the downward pressure on consumer spending that has so far come from a fall in real wages is likely to continue. Our other concern is the mountain of debt that consumers are building up and whether any of the bubbles in personal loans, credit card debt, and car loans will burst.

A year ago we contributed to the 2017 survey in which we said we predicted that growth would slow sharply, that inflation would rise and the negative impact from Brexit had been postponed rather than cancelled.

LatinFinance’s finance minister of the year

We worked with LatinFinance, the magazine that covers Latin American economies and financial markets, on its Finance Ministry Scorecard. This is an annual assessment of the performance of the finance ministers and their ministries over the latest calendar year.

It recognises outperformance in managing fiscal and external accounts, building sustainable economic growth, and contributing to controlled inflation. It takes into account ministries’ transparency and clarity in communications with markets, independence and financial strength. The final decision is based on a series of in-depth interviews with market participants including ratings agencies analysts, private-sector agencies analysts and independent economists.

Our assessment led LatinFinance to decide that Colombia and finance minister Mauricio Cardenas had performed better than any major economy over that period. The announcement is here. Colombia was the fastest-growing large economy in Latin America and the Caribbean in 2014. It kept its fiscal deficit limited, and attracted strong levels of foreign investment. Further, the country has a low debt ratio, at below 32% of GDP.  WE carried out an interview with Minister Cardenas in which he talked about how he had achieved strong growth in the face of the fall in the oil price and signs of weakness in the eurozone and Chinese economies. The article is here.