Brits are being hit by a wave of bad news

LONDON – “The brains of humans and other animals contain a mechanism designed to prioritize bad news,” Nobel Prize-winning economist Daniel Kahneman once said.

For the British, this mechanism has been defeated in recent months.

The Bank of England this week added to its emergency rescue package for UK pension funds, while the government make a medium-term fiscal policy plansent the market into turmoil with widely criticized announcements last month.

Some pension funds have hours since the crash when the central bank intervened 28, and policymakers continue to battle market volatility with further expansion of bond-buying plans on Monday and Tuesday.

A spike in interest rate expectations after the so-called “small budget” of the new Finance Minister Kwasi Kwarteng also caused turmoil in the mortgage marketcausing banks to withdraw the product and interest rates to spike for prospective homeowners.

Meanwhile GBP fall one all-time low against the dollar the aftermath of Kwarteng’s policy announcements, regained some support only when the U government implemented some of its most radical policies, such as abolishing the highest tax rates for earners highest in the country.

Kwarteng on Monday announced that his tentative expansion of last month’s controversial fiscal plans – and an independent review of their impact from the Office of Budget Responsibility – will given three weeks to 31 October, when the Department of Finance and the Bank of England review. to assuage market concerns and restore credibility.

On the same day, the central bank is expected to start selling government bonds (UK government bonds), part of a delayed quantitative tightening effort as it unwinds stimulus. currency during the pandemic in the hope of tackling inflation.

Economists expect a more volatile bond market, and risk to pension funds, in the coming weeks ahead of the full budget report, while the Bank of England continues to tighten. between ensuring fiscal stability and controlling inflation.

‘The recession has begun’

The UK is the only G-7 economy that has failed to return to pre-pandemic GDP levels by the second quarter of 2022, Citibank UK Chief Economist Benjamin Nabarro pointed out at a Research Institute event. Fiscal Tuesday.

The Office for National Statistics estimates the UK economy shrank 0.3% in August, potentially the start of what economists expect will be a recession that lingers through the winter.

The ONS said GDP had only recently returned to pre-pandemic levels, highlighting the challenge facing Prime Minister Liz Truss’ “growth, growth, growth” agenda. The prime minister has pledged to radically reform the country’s economic policy, pledging to tackle anemic growth over the past decade, even though her party has been in power since 2010.

The government’s growth plan must also overcome the impact of Brexit, which most economists predict will reduce real GDP per capita. The government’s Independent Office for Budget Responsibility (OBR) has calculated that Brexit will reduce The UK’s potential productivity increases by 4% in the long runwhile the OECD predicts that the UK will have the lowest growth in the G-20 in 2023, apart from heavily sanctioned Russia.

“Real GDP is likely to fall again in September as double-digit inflation erodes household purchasing power and lost output due to bank holidays,” said Raj Badiani, chief economist at S&P. The addition coincides with Queen Elizabeth’s funeral on Monday, September 19,” said Raj Badiani, chief economist at S&P Global Markets.

Queen Elizabeth II, the world’s longest-reigning monarch, died on September 8 after 70 years on the throne, ushered in 10 national days and a holiday on the day of her funeral.

“We now believe the UK recession has begun in the third quarter of 2022 and is likely to last for three quarters. Our short-term GDP outlook predicts the recession will extend into 2023 as a result of the budget. Household tightening and prolonged consumer push – recession,” added Badiani.

S&P also expects the economy to contract for the whole of 2023, despite substantial fiscal stimulus such as government guarantees of energy prices and income tax cuts, as household borrowing costs rise. Declining demand in key export markets and persistent volatility in financial markets.

The latest labor market statistics show the UK unemployment rate fell to 3.5%, the lowest rate since 1974, fueled by a rise in the inactivity rate, now at 21 .7%.

From June to August, the average annual gross salary growth (including bonuses) for employees was 6% while the regular salary growth (excluding bonuses) was 5.4%, respectively. with term reductions of 2.4% and 2.9%.

UK inflation eases slightly to 9.9% in AugustWith food and energy prices skyrocketing, annual consumer price inflation rose to The highest level in 40 years was 10.1% last monthbut economists expect it to rise for the rest of the year.

A worst-case scenario is issued by the national electricity system operator, National Grid, warning that homes and businesses could face up to 3 hours of power outages during winter as a precaution. grid collapse. However, Senior Cabinet Minister Nadhim Zahawi told the BBC this week that the scenario was “extremely unlikely.”

Chancellor Liz Truss is also under pressure from lawmakers in her own party to ensure welfare increases are in line with inflation, with reports suggesting she may choose to increase them in line with income. , instead, adding pain to the country’s lowest-income household.

New research by British investor Charles Stanley shows that 22% of adults in the UK said they’ve had sleepless nights in the face of market volatility, soaring inflation and rising costs of living, while 1/ 10 said they had experienced panic attacks.

Lisa Caplan, director of OneStep Financial said: “Even in ‘unprecedented’ circumstances, financial pressures can make us better off, but we live in unprecedented times, and the term ‘financial stress’ has taken on a whole new meaning,” said Lisa Caplan, director of OneStep Financial Planning at Charles Stanley.

“The cost of living crisis is having an adverse impact on individuals, not only financially, but also physically and mentally.”

Widespread strikes

Postal workers, railroad workers, journalists and public lawyers have all gone on strike in recent months to protest pay and conditions, as wages have not kept pace with inflation. level of about 10%.

Rail strikes by members of the RMT union, in protest of pay and conditions, brought the country to a standstill for several days throughout the summer and fall.

Members of the CWU (Communication Workers Union) also continued to go on strike, including 115,000 postal workers of the formerly state monopoly Royal Mail. CNBC reported on Friday that CWU representatives negotiated with Royal Mail executivesbut the next 19 days postal strikes are still set to continue during the festival period unless significant progress is made in the coming days.

Meanwhile, the Royal College of Nursing (RCN) is now holding its first industrial action ballot in its 106-year history for 300,000 members, demanding a wage increase in line with inflation. RCN cites new analysis from London Economics, which shows nurses’ real earnings have fallen by double the rate of the private sector over the past decade.

The Government introduced a minimum wage increase for most NHS staff of 4.5 per cent in July, representing a real wage cut of more than £1,000 a year when adjusted for inflation.

Wait times for access to the country’s National Health Service are at an all-time high, with public hospitals consistently understaffed and bedridden.

The union GMB is also holding votes for ambulance staff in various parts of the country, with the real wages of paramedics falling by £1,500 a year. Grassroots doctors will vote for industrial action in early January, after the government refused to respond to a request by the British Medical Association to restore pay increases to 2008/9 levels by the end of September.

Junior doctors were left out of the 4.5% NHS increase, with the government instead imposing an increase of just 2%, which the BMA said was “mockery” in the face of the looming cost-of-living crisis. happenings and consequences of the Covid-19 epidemic.