Is Farrow & Ball’s business model flaking?

The happiest thing that happens in May is the coming into leaf of my long beech hedge. The shift from brown to green symbolises, for me, an annual economic revival — of openings, reopenings and entrepreneurial optimism. This year, after April’s frosts on the end of a dismal winter, it was especially welcome. And as revival collides with new fears of ‘the Indian variant’, I’m clinging to optimism while watching for new-season winners and losers. In that spirit, I’ll make this column a collage of consumer themes. First — though I’m not sure what this symbolises — a friend tells me he celebrated relative freedom by driving to Bicester Village to buy ten pairs of Y-fronts. Chac..

The Spectator > Economy Is Farrow & Ball’s business model flaking?

The pandemic’s transatlantic divide in executive salaries

‘Consider a temporary cut in executive salaries’ was the Confederation of British Industry’s advice to members at the start of the pandemic. Back then I was gripped by fears of a backlash against capitalism: top pay cuts would indeed be wise, I wrote, not least because ‘sacrifice now is sensible insurance’. Looking at last week’s election results, I needn’t have been concerned about a second coming of socialism. But I’m one of many advocates for responsible capitalism who have long worried about growing disparities between executive and average pay — the key multiple having risen from 50 to 120 over the past two decades — that rarely reflect underlying performance. The pa..

The Spectator > Economy The pandemic’s transatlantic divide in executive salaries

When will the economy recover to pre-pandemic levels?

New growth figures were released this morning show that the economy contracted 1.5 per cent in Q1 this year and remains 8.7 per cent smaller than it was in Q4 2019 (the last quarter not to be impacted by the pandemic). Alongside this update, the Office for National Statistics also released its latest set of monthly figures, which saw GDP rise by 2.1 per cent in March — the biggest boost since August last year — taking the economy to 5.9 per cent below pre-pandemic levels. That GDP fell by just 1.5 per cent overall once again illustrates the extent to which businesses have developed a resilience to lockdowns. The first quarter of this year saw much economic activity either wildly distorte..

The Spectator > Economy When will the economy recover to pre-pandemic levels?

Sturgeon can’t hide the economic costs of Scexit

Might the 2020s be the seismic decade in which the post-war consensus, that liberal democracies do not and should not break apart, is broken? Scotland's First Minister Nicola Sturgeon certainly thinks so. Her lifelong quest to break up Britain must feel closer than ever after winning last week's Holyrood elections. But there are hurdles yet to be cleared. Sturgeon insists on an exact repeat of the process that took place after Alex Salmond won an SNP majority in 2011 – even though she did not manage to replicate his success, achieving instead another minority administration. As in the 2011 to 2014 period, she wants the referendum booked and in the diary before presenting an updated economi..

The Spectator > Economy Sturgeon can’t hide the economic costs of Scexit

Will Britain’s economic recovery break records?

It’s been a good week for seeing the vaccine factor at work. We’ve had multiple real-world updates on the Pfizer vaccine’s effectiveness against new variants of Covid-19 (this bodes well for the UK, which was the first country in the world to use the vaccine to protect its most vulnerable residents). And today we’ve had a revised economic forecast from the Bank of England, suggesting the UK’s impressive vaccine rollout could translate into the strongest growth since records began in 1949. The Bank of England now predicts that the economy will expand by more than 7 per cent in 2021, up from its forecast of 5 per cent in February. Its latest set of predictions puts the BoE on the opt..

The Spectator > Economy Will Britain’s economic recovery break records?

Can Melinda still keep Bill Gates in check?

‘We are seeing very substantial inflation,’ the great investor Warren Buffett told shareholders in his master company Berkshire Hathaway at their online annual meeting last weekend. He was talking chiefly about the housebuilding businesses in his port-folio, hit by rising material costs in what he called a ‘red hot’ economic recovery. But his remarks align him on a broader front with jittery bond investors and big-name economists, such as Larry Summers of Harvard, who have fuelled the US ‘inflation scare’. And if it’s coming over there — pessimists whisper — surely it’s coming over here? Maybe, but let’s keep this in perspective. Headline US inflation is 2.3 per cent bu..

The Spectator > Economy Can Melinda still keep Bill Gates in check?

Have we reached herd immunity?

When the Office for National Statistics released the last antibody survey a fortnight ago, the results were underwhelming. After watching prevalence in the population shoot upwards for months, the figure had plateaued at 55 per cent. There were several reasons suggested for the stall, including the move to giving second doses and difficulties detecting fading antibodies (which the ONS is quick to point out does not necessarily mean a person no longer has immunity). But, regardless, it raised concerns that it might take longer to reach high antibody prevalence rates than previously hoped. Thankfully, today’s update has provided plenty of cheer. In the two weeks following the last update (ta..

The Spectator > Economy Have we reached herd immunity?

When will vaccines begin boosting the economy?

Britain may be about to go from one economic extreme to another. This winter the OECD calculated Britain suffered one of the highest levels of economic damage in the developed world, compared with the year before, due to its stringent lockdown. Fast forward to spring and the UK’s trajectory for economic recovery is now being revised, with forecasts only moving in one direction: up. Today alone, two heavy hitters boosted their predictions. This morning EY Item Club revised its 2021 growth forecast from 5 per cent to 6.8 per cent – which, if accurate, would see the UK grow at its fastest rate on record, recovering to pre-pandemic levels months earlier than originally anticipated. Goldman S..

The Spectator > Economy When will vaccines begin boosting the economy?

Money to burn: shoppers, not the state, will lead our recovery

Compared with the United States, the UK has so far been relatively cautious about launching stimulus programmes to kick-start the economy. And yet perhaps it doesn’t need to. People are paying off their credit cards, putting some money into the stock market, buying new houses, as well as finally booking a restaurant and getting back to the shops. A lot of money is about to be unleashed on the economy, even if this stimulus is largely invisible now. The interesting question is this: where will all the money go, and which sectors will be the big winners? It may at times seem as if Rishi Sunak is spending like crazy. By global standards, however, he is far from exceptional. In the US, Preside..

The Spectator > Economy Money to burn: shoppers, not the state, will lead our recovery

Why the West should stop investing in China

The Prime Minister has called for an international coalition of free countries to oppose the growing influence of China’s authoritarian dictatorship. But it needs to be a lot bolder. The wheels of international diplomacy turn slowly and the government should make full and immediate use of the powers it already has. Three decisive steps are already possible. First, we should stop entities under the control or influence of the Chinese Communist Party (CCP) from buying up our companies, especially infrastructure firms. A Chinese company, for example, controls about 25 per cent of North Sea oil and other companies own gas, water and electricity suppliers in the UK. All Chinese companies are un..

The Spectator > Economy Why the West should stop investing in China

Can Rishi Sunak get people back into the office?

To what extent do workers want to return to the office? It’s a question on everyone’s mind – none more so than Rishi Sunak. If Covid working habits stick post-lockdown, with a majority of people continuing to work from their living room, it’s not just the working day that will be fundamentally altered, but the wider economy too. The economic implications for the shops and services designed to cater to the office worker will be drastic: large parts of city centres and high streets may find themselves without customers, or enough business to turn a profit. But these were not the main points the Chancellor made in his interview with the Daily Telegraph and the Sun, as part of a Conserva..

The Spectator > Economy Can Rishi Sunak get people back into the office?

Will Covid cost less than expected?

It’s no surprise that the bill for Covid-19 keeps racking up. The Office for Budget Responsibility's latest forecast predicts borrowing will reach £355 billion for the financial year: decisions to extend furlough, boosting public sector spending and supporting businesses that have been closed for months at a time all come with a price tag attached. But that doesn’t stop the sums from creating shock and awe each time they’re announced. Today’s update from the Office for National Statistics shows that government borrowing hit £19 billion last month — more than £17 billion from the previous year and the highest borrowing recorded for February since records began in 1993. Source: ON..

The Spectator > Economy Will Covid cost less than expected?

Boris, Biden and the era of big government

Bill Clinton’s declaration that ‘the era of big government is over’ summed up the late 1990s political zeitgeist. Centre-left political parties could win if they accepted the small state model bequeathed by the Thatcher-Reagan consensus. Now things feel very different, as I say in the Times today. The stimulus Joe Biden signed into law is huge, $1.9 trillion (£1.4 trillion): three times larger than the financial hole created by Covid. Here there has been nothing as dramatic. But it is still telling that Boris Johnson is insistent that the public finances won’t be brought back into order by ‘austerity cuts'. Big government appears to be back. This isn’t just about Covid ether. Pu..

The Spectator > Economy Boris, Biden and the era of big government

The UK economy is suffering worse than most

Last week The Spectator highlighted new data from the OECD that offers a weekly update comparing a country’s current GDP levels to the previous year. It continues to show the UK experiencing some of the highest levels of economic damage. If you factor in lockdown stringency, you can also make out a rough correlation between countries under the strictest lockdowns and countries taking the biggest hits to GDP. Just how reliable are these calculations? A cross-check between the OECD data and the Office for National Statistics' monthly GDP update would suggest it’s pretty spot-on, if not slightly more positive. Today’s update from the ONS shows the economy to be 9.2 per cent below where it..

The Spectator > Economy The UK economy is suffering worse than most

Letters: What happens if interest rates rise?

Spinning plates Sir: Kate Andrews is right to highlight the looming risk of inflation (‘Rishi’s nightmare’, 6 March), but to say that the UK has known barely any inflation for almost a generation misses a very painful point. It may be true for consumer prices. Low interest rates and quantitative easing, along with other ill-advised stimuli, have caused huge inflation over the past two decades in the single greatest expense throughout most working people’s lives: the cost of housing. Along with rash promises such as the triple lock, it has been responsible for a vast transfer of wealth from young to old, from the less well-off to the more affluent, and unlike the 1970s and early 1980s..

The Spectator > Economy Letters: What happens if interest rates rise?

The weekly cost of lockdown

Lockdown has always been a matter of trade-offs. The impact of suppressing the economy to also suppress a deadly virus has had consequences on every aspect of life, from non-Covid health treatment, to rising unemployment, to the impact on children’s education. But these costs can be calculated in something much closer to real time. New data from the OECD, analysed by The Spectator and unveiled in this week’s magazine, shows the weekly difference between a country’s economic activity now and how it compares with the year before. First, let's look at change in lockdown stringency — as measured by Oxford University's Blatavnik School of Government. When the second wave struck, Britain e..

The Spectator > Economy The weekly cost of lockdown

Rishi’s nightmare: will inflation crush the recovery?

At first, it seems to make no sense. Britain is in the middle of the worst economic crash in recorded history, with a Chancellor who is famously keen on low taxes, spending control and sound money. But Rishi Sunak this week presented a Budget that seems inspired, in parts, by Labour’s last manifesto. Debt surging to £2.8 trillion. Public spending up by a quarter in a year. And taxes: soon going up. Corporation tax, freezes to the personal tax threshold. The explanation most Tories comfort themselves with is that Sunak wants to explain to a high-spending Prime Minister that today’s cash splurge is tomorrow’s tax rise. But in truth, Sunak is motivated by something else. It’s not dream..

The Spectator > Economy Rishi’s nightmare: will inflation crush the recovery?

Up Crash: why are markets soaring as the economy tanks?

Shops are boarded up. More than four million people are on furlough with little idea of whether they will have jobs to go back to. Global trade has hit levels last seen a decade ago, and government deficits are soaring, while most developed economies have seen output shrink by 10 per cent, a collapse not seen since the Great Depression of the 1930s. On just about every measure imaginable, the global economy has never been in worse shape, and we are all a lot poorer. And yet here is a puzzle. Why can’t we see any evidence for that in the financial markets? Instead we are witnessing a series of extraordinary, epic bull markets. Crypto-currencies finally took a dive this week, but Bitcoin has..

The Spectator > Economy Up Crash: why are markets soaring as the economy tanks?

Starmer’s fundamental economic mistake

Keir Starmer’s speech on economic recovery, delivered at Labour’s Southside HQ this morning, was hyped as one of the most pivotal moments of his leadership so far. A Labour insider told Politico it had been 'six months in the making with a huge amount of work going into it’. It was designed to establish a clear ‘fork in the road’ between the Conservatives’ and Labour’s economic visions, both in the short term — leading up to the Budget next month — but also in the future, as Starmer pledged to shape the economy ‘to look utterly unlike the past’. But for a speech that was supposedly months in the making, there was surprisingly little substance. Starmer’s main proposals..

The Spectator > Economy Starmer’s fundamental economic mistake

Will the economy really rebound after lockdown?

Bank of England chief economist Andy Haldane last week described the UK economy as a ‘coiled spring’ waiting to rebound just as soon as lockdown restrictions are eased. But is it a spring like the one on which Zebedee from the Magic Roundabout used to bounce around, or is it like a Slinky – the toy you place at the top of the stairs and watch, fixated, as it furls and unfurls itself right down to the bottom? Haldane, it is fair to say, sees it much like the former. He describes the economy as full of 'pent-up financial energy'. While the bank sees lockdown number three causing output to fall by 4.2 per cent in the first quarter of 2021, thereafter it sees a steady recovery. Part of the..

The Spectator > Economy Will the economy really rebound after lockdown?

What a record GDP slump means for economic recovery

It’s been no mystery that the UK economy took a severe beating in 2020: two lockdowns, a host of circuit-breakers and fire-breakers, Christmas cancelled for millions of people. The experience of an economy forced to hibernate for months on end last year is reflected in today’s GDP update from the Office for National Statistics, showing the economy contracted 9.9 per cent last year — the ‘largest yearly fall on record’ and biggest contraction in 300 years. The fall isn’t quite as stark as the Office for Budget Responsibility forecast alongside the Chancellor’s spending review last November (an estimated 11.3 per cent), but it still represents one of the largest economic hits amo..

The Spectator > Economy What a record GDP slump means for economic recovery

Why it’s a good time to invest in a pub

It’s obvious from the body language of Bank of England Governor Andrew Bailey that negative interest rates — much talked about this week — are the last device he ever wants to use. Deployed with mixed success in Europe, this monetary equivalent of Pulp Fiction’s adrenaline jab in the heart is a desperate remedy against deflation, recession and banks’ reluctance to lend. UK banks have been given six months to prepare for the possibility, while Bailey has been talking up the likelihood of rapid recovery as vaccinations advance and Brexit trade disruptions fade. So by the time the banking system is ready, the negative-rate tool should be back in the vault and the Bank’s Monetary Pol..

The Spectator > Economy Why it’s a good time to invest in a pub

‘Inessential’ workers have helped keep the country afloat

A common sight across Britain these past ten months has been those rainbow flags fluttering in urban and village streets: ‘Thank you NHS.’ Many add an afterthought: ‘And other key workers.’ And who would dispute either sentiment? To these expressions of gratitude are added ministers’ and their medical advisers’ thanks to everyone who just ‘stays home’. We are saving granny. We are, if only by inaction, doing our bit in a great national effort, pulling together with the team. We join the ranks of the public-spirited, the selfless, the just. And again, who would cavil? Prudence, caution, carefulness… in a pandemic these are needed qualities. But there’s a group of our fello..

The Spectator > Economy ‘Inessential’ workers have helped keep the country afloat

The rise of the super pessimist

Covid isn’t the only thing to have developed a dangerous strain in the UK; pessimism has also mutated and is on the rise. BBC news recently reported in horrified tones that the economy had contracted 2.6 per cent in November, barely mentioning the fact that this was largely down to the nation being in lockdown. I don’t know what our national broadcaster has up its sleeve next but I’m expecting a dambing connection between home schooling and black market valium. That kind of contraction during lockdown is actually something to be proud of. The resilience of British consumerism during this last year has been this generation’s Dunkirk. Instead of hopping in tiny boats we’re resolutely..

The Spectator > Economy The rise of the super pessimist

Could the Australian approach to Covid work in Britain?

The government’s most important economic policy is its vaccination programme. The speed at which people are immunised will determine when — and how quickly — the economy can reopen. If all goes to plan, Britain will be the first country in Europe to get rid of restrictions and start the job of social repair. Three factors give grounds for hope. First, there is remarkably little ‘anti-vax’ sentiment in the UK. More than 70 per cent of the population ‘would definitely get’ a Covid vaccine if it were made available to them this week. In Germany, it’s just 41 per cent; in France, 30 per cent. The willingness of the British to have the jab means that there will be no major problem..

The Spectator > Economy Could the Australian approach to Covid work in Britain?

Has the economy developed lockdown immunity?

This morning’s update from the Office for National Statistics has boosted optimism about the prospect of the UK’s economic recovery. GDP fell 2.6 per cent in November last year, reversing the trend of six consecutive months of increases since April’s significant contraction. This takes GDP back down to 8.5 per cent below last February’s levels — wiping out the recovery gains made between roughly the end of July and November. Not, on the surface, good news — but there is a case for optimism. Cast your mind back to the economic conditions in November: England’s second lockdown had just been announced and there was a host of fire-breakers and circuit-breaks throughout the UK. Nove..

The Spectator > Economy Has the economy developed lockdown immunity?

Sunak unveils lockdown bail-out for businesses

Rishi Sunak’s latest giveaway totals £4.6 billion in grants for the retail, hospitality and leisure sectors, amounting to up to £9,000 per outlet. Alongside this comes an additional £1.1 billion for local authorities and a £600 million discretionary fund for businesses that might not qualify for the main grant. This money is meant to help businesses with their fixed costs problem: having to pay rent, utilities and upkeep despite bringing in far less income (in some cases, no income at all). The largest cost for most business owners — payroll — was addressed in December when the Chancellor extended the furlough scheme to the end of April. But this extra support is designed to tackle..

The Spectator > Economy Sunak unveils lockdown bail-out for businesses

Why 2021 could be the year of economic Armageddon

The British economy is wrapped in bandages – we won’t know whether the wound has scabbed or turned septic until they are ripped away. By the time the furlough scheme ends in April, whole sectors of the economy will have been out of action or severely incapacitated for over a year. Cash grants and the job retention scheme, both riddled with fraud, have propped up zombie businesses, some of which would have gone bust in the last year even without a pandemic. Of the businesses frozen in March 2020, how many will come out of hibernation in April 2021? How many people on furlough will discover that they have, in effect, been on gold-plated unemployment benefit for a year? No one knows, but th..

The Spectator > Economy Why 2021 could be the year of economic Armageddon

Where is the Conservatives’ post-Brexit agenda?

What’s the point of Brexit? We are told it is to take back control, but that is a means to an end: what is the end? The current answer is another slogan, ‘unleashing Britain’s potential’, which strings together a collection of policies: trade deals with non-EU countries that, to date, largely replicate existing deals; tougher immigration – although the government’s plan will open up the UK to higher levels of immigration from non-EU countries, and has no cap on numbers; taking control of our waters (fishing is about 0.1% of UK GDP); new rules for our ports and shipping (0.6% of GDP); banning live animal exports; blue passports. Amidst the murk, there is a silhouette of the destin..

The Spectator > Economy Where is the Conservatives’ post-Brexit agenda?

Rishi Sunak’s definition of a ‘sustainable’ deficit

Last week, Katy Balls and I interviewed Rishi Sunak for the Christmas issue of The Spectator (out today) and his comments on debt have caused some interest in today’s newspapers. As ever with such interviews, there’s only so much you can squeeze into two pages but I thought it worth elaborating on his position today. I suspect it will come to define the political debate next year: yes, 2020 was a year of almighty splurge. Sunak has borrowed more in ten months than Gordon Brown did in ten years: but there was a pandemic. The question is how you get that back to normal. For a surprising number of Tories, it’s a question of 'whether' you get it back to normal. Why not let debt rip? Let it..

The Spectator > Economy Rishi Sunak’s definition of a ‘sustainable’ deficit