No 251: But here is some good news!

AFTER that last post, which did not have much positive news for the UK, here is some much needed optimism.

The CBI (Confederation of British Industry - an organisation that represents business leaders) has just released a report about the economic benefits of "green" industries. Currently in the UK they contribute £71 billion a year to UK GDP, employ 840,000 people, and wages in these jobs pay £10,000 a year more than the overall average wage.

(See here for the full story: CBI green industry report.)

Now I am an environmentalist (so therefore biased)- but the CBI are not. So it is very revealing that they are saying that despite whatever climate change benefits these industries might have, they have a large positive effect on the economy.

For me and many others, this seems like a rare and valuable opportunity for the UK. If we develop our green industries, not only we will improve climate change, but profitable businesses and high quality jobs will also be created.

The UK has been a global leader in these industries, especially those related to renewable energy. There are signs, however, that this competitive advantage is under threat, particularly from the USA whose green businesses are benefitting from huge subsidies via Biden's Inflation Reduction Act (see post 249). Many economists believe the UK can continue to compete well, but that a well thought-out industrial plan from the government will be essential.

No 250: Two Important UK Macro Announcements

JUST announced this morning, two very important stories.

Food inflation in January was 16.7% (see here for full story). in other words, food prices in UK this month are 16.7% higher than they were in January 2022. For an average family, this equates to almost £800 a year higher food bills. Although rises in other prices are slowing down, news like this is sure to mean that the Bank of England MPC will again raise its base rate of interest on Thursday.

Meanwhile the International Monetary Fund (IMF - a global institution set up to provide funds for economic emergencies) has just published their 2023 forecasts for economies around the world (see this BBC article). It names the UK as the only major advanced economy that will have a recession in 2023, forecasting growth to be -0.6% for the year. Even the Russian economy is predicted to grow in 2023.....

The Chancellor, Jeremy Hunt, has said this shows the UK is subject to the same pressures that all other countries are under, but if so, why is the UK forecast to do worse than them? What individual factors is the UK experiencing that other similar countries are not?

Try to think of some. Later on in the week I will blog about what I think these factors are, and we can see if we agree. 

No 249: Green subsidies and electric car batteries

THE European Union could be on its way to self reliance in the production of electric car batteries, but only if it matches the green subsidies of the USA, according to the article below.

Having a thriving battery industry in one's country is seen as a very important medium term goal, both since there will be more and more demand and to ensure that a particular country does not have to rely on others for this. The pitfalls of relying on other countries to supply energy has of course been emphasised by the problems EU nations have had in the past year due to needing Russian gas and oil.

President Biden's recent Inflation Reduction Act has put the USA ahead in the race to develop large scale and cheap battery production. Much of the act's £300 billion of subsidies have been allotted to green technology industries. Other countries may complain that this is an unfair form of protectionism, but the reality is that if they do not match the US subsidies, they will lose the competition in these emerging industries. We already seen a large amount of green FDI funding switch to the USA from other parts of the world.

Meanwhile in Britain, the Britishvolt electric battery mega factory project has collapsed, at least in part due to government refusal to provide emergency funding.

Read about this and more at:

https://www.theguardian.com/business/2023/jan/24/eu-could-end-reliance-on-china-electric-car-batteries-by-2030-investment-joe-biden-369bn-green-subsidies?CMP=Share_AndroidApp_Other

No 248: Record December UK Government Borrowing

IT has just been announced that UK Government borrowing in December was £24.7 billion - the highest ever for December in the 30 years since modern records began.

One reason for this is the financial support beging given to households and businesses for the energy bills. Another is from the jump in government interest rates caused by the disastrous economic policies of the Truss administration (so much damage in less than 2 months in power!).

The implications for future increases in government spending are serious. At a time when there are pressing needs for more funding for the NHS and higher wages for government workers, how much is going to be possible given these already extremely high amounts of borrowing?

An important topic too for your Economic studies, so take the time to read this:

https://www.theguardian.com/business/2023/jan/24/energy-support-uk-government-spending-interest-payments?CMP=Share_AndroidApp_Other

No 247 Japan's demographic disaster

NEARLY 30% of Japan's population are aged over 65. The birth rate is so low that by 2065, on current trends, the population will have fallen from 125 million to 88 million.

Not surprisingly, the Japanese government are trying various measures to change this. But critics of the government's policies say they do not address the core problems of

"the cost of compulsory and higher education, the rising cost of living and, poorly paid and unstable jobs for non-regular workers, and punishingly long working hours that make a healthy family life practically impossible."

There are also cultural issues. Consecutive Japanese governments have refused to allow more immigrant workers into the country. It also seems that having a traditional family is not attractive to many Japanese women. As a university student, Nao Imai, said:

"When you have a child in Japan, the husband keeps working but the mother is expected to quit her job and look after the children. I just feel that it’s hard to raise children, financially, mentally and physically."

There could be huge economic problems created by the demographic problems.of having a smaller and older population. As you read the article below, consider the following questions:

(1) what will happen to the number of workers and therefore Japan's productive capacity?

(2) what will happen to tax revenue?

(3) what will happen to government spending?

https://www.theguardian.com/world/2023/jan/24/japan-birthrate-population-pm-solution-already-rejected-by-young?CMP=Share_AndroidApp_Other