The UK economy; Where are we now?

The UK economy; Where are we now?

The overall picture continues to be difficult to divine and there are some contradictory indicators out there. Most of the data tends to support the case for some kind of a recovery but quite how rapid that recovery will be and which sector will take the lead is still open to debate. What follows is a brief summary of what remains a pretty confused picture.

1. The slow road to recovery

• According to former Prime Minister Sir John Major the British economy may have passed its "darkest moment" and an economic recovery may be under way.
• He suggested that falling unemployment and a rising stock market indicated Britain was now on a "slow road to recovery".
• Speaking at the weekend on the 20th anniversary of Black Wednesday - the day Britain had to pull out of the European Exchange Rate Mechanism - he said that Britain may already have weathered the worst of the economic storm.
• He likened the current economic situation to that of the early 1990s when Chancellor Norman Lamont predicted he could see the "green shoots" of recovery.
• There are certainly some oddities in the figures at the moment: Why in the depths of this recession is employment growing? Why is industrial production going up? Why has the stock market risen?
• The former prime minister, who negotiated Britain's opt-out from joining the euro, said he thought the eurozone crisis would lead to a two-tier Europe - with closer integration for euro members. He said the process could take up to 10 years and would spark a UK referendum on Britain's relationship with the European Union.

2. Income levels to rise next year, says CEBR

• UK households will see a rise in real income levels next year for the first time since the onset of the financial crisis, a study suggests.
• Taking inflation into account, incomes are set to rise by 0.5% in 2013, according to the Centre for Economics and Business Research (CEBR).
• But they will still drop by 0.2% this year, the group said. Households have struggled in recent years with low or no wage rises and relatively high inflation.
• Many people have seen wage freezes during the economic downturn, with inflation rising sharply between September 2009 and September 2011 to stand at a peak of 5.2%, as measured by the Consumer Prices Index.
• It has fallen steadily since then to 2.5%, apart from a small rise in the rate of inflation last month.
• Unemployment also rose sharply during the downturn, from 1.61 million in May 2008 to 2.59 million in July 2012.
• The CEBR said real levels of income would start to pick up as inflation fell further, with middle and low-income families benefiting the most.
• Middle-income households would see incomes rise by 1% next year, with lower-income families seeing a rise of 1.5%. The richest households would see incomes rise by 0.7%, the research estimated.
• This is because of a drop in top executives' pay and bonuses and the scaling back of some tax allowances. Similar increases would be seen across the board in 2014 and 2015, it suggested.
• The CEBR said improvements in real income levels would have a knock effect for struggling retailers. Over the next 12 months, it predicted retail sales volumes to rise by 2.5%.

3. UK unemployment falls again in three months to July

• The number of people out of work fell by 7,000 to 2.59 million in the three months to July, compared with the previous three month period.
• The unemployment rate was 8.1%, down 0.1% on the previous quarter.
• The number out of work for more than a year was 904,000, the highest since 1996, official figures showed.
• But the Office for National Statistics (ONS) also said the number of people claiming Jobseeker's Allowance fell by 15,000 in August to 1.57 million. The drop in the number of claimants was the largest since June 2010.
• The number of people in work increased by 236,000 to 29.6 million, the largest quarterly rise for two years. The ONS said the Olympic Games was likely to have been a factor behind the jump in employment, with London accounting for 91,000 of the increase.
• The number of people in part-time work rose by 134,000 to 8.12 million, the highest level since 1992, when these numbers began to be collected. This figure includes 1.42 million people, a record number, who would like to work full-time but are unable to find such employment.
• With the UK economy in a double-dip recession, a number of economists said the jobs figures presented a puzzle. For example, "Why are we seeing GDP [gross domestic product] so weak yet unemployment, and particularly employment growth so strong?" asked George Buckley, an economist at Deutsche Bank.
• David Freeman from the ONS said women were driving the recent fall in unemployment: "The decrease in unemployment over the last three months, is all down to women. The number of unemployed women fell by 16,000 to 1.1 million, with the number of men out of work rising 9,000 to 1.49 million.
• The closely-watched category of youth unemployment saw the number of 16 to 24-year-olds who are out of work rise by 7,000 to 1.02 million.

4. Child benefit changes

• It is one of the few non-means-tested benefits left, but Chancellor George Osborne has announced it will be axed for better-off parents.
• From 2013, the coalition government will withdraw child benefit from families in which one or both parents are higher-rate taxpayers.
• The measure will affect people earning more than £42,475 a year. That means people in the 40% income tax bracket, and those whose taxable earnings are above £150,000, who therefore pay the new 50% additional rate of income tax.
• The proposal means that if both parents earn less than £42,475, they will continue to receive child benefit. But families with one main earner on, for example, £43,000, will see their benefit stopped.
• The Treasury says about 15% of families will lose out. In real terms, this means 1.2 million families will be affected, while 6.6 million will see no change to their child benefits.
• The Treasury says the annual child benefit bill is about £12bn, and the cutback will save £1bn a year.
• Child benefit is worth £20.30 every week for a first-born child. For each subsequent child, there is an additional weekly payment of £13.40. The money is not taxed.
• It is available for every child in the UK below the age of 16; child benefit is paid to the parent directly responsible for care of the youngster.
• Those in full-time education remain eligible until the age of 19, but the cut-off point for children registered for work or training is 18. Child benefit is taken up by 96-97% of the eligible population, according to HMRC.

Lower 6th Bloggers

So, the L6th Economists are now officially 'blogging'! Having had a brief introduction to the art in their first lesson, they are all set now to produce their own blogs throughout their AS year. Many of them have taken to the task like the proverbial ducks to water and there are already some fine names being used! Some of them seem keen to attract as many views as possible with scant regard for their content but I am convinced that this will change over time. Many are alreday using their site as a repository for their own links, musings and thoughts on their first week in the department.

The U6th too are back in the fold following a summer of mixed examination results. What is obvious is that very few of them paid very much attention to the news over the break as the top score in the first news quiz/test was only 5/20! There is clearly a lot to do ahead of the unit 4 module in January and I shall be inviting some of the A2 candidates to take on the testing 'Target 2.0' competition in the next couple of weeks.

So much to do and so little time to do it!!

I'll keep you posted!

New Term begins

After the excesses of the Summer, mostly in terms of rainfall, it's time to get back on the bike as it were and kick start the Autumn term at King's. Before we do so however, it's probably just worth a recap of the results of last year's cohort in their AS and A level examinations.

At A2, we saw some quite remarkable results for our groups. In Economics, the lowest grade was a B and Lucy Butterworth and Joe Fowles both achieved A*s. Just as pleasing though were the results of people like Will Tresider and, dare I say it, Aaron PJ!

In Business Studies, the lowest grade was a D grade and special mention must go to Harry Chapman and Claire Jakeman, both of whom scored well-deserved A* grades.

At AS, the picture was rather more mixed with rather fewer grade As than one would have liked but many students have put a marker down as to where they are and what they will need to do early this term.

We welcome the new students into the department this week and we have record numbers on the books with three BS and three Econ groups in the L6th. The new L6th Economists will be setting up their 'blogs' this week and will spend some time working on the Department's new iPads.

All staff now have their own teaching rooms, with Mrs. Friend in T6, complete with plasma screen and Apple TV attachment and Mr. Williams taking sole possession of T1. RPM remains in T8.

A small U6th group will be participating in the Target 2.0 competition this term and we wish them success in the initial, local rounds.

End of an era

So, with the examinations all but done and dusted, we have reached the end of an era as the upper sixth (my 28th!) take their leave and attempt to fit in a mad dash to foreign shores ahead of their final King's Day on the 12th July. This has been a good year in the department, not least because of the calibre of many of the U6th and their willingness to get involved in the subject but also because of the way in which the economists in particular took to the experiment of sitting unit 4 ahead of unit 3. Of course, only time will tell whether the strategy has been successful but I am hopeful that those that needed to re-sit unit 4 found the paper to their liking and that in addition, the unit 3 paper was pretty accessible. The L6th have been involved in an 'Apprentice' style challenge where they have had to design a website and a video to raise the awareness of the department for potential pupils and parents on Open Mronings etc.. This has been a very interesting exercise with some really good work produced. Some have found it easier than others to get involved and it has given some key pointers as to who the leaders and team players might be for next year. This will be particularly importantly for those economists involved in the Target 2.0 competition at the beginning of next term. The winning websites and videos (one from each subject) will be showcased on the departments website at the end of this term. There's no doubt that economics and business studies continue to grow in popularity both nationally and here at King's. Next year we have more students than ever in the department and we look set fair for a very exciting year. Quite what the wider world will throw up for us is difficult to predict but will we see the dismantling of the euro, a more expansionary monetary policy, changes to the tax structure or what? Let's wait and see what 2012-13 brings.

Unit 4 material

It would seem that the Euro crisis is still with us and that the infection may be spreading to Spain as recent figures predict a rather gloomy economic picture for the countries in the Eurozone.
Have a look at the detail here.

The final straight

Returning to school today after a nice long break, there are only 3 weeks left for the L6th to get to grips with the material for their upcoming AS examinations. A quick survey has revealed a range of revision techniques amongst the students including formulae sheets, revision cards, past paper reviews, traffic light highlighting of revision guides and so on. I wonder if there are any 'preferred' methods out there that we could share?

A New Year Overview

Just when we might have hoped that the worst was over, official figures suggest that the UK economy is far from out of the woods. Despite anecdotal evidence of a resurgent high street over the Christmas period, the fact of the matter is that UK economic activity shrank by 0.2% in the last three months of last year. It marks a sharp drop in economic activity from the third quarter of 2011, when gross domestic product (GDP) expanded by 0.6%. The whole year figures hardly make better reading with ONS data showing that the economy grew by just 0.9% during 2011. It would appear that the British recovery, which has been stalling since the government’s spending review in the autumn of 2010, may now have gone into reverse. The question remains though, “Are we still climbing uncertainly out of the 2008-9 recession, or heading for a new one?” The quarterly fall of 0.2% in GDP is the first since the last three months of 2010, when freezing weather was blamed for a 0.5% drop. The recent figure was worse than had been feared, as most economists had pencilled in just a 0.1% fall in activity. The contraction appears to have been driven by a 0.9% fall in manufacturing, a 4.1% drop in electricity and gas production as the warm weather caused people to turn down heating, and a 0.5% fall in construction sector. Meanwhile, the services sector (which accounts for two-thirds of the economy) ground to a halt. November's public sector strikes, which took place in the fourth quarter period, losing nearly a million working days, may also have held the economy back. Only last week, the International Monetary Fund cut the growth forecast for the UK economy in 2012 from 1.6% to 0.6%. Of course something similar in the current period, January to March, would technically take the economy back into recession. Politically that would be a big problem for the Chancellor although figures suggest that both Germany and France may have fared worse in the fourth quarter of last year. A flat economy will not generate the job creation needed to bring down unemployment. 2012 could well be another hard slog for workers and businesses. The Eurozone is the swing factor, with a further escalation of the crisis likely to the single biggest threat to the UK economy, while an improvement there could lead to a revival of both business and consumer confidence. Graeme Leach, the chief economist at the Institute of Directors, said: "The tightrope walk between recession and recovery continues. We've taken one step towards a double-dip recession, and it's now probably 50-50 as to whether we'll take the second, with a fall in output this quarter as well. It's important to stress that the 0.2% fall in GDP is not large and could be reversed as QE2 works through the economy.” The figure is in line with a recent Federation of Small Businesses survey which showed that confidence among small businesses plummeted in Q4, recording a score of -24.5, a fall of some 15 points from the previous quarter.There was however, better news on the inflation front with a fall in both measures on the back of lower fuel and clothing prices. Consumer Prices Index (CPI) inflation in the UK fell to 4.2% in December, down from 4.8% in November. Retail Prices Index (RPI) inflation fell to 4.8% from 5.2%. It backs the Bank of England’s predictions that inflation will be 2% by late 2012. The drop in the CPI rate was the biggest monthly fall since April 2009, and the lowest rate since June 2011. The figures reflected a 2.8% drop in the price of clothing and footwear as retailers cut prices to attract customers in the run-up to Christmas. Fuel prices fell 0.6% on the month, although this month's gas and electricity cuts by the main suppliers have yet to take effect. However, food prices rose by 1.4%, despite recent fierce competition between the main supermarket chains. Marchel Alexandrovich, analyst at Jefferies International, said: "The figure was bang in line with expectations. This is the beginning of a downward trend that will see inflation fall back towards 3% by springtime as the VAT rise drops out and energy prices fall." On the jobs front, UK unemployment rose by 118,000 in the three months to November to 2.69 million, official figures show. The Office for National Statistics (ONS) said the unemployment rate also rose to 8.4% from 8.3%, the highest since January 1996. The number of people claiming Jobseeker's Allowance in December rose by 1,200 to 1.6 million. The number of young people looking for work hit a new record of 1.043m, taking the rate for 16-24 year-olds to 22.3%. The number of people in employment rose slightly in the three months to November by 18,000 to 29.12 million. The figures support the picture of a flat UK economy, with other data showing average weekly earnings, including bonuses, grew at just 1.9%. The figures showed the private sector was not compensating for job losses in the public sector, with the private sector creating 5,000 in the period, while 67,000 public sector jobs were lost. Since the period covered by the latest ONS figures, there have been a number of job loss announcements from retailers and banks, and the government's public sector cuts programme is continuing. The figures also showed a large rise in the number of self-employed people. A rise of 101,000 took the total to a new record of 4.2m. The ONS said the number of employees and self-employed people working part-time because they could not find a full-time job had risen 44,000 to 1.31m, the highest figure since records began in 1992.