Archive

July 29, 2025
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UK: Loans Secured Despite Tax Hike

  • Credit extended its rebound far beyond expectations in June. Reformed stamp duty raises costs and housing tenure, but it hasn’t broken the housing or mortgage markets.
  • Demand for loans looks more resilient than banks expected amid easing monetary conditions. Refinancing may not have much effect on cash flow anymore.
  • Higher transaction costs probably won’t break expectations into a downwards spiral, but are now widely cited as a major hurdle, contributing to slower UK activity growth.

By Philip Rush

July 23, 2025
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UK Structurally Unemployed

  • Higher employment taxes can entirely explain the fall in payrolls as the tax wedge hits its highest since 1987, raising our structural unemployment rate estimate by 0.48pp.
  • That could understate the structural shift amid a substantial drop in the threshold, rise in the minimum wage (jobs ban) and benefit rates. Some will go ‘inactive’ on disability.
  • The unemployment rate must rise more than its natural rate to deliver disinflationary pressure sustainably. Our structural estimates suggest it won’t break excess inflation.

By Philip Rush

July 22, 2025
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UK Fiscal Slippage Rules

  • The UK’s de facto fiscal rule is slippage, with a £50bn to £100bn increase in borrowing between initial official forecasts and outcomes. 2025-26 made another slippery start.
  • Politicians spend any space in the OBR forecasts, skewing surprises to higher spending. Yet tax hikes keep failing to raise the hoped revenue, motivating further increases.
  • Investors should not be fooled by forecasts for consolidation when the failed strategy driving the fiscal slippage rule survives. Issuance may stay near £300bn in 2029-30.

By Philip Rush

July 17, 2025
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UK Jobs Data And The Muddled MPC

  • UK payroll revisions removed most of May’s weakness, while wage and price inflation is too fast, yet the BoE probably won’t back down from an August cut as the UR rises.
  • Fewer payroll inflows explain its downtrend, with <24yo suffering sustained pain, but the 25-64yo endure the taxation hit, structurally raising unemployment by ~0.5pp.
  • Wage growth isn’t showing signs of new disinflationary demand pressures, so we expect excessive underlying wage and price trends to persist, not helped by an August BoE cut.

By Philip Rush

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