January 29, 2025

UK: Political Policy Spectacle
- Labour’s new long-term growth plans have merit but limited short-term impact, as infrastructure and investment projects take years to deliver economic benefits.
- Despite policy rhetoric, the UK economy is structurally struggling, with GDP stagnation, persistent inflation, and fiscal constraints limiting immediate growth prospects.
- Political motives overshadow immediate economic substance, as ambitious projections serve electoral strategy rather than offering near-term economic transformation.
By Philip Rush
January 27, 2025

Russia, Ukraine and Trump’s Legacy
- Contrary to the prevailing view among the commentariat, Russia’s economy alone will not bring Vladimir Putin to the negotiating table over Ukraine, even if Donald Trump follows through on his threats. But we may still see a deal this year. This would be good news for European equities.
By Alastair Newton
January 23, 2025

GBP Depressed By Fiscal Risk Premium
- UK government spending and deficits have attracted unwelcome attention amid falling sterling and bond prices. Yet long-term rate moves match US and short-rate shifts.
- Sterling weakness defies relative rate moves, suggesting a risk premium worth about 4%. About 1.5pp of that premium is probably US trade policy, with the rest UK-specific.
- Donald Trump should sustain his threats against the EU but could be softer with the UK. Fiscal risk will likely extend beyond the 26 March Budget amid tough talk, not action.
By Philip Rush
January 21, 2025

UK Pay And Participation Are Rising
- A renewed rise in the UK unemployment rate took it to 4.4% despite employment hitting record highs. Participation among older people has reversed much of its pandemic fall.
- The underlying UR trend also increased, making this change look genuine. Nonetheless, the past two similar occasions proved extremes, with the UR falling a few months later.
- Rapid pay growth might have encouraged labour force participation. The direct inflation effect should dominate the second-order slack story, but the BoE will probably cut.
By Philip Rush
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