THE BRITS

thelivyjr
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THE BRITS

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City AM

"Inflation jumps to 9.1 per cent: Worried City insiders respond to consumer prices climbing again"


Michiel Willems

22 June 2022

The rate of inflation rose again in May, remaining at 40-year highs, the Office for National Statistics said this morning.

The rate of Consumer Prices Index inflation rose slightly to 9.1 per cent in May from 9 per cent in April, according to the ONS.

The increase matches what analysts had expected.

“Though still at historically high levels, the annual inflation rate was little changed in May,” said ONS chief economist Grant Fitzner.


“Continued steep food price rises and record high petrol prices were offset by clothing costs rising by less than this time last year, and a drop in often fluctuating computer games prices.”

“The price of goods leaving factories rose at their fastest rate in 45 years, driven by widespread food price rises, while the cost of raw materials leapt at their fastest rate on record.”

In response, Chancellor of the Exchequer, Rishi Sunak said this morning: “I know that people are worried about the rising cost of living, which is why we have taken targeted action to help families, getting £1,200 to the eight million most vulnerable households.

“We are using all the tools at our disposal to bring inflation down and combat rising prices – we can build a stronger economy through independent monetary policy, responsible fiscal policy which doesn’t add to inflationary pressures, and by boosting our long-term productivity and growth.”

In response to the news, several Square Mile insiders discussed with City A.M. what this means businesses, investors and ordinary Brits.

“There are no signs yet of inflation receding,” sighed Yael Selfin, Chief Economist at KPMG UK, this morning.   

He added that “rising inflation is putting further pressure on policymakers to ease the burden on households, while complicating the Bank of England’s task."

"As the economy enters a period of weaker growth, a more aggressive increase in interest rates could see the Bank of England undershoot its target in the medium term.”

Household finances

“A further spike in inflation was expected – but this will offer little comfort to struggling households, particularly as wages aren’t keeping up,” said Connor Campbell at NerdWallet said.

“Clearly, the government must go beyond one-off financial support and develop a long-term economic recovery plan to help the UK emerge from its current economic predicament."

"Not all households, however, can afford to wait for such measures to be announced,” Campbell added.

He added: “There is no quick fix to the cost-of-living crisis."

"However, Britons should know that there are tools available to provide some short-term relief."

"And such action could set them on the right track towards regaining some control over their finances.”

Investors

Jatin Ondhia, CEO of FCA-regulated investment platform Shojin, told City A.M. this morning: “Prices are rising faster than they have for four decades and while May’s CPI figures represent little change from last month’s record hike, the tide remains strong and is set to continue rising, which could push inflation into double figures towards the end of the year.”

Ondhia noted that “the combination of sustained and high inflationary pressure with sharp rate rises and generally tighter monetary policy constitutes a radically different macroeconomic environment, posing a serious threat to investment returns and consumers’ finances.”

As the global economic outlook darkens, investors must take the time to reassess their inflation toolbox and consider which assets are likely to help cushion their portfolios against further hikes, he added.

Property and mortgages

Zooming in on the housing market, Annabelle Williams, personal finance specialist at digital wealth manager Nutmeg, said: “After a 2 percentage point rise from March to April, you could be forgiven for thinking the more muted increase from April to May would come as some light relief.”

She stressed that “while most Britons with a mortgage are on a fixed-rate deal, rate rises will be difficult for those on variable rates and people hoping to either move home or buy their first place.”

“Hopeful home-buyers and movers ought to get their skates on, because any further interest rate rises will affect affordability."

"Lack of supply in the housing market may keep prices high.”

“It’s too soon to call definitively whether there will be a recession in the UK this year, but the ducks are getting into a row."

"The economy may begin to teeter on the edge of a recession by the end of the summer,” she added.

International markets

Giles Coghlan, Chief Analyst, HYCM said: “If today’s CPI print tells us one thing, it is that the UK’s economic outlook looks very bleak indeed."

"With forecasts suggesting that GDP will head into negative territory for 2023, the Bank of England has an impossible task on its hands.”

Coghlan thinks that “without adequate quantitative tightening, the Monetary Policy Committee risks inflation spiralling wildly out of control and causing a wage-price spiral, which would be disastrous for the economy.

“As today’s inflation data came in just a fraction below the market’s maximum expectations of 9.3 per cent year-on-year, traders and investors should therefore watch for yet more aggressive action from the Monetary Policy Committee in August,” he continued.

“Ultimately, policymakers have very little choice other than to hike interest rates to bring down inflation.”

Predictions are currently suggesting that inflation could top 11 per cent this year – this, combined with the Ofgem cap rise due in October, means that the risk of a recession is looking more and more probable by the moment.

“Before the release of the inflation print, the short-term interest rate (STIR) markets were pricing in a 86% chance of a 50bps rate hike for the central bank’s August 04 meeting, so investors will no doubt be awaiting a hawkish response from the BoE,” Coghlan said.

Retailers

Discussing the latest inflation figures, Mohsin Rashid, co-founder of ZIPZERO, said: “Consumers are being battered on all sides."

"If you delve beyond today’s data about the eyewatering rate of inflation, the figures make for ugly reading: annual spending on food is expected to rise £380 this year, while energy bills are on track to pass £3,000 for the first time ever.”

Rashid stressed that “savvy financial management is important, yes."

"But to think consumers can work their way through such a challenging economic climate on their own is foolish."

"Businesses must do more – namely, retailers and energy providers.”

He added: “Positively, there’s a solution."

"Each year, retailers and brands spend a whopping £27bn on digital marketing."

"This money could be redirected back to consumers in the form of cash rewards from their everyday shopping, helping them to pay their spiralling energy bills.”

“This can only work if retailers and energy providers operate together on the same platform."

"Retailers can engage directly with shoppers, offering cash rewards from purchases; these cash rewards can then be used by shoppers to pay their energy bills.”

https://www.msn.com/en-us/money/markets ... 59982ea970
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Re: THE BRITS

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REUTERS

"U.S. recession fears darken outlook for global growth"


By Lucia Mutikani, Jonathan Cable and Leika Kihara

June 23, 2022

WASHINGTON/LONDON/TOKYO, June 23 (Reuters) - Manufacturing growth is slowing worldwide as China's COVID-19 curbs and Russia's invasion of Ukraine disrupt supply chains and keep inflation at the highest in years, while the growing risk of a U.S. recession poses a new threat to the global economy.

Gauges of factory activity released Thursday in Japan, Britain, the euro zone and United States all softened in June, with U.S. producers reporting the first outright drop in new orders in two years in the face of slumping consumer and business confidence.


S&P Global's flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, dropped to 51.2 this month from a final reading of 53.6 in May and the slowest growth pace in five months.

The manufacturing component dropped to 52.4, the lowest in nearly two years, from 57 in May and was notably weaker than the estimate of 56 in a Reuters poll of economists.

"Business confidence is now at a level which would typically herald an economic downturn, adding to the risk of recession," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Meanwhile, high prices in the euro zone meant demand for manufactured goods fell in June at the fastest rate since May 2020 when the coronavirus pandemic was taking hold, with S&P Global's headline factory Purchasing Managers' Index falling to a near two-year low.

"June's euro zone PMI surveys showed a further slowdown in the services sector, while output in the manufacturing sector now seems to be falling outright," said Jack Allen-Reynolds at Capital Economics.

"With the price indices remaining extremely strong, the euro zone appears to have entered a period of stagflation."


There is a roughly one-in-three chance of a recession in the bloc within 12 months, economists in a Reuters poll published earlier on Thursday predicted.

They also said inflation - which hit a record high of high of 8.1% last month - was yet to peak.

Jerome Powell, chair of the Federal Reserve, said on Wednesday the central bank was not trying to engineer a recession in the United States to stop inflation but was fully committed to bringing prices under control even if doing so risks an economic downturn.

He acknowledged a recession was "certainly a possibility".

Inflation continues to run at least three times higher than the Fed's targeted level of 2% and it is expected to deliver another 75 basis point interest rate hike next month, according to economists polled by Reuters.

Despite Powell's comments a few primary dealers have either started predicting a recession as early as this year or have brought forward their recession calls.

U.S. investment firm PIMCO warned on Wednesday that central banks tightening monetary policy to fight persistently high inflation raised the recessionary risk.

There is a 40% chance of a U.S. recession over the next two years, with a 25% chance of that happening in the coming year, a Reuters poll found earlier this month.

"Stagflation, which is characterised by persistent high inflation, high unemployment and weak demand, has become the dominant risk theme since late 1Q22 and a plausible potential risk scenario," said Fitch Ratings in a report released this week.

A string of recent data globally showed policymakers are walking a tight rope as they try to defuse inflation pressures without tipping their economies into a steep downturn.

U.S. retail sales unexpectedly fell in May and existing home sales tumbled to a two-year low, a sign high inflation and rising borrowing costs were starting to hurt demand.

Britain's economy unexpectedly shrank in April, adding to fears of a sharp slowdown as companies complain of rising production costs.

Its PMI also showed signs the economy was stalling as high inflation hit new orders and businesses reported levels of concern that normally signal a recession.


There is a 35% chance of a British recession within 12 months, another Reuters poll showed.

In Asia, South Korea's exports for the first 10 days of June shrank almost 13% year-on-year, underscoring the heightening risk to the region's export-driven economies.

While Chinese exporters enjoyed solid sales in May, helped by easing domestic COVID-19 curbs, many analysts expect a more challenging outlook for the world's second-biggest economy due to the Ukraine war and rising raw material costs.

The au Jibun Bank flash Japan Manufacturing PMI marked its slowest expansion since February.

Reporting by Lucia Mutikani in Washington, Jonathan Cable in London and Leika Kihara in Tokyo; Editing by Shri Navaratnam and Toby Chopra

https://www.reuters.com/markets/europe/ ... 022-06-23/
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CNBC

"Bank of England’s Bailey warns global economic outlook has ‘deteriorated materially’"


Karen Gilchrist @_KARENGILCHRIST

PUBLISHED TUE, JUL 5 2022

KEY POINTS

* The Bank of England said Tuesday that the global economic outlook has “deteriorated materially” and warned of possible further shocks to come.

* Governor Andrew Bailey blamed Russia’s invasion of Ukraine for piling further pressure on commodity prices and already rising inflation.

* “It is the right time to lock in resilience so that we are well prepared for future possible shocks,” he said.


LONDON — The governor of the Bank of England said Tuesday that the global economic outlook has “deteriorated materially” and warned of possible further shocks to come.

Andrew Bailey blamed Russia’s invasion of Ukraine for piling further pressure on commodity prices and already rising inflation, and said that further resilience is needed to mitigate future risks.

“The global economic outlook has deteriorated materially,” Bailey said at a briefing at the Bank of England.

“It is the right time to lock in resilience so that we are well prepared for future possible shocks,” he added.

The warning came as the central bank published its Financial Stability Report Tuesday, in which it outlined a number of risks to the U.K.’s economic outlook.

Those include ongoing disruption to food and energy markets as a result of the war, high household and government debt, as well as the continued impacts of Covid-19 in China.

The BOE, alongside other central banks, has been raising interest rates in a bid to bring down high prices.

However, Bailey acknowledged that this had made the economic landscape harder for households and businesses, and that there was little sign of let up in the near-term.

“These higher prices, weaker growth and tighter financing conditions will make it harder for households and businesses to repay or refinance debt,” he said.

“Given this, we expect households and businesses to become more stretched over coming months."

"They will also be more vulnerable to further shocks,” he said.


BOE lifts banking capital demands

The comments came as the Bank on Tuesday lifted its countercyclical capital buffer rate (CCyB) for banks from 1% to 2%, starting in July 2023.

Central banks increase the regulatory capital demand when they believe risks are building up.

Bailey said the Bank’s Financial Policy Committee would be willing to continue readjusting the rate as needed.

“Given considerable uncertainty around the outlook, the FPC will continue to monitor the situation,” he said.

“We stand ready to vary the UK CCyB rate — in either direction — depending on how risks develop.”

Bailey also said the BOE would move ahead with its annual stress test in September, evaluating the U.K. banking system’s ability to handle various potential risks, including higher interest rates, asset price falls and “deep” recessions.

However, he added that the sector looks generally strong and that lenders are much better placed now than during the 2008 Global Financial Crisis to handle a severe economic downturn.

“The economic outlook is uncertain and undoubtedly a very challenging one for many households and businesses,” he said.

“The banking system is resilient to that outlook, however, or even a much worse one."

"In sharp contrast to the financial crisis, it is in a position to cushion the economic shocks, not add to them.”

https://www.cnbc.com/2022/07/05/bank-of ... ially.html
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REUTERS

"Putin warns the West Ukraine 'heading for tragedy'"



By Max Hunder and Simon Lewis

July 7, 2022

Summary

* Ukraine hoists flag on recaptured Black Sea island

* Russia carries out air strike on island

* UK PM and staunch Ukraine supporter Johnson resigns

* Russia shells and probes new territory it seeks


KYIV/BAKHMUT, Ukraine, July 7 (Reuters) - Vladimir Putin on Thursday accused the West of decades of aggression towards Moscow and warned that if it wanted to attempt to beat Russia on the battlefield it was welcome to try, but this would bring tragedy for Ukraine.

His remarks came as Russian Foreign Minister Sergei Lavrov prepared for a closed-door foreign minister's meeting at a G20 gathering in Indonesia on Friday which will be the first time Putin's top diplomat comes face-to-face with the most vocal opponents of the invasion of Ukraine in February.

In Ukraine, the regional governor of the northeastern city of Kharkiv said late on Thursday that three people had been killed and another five wounded after Russian forces shelled the city.

Russian forces also shelled other potential conquests in eastern Ukraine ahead of an expected new offensive.

"We have heard many times that the West wants to fight us to the last Ukrainian."

"This is a tragedy for the Ukrainian people, but it seems that everything is heading towards this," Putin said in televised remarks to parliamentary leaders.


The West had failed in its attempt to contain Russia, and its sanctions on Moscow had caused difficulties but "not on the scale intended," Putin added.

Russia did not reject peace talks, but the further the conflict went, the harder it would be to reach agreement, he said.

Earlier, Kyiv lost one of its main international supporters after British Prime Minister Boris Johnson said he would step down.

Ukraine said it expected Britain's support to continue and thanked Johnson for defending Ukraine's interests, while Moscow did not conceal its delight at the political demise of a leader whom it has long criticised for arming Kyiv so energetically.


In a phone call, Johnson told Ukraine's President Volodymyr Zelenskiy "You're a hero, everybody loves you," a spokesman for Johnson said.

Ukrainian Foreign Minister Dmytro Kuleba described the British Prime Minister as a "true friend of Ukraine" for being among the first world leaders to unequivocally condemn the invasion and also "to help Ukraine defend itself and ultimately win this war in the future."

Johnson's resignation comes at a time of domestic turmoil in some other European countries that support Kyiv and doubts about their staying power for what has become a protracted conflict.

The day began with Ukraine's defiant flag-raising ceremony on its recaptured Snake Island in the Black Sea, located about 140 km (90 miles) south of the Ukrainian port of Odesa.

Moscow was quick to respond, with its warplanes striking the strategic island shortly afterwards and destroying part of the Ukrainian detachment there, it said.

Russia abandoned the island at the end of June in what it said was a gesture of goodwill - a victory for Ukraine that Kyiv hoped could loosen Moscow's blockade of Ukrainian ports.

Andriy Yermak, the Ukrainian president's chief of staff, suggested the raising of the blue and yellow national flag there was a moment that would be repeated across Ukraine.

KRAMATORSK

Russian forces in eastern Ukraine meanwhile kept up pressure on Ukrainian troops trying to hold the line along the northern borders of the Donetsk region, in preparation for an anticipated wider offensive against it.

After taking the city of Lysychansk on Sunday and effectively cementing their total control of Ukraine's Luhansk region, Moscow has made clear it is planning to capture parts of the neighbouring Donetsk region which it has not yet seized.

Kyiv still controls some large cities.

The mayor of the Donetsk city of Kramatorsk said Russian forces had fired missiles at the city centre in an air strike on Thursday and that at least one person was killed and six wounded.

Pavlo Kyrylenko, governor of the Donetsk region, said the missile had damaged six buildings including a hotel and an apartment bloc in the large industrial hub.

Reuters could not independently verify those assertions.

In Kramatorsk, mechanic-turned-soldier Artchk helped shore up defences against imminent Russian attack while, nearby, farmer Vasyl Avramenko lamented the loss of crops supplanted by mines.

"Of course we're already prepared."

"We're ready," Artchk, identifying himself by his nom-de-guerre, told Reuters.

"It's their (Russians') fantasy to occupy these cities, but they don't expect the level of resistance."

"It's not just the Ukrainian government, it's the people who refuse to accept them."

Russia denies targeting civilians in what it calls a "special military operation" to demilitarise Ukraine, root out dangerous nationalists and protect Russian speakers.

Ukraine and its allies say Russia launched an imperial-style land grab with February's invasion, starting the biggest conflict in Europe since World War Two which has killed thousands, displaced millions and flattened cities.

Reporting by Reuters bureaux; Writing by Andrew Osborn and Alexandra Hudson; Editing by Angus MacSwan and Hugh Lawson

https://www.reuters.com/world/ukraine-r ... 022-07-07/
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FOX NEWS

"Unity at G20 fails over differences on Ukraine war, Russia, US snub each other"


Caitlin McFall

8 JULY 2022

Tensions between world leaders remained heightened Friday during talks with G20 nations in Bali, Indonesia as top economies look to address the biggest problems facing the globe.

Divisions between Western nations and the increasingly unified China-Russia front highlighted stark divisions and made effective diplomacy nil when it came to issues surrounding the war in Ukraine.

Russia’s Minister of Foreign Affairs Sergei Lavrov walked out of proceedings twice reports said Friday, first when his German counterpart Annalena Baerbock began to speak and again when Ukrainian Foreign Minister Dmytro Kuleba appeared on video.


Lavrov said the global food crisis – a major issue slated for the November summit and a result of Russia’s naval blockade in the Black Sea – was not the fault of Moscow.

"If the West doesn’t want talks to take place but wishes for Ukraine to defeat Russia on the battlefield – because both views have been expressed – then perhaps there is nothing to talk about with the West," he said, according to a report by The Guardian.

Secretary of State Antony Blinken and his Russian counterpart reportedly ignored each other outside the proceedings – which is the first time Lavrov has met with Western leaders since Russia’s deadly invasion of Ukraine in February.

"You know, it was not us who abandoned all contacts," Lavrov told reporters.

"It was the United States."

" And we are not running after anybody suggesting meetings."

"If they don’t want to talk, it’s their choice."


Blinken reportedly directed pointed comments at Moscow during a closed-door meeting that Lavrov was not present for, accusing it of blocking millions of tons of grain and exacerbating a global food shortage.

Lavrov’s sit-in apparently did not have a rebuttal to Blinken’s comments and said she did not have prepared remarks, according to one anonymous diplomat who attended the meeting.

This week’s talks were intended to lay the groundwork for a summit set to be hosted by Indonesia in November, but the rocky diplomatic relations have set an uncertain tone for the upcoming conference.

"The world has yet to recover from the pandemic, but we are already confronted with another crisis: the war in Ukraine," Indonesian Foreign Minister Retno Marsudi said.

"The ripple effects are being felt globally on food, on energy and physical space."

However, officials appeared to make a point to show their disinterest in working with Russia so long as the country continues its war in Ukraine and said there would be no joint communiqué as in previous years.

Western officials apparently suggested they were focused on addressing food and energy shortages that have become a global problem following Moscow’s invasion and said they would work to establish bloc agreements to counter the growing global crises.

However, the tone of the talks were of little surprise following the stops made by Western nations and officials from Russia and China prior to the G20 meeting in Bali.

Lavrov, along with Chinese Foreign Minister Wang Yi, reportedly stopped in several Asian capitals to rally support for their position and bolster their shared ties.

Blinken, along with his German, French and British counterparts have been meeting for months and attended NATO and G7 conferences over the last week.

The Indonesian host attempted to reign in the hostilities by reminding all attendees that the world is facing monumental crises that will have devastating effects if they are not remedied.

Developing nations in the G20, like Argentina, Brazil India and Indonesia, could also face steep consequences if relations between the West remained strained with Russia and China.

"Honestly, we cannot deny that it has become more difficult for the world to sit together," Marsudi said.

"The world is watching us, so we cannot fail."

Reports surfaced Friday alleging that Western nations refused to attend a group dinner Thursday evening after learning that Lavrov would be attending.

The customary group photo was also abandoned in a boycott allegedly led by Blinken and G7 members, according to a report by Politico EU.

Lavrov reportedly turned snappish when asked about the omitted group photo shoot and told reporters, "I didn’t invite anyone to pose for a photo together with me."

"It’s obvious that they used the G20 for goals that weren’t envisaged when it was created," he said.


The Associated Press contributed to this report.

https://www.msn.com/en-us/news/world/un ... 30608e1771
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CityAM

"Government suffers setback as judge rules net zero plans are ‘unlawful’"


Nicholas Earl

19 JULY 2022

Ministers will have to go back to the drawing board and spell out their plan for reaching net zero carbon emissions, after a judge determined the current strategy for reaching the country’s climate goals was unlawful.

The High Court judge, Justice David Holgate, decided that Downing Street’s current plans lacked sufficient detail concerning how the target would be met.


This was a breach of the government’s obligations under the Climate Change Act, the judge said, which compels the Government to reach net zero carbon emissions over the next three decades.

He concluded that a detailed explanation of how Government policies would achieve net zero greenhouse gas emissions by 2050 was important for holding ministers to account and for “transparency.”

He ordered ministers to publish an updated strategy by the end of March 2023.

Business Secretary Kwasi Kwarteng, secretary of state for business, energy and industrial strategy, launched the Government’s net zero strategy last year.

However, the judge ruled that Kwarteng did not know each individual policy would contribute to achieving the legally binding target, and therefore could not properly assess the credibility of the plan.


The government had argued that it did not need to provide a quantification of the effects of its individual policies.

The verdict follows a sustained challenge from campaign groups including Friends of the Earth, the Good Law Project and environmental campaigner Jo Wheatley.

They had highlighted that, taking the policies together, the net zero strategy would only achieve 95 per cent of the required emissions reductions, leaving a 5 per cent shortfall.

Friends of the Earth’s lawyer, Katie de Kauwe, said: “We’re proud to have worked on this historic case."

"Taking strong action to cut carbon emissions is a win-win."

"Not only is it essential to preventing climate breakdown, but we can also tackle the cost of living crisis with cheap, renewable energy.”

The Government has also been approached for comment.

The ruling came as the UK and large swaths of Europe endured scorching record temperatures, with Heathrow recording temperatures of 40.2C earlier today – breaking the 40C threshold for the first time ever.

https://www.msn.com/en-us/news/world/go ... f7dda10e2e
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BUSINESS INSIDER

"UK's newest and largest aircraft carrier broke down on the 2nd day of a mission to the US"


gglover@insider.com (George Glover)

29 AUGUST 2022

* The Royal Navy's largest ship broke down Sunday just one day after setting sail for the US.

* HMS Prince of Wales was left stuck off the UK coast as engineers addressed a mechanical issue.

* The carrier has spent fewer than 90 days at sea in the past two years due to technical faults.


The UK's newest and biggest aircraft carrier broke down on the second day of what was meant to be a months-long deployment to the US.

HMS Prince of Wales, a £3 billion ($3.5 billion), suffered a mechanical issue Sunday and remains near its base of Portsmouth on the UK's southern coast.


The carrier, which has held the role of command ship for NATO since January 2022, was on the second day of its latest deployment.

The mission is due to take the Prince of Wales, one of two Elizabeth-class carriers meant to revitalize the Royal Navy, to ports in the US, Canada, and the Caribbean.

Divers were on Sunday investigating the ship's technical fault, which is likely to be a damaged propeller, according to the independent news and analysis site Navy Lookout.

"The ship is receiving external support for ongoing investigations," a Royal Navy spokesperson said Sunday.

"Having successfully sailed from Portsmouth, HMS Prince of Wales remains in the South Coast Exercise Area," the spokesperson added.

"We expect her to continue her Westlant 22 deployment as planned in the coming days."

This isn't the first time that the 65,000-ton vessel has suffered technical issues since it entered service in 2019.

At the end of 2020, it was stranded in Portsmouth after a flooded engine room led to electrical damage.

The carrier, which has a crew of 1,600, spent fewer than 90 days at sea during its first two years of service after suffering multiple leaks, according to The Guardian.

The Royal Navy did not immediately respond to an Insider request for comment.

https://www.msn.com/en-us/news/world/uk ... 496395e56c
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NEWS 360

"London announces cancellation of Biden-Truss meeting scheduled for Sunday"


Daniel Stewart

17 SEPTEMBER 2022

The British government announced Saturday the cancellation of the meeting between U.S. President Joe Biden and British Prime Minister Liz Truss, scheduled for this Sunday, and its replacement by a "full" bilateral meeting to be held on Wednesday during the annual session of the UN General Assembly.

Truss maintains instead the appointments scheduled for this day with the Irish Prime Minister, Micheal Martin, with the Canadian Prime Minister, Justin Trudeau, and with the Polish President, Andrzej Duda.


During the day he has already met with the Australian Prime Minister, Anthony Albanese, and with the Prime Minister of New Zealand, Jacinda Ardern.

Truss has also scheduled a telephone call with the Saudi Arabian crown prince, Mohamed bin Salman, and has already spoken with the president of the United Arab Emirates, Sheikh Mohamed bin Zayed al Nahyan, said Number 10 Downing Street.

These meetings are considered as informal contacts and not as formal bilateral meetings, but it is not excluded that political issues will be discussed, explained the British news agency The Press Association.

In the case of New Zealand, it was Ardern who indicated that the death of Queen Elizabeth II and the new King Charles III will be the "center of the conversation" and they could also discuss Ukraine and the free trade agreement being negotiated by both countries.

https://www.msn.com/en-us/news/world/lo ... 9817043a8b
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REUTERS

"Britain sends investors fleeing with historic tax cuts and borrowing"


By David Milliken, Andy Bruce and Kate Holton

September 23, 2022

Summary

* Kwarteng cuts top rate of income tax in dash for growth

* Huge increase in UK government debt issuance planned

* Gilts suffer biggest slump in decades

* Pound falls 3% to new 37-year low against dollar


LONDON, Sept 23 (Reuters) - Britain's new finance minister Kwasi Kwarteng unleashed historic tax cuts and huge increases in borrowing on Friday in an economic agenda that floored financial markets, sending sterling and British government bonds into freefall.

Kwarteng scrapped the country's top rate of income tax, cancelled a planned rise in corporate taxes and for the first time put a price tag on the spending plans of Prime Minister Liz Truss, who wants to double Britain's rate of economic growth.

Investors dumped short-dated British government bonds as fast as they could, with the cost of borrowing over five years seeing its biggest one-day rise since 1991, while the pound slumped more than 3% against the dollar to levels last seen 37 years ago.

Economists and investors said Truss's government, in power for less than three weeks, was losing financial credibility after it set out tax cuts and huge spending plans just a day after the Bank of England hiked interest rates to contain surging inflation.


U.S. bank Citi warned that sterling could sink to parity with the dollar.

"Something has to give, and that something will eventually be a much lower exchange rate," analyst Vasileios Gkionakis said in a research note.

Deutsche Bank said the central bank needed to make a big unscheduled interest rate hike as early as next week to calm markets and restore credibility.

Kwarteng's announcement marked a step change in British financial policy, harking back to the Thatcherite and Reaganomics doctrines of the 1980s that critics have derided as a return to "trickle down" economics.

Truss, elected as prime minister earlier this month by a vote of the Conservative Party's 170,000 members, has vowed to deregulate and prioritise economic growth, even if it favours the wealthy at a time when millions are struggling to cover basic household bills.

"That is how we will compete successfully with dynamic economies around the world," Kwarteng said.

"That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth."


Speaking hours after he made his statement in parliament, Kwarteng declined to comment on the fall in sterling, saying he did not comment on market moves.

"I think it's a very good day for the UK because we've got a great plan," he told reporters.

HUGE GAMBLE?

The so-called mini budget is designed to snap the economy out of a period of double-digit inflation driven by surging energy prices and a 15-year run of stagnant real wage growth.

Moves to subsidise energy bills will cost 60 billion pounds ($65.3 billion) just for the next six months, Kwarteng said - part of a promise to support households for two years.

Tax cuts - including an immediate reduction in a property purchase tax - would cost a further 45 billion pounds by 2026/27, he said, costs that could be recovered by a rise in annual economic growth of 1 percentage point over five years - a feat most economists think unlikely.

Britain also will accelerate moves to bolster the City of London's competitiveness as a global financial centre by scrapping the cap on banker bonuses ahead of an "ambitious deregulatory" package later in the year.

In total, the plans will require an extra 72 billion pounds of government borrowing over the next six months alone.

"In 25 years of analysing budgets this must be the most dramatic, risky and unfounded mini-budget," said Caroline Le Jeune, head of tax at accountants Blick Rothenberg.

"Truss and her new government are taking a huge gamble."

The opposition Labour Party said the plans were a "desperate gamble" by a government that had delivered lower growth, lower investment and lower productivity.

"The only things that are going up are inflation, interest rates and bankers' bonuses," said Labour's finance spokeswoman Rachel Reeves.

BUMPY RIDE

The Institute for Fiscal Studies said the tax cuts were the largest since the budget of 1972 - which is widely remembered as ending in disaster because of its inflationary effect.

On Thursday the BoE said Truss's energy price cap would limit inflation in the short term but that government stimulus was likely to boost inflation pressures further out, at a time when it is battling inflation near a 40-year high.

"We are likely to see a policy tug of war reminiscent of the stop-go 1970s."

"Investors should be prepared for a bumpy ride," said Trevor Greetham, head of multi-asset at Royal London Asset Management.


Financial markets ramped up their expectations for interest rates to hit a peak of more than 5% midway through next year.

Despite the extensive tax and spending measures, the government did not publish growth and borrowing forecasts from the Office for Budget Responsibility (OBR) government watchdog.

The National Institute of Economic and Social Research (NIESR) said the budget deficit looked set to rise to 8% of gross domestic product during the current financial year.

The OBR forecast in March that Britain would have a budget deficit of 3.9% of GDP.

Kwarteng said the OBR would publish its full forecasts later this year.

"Fiscal responsibility is essential for economic confidence, and it is a path we remain committed to," he said.

Writing by Andy Bruce and Kate Holton; Additional reporting by Kylie MacLellan, Kate Holton, Paul Sandle, Sachin Ravikumar, Alistair Smout, William James, James Davey, Andrew MacAskill, Farouq Suleiman, Huw Jones and Elizabeth Piper; Editing by Catherine Evans, Toby Chopra, Kirsten Donovan

https://www.reuters.com/markets/europe/ ... 022-09-23/
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Re: THE BRITS

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REUTERS

"Analysis: Britain's new vision leaves onlookers with nightmares"


By Andy Bruce and Lindsay Dunsmuir

September 23, 2022

LONDON, Sept 23 (Reuters) - Britain's new economic agenda represents the biggest gamble for growth in a major Western democracy in at least 40 years, for which the chance of success fell instantly as investors ditched sterling assets.

Prime Minister Liz Truss's "Growth Plan" is Britain's second roll of the dice at economic renewal following the 2016 vote for Brexit which, so far at least, has failed to yield returns.

Investors reacted with dismay to the combination of free spending, unfunded tax cuts and huge increases in government borrowing announced by finance minister Kwasi Kwarteng on Friday.

His statement marked a step change in British economic policy, harking back to the Thatcherite and Reaganomics doctrines of the 1980s that critics have derided as a return to "trickle down" theory.

The pound crashed below $1.09 for the first time since 1985 and British government bonds suffered the biggest daily fall in decades.

International observers looked on with bewilderment, even if business groups at home saw merit in many of the plans outlined by Kwarteng, who says low growth is the real gamble.

"I've rarely seen an economic policy that is as uniformly panned by economic experts and financial markets," said Harvard professor Jason Furman, former chair of the U.S. Council of Economic Advisers during Barack Obama's presidency.

"It shockingly came in below the low expectations that almost everyone had," he added.

Willem Buiter, a former Bank of England rate-setter and Citi's chief global economist until 2018, said Kwarteng's plans to ramp up borrowing were "totally, totally nuts".

"From a cyclical perspective it is, I think, a disaster," Buiter said, adding that he had no objection in principle to tax cuts for firms and households with a better fiscal balance.

"It's probably the epitome of casino macroeconomics," said Jacob Kirkegaard, nonresident senior fellow with the Washington- based Peterson Institute for International Economics think tank.

In Germany, the director of the German Council on Foreign Relations (DGAP) Guntram Wolff said Truss's plans amounted to a "Singapore-on-Thames" attempt to deregulate Britain's economy and boost the City of London.

"The economy has more than the City..."

"It is no surprise that pound sterling has lost today," he said.

SLOWLY, THEN ALL AT ONCE

On Thursday Kwarteng said his plans to grow the economy would "build stronger capacity to alleviate inflationary pressure".

On Friday, those plans sparked a market meltdown that will only exacerbate inflation in the months, and possibly years ahead - automatically raising the bar for the eventual success of Kwarteng's plan.


U.S. investment bank Citi said sterling risked a confidence crisis among international investors.

"The risk now is that the UK government has diminished its credibility at one stroke, and you saw that with the market runoffs," said Dan Hamilton, nonresident senior fellow at the Brookings Institution, a U.S. think tank.

The collapse in investor sentiment leaves Bank of England Governor Andrew Bailey with a serious problem.

"Fiscal and monetary policy are now at war with each other in the UK," Furman said.


Hamilton agreed, adding that this tension was not evident in other major economies.

In financial markets, a small number of analysts predict that the BoE will be forced to raise interest rates before its next interest rate meeting.

"I think if you if you were Andrew Bailey and you were looking just at the detail of the market moves, you would already have called an emergency meeting," said Kirkegaard.

HISTORY LESSONS

Buiter said he could think of few historical parallels for Britain's new fiscal approach, even if there were superficial similarities with the tax-cutting Thatcher years.

Britain's Institute for Fiscal Studies compared Kwarteng's statement to a budget in 1972 that similarly sought to double Britain's rate of economic growth, but is widely remembered as a disaster for its inflationary effect.

Furman doubted that Truss would be able to implement her plans before running into some economic hard truths, as happened to Ronald Reagan in the early 1980s.


The U.S. Republican president was forced to U-turn on a major tax-cutting drive as the U.S. Federal Reserve jacked up interest rates.

Furman said Truss might also have no choice but to undo some of her plans if Britain's debt problems start to spiral because of higher interest rates.

"Sometimes a country's hand is forced," he said.

Reporting by Andy Bruce; editing by Jonathan Oatis

https://www.reuters.com/markets/europe/ ... 022-09-23/
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