It was odd to see Billy of the NTI newsroom with a ruler excavated from the depths of his desk drawer measuring the screen on his laptop this morning (Friday 23 June).
"What on Earth, Billy?"
Turns out there were two items in The Times Online, less than three centimetres apart, which appear to completely contradict each other. As we predicted on Wednesday prior to the Bank of England's Monetary Policy Committee announcing their 'ouch!' latest interest rate rise, the cost of borrowing rose by 0.5 per cent yesterday and, as a direct result, the UK economy is at a greater risk of falling into a recession in the year ahead, as investors expect interest rates to rise to the highest level since 2000 in an effort to quell inflation.
Andrew Bailey and his team can hardly expect otherwise, as their actions over the past three years have inevitably led to this place. The sledgehammer they have been using, most recently yesterday, lies dormat beside an uncracked nut, surrounded by flakes of skin from the collective heads of his Committee. We remind them that actions and consequences are indisputably linked. Money markets expect borrowing costs to peak at 6.1 per cent by the end of the year, a level of tightening economists warned would risk plunging the economy into a downturn.
Less than three centimetres away on Billy's laptop screen, displaying today's Times, is a report that UK retail sales rose unexpectedly last month as warmer weather and bank holidays boosted spending on summer clothes, DIY and gardening despite the squeeze on households. Sales volumes rose by 0.3 per cent in May, following a rise of 0.5 per cent in April and better than forecasts for a 0.2 per cent fall, figures from the Office for National Statistics showed.
Someone called Ruth Gregory who must know what she is talking about, as she is deputy chief UK economist at Capital Economics, said: “Overall, the figures were far better than we had expected but our view is still that the growing drag on activity from higher interest rates will eventually tip the economy into recession, generating a 0.5 per cent peak-to-trough fall in real consumer spending.”
Put plainly; we need to quell all of this optimism, re-introduce misery and desperation into our economy to stop people spending and the traditional way to do this is to make their lives so expensive they can hardly pay their mortgages, let alone buy a plant.
Coincidentally, The Times ran their 'CEO Summit 2023' in London yesterday and Rishi Sunak took to the stage just forty minutes after the Bank of England laid down their sledgehammer. How he must have laughed. There was much talk about sticky inflation and how bad it is, before some delegates got up to suggest what should be done about the economy at large.
One of them, who was dressed well, but failed otherwise to distinguish herself said: “There is just irrefutably a ‘peoples crisis’ in this country. It’s about recruitment, it’s about retention and it’s about retraining of people.” Helpful and noted.
Another, known as Keith Anderson, the boss of ScottishPower, called for radical reform to cut red tape, including in the planning system: “We need to rip up the rulebook and start again. That’s the problem in this country, it’s speed.” Okay, get quicker; got it.
Dame Kate Bingham, who achieved fame during Covid lamented the lack of UK institutional investors such as pension funds willing to back young, innovative British businesses. “We are in dinosaur land in terms of our ability to invest in high-growth companies in the UK.” Give money to young people. Right.
So, that should be sorted then. Now to go out and buy ice-creams whilst we still can.