Starmer inherits weak economy with 'no magic wand'
Keir Starmer, leader of Labour party, reacts as he addresses his supporters at a reception to celebrate his win in the election, at Tate Modern, in London, Britain, July 5, 2024. REUTERS/Suzanne Plunkett
Britain's next prime minister Keir Starmer spent the election campaign accusing Rishi Sunak's Conservatives of "14 years of economic failure", but he has no obvious quick fix to lift the country out of its slow-growth rut.
Living standards have stagnated since Conservatives took power in 2010 and Britain's recovery from the Covid pandemic has been the weakest among big rich nations after Germany.
Starmer will be under pressure to use Labour's huge majority in parliament to end the sense of decline, from creaking public services and inflation-hit personal finances to a shortage of housing and weak business investment.
But with public debt at almost 100 per cent of gross domestic product and taxes at their highest since just after World War Two, Starmer stresses the turnaround will take time.
"We're going to have to do really tough things to move the country forward," he told voters days before the election. "There is no magic wand."
Unlike in 1997, when Labour under Tony Blair ousted the Conservatives with the economy expanding by almost 5 per cent that year, Starmer might struggle to get British annual growth above 2 per cent in the foreseeable future, in line with much of a sluggish Europe.
Britain's economy is expected to grow by less than 1 per cent this year.
The 2007-08 global financial crisis which hit Britain particularly hard, cuts to many areas of public spending and the shocks of Brexit, Covid and surging energy prices have combined to weigh on the world's sixth-biggest economy.
But Starmer and his likely choice of finance minister Rachel Reeves say they will not go on a borrowing binge to fund a growth push, with memories still fresh of the 2022 bond market rout under former Conservative prime minister Liz Truss.
They have also promised no major tax increases, leaving the new government with little room in the budget.
"The fiscal inheritance will be a difficult one and there are a lot of challenges to address," Lizzy Galbraith, a political economist with investment firm abrdn, said.
Unlike in 1997, when Labour stunned financial markets by handing operational independence to the Bank of England, its first economic policy move is likely to be low key.
It plans to move quickly to reform Britain's archaic planning system to speed up investment in house-building and infrastructure, part of a plan to improve the country's weak productivity, support growth and generate more tax revenues to invest in health and other strained public services.
The Conservatives balked at upsetting core supporters in suburban areas where much of any surge in residential construction is likely to happen.
Starmer promises to be hard-headed about breaking down the barriers to growth, but the challenge will be big.
"We've been here before with an incoming government promising planning reform and it gets watered down in office," Galbraith at abrdn said.
Jack Paris, chief executive of InfraRed, an international infrastructure asset manager, expects Labour will turn more to private investment for green energy and speed up transportation projects.
"The new UK government should provide increased clarity and visibility to investors with a long-term infrastructure strategy representing a catalyst to making the UK again one of the most attractive destinations for long-term investors," he said.
Drop-out Britain
Also on Starmer's to-do list is reversing the post-pandemic rise in people dropping out of the jobs market due to sickness, something other rich economies have already done.
The Boston Consulting Group and the NHS Confederation, representing much of the health service, estimate that getting three-quarters of workforce dropouts since 2020 back into the jobs market could boost tax revenues by as much as £57 billion in total over the next five years.
For context, Britain spends around £11bn a year running its justice system.
Starmer's growth plan also includes lowering some of the barriers to trade with the European Union. But he has ruled out a major reworking of Britain's Brexit deal.
Economists say Labour's policies to date are unlikely to make a big difference, much less meet Starmer's goal of turning Britain into the Group of Seven leader for sustainable economic growth, something it has barely managed since World War Two.
Higher public investment would be growth-positive but Labour pledges to cut immigration could have the opposite effect.
Analysts at Goldman Sachs say Labour's reforms will boost Britain's economic growth in 2025 and 2026 by just 0.1 percentage point each year.
Economists polled by Reuters last month expected the economy would grow by 1.2 per cent in 2025 and 1.4 per cent in 2026, less than half its pace in the 10 years before 2007.
But in some ways Labour is inheriting an economy that is turning a corner, a point Sunak tried in vain to sell to voters.
After a recession in 2023, a recovery is under way and high inflation has now abated, allowing the Bank of England to start cutting interest rates possibly as soon as next month. Business and consumer confidence are on the rise.
Starmer says - and many business leaders agree - that political stability will help attract investment to Britain after a turbulent eight years in which the country was run by five different Conservative prime ministers.
Investors are already warming to the UK's lower risk profile in the light of rising populism in France and the US.
Laura Foll, a portfolio manager at Janus Henderson Investors, linked a recent out-performance of UK shares to that shift in perception. "Relatively, the UK, from a political standpoint, is looking in far better shape," she said.
US president Donald Trump on Thursday threatened to slap a 200 per cent tariff on wine, cognac and other alcohol imports from Europe, opening a new front in a global trade war that has roiled financial markets and raised recession fears.
Stocks fell on the news, as investors worried that Trump would enact stiffer trade barriers around the world's largest consumer market. The S&P 500 finished the day more than 10 per cent below its record high reached last month, confirming the benchmark index for US stocks is in a correction.
Trump's threat came in response to a European Union plan to impose tariffs on American whiskey and other products next month - which itself is a reaction to Trump's 25 per cent tariffs on steel and aluminum imports that took effect on Wednesday. The European Commission had no immediate comment on the move.
Canada, a neighbor and close ally that is the biggest aluminum provider to the US, has also announced countermeasures to Trump's metals tariffs and has taken the dispute to the World Trade Organisation. Talks between US and Canadian officials on Thursday failed to produce a breakthrough.
Trump has threatened to impose an array of trade penalties since returning to the White House in January, though he has postponed action on many of them. At an Oval Office meeting with NATO secretary general Mark Rutte later on Thursday, he said he would not back off from reciprocal tariffs he has vowed to impose on all trading partners on April 2.
"We've been ripped off for years, and we're not going to be ripped off," he said.
Alcohol is shaping up to be a key friction point in the brewing trade war.
Some Canadian retailers have pulled American bourbon from their shelves as relations between the two countries have frayed and Trump has threatened to annex that country.
US commerce secretary Howard Lutnick met with Canadian finance minister Dominic LeBlanc and Ontario premier Doug Ford on Thursday to discuss the metals tariffs, as well as economic and national security issues, the Canadian officials said.
Following his meeting with Lutnick, Ford told reporters in Washington: "We had a very, very productive meeting ... we feel the temperature is being lowered, and we've also agreed that we're going to have another meeting next week."
LeBlanc said Canadian officials have made clear that they will not reopen dairy provisions of the US-Mexico-Canada trade agreement, a demand repeatedly made by Trump, who has railed against Canada's high tariffs on US dairy products. But he said the issue was not discussed with Lutnick on Thursday.
He said it was not particularly helpful to have the tariffs in place in the run up to a review of USMCA.
Many of the EU's proposed countermeasures, worth €26 billion (£21bn), would apply to products with little more than symbolic value, such as dental floss and bathrobes.
But the proposed 50 per cent duty on US bourbon would be a significant hit for the industry, which has seen exports grow steadily since the United States lifted tariffs Trump imposed during his 2017-2021 term in office.
The EU accounted for roughly 40 per cent of all spirits exports in 2023, according to the Distilled Spirits Council of the United States, a trade group.
Likewise, the United States accounts for 31 per cent of EU wine and spirits exports, according to Eurostat.
Trump's proposed 200 per cent tax on European alcohol would create further headwinds for producers like Pernod Ricard, which has already cut its sales outlook due to Chinese duties imposed last year.
Industry calls for more toasts, fewer tariffs
Industry officials on both sides of the Atlantic urged their leaders to de-escalate.
"This cycle of tit-for-tat retaliation must end now!" said spiritsEurope, an industry trade group.
Trump says tariffs are needed to revitalise US industries shrunken after decades of globalisation, and he has stacked his administration with officials who agree with those views.
Treasury secretary Scott Bessent said he was not worried about Wall Street volatility because the Trump administration is focused on a longer-term transformation of the U.S. economy.
He warned that the EU has more to lose in a trade war, as it relies more on exports to the United States.
"I would counsel these government leaders that they are on the losing side of this argument economically," he said on CNBC.
Trump's barrage of threats has spooked investors, businesses and consumers. Producers of jets, coffee, clothing, autos and packaged foods are among the many businesses scrambling to assess their operations as Trump's actions threaten international supply chains.
Even Tesla, owned by Trump adviser Elon Musk, argued in a letter to US trade officials that the trade war could make it a target for retaliatory tariffs against the US.
"As a US manufacturer and exporter, Tesla encourages USTR to consider the downstream impacts of certain proposed actions taken to address unfair trade practices," the electric automaker said in a letter dated Tuesday.
Some economists say the uncertainty threatens the health of the U.S. economy and raises the risk of recession. A Reuters/Ipsos poll released on Wednesday found that 70 per cent of Americans expect Trump's tariffs to make regular purchases more expensive.
Trump said his alcohol tariffs would help domestic producers. But US importers and distributors said it would lead to lost sales, layoffs and shuttered businesses.
An undercover operation by Gloucestershire Trading Standards has found most shops in the county selling products containing corrosive substances to underage buyers.
In total, 10 stores were visited and eight made sales to underage volunteers.
The test purchases were carried out by Trading Standards, with the support of police cadets, in February. The volunteers visited stores across Gloucester, Cheltenham, Stroud, the Forest of Dean and Tewkesbury.
Eight different businesses sold a product containing corrosive substances to a young person under 18, without any checks on their age or requests for identification. The products sold included brick and patio cleaner, plughole unblocker and caustic soda drain unblocker.
Gloucestershire Trading Standards said it will be contacting the shops that failed the test to inform them of the sale and offer advice on their legal obligations. If these businesses do not heed this advice and evidence of selling to minors is found in the future, then Trading Standards have warned that more formal action could be taken which could include prosecution.
The Offensive Weapons Act 2019 makes it an offence to sell certain products which have a high percentage of corrosive chemicals to under 18s. Products which may have a high percentage of chemicals such as caustic soda, drain cleaners/unblockers and patio cleaners contain such chemicals, which can be dangerous if not used correctly.
“It’s disappointing to see that a number of retailers in the county have sold products containing corrosive substances to underage buyers,” Cllr Dave Norman, cabinet member for trading standards at Gloucestershire County Council, said.
“It’s important they seek advice and ensure that age-restricted goods are not sold to young people. Our Trading Standards team will be offering relevant advice to these businesses.”
If a business is unsure of their obligations, then they can find advice on the Trading Standards website.
Paul will join the NewstrAid team from 17 March and will take over from Tom Rodger, who is retiring at the end of the month.
“We are delighted to welcome Paul Bacon to the team. He has more than 20 years’ experience in the industry and will bring with him a wealth of knowledge to this important role,” said Neil Jagger, CEO for NewstrAid.
Paul most recently worked for Harmsworth Media as Key Account Manager at The i Paper and has previously worked in various sales and marketing roles for the Independent and The i Paper as well as working in distribution for wholesalers including Smiths News.
Neil Jagger added, “We are very sad to say goodbye to Tom Rodger and we know he will leave big shoes to fill, however I am confident that Paul will prove a great addition to the team and will continue the fantastic work that Tom has undertaken for the last six years.”
NewstrAid provides financial help, emotional support and practical advice to the UKs newstrade and in 2024 helped more than 1,500 industry colleagues who were facing challenging times.
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Brits pull out nearly £80bn from LINK ATMs in 2024
The UK’s transition away from cash continues to accelerate, nearly five years after the COVID-19 pandemic, according to a report released today by LINK, the UK's cash access and ATM network.
While the trend towards a low-cash society is clear, the pace of this shift varies significantly across the country, indicating a complex and evolving payment landscape.
Over the past 20 years, there has been a shift away from cash with more customers choosing to pay for things digitally or with contactless cards. According to the most recent industry statistics, cash represented 12 per cent of all payments, down from around one-quarter in 2020, and 60 per cent back in 2008.
LINK’s latest analysis shows that the total value of cash withdrawn from cash machines in every single constituency of the UK has seen a significant fall since COVID. In 2019, £116 billion was withdrawn from ATMs compared to £80bn in 2024, a 31 per cent fall.
This means UK banking customers are withdrawing £100 million less from ATMs every day compared to before the pandemic.
As customers use less cash, total ATM transaction numbers, which includes balance enquires, have also fallen significantly. In 2019, there were 1.73 billion transactions compared to 921 million in 2024, a 47 per cent drop.
However, LINK data shows that the average withdrawal value has increased from £65 to £85 over the same time period. Consumers are visiting ATMs less, but when they do they take out more cash.
Assessing the level of decline in transactions across the parliamentary constituencies reveals significant geographic differences. Over the five years, we can see which parts of the country have moved away from cash more quickly and slowly. The data shows:
The total cash withdrawn from ATMs has fallen in every single constituency across the UK with the average constituency withdrawing £1m less every week.
The fastest move away from cash has been in city centres and more affluent constituencies with Bristol Central, Edinburgh North & Leith and Westminster seeing the biggest shift
Areas with higher levels of deprivation and digital exclusion are moving away from cash more slowly
The top 50 constituencies where people have moved away from cash the fastest are dominated by English and Scottish constituencies
Northern Ireland is the ‘cash heaviest’ part of the UK with the average adult still withdrawing £2,274 in 2024, compared to the national average of £1,424.
Yet cash is still critical to every high street. Even in the quietest and most remote constituencies, over £400,000 was still withdrawn from LINK ATMs every month last year. In total, £79.5bn was withdrawn across the country, and surveys show around five million people still depend on cash.
LINK runs a national financial inclusion programme ensuring that, despite changing consumer behaviour, people can still access cash for free. Some 93.6 per cent of people live within one mile of access to cash.
“COVID changed how we live, how we work, and for many people, how we manage our cash,” John Howells, LINK chief executive, commented.
“Cash use remains popular – we still withdrew £250m a day in 2024. The fact that areas which are more deprived are moving away from cash more slowly is a timely reminder that we cannot afford to leave anyone behind, and that we need to focus more on digital inclusion as part of how technology is rolled out across the UK.”
20 areas with fastest declines in ATM withdrawals*
20 areas with slowest declines in ATM withdrawals*
Constituency
Decline
Constituency
Decline
Bristol Central
-67%
Weald of Kent
-22%
Edinburgh North and Leith
-67%
Leicester East
-27%
Cities of London and Westminster
-66%
West Tyrone
-28%
Edinburgh South
-65%
Knowsley
-28%
Holborn and St Pancras
-65%
Bradford South
-29%
Edinburgh East and Musselburgh
-64%
Mid Ulster
-29%
Glasgow North
-64%
Kingston upon Hull East
-30%
Sheffield Central
-64%
Birmingham Yardley
-30%
York Central
-64%
Wolverhampton South East
-31%
Leeds Central and Headingley
-63%
Belfast West
-31%
Oxford West and Abingdon
-62%
Hartlepool
-31%
Islington South and Finsbury
-61%
Bradford East
-32%
Edinburgh West
-61%
Merthyr Tydfil and Aberdare
-32%
Wimbledon
-61%
Middlesbrough South and East Cleveland
-32%
Brighton Pavilion
-61%
Easington
-32%
Winchester
-60%
Fermanagh and South Tyrone
-32%
Bath
-60%
Birmingham Perry Barr
-33%
Edinburgh South West
-60%
Birmingham Hodge Hill and Solihull North
-33%
Cardiff South and Penarth
-60%
Blaenau Gwent and Rhymney
-33%
Nottingham East
-60%
North Durham
-33%
* Volume of cash withdrawals from LINK ATMs, 2019 vs. 2024. ATMs within the 2024 constituency boundaries used for comparison in both 2019 and 2024.
Warnings have been issued against slush ice drinks by medical researchers, saying that poor transparency around slush ice drink glycerol concentration makes estimating a safe dose tricky.
Public health advice on the safe consumption of glycerol-containing slush ice drinks, also known as slushees, may need revising, stated medical researchers after carrying out a detailed review of the medical notes of 21 children who became acutely unwell shortly after drinking one of these products.
Brightly coloured slush ice drinks are designed to appeal to children, note the researchers. Slush machines are becoming a common fixture in convenience stores as retailers are increasingly recognising the potential for increased foot traffic and profits.
The findings, published in the journal Archives of Disease in Childhood, show that in each case the child became acutely unwell with a cluster of symptoms soon after drinking a slush ice drink, which the researchers refer to as glycerol intoxication syndrome.
The clinical and biochemical features were similar in all of these children and included reduced consciousness, a sudden sharp drop in blood sugar (hypoglycaemia), and a build-up of acid in the blood (metabolic acidosis).
Such symptoms, when they occur together, can indicate poisoning or inherited metabolic disorders, prompting further investigations.
While the ingredients vary, most of those available in the UK and Ireland are ‘no added sugar’ or ‘sugar free’ products and contain glycerol (E422, also known as glycerin), they add.
Glycerol stops the ice from fully freezing, so maintaining the slush effect in the absence of a high sugar content, they explain.
With a view to informing public health policy and guidance for parents, the researchers scrutinised the medical notes of 21 children who had become acutely unwell after consuming a slush ice drink and had initially been diagnosed with hypoglycaemia after their arrival in emergency care.
According to the study, 93 per cent of the children became ill within 60 minutes while one child had a seizure.
Twenty children had documented hypoglycaemia (blood glucose 2.6 mmol/l or below); but in 13 (65 per cent) this was even lower, indicating severe hypoglycaemia.
All the children recovered quickly after initial resuscitation and stabilisation of their blood glucose and were discharged with advice to avoid slush ice drinks.
Based on some of the cases in this series, the UK Food Standards Agency recommended that young children (4 and under) shouldn’t be given slush ice drinks containing glycerol, and that those aged 10 or younger should not have more than one.
The Food Safety Authority of Ireland (FSAI) followed suit with similar guidance in 2024.
But the researchers believe that these recommendations may no longer be enough.
“There is poor transparency around slush ice drink glycerol concentration; estimating a safe dose is therefore not easy.
"It is also likely that speed and dose of ingestion, along with other aspects, such as whether the drink is consumed alongside a meal or during a fasting state, or consumed after high-intensity exercise, may be contributing factors,” they write.
“Food Standards Scotland and the FSAI suggested that 125 mg/kg of body weight per hour is the lowest dose that is associated with negative health effects.
"For a toddler this may equate to 50–220 ml of a slush ice drink. The standard size drink sold in the UK and Ireland is 500 ml,” they point out.
Given that these drinks don’t confer any nutritional or health benefits, “recommendations on their safe consumption therefore need to be weighted towards safety,” they suggest.
“To ensure safe population-level recommendations can be easily interpreted at the individual parental level, and given the variability across an age cohort of weight, we suggest that recommendations should be based on weight rather than age.
"Alternatively, the recommended age threshold may need to be higher (8 years), to ensure the dose per weight would not be exceeded, given normal population variation in weight," mentions the report.