Apple podcast looking at what is needed to increase growth

 To Get The UK Growing Again, W–Merryn Talks Money – Apple Podcasts

UK's (and Europe's) problems in a nutshell

 Anything that doesn't address the core is just tinkering:

Andrew Neil

@afneil

My monologue on today’s The Times at One

@TimesRadio

1pm, live from New York: It’s only the start of the third full day of the new Trump administration but already we can see what an economic and business threat it poses to an ailing Europe, including the UK.  And it’s about much more than tariffs. Trump aims to consolidate America’s economic supremacy with lower taxes, cheaper energy, much less regulation.  It’s worth noting that taxes in Europe and the UK are already much higher than in America, energy is much more expensive and business far more highly regulated. That explains why America has come out of the pandemic downturn far more robustly than Europe.  Trump now wants to go faster on all three fronts, so that America pulls even further ahead of Europe than it already is.  As Europe continues to stagnate, America is poised to grow more. Multi-billion dollar investments in AI and other cutting edge technologies are being announced, reinforcing America’s clear technological lead.  It’s often thought high-tech business doesn’t consume as much power as the old heavy industries. You couldn’t be more wrong.  Data centres are fierce consumers of electricity, which is why Trump wants even cheaper energy — and why Europe and the UK, which has the highest electricity costs in the world, are struggling to attract these data centres.  Heavy industry in Europe and the UK is still being hollowed out. Not enough new stuff is replacing it.  In the UK alone chemical production is down 38% in just the past three years, cement production down 40%, electrical equipment down 50%. Either they close down because energy costs mean they can’t compete or they flee across the Atlantic, where energy costs are far cheaper.  It’s happening all across Europe.  Yet nobody in Europe is doing anything about it.  Far from cutting red tape, Brussels boasts, absurdly, that the EU is a regulatory superpower. Good luck with getting rich on that.  Far from cutting taxes, almost everywhere in Europe they are being increased, even though they’re already at record levels.  And far from reducing energy prices they continue to rise as Europe puts the huge cost of going for green energy generation onto everybody’s fuel bills.  It’s a hat trick of self-harm which Trump has spotted and intends to exploit.  In Britain Keir Starmer manfully struggles against all the legal constraints on growth and development, many exploited by his legal friends who’ve grown rich on lawfare.  He’s for the builders not the blockers, he claims. Which is good news. But I’d put my money on the blockers winning.  In Davos Rachel Reeves says she’ll look again at the tax regime for non-doms now that 11,000 millionaires and multi-millionaires left Britain in the past year alone to escape her high taxes. I suspect it’s too late to woo them back.  The punk left will say good riddance to them. They don't realise it’s Britain’s tax base walking out the door. Contrary to populist belief, our revenue base is hugely dependent on high earners. The top 1% of earners account for 30% of income tax revenues. The top 0.1% pay over 10% of income tax revenues.  If they go, everybody else will have to pay more tax.  Few in Britain realise this which is why wealth-destroying policies are so popular. It’s not a mistake made here in America, which is prepared to welcome companies escaping Europe’s anti-business climate and the high-earning, tax paying wealth creators that come with them.  By the end of this decade US business will likely be more dominant than ever. And Europe, Britain included, even more of a backwater. For the moment at least, there is nothing on the horizon to change that gloomy prognosis.

Laffer Curve

 There must be a new rule that says when an article ends with a quote from the Treasury, the spokesperson knows they are defending the indefensible:

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Labour’s tax plans trigger exodus of millionaires from UK

Since the general election was called one dollar millionaire has left Britain every 45 minutes

Andrew Ellson

, Consumer Affairs Correspondent |

Tom Saunders

Friday January 17 2025, 10.00pm, The Times

Labour Party

Personal finance

Keir Starmer

Inheritance

Tax

Rachel Reeves is facing calls to reverse the Treasury’s crackdown on non-domiciled residents

JUSTIN TALLIS/AFP/GETTY IMAGES

A record number of millionaires have left Britain since Sir Keir Starmer came to power and there is growing concern that Labour’s tax plans are exiling international investors and damaging the economy.

The Treasury is facing calls to reverse its crackdown on non-domiciled residents as the scale of the exodus becomes clear.

Tax advisers also report that growing numbers of British entrepreneurs are prepared to leave the country after the tax rises announced in the autumn budget.

In total Britain lost a net 10,800 millionaires to migration last year, a 157 per cent increase on 2023, meaning it lost more wealthy residents than any other country except China. The actual number that moved out is even higher because the net figure also takes into account the millionaires who arrived in the UK.

The outflow, mainly to other European countries such as Italy and Switzerland, as well as the United Arab Emirates, was especially large among the UK’s richest residents. Some 78 centi-millionaires and 12 billionaires left the country last year.

The figures were compiled by New World Wealth, the global analytics firm, and investment migration advisors Henley & Partners, which looked at high net-worth individuals with liquid assets of more than $1 million (£821,500). They show that the exodus accelerated after the general election was called. Since that moment one dollar millionaire has left Britain every 45 minutes.

Most UK-based non-doms have moved to Switzerland, Italy and, above, the United Arab Emirates

EXTREME PHOTOGRAPHER/GETTY IMAGES

In 2023, HM Revenue & Customs said there were 74,000 non-doms in the UK, and 37,800 of them who have lived in the UK for at least seven years paid a £30,000 annual fee to keep their offshore income and gains sheltered from the taxman.

However, from April, Labour will abolish this centuries-old regime, replacing it with a much less generous residence-based system that will also subject current non-doms’ overseas assets to UK inheritance tax (IHT) for the first time.

• The jewellers and estate agents hit by wealthy quitting Britain

A survey of more than 700 non-doms or their tax advisers by Oxford Economics found that nearly two thirds are planning to leave the UK or considering doing so because of the changes. Most said the principal motivation was the introduction of IHT on their world wide assets, while many other jurisdictions do not levy the tax at all or having more generous reliefs.

Charlie Mullins, the founder of Pimlico Plumbers, has moved to Spain

The Office for Budgetary Responsibility (OBR) estimates that between 12 and 25 per cent of non-doms will go. If a quarter do leave it could have a significant impact on the economy but also indirectly tax revenues and philanthropy.

The survey found that each non-dom paid an average of £800,000 of VAT in the last tax year, and £890,000 in stamp duty over the previous five years. They have also invested an average of £118 million in the UK since arriving and given an average of £5.9 million to good causes.

‘Monumental self-harm’

The Treasury predicts that Labour’s plan to end the non-dom regime will raise £2.5 billion a year over the next five years. But Oxford Economics says the plans will in fact cost the ­exchequer nearly £1 billion a year because so many non-doms will leave — and that is before the ­impact of lower VAT receipts and other taxes is included.

David Hawkins, of Foreign Investors for Britain, a group representing non-doms, described the government’s policy as “a monumental act of national self-harm”.

He said: “It appears that decisions have been made not based on the evidence but based on ideology. It’s a real worry because more and more people are leaving. And it’s businesses, jobs, investment, spending into the economy and tax take and philanthropy that are hit.”

The group is now working with the Institute of Directors and the British Chambers of Commerce to persuade ministers of the merits of designing “an internationally competitive offer” to overseas entrepreneurs.

Growing numbers of British entrepreneurs are looking at moving abroad. Henley & Partners says it handled a record number of applications from Britons seeking alternative citizenship and overseas residency rights last year. It said demand was up 57 per cent on 2023 and a “staggering” 580 percentage points higher than five years ago.

Stuart Wakeling, Managing Partner at Henley & Partners UK, believes there are a multitude of factors influencing entrepreneurs to leave, such as the bad weather and fears over crime, but that tax remained the biggest motivation.

Christian Angermayer, the German technology entrepreneur, left Britain last year for Switzerland

ANGELA WEISS/AFP/GETTY IMAGES

“Wealthy Britons are consistently telling us that they are becoming more and more disassociated with the country of their birth,” Ferrigno said. “They are realising that although a relocation brings about a significant change and upheaval to their lives, it is a change worth making. The wealthy are also becoming more and more aware that having a plan B, or additional residence or citizenship, is vital in an ever-changing world. Having all your eggs in one basket is risky and sometimes the grass can ultimately be greener elsewhere.”

Other firms have also noted the trend. Rachel De Souza, a private client tax partner at the accountancy firm RSM UK, said the “tables had turned” since October, with demand for relocation advice being driven by non-doms before the budget but also by British entrepreneurs afterwards.

She said: “In virtually all cases, these entrepreneurs are citing the budget announcements as the reason for seeking to move.”

Charlie Mullins, the founder of Pimlico Plumbing, is one of the entrepreneurs who has already left, having recently moved to Spain.

He said: “Britain is in trouble. I’m not going to blame Labour completely, the Tories also lost the plot, but Labour have made it worse. They’ve raised taxes, and added new employment laws like getting a contract from day one. It makes it hard to run a business.”

Other high profile business names have already left or are leaving, including Asif Aziz, the British real-estate investor, who has relocated to Abu Dhabi, and Christian Angermayer, the German technology entrepreneur who quit Britain last year for Switzerland.

Alan Howard, the British hedge fund billionaire, is also reported to be exploring a move to Geneva while Nassef Sawiris, the owner of Aston Villa, is thinking of relocating to the Middle East.

Alan Howard

HOLLIE ADAMS/BLOOMBERG/GETTY IMAGES

The Adam Smith Institute estimates that by 2035, the non-dom reforms will make the economy £1.3 billion smaller than it would otherwise have been, which could lead to over 23,000 job losses by 2030.

Foreign Investors for Britain wants the Treasury to introduce a tiered tax regime that would charge non-doms a fixed fee depending on their wealth, starting at £200,000 a year for those with assets under £100 million, rising to £2 million a year for those with wealth above £500 million.

Oxford Economics believes this system would actually raise tax revenue for the Treasury.

Leslie Macleod Miller, the chief executive of Foreign Investors for Britain, described a tiered tax regime as a “compromise solution” that would “maintain the UK’s attractiveness to international investors while ensuring fair contributions to the public purse”.

“It’s not too late for the government to work with us on it,” he said.

In a statement, the Treasury said: “We are committed to tax reforms that are progressive and underpinned by fairness. It is right that those who can afford to, contribute their fair share to fix the foundations to provide stability and fund public services to drive growth.”

Seven indicators that show where we are relative to our neighbours:

 Authors

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Is the UK economy ailing? Seven charts that show it’s not that bad, actually

Many commentators paint the UK as the sick man of Europe. By most measures — from debts to growth, productivity and unemployment — it’s just not true

Feeling the chill? Shadow chancellor Mel Stride said the UK economy has been frozen out by its competitors

JUSTIN TALLIS/GETTY IMAGES

Matilda Davies

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Jim Armitage

Sunday January 19 2025, 12.01am, The Sunday Times

If you believe Mel Stride and his Conservative Party colleagues, Britain is a uniquely impoverished economy run by a uniquely incompetent chancellor. But while it has suffered at the hands of the bond market over the past fortnight (before a rally on Wednesday), is this country really “an outlier”, as the shadow chancellor claimed? How does Britain’s economy stack up against the leading nations in Europe and the US?

Professor Martin Jacob, of the IESE Business School, a German based in Spain, said: “Relative to the US and some countries in Europe, the UK is lagging behind with sluggish growth and high debts, but it’s got very similar problems to Germany and France. And like them, it really requires a policy shift that will not be popular.”

Having been brought to its knees in the sovereign debt crisis, it is now Spain that is Europe’s “poster child” economy.

We scored Britain against major European economies, the US and Sweden, as a proxy for the Nordics, to see how bad we really are.

Gilt-y as charged

It is not only Britain’s sovereign debt on which interest rates have leapt over the past two weeks; bond yields in all major economies jumped in lockstep with the US. The problem is that Britain has relatively high debt and is constrained on spending by the high price of meeting the chancellor’s fiscal rules.

• British bonds are going cheap. Maybe it’s time to buy some

Deutsche Bank economists have highlighted another key measure, the “i-g differential”, which measures the difference between the interest rates paid by a government on its debt and the growth rate of the economy. For the past three decades, Britain has been in the bottom to the middle of the G7 pack, but now finds itself at the very top, Deutsche says. To return to the norm, Reeves must either take unpopular fiscal actions to get the debt down, or grow the economy.

Not the daddy of debt

The UK is far from alone in running up debts. Indeed, data from the International Monetary Fund (IMF) shows that Spain, France, Italy and the US all have higher levels of debt, compared to the size of their economy. The UK’s debt-to-GDP ratio has risen in lockstep with that of the US for two decades.

It’s a similar picture with the budget deficit. France and Italy are both in breach of the EU’s demands that members must not allow their deficit to get bigger than 3 per cent of their GDP. Germany and Sweden, both traditionally wary of running up debts, are outliers in the healthiness of their bank balances.

Rough trade

Measured by its current account deficit — the difference between what it imports and exports — the UK is not looking so pretty. For a long time, it been a net importer of energy, food and other goods, unlike the manufacturing powerhouse of, say, Germany at the other end of the scale. Remainers argue that Brexit has not helped here.

Deutsche Bank points out that higher global energy prices at the start of the year will add further pressure, and the IMF expects Britain to remain at the bottom of the pack for the foreseeable future.

Beating Germany

Britain’s economic growth is pretty much flat, with only 0.1 per cent expansion in November. While that’s far from good, it’s not the worst in the G7 by any means. As Professor Jacob said: “Britain is far from alone in struggling with its budget — at least the economy is growing faster than in Germany, where they have just had two years of recession.”

Due to high energy prices and falling demand in China for its cars and other manufactured goods, the German economy is startlingly weak. Spain, in contrast, is growing rapidly, with strong growth in tourism on its coasts, manufacturing in the north, and financial services in Madrid, which Jacob said had taken market share from the UK since Brexit. Spain’s property and construction sectors are also robust.

Job winner

Britain has one of the lowest rates of unemployment — a definite success story relative to its peers. Michael McMahon, professor of economics at Oxford University, said Britain has halved its jobless rate since the financial crisis, adding that wages in real terms have also grown recently. Like Germany and the US, a bigger problem has been finding new recruits to fill jobs.

Spain has the highest unemployment, which seems to be at odds with its rapid growth. Some economists argue that this belies the true picture in a country where many people work “off the books”. Immigration from Latin America is fuelling the workforce as people from the continent try their luck in a country connected by language and culture.

Germany, meanwhile, has struggled to attract skilled migrants due to the language barrier — a factor that some fear will become a big headache as the country’s ageing workforce retires.

Productivity in line

Britain beats itself up about its poor productivity record since the financial crisis, but it ranks broadly in line with the G7, albeit lagging France, Germany and the US for output per hour. Britain’s service-based economy should put it ahead of countries such as France, where there is more manufacturing and agriculture. But while Britain’s record improved dramatically as it moved from an industrial economy to services, it has failed to keep up the pace.

• Could higher employment costs shock firms into raising productivity?

Weak business confidence, and a resulting lack of appetite for risk taking, has led to a big drop in the amount invested by UK firms in their operations.

Some hope that Labour’s moves to make employing people more expensive and inflexible will drive firms to invest in automation, while cutting City red tape could help, too.

Fuel for inflation

Inflation in the UK was among the worst during the grimmest days in the aftermath of Covid, but it has since come back under control to be towards the bottom of our comparator group. Broadly, Britain has been in the middle of the G7 pack since the Bank of England was given its independence in 1997.

• Lower than expected inflation raises hopes of interest rate cuts

That said, Britain’s electricity costs, both for consumers and companies, are extremely high. Numerous factors, particularly our reliance on imported gas and less generous subsidies, add to the price. Industrial companies using a lot of energy cite this as a key reason why the UK is not seen as an attractive place to situate their plants. Electricity is also priced according to the price of natural gas, meaning that Britain’s success in building cheap renewable energy generation is not entirely reflected in bills.