Aneesh's Economic Insights Archive:

Introduction

Here are some useful application points that I may want to refer back to nearer my exams. I have taken these from the Deloitte Monday Briefing where Ian Stewart explains what is going on in the economy for the week and other sources such as the FT and the Economists, and sometimes even what my best friend, Danny, tells me on the walk to school each morning.

March 3rd:

Gold:

The twenty-first century has been good for gold, with its price having risen tenfold from the lows seen around the millennium. Interest rates remain high compared to most of the last 15 years, meaning holders of gold miss out on significant interest income.

Gold yields no income and incurs costs for safe storage. It also has limited practical use, with only about 10% of gold production being used in industry, mainly in electronics and medical applications. Though gold has served as a medium of exchange since ancient times, by 1924, John Maynard Keynes famously dubbed it "a barbarous relic." Today, gold no longer underpins the value of major world currencies as it did in Keynes’ era, but it continues to have strong advocates. JP Morgan, arguably the most important banker of the last century, put it succinctly: “Gold is money, everything else is credit.”

Gold has long been seen as a hedge against uncertainty and inflation. These factors seem to explain its recent price surge. As one source of uncertainty fades, another emerges—from the pandemic to conflicts in Ukraine and the Middle East, to today’s tectonic shifts in US foreign and trade policy. Gold has benefited from concerns about tariffs and protectionism. Lingering fears of inflation, coupled with memories of the inflationary shock of 2022-23, have also played a role in boosting its appeal.

Demand for gold has not only come from private investors. Since 2022, central banks have also increased their gold holdings, motivated at least in part by a desire to diversify away from the US dollar.

Economic and Market Updates

Former US President Donald Trump stated that the US is working on a trade deal with the UK, potentially avoiding import tariffs on UK goods. However, he also threatened to impose 25% tariffs on EU imports and an additional 10% tariff on Chinese imports.

In the UK, house prices rose for the sixth consecutive month in February, increasing by 0.4% according to Nationwide. Meanwhile, the number of young people in the UK not in employment, education, or training reached a ten-year high of 987,000 in the final quarter of 2024.

The total economic value of the UK’s net-zero economy grew by more than 10% in 2024, according to the Confederation of British Industry. However, the UK’s domestic energy price cap will increase by 6.4% from April to £1,849, driven by rising wholesale gas prices.

Apple announced plans to create 20,000 additional jobs in the US and invest at least $500 billion over the next four years. Meanwhile, BP announced a 20% increase in oil and gas investment and a 70% reduction in spending on renewables as part of a "fundamental reset" of its strategy.

The UK government stated that BMW remains committed to future UK investment, despite the company’s decision to delay a £600 million investment in its Mini factory in Oxford. 

March 10th:

A review of the Draghi report with the current European Economy in mind:

• Global defence spending is increasing; the Economist believes that military spending will need to rise from an EU average of 1.8% of GDP to between 4%-5%. Last week’s announcements from Germany and EU leaders suggest that much of this spending will be financed with debt.

• Geopolitical tensions are leading to greater protectionism, a development that is especially threatening for the export-dependent member states of the EU. Trade accounts for 55% of euro area GDP. Comparable figures for China are 37% and for the US 25%.

• Mario Draghi: former European Central Bank President and one of Europe's great economic minds, was tasked by the European Commission last year to prepare a report of his personal vision on the future of European competitiveness.

• The Draghi report included how the EU should be willing to tackle unfair competition with tariffs and other trade measures and by supporting domestic industries, as the US has, through subsidies and tax breaks. The report recommends that the EU implement the Critical Raw Materials Act rapidly, with the aim of diversifying supply chains, increasing domestic investment in critical technologies such as semiconductors and creating a platform for joint procurement and strategic stockpiling.

• Draghi and Innovation/productivity: Europe lags behind US and China in fast-growing sectors like AI and clean tech, leading to poor productivity growth. Europe's industrial structure is static, with few new companies disrupting industries, contributing to a lack of large, innovative firms. For example, no EU company with a market cap over €100bn has been created in the past 50 years, while the US has six companies with a valuation above €1tn.

• Energy costs: European firms face much higher energy costs than US firms, with natural gas and electricity prices significantly more expensive. The EU's reliance on imported fossil fuels and the switch to costlier liquefied natural gas post-Ukraine invasion have worsened this. High energy taxes also further increase costs, leading some energy-intensive industries to relocate to the US. There is a podcast that also explains how UK energy companies charge electricity based on the more expensive sources (coal/oil and gas) rather than cheaper sources which furthers this problem.

Economics:

• FTSE 100 equity index ended the week down 1.5% at 8,679, its worst week this year, amid global uncertainty from US trade policy announcements.

• US initially imposed 25% tariffs on imports from Canada and Mexico, as well as additional tariffs on China. Donald Trump subsequently granted a one-month extension from import duties for goods from Canada and Mexico that met the rules of the 2020 free trade agreement. Retaliatory tariffs have been imposed on China, Canada and Mexico announced tariffs and other measures against US imports in response to the tariffs

• The European Central Bank cut interest rates by 0.25 percentage points to 2.5%, in line with expectations. The ECB said, “the disinflation process is well on track”

• Rachel Reeves submitted government spending plans to the Office for Budget Responsibility which included public spending cuts, the FT reports, as higher borrowing costs and lower than expected UK growth have reduced the fiscal headroom from last October’s budget

• The proportion of small UK businesses accessing finance declined in 2024 compared with the previous year, as investors cited risk aversion and the high costs of credit for the lack of investment, according to the British Business Bank

• UK house prices fell 0.1% between January and February this year, according to Halifax, as strong demand ahead of stamp duty increases in April softened slightly

• Oil prices fell following the announcement that Opec+ countries would gradually increase oil production from April as planned

• The UK’s Payment Systems Regulator announced plans to tackle a lack of competition in the card payments market. There is a nice Instagram reel about Visa and Mastercard’s anticompetitive means and how they have effectively monopolised the credit card industry.

• Healthcare insurance company Bupa announced a 10m increase in customers globally to 60.5m in 2024, leading to a 16% rise in revenues

• Energy company BP cancelled plans to build a green hydrogen plant in the UK as it shifts away from renewable energy

• The FT reports that a record number of senior lawyers have moved jobs in London so far this year in a sign of the buoyancy of the market for legal services

March 17th:

UK economy:

 

• GDP unexpectedly contracted by 0.1% in January, following growth of 0.4% in December, according to official figures. The decline was mainly due to falling industrial production while the service sector expanded (marginally, 0.1% increase) 
• Keir Starmer's decision to abolish NHS England and integrate it directly into the health department. This free-market supply side policy aims to reduce bureaucracy and improve efficiency within the NHS, hopefully enhancing the productivity of public services. By cutting unnecessary layers of management, this policy seeks to free up resources, enabling a more effective use of funds to improve patient care and reduce waiting lists. I personally liked this policy, and hope these reforms streamline operations and boost efficiency.
• The labor government plans to cut welfare spending by over £6 billion through stricter eligibility rules for Personal Independence Payments, freezing some disability benefits in 2026, and adjusting Universal Credit calculations. While officials argue these reforms promote fiscal responsibility, critics warn they could worsen hardship for vulnerable groups, especially as UK welfare generosity ranks among the lowest in the OECD, with the poorest UK households worse off than those in Slovenia and Malta, according to a report by the National Institute of Economic and Social Research 
• Another supply side policy implemented by government is the Planning and Infrastructure bill, aimed to reduce regulatory and planning burden for housebuilding and infrastructure projects.

• The FCA's proposal to “name and shame” companies under investigation earlier aims to increase market transparency and deterrence but faces criticism for potentially harming UK competitiveness, as 65% of cases close without action. Critics argue this move contradicts the legal principle of "innocent until proven guilty," and “risks damaging firms” reputations, and could drive business away from the UK financial sector. I believe this proposal may reflect regulatory capture; the FCA may be influenced by industry pressure to prioritise business interests over the effectiveness of regulatory enforcement, potentially undermining market stability and fairness.
• The Economist published an eye-opening article; the gender wage gap persists in OECD countries despite decades of anti-discrimination laws, with cultural factors like childcare responsibilities and workplace norms contributing to women earning less than men. High childcare costs and rigid work cultures in some countries discourage women from pursuing or remaining in high-paying roles, particularly in fields like technology and finance. While efforts to close the gap continue, structural barriers such as workplace biases, social expectations, and career pipeline issues make progress
• Has privatisation of the water industry been successful? Since 1989, bills have risen significantly while companies have paid £72bn in dividends, despite issues like raw sewage discharge and underinvestment. Water is a public good, with its marginal social benefit far exceeding the private cost, leading to inefficiencies such as underinvestment and pollution. Privatisation, meant to improve efficiency, has instead caused rising debt, higher consumer costs, and a lack of competition, with foreign companies profiting while service quality worsens. This situation highlights the need for stronger government intervention and raises the question of whether renationalization is the solution.
• The Lower Thames Crossing, a proposed 14-mile road and tunnel connecting Kent and Essex, has already incurred over £1.2 billion in costs before construction has begun, covering expenses such as planning, consultations, environmental assessments, and legal fees. The total projected cost of the project is estimated between £9.2 billion and £10.2 billion, depending on financing methods. The Treasury is considering a "regulated asset base" (RAB) model, involving private investors financing the project and recouping costs through road toll revenues over time, though this approach would require new legislation and regulatory oversight. It’s a shame, and our “amazing service-sector” economy is, in effect, cannibalising itself.
• On the topic of the Thames, Thames Water, the UK’s largest water supplier, has been granted a £3 billion rescue loan to address financial instability and nearly £20 billion in debt. Criticized for underinvestment, it has faced issues like outdated equipment and sewage contamination. The loan approval is crucial for restructuring and infrastructure upgrades. This is a clear example of a natural monopoly; Thames Water dominates due to high infrastructure costs and economies of scale, making competition impractical and requiring government regulation.
• For the football fans, Manchester United has announced plans to build a new 100,000-seat stadium adjacent to the current Old Trafford site, aiming to create the "world's greatest football stadium" and surpassing Wembley Stadium's 90,000 capacity. The project, estimated to cost around £2 billion, is part of a broader regeneration scheme for the Trafford Park area, supported by the UK government, and is expected to boost the economy by £7.3 billion and create 92,000 jobs(nice example of the multiplier effect). Construction is anticipated to begin this year, with completion targeted by the 2030-31 season, reflecting the club's commitment to providing state-of-the-art facilities for fans and players alike
• For those interested in degree apprenticeships at PwC, there may be bad news. The big four firm squeezes on junior recruitment to protect its annual profit pool of close to £1mn per partner, which has been hit by a sharp post-pandemic slowdown in demand across the consulting sector. The firm has offered a “flying start” technology apprenticeship since 2018, alongside others, but its website says the scheme is “not currently accepting applications”. Sad to see as the four-year scheme allows apprentices to gain work experience alongside a degree funded by PwC, which was one of the UK’s top 10 apprenticeship employers in 2023.

 

The Global economy:

 

• Trump’s 25% tariffs on steel and aluminium led to immediate EU retaliation; the European Commission said their measures would affect up to €26bn of American goods. Tariffs contradict Ricardo’s theory of comparative advantage, which argues that free trade allows countries to specialize in what they produce most efficiently.
• Tariffs, market volatility, and political uncertainty are weakening consumer “Animal spirits”(a key component of consumption) in America as inflation and recession fears rise. Shoppers are cutting back on spending, reflecting the declining sentiment amid Trump’s trade policies and economic instability. This is the lowest point since 2022, with the University of Michigan's index dropping to 57.9 in March 2025.
• The FT reported that more than 200 major US corporates have reduced references to DEI (Diversity, equity and inclusion)and related terms such as ‘diversity’ in their annual reports, perhaps Trump’s blaming on DEI causing inflation, towards late Jan, really had its toll on the economy. 
• BMW reported a 36% fall in profits in 2024, following weak Chinese demand, and warned that earnings are expected to remain at similar levels this year due to European and US tariffs 
• Japan’s government discovered something unsettling in its most recent survey of national eating habits. Adults in this wealthy, healthy country were now eating the smallest daily volume of vegetables since 2001.Why? Inflation. At the beginning of March, prices of the three key ingredients of Japanese hotpot (cabbage, leek, and carrots) were respectively 227, 167 and 140 per cent above their long-term average. Clearly, as the price of vegetables rises, consumers view the opportunity cost of maintaining a healthy diet as less favourable compared to spending on other priorities. 
• Virgin Media O2 said it will spend £700m on improving the speed and reliability of its network, amid the recent competitive threat from merger of rivals Vodafone and 3. 
• Germany’s incoming chancellor Friedrich Merz has agreed a deal with the Green party for increased public borrowing to boost infrastructure and defence spending 
• A poll of economists found that Germany could increase public debt from 63% to 86% of GDP, equivalent to nearly €2tn, without damaging future growth amid recent announcements to boost defence and infrastructure spending 
• More than half of the global greenhouse gas emissions in 2023 were linked to 36 energy companies and cement producers, according to the Carbon Majors database, with state-owned companies comprising 16 of the top 20 emitters 

 

 

March 24th:

 

 

UK ECONOMY: 

 

The OECD(Organisation for Economic Co-operation and Development) cuts UK growth forecasts as Rachel Reeves struggles with her weak economy: the Paris based body’s new expectations lie 0.3 percentages points from its previous calculations at 1.4%. The main factors affecting the report included Trump’s tariffs and weakness in manufacturing.

 

Rachel Reeves is planning a new, multibillion-pound public spending squeeze in this week’s Spring Statement, following the announcement on Tuesday(18th) of £5bn in welfare cuts. I personally liked this of cutting welfare payments to create greater incentives, however, I also believe that the burden should not have to lie on the shoulders of the disabled and vulnerable families. Although, it could also be argued the £1bn investment in “back to work” programmes may help address the problem of the projected 3.6MILLION (roughly 1 in 12) working aged people by 2030. 

 

The Bank of England maintained interest rates at 4.5%, as expected, as it continues its “gradual and careful approach” to reducing rates. Markets expect the Bank to reduce interest rates to 4% by the end of 2025. The expectation is an example of “forward guidance” where the central bank aims to minimise uncertainty(Animal spirits, consumption, investment, AD etc.)

 

Taxation is a key source of income for governments. Increasing taxes, should bring greater short-term income, yet in the long run poses many difficulties, especially concerning investment. Last week, Drugmakers warned that Higher medicine sales tax makes UK ‘uninvestable’. Pharmaceutical companies would like the tax to be closer to the rates in other European countries, from 22.9% which are around 6-9 per cent.

 

The pound rose above $1.30 for the first time since November last year. Strong pound: exports decrease and imports increase(causing an increase in our £1.9 billion trade deficit)

 

Annual UK wage growth remained steady at 5.9% in the three months to January. With inflation falling to 3.4% in February, this is a good sign and lifts off some pressure from households.

UK consumer confidence unexpectedly improved in March, but remains in a “fragile” state, according to GfK who compile the index.

 

Heathrow Airport was shut down last Friday amid a power outage that caused significant travel disruption. Many carriers had to cancel flights, leading to stranded passengers and logistical challenges

 

Sports broadcasters, including ITV and BBC, have been fined over £4m by the UK’s Competition and Markets Authority regarding collusion over the pay of freelance workers

 

 

GLOBAL ECONOMY:

 

Nvidia is to spend hundreds of billions on US supply chain. The huge spending projection follows multibillion-dollar US investment plans announced by other technology companies including Apple, as the impact of Trump’s “America First” trade policies. Trump’s Tariffs clearly are not in line with Ricardo’s theory of comparative advantage, yet I see this as strategic in boosting US competitiveness

 

US tech giant Oracle announced plans to invest $5 billion in the UK over the next five years, focusing on cloud services infrastructure. This moves underscores confidence in the UK’s digital economy and could strengthen its position as a hub for cloud computing.

 

Google acquired Wiz for $32 billion to strengthens its position in the cloud services market, particularly in cloud security, to enhances its ability to compete with Amazon Web Services and Microsoft Azure. This is a good example of how firms in an oligopoly use strategic investments to increase market share, enhance efficiency, and maintain competitive advantage; crucial for maximizing profits and achieving economies of scale.

 

 

INTERESTING WIDER READING:

 

This week, I came across economist Gary Stevenson, whose career shift was inspiring. Once a successful trader earning handsome profits, he left the trading floor to join a think tank focused on reducing inequality. After an unsatisfactory volunteer placement, where he quickly realized those benefiting the most from inequality itself, were the ones that had the power to shape policy. Gary then pivoted to YouTube and aimed to appeal to the masses. For a deeper look at his perspective, have a look at his channel: Gary Stevenson Channel

 

I’d also recommend listening to the podcast “Economics explained”(can be found on Spotify and YouTube). Their recent podcast on the "Revenge of the BRICS" video explored how Brazil, Russia, India, China, and South Africa are increasingly challenging Western economic dominance by exploring alternative financial systems and trade agreements, a very interesting listen Economics Explained Channel

 

 

CASE STUDY OF THE WEEK- The Oil Crisis of 1973 and 1979:

 

The Oil Crises of 1973 and 1979 are nice examples to potentially mention of negative supply-side shocks which triggered cost-push inflation, stagflation(counter argument to the PC?), and contractions in real GDP. The 1973 crisis, driven by the OAPEC embargo following the Yom Kippur War, saw oil prices quadruple. Given oil’s derived demand (its consumption is driven by the need for goods and services such as transportation, manufacturing, and power generation) and its relatively inelastic supply(/demand), the resulting cost increases pushed inflation above 20% and led to measures such as the UK's three-day work week. The 1979 crisis was caused by the Iranian Revolution, and reignited(like what I did there?) inflationary pressures, exacerbating unemployment and challenged the effectiveness of monetary policy. Both crises highlighted the limitations of demand management policies in response to supply shocks and emphasise the macroeconomic risks of energy dependency.

March 31st:

 

Good morning,

 

This week has brought significant updates on both the UK and global economies. The Spring Statement has been the main focus in the UK, and I’ve linked my blog post for those interested in a more detailed analysis(so it doesn’t take over the whole email). With the Year 13 practice mock exam coming up, I’ve decided to focus more on A-level topics this week. I hope that this is found useful.

 

UK Economy:

 

• On Wednesday, we saw the Rachel Reeves unveil the spring statement; a mini budget to provide an update on the Uk’s economic performance and public finances. Defence spending will be increased to 2.5% of GDP by 2027(Trump’s tariffs and geopolitical instability), £13bn will be allocated to capital infrastructure with a construction skills plan to train up to 60,000 workers(reduces occupational mobility of labour), and investing £2bn into social and affordable housing. A really nice example, of an interventionist supply side policy with forecasts of the housing plans to add £6.8bn to the economy by 2029(multiplier effect). For a more in depth analysis of the statement, have a look at my blog post.
• Ministers have quietly cut England’s road building and repair budget for the coming year, with a £4.8bn funding pot for major highways being around 5 per cent lower than the current allocation(fiscal contraction and public good).
• HSBC decided to terminate investment bankers just before their bonuses were due; a cruel cost-cutting strategy under CEO Georges Elhedery.
• The UK National Living Wage is going up from £11.44 an hour to £12.21, with the government claiming the increase was worth £1,400 a year for an eligible full time worker
• UK inflation fell by more than expected in February, driven by a drop in clothing and shoe(shoe and leather costs…) prices due to an unusually high number of sales. Inflation decreased to 2.8%, down from a rate of 3% in January(ONS)
• FTSE 100 Index dropped approximately 0.5% following the tariff announcements. Major companies like BP and Shell experienced significant declines, reflecting broader market apprehension

 

Global Economy:

 

• Over the last week, Trump has escalated his trade policies by announcing a new wave of tariffs set to take effect on April 2, dubbed "Liberation Day", targeting industries such as automotive, pharmaceuticals, and steel, with rates potentially reaching 20%. These tariffs are concerning for economists and business leaders, who warn of higher consumer prices, disrupted supply chains, and potential retaliatory measures from key trading partners, including the UK, where Starmer hinted at possible counteractions to protect British industries.
• Germany's substantial borrowing for military and infrastructure investments has led to a significant rise in 10-year Bund yields, nearing 3%. This is a problem for This increase is impacting other EU countries, such as France and Italy, by potentially complicating their financial stability and efforts to boost defence spending. In a way, this links to crowding out but instead of borrowing affecting private investment, this case sees affecting other country’s ability to borrow instead
• OPEC(Organisation of the Petroleum Exporting Countries) has announced intentions to gradually unwind its voluntary production cuts starting April 1, 2025, aiming to boost oil output by 2.2 million barrels per day by September 2026(buffer stocks, keep prices less volatile)

 

 

Interesting Wider Reading:

 

• This week, I finally got around to finishing Fool’s Gold by Gillian Tett. The book initially explores how JP Morgan’s bankers had pioneered credit derivatives, which were meant to reduce risk(irony) but ultimately contributed to the 2008 financial crisis. Banks used securitisation to package risky subprime mortgages into collateralized debt obligations (CDOs), creating a moral hazard that encouraged excessive risky lending(which was not helped by credit agencies). The rise of credit default swaps (CDS) gave investors a false sense of security, while asymmetric information in the shadow banking system led to mispricing of risk. Halfway through the book, I came across David Li’s Gaussian Copula model, which was developed to as the WSJ put it “weigh a bag of apples and predict the likelihood of them rotting”. I hope to look into how it actually worked more, in the future. When Lehman Brothers collapsed, systemic risk spread through the financial system, causing a liquidity crisis that froze credit markets. Tett showed how the crisis exposed the failure of regulatory oversight and highlighted the dangers of underregulated financial innovation and excessive leverage.
• For those interested in the recovery post crisis, I have added a presentation that one might find useful(Austerity vs stimulus).

 

 

Case Study of the Week- The Collapse of the Soviet Union (1991):

 

• The collapse of the Union in 1991 marked the transition from a centrally planned economy to a market based(capitalist) system. One of the key reforms was the privatisation of state owned enterprises, where assets were sold to private individuals, leading to the rise of oligarchs and increased inequality. Privatisation, while controversial, led to higher productivity and efficiency, as private ownership incentivised firms to reduce costs and maximize profits, resulting in GDP growth of around 10% in Russia during the late 1990s. This shift to a market economy increased competition and innovation, promoting allocative efficiency, as resources were reallocated to more productive uses. However, we also saw the process also created market failures, such as monopolies, and led to economic instability in some regions, hindering stable and sustainable growth.

 

 

April 7th:

Good morning,

 

This week there has been a great focus on “liberation day” where President Trump announced “Retaliatory” tariffs. These have brought significant updates on both the UK and global economies, with a crazy $5.4 trillion lost from US stock markets in two days following his announcement. I will be on DoFe at the time this email will be sent and am writing this on Saturday, so forgive me, if the global economy slips into a recession and I have not covered it in this email. I’ve made sure to add other economic events which I hope is found useful.

 

 

UK Economy:

 

• Wednesday 9pm BST, multiple channels were covering the same thing: President Trump's "liberation" day, in which he announces a bunch of tariffs with hopes to "make America great again". In this blog post, I explored the cause behind these new tariffs, and the consequences they may have on the global economy. I looked at these Tariffs from the UK's perspective and used economic reasoning to explain points which I believed might be useful for exams. This was interesting to write and a very relevant topic in summer exams, so do have a look.
• Shell announced plans to cut spending on low carbon project by up to one third and increase its gas sales in a bit to boost profitability (short-term profit maximisation strategy, prioritising higher marginal revenue products over long-term investment in sustainability)
• The Property developer company Segro announced plans for a £1bn data centre in the UK as part of a joint venture with digital infrastructure organisation Pure Data Centres to support the rapid growth of AI (LRAS shifts outwards, PPF on the UK economy expands)
• International technology firm Vishay Inertechnology announced plans to invest £250m in developing the UK’s largest semiconductor manufacturing facility. This is an example of inward foreign direct investment (FDI) productivity boost.
• Co-op announced more than £70m of investment to lower prices to match those of rival Aldi. This made me think of a really nice introduction to PE video, which explains how Morrisons struggled with the rise of PE.
• A personal opinion about the national living wage. The recent 6.7% rise in the National Living Wage has further reduced low pay in the UK, with the proportion of low-paid workers falling from one in ten to one in twenty-nine. However, it has not improved productivity and may have increased work intensity, contributing to higher sickness rates and early retirement among workers. For a more depth study of problems of raising the NLW, have a look at this link.

 

Global Economy:

 

• Tesla reported falling sales in Europe for the second consecutive month in February, amid increasing competition from Chinese rivals
• Retail investors have invested $67bn in US stocks so far this year, according to data provider VandaTrack, even as professional fund managers reduce their US equity exposure amid recent economic uncertainty
• American inflation expectations over the next 12 months increased sharply to 5%. Not sure if we need to know this, but inflation expectations can be displayed using the EAPC(expectation augmented Phillips curve), which shows what the relationship between inflation and unemployment is like, if expectations of inflation are high/low.
• US consumer confidence fell for the third consecutive month to its lowest level since February 2021, according to the Conference Board, amid fears of a slowdown of the US economy
• The German business climate improved in March, with a noticeable improvement in business expectations, according to the influential ifo survey. The ifo Institute commented “German businesses are hoping for a recovery”
• If wanting to talk about geopolitics effecting economics, Trump said he is "very angry" and "pissed off" with Putin after weeks of attempting to negotiate a ceasefire in Ukraine. Trump said he was angry with Putin for attacking Ukrainian President’s credibility, and threatened to impose tariffs on countries buying Russian oil if Putin does not agree to a ceasefire.

 

Interesting Wider Reading:

 

• I came across an interesting post on our economics department channel about how firms like Coca Cola stay as monopolies and outperform their competitors. Here is a brief summary. Firms with monopoly power often create strong barriers to entry using various strategies, and one of Coca-Cola's key tactics is product line extensions. By offering multiple variations(Diet Coke, Zero Sugar, and Cherry Coke), the company can target a wider range of consumer preferences, including those seeking healthier options or unique flavors. This strategy capitalises on Coca Cola’s strong brand recognition, making it easier to introduce new products and gain consumer acceptance. Additionally, it helps Coca-Cola maximize shelf space, increasing visibility and market share while maintaining relevance in a competitive market. By catering to niche markets, such as those preferring fruit-flavored cola, Coca-Cola further strengthens its position. In contrast, Pepsi has struggled to match this approach which is why they have not been successful, and are losing their market share.
• These strategies made me think of my recent trip to the apple store. When I(my parents) bought my iPhone 15, I now realise how Apple's product line extensions made the decision easier. With models like the iPhone 15, Pro, and Pro Max, Apple essentially caters to different budgets and needs(affordable option vs latest features). The strong brand recognition made me confident in my choice, similar to how Coca-Cola uses product variations to appeal to a wider range of consumers. This strategy helps both brands maintain their dominance by offering something for everyone.
• Theres a nice video I watched a few days ago about monopiles by How Money Works, a nice channel to follow.

 

Case study of the week- The collapse of the Soviet Union(1991):

 

Soviet Union’s centrally planned(command) economy time ended and transitioned towards a capitalist model through rapid price liberalisation and shock therapy reforms. Key points to include:

• Over 15 independent nation-states were created following the collapse.
• Russia’s real GDP contracted by around 40% between 1991 and 1998.
• Inflation surged to over 2,500% in 1992, reflecting hyperinflation caused by sudden removal of price controls.
• Approximately 70% of state-owned enterprises underwent privatisation, often through controversial voucher schemes.
• Massive capital flight occurred, as investors and citizens moved assets abroad amid economic instability.
• Foreign Direct Investment initially remained low but gradually increased as economies stabilised and integrated into global markets

 

 

April 14th

This week there has been a great focus on “liberation day” where President Trump announced “Retaliatory” tariffs. These have brought significant updates on both the UK and global economies, with a crazy $5.4 trillion lost from US stock markets in two days following his announcement. I will be on DoFe at the time this email will be sent and am writing this on Saturday, so forgive me, if the global economy slips into a recession and I have not covered it in this email. I’ve made sure to add other economic events which I hope is found useful.

 

 

UK Economy:

 

• Wednesday 9pm BST, multiple channels were covering the same thing: President Trump's "liberation" day, in which he announces a bunch of tariffs with hopes to "make America great again". In this blog post, I explored the cause behind these new tariffs, and the consequences they may have on the global economy. I looked at these Tariffs from the UK's perspective and used economic reasoning to explain points which I believed might be useful for exams. This was interesting to write and a very relevant topic in summer exams, so do have a look.
• Shell announced plans to cut spending on low carbon project by up to one third and increase its gas sales in a bit to boost profitability (short-term profit maximisation strategy, prioritising higher marginal revenue products over long-term investment in sustainability)
• The Property developer company Segro announced plans for a £1bn data centre in the UK as part of a joint venture with digital infrastructure organisation Pure Data Centres to support the rapid growth of AI (LRAS shifts outwards, PPF on the UK economy expands)
• International technology firm Vishay Inertechnology announced plans to invest £250m in developing the UK’s largest semiconductor manufacturing facility. This is an example of inward foreign direct investment (FDI) productivity boost.
• Co-op announced more than £70m of investment to lower prices to match those of rival Aldi. This made me think of a really nice introduction to PE video, which explains how Morrisons struggled with the rise of PE.
• A personal opinion about the national living wage. The recent 6.7% rise in the National Living Wage has further reduced low pay in the UK, with the proportion of low-paid workers falling from one in ten to one in twenty-nine. However, it has not improved productivity and may have increased work intensity, contributing to higher sickness rates and early retirement among workers. For a more depth study of problems of raising the NLW, have a look at this link.

 

Global Economy:

 

• Tesla reported falling sales in Europe for the second consecutive month in February, amid increasing competition from Chinese rivals
• Retail investors have invested $67bn in US stocks so far this year, according to data provider VandaTrack, even as professional fund managers reduce their US equity exposure amid recent economic uncertainty
• American inflation expectations over the next 12 months increased sharply to 5%. Not sure if we need to know this, but inflation expectations can be displayed using the EAPC(expectation augmented Phillips curve), which shows what the relationship between inflation and unemployment is like, if expectations of inflation are high/low.
• US consumer confidence fell for the third consecutive month to its lowest level since February 2021, according to the Conference Board, amid fears of a slowdown of the US economy
• The German business climate improved in March, with a noticeable improvement in business expectations, according to the influential ifo survey. The ifo Institute commented “German businesses are hoping for a recovery”
• If wanting to talk about geopolitics effecting economics, Trump said he is "very angry" and "pissed off" with Putin after weeks of attempting to negotiate a ceasefire in Ukraine. Trump said he was angry with Putin for attacking Ukrainian President’s credibility, and threatened to impose tariffs on countries buying Russian oil if Putin does not agree to a ceasefire.

 

Interesting Wider Reading:

 

• I came across an interesting post on our economics department channel about how firms like Coca Cola stay as monopolies and outperform their competitors. Here is a brief summary. Firms with monopoly power often create strong barriers to entry using various strategies, and one of Coca-Cola's key tactics is product line extensions. By offering multiple variations(Diet Coke, Zero Sugar, and Cherry Coke), the company can target a wider range of consumer preferences, including those seeking healthier options or unique flavors. This strategy capitalises on Coca Cola’s strong brand recognition, making it easier to introduce new products and gain consumer acceptance. Additionally, it helps Coca-Cola maximize shelf space, increasing visibility and market share while maintaining relevance in a competitive market. By catering to niche markets, such as those preferring fruit-flavored cola, Coca-Cola further strengthens its position. In contrast, Pepsi has struggled to match this approach which is why they have not been successful, and are losing their market share.
• These strategies made me think of my recent trip to the apple store. When I(my parents) bought my iPhone 15, I now realise how Apple's product line extensions made the decision easier. With models like the iPhone 15, Pro, and Pro Max, Apple essentially caters to different budgets and needs(affordable option vs latest features). The strong brand recognition made me confident in my choice, similar to how Coca-Cola uses product variations to appeal to a wider range of consumers. This strategy helps both brands maintain their dominance by offering something for everyone.
• Theres a nice video I watched a few days ago about monopiles by How Money Works, a nice channel to follow.

 

Case study of the week- The collapse of the Soviet Union(1991):

 

Soviet Union’s centrally planned(command) economy time ended and transitioned towards a capitalist model through rapid price liberalisation and shock therapy reforms. Key points to include:

• Over 15 independent nation-states were created following the collapse.
• Russia’s real GDP contracted by around 40% between 1991 and 1998.
• Inflation surged to over 2,500% in 1992, reflecting hyperinflation caused by sudden removal of price controls.
• Approximately 70% of state-owned enterprises underwent privatisation, often through controversial voucher schemes.
• Massive capital flight occurred, as investors and citizens moved assets abroad amid economic instability.
• Foreign Direct Investment initially remained low but gradually increased as economies stabilised and integrated into global markets

 

April 21st:

As we get closer to exam season, I’ve tried focusing this week’s edition on something that’s been dominating the headlines again: Trump’s tariffs. Honestly, it shouldn’t be a surprise, every time I scroll through the FT or other major sources, it feels like all they’re talking about is America and trade tensions. But don’t worry too much if the topic doesn’t seem appealing, as I’ve mentioned other things too.

 

 

UK Economy:

 

• Following on from last week, UK officials have begun to work on trying to find a buyer for British Steel; keen to attract private sector investment Increased innovation, efficiency, and productivity through profit motives
• Employment fell 0.3% over the last month, while national minimum wage rose (Cost of production increases, cos-push inflation, or even an inflationary wage spiral…)
• The Cabinet Office said that nearly one-third of staff(around 2,100 people) would be cut or moved to another department amid wider government plans to boost public sector efficiency
• The most recent ONS survey stated UK Gini wealth coefficient 0.59(0 perfect equality, 1 perfect inequality). The wealthiest 1% owns as much as the bottom 50% combined.
• Reeves is visiting Washington to push for free trade and press the US to cut 25% tariffs on UK car and steel exports. She will be meeting Scott Bessent(US Treasury Secretary) and argue that any trade deal must serve Britain's national interest, while resisting US demands to relax food safety standards.
• Asda has cut prices on nearly 10,000 products (about a third of its range) and aims to re-establish a 5–10% price gap with rivals. This might trigger a potential UK supermarket price war, with Tesco warning its profits could drop by up to £428mn. This is an example of how price wars can break out in an oligopoly, where a few big players dominate and use tactics such as predatory pricing to gain market share.
• There has been upset caused among Labour MPs over the government's proposed £5 billion benefit cuts, particularly affecting Personal Independence Payments for disabled individuals. These concerns  are following last month’s spring statement which I have analysed in detail here.

 

 

Global Economy:

 

• Rising threats to global growth, due to a trade shock caused by US tariffs, have negatively impacted global confidence (Consumption, AD, Recession?). The Brookings FT Tiger Index shows a sharp decline in confidence and market conditions and although a global recession is not yet predicted, experts warn that trade breakdowns and increased policy uncertainty could significantly dampen growth.
• Goldman Sachs forecasts that Trump's tariffs will weaken the US dollar, citing rising inflation and stunted economic growth. The firm has downgraded its 2025 GDP growth forecast to 1.7% and anticipated a 35% chance of a recession within the next year.
• Interest rates in Turkey have been hiked to 46% by its central bank. This decision came amid political turmoil, including the arrest of Istanbul’s mayor, and global tariff repercussions. (leads to hot money infows, potentially higher FDI, slower economic growth, reduction in credit availability…)
• S&P(standard and poor) Global has lowered its global real GDP growth forecast for 2025 from 2.5% to 2.2%, citing the impact of rising tariffs and inflation. This is the weakest projected global growth since the 2008–09 financial crisis, excluding the COVID-19 pandemic.
• Gavi, the international vaccine alliance, is trying to convince President Donald Trump’s administration to maintain vital funding for the body by arguing that a donation would boost the US vaccine industry, as it seeks to raise $9bn by later this year(merit good, underconsumption, market failure?)

 

 

Interesting wider reading:

• Ive been watching the channel YouTube channel Good Work for a while now. Dan Toomey consistently delivers interesting economics related videos, often incorporating “humor” to make the more complex topics more accessible. Their content presents clear explanations of economic concepts and is a great resource for anyone interested in economics.
• In his recent video, he discusses the Americas trade policies, focusing on tariffs and their effects on global markets. We’ve seen Tariffs have surged under Trump, increasing from an average of 2.5% to much higher rates, leading to huge market volatility. Toomy’s experts debate the administration's goals, suggesting tariffs aim to restore manufacturing jobs but may not be effective on their own, a good idea that I briefly mentioned in last week’s blog post.

 

 

Case Study of the week- Brexit:

• Brexit (31st January 2020) was driven by the goal of reclaiming national sovereignty, allowing the UK to independently control its laws, borders, and trade policy. The campaign to leave the EU was led by figures such as Boris Johnson and Michael Gove under the "Vote Leave" movement.
• However, Brexit brought significant economic downsides, including a 22.1% fall in UK exports to the EU and long term 4% reduction in GDP.  In addition, real wages are estimated to be about 2% lower than they would have been without Brexit(due to reduced productivity and higher import costs).
• There are little positives that I’ve seen from the movement. The other day, when Trump was announcing his tariffs, I saw how tariffs for UK goods are 10%, compared to 20% for the EU, giving British exporters a slight competitive edge? This all links back to the economics course where one could mention how comparative advantage can be disrupted by new trade barriers(that reduce the efficiency of international trade).

 

 

That’s all for this week’s edition. I have attached below a few links: one for signing up to the email (if any of your friends are interested), and the other to my economics blog (which also has an archive of previous briefings). If anyone is interested in journalism or economics, and would like to join the team, feel free to apply as well!

Aneesh.

April 28th:

 

This week has been really nice for application points, especially with some great examples in the UK economy, that can be used in exams. We’ve seen that Investors are increasingly pricing in interest rate cuts across major economies, with the FTSE 100 hitting a record high of  8050 points this month. The reason for this primarily being due to optimism over lower borrowing costs and a potential “soft landing”. However, there are also some clear signs of fragility, with riskier debt markets drying up and geopolitical tensions (particularly around trade and technology) volatility may still be an issue in the coming months.

 

UK Economy:

• Reeves is really struggling; public borrowing overshot forecasts by £15 billion to reach £151.9 billion, while business activity contracted at the fastest rate in over two years. She will be made to consider tax hikes in the autumn Budget. Higher government borrowing during periods of falling private sector activity (crowding out) leads to worse budget deficits as lower business output reduces tax revenues, making it harder to achieve fiscal targets without austerity
• I remember writing in edition 3 about the lower Thames crossing, a clear example of the UK tangling itself with unnecessary layers of bureaucracy and a potential reason for why free market supply side policies are more efficient.
• On Wednesday, I stumbled across an article, following up on the crossing, where it was revealed that over £1.2bn has spent on planning applications. Is this yet another example of governmental failure?
• UK inflation slowed down more than expected to 2.6% up to March, down from 2.8% in February, mainly due to lower petrol prices. The Markets expect the Bank of England to cut interest rates in May (greater disposable income -> increased consumption -> AD)
• Demand for London office space increased 39% in the first quarter of this year compared with the previous quarter, in part due to the increasing return to office trend. This could boost productivity by creating positive externalities as workers may learn faster, collaborate more, and share skills more easily than at home.
• UK business confidence fell to its lowest level since the end of 2022 mainly due to trade uncertainty and higher employer national insurance contributions.

 

Global Economy:

 

• Companies with low credit ratings in America are unable to sell corporate bonds in recent weeks due to economic uncertainty. Businesses hate uncertainty which has reduced investor appetite for riskier deals.
• OPEC revised down its forecast for oil demand in 2025 and 2026 due to weaker expectations for global growth(derived demand).
• Nvidia said that it expected to take a $5.5bn hit to earnings in the three months to April because of new export restrictions on its ability to sell chips to Chinese organisations (intervention reducing efficiency).
• UK Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent held talks in Washington, discussing a potential UK-US trade deal, with Reeves offering to reduce UK tariffs on US-made cars and agricultural products in exchange for tariff reductions on UK exports, although both sides acknowledged more work is needed before a deal is finalized.
• The Swiss franc surged against the US dollar (highest level since 2015) as investors sought safe assets during Trump's trade war.  There is 80% market expectation that the Swiss National Bank will cut rates to 0% or even negatives to protect exports (which rely on the US for about 10% of sales) and prevent deflation, with inflation already at just 0.3%. MP(specifically interest rate cuts) may be used to counteract currency appreciation and deflationary pressures.
• In a sign of rising risk aversion, Japanese investors sold more than $20bn of international bonds at the start of April, one of the largest outflows on record since 2005

 

Case Study of the Week- the UK housing market- governmental failure?:

 

• Since 2008, average home prices have almost doubled from £150k to £300k, and with the average income being £30k, it makes it nigh on impossible to save up for a house deposit. But why is this the case?
• The supply for housing is very inelastic; notoriously slow planning permissions, NIMBYism culture and the existence of protected areas(greenbelts) limit the ability of making new homes,
• Demand is also very inelastic. With a rising population, longer life expectancy, and few viable substitutes, demand has remained strong and continued to grow.

• However, not all hope is lost. The recent spring statement included a few nice ways to tackle the issue. £2 billion has been allocated for the Affordable homes Programme, funding up to 18,000 new social and affordable homes(multiplier, accelerator).
• The OBR also predicts that market-based deregulation will create 170,000 new homes a year, a multiplier more effective than interventionist spending on 625 million on training on construction.
• If interested in learning more, this is a nice article from a few months ago.

 

Interesting wider reading:

 

• I came across this website this week that has a lot of articles and amazing blog posts, especially useful for those wanting to break into governmental policy making. For example, this article on Tarrifs explains how tariffs lead to a misallocation of capital; : instead of the best (most productive) firms getting more capital, less efficient firms survive and get bigger because they’re protected. This worsens overall productivity in the economy and goes against Schumpeter's theory of creative destruction.
• I also read an article that highlighted how African emigration may be crucial for world development in the future. Africa's population is expected to double to around 2.5 billion by 2050 while the working-age population in Europe and East Asia is projected to fall by 10% over the same period.

May 5th:

Good morning,

 

The last few months Trump’s Tariffs have been the center of focus for many new journalists, investors, and stressed economics students anticipating them coming up in this year’s Exams. On April 22^nd, the IMF cut UK’s growth forecast to 1.1%.  And although, yes, Tariffs and Trump are major supply side shocks, inflation expectations and government borrowing have also contributed to this poor growth, with UK inflation being the highest in the world's advanced economies, at 3.1%.  Furthermore, IMF also predicts the global economy will grow by 2.8% this year, down from its previous forecast of 3.3%. A scary situation, with CBC even saying that the probability of the US economy heading to a recession is 75%. Might be a good time to start “investing” into safe, quality assets and reduce exposure to America?

 

UK Economy:

• In the last 10 years, the UK has constructed only 65 miles of motorways (about 2% of the total amount of motorway in the UK). This week I was talking to an economist who works in natural capital, and he mentioned how new motorways are often controversial with environmentalists due their impact on the climate and on local biodiversity. He explained how this linked nicely to the controversy around a bat shelter costing more than £100m near HS2 and explained how his job was to minimise the trade of between economic growth and the environment.
• Reeves’ plan to encourage UK pension funds to invest more domestically has been criticised by the conservatives and industry for risking lower returns and breaching fiduciary duty (acting in oneself interest)
• Many doctors are voting on strike action, demanding a 35% pay rise by 2027 to restore real terms wages lost over 15 years. It’s very sad that those who save lives must fight for fair pay. Without proper incentives, we risk losing them abroad(brain drain).
• House prices fell by 0.6% in April(negative wealth effect).
• The UK government has allocated £94mn to rescue British Steel after taking over its two blast furnaces from Chinese firm Jingye, which had requested £1.2bn to sustain its £2bn green steel transition, while losses were running at £700,000 per day and a total collapse was projected to cost £1bn. Government failure or strategic?
• Starmer resists to guarantee MPs a vote on any US-UK trade deal, stating government will act in the national interest and follow known procedures. He wants a trade deal with Trump before the May 19 EU summit, despite many concerns from MPs about a rushed or substandard agreement, particularly over issues like food standards and tariffs.
• Labour MPs are urging Keir Starmer to also reconsider cuts to the winter fuel allowance and disability benefits after the party's poor performance in the recent local elections.

 

Global Economy:

 

• Apple says Trump’s tariffs will boost costs by $900mn in June quarter. The company’s shares fell almost 4 per cent in after-hours trading last Thursday.
• China has been gradually diversifying its foreign reserves away from US treasuries (concerns over the safety of US bonds) and is focusing on alternatives such as Mortgage-backed securities, gold and other short-term assets.
• Eurozone annual inflation remained steady at 2.2% in April 2025, slightly above the expected 2.1%. Core inflation (excludes energy and food costs) rose by 2.7%. Energy prices decreased by 3.5% over the month, contributing to the overall stability. The ECB anticipates that inflation will gradually return to its 2% target later this year, supported by a strengthening euro, which has appreciated nearly 10% against the dollar so far in 2025.
• Temu has stopped direct shipments from China to US consumers, following the American government fixing a tariff loophole, shipments valued under $800 now face a 120% tariff or a flat $100 fee, doubling to $200 in June. Cost for consumers may rise by up to 100% of a products value.
• A power outage affected Portugal, Spain, and parts of southwest France, halting services for up to ten hours. The disruptions impacted over 11 million people and the  supply-side shock was said to be caused by "anomalous oscillations" in high-voltage lines and led to significant interruptions in healthcare and transport.

 

Case Study of the week- The Bank of England in recent years:

• In response to 2008’s GFC, the BoE cut the base rate from 5% in 2007 to 0.5% by March 2009, its lowest ever level at the time.
• However, the economy still struggled, forcing the BoE introduced Quantitative Easing (QE) in March 2009, an injection of £75 billion to the circular flow of income to stimulate borrowing and investment.
• By 2021, the BoE’s balance sheet had swelled to over £895 billion in asset purchases. A new problem arose: Quantitative Tightening (QT). Selling off these assets too quickly risks pushing down bond prices (and increasing yields), tightening financial conditions and potentially triggering demand-deficient unemployment, especially in interest-sensitive sectors like housing and manufacturing.
• Post GFC reforms have also focused on making the banking system more resilient. UK banks are now subject to higher capital and liquidity requirements under the “Basel III” framework.
• Post pandemic, we saw soaring inflation (11.1% in October 2022), the BoE raised the Bank Rate steadily to 5.25% by August 2023. This aggressive tightening helped bring inflation down to around 3.2% as of April 2025, but also led to slower economic growth.

 

Interesting wider reading:

• The Bank of England posts reports throughout the year which are very interesting and insightful. This week I came across a study that the BoE published in which they hired a third party to analyse the trends of economics take ups. It was rather shocking and sad to see that in 2022, 70% of economics A-Level students were male; and at degree level this level rose to 72%. From analysing the general trend in their data, this gap is only going to increase in coming years and that government should be trying to make a more equitable co