The Office for National Statistics posted this tweet at 7 this morning:
What is now clear is that the UK had a second quarter of no growth this year, followed by a third quarter in which there was a decline. The fourth quarter is also likely to see a fall in GDP. In that case we would officially be in recession.
Three things are worth noting.
One has to be, I told you so: this was inevitable. Why Sunak pretended this would not happen when it was clear that the Bank of England was determined to achieve this was what's hard to work out.
Second, for many people in large parts of the country things will already feel much worse than this data suggests. It is only financial services in the south east, boosted by interest rate rises that only benefit the well off, that are keeping GDP where it is.
Third, there are no reasons to think things will get better until interest rates fall. But even then, government austerity will generate a dead cat bounce, at best.
Our economy is dismal because it is being managed abysmally.
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One sign of this is in social housing – councils are now getting owners and developers of distressed property assets and unsellable homes coming to them willingly offering to up s.106 quotas (52% OMV) deals or property that they just cannot afford to run or maintain anymore.
Amazing
Sorry, PSR, but could you possibly translate your comment into plain English for the lay reader?
What are ‘s.106 quotas (52% OMV) deals’ and what are the implications of these moves?
Maggie
Section 106 (Development/planning law) – whereby developers of new private housing are expected to contribute units for affordable housing to rent at sub-market rents (80% of market rents). These are purchased by council or housing association landlords at 52% of their Open Market Value (OMV) – discounted.
When times are good, developers would rather sell privately at 100% so sometimes settle with the Council for a commuted sum of money rather than actual houses; when the market slows down (like now with high interest rates) developers fall over themselves to find Council buyers and may even offer more units under s.106 agreements just to get cash flow on their sites that are not selling well. That is what is happening to us right now, with something like 60 units coming in next year because sales are down this way.
We also have other stuff coming in like ex student accommodation coming in that was over -provided for and out of use during the university expansion years back in the day that is being sold off. The problem is that the vendor has us in a bidding war. Such is the reality of property development these days – speculation, rather than need. Markets eh……………………?
I don’t think the s.106 system is fair on either affordable housing providers like Councils or fair on developers either. It’s all because our stinking government will not invest in the construction of more affordable housing. Government – when you think about what it is paying for (Rwanda, dodgy PPE, Bibby Stockholm, propping up private railway profits etc.,) – should be putting up the money. Their job apparently is to just to go missing. Bastards.
Anyhow, will that do Maggie? I have explained these things before many times and was concerned that I was just repeating myself. And it’s all online to discover and form an opinion on for yourself.
Thabnks for explaining, PSR.
With the Christmas celebration a few days away it’s worth reminding that GDP “does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.
It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.” RFK, of course.
It is traditional for economic pundits to make predictions for the year ahead around this time of year. I’m not an economist. And I’m mindful of Nobel prize winner Neil Bohr’s quote that “It is difficult to make predictions, especially about the future.” But I hope that you will excuse me, prompted by the latest GDP data, to make a prediction about next year.
In a couple of months time the ONS will release data showing that GDP growth in the final quarter of 2023 was negative. Which means we will officially know that the UK is in recession. There are already predictions that the BoE will reduce rates in March. This makes it almost certain.
The economy will continue to decline due to the absurd, egregiously high, interest rates we currently have, and the fact that their full effects will not be felt for many months. This will panic the BoE to reducing the interest rate further.
Meanwhile, inflation will continue to fall, pressuring the BoE even further to reduce interest rates.
What possible justification could even a neo-liberal idealog have for maintaining high interest rates with the economy in recession and inflation close to 2% and falling?
I have heard predictions of interest rates down to 4% by the end of the year. I shall be surprised if it is not significantly lower.
As Richard said (to paraphrase), this is no way to manage a whelk stall nevermind an economy.
You may well be right
“Our economy is dismal because it is being managed abysmally.”
Or could it be that the “management” is
on-hols
was never there in the first place
prefers a light-touch–no touch style
Couple that to no industrial strategy of any sort/ever & you have the slo-mo/on-off omni-shambles profiled in this blog, week-in, week-out, year after year. Covid & the incompetant/corrupt equipment buying is a symptom of this.
On a related note: I have just had a letter from a UK DNO (distribution network operator) concerning a project I am working one. The letter provides prima facie evidence that the entirety of what passes for electrical network planning for the power system is unfit for purpose & has left we wondering exactly who is in charge and their capacity for thought, or in this case, the lack thereof. I’m sitting here laughing as I write this & shaking my head in wonderment.
It’s amazing what the Market is incapable of doing.
Glad to hear you can still laugh ….
Is that for the national power system or just the project you’re working on?
My comment covers National Grid (the transmission system operator) and the distribution system operator. The upper management of all the DNOs and NG should be sacked, immediately, they have failed utterly to develop a tech planning system fit for a renewable future. They have not just failed, I’d suggest that they are incapable of understanding what is needed – that’s because they live in the past. Expressed another way, they are in a forest – they only thing they see are trees & thus react to trees, falling or growing. What they need to see is the forest, its outline & contours. But they can’t see that &/or don’t want to.
The UK’s electrical power system stands at a crossroads – the changes to it will be similar in scale and scope as those that took place post-1949/nationalisation. The problem then, was to grow generation to meet rising demand and rural electrification. Both problems were addressed competently. The problems now are very different and complicated by a network design & operational philosophy that has not evolved in the face of rising renewables & which is complicated & amplified by the daily imbecility of electricity markets based on marginal pricing (very good for market traders btw).
What should we expect when we have abysmal leaders, head of an abysmal government, following an abysmal policy based on abysmal assumptions of an abysmal science.
This is from the Sky News report: “Rather than remaining stagnant, as first thought, the economy contracted 0.1% in the three months from July to September. Economists had been expecting growth of 0.2%.”.
Do not worry. our Dickensian Chancellor, last month Scrooge, this month Mr Micawber has the answer: “Responding to the figures, Chancellor Jeremy Hunt said: “‘he medium-term outlook for the UK economy is far more optimistic than these numbers suggest. We’ve seen inflation fall again this week, and the OBR [Office for Budget Responsibility] expects the measures in the Autumn Statement, including the largest business tax cut in modern British history and tax cuts for 29 million working people, will deliver the largest boost to potential growth on record”.
All that is actually proved by all this is that the mainstream economists have neither purpose nor utility. They are, frankly a useless appendage, attaching itself like a leech to whatever institution they invade; with species claptrap disguised in coarsely rudimentary form, as mathematical wisdom. They survive because they are a priesthood serving the political ideology of neoliberalism that has successfully trapped the world in its grip for over forty years and is destroying far more than it creates.
I would place the mainstream economists activity on a scientific scale, somewhere below the failed ‘science’ of phrenology. Phrenology was absurd, but the poor benighted phrenologists at least inspected real human skulls before drawing their ridiculous conclusions. Economists have no observational or experimental skills of substantive use to offer, or reliable techniques of application at their disposal. Their capacities are thus redundant in the real world. They are in the same predicament as the mediaeval scholastics as the age of Galileo dawned. Living fossils. Unfortunately the economists who know better are – it appears – not of a character, strength or courage sufficient to turn over the priesthood.
John
Hunt is lying
I suspect he does not even know when he is doing it
Richard
I suspect he knows exactly what he is doing …..
The Prime Minister today: “”Compared to the predictions at the beginning of the year, the economy has done better, and we’ve actually grown faster than our European neighbours like Germany, for example”.
Only Sunak could present a fall in GDP as economic growth, without blushing and as a triumph of his making. This man is running the country…..
Can I thank PSR for explaining the terms that I didn’t understand in his first post. It was very helpful.
I hope you didn’t think I was being snippy, PSR, because that wasn’t my intention. I always enjoy your comments. I’ve often though that perhaps you should blog, too… 🙂
Anyway, apologies for being a bit annoying.
Oh no Maggie, not at all and you are welcome.
In my local authority we like to see 11% of new units from large sites put aside for s.106 obligations but it might vary around the country and in your area. And again, developer reaction is all about how well they are doing in the market. It is when you get involved in the contract negotiations with a developer you see the game that is being played – most developers have a contract that can only be described as duplicitous – it virtually keeps the option open for them to change their mind right to the last minute. Some contractors are better than others.
If we need extras doing – like curtain battens and washing machine traps – we also have to pay the developer to fit those at an extra cost to us because our tenants are so poor they can’t afford to pay for these.
But on the flip side, development is a risky business and now more so in these post-BREXIT and Covid times and the quality of workmanship is at an all time low because of labour shortages.
For me the bottom line is the State must invest more in affordable. Section 106 is closest thing I can think of as a form of theft against developers simply because the current British state couldn’t be bothered to invest.
The country is ran by morons.
As for blogging, I have a full time job in the public sector and would lose it if I were associated with the comments I leave here and I am most grateful to our host for letting me vent my spleen here.
Have a good Christmas Maggie.