National Institute of Economic and Social Research
National Institute of Economic and Social Research
News Article | November 3, 2016
The UK services sector faced the biggest one-month jump in costs for 20 years in October in the latest sign that the sharp fall in the pound since the Brexit vote is starting to push inflation higher. The latest snapshot from the Markit/CIPS services PMI showed the sector – encompassing shops, hotels, bars and banks – grew at the fastest rate since January last month, beating economists’ expectations. However, Markit’s chief business economist Chris Williamson said the spike in firms’ costs was “the ugly flipside of the weaker pound”, which has fallen about 17% against the dollar since the Brexit vote. The input costs measure of the services PMI – an indicator of what companies are paying to buy products and raw materials – jumped to 64.9 last month from 58.9 in September, where anything above 50 signals a rise. It was the biggest monthly spike since the survey began two decades ago and the highest costs figure since March 2011. The headline measure of the services PMI rose to 54.5 in October, from 52.6 in September. Williamson said the survey suggested the broader economy was on track. Williamson said: “An encouraging picture of the economy gaining further growth momentum in October is marred by news that inflationary pressures are rising rapidly. “If sustained, the increase in prices threatens to curb both corporate hiring and consumer spending, as firms seek to reduce staff costs and households see their pay eroded by rising inflation.” The official rate of annual inflation jumped to a near two-year high of 1% in September, and economists at the National Institute of Economic and Social Research are forecasting inflation will hit almost 4% in 2017. The UK service sector is crucial to national income, accounting for more than three-quarters of the economy. It includes restaurants, hotels and bars, as well as professional and business services. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said services PMI, and equivalent surveys from the manufacturing and construction sectors published earlier in the week, suggested the economy was on track to grow by 0.5% in the fourth quarter, matching the rate in the third quarter. Tombs said: “The pick-up in the services PMI in October to its highest level since January signals that the economy still is showing little adverse impact of the Brexit vote, but the risk of a renewed relapse in growth, caused by rising inflation and corporate caution due to hard Brexit risks, remains high.”
News Article | November 2, 2016
British households can expect a cut in their disposable incomes next year as the knock-on effects of the vote to leave the European Union send inflation rocketing and weaken the outlook for the economy. The government’s freeze on tax credit payments will also play a part in dragging down real disposable incomes for the first time in four years, according to forecasts by the National Institute of Economic and Social Research (NIESR). Revealing a worsening outlook after the collapse in the pound and slump in business investment, the NIESR’s forecasts showed the UK suffering a huge aftershock from the Brexit vote that “could still lead to a recession”. The thinktank warned that the 0.5% reversal in real household disposable incomes in 2017 would hurt the wider economy, pushing down GDP growth to 1.4% from the 2% the UK is expected to enjoy this year. The NIESR’s quarterly health check came as the CBI business lobby group cut its forecast for GDP growth next year from 2% to 1.3%. The CBI said average wages would continue to increase next year, rising by 2.8% compared to this year’s 2.6%, but soaring inflation would more than wipe out the gains, hitting consumer incomes. Three weeks before the chancellor, Philip Hammond, delivers his first autumn statement, Rain Newton-Smith, the CBI’s chief economist, said businesses were on the lookout for tax incentives to boost investment. She said: “Certainty and stability, vital ingredients that allow businesses to invest and create jobs across the UK, have been absent since the vote to leave the European Union. “Now, with the economic outlook tempered, business leaders will be looking to the chancellor to incentivise investment and instil confidence when he delivers his autumn statement.” The TUC general secretary, Frances O’Grady, said workers should be shielded from bearing the brunt of rising prices, after the prime minister, Theresa May, pledged in her speech to the Conservative conference to protect families who were “just managing”. “A fall in growth would leave workers paying the price through fewer jobs and lower wages,” O’Grady said. The NIESR said that per capita disposable income, which measures the combined incomes from wages and benefits of all households, will fall by 0.5% next year, mainly in response to a forecast jump in consumer price index (CPI) inflation to 3.9%, almost double the rate targeted by the Bank of England. The higher-than-expected inflation rate will dwarf rising average incomes, which will be dragged down by a cap on public sector wages, a freeze on in-work benefits and lacklustre private sector wage rises next year. A spike in inflation is expected following the slump in sterling, which is beginning to push up the cost of imported goods. A report by Merrill Lynch forecast a further slump in the pound in early 2017 to $1.15, from $1.22, which it predicted would further raise import prices and push inflation even higher. Analysts at the investment bank said investors had failed to judge the impact of the government’s intention to trigger article 50 by March 2017, which will mark the beginning of negotiations with Brussels and generate “a frequent and potentially contradictory Brexit news flow”. The NIESR said it forecast a rise in inflation to almost 4% next year after is assumed the pound would stabilise against the dollar following an 18% fall since the referendum. A further tumble in the exchange rate could push inflation even higher. Simon Kirby, an NIESR economist, said: “The depreciation of sterling has been the most striking feature of the post-referendum economic landscape. This will pass through into consumer prices over the coming months and quarters. “By the end of 2017 we expect CPI to have reached almost 4%. While we expect this to be only a temporary phenomenon, it will nonetheless weigh on the purchasing power of consumers over the next couple of years.” Consumer spending has propped up GDP growth in the last year after a sharp downturn in construction and weaker manufacturing sector, which has lost momentum in response to slowing growth in global trade. The most recent assessment of the UK economy by the Office for National Statistics showed that manufacturing contracted in the three months to the end of September by 1%. A survey of manufacturers in October found that the sharp fall in the value of the pound since the EU referendum had helped to increase exports, but also forced manufacturers to raise the price of their goods at the fastest rate in more than five years. The latest Markit/CIPS manufacturing purchasing managers’ index (PMI) survey for October suggested that firms are starting to pass on higher import costs as the weak pound makes raw materials such as oil more expensive. Prices of everyday items including clothing, wine, bread and fruit are expected to come under increasing pressure as Brexit nears. However, the weak exchange rate also helped to boost orders from the US, the EU and China. Rob Dobson, a senior economist at IHS Markit and an author of the report, said the manufacturing sector should return to growth in the fourth quarter.
Singh S.P.,University of Warwick |
Winsper C.,University of Warwick |
Wolke D.,University of Warwick |
Bryson A.,National Institute of Economic and Social Research
Journal of the American Academy of Child and Adolescent Psychiatry | Year: 2014
Objective Social adversity and urban upbringing increase the risk of psychosis. We tested the hypothesis that these risks may be partly attributable to school mobility and examined the potential pathways linking school mobility to psychotic-like symptoms. Method A community sample of 6,448 mothers and their children born between 1991 and 1992 were assessed for psychosocial adversities (i.e., ethnicity, urbanicity, family adversity) from birth to 2 years, school and residential mobility up to 9 years, and peer difficulties (i.e., bullying involvement and friendship difficulties) at 10 years. Psychotic-like symptoms were assessed at age 12 years using the Psychosis-like Symptoms Interview (PLIKSi). Results In regression analyses, school mobility was significantly associated with definite psychotic-like symptoms (odds ratio [OR] =1.60; 95% CI =1.07-2.38) after controlling for all confounders. Within path analyses, school mobility (probit coefficient [β] = 0.108; p =.039), involvement in bullying (β = 0.241; p <.001), urbanicity (β = 0.342; p =.016), and family adversity (β = 0.034; p <.001) were all independently associated with definite psychotic-like symptoms. School mobility was indirectly associated with definite psychotic-like symptoms via involvement in bullying (β = 0.018; p =.034). Conclusions School mobility is associated with increased risk of psychotic-like symptoms, both directly and indirectly. The findings highlight the potential benefit of strategies to help mobile students to establish themselves within new school environments to reduce peer difficulties and to diminish the risk of psychotic-like symptoms. Awareness of mobile students as a possible high-risk population, and routine inquiry regarding school changes and bullying experiences, may be advisable in mental health care settings. © 2014 American Academy of Child and Adolescent Psychiatry.
News Article | November 14, 2016
The US is expected to lead global growth higher over the next two years despite the growing threat posed by protectionist policies, Moody’s Investors Service has warned. The rating agency predicted the US would be the fastest growing of the G7 leading industrial countries in 2017 and 2018, with short-term growth boosted by Donald Trump’s plans to cuts taxes and spend more on American infrastructure. US growth is expected to rise from 1.6% this year to 2.2% in 2017 and 2.1% in 2018. “While prolonged policy uncertainty could weigh on already weak investment growth, there could be an upside to growth from increased fiscal expenditure, especially infrastructure spending, and tax cuts,” said Elena Duggar, associate managing director at Moody’s. “A protectionist stance [from Trump] on trade and immigration would be detrimental in the medium term.” Globally, 2016 is expected to be the slowest year for growth since the financial crisis, at 2.6%, before picking up to 2.9% in 2017 and 2018. Duggar said that threats to the outlook for the world economy included mounting anti-globalisation sentiment and fragility in the EU, with elections due in France, Germany and the Netherlands, and the Italian referendum on constitutional reform later this year. “With the unanticipated outcomes of the Brexit vote in the UK and the US presidential election, it has become evident that nationalistic and anti-globalisation sentiments are gaining traction globally. Going forward, there is likely to be an increased tendency toward protectionist economic policies in advanced economies. “The risk of rising political discord and an increase in EU fragmentation has increased,” she added. Britain’s growth prospects will be hindered by lingering uncertainty about a future outside the EU, Moody’s said, lowering its forecasts for 2017 and 2018. While the UK is expected to be the fastest growing of the G7 economies in 2016, growth is expected to slow sharply to 1% in 2017 and 2018. “Uncertainty around the future of the economy outside the common market will dampen business investment spending and potentially consumption, particularly, if businesses hold back on hiring,” Duggar said. “On the other hand, monetary policy accommodation will support the economy, limiting the slowdown in growth.” Moody’s said the sharp fall in the value of the pound since the Brexit vote on 23 June was unlikely to be the major boost to UK exports predicted by some. A weak pound is, however, expected to push consumer price inflation higher, from 1% now to 2.2% in 2017 before falling again to 1.7% in 2018. This is lower than other economists, including those at the Bank of England, have predicted. Forecasters at the National Institute of Economic and Social Research (NIESR) believe UK inflation will reach almost 3% next year. Duggar said: “There is a high degree of uncertainty surrounding the UK’s economic outlook, since it depends on the ultimate outcome of a multi-year trade negotiation process with the EU, and other economies. Our baseline growth scenario for the UK assumes that it would be able to negotiate a free trade agreement with the EU. “However, a failure to negotiate could substantially worsen sentiment, triggering a material correction in asset prices, a house price downturn, and more substantial declines in investment and consumption spending. The rise in protectionist discourse globally could also prove to be a hurdle for the UK, and challenge long-term prospects.”
News Article | October 29, 2016
Low-earning families that Theresa May has promised to help will be thousands of pounds a year worse off by 2020 because of rising inflation, lower wage growth and Tory social security cuts, according to new analysis of their post-Brexit economic prospects. Those who the prime minister describes as “just managing” – and who are her key priority, she says – are in line for substantial falls in real incomes unless the chancellor, Philip Hammond, steps in to help them in his autumn statement on 23 November. Pressure is growing on Hammond from senior Tories to reverse the decisions to slash benefits, which were announced last year by his predecessor George Osborne, in order to assist those who May said on entering Downing Street were “working around the clock” but still struggling to get by. New analysis by the Resolution Foundation, which takes into account the latest official forecasts on earnings and inflation, and the effects of 2015 budget announcements on tax, the living wage and benefits, finds that an already gloomy outlook for these families has got markedly worse since Brexit. It shows that a couple with two children both under the age of four, who are both working (one full-time at £10.50 an hour and the other for 20 hours a week at the living wage) will be £2,000 worse off in 2020 than would have been the case without the double hit from the effects of Osborne’s policies and the Brexit vote. The foundation finds that a single parent with one child under the age of four, working full-time on the minimum wage, would in 2020 be £3,800 worse off as a result of measures announced in this parliament so far. One important factor in these recalculations is that higher inflation and expectations of lower wage growth since the Brexit referendum have reduced the previous anticipated increases in the National Living Wage (NLW). Wherereas Osborne said the NLW would reach £9.00 an hour by 2020, the foundation says it now expects it to be only £8.60 an hour. The level of the NLW is linked to rises in the pay of typical workers. Millions of families are also affected by pay freezes across the public sector that will last until 2020, which will feel more severe as inflation rises. Lord Willetts, the former Tory minister who is now executive chairman of the Resolution Foundation, said May was right to prioritise those who were “just managing” but faced a “pretty tough climate in which to do it. The chancellor faces a double headwind. One consequence of the big falls we have recently seen in the value of the pound is that prices will rise more quickly over the next few years. This will squeeze family budgets with higher prices in the shops, and turn the cash freeze in social security support for working age families into a significant and painful real terms cut. “Added to this is the £3bn being taken out of the government’s flagship universal credit programme through cuts to in-work support. These cuts will reduce the incomes of ‘just managing families’ more than any other group. For many families, and for women in particular, these cuts will also reduce their incentive to work. “Making progress in reversing the effect of the social security cuts inherited by the new government is not cost-free, and that matters given the £84bn borrowing black hole the Treasury is likely to face in [the] autumn statement. But the money can be found if the chancellor chooses to make it the focus of his autumn statement. That would send a powerful message that the government really is on the side of just managing families.” Angus Armstrong, director of macroeconomics at the National Institute of Economic and Social Research, said: “Those millions of people Theresa May has promised to help are facing a series of challenges from rising inflation, benefit cuts and freezes as well as caps in public sector pay until 2020. “Given the financial constraints on government post-Brexit it will prove difficult for ministers to deliver that help without radically departing from their previous approach which has been to balance the books. The problem is that the PM has made a laudable commitment but when she can least afford it.” So far the Treasury has insisted that it will not revisit benefit cuts, including those to universal credit, despite calls from Tory MPs, including former work and pensions secretary Iain Duncan Smith, to do so. Privately, however, Treasury officials are becoming increasingly concerned at the economic outlook and the chancellor’s resulting lack of room for manoeuvre. They fear that recent bouyant GDP figures will prove a high watermark for the economy before a period of stagnation in 2017. The fall in sterling is proving helpful to exporters but is coming at the cost of higher import prices which are expected to push inflation to as much as 3% next year. With wages rising at around 2%, a hike in prices of this magnitude will eat into disposable incomes. GDP figures covering the three months to the end of September revealed last week that most of the strength in the economy came in the services sector and consumer spending. The rise of 0.5% beat City expectations of a slowdown in growth to 0.3%. However, the manufacturing sector contracted and the construction sector fell into recession after two consecutive quarters of negative growth. HSBC warned in the summer that the UK faced a period of stagnant growth and high inflation – stagflation – next year. Former Bank of England monetary policy committee member Adam Posen repeated the warning last week. Posen, now the head of the Peterson Institute thinktank in Washington, said Brexit had caused the UK permanent damage that would be made worse by higher inflation and slowing consumer demand, which would result in lower growth Bank of England interest rate setters meet on Thursday to consider policy options that include cutting interest rates to support the economy as it heads into a period of lower growth or raise interest rates to choke off inflation. City analysts expect the Bank to sit on its hands and wait for more survey data to reveal the impact of the Brexit vote on business investment and consumer confidence.
News Article | November 24, 2016
Extra funds for new roads, research and development and skills training will drive up UK productivity and put the economy in a better position to withstand the looming Brexit shock. That was the central message in Philip Hammond’s autumn statement and went to the heart of a debate about the UK’s low productivity growth, which according to official figures, has fallen well behind Germany, the US, France and Italy. “The productivity gap is well known, but shocking nonetheless,” Hammond said on Wednesday. “It takes a German worker four days to produce what we make in five, which means, in turn, that too many British workers work longer hours for lower pay than their counterparts.” The Office for Budget Responsibility (OBR) warned that productivity growth would be lower than it had previously forecast for the rest of this parliament and only return to its long-term trend of 2% in 2020. There have been times when the UK’s productivity growth has reached 5% and closed the gap with other major economies. The 1990s and early noughties were periods of intermittently strong growth. The early 1980s was another. But the 2008 banking crash knocked the stuffing out of the economy and productivity growth has barely moved ever since, allowing the gap to open up again. The commonly used measure of productivity is the rate of output per unit of input. The Office for National Statistics (ONS) says improving productivity results in improved living standards “because an increase in productivity translates into an increase in output (amount and quality) without any increase in input (labour and materials)”. There are generally two ways to improve productivity. One is the purchase of better machinery. The second involves a new process, which allows a worker to increase the speed or quality of what they are doing. Quality matters as much as quantity when firms can charge more for higher-grade goods. There is no shortage of academic musing on the productivity puzzle. Senior policymakers have also written extensively about the possible reasons, among them the former chief financial regulator Adair Turner and Martin Weale at the Bank of England. It was Turner who dubbed much of the derivatives and other products sold by City investment banks to their clients before the financial crash as “socially useless”. It was a comment that illustrated how good the Square Mile had been in the previous 20 years selling its services at high margins and taking the cash to reward not just its shareholders but also its workers. According to the ONS, east London is the UK’s most productive area, but it is not only because the Ford engine factory in Dagenham is highly efficient in its use of labour t is also a measure of the high productivity rates still seen among banks in the City. Next on the list of productive cities is Aberdeen, which is home to another of Britain’s high-margin industries: oil. It would therefore be easy to conclude that what Britain needs is more high-margin businesses, where the workforce is a relatively small element of the costs. Rebecca Riley, a research fellow at the National Institute of Economic and Social Research, said declines in banking and the oil industry partly explained the UK’s low productivity rate, but there were also a host of other factors. She also pointed out that most countries had failed to increase productivity since 2008, with many economists blaming it for the stagnation in wages across the north-east of the US that helped to propel Donald Trump into the White House. She said comparing one country with another – as Hammond did – was difficult because the value of goods and services fluctuated with currency values. There can also be variations in the way different national statistics authorities measure the contribution of labour and capital in making a unit of production. “But it is still the case that the UK sticks out against other countries that have at least had some growth,” she said. Studies have looked at whether the near collapse of the banks restricted the supply of credit to companies and prevented them making productivity-enhancing investments. Riley said this would have had some impact. The rapid expansion of mainly low-level service jobs that carry low levels of pay is another reason. In France and Germany, the coffee shop and online delivery culture is still in its infancy by comparison with the UK. These are businesses that provide a valued but unsophisticated service with limited room for productivity improvements. It means the UK has lower unemployment and a bigger workforce, with fewer people economically inactive than France – but lower productivity and lower pay. In France, and to a lesser extent Germany, restrictions on working hours are other factors at play. For instance, widespread industrial pay bargaining and limits on redundancies make hiring workers a more costly proposition than in the UK. This encourages French and German firms to invest in the latest machinery and limit employment. Bill Martin, a former City economist who is now at Cambridge University’s Judge business school, has argued that the UK’s poor productivity is “more plausibly interpreted as a symptom of a largely demand-constrained, cheaper-labour economy”. He is not alone in saying that companies would invest in new equipment and be more productive if only there was higher demand for British goods and services from its domestic businesses, consumers and the international community. The UK has seen a much bigger fall in trade as a proportion of GDP than France or Germany in the past eight years, forcing it to rely increasingly on its own economy to drive demand – a challenge that consumers have met, but businesses have refused to join. The OBR said a planned Brexit in 2019 would further damage Britain’s export sector and push down trade as a proportion of GDP. The fear must be that this will further discourage investment and delay again the moment productivity stages a recovery.
News Article | November 5, 2016
UK households should brace themselves for a combination of rising inflation, low pay and increased debt that will squeeze living standards next year and push more people into financial difficulty, experts have warned. Higher inflation, weak wage growth and rising levels of consumer debt are expected to weigh on households next year as the economy adjusts to the post-referendum environment. Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “The spectre of significantly higher inflation is a real concern. Many households have still not recovered from the last big squeeze on incomes in the aftermath of the financial crisis. The risk is that this new pressure on household budgets could tip many more people into financial difficulty. “As a society we need to prepare for what could be a significant increase in problem debt in the years ahead.” Economists at the National Institute of Economic and Social Research are predicting inflation will rise from a current rate of 1% to almost 4% in 2017, as the sharp fall in the value of the pound since the Brexit vote makes imports more expensive. Wage growth on the other hand is expected to be weaker, as firms seek to control costs amid slowing economic growth and heightened uncertainty. There are also signs that household debt is returning to highs not seen since the financial crisis. The British Bankers’ Association has said that consumer credit is growing at the fastest rate in almost a decade, as record low interest rates fuel demand for personal loans and credit cards. Gillian Guy, chief executive of Citizens Advice, said the rise in borrowing could lead to difficulties. “More people are turning to credit … While this borrowing might be manageable now, a sudden change in circumstances could lead to debt problems.” Peter Tutton, head of policy at debt charity StepChange, said many people were only just getting over the last period of falling real wages, when inflation outpaced pay growth following the 2008 financial crisis. He said: “A further squeeze on household incomes, made worse by the freeze on benefit uprating, will leave even more households struggling. With over seven million people already using credit to pay for everyday essentials, there is a real danger of more falling into severe problem debt.” Attention is now turning to Philip Hammond’s maiden autumn statement on 23 November. The chancellor has already signalled that he will ease the pace of austerity set in motion by his predecessor, George Osborne. Frances O’Grady, general secretary of the TUC, said: “Our research found that the last wage squeeze left more families struggling to make ends meet without turning to borrowing, with over 3 million households facing problem debt. Rising consumer credit figures raise concerns that we’ll see more families borrowing to get by. “The chancellor should address these fears in the autumn statement, and take action to boost jobs and wages. That means new investment in infrastructure such as roads, rail, green energy and homes, and increases in the national minimum wage.”
News Article | October 12, 2016
UK scientists say they’re dismayed by their new government’s toughened stance on curbing immigration, including ideas to restrict the flow of foreign students and workers. The government outlined its plans this week at the annual Conservative party conference, which was the first since the country gained a new Prime Minister, Theresa May, in the wake of June's vote for Brexit — the decision that the UK should leave the European Union. In speech after speech at the conference, held in Birmingham, politicians made it clear that they wanted to eliminate the free movement of EU citizens into the UK once the country splits from the EU, an event now expected to take place in 2019. “We are not leaving the European Union only to give up control of immigration again,” said May, opening the conference. Since the referendum, in which concerns over immigration were believed to have played a big role in swaying voters, scientists have worried about how Brexit would affect the free movement of people. Although the government has not yet fleshed out its latest proposals in detail, they are the strongest indication yet that scientists will not be allowed to move freely between the UK and the EU after Brexit — which in turn means that UK researchers may well be excluded from EU funding programmes. “There has been a change in tone. I was surprised by how strong some of the comments were,” says Azeem Majeed, who heads the department of primary care and public health at Imperial College London. He says the perception that non-UK citizens are not welcome — which grew as a result of June’s Brexit referendum — has only increased since the conference. That is particularly the case in health fields, as the Conservative government has pledged to cut the number of foreign doctors in favour of UK citizens. “Following the referendum, there was already a psychological impact on our EU staff,” he says. “The comments from the conference in the past few days have added to that.” UK universities get about 16% of their research funding and 15% of their staff from the EU, and scientists have been vocal about the need to maintain some form of free movement for people between the UK and EU after Brexit. It may even be a prerequisite for UK access to EU research funding. When Switzerland restricted freedom of movement in 2014, its researchers lost access to the major Horizon 2020 research-funding programme, leading to protracted negotiations that are still ongoing. “The hard line on freedom of movement is almost certain to restrict us from EU funds,” says Stephen Curry, a structural biologist at Imperial College London. Other comments on immigration and restricting foreign students are also going down poorly in academia. “It’s reinforcing the rather sour atmosphere,” says Curry. “I think the mood has turned a lot darker [since the conference]”. UK home secretary Amber Rudd said in her conference speech that the government would consider making it harder to recruit from overseas, forcing companies to disclose the proportion of foreign staff working for them, and cutting down on universities’ ability to recruit foreign students to “lower quality courses”. “We had a very decisive message from the Conservative conference that the priority is simply reducing the number of people who come here, and if that damages the economy, so be it,” says Jonathan Portes, an economist at the UK National Institute of Economic and Social Research in London. The conference was not all bad news for science and science policy, however, says Sarah Main, director of the Campaign for Science and Engineering in London. She says that the comments on immigration are concerning. But she adds that, at the Birmingham conference, “We’ve seen the government being much more clearly positive about research and innovation in general.” She cites a keynote speech from the Chancellor, Philip Hammond — which praised science as a driver of growth and emphasized the need to get “the brightest and best to work here in our high-tech industries” — and positive comments from science minister Jo Johnson at events away from the main auditorium. But Portes, chief economist for the UK Cabinet Office during the 2008–09 financial crisis, says Hammond's positive messages for science don't outweigh the negative impacts of May and Rudd's plans. “It’s nice to know the chancellor is not on the same page as the PM and the home secretary, but it seems pretty clear who is calling the shots,” he says.
Bishop K.,National Institute of Economic and Social Research |
D'Este P.,Polytechnic University of Valencia |
Neely A.,University of Cambridge
Research Policy | Year: 2011
This paper examines the various methods through which firms benefit from interactions with universities, arguing that such benefits are instrumental in nurturing the multiple facets of a firm's absorptive capacity. We bring together data collected from a survey of UK firms that collaborated with universities, and firm-level data on past partnerships with universities. The results show that benefits from interactions with universities are multifaceted, including enhancement of the firm's explorative and exploitative capabilities. Results also indicate that firms' R&D commitments, geographical proximity to and research quality of university partners have a distinct impact on the different types of benefits from interactions with universities. We find geographical proximity is crucial for assessing problem-solving as an important benefit, while interactions with top quality universities have a positive influence on the benefits associated with firms' downstream activities. We discuss the implications of these findings for research and policy. © 2010 Elsevier B.V. All rights reserved.
News Article | December 4, 2016
As the nation’s shoppers turn their thoughts to Christmas, a dark cloud looms. Could it be that rising inflation will spoil the party? Only a few weeks ago, Theresa May, Philip Hammond and the rest of the cabinet could have been forgiven for worrying about the impact of inflation after most economic forecasters predicted it was about to send shop prices sky-rocketing. And, worse, more of the same is expected next year, with rising prices eating into disposable incomes to more than halve Britain’s GDP growth rate. In recent days the news has been better. Comments by Hammond and Brexit minister David Davis holding out the possibility of a more accommodative stance towards the European Union have pushed up the value of sterling against the dollar and euro and cut the chances of a much more expensive festive period. Of course, a higher pound could snuff out a welcome recovery in manufacturing output since August. But voters shop much more than they work in manufacturing. So from the narrow perspective of a government attempting to keep the population on side during a potentially turbulent pre-article 50 negotiation period, during which migration data shows record numbers of continental Europeans rocking up on British shores, a lack of inflation will be good news. This situation is unlikely to hold. Davis’s comments that Britain might find a way to pay for access to the single market was simply another way of saying that all options were open. Hammond was also repeating himself: more importantly, he is well known as being a soft Brexiter, a breed vastly outnumbered around the cabinet table. Next week the theme could be hard Brexit – a change directed as much by the EU’s tough-talking negotiators as by a wild comment from Boris Johnson – pushing sterling down again. The difficulty in predicting inflation while the Brexit conflict continues lies behind the divergence between various forecasts, with the National Institute of Economic and Social Research reckoning it could rise to 4% by the end of 2017, while others believe prices will grow by little more than 2%. Unfortunately for the forecasters, the pound is not the only influence on prices. There is also the impact that comes from demand for goods and services. At the moment, businesses and the government are sucking demand out of the economy. In the autumn statement, the chancellor extended austerity into a third parliament, with cuts to disability payments and tax credits. His message was that a boost to infrastructure spending would compensate by creating thousands of well-paid jobs in areas such as engineering, science and construction. Last week Robert Chote, chairman of the Office for Budget Responsibility (OBR), took a sword to this narrative and killed it stone dead. He said Hammond’s plans to boost infrastructure spending with a £23bn “national productivity investment fund” failed to move the dial on its forecasts. “This is not the near-term fiscal stimulus package that some people either expected or feared or wanted,” Chote said in testimony to the Treasury select committee. “It’s a relatively small, gradually phased increase.” He added that it minimised one of the main boasts for infrastructure spending – a “multiplier effect” that sends out ripples of extra work to suppliers and services companies that in turn increase investment and employment. An example of how feeble the infrastructure package is likely to prove was given last week by the tax adviser George Bull of accountant RSM. He was talking of Hammond’s planned 100% capital allowance for companies investing in electric car charging points, and investment of £80m to expand the charging infrastructure. Bull, who describes the move to increase the number of electric vehicles on UK roads as “gloriously inconsistent” with the government’s reduction last year in subsidies for renewable electricity generators, asked who would benefit from this extra tax relief and how much it would be worth. HMRC’s answer was: “In practice it [the new tax relief] impacts only on those businesses with qualifying plant and machinery expenditure above the level of the annual investment allowance of £200,000.” “In other words,” said Bull, “very few businesses. And the cost to the exchequer, according to HMRC, is negligible. “So here we have a new tax relief which can’t be used by many businesses, which will hardly cost the exchequer a penny, but which seems inconsistent with the government’s broader policy on renewable energy.” The Institute for Fiscal Studies looked at another autumn statement initiative – the government plan to extend free childcare for three- and four-year-olds in England from 15 to 30 hours a week – and asked whether it was likely to boost parental employment. The answer was: “Only slightly.” So it would leave demand in the economy little changed. Demand can also be affected by business investment growth, which the OBR expects will falter as the Brexit vote debate gets into full swing. It all makes for a bleak picture when low inflation expectations rely on weak consumer spending, low business investment, an autumn statement that can only be described as a non-event and the odd ministerial comment hinting at a softer Brexit.