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These days, assessing the economic outlook at the start of the year feels like suffering a hangover without having had any fun first. Our growth rate has slowed to a crawl since the global financial crisis of 2008, with GDP barely increasing by 1% a year on average. “The country is in limbo,” said a magazine editorial this week; “2023 was a lost year.” That magazine was actually WirtschaftsWoche, a German financial weekly, but it is a reminder that we are far from the only country stagnating. In our cover story this week, independent economist Julian Jessop, whom some of you will remember from the MoneyWeek Summit in September, analyses in detail why the UK is in trouble and how we might get out of it. His manifesto for growth…

Politics & economics Britain faces a “fresh inflation headache” after shipping firm Maersk suspended all trade through the Red Sea due to the threat of attacks by Houthi rebels, say Melissa Lawford and Jonathan Leake in The Telegraph. On Sunday, the US Navy destroyed three boats carrying Houthi rebels, killing the crews, after fighters tried to board a Maersk container ship for the second time over the weekend. Analysts predict that oil prices could rise sharply if “tensions escalate further”. Transportation and shipping insurance costs have doubled over recent weeks and this will filter through to the prices of products on British shelves, including food. Shipping oil, gas and other products around the Cape of Hope uses more fuel and costs more in carbon taxes. Higher inflation would in…

1. Tesco buys Carrefour With its shares up 30% in 2023, the British supermarket has staged a comeback from the wobbles of the past decade. It has solidified its iron grip on the British grocery market, restored profitability and started paying generous dividends again. With rivals such as Asda and Morrisons owned by private-equity firms overloaded with debt, its position is more secure than ever. By contrast, France’s giant Carrefour is far less healthy. Its shares are at only half the level they were ten years ago, and it has already been targeted in a takeover bid. Tesco could turn it around, and together they would create a European powerhouse. The French government probably wouldn’t allow it, but it would be a great deal. 2. M&S buys Boots It has…

At 9pm on Sunday 15 August, 1971, Richard Nixon delayed the US viewing public from watching that evening’s repeat of cowboy show Bonanza. Nixon had spent the previous three days at Camp David with a team of advisors, to finalise details of a speech that would transform the global monetary system, even though that arguably wasn’t his main aim. US inflation was rising by more than 5% a year while the unemployment rate was above 6%. The Vietnam war was also dragging on. Nixon – with an eye on an election in 1972 – was keen to avoid a recession, so he didn’t want to raise interest rates. But nor did he want to be seen as going easy on inflation. So he instituted a freeze on prices and wages.…

China aims to be robot superpower Editorial The Economist To Xi Jinping and the Chinese Communist Party, robots are “serious business”, says The Economist. In 2023, half of all industrial robot installations were in China and the country produced more than six million “service robots”, which do things like cook, clean and move boxes. This is a deliberate push to increase productivity (also, robots don’t get Covid). The working-age population is projected to drop by more than 20% by 2050. Labour shortages abound and 41% are in manufacturing-related positions. Many of the challenges faced by factories apply to agriculture as well and since China is “paranoid about food security and uninterested in immigration”, automation could be the answer here, too. Then there’s the shortage of care workers for 8.1 million…

bloomberg.com/opinion Americans like to jest that there is no French word for “entrepreneur” – but “the joke may be on them”, says Tyler Cowen. The French government knows it has a winner in its highly regarded artificial intelligence firm Mistral AI, which may be one reason why the EU’s new regulations contained no ban on open-source AI. France, and Paris in particular, has a “fairly dynamic start-up scene”. And if you think technology and AI are the keys to the economic future, France is holding some important ones. The country has other economic strengths, not least a thriving nuclear-power sector. But perhaps most important of all is its long tradition of civil service. That has been a mixed blessing in the past, but French bureaucrats have an “impeccable education and…

“Had output per hour worked kept growing at its pre-2008 trend, it would now be 25% higher” One positive legacy of the brief premiership of Liz Truss is that politicians are finally talking about the importance of economic growth. Unfortunately, there is little agreement on how to turn this talk into action. My manifesto would be based on four priorities: rebooting productivity; removing blockages that add to the cost of living; improving the quality of public services; and encouraging more people back into work. All will require fundamental changes in mindset. But first, it is essential to appreciate the scale of the problems. Truss put growth back at the top of the agenda by setting an ambitious target of 2.5% for the annual increase in GDP. This growth rate would…

● Anyone can give away up to £3,000 a year without becoming liable for inheritance tax (IHT). The gifting allowance means you can hand cash to friends and family, and it is immediately out of your estate when it comes to future inheritance tax calculations. However, the allowance is overdue an increase, says Rachel Mortimer in The Times. “Families are paying a record amount of inheritance tax… and the value of the one-off tax breaks for gifting has been dwindling rapidly – they have not changed in more than 40 years.” The £3,000 gifting limit hasn’t changed since it was introduced in 1981. Had it risen with inflation, it would be worth just over £11,000 today. ● The Financial Ombudsman Service (FOS) has received many complaints in the past year…

● Thinking about new year resolutions for your business in 2024? If so, making shopping around for a better savings account could be a sensible option, particularly if you hold sizeable amounts of cash in the bank or building society. Research published recently by Allica Bank found that small businesses are missing out on £7.5bn of interest each year because they are not with providers that pay decent rates. ● Small businesses are usually eligible to ask their energy provider to install a smart meter, but using one is not compulsory. Recent controversies, including a case where artist Grayson Perry was hit with a £39,000 energy bill, have highlighted the ongoing problems with smart meters. Energy companies say the devices can help both companies and consumers manage their energy consumption…

In the summer of 2021, when a traumatised Britain was enduring a third wave of Covid infections, the Conservative peer Michelle Mone posted a photograph on Instagram of herself and husband Douglas Barrowman in the Mediterranean on board their new luxury yacht, Lady M. She captioned it: “business isn’t easy, but it is rewarding”. She was right about that, says Marina Hyde in The Guardian – “provided you’re shameless and grasping enough” to “fast-track” your way into winning a £203m contract to supply masks and other PPE products to the NHS and clear at least £65m in profit, even though much of the kit was allegedly unusable. Mone, who made her first fortune via the lingerie company Ultimo, lied repeatedly for years about her role as a “plague profiteer” and…

Lawyers are calling for an amnesty on fines issued for breaching Covid lockdown rules, says Paul Brand on ITV News. Almost half of the 124,771 fines issued up to October 2023, totalling £16.7m, have not been paid. Some people, owing in excess of £10,000, have turned to crowdfunding to raise the money, while others are being pursued through the courts. People are especially loath to pay following the “partygate” scandal at Downing Street; Boris Johnson and others were fined just £50 for breaching the rules. The vast majority of fines were issued to young people, with students and ethnic minorities disproportionately affected. Last year, Slovenia became the first country to issue refunds of paid fines (€1.7m in total) and expunge records. A British government spokesman told ITV News, paradoxically, that…

● I had planned to nominate my “business villains of 2023”, but the “list of rogues and cheats and chancers is a rich seam” (see page 27) and space is limited, says Patrick Hosking in The Times. So let’s cheer some heroes instead. The “first shout out” goes to Tufan Erginbilgic, the new boss at Rolls-Royce, who arrived promising a more disciplined approach to capital and costs, and to “stamp hard” on the urge to build market share at the expense of profits. Twelve months on, the shares have tripled. Another “champion of shareholder value” is Simon Barrows, the CEO of 3i, the most successful UK investment trust this year. His “gigantic bet” on Action, a retail chain, paid off 100-fold. Lars Fruergaard Jorgensen, the CEO of Novo Nordisk, has…

“Monetary policy was often the only game in town when it came to determining market outcomes for much of the last 15 years,” says Mohamed El-Erian, the economist who was previously chief executive and co-chief investment officer at bond giant Pimco, and is now chief economic adviser at its parent Allianz. Central bank guidance and market expectations for what policymakers would do next had a “disproportionate influence” on asset prices, with the consequence of “meaningfully decoupling valuations from economic and geopolitical realities”. After interest rates returned to more normal levels over the past two years, “the near exclusive focus on monetary policy was supposed to fade”, says El-Erian on Bloomberg. Yet so far, this isn’t happening. Shortly before Christmas, comments from Jerome Powell, the US Federal Reserve chair, on the…

“For some people, £140 is nothing… do we want the West End to become this huge corporate tanker? I’m not ripping anyone off. The people who are spending £140 to buy a ticket – they can get one for much less or they can go and see another show.” Actress Kristin Scott Thomas (pictured) notes that richer theatregoers subsidise cheaper tickets, quoted in the Financial Times “I like buying things really cheaply… It’s always good to buy shares when they get to a low point and the Tory party share value is nowhere near its bottom.” Nigel Farage, quoted in The Mail on Sunday “You know, 87% of my union doesn’t have health insurance because they make less than $26,000 a year.” Academy Award-winning actress Jessica Chastain, who participated in…

bbc.com/worklife It’s been condemned by Britain, Germany and France, and banned in Brazil, says Eric Alt. Its “violence and vehicular mayhem” has “drawn the ire” of campaigning organisations. But Rockstar Games’ “wildly successful” Grand Theft Auto has a cult following and its return in 2025, with GTA VI, is expected to be a spectacular financial success. GTA V had sold more than 190 million copies by September 2023, bringing in revenue of £623m. It had the best opening week of sales in video-game history, earning £1.2bn in just five days. All told, the franchise has earned more than £6.4bn since 2008. So expectations for GTA VI are high. It will be staking its claim to a growing industry. By the end of 2023, total revenues were expected to hit £199bn.…

Last year financial technology (fintech) finally went mainstream. Here are some examples that underline my case. Exhibit one: stockmarket indices. AI-focused equity indices had a superb 2023. Investment group WisdomTree, for instance, has an AI-focused exchange-traded fund (ETF) tracking a specialised index. In 2023 it rose by almost 50%. But the fintech news website AltFi runs a similar stockmarket index for global fintech firms. It gained nearly 60% last year. Then there is exhibit two: AltFi runs an annual awards ceremony for the most innovative fintech companies. Can you guess which provider won the award for the best digital bank in 2023? Chase UK, a brand also known as JPMorgan Chase, which happens to be one of the world’s largest banks, and a late convert to the potential of fintech.…

Small businesses planning for 2024 may be hoping to borrow to fund their strategies for growth and expansion. But overly cautious banks are too often demanding personal guarantees from the directors of companies arranging finance, warns the Federation of Small Businesses (FSB). It has filed a “super-complaint” with the Financial Conduct Authority, the City regulator, asking it to investigate such practices. The FSB is particularly concerned that banks are targeting directors of limited-liability companies, where directors are largely protected from personal liability for debts incurred by their firms. When a bank demands a personal guarantee from the directors, this undermines the protection that the limited-liability structure is supposed to provide. Some businesses may decide this is a risk they don’t want to take, hampering their ability to grow; others may…

Research shows that illiquid stocks tend to perform better over the long term. This is particularly true for companies with a large main shareholder or group of associate shareholders, such as a wealthy family. There are two reasons why this tends to be the case. Firstly, shareholders who own a large proportion of a firm tend to have a longer-term outlook than individual shareholders, and they are less likely to dump and run when the company misses its quarterly numbers. It’s also far harder to find a buyer for large blocks of stock; it is not a straightforward case of an ordinary investor selling a few thousand shares. Companies with owner-operators (where the majority investor or investors also call the shots in the day-to-day running of the firm) also tend…

In 2018, the CEO of Nikola, an upstart company seeking to make viable electric- and hydrogen-powered lorries, released a promotional video of its prototype Nikola One truck, which appeared to drive under its own power, says Tech Crunch. In reality, it was rolling down a hill. That video sparked investigations by Hindenburg Research, which called the company a fraud. Last month, that drama came to a close when Trevor Milton (pictured), the disgraced founder and former CEO of the company, was found guilty of lying to investors about the development of Nikola’s electric trucks in order to inflate the stock price, and was sentenced to four years in prison. Milton, now 41, had ambitions to be the next Elon Musk – his company, like Musk’s, was named after inventor Nikola…

2023 Oxford Landing Estates, Chardonnay, South Australia £7.49, reduced to £6.49, until 30 January in 265 Waitrose stores It is extremely unlikely that over the next 12 months of this brand-new year I will find another MoneyWeek-worthy wine that dips below the price tag of today’s incredible beauty. It helps that Waitrose has shaved a pound off the new vintage of Oxford Landing Chardonnay in its January sale, so this is one of the least-expensive, epic-tasting wines ever featured on this page. This wine is one of the 100 Best Australian Wines in my 2023/24 Report, and I will be pouring this wine and a host of other beauties at my four regional 100 Best Festivals in March. Check out my website for full details and ticketing information on…

The Wealth of a Nation Institutional Foundations of English Capitalism Geoffrey M. Hodgson Princeton University Press, £30 One of the biggest debates among economic historians is the reason for the sudden take-off in British economic growth after 1760 during the industrial revolution. Some say it was down to good luck, combined with large amounts of cheap, easily available energy in the form of coal. Others argue it was the result of good policies, especially secure property rights. Geoffrey Hodgson, however, contends that it was all down to the development of “financial capitalism”. He claims that capitalist growth requires more than just free markets and property rights, which had existed for thousands of years – you also need a financial system that enables people to borrow, and buy and sell debt.…

With the West dogged by talk of recession and China flagging, “India has emerged as a much-needed global good news story”, says Craig Mellow in Barron’s. The local BSE Sensex stock index rose by 18.5% in 2023 and has more than doubled since the pandemic era lows of 2020. Pro-business prime minister Narendra Modi is likely to win a third term this spring, so expect “the good times... to keep rolling in 2024”. The “sizzling rally” recently saw the National Stock Exchange of India, one of the country’s two exchanges, surpass Hong Kong as the world’s seventh-largest, says Diksha Madhok for CNN. By total value, Indian stocks already rank fourth globally, behind the US, China and Japan. The stock surge has been accompanied by a listings boom. Indian markets hosted…

“I will never understand the permabear mindset... Sometimes the market is overvalued. It does crash. There are corrections... and black swan events... it’s helpful to hear a reasonable bearish argument to keep you grounded... [But] there is a huge difference between bearish analysis and permabear doomers [who are always gloomy]... many of the financial doomers were born out of the Great Financial Crisis... These people are still living on being right once... even though basically none of them have been right ever since... the world could end... but the permabears are not going to help you if that happens. All they care about is profiting due to the fears of others... [As] William Bernstein once wrote, ‘The reason that ‘guru’ is such a popular word is because ‘charlatan’ is so…

What’s happened? Compared with expectations widespread in the West two years ago – that sanctions and the draining effects of Vladimir Putin’s Ukraine war could lead to economic collapse – the Russian economy is doing strikingly well. Twelve months ago, Western analysts expected an overall contraction over the course of 2023. Instead, Russia’s economy grew far more strongly than Western nations (including the UK), with GDP up by more than 3%. Higher oil prices and a ramping-up of exports to China and India have helped protect Russia from the catastrophe many predicted. The withdrawal of Western firms has opened up new niches for Russian firms, while capital controls have left them with no option but to invest in Russia. And massively increased defence spending – including on soldiers’ wages and…

Welcome to another year of markets obsessing over when central banks will cut interest rates (see right) and mostly imploring/coercing them to do so faster. We have had almost two decades of this game: the focus on the Fed dates back to when central banks cut too deeply in the early 2000s and embedded the idea that the “Greenspan put” would always be there to bail markets out. And yet the prospects for moving beyond it seem faint. It doesn’t help that most sides are lining up to claim victory as inflation eases. Those who always argued that it was transitory can say that we have not seen a 1970s-style wage/price spiral, but monetarists can equally point out that prices came under control just as policy got tighter. And in…

Rarely can the aphorism “pessimists sound smart, optimists make money” have been truer than in 2023. The Eeyores came into the year insisting that rising interest rates would cause a recession in the developed world, corporate profits would be hit, stockmarkets would slump and the only safe haven would be in government bonds. Yet recession was averted, earnings dipped but returned to growth, equities, especially in the US, performed well and government bond yields continued to rise (reflecting falling prices). The pessimists argue that most of the market’s gain was attributable to the “Magnificent Seven” stocks at the top of the US market (eight if you include Netflix), which make up 28% of the S&P 500 and jointly rose by 80%. This is, they believe, an unsustainable bubble that will…

usa.streetsblog.org After years of delays, Elon Musk’s Tesla Cybertruck, which looks like an “apocalypse bunker on wheels”, is finally on sale, says Kea Wilson. It is an exemplar of all the “worst impulses” of the motor industry. “Pretty much everything” about the car has been “maximised for pedestrian extinction” – it is huge, weighty and has a deadly hood design, and can accelerate faster than most Formula One cars, but silently and with a driver likely to be distracted by the car’s infotainment system. It gives buyers a false sense they’re doing good for the planet, when the reality is that the trucks are an “astonishingly inefficient use of precious battery materials”. And for all the promotional footage of the truck tearing through unspoilt countryside, the reality is that most…

For two years it has been impossible to earn a big enough return on cash savings to outpace inflation. In terms of spending power, then, your savings have been shrinking despite earning interest. For example, at today’s inflation rate of 3.9%, £20,000 in a savings account earning 3.15% will produce £630 interest a year, but you would lose that sum in addition to another £144 annually in real terms. However, the good news is that there are now several bank accounts where you can earn enough interest to beat inflation. The top-paying easy-access account is offered by Metro Bank and pays 5.22%, well above inflation. But this account includes a 3.46% bonus rate for the first year. So, after 12 months you will need to shift your cash. If you…

Self-employed workers and small-business owners operating as sole traders have until 31 January to file their self-assessment tax returns for the 2022-2023 financial year, and to pay the remaining income tax they owe for the year. But while that tax year finished last April, there are still things you can do to cut your bill. Firstly, if you are eligible, make sure you are claiming back higher-rate tax relief on the personal pension contributions you made during 2022-2023. Pension companies claim basic-rate relief on your behalf but won’t usually claim any higher-rate relief you’re owed. If you’re a higher-rate taxpayer, this will reduce your tax bill by 20% of your total contribution for the year. Next, check your allowable expenses: every single running cost incurred by your firm, which you…

“Broadcom’s biggest customers are Google and Meta, the owner of Facebook” The equity-income landscape has changed materially over the past two decades. Dividends used to be concentrated in certain traditional income-paying sectors – think healthcare, consumer staples, banks, and commodities. Now you can find many dividend-paying firms in non-traditional areas such as technology and industrials. This means that investors can profit from companies underpinned by secular growth trends, such as artificial intelligence (AI) and electrification. We focus on these non-traditional income sectors, seeking companies with sustained competitive advantages that we believe will translate into strong free cash flow and dividend growth. A disciplined approach to portfolio construction can also help deliver resilient returns over the long term. We highlight three compelling opportunities for income investors. Semiconductors powered by AI Broadcom…