Brussels has threatened to collapse the post-Brexit trade deal if Liz Truss triggers Article 16 of the Northern Ireland Protocol when negotiations resume. Maros Sefcovic, a European Commission vice-president, said the EU would seek to scrap the post-Brexit trade deal if the Foreign Secretary unilaterally overrides the measures designed to prevent a hard border. Ms Truss has already told her EU counterpart she will not drop Lord Frost's threat to trigger Article 16 and "remained prepared" to suspend areas of the Brexit deal relating to the province if the bloc failed to compromise. The UK's repeated threats to trigger Article 16 are "an enormously disruptive element in the negotiations", Mr Sefcovic told German newspaper Der Spiegel in a warning shot to Ms Truss. "You try to achieve something together, and – boom – there's the threat of Article 16 again," he said. "That goes to the heart of our relationship. This would initially have sever

 Policymakers in the United States spent much of 2021 insisting that inflation was a “transitory” effect of a rapid recovery. Yet, they start in 2022 scrambling to apply the brakes to rising prices (Callum Jones writes). A majority of the Federal Reserve’s rate-setters now expect at least three interest rate increases in the coming year. The central bank has not merely started tapering its vast support for the American economy, it has picked up the pace, and its asset-purchase scheme is on course to wind down within months. While this hawkish tilt is designed to alleviate the risk of the economy overheating, the emergence of yet another variant of Covid-19 has clouded the road ahead. Mounting numbers of coronavirus cases “pose risks to the outlook”, Jerome Powell, the Fed chairman, acknowledged recently. Should Omicron, the latest variant, undermine the overall recovery, some economists fear that inflation — driven by robust demand for goods in the face of sustained supply and labour s

  Anne Boden, the chief executive of Starling Bank, has been accused by more than 50 fintech company founders of stifling innovation after saying that Britain’s open banking regime had failed. The group, which includes the bosses of the fintech firms LendInvest, Zopa and Nested, wrote to MPs this week describing Boden’s comments during a Treasury select committee hearing as “uncompetitive and typical of banks trying to thwart the future of innovation in financial services”. Boden, 61, told the hearing on the future of financial services that the government-backed scheme launched three years ago had failed to encourage people to switch banks. “Customers are not influenced to switch banks because they can take their data with them. They switch banks because they want better service,” she said. While many fintech companies were set up to use open banking data, “nobody had a business model, because nobody is prepared to pay for that data”. She added: “Sometimes, you have to realise that it

  Household budgets face a £1,200 hit next spring because of higher energy bills, tax rises and stagnant wages, a think tank has warned. Today, the Resolution Foundation said that 2022 would be the “year of the squeeze” on people’s finances. Its quarterly  Labour Market Outlook , which projects how workers and families will be affected by economic shifts, says the UK faces a “cost of living catastrophe” in April. The cap on energy bills will rise that month due to soaring wholesale gas prices, with analysts predicting that households could pay double what they did 12 months ago. The foundation calculated that the typical energy bill would rise by about £600 a year. Ministers are under growing pressure to shield struggling households from soaring energy costs, with suggestions including cutting VAT on energy bills and introducing subsidies. Tax rises announced in the government’s last budget will also affect in April. The report says that the combined impact of a freeze on income tax th

 France and Italy have launched a push to revamp EU budget rules to spur investment and drive growth in a move likely to face a frosty reception from fiscally conservative member states.In a joint article in today’s Financial Times, Mario Draghi, Italian prime minister, and Emmanuel Macron, French president, call for debt raised to fund investments in priority areas to be “favoured by the fiscal rules”.The EU suspended its strict rules governing member state deficits and debt during the pandemic. It is now consulting over reforms to the regime for when the Stability and Growth Pact is eventually reimposed. Italy and France are among states seeking a less rigid approach to state borrowing.While EU members needed to bring down levels of indebtedness, public spending on future priorities “actually contributes to debt sustainability over the long run”, Draghi and Macron argue in their article.“Our strategy is to curb recurrent public spending through sensible structural reforms,” they say.

Dear customer, I am writing to tell you the government has announced additional economic support to help businesses most affected by the Omicron variant of coronavirus: • businesses in the hospitality and leisure sectors in England will be eligible for one-off grants of up to £6,000 per premises, and more than £100 million discretionary  funding will be made available for local authorities to support other businesses • the government will also cover the cost of Statutory Sick Pay for coronavirus-related absences for small and medium-sized employers across the UK • £30 million further funding will be made available through the Culture Recovery Fund, enabling more cultural organisations in England to apply for support during the winter. There is also continuing financial support. You can find more information by searching for 'Omicron support for businesses' on GOV.‌‌UK. Statutory Sick Pay Rebate Scheme If your client is an employer with fewer than 250 employees, and they’ve paid

  The Bank of England will step up talks next year with its international counterparts on a regulatory regime for fast-growing crypto assets. Sarah Breeden, executive director for financial strategy and risk at the Bank, said that moves by banks to offer cryptocurrency trading and custody services to clients meant that global regulators needed to design rules to protect the financial system.  Crypto investments take three primary forms: currencies such as bitcoin, which are not backed by any assets; so-called stable-coins, which aim to hold a store of value more like a means of payment; and decentralised finance, whereby a loan agreed between individuals could take the form of a string of computer code.  “The closer those assets get to the core of the financial system, the more likely those knock-on effects are likely to be material.” While this is just 1 per cent of all global assets, the vast majority of those assets are in “unbacked” items such as bitcoin, which have no underlying a

  Sterling, government bond yields and British bank shares rose yesterday after the Bank of England increased interest rates for the first time in more than three years. The 0.15 percentage point rise in the base rate to 0.25 per cent came as a surprise to investors, who had placed their bets on the Bank holding rates in light of concerns that the Omicron variant of Covid-19 would prompt more restrictions and hinder economic growth. The Bank’s monetary policy committee (MPC) voted 8-1 in favour of raising the base rate from its record low, noting that although Omicron was likely to weigh on economic activity, its impact on medium-term inflationary pressures was unclear at this stage. The pound reacted strongly to the rate rise, although it lost some of its gains later in the day. Against the dollar, sterling rose 0.4 per cent to $1.3321 and 0.4 per cent to €1.1783 against the euro. Government bond yields spiked on the back of the announcement, with yields on ten-year gilts briefly risi

Retail, manufacturing, travel and healthcare companies have warned about staff shortages as rising numbers of workers call in sick with Covid-19 as the Omicron coronavirus variant sweeps the country. One retail executive said staff shortages were not as dire as during the summer “pandemic”, but rising numbers were causing concern.  Rising numbers of sick staff had already sparked worries in labour-intensive industries, with some executives fearing a return to the sort of supply chain disruption seen during the summer “pandemic” when people were forced to isolate themselves after contact with Covid.  Another retail executive said staff were more cautious about coming to work before Christmas, saying that the “fear factor” had risen, as “people don’t want to be caught out and get Covid”.  Gary Grant, chief executive of The Entertainer, the toy retailer, said: “We have more Covid positive cases in the company now than at any time since the start of the pandemic,” he said. Alasdair Murdoch

   The International Monetary Fund has told the Bank of England that it cannot wait much longer to raise interest rates as it warned that inflation could hit a 30-year high next year. The fund said it would be “important to avoid inaction bias, given costs associated with containing second-round impacts”, referring to the danger that rising prices become ingrained in consumers’ expectations, leading to a further rise in the inflation rate.  The IMF stopped short of calling for immediate action but said that monetary policy would remain “accommodative” even after the Bank takes the “initial steps” in tightening.  In its annual report on the British economy, the fund said the UK had staged a stronger than expected recovery from the pandemic but cautioned that the Omicron variant could trigger a “mild slowdown”.  In a veiled rebuke to UK rate-setters, the IMF accused the monetary policy committee of looking for reasons not to tighten policy because of an apparent “inaction bias”.  The IMF

  “The UK banking system has weathered the pandemic well,” said Andrew Bailey, BoE governor, adding that the test included a “much more severe evolution of the pandemic and consequent economic shock” such as £70bn of loan losses, far higher than the £20bn of charges the banks took last year.  The BoE said it would reintroduce a requirement for banks to keep a special rainy day fund, known as the “countercyclical buffer”. This condition was suspended in 2020 to give banks room to keep lending even if the pandemic triggered significant losses.      The top eight banks could withstand a near tripling of unemployment, a sharp fall in property prices, and a significant economic contraction. So the Bank of England said yesterday that it gave lenders a clean bill of health almost two years into the coronavirus pandemic.  “Now is the right time to start rebuilding resilience,” Bailey said, as he announced the reintroduction of the countercyclical buffer: each bank will have to bring it back up

   A survey has revealed that a record number of manufacturers are raising prices, with factory-gate inflation of up to 10 per cent becoming “built-in” to customers’ expectations.  “While manufacturers will be able to enjoy some festive cheer this year, their spirits will be tempered by the eye-watering impact of escalating cost pressures,” James Brougham, senior economist at Make UK, said.  A balance of 52 per cent of firms said they were increasing prices in the fourth quarter, up from 50 per cent in the third. However, customers have accepted the higher costs “without a response”, suggesting that inflation is “becoming built-in”.  Price increases of 10 per cent have become a “regular occurrence”, it said. To underline how “sharply inflation has bitten”, it said the balance of firms raising prices stood at just 4 per cent in the fourth quarter of 2019, before Britain left the European Union.  Price increases of 10 per cent have become a “regular occurrence”, it said.  Make UK said th

  A senior British official yesterday briefed London-based EU journalists that Johnson was no longer seeking the immediate axing of the European Court of Justice from its role in enforcing the so-called Northern Ireland protocol.  Although Johnson wants to settle the "governance" issue of the protocol in the longer term, EU journalists were briefed to focus on securing the smooth flow of goods between Great Britain and Northern Ireland.  Stefanie Bolzen, London correspondent of Die Welt, tweeted that the UK official said: "If Protocol works as advertised, it can provide advantages" for Northern Ireland, which uniquely has a foot in both the UK and EU markets for goods.  According to journalists at the briefing, they had been explicitly summoned to report the "shift" in UK government thinking — an olive branch that could help broker a deal with Brussels.  But when accounts of the briefing started to emerge, Downing Street desperately attempted to downplay w

  Spanish bank Santander must pay Andrea Orcel €68m in compensation after losing a legal battle over its rancorous 2018 U-turn on hiring the Italian banker as chief executive.  The ruling was a significant blow for Ana Botín, executive chair of the Spanish lender, whose tenure since succeeding her father Emilio Botín has been marked by the decision to hire Orcel, a family confidant, and then to drop him, with the resulting legal fight.  The payment the court-ordered from Santander included €10m “for moral and reputational damages” to Orcel, as well as contractual items including €5.8m for two years of salary, a €17m sign-on bonus and €35m compensation for loss of long-term incentives at UBS.  The court ruled that both sides had signed a “valid” contract, which had been broken in a “unilateral and unjustified” manner by the bank and that, therefore, it had to pay compensation.  “I think it’s unfortunate that we are where we are, but if people look only at the facts and what has emerged

Consumer-facing companies such as shops, restaurants and bars remained 5.2 per cent below pre-pandemic levels. Still, all other services, including the public sector, were said to be 1.4 per cent higher than they were in February last year.  Capital Economics said that the GDP figures were disappointing and suggested that the economy had “slowed to a crawl” even before the Omicron variant emerged late last month.  Yael Selfin, a chief economist at KPMG UK, said that she expected the MPC to keep interest rates at the historic low of 0.1 per cent next week before raising borrowing costs in February.  According to official figures, the economy grew by 0.1 per cent in October, compared with its 0.6 per cent expansion in September.  Output in the construction sector fell by 1.8 per cent in October because of bottlenecks in global supply chains and rising input costs.  Services activity rose by 0.4 per cent in October after an increase in face-to-face appointments in GP surgeries boosted the