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UK Recession risk rises as economy unexpectedly shrinks

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The UK economy unexpectedly shrank in August, strengthening predictions that it will fall into a recession.

The surprise 0.3% drop came as factories and consumer-facing businesses struggled, according to official figures.

Analysts thought the economy would stall in August but not shrink as costs mount for businesses and households.

Prices are rising at their fastest rate for 40 years, eating into people’s budgets, and outpacing growth in pay.

In normal times, a country’s economy grows and on average, people become slightly richer as the value of the goods and services it produces – its Gross Domestic Product (GDP) – increases.

But sometimes their value falls, and a recession is usually defined as when this happens for two three-month periods – or quarters – in a row, and it marks a sign the economy is performing badly.

The Bank of England has previously said that it expects the UK to fall into a recession by the end of the year.

The latest data from the Office for National Statistics (ONS) means that in the three months to August, GDP also fell by 0.3%.

The drop in the monthly figure for August was driven by a sharp decline in manufacturing and maintenance work, which slowed down the oil and gas sector, the ONS said.

It marked a fall from July, when the UK economy grew by 0.1%.

But ONS Chief Economist Grant Fitzner said that lots of other customer-facing businesses like retail, hairdressers and hotels were “faring relatively poorly” in August.

“The economy shrank in August with both production and services falling back, and with a small downward revision to July’s growth the economy contracted in the last three months as a whole,” Mr Fitzner said.

He added that sports events didn’t generate as much economic value, after the economy had previously been helped by the UK hosting the Women’s Euro Championship in July.

 

Chart showing GDP in August

 

A reduction in the amount spending by the government related to the pandemic was also one of the big causes of the slump in manufacturing, which was hit by pharmaceutical companies cutting back production.

The ONS added that some falls were off-set, however, by some professional services like accounting and architecture.

The construction sector was the only one of the three main parts of the economy to see growth of 0.4% in August.

Some experts expect that September could see an even bigger drop in economic output, with the extra bank holiday for the Queen’s funeral and the period mourning affecting business opening hours, as well as higher costs starting to bite.

Yael Selfin, Chief Economist at KPMG, said that the UK was now “teetering on the edge of recession”.

“The ongoing squeeze on household finances continue to weigh on growth, and likely to have caused the UK economy to enter a technical recession”.

“August’s drop in GDP likely marks the start of a downward trend that will continue deep into next year,” said Samuel Tombs Chief UK Economist at Pantheon Macroeconomics.

Challenges to face

Meanwhile, Suren Thiru, Economics Director for ICAEW (Institute of Chartered Accountants in England and Wales) criticised Chancellor Kwasi Kwarteng’s recent mini-budget for sparking market turmoil and potentially piling extra pressure on firms and families as mortgage rates have been sent soaring.

Mr Thiru said: “The government has needlessly risked a longer recession with any boost from the energy package likely to be dwarfed by a sustained squeeze on UK output from persistently high inflation, punishing interest rate rises and acute financial market turbulence.”

Chancellor Kwasi Kwarteng insisted the government’s energy support package and growth plan will “address the challenges that we face”.

He added said: “Countries around the world are facing challenges right now, particularly as a result of high energy prices driven by Putin’s barbaric action in Ukraine.”

 

Chancellor Kwarsi Kwarteng

PA Media

Speaking to BBC’s Today programme, Business Secretary Jacob Rees-Mogg also urged caution in interpreting the most recent ONS monthly figures for August.

He pointed out that monthly figures are often more volatile and “very often subject to revision”.

But he acknowledged that the fall in the economic growth number for August “showed the need for the mini-budget in September to make sure we get back onto a path for growth”.

It comes after the International Monetary Fund (IMF) warned that the worst was still to come for the global economy, while 2023 would “feel like a recession” for many people because of rising costs and the continued fall-out of Russia’s invasion of Ukraine.

The financial institution warned on Tuesday that the UK economy could sharply reduce in 2023 as consumer spending is dented by rising prices and higher interest rates.

It downgraded its forecast for UK economic growth next year to just 0.3% in 2023 – down from 0.5% previously pencilled in.

Rachel Reeves MP, Labour’s Shadow Chancellor, said: “That the IMF yesterday described the “UK like a car with two people each trying to steer the car in a different direction” leaves us an international laughing stock.

She said that the new ONS figures released on Wednesday showed that the UK economy “is still in a dire state because of this Tory government.

“The Conservatives must reverse their disastrous mini-Budget. Any continued failure to do so shows damaging levels of denial from the prime minister and her chancellor.”

The IMF did welcome the news though that the chancellor has brought forward the date for his “economic plan” to 31 October, where he will set out will set out how he will fund tax cuts that he has pledged and reduce debt.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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N.B. election: Parties’ answers on treaty rights, taxes, Indigenous participation

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FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.

Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?

Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.

Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.

Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.

Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?

Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.

Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.

Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.

Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?

Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.

Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.

Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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Canadian Coast Guard crew member lost at sea off Newfoundland

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ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.

The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.

He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.

The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.

Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”

The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.

Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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