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UK increasingly unhealthy economy

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Could the nation’s dodgy health and creaking health system be linked to its economic problems?

These two are often discussed in isolation from each other. But it has become clear that the rising number of people who are out of the labour market and suffering from long-term illness is having an impact.

The evidence from the latest official data confirms the pattern. Since 2009, the number of people across the UK who are long-term sick has risen from 2 million to more than 2.5 million.

In the ONS’s figures for Scotland the evidence isn’t quite so stark, but it’s still there.

The number of people classified as “economically inactive” and giving the reason as long-term illness was below 200,000 in 2018. In each of the past four quarters, it has been above 240,000.

There is a problem with long Covid and with NHS waiting lists as the health service struggles to recover from the demands put on it by the pandemic.

But as with the UK figures, it’s not quite that simple.

The figures were low in 2018 and beginning to rise in 2019, before Covid struck. From 2019, as the UK total has risen from 2 million to 2.5 million, 360,000 of those were added after the pandemic began.

 

Long-term sickness graphic

 

The ONS had a deeper dive into its own UK-wide figures in a recent report and it muddied the waters further.

Yes, it said there’s clearly an issue about the rising number of people citing long-term illness as the cause of being absent from the labour market.

But no, it’s not just about the pandemic.

Those citing “mental health and nervous disorders” rose by 22% between 2019 and this year. Those with back and neck problems rose by more than 60,000, or 31% – and that may be a warning about the risks of so many people doing office work from home.

But then it was the retail and wholesale sector that had many of the worst long-term health problems.

The ONS found a significant number of those with long-term illness had previously given the cause as “looking after a family member”, including parenting or looking after older parents.

 

Covid patient and nurse

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And a significant number who ceased to have long-term illness moved to another reason for not being available for work, including looking after a family member.

What are we to make of that? The ONS tends not to interpret its own numbers, so the interpretation is up to others.

And one of those others is Andy Haldane, former chief economist of the Bank of England and now chief executive of the Royal Society of Arts.

He delivered a strong message to the Health Foundation last week, which emphasised that the economy should not be seen in isolation from the rest of society.

It is within “a tightly-coupled set of complex sub-systems”, including financial, social, community and health relationships.

A society is “only as strong as its weakest sub-system”, Haldane said.

A healthier population can be linked to economic growth over the past three centuries.

But the lack of resilience now within UK health and healthcare contributes to a “weak and weakening societal immune system”.

 

Office workers, Edinburgh

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It’s no coincidence, he suggested, that life expectancy has taken a dip, and healthy life expectancy – the age the average person reaches before ill-health reduces the quality of life – has become more of a factor.

The picture is clearly aligned with deprivation. Poorer people die younger, and have shorter healthy lives, and that trend is clear with each tenth of the population.

The problems set in early and need to be addressed at childhood, yet Haldane listed the ways in which public services for children are being depleted.

In Scotland, there is a response to that, with the Scottish Child Payment – this week rising to £25 per week and extended from nursery level to children up to 16 years of age – covering about 400,000 young people.

That is seen by poverty campaigners as a very important step in the direction of tackling those issues.

While older groups seem to be, predictably, more vulnerable to physical ailments that keep them from working, the bigger growth rate is in younger age groups.

Between spring 2019 and spring of this year, the number classified as “long term ill” in the ONS numbers were up 29% for those aged 16 to 24, and by 42% for those aged between 25 and 34.

That took them to 14% of all those in the category of long-term illness, and of them more than 60% were men.

Mental health

Mental health appears to be a key element of this.

Haldane highlights that as a reason for being unable to work given by 50% more people aged 16 to 24 than was the case in 2006. It’s true of young women, but again, there’s more of a rise among young men.

The Resolution Foundation has found the number of young men in that category across the UK rose from 18,400 in 2006 to 27,400 last year.

All this raises questions of how well the NHS is set up to meet the challenge.

Haldane’s lecture suggested that simply plugging gaps and hoping to fill vacancies is to ignore the gulf in provision when compared with similar countries.

The UK has long had a highly efficient health system, and people have been very proud of it.

But that efficiency is looking less attractive as its capacity struggles to meet need, demand and expectations.

Time for employers to act

This is a problem for the economy broadly. But it’s being recognised also as a problem for business.

While workers are awaiting NHS procedures, some may be off work, and some others may be working at well below their potential.

Haldane argued that the “ESG” mantra of business – environment, social and governance – must have an H added for health.

 

Fatigued woman file picture

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And the CBI employers’ organisation has set out its prospectus for a wellbeing approach.

It calculates that 131 million working days lost to ill health in the UK each year translates to a total cost of £180bn per year.

It sets out a plan that would help industry interventions in the working-age population to reduce levels of ill-health by up to 20% by the end of this decade.

It’s launching a UK-wide Work Health Index to benchmark businesses’ health provision.

‘Urgent action’

Brian McBride, president of the CBI, said: “Labour market resilience is a precondition to growth. Without healthy, productive employees, the UK economy will be unable to achieve the growth it sorely needs.

“Businesses understand the link between health and wealth, and have a major role to play.

“While the NHS continues to serve us all in our moments of immediate need, employers across the UK have a golden window emerging from the pandemic to lean into long-term measures which enhance employee health and wellbeing.

“With the UK staring down a fiscally constrained period, the moment to boost the UK’s preventative health model is now.”

At the Health Foundation in London, policy manager Sharlene McGhee says that employers have a big role: “Businesses should focus on keeping people with ill-health in employment, maintaining contact with workers on sick leave and making adjustments to ensure their working environment is accessible”.

She said one in four of those counted as economically inactive due to long-term illness were actively wanting or trying to get back to work, and the pressure to do so was increased by the squeeze on their household budgets.

But it’s about a lot more than employers, she added: “The government must recognise the drivers and scale of the recent rise in economic inactivity. This cannot be achieved by solely focusing on the unemployed.

“People out of the labour market should be a priority. Without urgent action to support people with ill health back into work, long-term sickness is at risk of having an enduring impact on the national economy.”

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Here is Trump economy: Slower growth, higher prices and a bigger national debt

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If Donald Trump is re-elected president of the United States in November, Americans can expect higher inflation, slower economic growth and a larger national debt, according to economists.

Trump’s economic agenda for a second term in office includes raising tariffs on imports, cutting taxes and deporting millions of undocumented migrants.

“Inflation will be the main impact” of a second Trump presidency, Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera.

“That’s ultimately the biggest risk. If Trump is president, tariffs are going up for sure. The question is how high do they go and how widespread are they,” Yaros said.

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports.

During Trump’s first term in office from 2017 to 2021, his administration introduced tariff increases that at their peak affected about 10 percent of imports, mostly goods from China, Moody’s Analytics said in a report released in June.

Those levies nonetheless inflicted “measurable economic damage”, particularly to the agriculture, manufacturing and transportation sectors, according to the report.

“A tariff increase covering nearly all goods imports, as Trump recently proposed, goes far beyond any previous action,” Moody’s Analytics said in its report.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. They could also affect businesses’ decisions about how and where to invest.

“There are three main tenets of Trump’s campaign, and they all point in the same inflationary direction,” Matt Colyar, assistant director at Moody’s Analytics, told Al Jazeera.

“We didn’t even think of including retaliatory tariffs in our modelling because who knows how widespread and what form the tit-for-tat model could involve,” Colyar added.

‘Recession becomes a serious threat’

When the US opened its borders after the COVID-19 pandemic, the inflow of immigrants helped to ease labour shortages in a range of industries such as construction, manufacturing, leisure and hospitality.

The recovery of the labour market in turn helped to bring down inflation from its mid-2022 peak of 9.1 percent.

Trump has not only proposed the mass deportation of 15 million to 20 million undocumented migrants but also restricting the inflow of visa-holding migrant workers too.

That, along with a wave of retiring Baby Boomers – an estimated 10,000 of whom are exiting the workforce every day – would put pressure on wages as it did during the pandemic, a trend that only recently started to ease.

“We can assume he will throw enough sand into the gears of the immigration process so you have meaningfully less immigration, which is inflationary,” Yaros said.

Since labour costs and inflation are two important measures that the US Federal Reserve weighs when setting its benchmark interest rate, the central bank could announce further rate hikes, or at least wait longer to cut rates.

That would make recession a “serious threat once again”, according to Moody’s.

Adding to those inflationary concerns are Trump’s proposals to extend his 2017 tax cuts and further lower the corporate tax rate from 21 percent to 20 percent.

While Trump’s proposed tariff hikes would offset some lost revenue, they would not make up the shortfall entirely.

According to Moody’s, the US government would generate $1.7 trillion in revenue from Trump’s tariffs while his tax cuts would cost $3.4 trillion.

Yaros said government spending is also likely to rise as Republicans seek bigger defence budgets and Democrats push for greater social expenditures, further stoking inflation.

If President Joe Biden is re-elected, economists expect no philosophical change in his approach to import taxes. They think he will continue to use targeted tariff increases, much like the recently announced 100 percent tariffs on Chinese electric vehicles and solar panels, to help US companies compete with government-supported Chinese firms.

With Trump’s tax cuts set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, the tax cuts to higher earners like those making more than $400,000 a year would expire.

Although Biden has said he would hike corporate taxes from 21 percent to 28 percent, given the divided Congress, it is unlikely he would be able to push that through.

The contrasting economic visions of the two presidential candidates have created unwelcome uncertainty for businesses, Colyar said.

“Firms and investors are having a hard time staying on top of [their plans] given the two different ways the US elections could go,” Colyar said.

“In my entire tenure, geopolitical risk has never been such an important consideration as it is today,” he added.

 

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China Stainless Steel Mogul Fights to Avoid a Second Collapse

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Chinese metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars. Two decades on, he’s once again fighting for survival.

A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed. Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co., along with plants held by his wife and son. Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.

 

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Why Trump’s re-election could hit Europe’s economy by at least €150 billion

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A Trump victory could trigger a 1% GDP hit to the eurozone economy, with Germany, Italy, and Finland most affected. Renewed NATO demands and potential cessation of US aid to Ukraine could further strain Europe.

The potential re-election of Donald Trump as US President poses a significant threat to the eurozone economy, with economists warning of a possible €150 billion hit, equivalent to about 1% of the region’s gross domestic product. This impact stems from anticipated negative trade repercussions and increased defence expenditures.

The recent attack in Butler, Pennsylvania, where former President Trump sustained an ear injury, has boosted his re-election odds. Prediction markets now place Trump’s chances of winning at 71%, a significant rise from earlier figures, while his opponent, Joe Biden, has experienced a sharp decline, with his chances dropping to 18% from a peak of 45% just two months ago.

Rising trade uncertainty and economic impact from tariffs

Economists James Moberly and Sven Jari Stehn from Goldman Sachs have raised alarms over the looming uncertainty in global trade policies, drawing parallels to the volatility experienced in 2018 and 2019. They argue that Trump’s aggressive trade stance could reignite these uncertainties.

“Trump has pledged to impose an across-the-board 10% tariff on all US imports including from Europe,” Goldman Sachs outlined in a recent note.

The economists predict that the surge in trade policy uncertainty, which previously reduced Euro area industrial production by 2% in 2018-19, could now result in a 1% decline in Euro area gross domestic product.

Germany to bear the brunt, followed by Italy

Germany, Europe’s industrial powerhouse, is expected to bear the brunt of this impact.

“We estimate that the negative effects of trade policy uncertainty are larger in Germany than elsewhere in the Euro area, reflecting its greater openness and reliance on industrial activity,” Goldman Sachs explained.

The report highlighted that Germany’s industrial sector is more vulnerable to trade disruptions compared to other major Eurozone economies such as France.

After Germany, Italy and Finland are projected to be the second and third most affected countries respectively, due to the relatively higher weight of manufacturing activity in their economies.

According to a Eurostat study published in February 2024, Germany (€157.7 billion), Italy (€67.3 billion), and Ireland (€51.6 billion) were the three largest European Union exporters to the United States in 2023.

Germany also maintained the largest trade surplus (€85.8 billion), followed by Italy (€42.1 billion).

Defence, security pressures and financial condition shifts

A Trump victory would also be likely to bring renewed defence and security pressures to Europe. Trump has consistently pushed for NATO members to meet their 2% GDP defence spending commitments. Currently, EU members spend about 1.75% of GDP on defence, necessitating an increase of 0.25% to meet the target.

Moreover, Trump has indicated that he might cease US military aid to Ukraine, compelling European nations to step in. The US currently allocates approximately €40bn annually (or 0.25% of EU GDP) for Ukrainian support. Consequently, meeting NATO’s 2% GDP defence spending requirement and offsetting the potential reduction in US military aid could cost the EU an additional 0.5% of GDP per year.

Additional economic shocks from Trump’s potential re-election include heightened US foreign demand due to tax cuts and the risk of tighter financial conditions driven by a stronger dollar.

However, Goldman Sachs believes that the benefits from a looser US fiscal policy would be marginal for the European economy, with by a mere 0.1% boost in economic activity.

“A Trump victory in the November election would likely come with significant financial market shifts,” Goldman Sachs wrote.

Reflecting on the aftermath of the 2016 election, long-term yields surged, equity prices soared, and the dollar appreciated significantly. Despite these movements, the Euro area Financial Conditions Index (FCI) only experienced a slight tightening, as a weaker euro counterbalanced higher interest rates and wider sovereign spreads.

In conclusion, Trump’s potential re-election could have far-reaching economic implications for Europe, exacerbating trade uncertainties and imposing new financial and defence burdens on the continent.

 

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