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28 December 2015 |
It’s the final week of 2015 so today’s article will examine the current trends and what to watch in 2016.
Are politicians losing their opinion and forthright nature? The Financial Times seems to think so. It argues through case studies globally that as immigration becomes the scapegoat for issues including economic stagnation, inequality, low living standards as well as the increasing threat of terrorism, politicians are rejecting their previous opinions and stances in favour of the people. Whilst there is no doubt that politicians need to listen to the demands of the people, they also need to consider the long term benefits and consequences as people’s opinions swiftly change. Are politicians simply acting as the Financial Times suggests with their own power in mind and not in the interest of the country? In light of this, will the issue of immigration actually be solved democratically and properly or will a closed door policy just automatically become adopted because public opinion demands it?
The UK in particular are attempting to take action through the new proposed immigration bill which is ‘due to have its first reading in the House of Lords this week’ according to The Guardian. However, this has raised criticism amongst anti-slavery campaigners as they argue it will prevent those in slavery from escaping. The Guardian reports Caroline Robinson, the policy director at the Focus on Labour Exploitation (Flex) comments, ‘“We have serious concerns that the immigration bill will make people more vulnerable. The proposed legislation hands unbelievable control to traffickers. The purpose of this illegal working offence is to find people and get them out of the country and our fear is that victims won’t want to come forward because of the immigration consequences.”’ Hence, the bill proposes that a ‘12-month sentence and unlimited fine’ for those working illegally in the UK. Whilst the bill still has to jump through many loopholes before becoming law, it looks as if the closed door policy is looking likely. However, as mentioned in previous articles, the impact of immigration is not always negative; will the UK lose out on the positive aspects by implementing this bill as well as provide a haven for more human abuse?
The recent election outcome in Spain has raised uncertainty within Spain and consequently the Eurozone. The Telegraph has described the event as an ‘electoral earthquake’ as it dismantled the ‘traditional two-party system, leaving the country almost ungovernable.’ The elections saw the radical party Podemos being elected after receiving 20.7 per cent of the vote. Podemos however, wants ‘to overturn the government’s bank bail-out and to restructure financial debt’. This no doubt will create friction between European nations. Nonetheless this comes during a time when the Southern European economies are improving; Spain itself in 2015 grew at a rate of 3% according to the Guardian. However, despite this unemployment in Spain is at 21% reasoning elements of dissatisfaction with austerity measures. Is this the beginning of another slippery slope for the Eurozone in 2016?
A record high! Boxing Day sales according to retail analyst Springboard increased by 11.7% in the UK reports the BBC. PCA Predict reported that on Christmas Day itself sales were up 21%. BBC explains how ‘John Lewis reported a 10.7% increase in revenues on 25 December compared with last year, with the busiest time between 21:00 GMT and 22:00 GMT once families were finished with food and presents.’ Will this impact and help economic growth in the final quarter of 2015 for the UK? It will be interesting to see if this spending trend continues in 2016 and what the figures for Q4 look like when released.
In other business news, Reuters has reported five major banks; JP Morgan, Bank of America Merrill Lynch, Deutsche Bank, Nomura Holdings and Morgan Stanley, have paid no corporation tax in 2014. How is this possible? Surely, as some of the biggest institutions and employers in Britain this would attract immediate attention? The BBC goes onto explain that ‘The research into the financial reports found that seven banks, which also included Goldman Sachs and UBS, used tax benefits as well as losses generated during the banking crisis to reduce their corporation tax bills. The seven banks paid a combined £20m in corporation tax in 2014, even though they had profits of £3.6bn on revenues of £21bn, the news agency said. The banks employed 33,000 staff.’ Despite this, it would appear that the banks have acted legally following all tax laws and simply just offsetting their losses against their profits. Surely this is not fair?
What will 2016 have in store for Britain? The Independent writers appear to be split in opinion. Deputy Political Editor Nigel Morris suggests that as families spend beyond their means the economy is at threat of another crash. Morris reports that families in the UK are ‘to spend £40bn more than they earn this year, fuelling fears that the country’s economic growth is based on soaring levels of debt and could easily collapse.’ On the other hand Jonathon Owen argues that the UK is to become the ‘best-performing economy in Western Europe’ as the 2016 World Economic League Table reports. It is believed that by 2030s the UK economy will overtake Germany and Japan due to its strength in ‘software and IT applications’ as well as its cultural diversity. However, the UK has a long way to go until the 2030s- will the World Economic League Table’s Prediction be hindered by events in 2016?
Nonetheless, it is no all doom and gloom as the property market looks like it will take off again next year within the UK. Bloomberg reports on The Royal Institution of Chartered Surveyors analysis explaining that ‘low borrowing costs and a shortage of supply will drive U.K house prices up 6 percent next year’. Will the increase in interest rates, predicted in late 2016 be too late? Will the Bank of England need to act beforehand in order to control the housing issue? Whilst George Osborne has attempted to resolve the housing issue by increasing spending on housing announced during the mid-term review last month, the time lag due to the development of housing means that during the interim period the issue remains. Bloomberg quotes the Chief Economist, Simon Rubinsohn at the Royal Institution of Chartered Surveyors who explains, ‘Lack of stock will continue to be the principal driver of this trend but the likely persistence of cheap money will compound it for the time being.’ Whether Osborne’s initiative will work and whether house prices will rise to predicted levels remains to be seen? However, despite Nigel Morris’ predictions, it appears 2016 might actually be a positive year for Britain. Let’s just hope the right type of growth is being achieved and the recovery is not creating another price bubble that could easily pop.
China and its economy are no doubt at the heart of the world economy and therefore when the markets in China crashed in August, a state of shock from countries worldwide emerged. China’s growth has slumped slightly this year, still high in comparison to Western economies, but weak in comparison to previous levels and therefore leaders met this week in order to form a strategy to increase growth. According to Bloomberg ‘leaders singled they will take further steps to support growth including widening the fiscal deficit and stimulating the housing market…Officials also pledged assistance for rural residents seeking to buy homes in urban areas and encouraged cheaper residential prices.’ The leaders commitments are clearly summarised by Bloomberg in the following:
‘Additional Central Economic Work Conference pledges, as outlined by Xinhua reports:
Hopefully, providing that these measures actually support growth, hopefully a recovery within China’s economy may encourage further worldwide growth.
In recent weeks oil has hit an eleven year low and OPEC do not predict a recovery to $70 a barrel until 2020. However, Morgan Stanley analysts Adam Longson and Elizabeth Volynsky’s recent argument casts doubt on this claim. They argue that the lifting of Iranian sanctions, which appears to be happening more quickly than expected, will see 500,000 barrels per day of oil being released onto the market between January and March 2016 Bloomberg summarises. This will further increase supply in the market resulting in and potentially increasing worries in the market. Nonetheless, Bloomberg reports how this prediction contrasts to observations by Credit Suisse who predict a recovery of sorts for oil prices. 2016 raises a lot of questions, and whilst there has been much volatility within the oil market, is it really possible for it to dramatically recover?