Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.40) and Nick Fletcher

Little progress on UK gender pay gap; £84bn Brexit black hole warning – as it happened

City of London Skyline at Dusk.
City of London Skyline at Dusk. Photograph: Alamy

The revival in the oil price has proved short lived, as doubts over producers agreeing to curb output at next month’s Opec meeting began to outweigh the news of a surprise drop in US crude stocks.

So Brent crude is currently down 1.3% at $50.13 a barrel while West Texas Intermediate is 0.9% lower at $49.47.

On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

European markets rebound from worst levels

A fall in commodity shares along with the usual concerns about Brexit and the US election, along with some disappointing results from the likes of Apple, have left most European markets nursing losses. However a revival in the oil price after a surprise drop in US crude stocks saw Wall Street reverse earlier falls and drag European shares off their worst levels. The final scores showed:

  • The FTSE 100 finished down 59.55 points or 0.85% at 6958.09
  • Germany’s Dax dropped 0.44% to 10,709.68
  • France’s Cac closed 0.14% lower at 4534.59
  • Italy’s FTSE MIB added 0.29% to 17,280.74
  • Spain’s Ibex ended up 0.37% at 9173.3
  • In Greece, the Athens market added 0.09% to 589.46

On Wall Street the Dow Jones Industrial Average is currently up 53 points or 0.29%.

With Wall Street turning positive in the wake of the oil price recovery, European markets are coming off their worst levels, albeit still down on the day. Chris Beauchamp, chief market analyst at IG, said:

US markets continue to dictate the tone, as disappointing numbers from Apple weigh on sentiment, while investors keep a nervous eye on falling oil prices. While scepticism around the OPEC deal was palpable, no one really expected it to unravel this quickly, but a procession of nations bearing their own ‘sick notes’ as to why they couldn’t possibly be expected to participate has shown that the unanimity on display recently was simply a front. In addition, sentiment has been hit by news that the Trump campaign for president may not be quite as DOA as previously thought. When combined with the disappointing numbers from Apple, it is clear to see why markets remain under pressure.

At least oil prices have stabilised, with the weekly crude inventories providing their usual burst of volatility. The drop in stockpiles might provide some temporary relief, but overall if the OPEC deal continues to unravel then we could see the lows tested in short order.

Oil prices have recovered some ground from earlier falls after a surprise fall in US crude stocks.

Crude inventories dropped by 553,000m barrels last week to 468.16m, compared to expectations of a 4m barrel rise, according to the Energy Information Administration.

So Brent crude, which had fallen as low as $49.65 a barrel on concerns that producers will not agree to curb output at next month’s meeting, is now at $50.63, down 0.32%.

West Texas Intermediate is now up 0.12% to $50.02 a barrel.

The European Central Bank is likely to extend its QE programme beyond the current March end date, according to Reuters:

The European Central Bank is nearly certain to continue buying bonds beyond its March target and to relax its constraints on the purchases to ensure it finds enough paper to buy, central bank sources have told Reuters.

The moves will come in an attempt to bolster what is being heralded as the start of an economic recovery in the euro zone.

ECB policymakers are due to decide in December on the future shape and duration of their 80 billion euros (£71.58 billion) monthly quantitative easing (QE) scheme, based on new growth and inflation forecasts.

They did not discuss specific options at last week’s meeting and no policy proposal has been formulated. But sources familiar with the matter said it was all but sure that money printing would continue in some form beyond March, currently the ECB’s earliest end-date.

The European Central Bank
The European Central Bank Photograph: Kai Pfaffenbach/Reuters

US new home sales have come in slightly better than expected, although there is some confusion in the figures.

They rose to 593,000 units in September, up 3.1% from the August figure of 575,000, which was itself revised down from 609,000. This was lower than the 600,000 expected but given the revision, the rise itself was better than the forecast 1.5% fall.

Updated

US service sector better than expected

The US service sector grew more strongly than forecast in October, according to a report.

The initial Markit US services PMI for this month came in at 54.8, up from the 52.3 expected and 52.3 in September.

US services PMI

Markit’s composite PMI, which includes services and manufacturing, rose from 52.3 in September to 54.9, the highest level since November 2015.

Markit said the surveys suggested that the US economy was growing at an annualised rate of 2% at the start of the fourth quarter. Tim Moore, a senior economist at IHS Markit, said:

The latest survey data reveal a decisive shift in growth momentum across the US service sector, which mirrors the more robust manufacturing performance seen during October.

Service providers experienced the fastest upturn in new business volumes since late 2015, which survey respondents linked to improving domestic economic conditions and signs of greater business investment in particular. That said, job creation remained relatively subdued in October, with firms reporting cautious hiring plans and efforts to alleviate pressures on margins.

October’s survey findings contained positive signs for near-term growth prospects, with service sector companies the most upbeat about the business outlook since August 2015. Moreover, the month-to-month rise in this index was one of the largest seen over the past two years.

US composite PMI

Updated

The fall on Wall Street has helped push European markets lower, with the FTSE 100 dropping by 91 points (1.3%). Germany’s Dax is down 0.97% and France’s Cac has fallen 0.6%.

Updated

The US stock market is dropping at the start of trading, following the UK’s lead.

The Dow Jones Industrial Average has shed 90 points, or 0.5%. Energy companies have slipped after the oil price hit a three-week low today.

And Apple has fallen more than 3% after it posted falling sales and profits last night.

Updated

PwC: How to fix gender pay problems

Laura Hinton, the head of people at PwC, argues that bosses must proactively do more to address the gender pay gap. She says:

It’s encouraging to see the gender pay gap reducing, but the underlying reasons for the gap remain the same. Women are still more likely to work part time, have lower-paid jobs and leave the workforce after having children. Until we tackle these underlying causes, it will be hard to reach true equality in the workplace.

In February, the government outlined plans to force large companies to reveal how much they pay their male and female staff, starting in 2018.

Hinton says this has already worked at her company:

At PwC, publishing our gender pay gap has allowed us to understand the reasons for the gap and helps hold ourselves accountable to make practical changes. For example, we know that when senior women leave us, they are more likely to be replaced by a male.

We are challenging ourselves on this by testing our recruitment processes, making more senior jobs available as flexible or part time and targeting women who have been out of the workplace for a number of years via our return to work programme.

Updated

The Resolution Foundation is playing a blinder today, and has created some more charts to show what’s happening in Britain’s labour market.

This chart shows how the “national living wage” has driven up earnings for customer service jobs above their pre-crisis level. Elementary occupations (unskilled jobs) are close behind.

I was surprised by this chart, which shows that wages in London are the furthest from pre-crisis levels.

And rising inflation is going to drive down real wages this year.

Updated

A quick catchup on the other news today.

Andrew Bailey, the head of the Financial Conduct Authority, has promised to clean up Britain’s financial sector after a long run of scandals and misbehaviour.

Vodafone has apologised after being fined £4.6m for taking pay-as-you go customers’ money without providing a service in return, and for flaws in its complaints handling processes.

And a major new housebuilding project has been approved in Thamesmead, south-east London, at a site famous for staging A Clockwork Orange.

Updated

City of London Skyline.

It’s not been a great morning in the City.

The FTSE 100 has shed 68 points, nearly 1%, to 6,949. Mining stocks continue to struggle after copper company Antofagasta cut its production targets this morning.

The FTSE is also catching up with last night’s rally in the pound back to $1.22, which came after the London stock market closed. A stronger pound is bad for international companies that earn dollars.

Joshua Mahony, a market analyst at IG, says the pound could spike ... if a legal challenge to Brexit is successful.

The continuing legal hearing against the government’s decision to view the referendum result as binding seems like the event risk no one is talking about.

Should the legal challenge succeed, it would push the decision to a vote in parliament, bringing about a sharp appreciation in the pound and subsequent weakness for the FTSE.

The oil price is also under pressure, with Brent crude dropping through the $50 a barrel mark for the first time in three weeks.

Updated

City analyst Alberto Gallo of Algebris Investments points out that UK borrowing costs have been rising since the start of October, as the price of British gilts has dropped.

Updated

UK borrowing costs rise after black hole warning

This morning’s warning that Britain faces an £84bn budget shortfall over the next five years is rippling through the City, and beyond.

The yield, or interest rate, on 10-year UK government debt has risen to 1.14%, up six basis points from 1.08% last night.

That means the price of the bonds has fallen; traders may be anticipating that the government will have to issue much more debt over the next few years.

George Eaton, political editor of the New Statesman, has written a good piece about chancellor Philip Hammond’s dilemma [riffing off the charts I posted earlier].

Here’s a flavour:

Were he to seek a current budget surplus, rather than an overall one (as Labour pledged at the last general election), Hammond would avoid the need for further austerity and give himself up to £17bn of headroom. This would allow him to borrow for investment and to provide support for the “just managing” families (as Theresa May calls them) who will be squeezed by the continuing benefits freeze.

Alternatively, should Hammond merely delay Osborne’s surplus target by a year (to 2020-21), he would be forced to impose an additional £9bn of tax rises or spending cuts. Were he to reject any further fiscal tightening, a surplus would not be achieved until 2023-24 - too late to be politically relevant.

The most logical option, as the Resolution Foundation concludes, is for Hammond to target a current surplus. But since entering office, both he and May have emphasised their continuing commitment to fiscal conservatism (“He talks about austerity – I call it living within our means,” the latter told Jeremy Corbyn at her first PMQs). For Hammond to abandon the goal of the UK’s first budget surplus since 2001-02 would be a defining moment.

Updated

Hopefully, poorly paid people should get another boost this financial year as the national living wage pushes up salaries:

Rupert Harrison, former advisor to former chancellor George Osborne, appears to feel vindicated by the news that Britain’s lowest paid workers got a 6.2% pay rise last year (or 4% more than average)

However.... that’s still less, in cash terms, than a smaller pay rise on a much larger salary.

And it’s important to remember that today’s report does not include self-employed workers, whose pay has been lagging behind.

And here’s where the money goes....

More gender gap detail from the ONS:

Here’s our news story on today’s report into UK pay:

Gender pay gap: the details

Britain’s gender pay pay varies, depending how many hours people work each week.

For part time jobs, women actually get paid more on average than men.

The ONS says:

For jobs where the number of paid hours worked by an employee is between 10 and 30, more women work in these jobs and the gender pay gap is in favour of women.

But the dial shifts the other way, once you look at full time jobs - where the gender pay gap is in favour of men.

This chart shows how men get paid more for doing jobs that are predominantly done by men:

UK gender pay gap

And this tweet shows how men still dominate senior positions, and on the factory floor, while women do the majority of administrative and caring positions.

The CBI, which represents Britain’s bosses, says it welcomes the “further progress” in closing the gender pay gap.

And they point out that it’s illegal to pay women less than men for doing exactly the same job.

The gap is caused by a wide range of factors, and there is a way to go to address it. But it’s crucial it is not confused with unequal pay, which is already illegal.

It’s important that the Government and firms work together on approaches that really change outcomes, such as the availability of childcare, career progression and improved careers advice.”

The TUC is alarmed that full-time male workers earned 9.4% more than women last year, marginally down on 9.6% in 2015.

TUC General Secretary Frances O’Grady says:

“The full-time gender pay gap is closing at a snail’s pace. At this rate, it will take decades for women to get paid the same as men.

“We need a labour market that works better for women. This means helping mums get back into well-paid jobs after they have kids. And encouraging dads to take on more caring responsibilities.

“The government should also scrap tribunal fees, which stop women getting justice from bad employers who have discriminated against them.”

New research from the World Economic Forum shows that O’Grady is right to be worried. They’ve calculated that, at current progress, the global gender pay gap won’t be eradicated until the year 2186.

UK earnings: The key charts

Here are the most important charts from today’s survey of UK hours and earnings.

This shows how people who’ve been in their job for at least 12 months enjoyed their biggest pay rise since the financial crisis in 2015:

.

But, real income are still below their pre-crisis level, once you adjust for inflation.

.

Today’s report shows that setting minimum pay levels has a real impact on the lowest paid.

Those at the bottom end of the distribution saw their pay rise by 6.2%, compared to 2.5% for the best paid 5%.

.

And Britain still has a gender pay gap.

The average full-time male earner receives almost £100 per week more than his female equivalent (£578 per week compared with £480).

.

Updated

UK wages grew by 2.2% last year.

Newsflash: Wages in the UK have grown at their joint fastest rate since the financial crisis.

That’s the topline from the annual assessment of Britain’s labour market, just released by the Office of National Statistics.

They say:

In April 2016 median gross weekly earnings for full-time employees were £539, up 2.2% from £527 in 2015. The 2.2% growth seen this year is the joint highest growth in earnings seen since the economic downturn in 2008 (matching that seen in 2013).

Adjusted for inflation, weekly earnings increased by 1.9% compared with 2015. This repeats the trend seen in 2015, which exhibited the first increase since 2008, and is due to a combination of growth in average earnings and a low level of inflation at that time.

Weekly earnings grew by 2.2% for full-time workers compared with 6.6% for part-time workers.

And the gender pay gap narrowed, slightly. Women now earn 9.4% less than men, per hour, down from 9.6% in 2015.

The ONS says:

This is the lowest since the survey began in 1997, although the gap has changed relatively little over the last six years.

Here are some more key points:

There are also some interesting charts, which I’ll post next...

A sign for Lloyds Banking Group.

The PPI scandal is the gift that keeps on taking, if you’re a long-suffering investors in Lloyds Banking Group.

Lloyds shares have fallen by 3% this morning after the bank, partly owned by the taxpayer, revealed it has set aside another £1bn to cover compensation claims from customers wrongly sold payment protection insurance.

This takes Lloyd’s total PPI bill to £17bn, or nearly half the £37bn set aside by the UK banking sector.

Lloyds also reported that profits in the last quarter fell by 15%, but are 50% up over the year to date.

Antonio Horta-Osorio.

CEO Antonio Horta Osorio said Lloyds hadn’t suffered from the Brexit vote, although some businesses are holding back from new investments.

And asked about his own future, following recent stories about his private life, Horta Osorio said:

I am very happy at Lloyds. I like the team here and I like the strategy.

UBS: Hard Brexit fears could drive pound down to $1.10

The pound is calm this morning, trading around $1.219 against the US dollar.

But UBS Wealth Management has warned that sterling could fall to between $1.10 and $1.20m “if concerns over the future of the UK’s trade relationships continue to dominate”.

But... if Britain recovers from the initial Brexit shock, the pound be worth $1.36 in a year’s time.

Geoffrey Yu, Head of the UK Investment Office at UBS Wealth Management, says:

“We expect the UK economy to bear the brunt of Brexit uncertainty in the coming months, levelling out as we move further into next year.

Though the pound should recover accordingly, we cannot underestimate the central role that politics has played in sterling’s fate up until now. With the terms and conditions of the UK’s future trade links still unclear it is too early to rule out further downside risks in sterling.”

Updated

Connor Campbell of SpreadEx says:

The market got another dose of Brexit negativity this Wednesday morning, with the Resolution Foundation claiming that Britain faces a £84 billion black hole in the next half a decade.

FTSE 100 falls back through 7,000 points

Shares are dipping in early trading in London, as investors digest this gloomy assessment of Britain’s public finances.

The FTSE 100 index of top shares has dropped back through the 7,000 point mark, down 35 points or 0.5% at 6983.

Mining shares are leading the fallers, after copper producer Antofagasta cut its production targets for 2016 and 2017. That could imply slower global growth; also bad news for Britain’s fiscal position.

Top risers and fallers on the FTSE 100 in early trading
Top risers and fallers on the FTSE 100 in early trading Photograph: Thomson Reuters

You can read Resolution’s report yourself, here:

Pressing the reset button

We shouldn’t pin all the blame for Britain’s deteriorating public finances on June’s referendum.

Resolution point out that the fiscal picture was already looking murky, before the public voted to leave the EU.

They say:

It’s worth noting that not all of the deterioration is likely to reflect ‘Brexit effects’.

Monthly public finance updates from the ONS suggest that the government had already veered off course before the June referendum, with tax receipts performing particular poorly. Indeed, given that most economic measures are yet to show any fall-out from the vote (Sterling being the obvious exception), it’s reasonable to assume that much of the weakening in the latest (September) outturn figures would have existed even in the absence of Brexit.

And of course we simply don’t know what Brexit will mean, whether banks will leave the City (maybe...) or if the weak pound will trigger a manufacturing renaissance.

Resolution: Softening budget targets would drive borrowing up

How should Philip Hammond react to the deterioration in Britain’s public finances?

According to Resolution, the chancellor has two options.

He could:

  1. Soften the target. Instead of trying to eliminate the deficit, he could just aim for a ‘current budget balance’, which would exclude borrowing for long-term investment.
  2. Delay the target. So, still aim to eliminate the deficit, but admit it’s not going to happen by 2019-20.

Softening the target would require borrowing an extra £61bn over the next five years --- and crucially, that would be ON TOP of the £84bn black hole.

As Resolution puts it:

Such an approach would have serious ramifications for how the government’s approach to fiscal policy is viewed.

This chart shows those two options in more detail:

.

Government likely to break debt rule

This £84bn black hole isn’t Philip Hammond’s only headache.

Resolution Foundation also believe the government will break its target of cutting the national debt as a share of national income.

They predict:

Rising debt as a proportion of GDP in 2017-18, breaking the secondary rule by around £10 billion in that year.

Introduction: £84bn Brexit black hole looms

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Let’s get the bad news out of the way first. Britain’s new chancellor faces an £84bn black hole over the next five years, as the Brexit vote takes a bite out of the public finances.

The Resolution Foundation has calculated that the UK government is on track to borrow more each year, and take in less tax receipts, over the lifetime of the current parliament.

With growth slowing, and tax revenues disappointing, Resolution sees the UK running up a deficit of £13bn in 2019-20, rather than the £10bn surplus predicted before the Eu referendum.

That means finding more than £80bn to plug the gap, as this tweet shows (the gap between the red and blue lines = £84bn).

Chancellor Philip Hammond has already suggested he will ‘reset’ fiscal policy in the autumn statement, in four weeks time.

And Resolution Foundation chief economist Matt Whittaker suggests Hammond will have to abandon the government’s goal of balancing the books this parliament, unless he fancies imposing significant extra tax rises or spending cuts.

As Whittaker puts it:

“The good news for Philip Hammond is that by softening his fiscal target he has significant political and economic room for manoeuvre.

“But the trade-off for this approach is significantly higher borrowing in the coming years. The chancellor will need to decide if that is a price he is prepared to pay for adjusting to new economic times and setting out a direction for the new government.”

Here’s the full story:

This may not reassure international investors, as they wonder whether to hold British financial assets.

UK government debt, or gilts, could weaken if Hammond is forced to tap the markets for tens of billions of extra debt to cover this black hole.

No wonder that Theresa May was very concerned that Brexit would hurt Britain’s economy (our front page scoop today), in the run-up to the vote:

Also coming up today...

Two of Britain’s biggest companies are in the spotlight this morning, for the wrong reasons.

Lloyds Banking Group is reporting results this morning, and revealing another £1bn provision to cover the cost of the PPI (payment protection insurance) scandal

And Vodafone is just been hit with a £4.6m fine for customer failings. We’ll have more on both those stories shortly.

At 9.30am the Office for National Statistics publishes its annual survey of hours and earnings in the UK. That should give new insight into Britain’s labour market, and the pay gender gap.

We’ll be tracking all the main events through the day....

Updated

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
'It Feels Good' Oprah Video Resurfaces Allegedly Normalising Paedophilia in Disturbing Childhood Remarks
A resurfaced video of Oprah Winfrey discussing child abuse has sparked debate, with claims of normalising abuse. Fact-checkers clarify the context.
International Business Times UK
International Business Times UK
There are sharks in Las Vegas and they feast on hundreds of pounds of fish every week
In one week the aquarium goes through over 300 pounds (136 kilograms) of fish
The Independent UK
The Independent UK
Jennifer Lopez's Micro Mini Dress Is Nude, But Not Naked
She bared it all without going sheer.
Marie Claire
Marie Claire
Maine boyfriend moves in, agrees to pay utilities. Then on payday, he goes on ‘a little shopping spree’ instead
Moving in with a partner can teach you a lot about a relationship.
The Mary Sue
The Mary Sue
Camera sensors love green. But as a photographer, I have a love-hate relationship with green
I know it’s St. Patrick’s Day, but sometimes the photographer in me has a love-hate relationship with the color green
Digital Camera World
Digital Camera World
This '80s classic with undeniable chemistry' is exactly what you need to stream on Prime Video if you love Kurt Russell but hate The Madison
New Taylor Sheridan series The Madison isn't everyone's cup of tea — and this 80s classic movie on Prime Video might be a better alternative for Kurt Russell fans.
TechRadar
TechRadar
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play