11/07/2026 by Tony Redondo
Britain birthed the Industrial Revolution, invented modern capitalism, governed 25% of the world’s population and invented swaths of technologies the world still relies on, yet some would argue we’ve become one of the most anti-wealth, anti-success, anti-growth nanny states in the developed world. And yet, by most measures, we are a normal economy. The wealth of the top 1% has been stable for over forty years. The wealth of the bottom 50% sits in line with the rest of the world’s major economies.
So, what’s going on? Our economic freedom index rating is falling. A sign that we are over-taxed and over-regulated. Government spending now runs at 45% of GDP, meaning almost half the economy is state rather than market driven. Taxation is at an all-time high and wildly progressive relative to both our own past and our peers. The top rate kicks in at roughly 3x average earnings, against 7x in the US, though it’s worth noting these threshold comparisons vary depending on which tax year and definition of “average earnings” you use, so the figure is directionally right rather than exact. The National Minimum Wage is pegged at 60% of the median, among the highest ratios in the world, on the OECD’s own comparisons.
We should be focused on making the country richer and raising living standards, not managing decline. Private sector debt to GDP now stands at 130%, its lowest since the turn of the millennium. Bring in some confidence and the economy could turn. Nobel laureate Robert Shiller is the most prominent economist to argue that positive narratives can move economies, and there are signs, though not yet firm commitments, that this thinking is gaining an audience within the Bank of England. I’ll admit the irony: I’ve just spent three paragraphs dismantling one narrative, decline, nanny-statism only to lean on another, confidence, narrative economics to argue growth is within reach. The difference, I’d argue, is that one narrative is about facts that don’t survive scrutiny, and the other is about expectations, which by Shiller’s own thesis are self-fulfilling almost by definition.
PM-in-waiting Andy Burnham cuts a more cheerful, optimistic figure than Starmer. Maybe, just maybe, the UK economy could power ahead. There are tentative signs Burnham will pursue sweeping tax reforms, championed by heavyweight advisers Jim O’Neill, former Treasury minister and Goldman Sachs executive and Andy Haldane, former Bank of England chief economist and now President of the British Chambers of Commerce. Both are pushing radical change on infrastructure, welfare and tax. The ideas draw on UCL’s Institute for Global Prosperity report, Prosperity 2030, which sets out thirty policies to “remake Britain”, though it’s worth being clear this is the authors’ own advocacy document, not an independently audited forecast, and the widely cited £100bn revenue figure is their modelling, not a Treasury or OBR number. Among its proposals: replacing stamp duty with a 1% levy on property valuations, ending what the report calls the absurdity of a modest terrace paying proportionally more than a high-value mansion. It also calls for income tax, National Insurance, dividend tax, inheritance tax and capital gains tax to be merged into a single “national contributions” tax, scaling from zero to a 22% base rate, with a 46% top rate on a flattened definition of income. At its core is a tax cut for workers, including relief for those caught in the £100,000–£125,000 personal allowance trap.
Other reforms include replacing job centres with apprenticeship training centres, shifting energy system investment costs off bills and onto general taxation, and providing nine “Universal Services” delivered in kind rather than as cash handouts.
Then again, once Burnham takes over on 20 July, he could just as easily lurch the country further left, pay no heed to the markets, hand the Chancellorship to Ed Miliband, and I fear he’d get the briefest of honeymoons before we smack into a bond market and Sterling crisis.
Currency Exchange Rates Update
This week, the Pound rose to its highest level against the Euro since mid-June 2025. The main support remains the carry trade yield advantage over the Euro. The Bank of England base rate sits at 3.75% against the ECB’s 2.25%. BoE Governor Andrew Bailey has signalled this is not the time for a rate cut, still fighting inflation rather than chasing growth, whereas eurozone inflation has softened, with markets treating June’s 0.25% rise as a one-off.
Huw Pill, chief economist at the BoE, has indicated that interest rates may need to rise this year to control inflation, which is currently at 2.8%, well above the Bank’s 2% target. Mr Pill, a member of the MPC (Monetary Policy Committee), noted that productivity in the UK has slowed and said improving the efficiency of the economy is key to raising living standards. He added that he is “concerned that we’ve been running the economy a little bit hotter than the supply side.” Mr Pill was one of two members of the nine-strong MPC who last month voted to raise interest rates from 3.75%.
Against the US Dollar, the Pound hit a 4-week high this week and a 15-week high against the Australian Dollar. Next to no change this week against the Canadian dollar so the Pound remains very close to the decade high rate.
In the coming week, the key economic data releases and significant events include:
Monday Canada – Bank of Canada – Business Outlook Survey & Canadian Survey of Consumer Expectations
Tuesday China – Trade Balance
US – CPI Inflation
Wednesday China – GDP, Industrial Production & Retail Sales
US – PPI Inflation
Canada – Bank of Canada – Interest Rate Announcement
Thursday UK – GDP
US – Retail Sales
Friday EU – CPI Inflation
US – Industrial Production & Consumer Sentiment
What’s in the news?
UK
The OBR’s (Office for Budget Responsibility) latest Fiscal Risks and Sustainability Report delivers a stark warning: ageing population pressures, rising public spending demands and weaker future tax revenues could push the nation’s finances onto a dangerous long-term trajectory, leaving future generations facing higher taxes and tougher choices.
The OBR stresses these are projections, not predictions. Future governments are expected to intervene before we reach that point. But the message is clear: tackle it later, and it costs far more.
Under the OBR’s baseline scenario, primary government spending, excluding debt interest is projected to rise from 40% of GDP in 2030-31 to 49% by 2075-76. At the same time, the Government could struggle to maintain tax revenues as traditional income streams decline.
Good news
The IMF has modestly upgraded the UK’s economic growth forecast from 0.8% to 1% this year, despite fresh Iran war tensions. UK growth is set to lag the US and Canada, though it’s projected to outpace the rest of the G7, Germany, France, Italy and Japan. The IMF’s 2027 UK forecast was left unchanged at 1.3%, again trailing the US and Canada.
Meanwhile, the BoE is poised to relax post-GFC (Great Financial Crash) lending regulations, potentially releasing £400bn into the economy. This follows a decision last December to lower lenders’ capital requirements from 14% to 13%, with further changes anticipated.
Not so good news
The S&P PMI for the UK’s services sector, 81% of the economy suffered its steepest decline in three and a half years, dropping to 48.8 in June: a second consecutive month below the 50-growth threshold. The slump is attributed to rising costs from the Iran war and political uncertainty denting business confidence.
Ahead of Burnham’s arrival at 10 Downing Street, financial services activity has dropped sharply as confidence slumps. The CBI’s net business activity reading collapsed from 65 in March to -58 in June, with profitability also deteriorating sharply. A separate Rathbones survey found political uncertainty now worries businesses more than interest rates or inflation, reflecting director-level angst about the incoming government. Rathbones’ Elizabeth Hart said clients are questioning Westminster drama as tax, pensions and financial planning rules face potential change.
Construction offers no relief: the sector’s PMI hit 38.4 in June, barely above May’s six-year low of 38.2, and construction has now shed jobs for 18 straight months amid sharp declines in house building. This comes as Burnham pledges the biggest council house building programme since the post-war period. Labour’s 2024 pledge of 1.5m homes by decade’s end requires 300,000 homes a year; current delivery sits at roughly 200,000, two-thirds of pace. Closing the gap over the remaining three years would now require over 361,000 homes annually, a rate with no precedent in modern British housebuilding.
A BCC (British Chambers of Commerce) poll shows businesses planning to increase investment has fallen to 17%, down from 21% last quarter, driven by tax rises and operational costs. Inflation remains the top concern, cited by 66% of the 4,744 businesses surveyed.
The BoE now expects over 5m homeowners to face higher mortgage repayments by end-2028, up from 4m projected in December. A typical borrower rolling off a fixed rate faces a £45 monthly increase, against £120 for those who refixed between late 2022 and 2024. The Financial Stability Report flagged lower-income households as most exposed to energy costs, though it judged overall household finances resilient.
USA
New Commerce Department data showed the US trade deficit widened in May to its highest level in a year, driven, analysts suspect, by a surge in imports ahead of new tariffs.
The ISM Services survey came in broadly as expected: softer new orders offset by a stronger employment reading. Overall, the report does little to shift the prevailing picture of a US economy that remains resilient but not accelerating.
Annualised US inflation jumped to 4.2% in May, more than double the Fed’s target. The sticky print is being driven by the pass-through of aggressive import tariffs, rising Middle East energy costs, and an unyielding corporate rush to build out AI capacity.
Minutes from the Fed’s 16–17 June meeting showed unanimous support for holding rates unchanged, even as policymakers stayed concerned about inflation risks. Officials generally viewed price stability risks as elevated, while job market concerns eased somewhat. A few saw a case for a rate hike, but ultimately backed standing pat.
The Dow briefly topped 53,000 this week for the first time ever. Far from a rally on its last legs, this looks like one starting to broaden out, and a broadening rally tends to be a more durable one.
Elsewhere, New York built 38,682 new apartments last year, the most in 60 years, bucking the national decline and offering rare, good news for a city in an acute housing shortage. Steady job growth, high rents, and new zoning and tax incentives are driving development. A recently approved rent freeze on nearly half the city’s apartments may chill some investment, but not all of the market is rent-stabilised. Analysts say the metro still needs 400,000 new homes to meet demand.
The EU
The latest eurozone CPI (inflation) report showed softer services and core inflation readings, adding weight to the argument that second-round effects from the energy shock may prove more limited than initially feared. As a result, the case for a prolonged ECB pause, following June’s 0.25% rise is becoming compelling.
The Eurozone Sentix Investor Confidence Index surged 10.3 points to -3.1 in July, drastically outperforming forecasts. This third consecutive monthly improvement was driven by a sharp rebound in six-month expectations, suggesting investors believe the worst of the stagnation, particularly in Germany, where a 30-measure economic reform package is being finalised has passed.
Despite the brighter sentiment, eurozone finance ministers issued a sober joint statement confirming the European Commission’s latest projections point to slower-than-anticipated GDP growth for the rest of 2026.
Elsewhere, Marine Le Pen has been cleared to stand for president in 2027 after appeals court judges shortened her sentence, even as they upheld her conviction for embezzling European Parliament funds.
Australia
Australia’s services sector returned to growth in June, with the S&P Global Services PMI rising from 48.7 in May to 50.5 in June, driven by stronger consumer-related activity. Increased hiring supported output growth, though demand remained soft with new orders falling for a fourth consecutive month, and export orders declined again amid disruptions linked to the Middle East conflict. Input cost pressures eased but stayed elevated, with businesses slowing price increases to their weakest pace since January. Without a pickup in demand, the recovery may struggle to gain momentum.
Elsewhere, Australia and India finalised a uranium export agreement during Prime Minister Narendra Modi’s visit to Melbourne. Australia, home to the world’s largest known uranium reserves will supply the mineral for India’s civilian nuclear energy programme. The deal supports India’s plan to expand nuclear capacity from 8.8 to 100 gigawatts by 2047, enough to power more than 60 million homes annually. For Australia, it also diversifies export markets and reduces reliance on China, its largest trading partner. The agreement had faced years of delays over concerns Australian uranium could indirectly boost India’s nuclear weapons programme; exports will now be subject to IAEA supervision to ensure the uranium is used only for peaceful purposes.
Canada
The big political and economic news stems from the fallout of the US administration’s decision to forgo a long-term renewal of CUSMA, the Canada-United States-Mexico Agreement in its current form leaving Ottawa facing massive policy uncertainty. While CUSMA protections are currently keeping broad tariffs at bay for compliant goods, the threat of targeted bilateral actions on steel, aluminium, and softwood lumber remains a major hurdle.
Fresh economic indicators and private bank reports reveal a domestic Canadian economy in dire straits. The Services PMI Hit a 4-Month Low, tumbling from 50.6 in May to 47.1 in June. Anything below 50 indicates contraction.
New analysis from Signal49 Research forecasts Canada’s overall 2026 GDP growth at a sluggish 0.5%, citing trade disputes and the lag effects of high global energy costs.
Others
A new McKinsey report shows China is the world’s biggest investor, pumping in $5.9 trillion a year versus $5.1 trillion in the US and just $3.1 trillion in the EU, underpinning Beijing’s global competitiveness. Relative to economy size, China now holds 1.7 times the productive capital stock of the US and EU.
China’s factory gate prices rose at their fastest pace in four years as Middle East conflict pushed up energy costs, with experts warning price pressures are unlikely to subside, even before fighting between the US and Iran resumed. Consumer price inflation, however, rose just 1% year-on-year last month, further evidence that China’s economy is running on two tracks: export industries remain strong, with a record $1.2 trillion trade surplus last year despite US tariffs, while services inflation has flatlined for months amid deflationary fears as the real estate crash continues to weigh on domestic demand.
Elsewhere, Dubai is pouring billions into “building a city that does not pause” as it looks to bounce back from the economic fallout of the Iran war. The emirate’s executive council, chaired by Crown Prince Sheikh Hamdan bin Mohammed, approved an 18-billion-dirham spending plan to boost the city’s attractiveness. The UAE’s non-oil economy is experiencing its worst period since the pandemic, with the private sector at its weakest in over five years and employment falling at its fastest pace since 2020. The S&P Global PMI fell to 50.8 in June, the lowest reading since February 2021 reflecting weak demand, disrupted supply chains and rising costs from the Iran war. By contrast, Saudi Arabia’s non-oil PMI rose to 53.3, its highest since February, with investor and consumer confidence holding relatively strong; Kuwait and Qatar remained below the 50-point threshold.
Tensions between the Gulf’s two largest economies are simmering: firms moving goods from the UAE into Saudi Arabia report border delays lasting several days, with trucks held up without explanation and drivers sleeping under trailers for over a week. Affected goods range from building equipment to fresh flowers. It’s difficult to draw a direct line between the delays, recent cross-border payment problems, and worsening diplomatic ties, but the timing coincides with a new low in relations. Saudi officials deny any issues at the border, even as land-border trade across the Gulf has risen amid the Iran war and Strait of Hormuz closure.
In central banking news, the RBNZ raised its base rate by 0.25% to 2.5% last week, in line with expectations, with guidance pointing to further tightening before year-end.
Gold ended the week at $4,128.90, up 2% since fighting resumed between the US and Iran. That follows a 14.1% drop between April and June, gold’s steepest quarterly fall since the second quarter of 2013. Even so, gold remains up over 20% on a rolling 12-month basis, cushioned by robust central bank buying as institutions diversify reserves.
https://www.express.co.uk/finance/personalfinance/2227667/new-gold-investment-update-ultimate
Renewed US strikes on Iran last week pushed crude sharply higher, with Brent gaining around 5% and WTI 4%. The IEA says world oil demand is set for its first annual decline since 2020, forecasting a drop of 1 million barrels per day year-on-year in 2026.
Stranger than fiction
NASA’s New Horizons spacecraft, 5.9 billion miles away, is nearing the edge of the solar system and will soon become only the third functioning human-made object to enter interstellar space. The boundary is messy to define, but one key marker involves the pressure and speed of solar wind flowing from the sun. The Voyagers, launched in 1977, crossed it in 2012 and 2018 and are still working; two Pioneer spacecraft have probably crossed too, but stopped transmitting years ago. New research suggests New Horizons will reach the threshold sometime between 2029 and 2040, and if its plutonium batteries hold out, scientists hope it will send back data to help map the boundary more precisely.
The Euclid space telescope has spotted some of the oldest quasars ever observed, dating to just 700 million years after the universe began. Quasars, powerful light sources at galactic centres are powered by supermassive black holes, and their presence so early is a puzzle: black holes have a theoretical growth-speed limit, and the earliest ones shouldn’t have had time to get so large. Euclid, orbiting a million miles from Earth, can detect not just the largest black holes previous telescopes caught, but more typical ones too, giving a fuller picture. Early results suggest black holes are more common than previously thought, hinting our formation models may need revisiting.
Elsewhere, scientists have developed a technique to grow eye cells from scratch, offering fresh hope for millions at risk of blindness. Researchers say the breakthrough could pave the way for a continuous supply of retinal tissue for transplant.
Fewer than half of US adults read a book in 2022, and the share reading for pleasure on any given day fell from 28% in 2004 to 16% in 2023. But the decline isn’t uniform. Reading scores have fallen mainly at the lower end of the spectrum, while the most proficient readers haven’t lost ground, and may even have improved in some places (measurement changes may also be a factor). Globally, meanwhile, literacy is rising with adult basic literacy rates worldwide climbed from 81% in 2000 to 88% in 2024.
Quote
“Pain is real, suffering is optional” from the Arrow Sutra.