28/02/2026 by Tony Redondo
Is It Me, Or Are the 1920s Calling?
Mark Twain is reputed to have said that “history doesn’t repeat itself, but it does rhyme.” Right now, the echoes of the 1920s are growing louder and unless we change course, we could well repeat the complacency of the 1930s too.
Consider the parallels. The 1920s began with a global pandemic. Political turmoil gripped the UK. A new party (Labour) was rising to prominence. And prime ministers came and went with revolving-door regularity. Sound familiar?
Now consider this. We are on track for the 2020s to be the worst decade for UK economic growth in a century. The 1920s saw anaemic growth of just 0.8% per year. Since 2020, we are averaging just 1.1%. A century on, and we are barely doing better.
The causes back then were, at least, fairly obvious and include the devastating aftermath of the Great War, the catastrophic mistake of re-entering the Gold Standard at the wrong rate, and the upheaval of the General Strike in 1926. Today’s causes are murkier, which in many ways makes them harder to fix.
The Headline Figures Don’t Tell the Half of It
If anything, today’s GDP growth numbers are too flattering. Strip out population growth and look at GDP per capita, and the picture darkens considerably — declines of 0.1% in both of the final quarters of last year. The past six years have been the worst period for peacetime growth since the start of the Industrial Revolution over 200 years ago.
And the headwinds ahead are not letting up. An ageing population means rising spending on pensions, healthcare and social care is all but inevitable. Just to hold the tax burden steady at its current historically high level would require average growth of 2.9% per year over the next fifty years. Since the great financial crash, and setting aside the pandemic recovery bounce, we have only exceeded that rate in 2014 and in 2017. Not averaged it. Exceeded it. Twice.
For further context, ONS (Office for National Statistics) data going back to 1949 shows that even during the long post-war boom and fifty years of historically high growth between 1949 and 1998, the UK only managed to average 2.8%.
Words vs. Actions
There has been no shortage of fine words from governments of every stripe about the critical importance of economic growth. But actions speak louder. Both government and regulators have continued to pile costs onto UK businesses, making them less competitive and pushing prices higher for consumers. The rhetoric and the reality could scarcely be further apart.
Can Technology Ride to the Rescue?
The US has seen productivity growth nearly double in the past year, likely driven by AI. Could the same happen here? Perhaps. But even if AI were to add an extra 1% annually to UK growth, it would still fall short of what is needed to prevent further tax rises. And while automation could provide a meaningful boost, history tells us the gains from general-purpose technologies like electricity, the internal combustion engine, and information technology eventually fade. There is no reason to expect AI will be any different.
A Government Stuck in a Doom Loop
Sir Keir Starmer has a devout belief in state power. More laws, more regulation, and an unshakeable conviction that the state is both the principal and the best agent of change. The result is a government stuck in a statist doom loop: confronted by every problem, it reaches for the same answer, more government.
The numbers bear this out. The government currently spends 45% of GDP. A third of that goes on welfare benefits. A quarter on healthcare. That figure is comparable to or higher than almost any point since the end of the Second World War. We are spending more and more to less and less effect, and still the cry goes up of “austerity” and public services “starved of cash.”
Time Is Not On Our Side
So far, the 2020s have been a dire decade. Given an ageing population, already stretched public finances, and the slowest peacetime growth in over two centuries, we simply cannot afford to sit and wait for a government willing to make the hard choices and implement the reforms that are so clearly necessary.
Make People Want to Work: A Systems Thinking Playbook for UK Productivity – Cosmos Currency Exchange
Change is coming. Our current model is plainly unsustainable. The only question is whether that change is managed or forced upon us.
Currency Exchange Rates Update
The Pound lost over 2% of its value against the Euro between the 4th and the 27th of February.
Against the US Dollar, the Pound fell more than 2.8% between the 29th of January and the 27th of February.
Against the Australian Dollar, the Pound lost over 4.7% in the same time period.
With this weekend’s US-Israeli attack on Iran, expect further falls when the markets reopen on Monday.
Brits told to fill up now as petrol costs could jump to £2 a litre – The Mirror
In the coming week, the key economic data releases and significant events include:
Monday UK Nationwide House Price Index & PMI
Germany PMI
Tuesday EU CPI
Wednesday Australia GDP
EU Unemployment & PMI
Friday UK Halifax Housing Index
EU GDP
US Employment (NFP) & Retail Sales
A recent IMF (International Monetary Fund) report states that the Chinese Yuan (CNY) is undervalued by 16%, driving the country’s trade surpluses and preventing a rebalancing toward domestic consumption. Goldman Sachs estimate 25%; Weijian Shan, the chair of private equity firm PAG, argues 50%, pointing to The Economist’s Big Mac Index. The Yuan’s value is why residents of Hong Kong, whose currency is tied to the US Dollar, now pour into the mainland to eat and shop. Chinese leaders are wary of letting it strengthen, pointing to Japan’s “lost decades” following a sharp currency appreciation but continued inaction risks a global backlash.
What’s in the news?
Chancellor Rachel Reeves will present her Spring Statement on the public finances to Parliament on Tuesday, 3 March. This should be a much lower profile fiscal event than the Budget for various reasons, but the new DMO (Debt Management Office) remit for 2026-27 will be published, so it is still an important event that sets the political narrative for the year ahead.
Unveiling her 2025 Spring Statement, Reeves declared it would “kickstart economic growth” and bring about a “new era of national renewal.” A year down the road, that’s not working out at all well. Unemployment has risen relentlessly; GDP growth peaked before last year’s Spring Statement (0.7 per cent in Q1) before slumping to 0.3 and then flatlining for the final two quarters at 0.1 per cent; and inflation, which had cooled to 2.6% in March 2025 spiked to 3.5% the following month, levelling off at 3.8% for most of the year before, finally, easing in recent months. Another wasted year and a year capped off with the most damaging and chaotic Budget process since Liz Truss in 2022.
This time, there has been remarkably little leaking or briefing. Reeves will do her best to present a narrative of improving economic circumstances. That doesn’t alter the fact that economic growth, the government’s “driving mission” remains as elusive as ever. Almost everything Reeves does turns out to be a catastrophe. So, if she has decided to do nothing, that will at least be a modest improvement.
UK
The Green Party secured its first-ever Westminster by election victory on Thursday in Gorton and Denton, taking 40.7% of the vote. Reform UK came second with 28.7%, while Labour slumped to third place on 25.4%. Labour’s third place finish will further sharpen questions around party leadership and voter sentiment ahead of May’s local elections. Starmer is expected to remain in place for now, and no immediate policy shift is anticipated, but a weak result in May could trigger internal pressure or a leadership challenge. It was also the Tories worst-ever by-election result.
For the financial markets, the by election outcome increases the risk of a shift toward a less predictable fiscal stance at a time when the UK’s fiscal headroom is already limited. Any move in that direction would raise uncertainty around the medium-term tax and spending framework. Historically, such uncertainty raises gilt yields as investors demand a higher risk premium, increasing the cost of government borrowing and typically softens the Pound Sterling as the markets anticipate and price in the idea of greater gilt issuance or reduced clarity over the fiscal outlook.
Good news
The UK’s first commercial-scale lithium plant has opened near Redruth, Cornwall. The facility, developed by GEL (Geothermal Engineering Ltd) is a dual-purpose site that marks a “double-first” for the UK. It is the country’s first deep geothermal power plant and its first commercial lithium production facility. The mine will initially produce around 100 tons annually, enough for about 2,000 EVs, with plans to scale up to 18,000 tons within a decade. Lithium is just one of about 60 elements listed as economically crucial by the US Geological Survey, and demand is especially high in the energy, defence, and semiconductor industries. China refines around 60% of global lithium production and is similarly dominant in the supply of other minerals, from copper to rare earths. The US has begun stockpiling several key minerals and collaborating with allies such as Japan and Europe to develop alternative supply chains.
Not so good news
The CBI’s (Confederation of British Industry) latest survey shows profitability in the UK’s service sector, about 81% of the overall UK economy, declined for the seventeenth consecutive rolling quarter with businesses reporting few signs of improvement on the horizon. The pressure on profit came from rising costs, with businesses reporting growing cost burden for the 22nd consecutive quarter.
The UK’s job market took another hit with total vacancies falling to their lowest level since 2021, with London facing the biggest drop in open roles. The research by job search platform Adzuna, shows the number of jobs advertised plummeted by 16% year-on-year to January. Graduate vacancies fell below 10,000 for the first time since Aduzuna’s tracker began in 2016, down 45%. Youth unemployment is at its highest level, 16.1% since 2014 and has climbed above the EU average for the first time.
JPMorgan Chase expect UK unemployment to soar above its pandemic-era peak, which could lead to sector-specific challenges, especially in retail and hospitality, due to the rise in business costs from the last two budgets. Allan Monks, chief UK economist at JPMorgan, said the rise in employer National Insurance had “disproportionately affected businesses employing higher proportions of lower-paid workers”, particularly in sectors such as retail and hospitality.
Research by wealth manager Rathbones show nearly 6,000 business owners relocated overseas in just two years, intensifying debate over the country’s tax competitiveness. Technology entrepreneurs account for the largest share of departures. The most popular destination was the United Arab Emirates, followed by Spain and the United States.
UK factories, data centres and office blocks are paying 81% more for electricity than companies in France, according to analysis published by the ASI (Adam Smith Institute), leaving Britain at a “significant competitive disadvantage” compared with its Continental neighbour. Over the past 25 years, the cost of electricity used in manufacturing has risen in both Britain and France, but the UK price has surged further and faster since 2021. The ASI said the “most important” factor for the disparity was the “UK’s reliance on a combination of expensive renewables and a gas backstop”.
“France, by contrast, enjoys reliable, low-carbon electricity from nuclear power plants that were relatively affordable to build at the time”.
A closely monitored survey conducted by the research firm GfK said consumer confidence slipped in February despite hopes of a turnaround, adding to fears the UK economy could slump this year.
The survey found that people were also more negative about their personal financial situations across separate metrics in the last 12 months and the next 12 months, with both scores dropping by four points.
New warning over ‘permanent tax on the squeezed middle’ | Personal Finance | Finance | Express.co.uk
USA
President Donald Trump said in his State of the Union address that the US is “bigger, better, richer, and stronger than ever before” despite surveys finding Americans do not feel richer; most are unhappy with the economy, and 57% disapprove of his presidency according to The Wall Street Journal.
US consumer confidence rebounded more than expected in February, though worsening sentiment around job prospects could signal turmoil ahead.
People are leaving the US in record numbers, partly for political reasons, but also because remote work lets them combine high American salaries with other countries’ lower living costs. In 2025, 150,000 more people left the US than arrived, the first confirmed year of net emigration since the Great Depression. Portugal’s American population has jumped 500% since 2020; Ireland welcomed 10,000 people from the US last year, more than the number of Irish who moved to the US; Bali, Colombia, and Thailand saw protests against rising housing costs as high-paid US workers arrived.
The EU
Germany may finally be entering the long-awaited cyclical upswing with the Ifo index jumping in February to its strongest reading since last summer. Both the current assessment and expectations components improved in tandem, signalling that sentiment is firming across the board.
Last week, Dutch politicians voted to reform the part of their tax system. As a result, from 2028, the Dutch will pay an annual 36% capital gains tax (CGT) on any increase in the value of their stock, bond or crypto investments, even if they have not sold the asset and realised the gain. Even if investors only make money on paper and are sitting tight, they will have to stump up hard cash for the tax collector. For example, on the day the tax is calculated, the value of an investor’s holdings might have doubled in a year. But by the time they get their tax bill, the price might have slumped again. The investor would then be forced to sell some of their holdings at a loss, to pay tax on a gain they never realised. By the end of the week, almost 50,000 people had signed an online petition demanding that the Dutch parliament’s lower house revisit its vote. This level of backing surpasses the threshold needed to force MPs to formally consider the petition. Some would call this not a capital gains tax but a wealth tax. In the UK, the Green Party who just won the Gorton and Denton by-election are in favour of the introduction of a wealth tax.
The ECB (European Central Bank) have a policy ban on the taking of third-party payments by staff. This has not stopped ECB President Christine Lagarde taking a EUR 140K salary from the Bank of International Settlements on top of her ECB emoluments. Negative postings from disgruntled ECB staff including this one, “Preach water, drink wine.”
Others
Australia’s private sector lost steam in February, with the S&P Global flash composite PMI slipping. Both services and manufacturing slowed as new business cooled and confidence fell to its weakest since mid-2024. Employment growth hit an 11-month high, helping firms manage workloads, but cost and selling price pressures jumped to five-month highs on rising wages, energy, and input costs.
January headline CPI inflation surprised to the upside. The data highlight persistent price pressures. The financial markets are still leaning toward a May rate rise by the RBA (Reserve Bank of Australia) but the odds of a March move have edged higher.
Russia’s war in the Ukraine entered its fifth-year last week. Most geopolitics experts now believe the war will end in a “frozen conflict” and only likely to end should Putin run out of money.
Ukraine’s economic reconstruction is expected to cost about $588 billion over the next decade. Despite the considerable damage, which is most pronounced in the transportation, housing, and energy sectors, Ukraine’s economy has proven resilient. GDP has increased every year since 2023, and the war has spurred technical innovation that has bolstered Ukraine’s manufacturing sector. Domestic drone production in particular has been a boon for Kyiv’s efforts to more closely integrate into the EU’s industrial network.
Stranger than fiction
A Spain-based hobbyist’s effort to rewire his robot vacuum allowed him to access live video from 7,000 homes worldwide. The software engineer wanted to steer his Chinese-made DJI Romo with a video game controller, so used an AI tool to hack it, unintentionally gaining access to thousands of robots. DJI has reportedly fixed the problem, but the incident reveals that web-connected devices could create “an army of internet-connected robots” to use as surveillance tools.
Markings on ancient bone and ivory objects show that humans were storing information outside their heads more than 30,000 years before the first known “writing.” Cuneiform, the first true writing, emerged in Mesopotamia around 3,000 BC. But a new study showed that Stone Age people in Europe were recording complex information far earlier, around 40,000 years ago. The tools and figurines are covered in markings according to specific conventions: For instance, crosses mostly appeared on animal figures, but dots were never used on tools. It does not record spoken language and so is not “writing,” but the researchers believe it to be as information dense as early cuneiform and may have been used for tallying purposes or passing messages.
Quote
Milton Friedman, “When government, in pursuit of good intentions, tries to rearrange the economy, legislate morality or help special interests, the cost comes in inefficiency, lack of motivation and loss of freedom. The government should be a referee, not an active player.”
