30/05/2026 by Tony Redondo
June promises to be an interesting month. The Makerfield by-election, which could return Andy Burnham to parliament to challenge to Sir Keir Starmer for the Labour leadership and the premiership is scheduled for Thursday, 18 June. Five days later marks the tenth anniversary of the Brexit referendum, held on 23 June 2016, which saw a 72.2% turnout with 51.89% voting to leave and 48.11% to remain, ultimately setting the UK on the path to formally exiting the EU on 31 January 2020.
Burnham, like most Labour MPs, is a theoretical re-joiner. “I want to rejoin a lot,” he said last year. “I hope in my lifetime I see this country rejoin the European Union.” Yet he knows that Makerfield is Eurosceptic. Around 65% voted Leave in 2016 and some argue that the last thing local voters want is to reheat the old rows.
Wes Streeting, another leadership hopeful rolled what amounts to a hand grenade towards Makerfield by demanding reversal of what he calls the “catastrophic mistake” of Brexit. Starmer is taking a similar line, pushing a bill to automatically download EU food safety and veterinary rules, even though food accounts for just 1.3% of UK exports to the EU.
There are honest arguments on both sides. Remainers were right that changing our systems would carry a cost. New regulatory agencies, new trading arrangements, and new border controls all required effort and expenditure. Having absorbed those one-off costs, the question is whether it makes sense to absorb a new set simply to undo what was just done. Leavers were equally right that the EU is dynamic. Rejoining would not mean returning to the status quo ante. Even setting aside questions of the Pound and Schengen, much has changed. The EU budget in 2028 will be roughly twice what it was at the time of the vote, before accounting for the net cost of admitting Moldova, Georgia, Ukraine and others. The new migration pact, which takes effect in July, requires illegal immigrants to be shared among member states every six months. By staying out, the UK has avoided the costs of the Covid Recovery Fund and more than 10,000 new EU directives and regulations.
Lord Blunkett, the Labour peer and former Home Secretary, has called the current EU debate “most unhelpful to Labour,” attacking suggestions that reversing Brexit would fix the party’s difficulties. It was “not a moment,” he said, to pander to “easy, trite and populist” solutions ahead of a by-election expected to be a close contest between Labour and Reform UK. He added a broader warning, “There are some dangerous signs that should lead us to reflect on the history of Europe in the 20th century. We need to be far more alert and aware of the dangers that confront us when grievances are stirred, bitterness and even hatred fostered, and false promises lead us into unknown territory.”
Any future Labour leader dreaming of rejoining may also face an external veto. Marine Le Pen’s National Rally is the favourite to win France’s 2027 presidential election after Emmanuel Macron completes his final term, with her protégé Jordan Bardella leading the polls. Charles-Henri Gallois, Bardella’s economic adviser and an MEP, has said the RN would block British accession unless Labour first held another referendum: “To do so without a referendum would obviously be a denial of democracy because the people expressed their will through a referendum to leave… we would oppose it without a referendum. In any case, we’re against any enlargement of the EU anyway.”
Meanwhile, former Prime Minister Sir Tony Blair has delivered a blunt warning to Starmer, cautioning that Labour risks political collapse without what he called “a coherent plan” for Britain’s future. In an essay published by the Tony Blair Institute for Global Change, he criticised the party’s direction on Brexit, Net Zero and economic policy, arguing it had taken on an “extraordinarily retro 20th-century feel.” “The Labour Party is playing with fire,” he wrote, “or, more accurately, with its future, and that of the country.”
Currency Exchange Rates Update
In May, the Pound has been relatively stable but not strong and looking forward to June, the Pound looks increasingly vulnerable, with near-term resilience giving way to a more fragile, risk-sensitive profile. The markets now price in just under two rate rises by a cumulative 50 basis points in the rest of 2026. That’s a sizeable fall from 100bp that was expected in March and April when uncertainty over the Middle East war was high and oil prices were spiking towards $120/barrel. The UK faces real headwinds with low productivity growth, high public debt, energy exposure, weak investment and political risks that could spike gilt yields or deter investment. A prolonged energy shock or deeper domestic instability could pressure the Pound further.
In the coming week, the key economic data releases and significant events include:
Monday UK Nationwide House Price Index & PMI Manufacturing Index
EU PMI Manufacturing Index
US PMI – ISM Manufacturing Index
Tuesday Australia Balance of Payments & Building Approvals
EU CPI Inflation
Wednesday Australia GDP
EU PMI Composite
Thursday US Unemployment Claims
Friday UK Halifax House Price Index
EU GDP
Canada Unemployment Rate
US NFP & Unemployment Rate
What’s in the news?
UK
Bank of England governor Andrew Bailey told the Reykjavík Economic Conference on Friday that interest rate rises may not be needed in response to the Iran war as monetary policy has already effectively been tightened by taking the prospect of future rate cuts off the table. The remarks are some of Bailey’s most dovish since the outbreak of the Iran war prompted the closure of the Strait of Hormuz. Bailey said, “Continued weakness in the UK activity and the labour market is likely to lessen the strength of second-round effects from higher energy prices, while recognising that these effects are likely to be stronger, the larger and more persistent is the rise in energy prices.”
Good news
The benchmark UK 10-year gilt yield had spiked to 17-year highs on a toxic combination of a Middle East energy shock, soaring rate hike expectations, and a UK political crisis threatening fiscal discipline. All three of those fears moderated simultaneously in the past two weeks, producing a sharp 7.9% yield drop from 5.19 to 4.81%.
Not so good news
Unit Labour Costs in the UK have gone from some of the most competitive in the G7, to the worst since the introduction of the National Living Wage in 2016 and have been further amplified by employer NICs, and the recent ERA. Yet the government trumpet it as one of their signature achievements. The overall package has made employing young people increasingly unattractive for employers.
Former Blair-era health secretary Alan Milburn has produced an extensive report that states that the crisis of nearly a million young people who are out of education, employment or training, ‘Neets’, costs the UK economy up to £125bn a year in lost economic output and tax revenues, nearly twice the defence budget, as well as increased benefit and health spending caused by ‘broken’ welfare system. It’s the highest number of economically inactive young people since records began. In her two budgets since Labour’s election in July 2024, Chancellor Rachel Reeves has increased taxes on employers through raising employers’ national insurance contributions and the decision to raise the national minimum wage, as well as Labour’s Employment Rights Bill legislation. Rain Newton-Smith, the chief executive of the CBI (Confederation of British Industry) said that businesses had a “central role” in solving the Neets crisis as she urged the government to reduce the cost of creating jobs in the UK.
Lord Simon Wolfson, the boss of Next has slammed the government’s crackdown on zero-hour contracts and called on Labour to unwind its “employment taxes”. The new rules would require bosses to offer a fixed contract with guaranteed hours to qualifying workers, but Wolfson said these requirements are difficult because “the risk is you then have to contract for those hours forever. You can’t afford to have the same number of people in your shop in February as you have in and around Christmas. That’s going to be bad news for our colleagues who want extra hours, particularly students who, in holiday time, need extra hours, and of course bad news for customers because service won’t be as good.
The latest Business Barometer from Lloyds shows business confidence in London fell in May. While companies in London reported higher confidence in their own trading outlook month-on-month, up five points at 64%, when taken alongside their optimism in the economy, down 12 points to 30%, gives a headline confidence reading of 47% (vs 51% in April 2026). Since May 2025, London has had an average overall business confidence of 58%, with its highest at 69% in August last year and its lowest at 46% in November.
Bank lending to businesses has plummeted to its lowest level for almost three decades according to new research from the Boston Consulting Group that shows British banks’ loans to companies outside of finance fell to 59% of UK GDP in the third quarter of 2025. This compares to a 2008 peak of roughly 90% of GDP. Other reported figures showed SME businesses have been particularly affected with Bank of England data suggesting loans to SMEs have nearly halved in 15 years, falling from 12% of GDP in 2011 to 6.5% in 2026.
The CPA (Construction Plant-hire Association) said Labour’s fuel duty freeze provides only short-term relief for firms already under severe strain. It fails to address the “perfect storm” of rising National Insurance, wage pressures, inheritance tax reforms and soaring fuel and energy bills, just as the Government demands faster delivery on homes and major projects. The sector is worth £14billion to the UK economy and supports more than 191,500 jobs. It is one of Britain’s most capital-intensive industries, generating £218 for the wider economy for every £100 it produces. More than 95% of CPA members are SMEs, many family-run businesses investing heavily in apprenticeships and equipment. Recent CPA survey findings highlight intensifying pressures with 76% of firms say recent tax changes have reduced confidence to invest, 42% are pessimistic about the next 12 months, and 66% cite energy costs as one of their most acute challenges.
The HBF (Home Builders Federation) has accused local authorities of thwarting housebuilding with a ‘manifestly unfair’ council tax raid on developers with steep council tax bills as soon as their homes are listed as complete. HBF say 45% of local authorities levy the full rate of council tax on firms immediately, which HBF boss Neil Jefferson says was forcing developers to abort schemes they would otherwise have built.
USA
The US annualised March quarter GDP has come in at 1.6% versus forecasts of 2.0% whilst the Fed’s preferred inflation index, core PCE inflation hit an annual rate of 3.3% in April, as expected. The personal consumption expenditures price index increased a seasonally adjusted 0.4% for the month, putting the 12-month inflation rate at 3.8%, again in line with expectations.
New Fed Chair Kevin Warsh has indicated that the Fed’s benchmark rate could be lowered, though he’s likely to face opposition from the rest of the FOMC (Federal Open Market Committee).
Treasury Secretary Scott Bessent said today that high gas prices are “transitory,” and for the first time since the start of the conflict in Iran, US drivers are seeing a shift with the average price of gas down about 10 cents a gallon nationally in the last week.
All three major stock market indices in New York finished May with fresh closing records. The Dow Jones Industrial Average rose 363.49 points, or 0.72%, to 51,032.46, while the S&P 500 added 0.22% to 7,580.06. The Nasdaq Composite gained 0.2% to 26,972.62. Goldman Sachs has raised its year-end S&P 500 target from 7,600 to 8,000 on the notion that earnings growth will continue to be strong even with some geopolitical headwinds.
Waymo suspended service in six US cities after its driverless cars drove on flooded roads during storms last week. Footage showed one of the vehicles stopped in water almost up to its headlights in Atlanta, which received several inches of rain. Waymo, owned by Google’s parent company, also said it was pausing service on highways as it improves how the robotaxis navigate construction zones. The retreats showed how the unpredictability of the real world could pose hurdles to the global proliferation of robotaxi services. A power outage in San Francisco last year caused Waymo cars to halt in the middle of city streets, while at least a hundred Baidu self-driving taxis stopped abruptly mid-traffic in a Chinese city last month.
The EU
Inflation has accelerated in the EU’s major economies, with Spain, Italy, and France rising to 3.6%, 3.3%, and 2.8% YoY, respectively supporting market speculation that ECB will raise interest rates at their next meeting scheduled for 11 June.
The EU industry commissioner said Brussels would deploy trade measures, including import quotas and tariffs, across a range of sectors alongside requirements that firms diversify their supply chains away from China as part of a more “muscular” strategy.
A corruption scandal is threatening to topple Spain’s Socialist Prime Minster, Pedro Sanchez after he lent his ‘full support’ to a Socialist ally Jose Luis Rodriguez Zapatero, a former Spanish prime minister accused of overseeing a vast influence peddling network. On 17 June, Zapatero will become the first former Spanish prime minister to appear as a suspect before the National Court. According to Jose Luis Calama, a National Court judge, Zapatero used this influence to help foreign companies, specifically those with links to the Chinese and Venezuelan government to gain access to public funds, in exchange for a cut. Investigators began by examining his role in a curious bailout. In March 2021, Spain used €53m of emergency Covid funds to prop up Plus Ultra, a Spanish airline with close ties to Maduro’s regime in Venezuela and only four planes that would help migrants travel to and from Latin America. It is now alleged that the decision was masterminded by Zapatero, who is said to have arranged a 1% commission and, through a member of his inner circle, let Plus Ultra know its application would be successful weeks before the relevant ministers actually met.
In 2020, Madrid took a stand against pressure from the US to restrict Huawei technology from the core of its 5G network. Other European states, including the UK, fell in line but Sanchez’s government not only placed no limits on Huawei, in 2025 it selected the company’s servers to store recordings of judicial wiretaps allowing the Chinese tech company to win large contracts in Spain despite EU and US security concerns. In doing so Madrid opened a “backdoor to the CCP”, according to the heads of the US House and Senate intelligence committees, who have urged the White House to review intelligence sharing.
Australia
Australia’s economic and political landscape has grown intensely combative following the Federal Budget’s sweeping tax overhauls. Prime Minister Anthony Albanese is pressing forward with plans to dismantle the long-standing 50% Capital Gains Tax discount, replacing it with cost-base indexation and a 30% minimum tax rate while restricting negative gearing solely to new builds to address housing affordability. Critics and industry modelling warn the reforms could stifle rental supply and hit small businesses, prompting the government to flag potential corporate carve-outs.
Seizing on this policy shifts and subsequent polling dips for Labor, the Coalition Opposition has launched a fierce counter-offensive, with newly elected Liberal Party Federal President Tony Abbott vowing a “people’s revolt” against the changes.
Canada
Canada’s economic and political landscape shifted heavily this week as Prime Minister Mark Carney pivoted federal policy toward major international defence and energy agreements. In a high-profile address to the Economic Club of New York, Carney pitched Canada as an “energy superpower” to US investors, proposing an enhanced trade and security partnership designed to fuel the American AI boom. Simultaneously, Canada moved closer to European allies, securing a landmark deal to export LNG from British Columbia to Germany. On the procurement front, Ottawa bypassed traditional US bids, advancing exclusive talks for Swedish surveillance planes and reviewing multibillion-dollar submarine proposals from Germany, Norway, and South Korea. However, this strategic shift toward fossil fuels and defence spending sparked a major political rupture back home, triggering the high-profile resignation of climate advocate Steven Guilbeault from office.
Canadian hopes that the US could uphold their free trade accord that also includes Mexico have dimmed after the US said it intended to maintain tariffs on some imports from Canada and Mexico. All three nations must decide by the 1st of July whether to extend the US-Mexico-Canada Agreement, signed during President Donald Trump’s first term, for another 16 years. But the Trump administration had “significant” trade issues with Canada, US Trade Representative Jamieson Greer said, adding that the “giant” US trade deficit remained a cause of concern. Meanwhile, Mexico, which has in recent years surpassed China to become Washington’s biggest trading partner this week reported a record monthly trade surplus, beating analysts’ expectations by a factor of 10.
Others
China’s industrial profits last month grew at their fastest pace in more than two years, easing fears that the Iran war would upend the sector. The new figures still pointed to signs of China’s economic divergence with exports remaining strong but with paltry domestic consumption.
As of 2025, Hong Kong has surpassed Switzerland as the world’s top cross-border wealth hub, booking nearly $3 trillion worth of international assets. The shift comes as investors seek to diversify their wealth-parking spots amid growing geopolitical tension and uncertainty but above all, it reflects massive new wealth in China, which by itself is the source of 60% of Hong Kong inflows.
The RBNZ (Reserve Bank of New Zealand) surprised markets with a more hawkish tone, saying it remains vigilant on inflation. Financial markets now see an 82% chance of a rate rise at the next RBNZ meeting due on 8 July.
Singapore’s economy expanded 6.0% in the 12 months to March 2026, comfortably above both the 4.6% official estimate and the 5.2% market consensus. The trade ministry held its 2026 growth forecast at 2%–4% but struck a more cautious tone on risks, flagging energy supply disruptions, a fresh round of US tariffs, and a potential pullback in global AI-related capital spending.
South Africa’s central bank raised its benchmark interest rate for the first time in three years, blunting a $1 billion fuel relief package designed to soften the blow of surging oil prices. Policymakers voted 4-2 to lift the repo rate by 25 basis points to 7%, with Governor Lesetja Kganyago telling reporters in Pretoria that the bank was prioritizing its newly codified 3% inflation target over a fragile domestic recovery.
Japan, the fifth-largest economy in the world is facing a major population crunch with a decline from 126.1 million to 123 million, the biggest population drop over a five-year period since the government began collecting census data in 1920.
Brent crude oil prices fell just over 19% in May, their biggest monthly loss in six years as the markets price in the likelihood of a US-Iran deal.
A new report by the IEA (International Energy Agency) forecasts global investment in oil projects are set to drop below $500 billion in 2026 for the third straight year, while spending on natural gas projects is expected to rise by more than 10%, the highest level in a decade. Throttled traffic in the Strait of Hormuz has upended fossil fuel markets, causing price rises and supply shortages, and prompting countries to boost spending on renewables, LNG, or coal. Energy investments are still projected to rise this year, but they will mostly focus on electrification.
Analysts forecast that lithium demand will increase three- to sixfold in the next decade, but a mining boss in China argued that even these bullish forecasts were underestimates. The metal is vital in batteries, and the electrification of the global economy has driven its uptake: Annual use has gone up 30% a year since 2020, up from 10% a year in the 2010s, and demand hit 1.1 million tons last year. The CEO of Tianqi Lithium told the Financial Times that projections did not account for the growth of electric trucks, mining equipment, and ships. China accounts for about half of global lithium mining and 80% of battery production.
Stranger than fiction
Until two years ago, West London’s Greenford Tube station flooded whenever it rained heavily. Then the Ealing Beaver Project got a licence to resettle a family of five beavers in Paradise Fields, a former golf course turned urban-forested park near the Greenford Tube station. After the beavers felled a few trees and built a dam to make a pond from the golf course creek, flooding stopped at the tube station, and new species started moving in. The council has now scrapped its expensive plans for a reservoir and levee.
Palaeontologists identified a massive ancient marine reptile twice the size of a great white shark. Mosasaurs roamed the seas in the Cretaceous, at the same time as dinosaurs (but, like other marine reptiles and the winged pterosaurs, were not themselves dinosaurs). Fossils found in Texas were thought to be particularly large examples of a known species, Tylosaurus Proriger. But reanalysis has shown them to be a bigger and apparently more violent animal, up to 43 feet long, with some showing damage from fights with its own kind.
Quote
Voltaire, “Politics is the path for men without principle to lead men without memory.”
