31/01/2026 by Tony Redondo
Andy Haldane, the former Chief Economist of the BoE (Bank of England) and current head of the BCC (British Chambers of Commerce), has issued a pointed critique regarding the Labour Party’s economic competence. In a recent interview with LBC, Haldane argued that the party suffers from a fundamental lack of private-sector experience, stating bluntly that Labour has “no nose for business.” He suggested that this disconnect has led to a series of high-profile policy U-turns, which he attributes to a systemic failure in the early stages of planning and rigorous evaluation. According to Haldane, these shifts signal a lack of strategic confidence that hampers the party’s ability to present a stable economic alternative.
Expanding on the broader state of the nation, Haldane remarked that the UK economy continues to “fly below its cruising altitude,” struggling to regain the momentum lost to years of stagnation. To counteract this, he advocated for a bold pivot in industrial policy, suggesting that the defence sector should be treated as a primary cornerstone of any national growth strategy. By leveraging the UK’s historical strengths in high-tech manufacturing and security, he believes the government could stimulate innovation and high-skilled employment.
This scepticism from the BCC is echoed by sobering data from the CBI (Confederation of British Industry). Their latest growth indicator reveals that private sector activity weakened significantly in the three months leading to January. More concerningly, business expectations for the coming quarter remain firmly negative. This alignment of political criticism and poor economic indicators paints a challenging picture for the UK’s path to recovery, highlighting a pervasive sense of uncertainty among the country’s primary wealth creators.
Currency Exchange Rates Update
The Pound hit its best level against the Euro since September on Wednesday before closing the week little changed against the single currency.
The Pound also hit its best level against the US Dollar since October 2021 on Wednesday, after climbing nearly 4% in 10-days before closing the week just 0.34% up. Several factors are weighing on the US currency with the Japanese and US authorities apparently coordinating to bolster the yen and weaken the dollar in a trans-Pacific currency pact. This suggests the US administration is now intent on actively pursuing a weak dollar policy in order to bolster the country’s trading position, as a weaker currency helps US exporters. In addition, there is an ongoing rotation trade from currencies into precious metals by investors diversifying their exposure amidst fears of fiat currency debasement. Central banks have also significantly increased their reserve holdings of gold. The IMF says reserves have grown by approximately $300BN in the past year, or 2.3%. The US dollar now accounts for 56% of reserve manager portfolios compared to 71%.
https://bmmagazine.co.uk/news/pound-hits-four-year-high-against-dollar-buy-now
The Federal Reserve held rates at 3.50–3.75% at the first policy meeting of the year last week. There was broad consensus pointing to improvements in the US economy, including a more stable labour market and somewhat elevated inflation, both of which signalled a more cautious approach to potential future adjustments.
US President Donald Trump named Kevin Warsh as his pick for Federal Reserve chair ending months of speculation over who will replace Jerome Powell at the head of the US central bank. Warsh is no stranger to the world’s largest central bank, having served as Federal Reserve governor on the Fed’s Board from 2006 to 2011, the youngest to serve having been nominated at just 35. He also previously interviewed for the top job in 2017 before it ultimately went to Jerome Powell. Warsh is a familiar face across both the US’s business and political spheres, known for his connections both on Wall Street and in Washington. He served as an economic adviser for the George W. Bush administration, focusing on domestic finance, banking and regulatory policy. Prior to his work at the White House, he worked at Morgan Stanley between 1995 and 2002. Warsh is known to have a close relationship with Trump, reportedly having previously advised him on economic policy.
The Canadian Dollar hit its highest level against the US Dollar last week since September 2024 on US Dollar weakness and strengthening oil prices which has seen Brent get to USD 65.88 rather than innate Canadian Dollar strength.
The Swiss Franc is the ‘strongest currency on earth’ and just hit an 11-year high. It’s traditionally seen as a safe haven asset, gaining value during geopolitical or macroeconomic uncertainty and its current strength is making monetary policy more complicated for the SNB (Swiss National Bank) with Switzerland teetering on the edge of disinflation and negative interest rate territory that constrain the SNB’s room for manoeuvre.
Polish Finance Minister Andrzej Domanski says his country is in no hurry to join the EUR (Euro) due to Poland’s strong and strengthening economy. Analysts expect the PLN (Polish Zloty) currency to be around for some time to come.
This week, the key economic data releases include:
Monday UK Nationwide House Prices & Manufacturing PMI
EU Manufacturing PMI
US Manufacturing PMI
Tuesday Australia RBA (Reserve Bank of Australia) Interest Rate Decision
Wednesday EU CPI Inflation & Composite PMI
Thursday UK BoE Interest Rate Decision
EU ECB (European Central Bank) Interest Rate Decision
Germany Manufacturing & Industrial Orders
Friday UK Halifax Housing Index
Canada Employment Rate
US NFP Unemployment Rate & Consumer Sentiment Survey
The BoE will deliver its first policy announcement of the year alongside the latest MPR (Monetary Policy Report) on Thursday. After the narrowest of votes to cut the Bank Rate by 0.25% to 3.75% in December, most analysts expect a clear majority for holding at 3.75%, but not unanimity.
The ECB is also expected to keep rates unchanged on Thursday with the euro strength a likely focus in the Q&A with ECB President Christine Lagarde.
What’s in the news?
UK
MPs have urged Britain’s fraud squad to investigate a “catastrophic” £4.6 billion Government Net Zero scheme after 98% of wall insulation installed under it had major defects that required fixing, some of it posing an urgent health risk. In a scathing report, the PAC (Public Accounts Committee) said the home retrofit scheme that left more than 30,000 properties with defects that “failed at every level”. It warned over possible fraud in the scheme which the committee Chairman branded the “most catastrophic fiasco that I have seen”. The PAC took aim at Ed Miliband’s Department for Energy Security and Net Zero saying senior officials took two years to recognise the scale of the problem.
The FT (Financial Times) reported that two out of every five overseas students at top UK universities came from China with almost 105,000 Chinese students attending the elite “Russell Group” schools, a record 42.5% of their international population. A major income source, the swell of students highlights the risks associated with relying on a single recruitment market. In contrast, the US higher education system is having the opposite experience. Although America remains a top destination for students coming from China, numbers have been falling for years with the number of Chinese students in American schools falling by 4% to 265,000 in the 2024-25 school year.
Good news
The flash S&P PMI (Purchasing Managers Index) shows the UK’s private sector experienced its fastest growth in nearly two years in January. The PMI rose to 53.9, indicating expansion, driven by improvements in the services sector, manufacturing, and technology. However, the hospitality sector continues to struggle, with Chris Williamson, chief business economist at S&P, noting that “cost pressures were again often linked to government policies relating to higher National Insurance contributions and the national minimum wage.”
Banks experienced a 23% growth in new buy-to-let mortgages last autumn including a 32% increase in remortgaging according to UK Finance. However, the proportion of homes bought by investors dropped from 15.8% in 2015 to 10.9% in 2025.
Not so good news
UK businesses continued to face intense financial pressure throughout 2025 with 28,616 insolvency activities recorded, while start-ups declined, according to a new report from R3. Corporate insolvency-related activities (including administration and voluntary and compulsory liquidations) eased slightly compared with 2024, levels remain significantly above pre-pandemic norms, reflecting a fragile operating environment for many businesses.
The Lloyds Bank business barometer shows business confidence fell again at the start of the year, dealing a blow to the government in its hopes of boosting the UK economy before difficult elections in May.
Both prime Minister Sir Keir Starmer and the chancellor Rachel Reeves have frequently pointed to the Lloyds Bank business barometer when speaking about bosses’ confidence in growth plans, with recent examples showing higher confidence levels than other surveys.
The latest Industrial Trends Survey shows UK manufacturing output falling with further price rises expected. The decline was broad-based, led by food, drink and tobacco, metal products, mechanical engineering and chemicals. Firms expect output and orders to fall again by April, though at a slower pace. Cost pressures stayed elevated, and while selling prices were broadly stable, manufacturers expect both domestic and export prices to rise in the coming months. Investment intentions remain weak, constrained by demand uncertainty and inadequate returns.
Nearly 1m five-year fixed-rate mortgages will renew in 2026, leading to significant repayment increases for households. In 2021, 971,105 such mortgages were opened, according to the FCA (Financial Conduct Authority) with mortgage rates below 2% so many borrowers now face annual repayment rises of up to £2,124. UK Finance notes that 1.8m households will exit fixed rate deals in 2026.
Fresh analysis by the CSJ (Centre for Social Justice) has found the number of jobless graduates on benefits nears three quarters of a million. The CSJ have called for clearer targets on technical training, suggesting there were already “too many graduates” as 37% of graduates were over-qualified for their jobs despite skills shortages in the areas such as construction. Apprenticeship starts among under 19-year-olds had fallen by 40% since 2014 despite higher level apprentices out-earning the average degree. The CSJ suggested that half of university students would have been financially better off by taking a higher-level apprenticeship and avoiding debt.
The Begbies Traynor quarterly red flag alert report is warning that tens of thousands of “zombie” firms are at risk of collapsing this year due to increased pressures from Rachel Reeves Budget which has raised taxes, wage bills, increased inflation causing weak consumer demand. In the last three months of 2025, there was a 44% year-on-year increase of firms being in “critical” financial distress. Zombie firms are typically highly leveraged and are unprofitable but generate enough revenue to stay in business and pay debt but does not make enough money to invest in growth. Hotels are seeing a 54% increase of having financial problems, along with a 39% rise for restaurants and bars the last year.
USA
In a positive move for the US economy, data shows a significant increase in factory orders, with the total value of new purchase orders placed with manufacturers rising by 2.7%, well ahead of the forecast growth rate of 1.7%. The 2.7% increase is also a marked improvement from the previous figure, which showed a decline of 1.3%. This turnaround suggests a resurgence in the manufacturing sector. The report also includes revised data on Durable Goods Orders as well as new data on non-durable goods orders.
The US stock market has hit a new milestone with the S&P 500 hitting the 7,000 mark for the first time. Tech is once again setting the tone as investors bet on the AI boom continuing, fuelling the prospects for listed companies. Sentiment has been boosted by a raft of results, showing demand for semi-conductors is racing ahead.
The US government is reportedly pursuing a $1.6 billion investment in an American rare earth company, its largest such foray into the sector, as Washington looks to build up its domestic mineral supply chain. The planned 10% stake in USA Rare Earth marks the latest intervention by the Trump administration into private industries it deems central to national security as the US government has stakes in at least six other minerals companies.
A new US national security strategy deprioritized China as the military’s top threat, shifting focus to the homeland and Western Hemisphere. The Pentagon plan calls for the abandonment of “grandiose strategies” and prioritizes diplomacy with Beijing in an effort to deter the superpower “through strength, not confrontation.” It signals a longer-term goal of reducing Washington’s military role in Europe, East Asia, and the Middle East.
A massive winter storm pounded much of the US with snow, ice, and dangerously cold temperatures. Airlines cancelled more than 17,000 flights last Sunday, a level last seen during the early days of the pandemic while ice across the mid-Atlantic and South knocked out power for more than 1 million customers. The storm shattered records and was unique in its spread, stretching from New Mexico to New England with Copenhagen, New York, seeing a temperature reading of minus 49°F or minus 45°C.
Amazon is reportedly planning a second massive round of reductions to jobs as it moves toward the target of 30,000 corporate job cuts, about 10% of Amazon’s corporate staff and are Amazon’s largest job cuts in history.
US life expectancy at birth reached an all-time high in 2024 after opioid overdoses fell 35% between 2023 and 2024.
The EU
The EU and India signed a landmark trade agreement as both look to bolster commercial alliances. The EU expects to double exports to India by 2032 as part of the deal while Delhi anticipates EU-bound exports to soar.
Europe’s economy is showing signs of recovery, despite widespread despair over its prospects. Survey after survey shows Europeans ever pessimistic about the continent’s future but the IMF (International Monetary Fund) chief Kristalina Georgieva says this pessimism is misplaced as seven of the world’s top 10 performing economies are European, and analysts say Germany’s economy, stagnant for years, is expected to accelerate this year after stimulus.
Europe is building weapons and ammunition at its fastest pace in decades as it aims to manage its defence independently of the US. German defence giant Rheinmetall, for example, has been building a slew of new factories since Russia’s 2022 invasion of Ukraine and will soon make more 155mm artillery shells than the entire US defence industry. Italy’s Leonardo has increased its headcount by nearly half. Europe spent $560 billion on defence last year, twice what it spent a decade ago, and by 2035 its spending will be equivalent to 80% of the Pentagon’s. Although the continent still relies on the US for satellite support, advanced fighters, and long-range drones, the pivot toward defence self-reliance is well under way.
Germany’s Ifo business climate index disappointed with the headline unchanged at 87.6 in January, below expectations of 88.2. Sentiment has been depressed for years, with the index stuck below its long-term average of roughly 90 since early 2022. The latest reading reinforces the view that any meaningful lift in activity will come only once defence and infrastructure spending plans finally translate into real outlays later in the year, a process slowed by Germany’s sluggish federal decision-making.
For the first time since the end of the Second World War, France recorded more deaths than births in 2025, marking a historic demographic shift.
The French government aims to stop using US-made videoconferencing software in favour of homegrown technology. From 2027, the domestic Visio platform will replace Zoom and Microsoft Teams, among others.
France’s economy expanded at its weakest rate for five years in 2025 as US tariffs weighed on the second largest EU economy. French GDP (gross domestic product) increased by just 0.9% in 2025, down from 1.1% in 2024 and 1.6% in 2023. Foreign trade, which had positively contributed to GDP in 2023 and 2024 became a drag on French growth in 2025. Exports slowed significantly, rising only 1.4% compared to 2.4% in 2024. Meanwhile, imports into France surged 2.9%, reversing the 1.3% decline seen in 2024.
In contrast, Spain’s economy grew by 2.8% in 2025, positioning it among the fastest growing large, developed nations globally, despite slowing from 3.5% growth in 2024. Spain’s unemployment rate dropped below 10% for first time since 2008 in the fourth quarter of 2025. The Spanish economy showed strong job creation throughout 2025, with the private sector generating 92% of all new jobs created during the year.
Spain plans to grant 500,000 undocumented migrants’ legal status, bucking a trend among many Western nations that are cracking down on immigration. Prime Minister Pedro Sánchez has for years sought to increase immigration to Spain as the country ranks as the seventh oldest in the world by median age and spends around 12% of its GDP on pensions.
Others
India’s economy is expected to grow between 6.8% and 7.2% in the fiscal year starting in April, a slowdown from the current fiscal year’s growth estimate of 7.4%. India is going green faster than China did at the same income level as cheap solar, wind and batteries are allowing India to bypass a fossil-heavy growth phase.
China’s industrial profits climbed 5.3% year-on-year in December, reversing a 13.1% drop the month before and marking the first gain in three months.
China’s top general was ousted after being accused of leaking nuclear secrets to the US, raising questions about Beijing’s military readiness. Zhang Youxia, who was second in military command only to Chinese leader Xi Jinping and considered one of his closest confidants. His demise lessens the chances of an attack on Taiwan in the short term.
African nations now send more money to China in the form of loan repayments than they receive in new borrowing. China began accelerating lending to African nations two decades ago, with annual loans peaking at almost $30 billion in 2016. However, under-performing projects and economic mismanagement led several countries to default on their loans, with China pulling financing in response. Yet Beijing remains keen on expanding its footprint in Africa as competition with the US for access to critical resources heats up with Chinese foreign direct investment in the region growing almost tenfold in the two decades to 2024.
Business confidence in Australia strengthened in December. Capacity use slipped slightly but remains well above the long-run average, pointing to a tight labour market. Unemployment fell to 4.1% and underutilisation dropped sharply, reinforcing signs of labour market pressure. The Australian CPI (Consumer Price Index) inflation grew more than expected in December, while core inflation also rising and stubbornly remains well above the RBA’s annual 2% to 3% annual target. The RBA held interest rates in December, striking a hawkish stance after inflation rebounded sharply in the second half of 2025 with some members of the central bank raising the possibility of an eventual rate rise in 2026.
Australia’s clean energy transition is moving at a cracking pace. In the last quarter of 2025, renewables supplied a record 51% of the country’s electricity, with wind, solar and batteries each at all-time highs. The share of fossil gas is at its lowest since 2000, coal power is at its lowest level ever, emissions are down, and wholesale electricity prices have plunged by 44%.
New Zealand will deliver its 2026 Budget on 28 May with Finance Minister Nicola Willis pledging strict cost control and targeted investment. She told Parliament the plan will prioritise healthcare, education, defence capability, and law and order, while keeping a firm lid on discretionary spending. The budget looms ahead of the 7 November election.
Saudi Arabia wants high net worth individuals worth more than $30 million. The kingdom may open its premium residency program to a wider range of candidates according to Bloomberg as the Gulf’s urban centres compete to attract high-net-worth, educated denizens to live, work, and spend. High-achieving students and a wider range of entrepreneurs may also be invited to apply for the status, which comes with perks such as fee exemptions and access to the real estate market. Expanding the premium residency scheme follows similar efforts by Bahrain, Qatar, and the UAE, all of which are trying to keep foreign workers and their spending in their countries for longer than previous expat stints in the region.
Meanwhile, Dubai is doubling down on efforts to fend off regional rivals trying to dethrone it as the Gulf’s top financial hub with a 100-billion-dirham expansion of the Dubai International Financial Centre with the aim to more than double the district’s footprint by 2040. Nearly half will be office space, lifting pressure on a zone that is already operating at full capacity. There will also be roughly 4,000 apartments, aimed at easing the long commutes for at least some of the area’s workforce. Around 48,000 people work in the DIFC today, and officials expect that to climb to 125,000 once the expansion is complete.
Zimbabwe’s annual inflation rate fell to single digits this month for the first time since 1997. Authorities hailed the 4.1% reading as a “historic milestone” after decades marred by hyperinflation and currency collapse with inflation hitting 79.6 billion percent in November 2008 with prices doubling roughly every 24 hours. The deflationary shift follows the rollout of central bank policies aimed at stabilizing prices since the country’s gold-backed currency was launched in 2024, Harare’s sixth attempt since 2009 to replace the US dollar as the nation’s main form of tender.
Oil prices have paused after rallying to their strongest levels in roughly four months. Near-term supply fears still support price rises but gains could be limited while the oversupply narrative remains a headwind over the long term.
Gold, silver, and copper hit record highs on geopolitical turmoil and industrial demand. Gold climbed another 4.6% to hit an all-time high of $5,542. Gold only surpassed $5,000 for the first time on Monday and only broke past $4,000 last October.
Silver, meanwhile, extended a “frantic” rise, up almost 60% since the start of the year and posted its strongest one-day gain since 1985 last Monday, jumping 14%.
On Thursday, it was the turn of copper to soar when it shot up to $14,000 per ton. Just two months ago it stood at $11,000 per ton. Demand from AI, electronic chips, and power construction means that there is no sign of the price pulling back just yet.
A brutal cold snap in the US drove natural gas prices higher globally. As one Reuters columnist put it, “When the US freezes, the global LNG market catches a cold.”
Stranger than fiction
The amount of microplastics in the air might be several orders of magnitude lower than studies have suggested. A new paper examined global microplastic emissions and recorded concentrations and found that previous models’ estimates were between 100 and 10,000 times higher than is plausible, suggesting a problem with over-extrapolation from limited data. The news follows other recent research and news reports that found that concentrations of microplastics in the human body may also be overestimated. A popular paper claimed the average human brain contained enough plastic to make a teaspoon, but new analysis shows that tests cannot reliably distinguish between plastic and body fat.
Quote
British hairstylist, cultural icon and businessman, Vidal Sassoon, “The only place where success comes before work is in the dictionary.”
