1 April 2025: Reeves’s “measures” could cost 85,000 jobs

It has been estimated that the measures announced in last October’s Budget that come into force this week could cost the economy 85k jobs.

The Resolution Foundation warned of potential redundancies ahead of the increases, which the think tank claims will drive up the cost of employing part-time low-paid workers by 14pc, the biggest jump on record.

The increases, which will cost businesses up to £1,400 per employee per year, will either see enterprises scale back expansion plans or rationalize employment costs in other areas like productivity bonuses.

Charities that are dedicated to supporting the most vulnerable sector of society are again asking, “Why is Rachel Reeves targeting this sector and ignoring the ultra wealthy, if she feels the need to impose tax increases.

The minimum wage is set to rise by 6.7pc to £12.21 per hour today, while the Chancellor’s £25bn National Insurance raid will kick in at the start of the new financial year this weekend. The Confederation of British Industry said the decision to increase both NI and the minimum wage would inflict further harm on businesses at a time when the government should support increases in growth rather than try to balance the books over a single year.

The “employers union” is also concerned about the cost of implementing the Deputy Prime Minister’s overhaul of worker’s rights legislation, which will also cost businesses in the medium term.

A spokesperson for the CBI said that Reeves has made it unnecessarily tough for those entrepreneurs looking to start a business, while the hospitality sector which employs a large part of the low paid sector believes that the all round cost of all the changes will have a “chilling effect on investment plans and job creation”.

The opposition parties have rubbished the government's assertion that the measures will benefit working people overall by over £500 per annum. This number has been taken in isolation from the OBR’s report, which was published last week. In it, it was estimated that if no other issues come to light during the life of this Parliament, the average working person could see a benefit of a few hundred pounds.

The Green Party believes that similar savings could be seen from the implementation of several green initiatives, while Ed Davey for the Lib-Dems wants to see a complete overhaul of social care.

The Prime Minister has come close to admitting defeat in his efforts to persuade Donald Trump to provide an exemption for the UK from the reciprocal tariffs that are expected to be implemented tomorrow.

Sir Keir Starmer has said that when it comes to tariffs, I have been clear I will always act in the national interest, and we've been preparing for all eventualities ahead of the announcement from President Trump, which we would expect the UK to be impacted by alongside other countries.

The pound traded sideways yesterday as the market considered the effect of the implementation of tariffs. It fell to a low of 1.2886 and closed at 1.2917.

President Trump took time away from considering how to implement further tariffs to forward his plans to “Make America Great Again” by renewing calls for the Federal Reserve to cut interest rates. Trump conveniently forgets that the imposition of tariffs on the import of both finished goods and raw materials will have a significant effect on inflation and could force the Fed, far from cutting rates, to increase them.

Even without the President’s intervention, inflation, as seen from last week’s publication of Personal Consumption Expenditures data, is currently not falling as fast as the FOMC would like.

For now, members of the Committee have been content to subscribe to a wait-and-see policy, but if inflation doesn’t begin to fall towards their 2% target, a rate increase may begin to be a topic of conversation again.

Trump is also ignoring veiled comments that it is his measures that are creating uncertainty, as asset markets in both the U.S. and overseas fell yesterday. Having made another grand gesture by labelling tomorrow America’s Liberation Day, he maintains that he is simply implementing the policies that won him the White House last November.

Any criticism of the Administration is conspicuous by its absence from any domestic publication or website, due in no small part to the fears that Trump will take reprisals against anyone who questions him or his methods.

Ten weeks after coming to power, Trump has said that he will implement tariffs on all products that charge tariffs on U.S. exports, the so-called reciprocal tariff. He is also targeting imports from Canada and Mexico to encourage them to take illegal migration and the flow of drugs into the U.S. more seriously.

It is estimated that the ensures will knock 0.7% off GDP, while the economy could lose 500,000 jobs, that is without considering the number of jobs that won’t be created over the next few years.

Economists from outside the U.S. are questioning how Trump is allowed to act with such impunity, ignoring the checks and balances that make it a democracy that cannot be ridden roughshod over.

Fed Independence is enshrined in that democracy, and it is believed that Jerome Powell has pushed Trump close to his limits by ignoring calls for looser monetary policy. Powell is not alone; several of his colleagues on the FOMC have significantly tempered their expectations for lower rates this year.

Uncertainty reigns, and while that is happening, the Fed won't feel comfortable in being either proactive or preemptive in any changes to monetary policy. Their mandate is very clear: to promote both maximum employment and stable prices (low and stable inflation) in the U.S. economy. This is impossible while they have a President who is making economic policy seemingly on a whim.

The dollar index snapped two days of falls yesterday as the market awaited further tariff announcements. It rose to a high of 104.40 and closed at 104.20.

Most analysts expected the ECB to continue to cut interest rates deep into the second quarter of 2025. However, as the drop in inflation has slowed, the more hawkish elements on the Bank’s Governing Council are considering pushing for a pause to allow economists to re-evaluate what constitutes the “neutral rate”.

Arch Hawk Isabel Schnabel believed even before the latest cut that rates had reached a neutral state where they are neither encouraging nor restricting growth.

On balance, the market still feels that one more cut would see rates reach neutral, but the vote may be closer than had been previously imagined.

ECB President Christine Lagarde has “teamed up” with the Bank’s Chief Economist to call for the European Union to become more financially independent.

Given what is taking place currently in the U.S., where the President has adopted an “every man for himself” attitude, both Lagarde and Philip Lane are calling for the region to create a truly independent payment platform to challenge Visa, Mastercard and platforms like Apple Pay, Google Pay and PayPal.

Lagarde said yesterday that Europe should move toward economic independence as US President Donald Trump prepares to unleash a new wave of tariffs. She told France Inter radio that Europe faces an “existential moment.”

“Trump calls it ‘Liberation Day,'” she said. “But I see it as a moment when we must collectively decide to take greater control of our destiny, and I think it is a step towards independence.”

Lagarde emphasized the need for Europe to assert its strength in trade negotiations. “To put ourselves in a position to negotiate effectively, we have to show that we won’t just roll over,” she added.

The European Central Bank warns that Trump’s trade war could reduce the eurozone’s economy by 0.3 per cent in its first year and by 0.5 per cent if the EU retaliates. “A trade war creates only losers,” Lagarde concluded.

As stablecoins and U.S.-based payment systems grow in global popularity, Europe must act swiftly to protect its financial independence by launching a digital euro, according to Philip Lane, Chief Economist at the European Central Bank (ECB).

In recent remarks, Lane emphasized the strategic importance of developing a euro-denominated digital currency to counter foreign influence and maintain Europe’s monetary autonomy in an increasingly fragmented geopolitical environment, reports Bloomberg.

Lane warned of Europe’s growing reliance on non-European payment systems, arguing that such dependence could leave the region exposed to external pressures and limit its ability to shape domestic financial policies.

Stablecoins, digital assets pegged to traditional currencies like the U.S. dollar, pose a particular challenge, potentially undermining the euro’s dominance within its territory. If left unchecked, Lane cautioned, foreign digital payment solutions could erode Europe’s financial self-sufficiency.

The euro again trod water yesterday as the market considered the worst possible outcomes from the imposition of tariffs on trade between the U.S. and the EU. It traded between 1.0849 and 1.0784, closing at 1.0802.

Have a great day!