8 October 2025: Economists believe that NI and business rates should be reduced

Economists continue to speculate about the measures the Chancellor will announce in her budget next month, and have begun to provide their own interpretations of what is necessary to promote economic growth.

Building on an idea that was first mooted at the Conservative Party Conference this week, a cut rather than the complete removal of Business rates on bricks and mortar retail outlets in high streets and retail parks as well as providing similar support to the hospitality sector, would provide significant growth opportunities, while reversing the National Insurance increase that was contained in last year’s budget would see the SME sector return to hiring workers.

Michael Saunders, once a significant hawkish presence on the Bank of England’s Monetary Policy Committee and now a senior economic advisor at the consultancy Oxford Economics, commented recently that the UK economy remains exceptionally fragile; subdued growth, high inflation, and a weak fiscal position are set to persist, and a sustainable driver of UK growth has yet to emerge.

The Budget on November 26 could add to the headwinds, with further substantial tightening of fiscal policy likely.

Rachel Reeves is unlikely to receive any support from the Bank of England, as interest rates are expected to remain anchored at 4% in light of the current inflation outlook.

The Bank’s Governor has been speaking about the country’s potential as an investment destination this week, saying the UK needs a “supportive” investment environment if it is to realise the economic benefits of innovative new technologies.

Speaking at an event in Edinburgh on Monday, Andrew Bailey said “general purpose technologies”, such as AI, green energy, and the space sector, could lead to “industry-wide growth” and a boost to productivity.

However, he said achieving this required “the necessary investment”, which he said depended on “a lot of commitment”. “If we are on the cusp of seeing another advance in GPT, we need the conditions to support an environment where investment occurs across the economy,” he said.

Having survived what was expected to be a severe examination of his leadership during and after the Labour Party Conference, Sir Keir Starmer faces further scrutiny, with the press asking how long he has to turn things around. From domestic terrorism to small boats, the economy, and overall responsibility for anaemic growth, the Prime Minister has a full agenda to address before the end of the year.

Having lost his deputy and several other senior advisors, Starmer does not have the support to give an inexperienced Cabinet time to grow into their roles. Lammy, Mahmood and Cooper need time to bed into their new roles, a luxury they do not have, as in no time the Government will be “celebrating two years in power and is in danger of failing to achieve any of Starmer's five pledges, which are to secure the highest growth rate in the G7, become a green energy powerhouse, build an NHS which is fit for purpose, ensure the safety of Britain’s streets and break down barriers to opportunities.

There is a tagline that applies to each of those priorities, which would show that his backbenchers are right to question his performance thus far.

As the Federal Reserve signals an aggressive path of interest rate cuts, driven by concerns over a softening U.S. economy, the GBP/USD exchange rate finds itself at a critical juncture. Yesterday, the pound lost all the ground it made up last week, falling to a low of 1.3392, although it recovered to close at 1.3423.

The lack of a data release for job creation in September is causing a sense of nervousness on Wall Street. While the Fed remains optimistic that the September NFP report would have seen job creation remain in positive territory, some economists believe that the suspension of the report may have masked the economy’s slide towards a recession.

Other G7 members yearn for the kind of growth that the U.S. achieved between April and June, and the storm clouds that appear to be looming over the economy seem like figments of the imagination of FOMC members loyal to the Trump administration.

An economy that grew by 3.8% in the second quarter would need a significant event to occur for that level of growth to dissipate anytime soon.

While Harker, Bowman, and Miran advocate for rates to be cut, citing concerns over job growth in the longer term, the FOMC shows a complete lack of willingness to be “bounced” into a preemptive rate cut.

Federal Reserve Bank of Minneapolis President Neel Kashkari struck a more reserved tone than some of his Fed counterparts yesterday, cautioning that it's still too soon to be able to tell if tariff-led inflation will be "sticky" or not.

However, he noted that he's particularly bullish on the labour market and is expecting a return to form for American job creation, which has sputtered recently.

Kashkari is not a voting member of the FOMC this year. However, he and his non-voting colleagues attend the meetings and their opinions are valued when it comes to deciding monetary policy.

Kashkari also cautioned that any drastic cuts to interest rates would risk stoking inflation. “You would expect to see the economy have a burst of high inflation,” Kashkari said Tuesday during a panel discussion on artificial intelligence and the economy hosted by the Minnesota Star Tribune.

“Basically, if you try to drive the economy faster than its potential to grow and its potential to produce prices, you end up just going up across the economy.”

Stephen Miran, the Fed's newest Governor, has not been shy in letting the markets know his views on inflation, rate cuts and the prospects for economic growth.

Miran made another lengthy appearance, reiterating that he believes any underlying inflation pressures within the US economy are entirely contained within the effects of the migrant population and will be solved mainly by immigration controls.

Miran also gave his own personal estimate of the neutral rate of interest, or r-star as it is known to economists, of 0.5%. Miran's unexplained personal model for r-star falls significantly below even the most conservative standard r-star models, which currently range from 1% to 0.8% at their lowest.

Monetary policy is becoming more and more politicised as the markets are beginning to see through the dovish comments made by Trump appointees to the FOMC. The comments of the twelve members of the committee who are in day-to-day contact with businesses in their “districts” are thought to have a far better handle on what is happening “on the ground” than the “theorists” who are board governors.

The dollar index rallied to its highest level since early August and has continued to rise in early Asian trading. Yesterday, the Greenback reached a high of 09.66 and closed at 98.59.

One day soon, Brussels will wake up to the potential for the crisis in France, which began as a political split between the hard left and hard right, morphed into a debt crisis and now threatens to erupt into an event that will make the 2009 and 2012 crises look like a storm in a teacup.

The political histories of Greece, Spain, and, most obviously, Italy are marked by failed governments, elections, and wild swings between left and right.

However, we are talking about France, the Eurozone’s second-largest economy, a member of the G7 in its own right, and a significant player in many global issues.

The implosion currently taking place has cost five prime ministers their jobs, while a deeply unpopular president clings to the Élysée Palace like a child on a roller coaster.

Emmanuel Macron has asked Sébastien Lecornu to have one more try to bring the warring factions together in some form of compromise. Still, today’s deadline is expected to expire with no noticeable change.

While in Italy it is often the entire voting population that swings wildly from left to right and back again, it is a tribute to the right-wing Government of Giorgia Meloni that she is not just clinging to power but gaining in popularity.

France could not be more different. The country is split almost down the middle, not just between left- and right-leaning middle-of-the-road centrist politicians, but also between the hard right of Marine Le Pen and the hard left, controlled by Jean-Luc Mélenchon, neither of whom shows any willingness to compromise.

The only answer is to hold more elections. However, if they produce another stalemate, the outcome may mean that there is no possibility of a budget being agreed upon, and Government debt will rise further. Eventually, France may be forced out of the Eurozone.

That particularly drastic outcome is a long way from being realised, but there always seems to be the potential for such drama. Were we to see a “Frexit”, Germany would be left very exposed, and despite its voters being overwhelmingly in favour of the European Union, the very least that could be expected would be a massive overhaul of the financial side of the region's affairs.

German industrial orders unexpectedly fell in August, marking a fourth straight month of decline, official data showed yesterday, the latest blow to the government’s efforts to reboot the ailing economy.

The only positive aspect of the data was that at least the German state can publish its data, in contrast to the U.S.

New orders, closely watched as an indicator of future business activity, dropped 0.8% month-on-month, according to preliminary figures from the federal statistics agency Destatis, after sliding 2.7% in July.

Analysts surveyed by the financial data firm FactSet had predicted a 1% increase in August.

The common currency fell to a low of 1.1647 and closed at 1.1657. At some point, traders and investors may take heed of the situation in France and begin to divest themselves of their long Euro positions, as it seems significantly overvalued, particularly in the current global environment.

Have a great day!