19th August 2021
Good morning Last week a hacker successfully stole $600m worth of cryptocurrency from platform Poly Network. The hacker has returned all but $33m worth, and earlier this week Poly offered the cyber bandit a job as the company's "chief security advisor" and sent a $500,000, no-strings-attached reward. Who says crime doesn't pay?
- Scotland’s blackhole doubles
- Summer sales cools inflation
Yesterday's market moves
FTSE 100 -0.2% 7,169
FTSE 250 +0.6% 23,836
There was mixed trading in the UK markets as investors weighed the latest inflationary data (more below) against ongoing Covid-19 concerns. Investors also waited for further clues from the US Federal Reserve (who spoke last night) about when it could reduce crisis-era support for the American economy.
Scotland’s blackhole doubles
What’s going on?
Scotland spent £36.3bn more on public services than it raised in taxes in the 12 months to March 2021 – more than double the previous year.
The figure is 22.4% of GDP i.e. economic output compared to 8.6% in the year before.
Scotland’s deficit is much higher than the 14.2% for the UK as a whole, and more than twice the advanced economy average of 11.7%.
Why is this important?
The past year has been tough on public finances in many economies with governments borrowing unprecedented amounts to support citizens during lockdown.
Total spending in Scotland rose to a record £99.2bn, reflecting the costs of health and economic interventions such as furlough in response to the pandemic, while income from taxes fell to £62.8bn.
Scotland which, through it’s ownership of the North Sea oil reserves, also suffered from the lower income as oil prices slumped.
The Scottish National Party (SNP) is determined to gain Scottish independence from the rest of the UK. The ultimately unsuccessful 2014 independence referendum was billed as a ‘once in a lifetime’ vote, however the SNP argue that Brexit has changed the landscape and that the Scots should have another chance to decide.
The UK government disagrees and is refusing to give permission for another referendum.
Campaigners in favour of Scotland staying in the UK point to the financial benefit that the nation reaps from being in the union. Total spending was equivalent to £18,144 per Scot - £1,828 per person more than the UK average, while revenue raised in Scotland was £382 less per head.
This latest picture of Scotland’s public finances will come as a blow to independence campaigners but strengthen unionists’ argument that Scotland’s relatively weak financial position means that leaving the UK is not a viable option.
Summer sales cools inflation
The UK Consumer Price Index (CPI) rose less than expected in July, by an annual rate of 2.0% down from 2.5% in June and lower than the 2.3% forecast. That’s according to the latest data from the Office for National Statistics (ONS). The CPI is the main metric used by the government and Bank of England to measure the cost of living.
The lower growth was partly driven by heavier than usual discounting of clothing, footwear and electronics in the summer sales. Falling prices of recreational activities and cultural trips also helped.
The fall in the CPI was the first since February and brings it in line with the Bank of England’s target inflation rate.
However economists have been quick to call out that the fall is most likely a blip and that inflation could pick up again for the rest of the year. It’s predicted that global supply chain issues and increasing demand from the economy reopening will drive prices higher.
Earlier this month the Bank said it expected inflation to jump to 4.0% around the end of the year, which would be a decade high. But the Bank stuck to its view that the acceleration of inflation would prove to be temporary.
Stat of the day
Year to date online spending in the UK hit a record of £65bn, a rise of 18% on 2020 and 56% higher than in 2019
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