Thursday, March 9, 2017
UK workers warned of 15 years without pay rise; ECB sees global politics as the big risk; AirBnB valued at $31bn
1 No pay rise for 15 years, UK workers warned (Katie Allen, Angela Monaghan & Phillip Inman in The Guardian) Workers in Britain are on course to suffer an unprecedented 15 years of lost earnings growth and have been warned to prepare for a third successive parliament of austerity by a leading thinktank.
Analysing Philip Hammond’s spring budget, the Institute for Fiscal Studies (IFS) said that after suffering a lost decade of earnings growth, households were now about to be hit by big welfare cuts.
Paul Johnson, the thinktank’s director, highlighted permanent scars to the UK economy from the global financial crisis and said that almost a decade on the prospects for income and earnings growth remained weak.
“On current forecasts average earnings will be no higher in 2022 than they were in 2007. Fifteen years without a pay rise. I’m rather lost for superlatives. This is completely unprecedented,” he said at the IFS’s traditional post-budget day briefing. Johnson said the latest economic outlook implied that in the wake of the financial crisis the UK had suffered permanent losses to productivity – a measure of output per hour.
In a grim assessment of the new budget forecasts, the thinktank said families would miss out on £12,000 of pay growth by 2020, the worst decade for 210 years. Workers will be hit with falling real pay, where inflation exceeds wage growth, in the coming months. Real average earnings are only expected to return to their pre-crisis peak by the end of 2022.
2 ECB sees global politics as the big risk (San Francisco Chronicle) The head of the European Central Bank says global political events like Brexit and turbulent election campaigns in Europe pose increasing risks for the economy.
Mario Draghi said that the international arena has become more troubling since last year even as the 19-country eurozone's economy continues to heal from its own home-grown and drawn-out economic difficulties.
"If one wants to assess the balance... we would say that the domestic sources of risks have been more contained," Draghi said. "And the geopolitical global risks share of importance, if anything, has gone up."
Risk factors Draghi mentioned include the raft of European elections this year in France, the Netherlands and Germany that will give right-wing candidates opposed to the EU and euro membership a chance to test their support. And Britain is due to start its official divorce talks with the European Union within weeks.
New U.S. President Donald Trump has raised uncertainty about US policy on trade as well as toward the dollar by at one point mentioning the currency was "too strong." Draghi said that while geopolitical events have not derailed the economy's recovery so far, it was unwise to become complacent.
The eurozone economy grew 1.7 percent last year as the bloc continues to recover from a crisis over high debt that threatened to break it apart in 2011-2012. Unemployment has slowly fallen to 9.6 percent with big differences among member countries; Germany's is at 3.9 percent but Greece, still struggling with bailouts, has a rate of 23 percent. By comparison, the rate in the US is 4.8 percent.
3 AirBnB valued at $31bn (BBC) Home rental company AirBnB has raised $1bn (£821m) of investment funding in a deal that values the firm at $31bn. The San Francisco-based firm disclosed the investment in a filing to the US Securities and Exchange Commission.
It has grown rapidly since its launch in 2008, and currently operates in 65,000 cities worldwide. The firm, which does not publish its sales figures, makes its money by enabling homeowners to rent out their homes. It takes a 3% cut of each booking and a 6% to 12% service charge from guests.
AirBnB has been diversifying and recently began offering users new services, such as tailor-made city tours and exclusive experiences with local experts. However, it has also faced criticism over claims it is driving up rents and contributing to housing shortages in some cities.
The accommodation site lets people rent out their properties, often at prices undercutting hotels and traditional Bed and Breakfasts. It was started by university friends Brian Chesky and Joe Gebbia in 2008 to help pay the rent on their San Francisco flat.
As the site expanded into more and more cities, helped by the use of professional photographers, it attracted backers including Amazon founder Jeff Bezos and actor Ashton Kutcher. In total it has raised more than $3bn from investors and it is now the second most valuable start-up in the US after Uber, which is valued at about $70bn.