Crypto News: A bleak anniversary

Britain, which today marks three years since leaving the European Union, will be the only major industrial nation in recession in 2023, the International Monetary Fund predicts.

While correlation may not mean causation, it's worth noting that an analysis by Bloomberg Economics has concluded that Brexit is costing the UK economy £100 billion a year. The economy is 4% smaller than it might have been, with business investment falling behind and a widening shortfall in EU workers, argue economists Ana Andrade and Dan Hanson.

"Did the UK commit an act of economic self-harm when it voted to leave the EU in 2016? The evidence so far still suggests it did," they write.

Also, the wealth and opportunity gaps in most areas that overwhelmingly voted for Brexit have only widened relative to other parts of the UK, Ellen Milligan and Andre Tartar write — citing Bloomberg's Levelling Up Scorecard which was referenced today in the House of Commons.

Britain's economy could shrink 0.6% this year, the IMF estimates, faring even worse than sanctions-hit Russia — which is estimated to expand by 0.3%. So much for Chancellor of the Exchequer Jeremy Hunt's prediction in the Autumn Statement of a recession made in Russia, but a recovery made in Britain. He was more circumspect in response to today's predictions, saying in a statement that "short-term challenges" should not obscure the country's "long-term prospects."

The forecasts increase the pressure on Prime Minister Rishi Sunak, notwithstanding tweets today laying out what he says are the benefits of Brexit including striking trade deals with over 70 countries and "cutting red tape for businesses."

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The stories you need to know about this evening

The UK has slipped down a global corruption ranking, with watchdog Transparency International describing public trust as "worryingly low."
Airlines will be required to use 80% of their airport slots this summer in order to retain them.
Gautam Adani slipped out of the list of the world's top 10 richest people and could soon be supplanted as Asia's wealthiest person.
Feuding billionaire Aldi heirs have finally put their long-running dispute to rest.

An estimated 475,000 employees, from teachers to civil servants, are planning to walk out in the UK on Wednesday, calling for higher wages. Each day brings the fresh threat of a new group of workers joining the ranks of protesters. Bloomberg's strikes reporter Eamon Akil Farhat argues that strike-hit Britain is starting to look a lot like France.

There's also bad news for house sellers, with mortgage approvals in December falling to the lowest level since May 2020, when the housing market was shut because of the coronavirus pandemic. Approvals dropped to around 35,600, the Bank of England said, declining below economists' estimates. If approvals hover around these levels, falling prices are almost inevitable, writes my colleague John Stepek.

The only place where prices are consistently rising is in the weekly shopping spree, with inflation on British groceries spiking to a record high in January, according to Kantar. The price rises are benefiting discount retailers like Aldi and Lidl, as cash-strapped shoppers switch loyalties. There's a sliver of good news on the grocery bills, though. Ash Amirahmadi, the head of the UK's biggest dairy producer Arla Foods, has said that butter and milk prices are set to fall sharply after soaring in recent months.

Elsewhere in the UK Plc universe, dealmaking or the promise of it is starting to pick up after a slow year. Billionaire investor Patrick Drahi's Altice Group sees UK phone and internet provider BT Group as an "undervalued" asset and one the company continues to like, Dennis Okhuijsen, a financial adviser to the French telco, said in an interview. Altice has a stake of about 18% in BT.

And in more potential French UK combinations, Haleon, the consumer health business spun out from pharmaceutical producer GSK, is considering possible transactions including a combination with Sanofi's multi-billion consumer health arm, Bloomberg reported today.

Brexit or not, it seems the British French connection is a hard one to sever.

China's manufacturing and services expanded for the first time in four months in January as the reopening continued and the Lunar New Year holiday spurred travel and spending.

January's activity improvements are welcome news for the world economy, which is cooling and and will rely in part on China's recovery in 2023 to offset other risks.

Get ahead of the curve

Useful to know. Ady Nugroho has put together a list of February's train strikes.

Rival powers. Putin's war in Ukraine is pushing ex-Soviet states towards new allies.

Defying expectations. Samsung made a surprisingly aggressive decision to keep capital spending at the same level as last year, despite the chip downturn.

Contrarian stance. After successful bets against the world's major bond markets paid off in 2022, a BlueBay Asset Management fund is positioned for another debt selloff this year.

Net zero economy. A push to reduce carbon emissions in the UK is helping to boost industry and jobs outside of London, writes Celia Bergin.

A bigger stick. Parmy Olson writes that a new EU auditing regime should make it harder to give Meta, Google and Amazon an easy ride on data protection.

€51 Billion

Falling property values are creating a funding shortfall in Europe.

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Early signs from the Lunar New Year holiday in China show travel and box office spending significantly stronger than a year ago.
Photographer: Qilai Shen/Bloomberg

China's reopening is set to provide a welcome boost to global growth, offsetting weakness in Europe and a looming recession in the US. But unlike in 2009, when China's four-trillion-yuan stimulus helped kickstart a recovery from the Lehman slump, in 2023 there's a catch — a boost to inflation at exactly the moment the Federal Reserve and other central banks race to bring it back under control.

Read The Big Take.

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