UK debt level unsustainable says watchdog

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8th July 2022

Bite-sized business news from the UK and beyond

Good morning What a week for British politics – after three years in power, yesterday Boris Johnson stepped down as leader of the Conservative Party and will exit as PM once a successor is found. Here’s a breakdown of what happens next.

Today's stories

UK debt level unsustainable says watchdog
PwC partner pay soars to £1m

ECONOMY
UK debt level unsustainable says watchdog

What happened?
The UK’s public finances are on an ‘unsustainable’ trajectory with government debt predicted to treble in the next 50 years. That’s the grim warning from spending watchdog the Office for Budget Responsibility.

The OBR gives independent analysis of the UK's public finances and forecasts economic output, unemployment and inflation.

In its annual health check of the economy, the body said that without tax hikes or spending cuts the national debt as proportion of GDP will balloon from 96% to 320% in 50 years, driven by:

Increasing costs from supporting an ageing population with pensions, social care and the NHS.
Falling income from fuel duties – a huge source of government revenue - as the country switches electric vehicles following the ban of petrol and diesel cars in 2030.
Rising inflation and interest rates will increase government borrowing costs.

But the OBR acknowledges that forecasts can be a tricky business. Public debt is now more than double the amount it had expected it to be 20 years ago due to the unforeseen shocks to the economy, the latest one being the pandemic.

Zooming out: Tackling the state of Britain’s public finances will be a major task for the new prime minister and chancellor. However the OBR’s forecast go decades into the future, far beyond the term of any government and therefore making it less likely to get attention.

Other stories to keep you in the loop

Conservative MPs scramble to choose a new party leader
UK house prices rise at the fastest rate for 18 years
British Airways strike suspended as company makes improved pay offer
HSBC banker in climate row quits, attacks corporate ‘cancel culture’
Currys says rising costs being passed on to shoppers and warns of impact on sales
Twitter says it suspends 1m spam users a day as Elon Musk row deepens
Theranos exec convicted of fraud

ACCOUNTING
PwC partner pay soars to £1m

What happened?
Average partner pay at Big4 accounting giant PwC reached a record of more than £1m for the latest financial year.

The last 12 months have been busy and profitable for PwC. The firm and its peers, EY, Deloitte and KPMG, have seen strong demand for their consulting services following the boom in corporate dealmaking during the pandemic.

PwC partners will get an average payout of £920,000, up from the previous record of £868,000 in 2021. Plus an extra £100,000 each from the £1.8bn sale of a tax advice business to US private equity firm Clayton, Dubilier & Rice. That meant the average partner pay for the year broke through the £1m barrier.

It's not just partners receiving a pay rise. Last month the firm announced that half of its more than 20,000 UK staff would get an increase of at least 9%, while 70% would get a rise of 7% or more in response to rising living costs and a competitive recruitment market.

Looking ahead: PwC expects profit per partner to fall in the coming year as the firm defends its competitive position by investing in people and technology. Also the growing concerns over a recession could dampen demand for its services as companies reign in on dealmaking.

Stat of the day

Netflix viewers have spent 1.15 billion hours watching “Stranger Things” season four, making it the second-most-watched show on the platform trailing only 'Squid Game'

Interesting links from around the web

How to teach your brain to reframe negative thoughts
Boris Johnson’s 7 anti-leadership lessons
Does grinding hard now earn work-life balance later?

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UK debt level unsustainable says watchdog

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