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Thursday's Business and Politics round-up

19 Oct 2017

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Good morning,

I want to start with a warm welcome to the round-up new joiners this morning - we hope you enjoy it.

In other news, as the crucial EU summit commences today, Theresa May has vowed to make it as easy as possible for EU citizens to remain in the UK after Brexit.

At a meeting tomorrow, for which the UK will not be present, the EU 27 are expected to conclude officially that "insufficient progress" has been made on the status of EU nationals in the UK and British expats on the continent - and other separation issues - to move onto the second phase of trade discussions.

Before leaving for Brussels, Mrs May used a Facebook post to offer further assurances to the three million or so nationals of other EU countries living in the UK. She insisted the application process for settled status would be "streamlined" and the cost "as low as possible" and said representatives of EU citizens will sit on a "user group" which will iron out any problems in the system.

European Council President Donald Tusk said there would be no "breakthrough" at the two-day summit, but progress could be achieved by the next scheduled meeting of EU leaders in December.

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Draw a line in the sand

The Prime Minister has been told to draw a line in the sand of negotiations. Senior figures behind the Leave campaign said Britain must be prepared to walk away if European leaders do not agree to talk trade at the EU summit today.

As reported in the Daily Telegraph, in an open letter to the PM, four former Cabinet ministers, as well as MPs, business leaders and academics demanded she “formally declare” that Britain will leave the EU and conduct trade deals via the World Trade Organisation.

The former Conservative Party leader Iain Duncan Smith and other MPs have said it is time for Mrs May to call the EU’s bluff.

Sources in Brussels have told the paper that EU leaders will tell Mrs May Britain must agree to pay some money into the EU budget until 2023, rather than 2021 under the current offer, before there can be any movement on trade talks.

To add fuel to May’s fire, EU leaders have agreed to meet the Labour leader, Jeremy Corbyn in Brussels before their audience with the Prime Minister.

The Guardian has taken a slightly different focus on the EU summit this morning, saying that 'EU leaders aim to let Theresa May down gently over trade talks'. The paper suggests the leaders of the EU 27 are set to rebuff Theresa May’s appeal for trade talks, while they seek to publicly talk up her efforts in the Brexit negotiations, because they fear that the prime minister’s domestic weakness will leave her unable to make vital concessions on Britain’s divorce bill.

A devil of a job 

Unemployment in the UK fell by 52,000 in the three months to August to 1.4 million, leaving the jobless rate unchanged at 4.3% from the previous quarter. However, pay is failing to keep pace with inflation, with the real value of earnings down 0.3% over the past year.

On the one hand record numbers of people are in work, but on the other, their wages are still being squeezed. According to the Office for National Statistics, total earnings, excluding bonuses, rose by 2.1% from June to August. Inflation, however, is now at 3%.

The disparity between wage growth and inflation will increase expectations that the Bank of England will raise interest rates on 2 November. The Monetary Policy Committee have a devil of a job at hand, trying to balance meeting their inflation target vs. the impact of a interest rate rise on individuals and businesses.

Another tricky question at hand is one of quality vs. quantity of work. Commenting on the labour market figures yesterday, the IoD’s Head of Policy Research, Seamus Nevin, said “there are now 32.10 million people with a job, 317,000 more than last year. On the surface these are great numbers but the question is increasingly becoming one about the quality rather than the quantity of jobs”.

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