Economics Observatory | Insights on the UK and global economy

The price of security

War and security come at a price. Global defence spending is rising in response to geopolitical threats – from Russia’s aggression in Europe to conflict in the Middle East. Governments face difficult choices as a result: balancing the need for security with other priorities and targeting defence investment to foster innovation and growth without draining public finances.

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Trade & supply chains

Global defence spending: What next for European military procurement?

With its fragmented production process, European defence procurement is inefficient and uncompetitive in comparison to the United States. A new approach, prioritising cross-country collaborations, could improve things, but would not be without its own challenges.

DATA HUB

COP30: Climate adaptation financing gap

COP30 kicks off this week in Belém, Brazil, with adaptation finance set to dominate the agenda.

Our #ChartOfTheDay illustrates the problem: Estimated needs vs. international public flows for developing nations leaves a financing gap of over $339 billion.

How will climate adaptation be financed, and will it be enough to protect the most vulnerable to global warming?

Click here to read Jonathan Colmer on how climate change shapes inequality, poverty and economic opportunity.

Productivity & growth

Can defence spending boost growth and productivity in the UK?

The UK is raising defence spending to bolster national security. But unless this shift supports defence-related research, without sacrificing public funds for innovation in health, science and education, the result could be slower productivity growth, not faster.

MAGAZINE

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Russia’s economy looks likely to experience a deep recession following the country’s invasion of Ukraine. Increased spending on defence and refugees may limit the adverse effects of the conflict on Western European GDP, but it will to add to pressure on resources and drive up inflation.

Lessons from history

Can researchers predict conflicts and their consequences?

Wars have many economic, political and social consequences. From changes to technology, to the re-drawing of borders, to mass losses of life, conflicts shape human history. They are also extremely challenging to predict – both in terms of their causes and effects.

Public spending, taxes & debt

The UK’s public finances: is it time to reform the fiscal rules?

Boosting economic growth while maintaining sustainable levels of public spending is a huge policy challenge for the UK. The government’s self-imposed fiscal rules may themselves act as a constraint. Reforming the rules could help to revive the country’s stagnant economy.

Families & households

What are the effects of paid family leave programmes in the United States?

To compensate for the lack of national provision, nine US states plus the District of Columbia have launched their own paid family leave programmes, with four more in the works. Studies highlight the effects of these policies on health, fertility and employment, but there is still much to learn.

Prices & interest rates

What’s happening to the cost of rent in the United States?

Americans faced surging rental costs in the immediate aftermath of the pandemic. Since then, the cities and regions that have built the most houses have managed to bring prices under control. But in places where housing supply remains low, rents have continued to spiral.

Public spending, taxes & debt

Which taxes are best and worst for growth?

Tax affects economic growth by reducing consumer spending and lowering incentives to invest. But different fiscal policies have variable overall economic effects, with taxes on income better than those levied on corporate profits in terms of their wider impact on GDP.

Nations, regions & cities

What role could migration play in the reconstruction of Ukraine?

Russia’s full-scale invasion of Ukraine has triggered the largest refugee crisis in Europe since World War II, with nearly six million Ukrainians displaced worldwide. This creates a critical challenge looking ahead to post-war reconstruction. With over 200,000 Ukrainians currently here in the UK, policy-makers must consider both the current needs of refugees and how the diaspora can help to support economic recovery in Ukraine.

Productivity & growth

How might the UK’s new approach to migration affect the economy?

Net migration in the UK reached historic highs following the introduction of the post-Brexit immigration system. While this is likely to have only minor effects on the labour market and public finances, evidence on housing is more mixed. The impact of further policy reforms targeting demand for migrant workers is also uncertain.

Attitudes, media & governance

Beyond the ‘Global Irish’: what are the migration challenges facing Ireland?

Ireland has turned its experience of large-scale emigration into an asset by actively engaging its diaspora and maintaining strong connections around the world. But with immigration into Ireland at record levels, policy-makers face new challenges.

Jobs, work, pay & benefits

Job opportunities for refugees: how can host countries help?

People who are refugees typically have worse employment prospects than the rest of the population, including other migrant groups. Targeted policies can help: speeding up application decisions, supporting access to work, improving job matching and providing language and mental health support.

Productivity & growth

What policies could kick-start economic growth in the UK?

For two decades, the UK economy has seen weak growth, driven by low business investment, inadequate market dynamism and persistent policy instability. These failures shape the daily reality of households whose living standards have stagnated. New policies are needed that can stimulate growth and move the country back on a path to prosperity.

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