Posts Tagged ‘NIESR’



The new study by the National Institute of Economic and Social Research announced today that employers in three sectors employing large numbers of EU migrants – hospitality, food and drink, and construction – reveal they were unprepared for the Leave result and believe it is bad for business.

According to the study employers were surprised by June’s referendum result and some expressed strong feelings including ‘shock’, ‘horror’ and even devastation. Employers are worried about recruitment once free movement ends, are concerned for the wellbeing of their EU workers who have been left in the dark about their future and they want a say in future immigration policy.

The research with 17 employers with workforces of between 30 and 15,000, reveals their EU workers feel they are unwelcome in the UK and have even experienced hostile comments from customers. This led many to issue reassuring messages about the value of EU migrants to the business.

The research reveals:

  • Few employers sent out information to their workforces about the referendum before the vote but many regretted not doing so.
  • Workplace discussion about the referendum has been livelier after polling day than before.
  • A number of employers have needed to put in place policy to deal with xenophobic incidents involving the public towards their EU employees.


Employers say their preference is for free movement to continue. They cannot see how a points-based system, often proposed during the referendum campaign, could work in low-skilled sectors. They are interested in the use of sector-based schemes but are concerned that any system should involve minimal additional cost and bureaucracy. They are also concerned that any visa systems will not allow them to respond quickly to fluctuating labour requirements.

britihs flag

The study re-interviewed employers who took part in research on free movement before the referendum. Following the Leave result a number are looking more seriously at how they might recruit more UK workers but can see no easy answers. The CEO of a bakery company employing 280 staff, including 168 EU migrants, stated:

“The outer’s view is that migration will stop and we’ll suddenly have a sensible level of tens of thousands net migration whereas anybody I know who works in a food manufacturing industry is thinking ‘oh crikey, if that happens, we’re going to be seriously stuffed in terms of what we can do to make food’.”

Dr Heather Rolfe, Associate Research Director at NIESR, said:

“Like many people, employers were not prepared for the Leave result. But unlike others, employers have already felt the impact and have needed to reassure worried EU workers. They feel regret that they were not more involved in the campaign and that business failed to convey to the public how changes to the economy impacts on people’s lives”.

“As we negotiate our way out of the EU, politicians need to minimise damage to businesses and individuals. A new immigration policy should be formed in consultation with employers, among others.”

Dr Rolfe wrote on her recent article at NIESR that while the referendum results took immediate and devastating effects on migrant employers, who received racist attacks from their customers and co-workers British employers who were described as “jubilant” will be experiencing the same effects next year when the Article 50 is triggered.

The manager of a holiday resort chain stated:

“The general flavor that I got back from EU workers was discontent, concern that English people do not like them being here and what is their future going to be.”

“Employers should be involved in shaping immigration policies; beyond immediate concerns for their businesses and their EU workers, employers are worried about an end to free movement and want a say in future policy. “ further explained Dr Rolfe in her article today.


National Institute of Economic and Social Research (NIESR) launched its latest economic review at the organization’s quarterly press conference yesterday in Westminster, London.

According to NIESR’s review of UK economy, GDP is to grow by 1.7 per cent in 2016 and drop to 1 per cent in 2017 and will continue to deteriorate in the third and fourth quarter. Inflation  is to increase and peak at 3 percent at the end of 2017.

UK will barrow additional £47 billion within the next five years, the forecast predicted.

Simon Kirby, Head of Macroeconomic Modelling and Forecasting at NIESR, who presented UK economy at the conference explained that :“We expect the UK to experience a marked economic slowdown in the second half of this year and throughout 2017. There is an evens chance of a ‘technical’ recession in the next 18 months, while there is an elevated risk of further deterioration in the near term. In light of the downturn underway and the downside risks to the outlook, a decision by the MPC to provide monetary stimulus would be welcome and we look forward to assessing the new Chancellor’s plans at the Autumn Statement.”

recession after brexit

NISER expects the unemployment rate to rise  from 4.8 per cent in the second quarter of  2016  to a peak of around 5,75 per cent in the middle of 2017.The organization estimates that the economy will shrink in 2016Q3 and lead to a recession at some point during the period 2016Q3 to 2017Q4, inclusive.

Dr Angus Armstrong, Director of Macroeconomics at NIESR, presented the organization’s  forecast of the world economy following Simon Kirby. According to the forecast the world economy is expected to grow by 3.0 per cent in 2016 and peak at 3.5 percent in 2017.  Inflation is likely to be below target in the OECD economies in 2017. The European Central Bank (ECB) stands ready to ease monetary conditions while the Federal Reserve is likely to raise interest rates gradually.

“Re-joining EFTA (European Free Trade Association) is consistent with the notion of ‘taking back control’. This will result in less economic integration with the EU and so lower productivity and output over the medium term. The critical issue is whether the UK can strike deep trade deals with our trading partners elsewhere.  This could be  joining the Trans Pacific Partnership or the Transatlantic Trade and Investment Partnership. At this stage both face significant challenges due to lack of popular support,” said Dr Armstrong at the press conference.

Forecast shows that Brazil, Japan and Russia economies are to grow . India is likely to remain the fastest growing major economy. The US is expected to grow by 2.3 per cent in 2017, with the Fed likely to raise interest rates only very gradually. Inflation is expected to be slightly lower .OECD average inflation will remain well below central banks’ targets through to 2018. The exception is the UK where a short-term rise reflecting the depreciation of sterling is expected, NIESR’s forecast indicated.

National Institute of Economic and Social Research has held a financial forum today on “Financial Markets in the Aftermath of the Basel III”, which mainly focused on the “Future of Bank Regulation”, in Westminster,London.

The seminar that was chaired by Professor Charles Goodhart,an institute governor and former member of the council, and led by Professor Ray Barrell, Professor Philip Davis. Dr Dilruba Karim and research fellows Tatliana Fic, Rachel Whitworth who have presented the institution’s recent research.The researchers have looked for the answers of four vital questions in their debate:

1.Will controlling the bank size make the system more stable?

2.Will increasing the quantity and quality of reduce the risk?

3.Will controlling the credit improve the financial stability?

NIESR's Research Fellow Rachel Whitworth(from left to right),Dr Dilruba Karim,Professor Charles Goodhart,Professor Ray Barrell,Professor Philip Davis and Research Fellow Tatliana Fic at the seminar on "The Future of Bank Regulation" in WEstminster,London.

4.Will regulation change damage house price cycle?

In his presentation on “Is there a link from bank size to risk taking?”,Professor Ray Barrell said that they have found a strong relationship between bank size and risk as measured by charge offs. Larger banks make larger charge-offs as a proportion of their asset .

Too big to fail” insurance in the regulation, which brings larger banks higher loss rate, encourages larger banks to take bigger risks in the competition. However Barrell thinks  that larger banks should have lower loss rates. Having more Tier 2(subordinated debt issuance) which increases charge offs and guarantees bailouts for larger banks another factor that was exploited by big banks in the financial crisis of 2007-09.On the other hand Tier 1(risk absorbing capital that is a shareholder asset) reduces the charge offs .Therefore regulators  who increase Tier 1 ratios and reduce the scale of large banks will produce industries less prone to big failure, according to  Barrell.

Professor Philip Davis opened a debate on “Advances and Shortcomings of Basel III” and said that Basel III that is outlined in December 2010 will be gradually introduced within the next a few years. However Davis added that they are as an institution concerned about ongoing risks posed by the current proposals.

Basel III has higher quantity and better quality of capital to reduce solvency risk but on the other hand it needs higher capital to reduce banking crisis risk to acceptable levels. It doesn’t eliminate Tier 2 but only reduces. Common equity will be 7% in Basel III. It is going to support larger banks as they are systematically more dangerous to the economy, said Professor Davis.

“Estimation equilibrium house prices for the UK” was discussed by Rachel Whitworth in the end of the forum. According to Whitworth loan-to-value and loan-to-income ratio are the policy instruments to detect a bubble in the housing market and mitigate it .

The research shows that key driver of house prices is per capita real disposable income and loan-to income ratio. Loan –to-value is not that significant.

National Institute of Economic and Social Research(NIESR) has launched new issue of National Institute Economic Review at its final quarter press conference today in Westminster,London.

NIESR’s latest forecast has focused on impact of oil price on a financially fragile economy, trend growth and output gap in the UK and the debt crisis in Europe.

Dawn Holland has presented prospects for the world economy researched by Holland, Ray Barrel, Aurelie Delannoy, Tatiana Fic, Ian Hurst,Ali Orazgani and Pawel Paluchowski.

Simon Kirby (From left to right),Dawn Holland and Ray Barrell at NIESR's Press Conference in Westminster.

According to Holland’s presentation world economic growth is to slow by 4.2% due to high oil price which rose $20/barrel in last quarter of 2010 and is to reach $95 in 2011.World trade will increase by 7.8 per cent this year and 5.7 per cent in 2012.While Chinese GDP will be growing by 9 per cent in 2011 and 8.1 per cent in the following year Japanese GDP will expand only by 2.2 per cent this year.

Holland and her researcher  friends estimate that Euro Zone GDP is to grow by 1.7 per cent  despite the sovereign debt crisis and 2 per cent in 2012.Germany will be leading the recovery  with GDP rising by 2.6 per cent however its contribution will be less in 2011 as national output rose by 3.6 per cent. Greece economy will shrink by 1.9 per cent in 2011 while Irish GDP will rise by 1.7 this year despite the fact they both were bailed out. Portugal is expected to be the next country to be bailed out as its output is to decline by 0.8 per cent this year.

The American economy that regained its pre-crisis level of output in the last quarter of 2010 will grow by 2.6 per cent this year .However the unemployment rate is to remain at 9.7 per cent.

Prospects of the UK economy that researched by Simon Kirby, Ray Barrell and Rachel Whitworth was presented by Kirby at the conference. According to forecast UK economy will grow by only 1.5 per cent in 2011 which was 1.4 per cent in 2010 and average growth will be 0.1 per cent until the middle of this year. Consumer price inflation will reach 3.8 per cent due to high oil price but will fall to 1.8 per cent in 2012. High oil price will also cause real incomes to fall by 1 per cent. However  interest rates may well have to rise in the Spring to help the pressure of inflation.

Uk GDP growth will reduce by 0.5 per cent in 2011  while unemployment increase by 8.8 per cent in the third quarter of this year.320.000 more people will be unemployed and average hours worked in 2011 will rise.Retirement age is expected to reach 68 by 2020 due to the high cost of aging population according to the forecast.

National Institute of Economic and Social Research announced its World and UK Economy third quarter forecast at its regular press conference in Westminster yesterday, on 19 October 2010.

Senior Research Fellow Dawn Holland presented the recent figures of the world economy at the conference. According to the research that was done by Holland ,Ray Barrell and six other research fellows of the organisation :

Research Fellows; Simon Kirby(from left to right),Dawn Holland and Ray Barrell present prospects for the world and the UK economy at NIESR's third quarter press conference in Westminster.

World GDP growth will be 4.9% in 2010 and to decrease to 4.5% in 2011.

China is to grow by 10.7% by the end of 2010 and will become the largest economy in the world in 2019 while Japan growth reaches 3.2 %  in 2010.

Despite  fears of double-dip recession in the country, US will grow by 2.8% both in 2010-2011. Euro Area ‘s growth will be only 1.8% in 2010 and 2.1% in 2011.

Canada is to be the first G7 country to regain pre-crisis level of output by the end of this year while OECD  output will be reaching  pre-crisis level in the first quarter of 2011.

World trade will grow by 13.5 per cent this year and 10.3 per cent in 2011.

German output will increase by 3.4 per cent this year and 2.8 per cent in 2011.However, Greek GDP will shrink by 3.1 per cent in 2010 and 1 per cent next year. Output in Spain and Ireland will fall this year, by 0.1 and 0.4 per cent respectively.

Prospects for the UK economy was presented by NIESR’s research fellow Simon Kirby at the conference. Kirby’s research showed that:

GDP growth in the UK  expected to be 1.6% this year and in 2011 and will rise to 2% in 2012.

Consumer spending to rise by 0.8% this year and will stagnate in 2011.Real incomes expected to drop by 0.8% in 2010 and 0.6% in 2011.

30 months after the recession the UK economy remains  4% below pre-recession peak.

Unemployment in the UK has stabilised but it will rise to 8.5% in 2011.

Dr Ray Barrell explained the fiscal policy at the end of the press conference.

Director of Macroeconomic Research and Forecasting of  National Institute of Economic and Social Research ,Professor Ray Barrel  has  announced his recent research on optimal bank regulation and  the causes of financial crises at Westminster Economic Forum at  NIESR in Westminster today.

Professor Ray Barrel(on the right) and the chairman Dr Sushil Wadhwani (on the left )at Westminster Economic Forum at NIESR.

Barrel  has  explained the costs and  benefits of bank regulation in the forum chaired by Dr Sushil Wadhwani .While benefits of regulations  equal the cost of crises ,costs of regulation cause firms to pay higher  fee of capital and consumers to pay higher borrowing fee according to the research.

Question of “Do regulatory factor affect crisis probabilities?”  was answered with the  role of  capital and liquidity in OECD crisis model  which was first found by Barrel, Davis, Karim and Liadze in 2010 .Bad lending indicators house price bubbles and sustained deficits ,split between on balance and off balance sheet(OBS) ,faster growth of  OBS activity increase crisis probabilities, explained Barrel.

The research shows that a five point in capital and liquidity would reduce crisis probability from 1 in 19 years to 1 in 100 years. Provision against housing bubbles and current account are found wise but second best  while acting against the growth of OBS activity  was and is crucial to  decrease crisis probabilities.

Evaluation of crises between 1981 and 2007 proves that not all crisis are followed by a recession and not all recessions follow crises ,however crisis recession are longer  (5.9 years) and deeper(-1.8%)  and one in four crises  affect output per person hour permanently.

Barrel has   also explained the costs of tighter capital and liquidity in the long run and how markets work and the bankers’ approach  as well as the impact of changes in Headrooom.

According to the research markets work but slowly.1% point increase in regulatory capital reduces unweighted lending by 1 to 1.5 percent and 1.6 to 2.0 percent risk weighted  thus corporate loans drop more. Liquidity  costs rising in proportion to size from 150 basis points to 500 basis points.5 points on liquidity and capital would reduce lending by 10 percent .

Barrel’s last and maybe the most important point was to act together to change the global saving and investment balance which would reduce real long term interest rates and halve the effects.

In the end of the forum Barrel answered the questions of the participants.