Cutting deals, splashing cash and thinking anew 9 May 2025 Afternoon all, I’ll spare you the tired bus analogy but instead invite you in on a conspiracy – the UK only signs major trade deals when the Resolution Foundation’s trade experts are on leave. If anyone wants to subsidise our annual leave entitlements in order to support Britain securing many more deals, our staff are all ears. More on why deals with the US, EU and India matter in Chart of the Week. Stay tuned for enlightening reads on humanity’s capacity to think of new ideas, and pensioners’ capacity to splash the cash. Both are good for growth! Have a great weekend, Ruth Chief Executive Resolution Foundation Waiting and waiting. The Government’s plan to cut disability benefits is back in the spotlight. But beyond the political controversy is the deeper question of why health-related benefit claims in Britain are rising. This IFS paper compares changes in NHS waiting times and benefits claims across local areas in England to see if the former might help explain the latter. The link sounds intuitive but in fact they find almost no evidence that longer NHS waiting times for pre-planned hospital treatment and some mental health care are driving the increases in the disability benefits caseload. Our own research suggests that about one-in-five additional claims for working-age health-related benefits over the last decade can be explained by an ageing working-age population and higher State Pension age. Something to keep in mind as the Government’s own assessment shows that older claimants are most likely to lose out from the recently-announced reforms to PIP. Catalysing clean investment. Clean innovation has the potential to bolster the UK’s net zero efforts and energy security; a growing concern for Ministers as energy imports become increasingly fragile but still comprise just under half the UK’s electricity supply. And yet firms’ allocation of funding for clean energy R & D has decreased globally over the last decade. How might we turn that around? This column assesses how the low profitability of fossil fuels following the 2014 oil price crash triggered a shift towards clean innovation in Norwegian firms. Rather than scaling back R&D efforts when faced with plummeting future profit expectations, firms exposed to the price drop instead strategically reallocated existing R&D budgets towards clean energy projects. With oil prices falling in 2025, maybe more firms will follow suit? Ideas a go-go. Some doomsters claim a lack of ideas lie behind the West’s recent economic malaise. Not true, according to heartening new research from the US. Looking at five decades of patent data, they find that researcher productivity in the US is (or, to be precise, has been….) actually rising. At the same time, they find evidence of a long-term decline in output unrelated to patenting, suggesting that other factors are playing an important role. Meanwhile, the type of firms registering the most patents has also changed, with wholesale and professional services having overtaken the manufacturing firms that dominated up to the millennium. Pensioner puzzles. We all face big decisions about how to draw down our income when we stop working and retire. But do we know how pensioners spend their cash? Step forward then new research that investigates the spending patterns of over 100,000 pensioners between 1968 and 2019. Overall, real spending per head has increased as successive cohorts have got richer (a pattern that has broken down for younger generations). But there are interesting nuances. Homeowners like to front-load – spending £350 per week in their late 60s, on average, which falls to £250 a week by their late 80s. They are front-loading on fun too – spending £200 a week on luxuries in early retirement. Social tenants spend far less – around £230 a week – and their spending doesn’t change as they age. If millennials’ low homeownership rates stay with them into retirement, might that mark the end of the luxury market for recent retirees? Something for the weekend? | What is going on in the labour market? Next Tuesday we get the ONS’ latest labour market statistics. An important one as some of the data – payroll jobs and vacancies – will cover the month of April, and so provide a first indication of the impact of the minimum wage increase and employer NIC changes that came into effect. Except, as TOTC readers will know, there are big question marks over the reliability of some of the data (which the ONS will update us on). Last year we started publishing our own employment estimates using HMRC payroll data and the latest ONS population estimates, which have now been beefed up with FOIed self-employment stats. As of last month, our estimate of the employment rate was converging to the ONS estimate – 75.5 per cent to 75.1 per cent (for 16-64 year olds). However, the lines are travelling in the opposite direction, with our data indicating falls in the employment rate consistent with recession territory. This is now live on our website, where you can download the time series back to 2014, and we will update for the latest data by lunchtime on Tuesday. Britain’s labour market challenges aren’t confined to the quantity of jobs either. Recently released data from the Skills and Employment Survey shows a mixed picture on trends in job quality. Since 2017, job intensity has reduced slightly – but control over the way you do your job has fallen to an all-time low (you can find a summary of key trends here). Also in the spotlight is the challenge faced by younger people in finding good quality work. Chart of the week It was double trade deal this week, although the ‘deals’ were quite different with a significant trade agreement concluded with India, and a (sort of) deal with the US, with questions about the implications for a third one with the EU. These glass half-empty / glass half-full takes are worth a read. This week’s chart focuses on why they matter. It is remarkable how little we trade with India given its size and our historic links. But with it reckoned to be the fastest growing major economy over the next decade, there is plenty of potential upside. Inevitably, the focus is on lower goods tariffs and visa controversies, but our research shows that mutually beneficial services trade is where the gains really lie. UK-US trade is obviously bigger news. We’re clearly in a worse position relative to pre-Trump days, but UK car manufacturers are breathing a sigh of relief. Again, the ‘deal’ had little to say about services, despite it being almost twice as big as our goods trade. Sheer volumes alone show that the deals reached this week pale in significance to whatever can be agreed with the EU. An ambitious deal could deliver the single biggest boost to growth. We won’t get that – but we have a low baseline to improve upon. Here’s where to start.
