Economy
UK finance chief pitches brighter vision ahead of tough budget
Britain’s Treasury chief used his first major speech since taking office seven weeks ago to try to set out a brighter vision for the economy before an annual budget, when he faces tough tax and spending choices.
Speaking at a manufacturing hub in Coventry, John Healey announced plans Monday to give city regions greater powers to attract private investment as part of Prime Minister Andy Burnham’s plan to devolve power away from central government.
He also stressed his commitment to fiscal discipline and to curbing rising costs for business and the public, including a 25% reduction in regulatory costs by the next election due in 2029.
Yet much of what Healey said about his focus on growth, reducing regulation and lowering the cost of living was a continuation of the policy of his predecessor Rachel Reeves and former Prime Minister Keir Starmer.
“While Britain’s growth trajectory has been weak, this must now change,” Healey said, pointing to positive signs from fast growth in the first half of the year and signs that “productivity (is) finally ticking up after decades of lagging behind our peers.”
Challenge underlined by JLR job cuts
However, the challenge facing Healey was laid bare by an announcement while he spoke that Britain’s biggest carmaker, Jaguar Land Rover, planned to cut 4,000 jobs worldwide over the next two years.
Asked about the threat to jobs, Healey said it showed how the government needed to focus on developing growth broadly across Britain, rather than relying on a handful of major economic centres.
Several earlier governments have made spurring growth their focus with limited success.
Healey talked about wanting to set out an optimistic vision for Britain, in contrast to Reeves, who used some of her first speeches as Treasury chief to dwell on the difficult budget legacy she was left by previous Conservative administrations.
Reeves’ first budget shocked businesses with a big rise in employers’ payroll taxes. Healey repeatedly declined to comment on his tax plans before his debut budget on Oct. 28, as investors worry about the inflationary impact of rising oil prices from the Iran war, shrinking budget headroom, and rising spending commitments.
Andrew Griffith, finance policy chief for the main opposition Conservative Party, said Healey sounded like “continuity Rachel Reeves.”
“Warm words about growth will not make growth a reality,” he said in a statement.
Pledge on fiscal rules
Healey and Burnham have already pledged to stick to the fiscal rules adopted by Starmer and Reeves, including a target of balancing day-to-day spending with tax revenues by the end of the decade.
But given Burnham’s plans for expanded social care and more defence spending, Healey is already under pressure to raise billions of pounds in tax at the budget.
“Staying true to our values means being honest about the need to control government spending,” Healey said, highlighting the rising cost of servicing government debt as interest rates globally have soared to multidecade highs.
Healey Monday announced 150 million pounds ($203 million) of funding already allocated from the British Business Bank will be earmarked for firms in the U.K.’s northern region, pumping in between 5 million and 15 million pounds to attract additional private capital.
Legal challenges to big infrastructure – usually made on environmental grounds – would be restricted and the government would investigate the high cost of delivering new railways, he added.
“The role of government is to act, and I’ll end the consultation culture at the Treasury and beyond,” he said.
German auto giant Volkswagen announced Monday that one of its plants would be converted to make defense equipment for the Israeli group Rafael after car production ends there next year.
The struggling carmaker said it would sell the Osnabrueck plant to Tel Aviv-based Aurelius Capital as well as the German state of Lower Saxony, VW’s second-largest shareholder, with an initial air defense project planned for Rafael Advanced Defense Systems.
Volkswagen has faced mounting scrutiny after reports in May suggested it could produce components for Israel’s Iron Dome system.
Germany remains one of Tel Aviv’s closest allies, alongside the United States, despite Israel’s genocidal campaign in Gaza, the expansion of settlements in the occupied West Bank, and its actions in Lebanon and Iran.
Monday’s deal offers a potential blueprint for other Volkswagen sites facing an uncertain future as Europe’s largest carmaker embarks on its biggest ever restructuring.
Volkswagen has warned that up to four German plants could face closure or repurposing unless alternative uses can be found amid weak demand, high costs and growing competition from China.
“With today’s agreement, we are taking an important step towards opening up a new industrial future for the site,” Volkswagen CEO Oliver Blume said Monday. “Volkswagen stands by its responsibility for Osnabrueck.”
The company, which is struggling with weak demand, had already decided in 2024 to end vehicle production at the site in northwest Germany by 2027.
The deal would secure around 1,400 of the plant’s 1,800 jobs, Volkswagen’s works council said in a separate statement.
The long-term future of four other German factories is also uncertain.
The 10-brand auto giant, whose companies range from Audi to Porsche and Seat, is battling fierce Chinese competition amid a troubled shift to electric vehicles.
The agreement comes days after Volkswagen unveiled a major revamp to cut jobs and simplify its structure, highlighting how rising defense spending in Europe could help absorb excess manufacturing capacity in the automotive sector.
Management and unions last week struck a deal to shed 50,000 more jobs across the group, taking the total number of positions set to be lost in coming years to 100,000.
Defense production is increasingly being seen as a solution for underused automotive plants, with companies including Rheinmetall and Continental pursuing similar initiatives.
Türkiye aims to continue its disinflation process without interruption despite a higher-than-earlier-expected inflation projection in the near future due to the fallout from the Iran war, according to its updated economic blueprint.
The 2027-2029 Medium-Term Program (MTP), unveiled Sunday, projects a year-end inflation forecast of 28.4%, compared to 16% estimated last year.
Officials said the war in the Middle East had played a key role in the upward revision of the inflation outlook.
The direct and indirect effects of the conflict on inflation have been estimated at approximately 7 percentage points, according to the Central Bank of the Republic of Türkiye (CBRT).
Türkiye’s annual inflation rate eased to 31.51% in August from 31.75% in July, according to official data. The decline had stalled following a sharp rise in energy prices caused by the Iran war.
Inflation is projected to fall to 21% in 2027, 13.5% in 2028 and 9% in 2029, according to the MTP.
The program identifies breaking inflation inertia and restoring price stability by bringing inflation back to single-digit levels as a key objective.
To achieve this, it says monetary, fiscal and income policies will remain closely coordinated, while demand conditions will be kept on a non-inflationary path.
The contribution of domestic demand to the decline will be supported by more favorable cost conditions, while policies aimed at strengthening competition in product markets and increasing supply-side capacity will seek to raise Türkiye’s production potential.
The government also expects lower inflation and a more balanced income distribution to contribute to a lasting increase in welfare.
The CBRT will continue to use all available policy tools effectively until price stability is firmly established, the program said.
Breaking inflation inertia
The central bank will continue to implement an inflation-targeting regime and a floating exchange-rate regime as part of the fight against inflation.
Exchange rates will continue to be determined by supply and demand under free-market conditions, while communication channels will be strengthened to help anchor inflation expectations in line with official targets, the program says.
The government also plans to increase public awareness of the “Market Prices” website, which publishes prices from major supermarket chains, in an effort to improve market transparency.
The program calls for a broad shift away from backward-looking price-setting based on past inflation toward pricing based on expectations.
It also aims to reduce price rigidities and prevent persistent inflation inertia. Administered and regulated prices will be brought into greater alignment with inflation forecasts and targets.
Food price stability
The government plans to strengthen food supply security and price stability by taking a broader approach to agricultural production and food markets.
Prices paid for agricultural products will be determined with consideration for their impact on public finances, market dynamics and program targets, while seeking to reduce the practice of indexing prices to past inflation.
Short- and long-term changes in supply and demand for food and agricultural products, as well as import and export developments, will be monitored through an early-warning approach.
Production planning for strategic agricultural products will continue to take into account supply-demand balances, self-sufficiency levels, water constraints and regional production potential, the program said.
Türkiye is preparing to introduce new measures to increase employment, including expanding institutional child care services, adjusting working days and promoting flexible working arrangements, according to its updated economic blueprint.
The 2027-2029 Medium-Term Program (MTP), unveiled Sunday, calls for comprehensive policies to reduce underutilized labor and increase participation in economic activity, while also envisaging greater cooperation between the public and the private sectors.
The program aims to remove barriers to entering the labor market stemming from skills gaps, care responsibilities, job-search difficulties and regional mismatches.
People currently outside the labor market will be supported in moving into registered and sustainable employment, while programs will be introduced from an early age to prepare people for working life and encourage labor-force participation.
The value of work and the social importance of production will be reflected in school curricula from the beginning of formal education, according to the program.
People with potential to join the labor force will be directed toward active labor-market programs through career and employment counseling. Profile-based guidance and skills development opportunities will also be expanded to increase their participation.
Remote work support, flexible arrangements
The government plans to strengthen links between the social assistance system and active and passive labor-market programs, while expanding active employment measures aimed at improving the employability and labor-force participation of people receiving social assistance.
Reskilling, monitoring and job-matching mechanisms will be strengthened to help participants in active labor-market programs move into permanent jobs in sectors facing labor shortages.
Parental leave arrangements will be revised to enable a more balanced sharing of caregiving responsibilities, the program said.
Institutional child care and nursery services will be expanded through cooperation between the central government, local administrations and the private sector. Workplace child care services will also be developed to support employment, particularly among women.
Companies will be encouraged to offer partially or fully remote working options to employees with child care responsibilities.
Programs designed to provide new skills to underutilized workers will be developed based on local labor demand and regional needs.
The government will also work on measures to adjust working days and develop flexible-duration employment models to improve work-life balance and employee productivity.
The United Arab Emirates (UAE) is building alternative routes for its energy exports and trade to ensure they are not “held hostage” by the ongoing Iran war, a top official said Monday.
The conflict has significantly impacted the oil-rich Gulf Arab states, including the UAE, as Tehran fired missiles at the country and attacked its oil tankers in the Strait of Hormuz.
“Our energy exports will not be held hostage, nor will our trade and economic activity,” UAE presidential adviser Anwar Gargash told the Hili Forum in Abu Dhabi.
The UAE has been expanding port capacity along its eastern coast, as well as pipelines, railways and trade routes for alternative corridors, he said.
Gargash added that while relations with Iran could be restored, rebuilding trust with its neighbors after the attacks may take decades.
“A functional relationship with Iran can and must be restored, but rebuilding trust is another matter,” Gargash said.
The UAE, a critical economic lifeline for Iran, had suspended all financial and economic transactions with the country in August, citing military escalation by Tehran and missile threats.
Gargash also criticized the Gulf Arab states for their response to the Iranian attacks, saying their collective action fell short.
“For many years we broadly agreed on the nature of the challenge posed by Iran,” he said.
“The problem was therefore not a lack of understanding. Where we fell short in confronting this historic challenge was translating this shared understanding into a sufficiently united and strategic response.”
British luxury carmaker Jaguar Land Rover announced a voluntary redundancy program Monday after months of turmoil caused by a cyberattack and U.S. President Donald Trump’s tariffs on the auto sector.
British media reported that up to 4,000 roles could be removed, equivalent to around 10% of JLR’s global workforce of more than 40,000 people, according to its website.
The vast majority, around 34,000 staff, are based in the U.K.
“As we deliver the next phase of our strategy, we need to adapt to evolving global market conditions while targeting approximately 1.7 billion pounds ($2.3 billion) of savings over the next two years,” JLR said in a statement.
“We have informed our colleagues and trade union partners that JLR is opening a voluntary redundancy programme offering salaried and management team members the opportunity to leave the business,” it said.
JLR said it would provide further detail later Monday, and U.K. Business Minister Jonathan Reynolds is scheduled to meet with the company’s management this week.
Reynolds told the BBC that while he wanted to mitigate job losses, the business environment for carmakers was “challenging” in the U.K. and across Europe.
“If this is about making sure over time that the workforce is right to make the business as competitive as possible, that’s the conversation we need to have,” Reynolds said Sunday.
The job cuts would be a setback for Prime Minister Andy Burnham, who took office six weeks ago, and has repeatedly said he wants to “reindustrialize” Britain.
The restructuring comes one year after a major cyberattack halted JLR’s production in Britain and severely affected its finances.
Owned by India’s Tata Motors, JLR was forced to halt production for more than a month, costing the company 196 million pounds.
Hit also by U.S. tariffs, the carmaker posted a loss of 244 million pounds for its fiscal year ending in March, compared with a net profit of 1.8 billion pounds in 2024-25.
“We must further simplify our organisation, improve efficiency, and build greater resilience,” JLR said in its statement.
Seeking to move on from the cyberattack, the company last week opened orders for its new fully electric Range Rover.
It comes as European carmakers are facing increased pressure for their vehicles from Chinese manufacturers as the industry shifts toward electric vehicles.
German car giant Volkswagen said Thursday that its management and unions had agreed to axe a total of 100,000 jobs by the end of the decade, the biggest-ever restructuring in the global auto industry.
The company said it had approved a plan involving the reduction of around 50,000 jobs, on top of another 50,000 already agreed.
Focusing on the disinflation process and ensuring price stability alongside sustainable growth remains the top priority, Vice President Cevdet Yılmaz said on Sunday while unveiling the new road map for the Turkish economy, covering the 2027-2029 period.
“The main point is to resolutely continue the disinflation process and permanently establish price stability,” Yılmaz said while presenting the new Medium-Term Program (MTP) for the 2027-2029 period.
Speaking in Ankara, Yılmaz said that the government revised its growth forecast for 2026 to 3.3% from an earlier 3.8% and that it expects inflation to end the year at 28.4%.
“We expect inflation to start declining again in the fourth quarter of 2026 and to reach 28.4% by the end of the year,” he said in a televised address.
Under the new program, inflation is projected to fall to 21% in 2027, 13.5% in 2028 and 9% in 2029, the vice president also said.
Türkiye’s annual inflation rate eased to 31.51% in August from 31.75% in July, according to official data.
Yılmaz said the war in the Middle East had played a key role in the upward revision of the inflation outlook.
“According to our central bank, the direct and indirect effects of the war on inflation have been estimated at approximately 7 percentage points,” he said.
The vice president also said the government had made “significant progress in combating inflation,” which remains the top priority of its economic program.
“Inflation, which had risen to 75.5% in May 2024, has begun to show a clear downward trend as a result of the policies we have implemented,” he said.
Starting his speech, he reflected on the holistic approach and involvement of the ministries when forming the road map, which constitutes the main policy framework, as he shared key targets and forecasts for the upcoming period.
Global risks
“The global economy is going through a new period in which economic, technological and geopolitical developments have become increasingly intertwined, predictability has declined, and risks have reached historically high levels,” said Yılmaz.
“The Turkish economy is, of course, not independent of developments in the world or in our region,” he added.
He went on to say that the direct and indirect effects of the war in the region “are being felt across many areas, from energy and commodity prices to global trade, and from the inflation outlook to growth expectations.”
In line with this, he said that the assumptions used last year had been updated in light of developments during the year, particularly due to the war in the region.
Türkiye, as an energy-importing country, has been exposed to the increase in oil and gas prices, which have risen sharply this year following the outbreak of the U.S.-Iran war.
“The global growth forecast, one of the main assumptions in the previous MTP, was revised down from 3.1% to 3%. The growth forecast for our trading partners declined from 2.4% to 1.6%, while growth in the euro area fell from 1.2% to 0.9%,” he said.
Growth at 3.3% this year
Furthermore, he shared the revised figure for the Turkish economic growth this year, suggesting it is expected to come in at 3.3% before recovering next year and in the years after.
“We revised our 2026 growth forecast to 3.3%. Our industrial growth forecast was reduced to 2.3%, while our year-end inflation forecast was raised to 28.4%,” Yılmaz noted.
“Due to the direct impact of higher energy prices on our external balance, our energy import forecast increased from $63 billion to $71 billion, while our forecast for the foreign trade deficit rose from $96 billion to $105 billion,” he also said.
“Accordingly, we also revised our forecast for the current-account deficit as a share of GDP (gross domestic product) to 2.6%,” he further said.
“Our tourism revenue forecast was also revised downward from $68 billion to $65 billion due to the effects of the war,” he added.
Still, Yılmaz said that these revisions “do not represent a change in the direction or main framework of our program.”
He referred to the long-term goal of price stability, which Turkish authorities have been pursuing since the middle of 2023 with the return to more conventional macroeconomic policies.
“Despite this, the Turkish economy continues to produce, grow and create employment,” said the vice president.
He continued by also pointing out that expectations for 2027 point to a renewed recovery in the global outlook and consequently easier conditions for trade and stronger growth for Türkiye as well.
He also said that officials were closely monitoring the risks amid the geopolitical tensions.
“We are closely monitoring these developments and the additional risks they may create, taking measures to limit their effects and conducting our economic policies with an approach that takes different scenarios into account and strengthens resilience against external shocks,” Yılmaz said.
‘Program producing concrete results’
At the same time, he cited the gains of the economic program so far.
“Within the framework of the policies we have implemented, confidence in the Turkish lira has continued to increase,” he suggested.
“The rise in the share of TL deposits in total deposits from 31.6% to 61.5% as of Aug. 28 has been a concrete indication that the policies we have been pursuing are right,” he maintained.
He also recalled that the exit from the KKM scheme, a form of contingent liability, had been completed without disruption and said that despite uncertainties in the global economic outlook and geopolitical risks, “our gross reserves have increased by $89.7 billion to reach $188.2 billion as a result of the policies we have implemented with determination.”
“This strong increase in reserves supports the resilience of our economy against external shocks,” he added.
“Despite geopolitical tensions, our risk premium has also declined significantly, falling from levels in the 700s to below 220 (points),” Yılmaz said.
Similarly, he pointed out that annualized exports have reached $280 billion as of August, while underscoring the improvement in the composition of the exports, with the share of medium- and high-tech exports on the rise.
However, due to rising energy and commodity prices, there has been a “temporary pressure” on the external balance, Yılmaz said.
“The current-account deficit as a share of GDP was 1.8% in June 2024 and 1.6% in June 2025. As of June 2026, this ratio had risen to 2.3%. We calculate that 0.7 percentage points of this increase was attributable to the war,” he maintained.
Growth, unemployment figures
In addition, the vice president shared the expectations for growth and unemployment figures in the new 2027-2029 period.
He said that the growth is expected to rebound to 5% in 2029 after hitting 4.2% in 2027 and 4.6% in 2028, adding that the goal is to have “balanced and sustainable growth.”
He also conveyed the projections of the unemployment rate reaching 8.1% this year before falling to 8% next year, 7.8% in 2028 and 7.6% in 2029.
Yılmaz also stated that they aim to gradually reduce the budget deficit and continued: “Last year, we projected a budget deficit of 3.5% of national income for 2026, and with the measures we have taken, we expect to achieve it at 3.1%.”
Among others, he also said they expected the Turkish economy to reach $1.8 trillion in size by the end of this year for the first time.
The program foresees a national income exceeding $2.2 trillion and per capita national income reaching $25,000 by 2029.
It also aims to create more jobs through economic growth and reach $450 billion in exports when goods and services combined. In terms of employment, the program aims to create approximately 2.1 million additional jobs.
Its other objectives include increasing production capacity and productivity, strengthening the competitiveness of the industry through policies such as green transformation, and supporting high-value-added production and exports.
Yılmaz also wished the program to be auspicious for the country.
The unveiling of the program was attended by other top officials, including Treasury and Finance Minister Mehmet Şimşek and the governor of the Turkish central bank, Fatih Karahan.
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