The Monday note - 5 March 2018

• The FTSE 100 fell by nearly 175 points last week to close on Friday at 7,069.9, as investors responded to President Trump’s plans to impose steel and aluminium tariffs. The ten year Gilt yield stood at 1.48%. 
• Prime Minister May set out her plan for Brexit in a key note speech, which proposed the UK opting in and out of some parts of the Single Market and Customs Union. The EU has previously stated it would not consider “cherry picking”. 
• Jay Powell, the new Chair of the US Federal Reserve, said he would continue his predecessor’s gradual policy on rate rises. Recent financial markets volatility was prompted by fears that the Fed might tighten policy faster. 
• According to the ONS, the number of unfilled job vacancies in the UK reached a 17-year high at the end of 2017. Industries facing staff shortages include food and hospitality, finance and IT. 

Chief Economist comments: 

Since July 2016, we have seen countless reports predicting that Brexit would drive UK financial jobs overseas. Now we read about staff shortages. Perhaps the biggest challenge facing the UK is squaring what the populist politicians believe with economic reality. This is going to mean expensive choices. On the face of it, choosing whether to grant visas to bankers and IT programmers versus waiters and chefs seems like a no-brainer. The bankers and techies are highly skilled and will pay more taxes. However, that means wage inflation in the leisure economy, which will be added to restaurant and bar prices. Ultimately, this filters through to the inflation figures, then interest rates rise.