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Among leading economic forecasters, none has been more negative about the outlook for the British economy than the Paris-based Organisation for Economic Co-operation and Development (OECD).
Those of us with a suspicious mind have long considered that, like much of the international forecasting establishment, he has never quite forgiven the UK for leaving the European Union and has been at pains to be negative.
In its latest projections, the OECD has made a U-turn and raised its growth forecast for this year from 0.4 percent to 1.1 percent.
Rethink: In its latest projections, the OECD has done a U-turn, raising its growth forecast for this year from 0.4% to 1.1%, the biggest upgrade for any rich G7 nation.
So what changed?
It would have been difficult for the OECD to remain so far behind when UK output was so healthy in the first half of the year, supported by robust services, an improvement in manufacturing and signs of a revival in construction.
The biggest threat to that recovery has been the arrival of Rachel Reeves at the Treasury, sending out negative vibes that have damaged consumer confidence and made some businesses reluctant to invest.
The Bank of England has not helped by keeping interest rates at 5 percent because inflation has not yet been destroyed.
Both the European Central Bank and its US counterpart, the Federal Reserve, have been steadfast in cutting rates.
Sweden’s central bank, Riksbank, is the latest to act, cutting its borrowing costs by a quarter of a percentage point to 3.25 percent.
The human factor should never be underestimated when it comes to erroneous forecasts.
A common thread is former Treasury economist Clare Lombardelli, who moved seamlessly from Whitehall to the OECD, where she was responsible for the gloomy projections of the UK’s outlook.
Barely taking a breath, she has since been parachuted into the Bank of England as deputy governor. Her responsibilities include producing the Inflation Report that guides the bank’s interest rate-setters.
It is hardly surprising that “groupthink” – self-perpetuating views on the economy – is one of the criticisms levelled by the House of Lords economic affairs committee.
Former Federal Reserve Chairman Ben Bernanke also hinted at this in a critical report on the Bank’s inadequate forecasting models.
As an outside member of the Bank’s Monetary Policy Committee, one might have expected that former Kroll economist Megan Greene might have held different views than those who cut their teeth in the Treasury-Bank complex.
Instead, he has suggested the Bank may have to slow rate cuts as consumers unleash their purchasing power.
Consumer cash is exactly what our shuttered high streets, quiet retail parks and recovering housing sector need.
Real deal
The skill and determination of the now fractured Murdoch dynasty should never be underestimated.
Australian property listings company Rea Group, an arm of News Corp, has made three increasingly larger offers for British online estate agent Rightmove.
The firm has already been evicted three times and the bid value has risen to £6.1bn. Rightmove boss Andrew Fisher has called the raid “unattractive”.
Rea wants to go global and is expanding in India, where property prices in wealthy enclaves can outstrip those in London.
Entering the British market, three times the size of Australia’s, is an attractive bet. The timing is opportune, given the market-driven downward trend in mortgage rates and the Labour Party’s pledge to boost construction.
The British firm faces challenges, including rivalry with US firm CoStar, which bought On The Market last year. Fisher has responded to phone calls, but Rea is upset by Rightmove’s refusal to engage.
How refreshing to see a publicly traded Internet pioneer holding its own against foreign marauders.
Leveling up
German carmakers are having a tough time, but there are glimmers of hope in the UK.
BMW-owned Royce Motor Cars is brimming with confidence. Even as the rich are supposedly leaving Britain in droves, it has opened its biggest European show in Leeds, bringing “a touch of Goodwood (where the cars are made) to Yorkshire”.
Made in Britain… and the Rolls brand still counts.
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