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Short-term thinking is one of the big problems of the British economy.
The stock market, which requires quarterly reporting, is part of the problem, as analysts and asset managers are too focused on immediate results rather than long-term prospects. The patience that is often required is lacking. It took Jeff Bezos’ Amazon nine years as a publicly traded company before it made its first profits.
That virtue is missing in the UK, where boards and investors rush to sell or move to New York at the first smell of cordite.
None of this is terribly surprising and it comes from the top.
Next Wednesday, March 6, Chancellor Jeremy Hunt will deliver his spring budget, accompanied by 100 pages or more of policy pronouncements and 160 pages or more of forecasts from the Office for Budget Responsibility.
Hitting the buffers: HS2 has been cut, all that remains is a stump connecting London to Manchester
All of this, in addition to countless guidance and fact sheets, will be released just four months after the same exercise in November.
There is no other Western democracy that feels the need to adjust so many moving parts of the nation’s economic and fiscal affairs (outside of crisis conditions) with such regularity. Short-termism is deeply rooted in our democracy. The consequences are enormously detrimental to public investment and productivity. The Treasury is so concerned with keeping the nation’s books in order that it is almost impossible to keep them for the next generation. Achieving results requires sheer determination and a willingness to tolerate delays, cost overruns and crises.
The Elizabeth Line, the Southeast’s newest rail project, is an example of how tenacity can overcome anything. Boris Johnson has pledged to roll out full fiber broadband to the door for everyone, albeit years behind Spain and South Korea. The increase in terms of production and productivity – coming from large infrastructure projects – is immeasurable.
Of the three biggest plans on the post-Brexit radar – the Hinkley super nuclear power station in Somerset, HS2 and a third runway at Heathrow – the only one that has any chance of reaching the finish line is the energy project. That, for the record, is because French government-controlled electricity supplier EDF and Chinese investors are committed to seeing it through.
The condensed way in which HS2, Britain’s most imaginative railway project since Victorian times, has been cut up so that all that remains is a sliver connecting London to Manchester, is a triumph for unimaginative and short-sighted thinking. term. Rishi Sunak bowed to Treasury pressure on costs. Instead of bringing in new direction (the engineers who built the Elizabeth Line come to mind), he simply threw in the towel.
Yes, with its dozens of bridges and cuts, the project was bathed in gold. Politicians wrongly sold HS2 to speed up travel times. But the long-term benefits are economic. A study shows regeneration near HS2 stations and depots in the West Midlands is generating £10bn of investment over the next decade.
This includes 41,000 new homes, 30,835 jobs and 704,000 square meters of floor space near HS2 centres.
Think about the potential long-term growth and increased productivity if the branches of the project in Manchester, Leeds and Glasgow, as well as the Heathrow branch line and the Northern Powerhouse fast link, still existed.
Then there’s Heathrow. Covid-19 was an excuse to put plans for a third runway on the back burner.
But, as airline financial results showed this week, Britain’s main airport will soon face capacity constraints. He understood that Heathrow was timid about the third runway for fear it would become an election issue.
However, the Sunday Times reports that new chief executive Thomas Woldbye is disbanding the third track team and is in favor of making greater use of the existing tracks. Whether this is possible without subjecting passengers to increasing inconvenience is a debatable question.
Heathrow is central to Britain’s role as a center for business and professional services. If trade is diverted to Paris, Amsterdam or Frankfurt – all with greater runway capacity – it will be another unnecessary blow to Britain: the short-term convenience of Heathrow’s foreign owners against the wider national interest.
Jeremy Hunt prioritized long-term private investment through the permanent “full spending” regime in his November autumn statement. But when it comes to public investment, projects that drive growth have a terrible habit of ending up on the cutting room floor.