The new adventure begins. If you wanted to pick a time when the UK starts to direct its economy from Europe to the rest of the world, this is as good as any other.
On Wednesday, we’ll get Rishi Sunak’s Spending Review, outlining the government’s plans to steer the more than 40 percent of GDP.
And we can finally see the conditions under which we will trade with Europe, although we know how these things are going to continue, it could take a few more days.
Drawing a Line: Will we finally see the conditions under which we will trade with Europe?
Given the uncertainties, the Spending Review wisely looks only a year ahead.
But its background is a bit more positive than it even seemed a few days ago.
The loan in October was the highest ever and national debt now stands at £ 2,077 trillion.
But this year’s deficit is actually well below the estimates of the Bureau for Budget Responsibility. Part of this is due to higher tax revenues, which in turn are the result of higher spending. Retail sales are booming for six months and nearly 6 percent more than a year ago – and Black Friday is yet to come.
The loan numbers are bad, but they could have been worse.
So what we should look for on Wednesday will be priorities. What is the government planning to spend in the coming fiscal year and where?
It’s all very good talking about leveling up, or spending money on “green” investments, or building more warships, or whatever. We need to see the numbers.
Come April, when the fiscal year begins, some sort of normalcy has been restored. So this will be our first glimpse of a government trying to plan rather than fight. I hope it will be orderly and rational – a government that follows the Hippocratic Oath, in abbreviated form, “First, do no harm.”
The deal with Europe, be it on the terms of Canada or Australia, will do some damage in the short term, as disruption is always harmful.
So the trick will be to make sure it delivers long-term benefits, which rationally can certainly be done.
We can already see some of the impact because disruption from the virus has forced companies to shorten their supply lines.
So they buy from British producers instead of European ones. We also have that choice.
Have you noticed union flags appearing on British produce in supermarkets? If you believe in supporting domestic suppliers, you know what to do.
There are many areas where this change of course needs government support.
Take foreign students, for example, which is extremely important to our universities. There was a rush of EU students this fall as new students have to pay international fees next year, much higher than the UK’s.
So there will have to be a little push to get global, and the new two-year work visa for them is a really smart idea. Being a magnet for talent is a good slogan for any country.
The city needs to grow by looking out, and it is encouraging that the authorities are already trying to find ways to take advantage of this.
Rishi Sunak has drawn up plans to strengthen the UK’s position in financial services.
These include allowing European financial institutions to operate in the UK, whatever Europe decides on UK companies operating there, encouraging cross-border fund management, a business that is slipping.
The chancellor also wants to encourage high-tech companies to list on the London stock exchange.
Another thing that needs to be done is to find ways to change pension fund controls so that they can put more money into productive investments.
Bank of England Governor Andrew Bailey spoke about this last week.
Having a smart Chancellor is fine, but the Treasury doesn’t intuitively understand the city the way the bank does.
This new direction for the economy is a reset forced upon us by a series of different things: Brexit and the virus of course; but also environmental problems, the shift of the world economy to Asia and a world of zero interest rates.
The good news is that the UK has an interesting hand of cards to play – we just have to play it wisely.
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