Crisis era financial regulation may, as the Chancellor argued at Mansion House, be holding back investment in Britain’s infrastructure, creative, fintech and pharma industries.
But nothing has been as damaging to output as Labour’s negative narrative of black holes, followed by a disappointing Budget which imposed an unholy tax on jobs and tampered with fiscal rules.
The people most responsible for the dip in growth in the third quarter are Keir Starmer and Rachel Reeves. The Prime Minister’s dismal August performance in the Downing Street rose garden, when he talked of a ‘deep rot’ in the heart of Britain, was a deadly blow to rising consumer and business confidence. It came on top of the Reeves narrative of the worst crisis since the Second World War.
It was ‘uncertainty’ which did it, remarked the NIESR economic think-tank yesterday after it was disclosed that gross domestic product, total output, climbed by a disappointing 0.1 per cent in the three months to September.
As encouraging as it has been in the past several days to hear the Government talking about growth, one has to ask why it didn’t do so in the first place. It has been so intent on pinning all the nation’s problems on a defeated and demoralised Tory Party that a promising recovery is at risk. Instead of the UK being the fastest expanding economy among the G7 rich nations, it has cascaded down the league table.
Disappointingly, output of services, the powerhouse of the UK economy, trailed off and a manufacturing recovery stalled.
Only construction, coming out of a deep post-Covid slump, showed signs of life. It is possible that over the short-haul, output from the health and education sectors, as a result of the injection of large dollops of cash, will re-ignite expansion.
Working in the other direction will be the hit to the wealth creating sectors of the economy from the national insurance travesty and the penalties on entrepreneurship. Labour also made much of how Liz Truss put up the cost of many millions of mortgages. Reeves’s budget has done the same. The main beneficiaries of two cuts in bank rate are the minority of homeowners on tracker or standard variable rate mortgages.
The Chancellor’s switch in the fiscal rules and unruly spending comes at a cost. ThisIsMoney reports that five of Britain’s biggest mortgage lenders – Santander, TSB, HSBC, Virgin Money and Nationwide – announced increases in fixed rate home loan deals over the past week. Some might unkindly describe this as the ‘Reeves reversal’. Foundations are not fixed by detonating recovery.
Retail revival
Amid the gloom a shard of light from the grandest name in property, Land Securities. It records a growth in occupancy, amid the working-from-home epidemic, and rising rental values. Profits are in positive territory in the first half at £243m after losses this time last year. Net asset value per share, a key metric in real estate, is creeping up.
Visitors to Victoria in London can see LandSec’s work coming together as one of Britain’s biggest redevelopments emerges from the chrysalis of barriers. As encouraging is LandSec’s observation that retail is far from dead. Fresh names such as Pull&Bear, Bershka and LVMH’s Sephora are providing new dazzle in shopping centres. They sit alongside other expanding bricks-and-mortar favourites such as no-frills retailer Primark and sneaker champion JD Sports. It is to be hoped the national insurance rise and business rate pressures do not stymie ambition.
Kennedy effect
Earlier this year, I dined in Washington with an old friend who is among America’s top lobbyists. We discussed presidential candidates. He was cool on Vice-President Kamala Harris and described the independent candidate Robert F Kennedy Jr, son of assassinated 1968 hopeful Bobby Kennedy, as ‘a total kook’. In particular, his fearsome anti-vax stand was mentioned.
Senate permitting, the kook now becomes the US Health Secretary. Britain’s vaccine pioneer GSK already has reported disappointing sales for its shingles shot Shingrix in the past quarter. Its new respiratory RSV protection was taking time to gain traction. A combination of Trumpian America First and vaccine madness inevitably casts a shadow over GSK’s ambitious growth targets.
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