Europe will become ever less relevant as century progresses

Allister Heath
ONCE again, the political establishment is debating Europe, and what Britain’s place in it should be. To me, the answer is straightforward: Europe will become increasingly irrelevant to the global economy as the century progresses, a tragic development which will see one of the world’s great civilisations increasingly marginalised culturally and geopolitically. Those who still believe Britain’s future lies with the European Union are out of date; our future is global or it is nothing. Europe’s slow decline will have downsides, not least the possibility that liberal democracy will lose ground – but that doesn’t make it any less inevitable.

Take the forecasts by Karen Ward and Frederic Neumann, economists at HSBC. A consumer revolution is looming, driven by an unprecedented expansion of the global middle class. Almost 3bn people – more than 40 per cent of today's population – will join the middle classes by 2050. Virtually all of these people will live in emerging markets, where a much smaller share of the family budget will be taken up with necessities and a greater proportion allocated to discretionary purchases. This will open up almost unimaginably large markets to successful entrepreneurs.

In fact, emerging market consumption could make up almost two-thirds of global consumption in 2050, compared to one-third today. My take from this report is that there is a simple lesson here for UK firms: follow the money. Forget about the decaying Eurozone. This is also true of City firms, including banks, fund managers, insurers and accountants: emerging markets consume 18 per cent of global consumer-facing financial services today; this will rise to over 50 per cent by 2050.

HSBC focuses on 17 of the emerging markets it expects will belong to the world’s top 30 economies in 2050. By then, Chinese workers will have enjoyed a seven-fold rise in income from around $2,500 to $18,000; with a population of 1.4bn, that will be a massive market. If anything, this could be an under-estimate; the forecasters assume that average incomes in China will be one third of America’s. India’s population of 1.6bn in 2050 will have an income more than six times today’s. The Philippines, with a population in 2050 twice the size of either Germany or the UK, will have enjoyed a nine-fold rise in income. Peru will be the star performer from Latin America. Other emerging countries HSBC believes will do well include, among others, the Philippines, Malaysia, Russia, Indonesia, Turkey, Thailand, Colombia – and just one European country, Poland.

The future lies everywhere but the old continent. Whether one likes this or not, it is time to adapt – and that means jettisoning old alliances and failing European bureaucratic structures and embarking on a new, ruthlessly global trading adventure.

IT is always sad news when an iconic company goes into administration, and especially so when that firm is Manganese Bronze Holdings, maker of London’s Black Cab. But we should remember that companies are not fossils. They are living organisms. They must not be molly-coddled by taxpayers or preserved in aspic but forced to compete, innovate and change. Traditions only survive if they remain relevant and financially viable. For the sake of London’s image, we must all hope that somebody will buy Manganese as a going concern, shake up its management practices and improve quality control – and once again make a commercial success of its wonderful taxis.