There is no reason Britain should not aim to have an economy growing the same speed – if not faster – than the US, writes Chris Hayward
UK economy has received a glimmer of hope as the cost-of-living crisis seems to ease, with average wages witnessing a remarkable growth of 7.8 per cent, outpacing inflation for the first time in nearly two years.
Alongside this positive news, revised GDP figures from the Office for National Statistics reveal that the UK’s economy is 2 per cent larger than previously estimated. This adjustment places Britain in the middle of the G7 pack rather than lagging behind.
Nonetheless, the goal should be to lead, not merely to be in the middle. To achieve this, it is imperative we enhance the promotion of UK businesses on the global stage.
Foreign Direct Investment stands as a potent catalyst for job creation and economic growth. By creating a UK knowledge and support hub analysis from the City of London suggests that we could attract an additional £24bn in financial and professional services exports in the coming years, along with £700m in FDI and an additional 5,000 jobs by 2030.
Leading financial hubs such as Luxembourg and Singapore have demonstrated their dedication to boosting exports, and we must do the same.
Alongside this we also need to shift our approach to international trade, placing greater emphasis on services. Traditionally, international trade has been fixated on goods, neglecting the potential of services.
Establishing a global network of agreements centred around data, digital services, and professional qualifications will invigorate trade and drive economic growth.
This approach has been exemplified in the UK’s recent Economic and Financial Dialogue with India. Recently, there were real commitments made to facilitate Indian companies listing on the London Stock Exchange, and to sharing expertise in structuring and financing major infrastructure projects, in partnership with the National Institution for Transforming India.
Such collaborations at the local, national, and international levels are essential to fostering growth and ensuring that the UK remains at the heart of services trade, with the sector at the core of the UK economy.
During my visit to the US later this month, I will discuss with regulators, businesses, and politicians, ways to explore opportunities in the financial services sector, particularly in the realms of digital technology innovation, and green finance.
Comparing our economic growth to that of the United States reveals a stark disparity. By the end of the second quarter of 2023, the US economy has grown six times faster than the UK’s, expanding by 2.5 per cent compared to the UK’s modest 0.4 per cent.
While some may dismiss the idea of the UK matching US economic growth, I firmly disagree. In fact, there is no reason why the UK cannot grow faster than the US, provided we focus on our strengths, specifically in financial and professional services.
The UK government has already taken steps in this direction, with groundbreaking financial and digital service chapters in the renegotiated trade deal with Japan, digital trade agreements with Singapore, and financial and digital service chapters in free trade agreements with Australia and New Zealand. And more recently accession into CPTPP which will give us access to a market worth £12tn.
The UK’s stature as an international financial centre must be fortified, and a focus on seizing on the opportunities globally will help us do just that.