We’re walking an economic tightrope and the wind is picking up
I spent much of my morning yesterday with a group of City chiefs for a candid (though unfortunately, off the record) chat about the health of our economy and the state of our politics. I feared that my stump speech about the perilous state of our public finances, our low growth rate, the ever-expanding state and unprecedented political uncertainty would be dismissed as the pessimistic ramblings of a jaded hack, but it seems my assessment chimed with their own.
When considering our economy, I offered the analogy of a tightrope walker – and not the kind you’ll find in a circus tent above a safety net, but the more precarious daredevils who do it over the Grand Canyon. We’re keeping our balance, for now, but one unexpected gust of wind and, well, it’s the fall that kills you.
Speaking for themselves as much as for their institutions, concern was expressed about the size of the welfare bill, the unaffordability of the triple lock on state pensions, our lacklustre public markets, the cost of housing, the hostility towards wealth and the regulatory burden holding back parts of our economy. When it comes to politics, the prospect (or threat) of a Reform government is rightly being taken very seriously, while all eyes are firmly on the Budget – the third from a Labour government with the previous two having hiked taxes by tens of billions of pounds.
Where does Britain want to be in the future?
Having discussed this rather grim context, there was at least consensus that London (and by extension, the rest of the country) retains some impressive and highly valuable advantages. Yesterday the consultancy Oxford Economics released its latest Global Cities Index, which places London in the second spot, just behind New York, thanks to its economic muscle, human capital and international connectivity. True, the capital’s eye-watering housing costs drag down its ‘Quality of Life’ score to an alarming 144th (Paris ranks 7th in this category) but our commercial strength powers us up the overall rankings.
Today, the latest Global Financial Centres Index (an extremely detailed piece of work) confirms London retains the second spot behind, one again, New York. But the real story of this year’s GFCI is that after London the following six spots are taken by (in order) Hong Kong, Singapore, Shanghai, Tokyo, Seoul and Shenzhen. Zurich squeaks into the top ten, but Paris and Frankfurt have fallen out of the top 20.
A reordering is taking place. Where does Britain want to be in this or any other ranking in the years ahead? And how do we get there? “No complacency” is a phrase easily uttered by politicians but while the Oxford Economics analysis and the GFCI appear to confirm London’s relative attractiveness, the position is far from guaranteed and it is certainly not unassailable. Yes, we have strengths and opportunities but we also have a growing list of problems; some of them are acute, some are chronic, and very few of them are being addressed by our political leaders.
We’re up on that tightrope, without a safety net, and the wind is picking up.