As of September 6th, the UK has a new prime minister, in Liz Truss, and a new chancellor in Kwasi Kwarteng. To say they face immense challenges is no exaggeration. Then again, challenges abound across Europe, MENA and no less in the United States. Against such a chilling backdrop, do we not face the threat that economic problems building within the UK are exacerbated by economic troubles beyond it? Indeed, only an ‘economic fool’ would deny the risk those of us in the West ‘go down’ all the faster because we have spent decades shackling ourselves together economically and financially.
With all these clouds darkening over the UK, let me reflect on forces that just might shed some sunlight. For one, the reshoring of manufacturing to the UK is underway. This is being propelled, not merely because the pound sits competitively comfortably where it lowly does, but because of efforts at bolstering supply security. Here is another ray of sunshine. However much Truss tries to go cold on the Chinese state, its rapidly growing ‘affluent’ class can only continue warming to all things British. And be in no doubt whatever challenges China faces, Beijing has the monetary and fiscal firepower to effectively fix things. Less we forget, India too is growing its affluent class, albeit not as impressively as its neighbour. More widely, the world is not short of economies which are not merely enjoying growth, but nations which the UK enjoys close commercial connections thanks to a commonwealth.
“The escalation in pay awards being seen in the UK which some claim will result in a hysterical form of wage-price leapfrog will all the more draw those formally here to return”
We have also to consider some positive fall-out from the economic and political shocks that are certain to hit continental Europe. The fall-out I write of is the return of not only many of those hundreds of thousands of EU nationals who evacuated the UK when coronavirus struck, but some British ex-pats too, possibly many. Remember, virtually all of these have settlement status here. The reality is, in being so focused on our problems, we miss the fact that living costs and interest rates are moving sharply higher across large tracts of Europe. Indeed, the escalation in pay awards being seen in the UK which some claim will result in a hysterical form of wage-price leapfrog will all the more draw those formally here to returnand indeed encourage those here who stepped out of the labour market to become economically active again, filling record-breaking vacancies.
