These two issues are of course related, not least in respect of the continued erosion of the country’s productivity. Economists have puzzled over the UK’s falling productivity for some time, but I tend towards the simplest explanation: that stagnating wage growth means businesses have favoured cheap labour over capital investment, the corollary of which is record low unemployment. As Chris Dillow writes on page 16, it has been people taking the robot’s jobs, not – as we have been constantly warned would happen since the advent of the microchip in the 1970s – the other way around.
Looking across our results section, it has been becoming clear for some time that life is becoming tougher for those companies that have come to rely on armies of endless cheap labour – Sports Direct springs most immediately to mind, but many retailers and leisure groups face pressure to pay fairly. Raising wages alone will not, of course, increase productivity, but it will perhaps encourage companies to operate more efficiently, and there are dozens of listed suppliers of technology that stand to benefit by helping them to do so. Such companies should also benefit from improved R&D support and money for education to deliver key skills, while sensible changes to sources of patient capital like EIS are also good news for the entrepreneurs that will create the listed companies of tomorrow.
Yet housing was always expected to be the star of the Hammond show, and the chancellor did not disappoint. Communities secretary Sajid Javid has said it would cost £50bn to address the crisis of affordability and availability – he got £44bn, and a promise to significantly shake up the planning and housebuilding industries. Whether this is enough to fix the issue remains to be seen, but it will certainly have implications for the listed housebuilders – not least the warning that should they be found to have gamed the land market to their own advantage the government would intervene, a threat which saw a notable sell-off across the sub-sector. Critics of the Budget will suggest that this represents little more than empty rhetoric – but as it has demonstrated through the strictures being waved at the domestic energy market, this government has not proved shy of targeting industries perceived to be distorting the market.
