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OPINION

Sterling’s void

Sterling’s void
July 2, 2020
Sterling’s void

There is one characteristic commonly found in emerging markets that is conspicuously absent in the UK now, though: growth. And as you will have heard Phil Oakley and me discussing on last week’s Investment Hour podcast, in an underinvested, underproductive, unbalanced service-led economy built on near-full employment at low wages, debt and property, it has been hard to see where that is likely to come from. Even before Covid-19, the country’s economic performance was reliant on these very fragile foundations, which have now been dangerously exposed by the virus – the industries that depend on them are unlikely to survive intact. Then there is the rising fear that as the country starts to tentatively reopen, a second wave comes and knocks everything back again – Leicester’s extended lockdown could be a portent of how we live with the virus for the foreseeable future. 

The civil disorder seen recently is yet another symptom of the very poor financial health of the nation, with growing social division a reflection of very real economic problems. But tearing down statues is hardly the solution – criticism of the often unsavoury methods of past wealth creation may be justified, but a poorly thought-out response threatens a situation that hugely undermines the ability to create wealth in the future. The idea that redress should be paid by companies for past sins, for example, seems like a Pandora’s Box that should not be opened – because where will it end?

Worrying so much about the past also seems a rather counterproductive effort when the future is so uncertain. We have been attempting for several months now to look at what this ‘New Future’ may look like, and the ‘New Deal’ announced by the prime minister this week echoes much of our thinking. We need a greener, better connected, better educated, better housed country, and huge public investment to deliver it and spread opportunity across the nation makes sense.

But this is by no means a slam dunk of a policy, and the sheer cost – on top of the already burgeoning costs of tackling Covid-19 – will do little to rescue the pound from the void into which it appears to be plunging. And I’m sure followers of political history will hear echoes of many previous governments in the new plans, none of which have truly changed the course of the country. The devil will be in the detail of the delivery.