While Brexit negotiations trundle along economic warnings are building up. Former Labour Chancellor during the financial crisis of 10 years ago Lord Darling and former deputy BoE governor Charlie Bean have both recently shared concerns over debt remaining high since the 2008 crisis and an economic slowdown in the UK economy continuing into 2018. The latest construction purchasing managers’ index survey recorded a fall in activity from June-July 2017 and a reduction in new business since August 2016.
Widespread wealth and job insecurities from low wage growth evident with public sector wage increases of only 1% and worries over technological displacement of workers are not helping consumer confidence. The combination of lower real wages and rising inflation from a falling pound, a consequence of Brexit, and political uncertainty are producing the weaker consumer and construction sectors which are already showing the strain.
Will exports of now cheaper finished goods and services fill the gap the consumer and construction sectors make in the GDP projections for H2 of 2017 into 2018?
They could certainly help however all kinds of investment decisions are dependent on the meandering Brexit talks finally making some solid progress. The split in opinions within the Conservative government over Brexit does little or nothing to inspire confidence to help business make investment decisions.
In 2018 Retailing spending will remain weak as cash strapped consumers will maintain their C.21st century “Amazon effect” approach to consumption where an internet search helps compare prices, discounts are routinely expected thus squeezing retail margins and constricting growth remain particularly for non-essential purchases. When cash is hard to come by price is king.
A suggestion for an impetus for the economy and in light of the Grenfell Tower disaster (June 2017 blog) concerns over public housing procurement. This combined with comments on UK housebuilders and housing associations never constructing enough homes at affordable prices. A fresh public housebuilding policy focussed on this critical aspect of economy would surely provide a boost for the ailing construction industry and provide new homes and some job security across many sectors of the UK economy. The government Help-to-Buy scheme does more to prop up existing prices than to build the numbers required. So a more radical house production solution is urgently required although with industry skill-shortages it would struggle to make any policy happen quickly.
Nevertheless, a new or re-invigorated agency and overhauled construction regulations would improve safety and procurement processes. However how to finance such a programme may require some adjustment and planning issues would raise their NIMBY objections as usual. The government needs to do something to provide a swithering electorate to support them regardless of some resistance in the Shires. It would certainly be a bold urban investment strategy to embark upon to help a slowing uncertain economy. Unless the entire UK government remains in a policy initiative funk incapable of anything except bickering over Brexit until the economy does go over the Cliff in 2019.
Let’s see if we’ll be crying over the White Cliffs of Dover…