Prime Minister Boris Johnson wants to open blue water between his Tory government and those that came before.
No austerity and ‘we are not going to cheese-pare’ our way out of trouble, is his recipe for the coronavirus economic response.
In terms of firing up output, there is much less on offer than the rhetoric.
No austerity and ‘we are not going to cheese-pare’ our way out of trouble, is prime minister Boris Johnson’s recipe for the Covid economic response.
The £5billion of infrastructure investment brought forward to this year amounts to a fiscal boost of about 0.2 per cent.
In the context of the £25.1billion and rising spend on furlough, it is no New Deal. But there is a strong sense of direction.
The easing up of planning on the nation’s high streets will give conservationists kittens but may be the only way to prevent dereliction.
There is some encouragement also for free market advocates who argue red tape and regulation are enemies of productivity and growth.
Johnson’s speech provides little economic detail. For that we turn to Andy Haldane, the Bank of England’s chief economist.
On the plus side, Haldane suggests that the data seen so far means that the loss of GDP from the pandemic and lockdown will be around 8.5 per cent rather than the 17 per cent the Bank originally feared – a huge improvement.
Less welcome is the scarring in the labour market (irrespective of furlough) with private sector employment likely to be 10 per cent lower, rather than the 9 per cent originally envisaged, by the end of the year.
We will have to wait until July 14 for the latest Office for Budget Responsibility forecasts. Chancellor Rishi Sunak will keep his powder dry when he delivers his Covid-19 economic statement expected on July 8 in which the focus is likely to be on furlough, getting people back into permanent work and schemes for young people coming in and out of the workforce.
For this staunch opponent of the takeovers of Arm Holdings in 2016, Imagination in 2017, Inmarsat last year and Cobham earlier this year the most satisfying aspect of Johnson’s speech for me is recognition that this can’t keep on happening.
The Prime Minister vows that we cannot see British discovery disappear to California or China. British ideas need to translate into British jobs.
Free markets have their limits. The UK is seeking to buy its way back into the satellite business, with a stake in One Web, currently in Chapter 11 bankruptcy in the US.
Yet in the last 15 months Inmarsat and Cobham, both satellite pioneers, disappeared into foreign hands. Madness.
Double Standard
Douglas Flint has done what a newish chairman is meant to do. He replaced Keith Skeoch as chief executive of £6billion UK fund manager Standard Life Aberdeen (SLA) with Citibank veteran Stephen Bird.
The change is a milestone for SLA, for it means that for the first time decision-making at Standard Life, the dowager of Edinburgh asset management, will depart from its roots into conventional City hands.
Skeoch’s five-year leadership at SLA cannot be regarded as an unalloyed success.
The best that can be said is that a tricky merger with Aberdeen was bedded down, he survived a potentially fraught relationship with gregarious Aberdeen boss Martin Gilbert and sold legacy life operations to Phoenix.
What he failed to do was stem the outflow of assets, which shrank by £17billion last year.
Bird’s first job could be to slash or burn the dividend which gobbled up £500million in 2019-20 and way exceeds earnings per share. An 8 per cent yield suggests shareholders are prepared for the worst.
Bird may be the right person for the job but it would be a pity if the Standard Life tradition of governance activism were to be lost. The salary of the new boss, at £875,000, is in line with the City norm.
Pay arrangements which could yield up to 600 per cent of that in bonuses and shares are a banana skin to have been avoided.
Shell shocked
What is £17.8billion between friends? Shell’s Covid-19 write-off of assets would be an earthquake anywhere else but big oil.
It does represent a reality check for the oil majors which are recognising that a combination of the demand hit from the coronaviurus, the green agenda and abundant US supplies of energy represent sea change for the industry.
Investors must be wondering whether chief executive Ben van Beurden’s £47billion takeover of BG in 2015 was an act of corporate vanity now regretted.
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