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Is the UK economy on the brink?
Even as President Trump hints at a possible end to the conflict in Iran, the Bank of England issues a stern warning about the remaining threats to the UK economy.
City AM's Editor in Chief, Christian May, gives his reflections on a turbulent few weeks in business, foreign, and domestic affairs.
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0:00
Well, as I sit down to talk to you,
0:02
there is the latest noise of great
0:04
breakthrough in the Middle East. Trump
0:06
says some sort of ceasefire on the
0:08
cards. I mean, God willing. But, I'm
0:11
about to go away on holiday, so I
0:13
thought I'd just take a moment to
0:15
reflect on
0:16
quite what an extraordinary few weeks
0:18
it's been
0:19
and to acknowledge the fact, I think,
0:21
that even if this war in Iran comes to
0:26
an end in the coming days or weeks in
0:28
some form, and whatever happens, it's
0:30
unlikely to
0:32
result in a ceremony of doves and
0:34
flowers and handshakes.
0:36
The consequences for the British
0:39
economy, for many economies,
0:41
will be profound and negative. I just
0:45
watched the Prime Minister's standing
0:46
street press conference in which he
0:48
didn't really say anything
0:50
other than that it's good news to people
0:52
on the minimum wage cuz that's going up
0:54
and the state pension's going up and
0:56
welfare spending is going up. In
0:59
contrast to many other countries and
1:01
economies who have taken quite
1:02
deliberate action on tax, for example,
1:04
on the cost of fuel.
1:07
If you look at Australia, their Prime
1:08
Minister also addressed the nation and
1:11
committed to building refineries to make
1:13
fuel and to become more energy
1:15
independent and to use their natural
1:16
resources and to cut the taxes that
1:19
people are
1:20
having to grapple with. We didn't get
1:21
anything like that from Keir Starmer.
1:24
It seems that every time he says
1:26
anything about the Iran war, it's just
1:27
to reiterate that we're not in it. He's
1:30
very keen for us to reflect on that. The
1:33
Bank of England has also published its
1:35
latest financial stability report and in
1:38
addition to ongoing
1:40
issues and threats that it monitors from
1:42
AI to private credit, it obviously
1:45
acknowledges the huge upheaval in
1:49
economic conditions in this country
1:51
regarding inflation and interest rates.
1:54
Now,
1:56
who knows? Maybe it's the case that
1:57
there were going to be a series of
1:58
interest rate cuts and now it's more
2:00
likely that there just won't be any
2:02
over the months ahead. It is still
2:03
possible that there will be interest
2:05
rate increases. In fact, still quite
2:08
likely such as the long tail of
2:09
inflation
2:11
coming down
2:12
the pipeline to the UK economy.
2:15
Retailers and food producers have warned
2:18
today that food price inflation could
2:20
hit 9 or 10% later this year. The
2:23
consequences of this huge supply crunch
2:25
on on fertilizer and combined with the
2:27
great energy shocks that they're
2:29
struggling with mean that even if
2:33
peace breaks out while I'm on holiday
2:36
and I hope it does
2:38
then
2:39
we have to acknowledge that this has
2:41
come at a huge cost to us and that we
2:42
did not go into this crisis in anything
2:44
like as healthy a state as we ought to
2:47
have done. Over the course of last year,
2:49
our growth rate continued to decline. I
2:52
think the most recent analysis is that
2:54
it rounded out the year at about 1.4%
2:57
which is totally totally inadequate for
2:59
the demands that we have on the state,
3:02
for the demands that this government
3:03
wants to make on it and for the demands
3:05
this government wants to make on
3:06
productive part of our economy, the tax
3:08
generating part of our economy, which is
3:11
the private sector, of course. Now, we
3:13
didn't go into this crisis in the best
3:15
health. I think best case scenario is
3:17
that growth has been knocked out of us
3:20
for the first half of this year. It's
3:22
unlikely to bounce back in a way that's
3:25
going to move the dial for the kind of
3:27
GDP growth that we need to see.
3:29
And as I have spent the last few weeks
3:33
considering the City AM Awards and the
3:35
nominees and looking forward to that
3:37
night on the 6th of May, it's become
3:38
clearer and clearer to me that whilst
3:40
there is still an extraordinary
3:43
appetite for success in this country in
3:45
the business community, it just feels
3:47
like for too long that success has been
3:51
despite government policies or despite
3:54
structural problems with our economy and
3:56
there's not enough wind in the sails.
3:57
So, businesses, private sector
4:00
investment, confidence, small businesses
4:03
these are the only forces which are
4:05
going to help turn the tide of economic
4:07
fortunes. We're going to celebrate a lot
4:09
of them at the City AM City AM Awards on
4:11
the 6th of May, for sure. But, the
4:14
government has gone out of its way
4:16
almost to hold them down, to hold them
4:19
back and in so doing hold back the
4:20
British economy even before this
4:23
horrendous war. The cost increases on
4:25
business, the policy mistakes on energy
4:29
the level of taxation all too high. Now,
4:33
it's all well and good for the Prime
4:34
Minister and Chancellor to summon in
4:36
business chiefs from energy and the city
4:38
and and retail today to talk about what
4:40
they are going to do together to get
4:42
through the next few weeks and months,
4:43
but I hope that those businesses, in
4:45
fact, I know that those businesses have
4:47
taken the opportunity of those meetings
4:48
to say, "We hear you. We know there's a
4:50
crisis on, but whilst we're here, you
4:53
need to understand that our operating
4:54
environment is getting harder and harder
4:57
and there are consequences for that." We
4:58
see that consequence in jobs. We see it
5:00
in increasing unemployment in this
5:02
country. We've been losing jobs in this
5:04
country month after month after month
5:06
and our growth rate is not adequate. So,
5:09
I'm frustrated. I go I go off on holiday
5:12
frustrated that we're not where we
5:14
should be as a country, as an economy,
5:16
frustrated with government policy, but
5:19
also full of admiration for the
5:20
businesses which are still investing,
5:23
still trying to generate growth, still
5:25
trying to generate jobs, still trying
5:26
to, you know, keep the the staff that
5:28
they've got even. There are big big
5:30
challenges that this war has exposed
5:34
and I'm I'm not confident that this
5:37
government recognizes that the tide has
5:40
gone out and that has revealed us to be
5:43
well, not where we should be. Let's put
5:45
it like that. So, we hope this war is
5:48
going to come to a conclusion one way or
5:50
another. We hope that in time you know,
5:52
we see a return to the sorts of trade
5:55
routes that have been
5:56
seized up in recent weeks. Of course,
5:58
all of that is vitally important. But,
6:00
it leaves unanswered big questions about
6:02
the level of taxation that businesses
6:04
and individuals face, our energy mix,
6:06
our resilience
6:08
because this simply won't be the last
6:09
time that a major international shock
6:11
exposes Britain
6:14
and reveals some of the problems
6:16
that are either not being addressed
6:17
sufficiently by this government or which
6:19
are being made worse by government
6:21
policies. So,
6:22
I don't want to spend all of my holiday
6:24
dwelling on those issues, but that's the
6:26
sort of state of play as I see things
6:29
just ahead of Easter. When I return, the
6:32
week in business in its usual format
6:34
will return as well.
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