I would be the first to admit it. My stories and commentaries on the state of the British economy have not made for very cheery reading over the past two or three years. Close friends have taken to calling me the Prynn Reaper during the seemingly interminable and gruelling cost of living crisis.
Well I bring glad tidings. Almost uniquely in my recent experience a trio of key sets of official economic data this week have brought decently encouraging news.
First, the labour market figures on Tuesday showed wage increases have slowed to their lowest level in two years, though at 5.4 per cent still sufficiently far ahead of price rises to make people feel just a little better off — for a change.
Second, yesterday’s inflation numbers for July revealed that many of the underlying measures of price rises, particularly in the key services sector, are falling pretty sharply now. The City was even ready to shrug off the uptick in the headline rate, from two per cent to 2.2 per cent, as a statistical blip caused by fluctuations in the pace at which energy prices are falling.
And today the GDP figures show that the British economy has been bounding along at a respectable clip, 0.6 per cent between April and June, hard on the heels of 0.7 per cent in the first quarter. Growth is back and the “technical” recession of last year just a memory. The improving picture, especially on inflation, should give the Bank of England enough wiggle room to cut interest rates perhaps twice more this Autumn, bringing down its benchmark rate to 4.5 per cent by Christmas. So far, so benign.
But don’t just take my word for it. Far more significantly the global fund managers who control the trillions of pounds worth of clients’ assets sloshing around the world’s financial system are finally taking the UK seriously again.
It is hard to overstate just how much self inflicted harm the political soap operas since 2016 have inflicted on the UK plc brand, but it has been immense. Now the perception is finally changing.
The Bank of America’s (BoA) widely followed global fund manager survey shows “the UK” is no longer the world’s least popular mainstream asset class, a status it held until May.
Indeed the BoA’s latest survey published this week shows that the UK stock market is now the most favoured in Europe, overtaking even dull but reliable Switzerland. Finally the serious money managers are shouting it is time to “buy, buy, buy” the UK after years of screaming “sell, sell, sell.”
Politics is a rough, and often deeply unfair old game and it will be Keir Starmer and Rachel Reeves who reap the benefit. And to some extent they should as it was their decisive election victory that has done much to cement’s Britain’s global reputation as a grown up place to do business again.
But it was the hard yards put in under Rishi Sunak and Jeremy Hunt delivering the so called “dullness dividend” that paved the way for this welcome turnaround. It is less than two years, let’s not forget, since Liz Truss and Kwasi Kwarteng pulled off the remarkable trick of triggering simultaneous crashes in the UK currency, shares, gilts, pensions and mortgage markets. Fortunately, we have all come a long way since then.
