- According to ONS at the end of Quarter 1 UK general government gross debt reached 2,365.4 billion and rising as I write!
- A whopping 99.6% of GDP. UK general deficit or net borrowings are climbing faster than a SpaceX – Can they land back safely?
- In day and age of all things AI one could call the latest “mini budget” a Virtual Prosperity for Masses & Augmented Favoritism for the Elites
- Since Brexit UK is akin to “Poundland Shop” where P.E firms are pushing their shopping trolleys scooping one strategic asset after the other
- The Sterling at its 37-year low should send shivers down the spine of all industrialists & entrepreneurs in the United Kingdom
- The Pound Barrier like Sound Barrier has already been rumbling, the Big Bang will be heard soon when $ and £ reach parity
- UK finds itself outside of 3 major tents: 1. US (FTA) 2. EU (Brexit) & 3. A U-turn from UK-China Golden Era, high speed to Pewter Era
- To give all the credit of country’s malaise to Conservatives is simply handing a free pass & ignoring the duty of a hibernating opposition for 12 yrs
- To say Don’t Forget, Don’t Forgive in Liverpool sounds sassy & one must add…
- Don’t Fantasise. It is time to build a new model; the alternative can only be Failure.
Staying Sober, Sound & Sensible…
Bailey to Bailout: Inflation + Stagnation and Confusion
Q1: Andrew Bailey is getting ready to firefight! His goal is to take back the sizzling inflation to 2%. When? When Pigs Fly? To stop Sterling’s spiral, FDI has to increase. Yet the key Q is who has the money and “air cover” to invest in UK today? Europeans are running major budget deficits; China is frowned upon. Should UK then sell all the family silver to US? Is that a smart move geo-economically, geo-politically and geo-strategically?
Q2: During the Negative Interest Rate Bonanza many PE firms raised so much of dry powder on cheap that we are dealing with what I have coined as “Confused Capital”. The Confused Capital has to deliver returns & the common PE practice of “Passing the Bucket” can result in similar smelly & rotten buckets of investments like 2008 with inflated asset prices. London’s reputation is online and The City must remain Composed & Calm.
Q3: In coming 12-18 months Bailey’s Bail Out Plan – will continue to suffer from tone-deaf Kwak Kwak echo coming from treasury. Can putting the fiscal ducks in the row be the toughest battle for The BoE? Failing to do so makes UK Economy a “Sitting Duck” for the PE Barbarians at the Gate!
“Britannia Unchained”: The Manufacturing Atrophy & Productivity Dilemma
Q1: To be unchained is inspirational. But anchoring in realism is a Must Have for economic growth. The key question is which markets can Britannia sail to & develop an independent and credible trade relationships with? Can UK today develop an unchained trade policy for her best interest?
Q2: The UK economy is in a comma. Small State Economics sounds sexy only if backed by Big Manufacturing & High Productivity. The chain of, Skills Development, Well Paying Jobs (not zero contract bikers at mercy of tech firms), Investment in R&D, State of the Art Infrastructure, Mentoring are all essential links in a chain of economic development. When was the last time a Unilever, Jaguar Land Rover, John Lewis was born in UK?
Q3: The future of this Island is not just about unchaining but having a compass that can lead UK to old and new waters. To old waters (Global South) to un-learn, heal & reconnect with humility, to new waters to develop establish & collaborate with curiosity. Where is that Compass?!
The Mini Budget & Myopic View of a Changing World
Q1: A great part of the future growth is in Global South. The challenges of south are substantial & so are the opportunities. But who is in the driving seat in Global South? Would UK be a bystander or can be an active participant in opportunities in The Global South?
Q2: In 1976, 46 years ago during another currency + energy crises when UK had to go the IMF, some “revolutions” were incubated, engineered & endorsed. The world is still reeling in the geopolitical aftermath of that decade. Are we on cusp of new geopolitical miscalculations in making?
Q3: The Long Term Growth requires foresight and a thorough check-up & overhaul of economic model of UK. How long can this MRI be delayed & can only changing the dose of the taxes save the patient?
Europe – A Neighbour & Growing Fractures
Q1: The picture across the English Channel is also discouraging. Welcome to the European Union of Deficits – where surpluses have melted faster than Dolomites’ Marmolada & Chamonix’s glaciers. Can EU maintain its social contract & coherence if Germany’s Mittelstands go to insolvency (the fear of BDI Lobby) or U.S conglomerates & private equity firms start swallowing likes of BASF or other big European businesses?
Q2: While Eurozone factories report their biggest fall in outputs since 2020, winter is here; US shale sector has notified that they cannot help EU in an energy crunch this winter. So is EU going to see its “energy policy fracked” under systemic risks? Would that risk fracking EU itself?
Q3: The steering wheel of where Euro goes is entirely in hands of The Fed. As Euro & Sterling risk becoming “Toilette Currencies”, the jester would wonder if Russia-Ukraine war is the best economic arbitrage for US dollar to round up, leverage & acquire key assets of E.U’s industry. Just in time for The Major Economic Showdown with China? A fool may ask what are the stakes for UK EU Citizens in this Arbit”war”age?
“You never change things by fighting the existing reality.
To change something, build a new model that makes the existing model obsolete.”
Ali Borhani is the Managing Director of 3Sixty Strategic Advisors Ltd. It is the readers’ responsibility to verify their own facts. The views and opinions expressed in this article/commentary are those of the author’s and do not necessarily reflect the official policy or position of any other individual, agency, organization, employer or company.
Photo Shout Out To: Alice Pasqual on Unsplash