Has the shadow of Brexit already cost us a slice of GDP — and if so, is it a blip or an omen? The Office for National Statistics says UK growth was 0.4 per cent in the first quarter of this year, down from 0.6 per cent in last year’s final quarter. And we can’t blame the neighbours, because the eurozone upped its game from 0.3 per cent to a positively breathless 0.6 per cent — with even France trotting in ahead of us at 0.5 per cent.
We still look stronger on the jobs front, mind you, with our unemployment rate, at 5.1 per cent, well down on a year ago and at half the rate for the eurozone. And our service sector continues to perform quite well. But manufacturing showed a decline and construction plunged, with housebuilding at a 38-month low and commercial property deals subdued. International retailers and office tenants were widely reported to be reducing their investment into the UK, or making contingency plans to do so.
A Deloitte survey of corporate sentiment blamed the downbeat mood squarely on Brexit fears: ‘A fog of uncertainty has descended,’ said Deloitte’s chief economist, Ian Stewart. ‘The dominant concern is the referendum… Corporates are pulling in their horns, with expectations for hiring and capital spending at three-year lows.’ Minutes of the Bank of England’s monetary policy committee said similar things.
And April indications suggest the fog is thickening. The Markit/CIPS purchasing managers’ indices of optimism in the services, construction and manufacturing sectors registered their weakest pulse since 2013, ‘consistent with a near-stalling of economic growth’, according to Markit economist Chris Williamson. Like-for-like retail sales were down 0.9 per cent last month (the weather didn’t help). Consumer confidence indicators varied, but a survey by GfK found a 15-month low which it attributed in part to ‘mixed messages about a post-Brexit world’.
So there’s undeniably a pattern — and even though the US is also experiencing slower growth, and China’s import volumes are declining, we really can’t claim another episode of ‘global headwinds’ blowing our proud economy off course. Historians will probably tell us that we sacrificed a quarter’s growth in order to settle a European question that was at its heart an internal Tory party argument.
But if you’re George Osborne you may not think this is a bad thing. If he’s on track to miss another set of fiscal forecasts, he can blame the Leave campaign for frightening us into a downturn. If, as he hopes, the result is a vote to stay in, all those deferred spending decisions will suddenly look safe again and there will most likely be a second-half bounce for which the Chancellor can claim credit. As for the rest of us, no better informed than when the campaign began, we’ll wonder forever whether collectively we made the right decision and why we had a bloody referendum in the first place.
Queuing for Tata
After all the hoohah about the death of Port Talbot, bidders for the residue of Tata Steel — minus the Scunthorpe works already sold to Greybull Capital — are queuing around the block. No fewer than seven have showed up, reportedly including Greybull as well as steel players from Germany, the US and India. There’s also a management buyout team. I’ve written before about the attractions of the remaining Tata operations that are not Port Talbot’s blast furnaces, but it may well be the government’s politically-driven offer to underpin a rescue that has really done the trick.
But no bidder will take on the £485 million deficit in a pension fund with almost ten times more members than Tata Steel’s current workforce; that will have to fall back on state support. The pensions crisis that kicked off with Gordon Brown’s tax raids and has deepened in the era of ultra-low interest rates is only apparent, as with BHS, when big companies stumble for other reasons. But it is enormous, has no obvious solution, and will haunt us for decades to come.
I judge politicians as I find them, regardless of party. In several contacts with Sadiq Khan, I thought him a smart operator and found nothing to dislike. In my single brush with Zac Goldsmith — I commissioned him, long ago, to write a piece for a Conservative magazine — I encountered a languid arrogance that did not make me want to know him better.
So I suspect the better man won, but still think it’s right to scrutinise the new mayor’s past: not so much in relation to alleged contacts with Islamist zealots as to his claim to experience in ‘helping run a business’. I gather he did a paper round as a kid, but the phrase presumably refers to his partnership from 1997 to 2004 in the legal-aid-funded law firm of Christian Khan, formerly Christian Fisher, where he specialised in cases against the Metropolitan Police.
That hardly counts as hands-on entrepreneurship. But the mayoral role requires empathy with capitalism on many fronts. He must champion the City against attacks from Brussels and Frankfurt: for all its faults, the financial sector is the engine of London’s prosperity. He must big up the vision of London as Europe’s hottest hub for digital start-ups. He must persuade multinationals that London has no serious competitor as the most civilised place to site a gleaming European headquarters.
And if he wants to make an impact on the critical shortage of housing for essential workers, he must promote pragmatic deals that allow developers their profits while securing rising numbers of ‘affordable’ units.
None of that was part of Sadiq’s repertoire as a radical lawyer, suburban MP and shadow justice minister. Now he’ll be helping run the mega-conglomerate that is London itself — and in a job that has few real powers beyond cycle routes and bus design, the city’s economic performance is what he will ultimately be judged on. He had better find himself a business adviser: my CV’s in the post to City Hall.
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