Any other business

Who dares ask how far Brexit is to blame for UK inflation?

11 June 2022

9:00 AM

11 June 2022

9:00 AM

After the Jubilee dream of a lovely lost Britain, back to reality with a face-slap: the reality of the £8 pint of beer, the £8-plus gallon of diesel and the death throes of a Downing Street regime that has no discernible answers to the cost-of-living crisis. All of which takes me back to some questions I’ve been pondering for a while: whether the UK faces higher inflation and a deeper downturn than the rest of the western world, if so why, and who we should blame.

By way of caveat, let’s recall the shifting pattern of Covid statistics over time: just because the UK topped April’s G7 inflation table – at 9 per cent, ahead of 8.3 per cent in the US and 7.4 per cent in Germany – doesn’t mean we’ll still look worst when this is all over. But let’s briskly examine the contributing factors.

On energy prices, we share vulnerability with most of Europe, though our government has done less than others to cap prices and cut fuel taxes. On food we really are exposed, because we import half of what we eat, the pound is weak and post-Brexit barriers had already pushed prices upwards.

Post-pandemic labour shortages are international too, but in our case currently so severe – many non-UK-born workers having left, many others not wanting to return to work – that last month, for the first time, the number of vacancies exceeded the number of unemployed. And it doesn’t help that our productivity is perpetually weak.

As to the utility of interest-rate hikes, the UK’s high proportion of short-term-fixed and tracker mortgages means many household incomes are immediately pinched by rises which have minimal impact on the slice of inflation that’s driven by physical supply gaps. And my old friend Adam Posen, the US economist who used to sit on the Monetary Policy Committee, says that UK ‘core inflation’ (stripped of volatile energy and food components) is particularly acute for one plain reason: ‘Brexit has amplified the inflationary impact of a simultaneous common shock.’ Many readers will reject that contention but it’s surely worth debating.

When the Tory backbencher Tobias Ellwood suggested we should rejoin the single market to ease cost-of-living pressures, Johnson allies claimed to spot a conspiracy to ‘drag us back into the EU’. No one I know thinks that’s even a remote possibility – but I wonder whether any leadership contender will be brave enough to highlight Brexit’s inflationary downside.

All over for ESG?

A wave to Gillian Tett for a provocative essay in FT Money on the way ‘environmental, social and governance’ investing seems to be going out of fashion even faster than previous catchphrases such as ‘corporate social responsibility’. When millions of households face fuel poverty, the case for rapid disinvestment in carbon energy looks pie-in-the-sky. Why shun defence manufacturers’ shares when their products could save Ukraine? If millions more will go hungry for lack of grain supplies, why withhold capital from responsible bioscience companies developing high-yield GM crops?

There are immutable principles of good business behaviour, there are desirable long-term environmental goals to be balanced against shorter-term exigencies, and there are passing fads. Current global tensions are teaching us the difference.

What the Pageant forgot

I enjoyed Sunday’s high-camp decade-by-decade Jubilee Pageant – but as in every overview of British popular culture, business barely got a look in. There were some iconic products on show, such as the Sinclair C5, and a face from Dragons’ Den on one of the buses. But whoever booked the celebrity cavalcade seemed to have entirely forgotten the boardroom titans, chancers and moneymen who shaped the economic life of the Queen’s reign.

They would of course largely have had to be waxworks or holograms. But still it would have been good to glimpse Isaac Wolfson of Great Universal Stores from the 1950s, then Arnold Weinstock of GEC and Frank Kearton of Courtaulds from the 1960s. For the 1970s, a clapped-out British Leyland car driven by Donald Stokes might have been followed a float carrying the entire Bank of England ‘Lifeboat’ committee that saved the banking system from collapse. The 1980s could have featured dancing red-braced City traders and a prison van carrying Ernest Saunders and his Guinness gang. For the 1990s, a stretch limo of privatised utility chiefs and demutualised building society bosses waving their salary cheques; for the 2000s, Fred Goodwin of RBS alone in the stocks.

Richard Branson – a player in six of the seven decades, no less – could have been the peacock pageant master up front; James Dyson with his vacuum cleaner sweeping up behind. What a missed opportunity to educate the crowd.

Farewell to Sheryl

I should probably be sending a bouquet to Sheryl Sandberg, the feminist torchbearer and ‘first lady of tech’ who is standing down after 14 years’ hard labour at Facebook, helping its brattish founder Mark Zuckerberg to build his company, now called Meta, into one of the world’s most influential businesses. But I can find scant praise to offer, because I regard Facebook as a heartless monster whose publication of corrosive material and exploitation of personal data – the latter very much led by Sandberg – have done untold harm.

As for Sandberg’s four-million bestseller Lean In (2013), hyped as a manifesto to help other women become more assertive in the workplace, in truth it was little more than a lecture to lesser mortals in praise of her own career. Then again, with a fortune of $1.6 billion – and, at 52, plenty more corporate and political mountains waiting to be climbed – I don’t suppose she’ll be bothered by my opinions. But let me attempt at least a backhanded compliment: I’m sure she’s a nicer person than Zuckerberg.

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