The UK’s Economic Firepower

Alpesh Patel Wednesday 24th March 2021 07:48 EDT

I’d like to share my interview with Adi Raj, which he did for his school newsletter. He’s applying to Oxford so wish him well!

Brexit would have been the only thing in the news had COVID not happened. Does the UK has the economic firepower to overcome the impact of both these challenges simultaneously?Alpesh: For any economy, let alone the world’s fifth largest, these significant events will hurt.  However, the UK government’s debt issuance is an excellent indicator of people’s willingness to lend money to the government based on the country’s strong economy. Our government has not had any significant difficulty in raising funds from global markets; its bond issuance programme is continuing. My bet is on the economy to cushion the impact. Perversely, it can also be that this economic shock leads to a stronger rebound. Indeed, the opposition argues that the government should be providing greater firepower to the economy. Right. My analogy is that I am going to find my inner strength and come up with the best ideas of getting back on my feet. We cannot afford to get complacent; we have to find every single resource we can to fight back and come back stronger. That’s where the government safety net comes in.How optimistic are you about UK’s economic prospects post-Covid19?Alpesh: I put my money where my mouth is, and see where people are putting theirs! In 1999, in my very first column in the Financial Times, I said that I invest in US equities not UK ones, and in the 21 years since, the FTSE 100, have stayed put, while the US ones have shot through the roof. This year, I am expecting the UK to catch up. Partly because of the overreaction from market participants on the UK corporate scene, and partly because I think that is where the money is flowing to, as well as the capture diversions which will narrow. The data on venture capital investment from abroad coming into the UK has actually been growing and this trend has sustained.  Data shows that the fall in the pound made investing in the UK rather attractive. Our intellectual capital, skilled workforce, the infrastructure, the ability to create intellectual property for commercial advantage, world-leading universities, are all instruments that we have to create sustainable growth. Therefore, I am very optimistic. UK is currently eighth in the ease of doing business rankings according to the World Bank. How do you think Brexit will affect this and what regulatory reforms are needed to improve the ecosystem for foreign investment and business in the UK?Alpesh: This government has openly stated that it wants fewer regulations. If you look at the ease of doing business index, you would think that it should be easy to climb up that table – just look at what the countries above you are doing and replicate it. There's a problem with that. Some regulations are there for very good reason, e.g. protecting employees, environment, etc. It could be that we do not want to be higher as reducing regulations may lead to negative externalities. As a result of Brexit, we may be able to deregulate and that should see us moving up the rankings, however we need to be sure that we don’t become the wild west of doing business either.  There is that balance protection of consumers, workers and small businesses as well. 

comments powered by Disqus

to the free, weekly Asian Voice email newsletter