The UK economy is at a crossroads. A turning point for growth, inflation and employment is apparent in recent data. The BREXIT vote might have been the trigger for the change of mood because it adds a new layer of uncertainty but the economy was already going that way. Moreover, the fundamental imbalances of the UK economy – exhibited by huge trade and fiscal deficits, now ineffective monetary policy and poor comparative productivity – have yet to be addressed – whether we voted in or out of Europe.
The ‘new world’ of external relationships, as evidenced by the 18% drop in sterling since July, implies an adjustment of costs (up) and investment (down) that will probably mean lower growth and higher inflation than would otherwise have occurred over the next few years. Further out, the UK business sector has the ability and scope to mitigate such negative effects and, indeed, more than offset any adverse changes. British firms and people are still inventive, innovative, skilled, entrepreneurial and competitive. With change comes opportunity. The big question is whether the policy regimes adopted over the next few years facilitate that process of market-led adjustment.
In the UK Autumn Statement, next month, it is expected that the Chancellor of the Exchequer will promote a new Industrial Strategy. It is tempting to say that there is nothing new in the world of sub-national development. A re-hash of established intervention strategies is probable, which may be no bad thing.
It is likely that the SW LEPs will be tasked to support major national investments (including power stations, runways and railways) through their activities towards future growth deals, enterprise zones and/or wider business support. The target, as always, will be more productivity and export-led growth backed by a strong business voice.
We await the government’s ideas with both trepidation and expectation. We hope the LEPs and their development partners are ready for the task ahead. We will blog on the ‘new’ strategy after November 23rd, assuming enough details about the new policy approach are forthcoming.
By then, we will have a new US president-in-waiting. With this and BREXIT dominating the macro world, these are exciting times for analysts of the regional economy and the world of local development.