Neil Woodford is offering advice, should we listen?
Neil Woodford, who was investigated by the FCA after losing billions, is telling us to be optimistic about the economy. He has a point, says Eliot Wilson
Neil Woodford, whose eponymous investment fund collapsed amid investigation by the Financial Conduct Authority in 2019, has obviously been taking a course in self-assurance from Liz Truss. The one-time “City kingmaker” lost billions of pounds for clients when Woodford Investment Management closed its doors, and earlier this month the FCA concluded that he “had a defective and unreasonably narrow understanding of his responsibilities for managing liquidity risks”.
Woodford is nothing daunted. He has asserted that “I am neither hero nor villain” and did not deserve “the onslaught that followed the failure of my business”. The fightback has begun, and he is now presenting himself as an optimistic economic guru, launching a blog entitled Woodford Views and headlining his first pronouncement “Reasons to the Cheerful, Part 1”.
Echoing the former BBC newsreader Sir Martyn Lewis, who argued in 1993 for “positive stories to be given a fair hearing when the day’s news agenda is discussed”, Woodford’s thesis is simple enough: our society and its media thrive on bad news, and the “consensus narrative on the UK economy appears to be overwhelmingly negative”. The reality, he suggests, is that “there are many good reasons to be cheerful about the UK economy’s current state”, and he will as the days and weeks unfold explore the data which underpin this sunny disposition.
It’s an approach which is easy to mock. Last week St George’s Day brought the usual round of self-reflection and a stereotypically English hand-wringing about our national plight, and it is true that we often associate optimism with simple-mindedness. Maybe, however, we should pause just for a moment and ask ourselves: does Woodford have a point? Are we too negative, and, more importantly, does that negativity of perception have a real effect?
Some arguments adduced by Woodford: between 2010 and 2023, the UK’s GDP grew by 22 per cent in real terms, nothing like the American economy but ahead of our major European rivals Germany and France. Public sector debt grew during the pandemic and by 2028 will reach a terrifying 93 per cent of GDP, but the deficit is predicted to fall to a manageable one per cent of GDP by the same date.
He also points, rightly, to the fact that inflation is falling “as rapidly as it rose”, and according to the Office for National Statistics the rate stood last month at 3.8 per cent. It is expected to continue falling and come under the target of two per cent. It peaked in 2022 at just over nine per cent, the high point in recent years before that being 7.5 per cent in 1991.
I argued early this year that politicians squabbling over a “technical recession” was a semantic distraction. In any event, the UK seems to be moving out of that area and into small but real growth, and KPMG’s economic outlook published last month predicted a “service-led recovery” with an increase in the economy of 0.3 per cent in 2024 and 0.9 per cent in 2025.
Confidence matters when it comes to economic policy. Would-be investors can assemble all the data in the world but there will still be part of their decision made effectively by sticking their finger in the air. It is also important to measure ourselves against competitors as much as in the abstract, as investors are often deciding where, not whether, to put their money. Charles Sanford, partner at LGT Wealth Management, explained this importance: “the UK has an established and enduring spirit of optimism… this entrepreneurial culture runs deep and, as any scientist will attest, DNA is somewhat resistant to change.”
The UK economy has structural challenges which are not susceptible to a quick fix: a housing shortage, sclerotic planning regulations, an over-centralised system of governance and inability to manage large-scale infrastructure projects. It is inevitable in an election period that language will become polarised, but we are not a basket case or a failing state.
What Britain does need, though, is a careful assessment of our strengths – financial services, retail, technology – and effective, decisive action to foster growth in those areas. We cannot turn a blind eye to problems, but equally we mustn’t become obsessed by them: if we are not cheerful, then perhaps guardedly optimistic.