Self-inflicted damage makes mockery of government growth pledge
Back in June, before Donald Trump orchestrated a tentative peace in the Middle East, he reacted with fury to Israel and Iran’s escalating exchange of missile and drone attacks, telling reporters “they don’t know what the f**k they’re doing.” Sometimes undiplomatic language has its place, even in high-stakes diplomacy.
I was reminded of this approach when reading a note from analysts at Shore Capital yesterday morning, sent out shortly after the latest poor retail figures were published. The City broker’s analysts, Clive Black and David Hughes, had clearly had enough, and they accused our political leaders of being “detached, ignorant and selfish.”
They aimed their fire at the Treasury (being too polite to name the Chancellor), saying the department “just does not understand the damage they are causing to this country’s consumer economy.” Shore Capital’s team includes some of the most respected retail sector analysts in the country, and their frustration was hooked on poor consumer confidence and high inflation.
They described “the unfortunate blend of rather anaemic economic growth…uncontrolled expenditure and a shallow fiscal buffer” setting up a “car crash for the discretionary consumer economy in 2025.”
Life being sucked out of the economy
The retail sector has been hit hard by state-imposed cost increases in the form of employment taxes and wage increases, and the same forces have sucked the life out of other parts of the economy.
On top of this, the looming mess of the Employment Rights Act and the near certainty of another tax-raising Budget means that the UK is, despite its many assets and advantages, limping towards the end of the year. The word ‘recession’ is heard more and more in conversation, and the scourge of inflation will compound the scandal of fiscal drag to keep Brits poorer for longer.
The Chancellor may have welcomed the IMF’s assessment that the UK will experience the second highest growth rate in the G7 this year, but in truth there is nothing to cheer, not least when you pause to consider that our GDP per capita growth rate (which matters far more) is a dismal 0.4 per cent, languishing at the bottom of the table of major economies.
Meanwhile, economists expect growth in August to come in at a barely recordable 0.1 per cent. This state of affairs is nothing short of a tragedy, one that makes a mockery of this government’s gas-lighting pledge to put economic growth at the heart of its agenda.