The PM must take decisive action to drive UK growth

The UK public has decided it’s time for change and there is precious little time to waste when it comes to addressing the numerous economic and social challenges facing the UK. Resolving the UK’s growth conundrum should, for example, be at the very top of the new government’s agenda.

Recently published forecasts from both the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) predict that real GDP growth for the UK for 2024 and 2025 will be amongst the lowest of the economies in the G7; only Germany has lower projected growth in this period. There is a similar assessment when broadening this out to the G20, further highlighting the scale of the challenge.

But these are only projections. They should not be viewed as a pre-determined path that the UK is destined to follow. We can be the masters of our fate. But to chart a new course for the UK economy, and set it on a more upward trajectory, will require meaningful and thoughtful action. And, yes, we understand the government’s limited fiscal headroom will no doubt restrain the level of direct public intervention, but there are other actions Labour should be prioritising to unlock economic growth in partnership with business.

First and foremost, the UK needs to see a period of political stability and certainty in economic policy from here. The last five years have been an intensely volatile period. Although primarily due to external factors, such as the pandemic and the Russian invasion of Ukraine, their effects were amplified by well-intentioned but poorly implemented policy which was factored into private sector investment decision-making. The new government must therefore ensure it provides clarity over its objectives, not just in the short but also medium-term, and also ensure the various tools at its disposal are aligned in delivering on this.

This is intrinsically linked to the need to create an environment that attracts and facilitates private investment, whether that be new international capital or the voluntary reorientation of domestic capital. As part of this, the government should develop the right mix of policy and fiscal incentives to ensure that companies have access to capital at every stage of their development. In doing so, this would help to address the current concern that the UK is a good destination for startups but that once these companies have reached a certain state of maturity, they begin to look at overseas jurisdictions to finance their future growth.

And for an export-based economy, like the UK, a proactive and open trade policy that will potentially create additional demand will be crucial. This has been recognised by Labour and now it’s important we see this put into practice.

The UK should also continue developing a well-designed, proportionate, and effective regulatory environment. The UK’s regulatory framework is widely considered to be a net positive, but there remains scope to achieve a better balance between providing sufficient protection to investors and supporting well-calibrated risk taking, without being overly burdensome on the industry. The review of the UK’s Corporate Governance Code was a welcome step in this regard. Similarly, we look forward to seeing how the UK regulators put into practice their secondary competitiveness and growth objective in the development and implementation of new regulation.?????

Importantly, the burden of delivering this ambitious agenda should not fall solely on the shoulders of government.? A key element underpinning future success will be the government’s close partnership with the financial services industry. In a recent speech, Rachel Reeves, then-Shadow Chancellor, spoke of bringing together “an active state in partnership with a vibrant market”. The UK’s financial services industry is a cornerstone of that vibrancy, including employing some of the best and brightest talent, helping to ensure we remain one of the world’s preeminent international financial centres. And the asset management industry, in particular, has a prominent role to play.

As intermediaries, we support the flow of capital to the wider economy and to different parts of the UK, as we identify investment opportunities on behalf of our customers, including those looking to achieve economic security in their retirement. In this context, we continue to support the increased focus by government on delivering the best long-term retirement outcomes, rather than exclusively focusing on minimising costs in the short term. Also, Labour’s planned pension and retirement savings review will be an important opportunity to remove any? potential barriers that currently prevent UK pension funds from investing into UK companies and infrastructure.

The UK elections have taken place in a pivotal year, with over half of the world’s population heading to the polls. But amidst such disruption lies many opportunities and the UK must seize them. The call for change is clear, but it must not be performative. Now is the time for decisive action.????