UK Growth Agenda: Do Policies & Actions Match the Rhetoric?

I can’t help thinking that the growth agenda now being espoused in every other speech made by the Prime Minister and Chancellor has been driven in part by the new administration in the United States.?

Why do I say that??

It was only a few months ago that Rachel Reeves announced her first budget, and while there was talk of restoring economic stability, supporting working people and driving growth, the direction of travel was one of ideology-driven policies and stalling businesses.

Here are a few examples of either new policies, or policies they inherited which hinder growth and innovation:

Tax burden:

True, the highest tax burden in seventy years was inherited from the previous government.

However subsequent increases in Employers’ National Insurance Contributions (NICs), Capital Gains Tax, and Stamp Duty had me scratching my head.

Sure, there are fiscal rules to adhere to. While I am not an economist, I know you don’t encourage growth by encumbering people and businesses with more taxes.

Increased Employers’ NICs and associated costs:

I’ve called this out separately, because increasing Employers’ NICs and minimum wage at a time when the job market is stuttering seems counterintuitive.

Increased staff costs only mean businesses will hesitate and in some cases, pause their hiring plans. Or in the worst case scenario, lay people off.

Wealth Flight:

I’m sure you’ve seen the stories about thousands of millionaires leaving the country.

At first I thought it was just media hype, but turns out it’s true. A combination of the economic outlook and uncertainty, changes to the non-dom tax status and aforementioned tax increases resulted in a net outflow of 9,500 millionaires in 2024, a 157% rise from 2023.

Only China lost more High Net Worth Individuals (15,200 of their HNWIs left the country). Also in the Top 10 countries with the highest net outflows of HNWIs are India, Russia, Brazil, South Africa and Taiwan.

And if you don't think it's a big deal? To give you a better idea of the impact, The Independent estimates that exodus to be the equivalent of more than 500,000 average earning taxpayers leaving. Shocking, and not exactly a vote of confidence in the economy and the government’s direction of travel.

At the very least, it raises questions about the country’s attractiveness for wealth creation, innovation and business growth.

Energy Prices

It’s said that people in the U.K. pay the highest energy prices in Europe and according to the Institute of Economic Affairs (IEA), electricity prices are the highest of the 28 countries it reports on which includes France, Germany and New Zealand.

Prices are 4 times higher than the United States, 2.6 times higher than South Korea, and 46% higher than the IEA median. Given ambitions to drive growth in sectors such as AI and manufacturing, a focused strategy on generating cheaper but more reliable energy through sources such as nuclear needs to be implemented quickly, efficiently and safely.

Don't get me started on restrictions on planning and development; bureaucracy and indecision (case in point: Heathrow expansion); the Renters' Rights Bill; VAT on education, as well as kicking cans down the road om crucial policies for the next government to deal with.

Never mind that the next election is in five years...

...this Labour government was given an overwhelming mandate as the electorate was fed up after fourteen years of the deteriorating public services, infrastructure and living standards under the Conservatives. But they risk squandering critical goodwill with these blunders.?

I'm not na?ve; I recognise that fourteen years of decline cannot be turned around in seven months.?

But some of the decisions being made, and the failure to engage with key stakeholders in a way that is honest, meaningful and constructive shows that the government is taking its political capital and the opportunity to drive an agenda that is truly pro-growth – for granted.?

Will it change course? Time will tell.

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