Andy Burnham is set to deliver a major speech on the economy this week, and observers suggest his newly assembled economic team could signal an improvement in economic competence. Burnham has appointed seasoned figures such as Jim O’Neill, former chief economist at Goldman Sachs and now Lord O’Neill, and Andy Haldane, formerly of the Bank of England, to key economic advisory roles.
While details remain to be seen, particularly regarding the composition of the Treasury, there is anticipation that Burnham will reassure markets about his fiscal plans, especially given previous comments about avoiding excessive borrowing. This comes as the current government's economic policies are seen by some as less business-friendly than in previous decades.
"We should not exclude the possibility that the new team might turn out to be more sensible than the present lot. Not grand ideas, just reasonable competence," noted one analysis. The UK economy, despite global complexities, is presented as having a relatively strong balance sheet. Unlike some European counterparts, it is not heavily reliant on sectors facing intense international competition, and it shows some level of growth. While the fiscal deficit is a concern, it is described as less severe than those in France or the United States. Furthermore, the UK boasts a robust high-tech startup sector and remains the second-largest exporter of services globally, with financial services in the City of London demonstrating resilience and job growth since 2019.
This potential shift comes against a backdrop of perceived stagnation under the current administration, which has been characterized as the least business-friendly government in half a century. A recent essay by Tony Blair outlined an agenda focused on delivery and pragmatism, urging a move away from ideology to address economic realities, including reforms to benefits and a prioritization of energy costs over net-zero targets. While Burnham's team has faced some initial disagreements, the prospect of a more detail-oriented and pragmatic economic strategy is seen as a welcome change from the current government's approach.
Looking ahead, potential challenges include the speed at which the new team can adapt and the impact of the UK's deteriorating public finances, marked by a significant overshoot in borrowing in the early months of the financial year. Global economic shifts also pose a risk, with expectations of a potential downturn in the global economic cycle within the next two to three years. The global economy has shown considerable resilience thus far, with the US economy experiencing a boom, reflected in stock market optimism, though not all segments of the population have benefited equally. Despite these potential headwinds, the analysis suggests the UK possesses a strong position in the global economic landscape, which could be leveraged more effectively with a competent government.
