The first in a three-part series examines how the country has been transformed (for the better) in the past few decades.
The UK economy looks fundamentally different now from its image just 30 years ago. It is simply unrecognisable – and for the better, yes, even in these momentarily unhealthy times. From a practically sclerotic housing market, the UK can now boast a large and growing private rental sector, standing alongside but not in the shadow of a sizeable, healthy owner-occupancy market. Where the latter was once plagued by flexible, fast-moving mortgage rates and high loan-to-value ratios, it is now filled with fixed rates, and householders moreover are enjoying greater equity in their homes than at any time in history.
And where banks once would swiftly foreclose and make housing matters so much (and unnecessarily) worse, they now sensibly forebear – helped in doing so because they behave in a macro-prudential way, their oversight also back in professional hands. Professional Bank of England hands too are holding the tiller of UK interest rates, which are no longer prone to politically opportunistic moves as once was so sadly the case.
And while interest rates are historically low, in part because of the crisis of 2008 and the one we find ourselves in today, that is far from the entire picture. An important reason why inflation is so low is that the UK has moved to an entirely new pricing architecture, one brought about by the building-out of e-commerce, so we can buy ever more from disruptive technologies.
What can the England of 2021 have in common with the England of 1991? Nothing, except it happens to be the same nation, but grown-up and strapping – robust enough economically to shoulder even this crisis
These technologies, in which the UK is a world leader, have grown ever more pervasive. And while they have destructively egressed into older sectors, where they have driven down workforce numbers, they have also created entirely new hiring demands that have involved net new job creation. After all, buying from the clouds still very much demands feet on the ground to satisfy customer hunger and thirst for all manner of goods and services. I write this with confidence because it is precisely what we witnessed ahead of this crisis.
Where our universities were once small, hallowed grounds occupied by ivory towers and filled with our privileged young adults – albeit often living in damp garret bedsits – the UK’s higher education institutions (HEIs) are now pervasive across every region, helping to repopulate towns and cities beyond London. Our ever-expanding universities have created an HEI sector that has occupied ever more well-appointed commercial and residential real estate, recruited ever more skilled and general labour, and been ever more rewarded with lucrative fee-paying foreign students keen to be awarded prestigious degrees. Indeed, this crisis has thrust the UK’s HEIs to the fore and made their business and science parks all the busier for our vaccinated health.
Where once stood regionally monolithic ‘smokestack’ industries whose ebbs and flows brought plenty or poverty to their immediate surroundings, the UK now boasts a landscape where no single industry, with its satanic mills, can be accused of holding any part of our nation hostage to its fortune or misfortune – universities pose no problem in this regard.
This is not to claim all these changes were easy or quick to make, merely to point to their arrival for our better. Let me paraphrase from George Orwell and stand on that giant’s shoulders when I say: What can the England of 2021 have in common with the England of 1991? Nothing, except it happens to be the same nation, but now grown-up and strapping – robust enough economically to shoulder even this crisis.
Let me continue with change. The British banking landscape has seen the disruptive arrival of a raft of virtual banks – Monzo, Revolut, Atom, Starling and others. These have all vied to competitively win over depositors from their old high-street stalwart rivals. I have no doubt these tech-savvy ‘newcos’ will in turn face competition from fresh e-finance arrivals. I am no less sure that to keep ahead of the game the early entrants will move forward. To do so, existing fintech disruptors will, I have no doubt, very quickly grow their current extremely modest presence in the UK residential mortgage market. They will achieve this by acquiring or merging with existing non-banking buy-to-let mortgage-offering platforms. What this all means for the UK residential market is easy enough to predict: ever more competition for UK mortgage custom can only be good news for UK borrowers in terms of availability and affordability of debt.
As to whether there comes the risk that disruptors fuel a housing bubble that ultimately bursts, I will say only this. Sound demographic fundamentals – not least the increasing arrival of students from Asia and an upturn in births from 2000 – alongside attentive regulatory oversight should provide protection. Protection yes, but no cast iron guarantee.
