To read The UK Economy – A picture of change, part one, visit https://www.propertychronicle.com/the-uk-economy-a-picture-of-change-part-one/.

Before the present crisis, the UK had scaled to its highest ever number employed, 33 million, and its lowest jobless rate, 3.8%. Yes, jobs were sometimes laborious and unfulfilling. However, one has to qualify (sic) the jobs data included the highest ever figure in UK history of skilled non-manual workers: a record 12 million in professional roles. Moreover, those doubting the number of us with ‘good’ jobs is positively correlated with the number working under less fortunate circumstances, are confusing utopian theory with practical economic reality. Moreover, those doubting a very strong labour market rebound will prove very wrong indeed.

To repeat, the upwards job journey cannot fail to involve an ever-increasing number of workers involved in the extensive supply chains that see goods and services journey to us at home, as well as being delivered to our traditional workplaces when we return to a post-coronavirus normal. This normal will be old in the sense WFH will be deemed an aberration. 

Let me turn to the UK’s much-vaulted ‘labour productivity problem’. This is simple enough to understand, for there is no doubt a problem. The problem is that in our ‘post smoke-stack’ service-based employment form, we have yet to master how best to measure our very real and rising productivity. Let’s just say this problem is work in progress. This brings me to another piece of work in progress, the job being done by the Chancellor.

There is no shortage of Budgets to compare and contrast in real time

Over three decades of working I have covered a great many Spring Budgets, Autumn Statements and the transpositions when, on occasion, budgets were delivered in the autumn. Add the many others I lived through before my career began and there is no shortage of Budgets to compare and contrast in real time. All such statements of the then Chancellor’s ‘economic policy intent’ were delivered by a host of occupants of No 11, not merely of both political persuasions, but with varying degrees of dogma within each. Indeed, until 1997, when the Bank of England became independent, Chancellors could use their Budgets to wield monetary as well as fiscal power. Moreover, until 2010, with the empowerment of the independent OBR, they could deliver their statements against the backdrop of Treasury debt and growth forecasts of their own making. Such narrowing in Chancellorial ‘power bandwidth’ has only been for our economic better.

Now, without wishing to play down the exceptional backdrop the latest Budget was presented against, one can claim that others before, even in relatively recent times, were delivered by Chancellor’s having to deal with economic circumstances no less demanding in their own way than those we are presently in. In all cases it was not how the particular Budget was received at the time that has come to define it, but how in its own way it came to shape the UK economy, for better or otherwise. Moreover, there is no shortage of Chancellors for whom one Budget has, on reflection, been reviewed with praise while another garnered a far less favourable legacy; ‘Recency Bias’ ensuring old successes were overshadowed by later failure.

With all the above said, let us be clear, Chancellor Sunak’s second budget will not be his last. And in many ways, it will have to be reflected on as one act in a stage play with more action to follow. Continuing with this metaphor, the Chancellor did exactly what those of us in the audience would have wanted: he has kept our attention and made us eager to see what comes next. He has, in short, left story lines tantalisingly hanging.

A 25% rate is comparatively modest in relation to both UK corporate tax history and current rates across developed nations

As timing is crucial when delivering any performance, so too with Budgets. When the Chancellor announced an increase in corporation tax to 25%, he greatly disappointed those who wanted his tax focus to be solely on those ‘foreign’ companies who exploit Base Erosion Profit Shifting (BEPS) to evade UK corporation tax. Such disappointment should, however, have quickly lessened. First, it should have been eased by the unexpected but very welcome announcement of near immediate super-deduction investment relief of 130%. Second, there was the fact that the new corporation tax rate would not come into play until 2023, this impact date pushed even further out given that such liabilities are invariably paid in arrears a year or more later. Another point worth stressing is that a 25% rate is comparatively modest in relation to both UK corporate tax history and current rates across developed nations.

Yet another reason not to have been terribly disappointed by the Chancellor’s ‘failure’ to address BEPS is that he has enough time ahead to deal with it. Indeed, far from its culprits escaping any time soon, BEPS villains are ever more deeply entrenching themselves in the UK and in so doing making themselves an ever easier target when the time comes to put them squarely in the UK’s tax cross-hairs. This conveniently brings me to another of the Chancellor’s announcements, the go-ahead for eight English ‘Freeports’ (bringing the UK finally up to speed with many other European coastal nations which already have them).

There will be those familiar with the experience of the London Docklands Development Corporation (LDDC), established in 1981. These will no doubt argue that efforts at ‘port regeneration’ take considerable time and money and often encounter many false starts and failure, before they finally succeed. My reply to this concern is that the LDDC is far from the precedent or benchmark to use for the Chancellor’s proposed eight ‘Freeports’. Back in 1981 the cost of capital was extremely punitive – a stubbornly double-digit base rate – while the UK economy was sclerotic and woefully unreconstructed. Forty years on, matters could not be more different, and different for the better.

The present reality is that the incentives to invest that ‘Freeports’ offer will be quickly exploited commercially and therefore will contribute in no small way to the levelling-up promises of the 2019 Tory election campaign.

With levelling up still in focus, let me return to the Chancellor’s announcement of a new super-deduction tax relief on capital investment with near immediate effect. I have no doubt this will be most capitalised upon (sic) by those keen to be part of the looming electric car revolutionary boom – one coming in a great many manufacturing and energy producing forms.

[X-HEAD] The UK has one of the world’s most ambitious early dates to go carbon neutral

Tne UK has one of the world’s most ambitious early dates to go carbon neutral

We need remember here that the UK has one of the world’s most ambitious early dates to go carbon neutral and banning of the sale of dirty-engine cars. The UK also has an extensive automotive engineering base and supply chain. It is one greatly improved from that of its past, but still in need of considerable investment for it to re-orientate so as to meet what could be demand for multiple tens of millions of electric vehicles in a mere dozen or so years.

What in effect the Chancellor did in his recent Budget was connect UK commercial profit self-interest with our environment and regional equitable good. After all, identifying where the UK’s post-modern environmentally friendly and tax-incentivised new industrial capacity will be located is easy: well beyond London. This is yet another move forward in the levelling-up programme.

Let me say a word about sterling. There will no doubt be those asking if the budget was as ground building as I claim, why the pound didn’t build strength upon it? To this challenge my answer is simple enough. When the penny, as it were, drops as to the Budget’s economic growth quality, the pound is sure to rise.

I will end with a final reflection on the Chancellor’s recent Budget and my words earlier in this very short piece. Only time will tell how good the recent Budget proves. This accepted, I see it as another instance of ‘good’ work in progress.