HAMISH MCRAE: These are worrying times – we have to plan knowing very little about what might happen in our politics
These are bumpy times – and worrying ones. We all have to make practical decisions in our daily lives about work, holidays, our homes and our mortgages, pensions, investments and so on. But we have to plan knowing very little about what might happen in our politics.
We don’t know what will happen to the UK’s relationship with Europe, of course. But we also can have little feeling for the other decisions of the next government and its successors.
So at this time of uncertainty, here are my top ten things in the UK and world economies that we can be reasonably sure about – things that can form a base on which to plan.
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One. We know the UK economy is extremely resilient. It is still, despite all the adverse publicity heaped on it, growing reasonably swiftly – over the past year faster than Germany, France or Italy. It is still creating jobs, with unemployment at 3.8 per cent the lowest for 44 years. And Britons are still spending money. Retail sales are up 5.2 per cent year-on-year.
Two. Sterling is very weak. It is at the bottom of its trading range of the past 30 years. It may get even weaker, but on a long view UK assets must be bargain basement. A cheap pound is bad for our holidays abroad, which is why ‘staycations’ are booming, and it increases inflation. But it does help insulate the economy against any downturn.
Three. There is a global economic cycle, and this summer the current expansion becomes the longest ever. The last recession was 2009. Expectations for the next downturn keep being pushed forward, and the downturn – as and when it comes – may not be particularly serious. But we would be mad not to acknowledge the risks and plan for them.
Four. Interest rates are the lowest they have ever been. Or just about ever, for the only time in the UK when rates have been as low as they are now was after the Black Death killed one third of our population in 1350. So this period is unnatural.
Eventually, rates will have to rise, but that may not happen for some years, and when they do go up, they may not climb very fast. Conclusion: rates will remain low for a while yet. That makes a general property crash unlikely, though particular markets – high street shops, for example – will continue to find the going tough.
Five. Technology is racing forward and will continue to do so. So our day-to-day lives will continue to be transformed by the growth of online services, from food delivery, traffic apps, to GP consultations, and so on.
The downside will include continued pressure on our high streets, on travel agents, on branch banking – indeed all old-style businesses. The upside will be that we will get an almost unimaginable range of new services that will, on balance at least, improve our daily lives.
Six. Global trade tension will continue. The US and China are in the early stages of a battle for economic leadership that will continue long after Donald Trump leaves office. What is happening to Huawei right now gives us a feeling for what is to come. But that does not mean that the world will descend into a global trade war, damaging prosperity for all.
Seven. Europe becomes less important in the world economy. That is not a comment for, or against, Brexit. It is simply an observation that it is a slow-growth area with a declining workforce. The rest of the world will grow faster.
Opportunities for young people will be greater in the US than Europe.
Eight. Education is more important than ever. A world where talent is globally mobile is one where the best way to ensure a prosperous future is to be as well-educated as possible.
That is a challenge for the UK, where unlike most countries, young workers are no better educated than older ones.
Nine. Compound interest – saving money and reinvesting the interest on it – has been the path to personal financial security over the centuries and will continue to be so.
And finally, while all social tensions are troubling, and there are plenty of them now, those of us who remember the 1970s can testify to the fact that they were much worse then.
I find that really comforting over this difficult weekend.