As the UK economy rebounds, are we, the skeptics, to say that we were wrong? | Will hutton



BBritish capitalism seems to be on the rise. A million job offers were announced in July, a new monthly record. The first signs show that the unwinding of the leave scheme, currently underway, will not lead to a sharp increase in unemployment.

House prices are rising at the fastest pace since 2004. Public loans in July halved compared to last July. Many new businesses are created. Business confidence is improving. The recovery is unfolding so quickly that threats of lockdown are receding that the UK will on average return to pre-pandemic production levels before the end of the year. The Chancellor, Rishi Sunak, can indulge his boss’s temper tantrums; his political position could hardly be stronger.

The skeptics, pretty much everyone, including me, were confused. In all fairness, no one had foreseen, nor could have foreseen, the incredible development of effective vaccines and the rapid rate of deployment. In addition, more than 7 million people came out of the leave, using it as intended, shielding the economy from what would have been devastation, but sending people back to paid work as quickly as possible. Overall, employers and employees have played by the rules of the game regarding leave and lockout rules. Expectations, largely on the right, that nothing the state does on a large scale can work and that the British, as freedom-loving libertarians, believe the rules are there to be broken, have grown. proved to be unfounded.

Quick guide

Offers for UK private equity firms since the start of the Covid crisis


The unsolicited – and quickly rejected – takeover approach of US private equity group Clayton, Dubilier & Rice for supermarket chain Morrisons is the latest in a wave of offers for UK companies from companies in the UK. investment capital since the start of the pandemic.


Billionaire brothers Mohsin and Zuber Issa acquired a majority stake in the supermarket chain with TDR Capital, in a leveraged £ 6.8 billion buyout.

UDG Health

Pharmaceuticals services group FTSE 250 accepted a £ 2.6 billion takeover offer from Clayton, Dubilier & Rice in May.

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The life insurer originally known as Liverpool Victoria agreed to sell to Bain Capital in a £ 530million deal.

John laing

In May, KKR agreed to buy the UK infrastructure investor in a deal valued at around £ 2 billion.


The real estate investment and development group has agreed to be acquired by Blackstone in a £ 1.2 billion deal.

McCarthy & Pierre

The nursing home specialist has accepted an offer to buy back around £ 650million from Lone Star in 2020.


CD&R finalized the £ 308million acquisition of the plumbing and heating business in February.


The roadside assistance group has accepted a £ 219million takeover offer from TowerBrook and Warburg Pincus, who have also agreed to invest £ 380million in its large pile of debt.


The electrical equipment supplier accepted a £ 2.3 billion takeover bid from I Squared Capital and TDR Capital in March.

Vectura Group

The British inhaled pharmaceutical company agreed to a £ 958 million takeover by global investment firm Carlyle Group in May… before tobacco group Philip Morris International launched a counter-offer.

Bourne Leisure

Even Butlins was caught in the private equity frenzy, with Blackstone acquiring its owner, Bourne Leisure, earlier this year.
Graeme wearden

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However, beware. British capitalism has not changed its place. The open questions are whether the government has learned any lessons from this success, understands the nature of the recovery, and has a well-designed and flexible strategy for navigating the economy through an almost perfect storm of challenges. From the evidence so far, the answers are that it doesn’t and it isn’t – and that it is rather wishful thinking.

First, a vaccine-induced rollback to a previously functioning economic structure should be understood like this. London and the South East led the rebound, dragged down by heavy spending on construction and leisure, which are also the areas in which most startups are forming, from nail bars to food delivery companies, rather as technology, innovation and export. In addition, the rest of the country is far behind. Surveys by the National Institute for Economic and Social Research (NIESR) show that the northeast, for example, will not return to pre-pandemic production levels until 2024.

Worse yet, despite all the vigor of the comeback, no part of the UK, according to the NIESR, is returning to pre-pandemic growth trends that were already weak. We are in an economic trap of low growth, low skills, high regional inequalities and low trade – Brexit has hammered trade volumes with Europe and choked our service sector exporters.

The double problem in terms of politics is that Sunak and the Treasury view the economy almost entirely in financial terms. Their concern, as befits what is essentially a finance ministry, is borrowing and indebtedness. Both are important, of course, but the economic behavior they drive is just as important. Britain needed big loans during the pandemic; it will need significant and ongoing borrowing to reshape and stimulate the economy.

Britain needs an economics and business ministry on the same level as the Treasury to lead the country through its recovery. Instead, he has a business secretary, Kwasi Kwarteng, who has regressed, despite what some of his officials advise, by advocating a rejuvenated “free market” approach, oblivious to the structural weaknesses that the “free market” has. created. Moreover, he and the Chancellor agree in the fiction that Brexit presents opportunities that outweigh its obvious costs. The denial of the truth, in economics as well as in defense and security, makes good politics impossible.

Mandatory reading in this context is the decisive decade of the United Kingdom report, the UK Economy 2030 project jointly launched by the LSE Center for Economic Performance and the Resolution Foundation. Britain needs to invest heavily and smartly this decade to step up a gear and reach net zero, she says, but it has the ball and chain around its Brexit economy and low productivity.

Yes, there are strengths – our universities, our scientific base and our language – but the scale of what lies ahead, as well as the misery of current economic institutions and thought, is incredible. So, for example, one of the signs of a vibrant economy is that people are moving from low-promise jobs to those with better prospects, but the rate of job movement in the 2010s was the lowest since. the 30’s. When it comes to managing change, Kwarteng should note the report’s evidence that the Thatcherite 1980s were, in terms of managing global change, an economic debacle that left lasting scars. And while it needs to rethink, it is not clear, the authors say, that the hollowed out UK state at national and subnational levels has the capacity to do the right thing after a decade of austerity.

To top it off, there is the unprecedented private equity raid in Britain, buying up businesses as disparate as food retailer Morrisons and top defense contractors in record numbers, putting them in debt while offering free insurance. value that they only signify good. Britain faces great challenges not only with a hollowed out state, but also with a hollowed out private sector.

But for all of this there is an opportunity. No one beyond the 60s in conservative riding associations and a few pivotal-eyed members of right-wing think tanks thinks all of these issues can be addressed by the private sector and the market alone. Even the Competition and Markets Authority has serious doubts, calling for a proper investigation into whether the British high-tech jewel Arm should be transferred from a reckless owner, SoftBank (who should never have been allowed to buy it in the first place), to another even more careless and rapacious, Nvidia.

We need more of this thinking and action – a lot more. There are strengths to build on, but that means putting business ahead of finance, prioritizing real economic needs over overheated concerns about public debt, thinking honestly about managing the obvious costs of Brexit and s ” make a real commitment to shifting gear and reaching net zero. There are politicians, business leaders, civil servants and thinkers who understand all of this. We just need to have them in power – not sidelined by delusionality.

Will Hutton is an Observer columnist


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