Doom and boom?
The business news that matters
A scheduling note: There will be no Off to Lunch tomorrow, Friday January 26. We will be back on Monday
The next government will face “some of the most difficult economic and fiscal choices the UK has faced outside of pandemics and major crises”, according to a new report.
Even if the chancellor unveils tax cuts in the Budget in March then these may need to be rolled back after the general election due to the strain on the public finances, the Institute for Fiscal Studies, the economic think tank, has said today
Meanwhile, Labour’s plan for £20 billion of green investment would not be enough to offset a wider fall in public investment and will put pressure on day-to-day spending, the IFS added.
The new report is called “Constraints and trade-offs for the next government” and looks at the challenges that the government will face after the next election, whoever they are. The paragraph below summarises the IFS’s view:
This will be a thorny inheritance for whoever is in office after this year’s general election. Both Labour and the Conservatives have promised to reduce debt as a fraction of national income. Yet a combination of high debt interest payments and low growth is forecast to make this much more difficult to achieve than in the recent past. In fact, on one measure, it will be more difficult to reduce the debt-to-GDP ratio over the next parliament than in any other parliament since the 1950s.
The report makes for pretty grim reading. You can find it here. What it does underline, however, is that the driver of economic growth and productivity in the UK is going to come from the private sector and business breakthroughs.
Thankfully, there is good news on the front. Look at the news from the car industry today on £24 billion of new investment (more on that below), or, on a smaller scale, the news we flagged yesterday about another promising business emerging in the UK’s world-leading video game industry (you can find Wednesday’s Off to Lunch here).
The Financial Times has published a piece today about the challenges facing Birmingham because of a lack of investment in public transport. But underlying those challenges is the need to meet a rise in investment from the private sector in new jobs and offices, especially in financial services. Gurjit Jagpal, who heads the Goldman Sachs team in Birmingham and is from the area, is quoted as saying:
“It was a place with a central business district where no one lived, then light industrial and then the suburbs, but that is now changing. [Goldman’s] main commodity is talent and being in a place where talent wants to be is incredibly important to our firm.”
You can read that piece in full here
Other stories that matter…
1. More than 1 million vehicles were manufactured in the UK last year, the first time that has happened since 2019. Production rose 17 per cent year-on-year, which was the biggest rise for a decade. In more good news, £24 billion of new investment was pledged to the industry last year. Car makers have benefitted from problems with the supply chain easing and Covid-19 restrictions being lifted. You can read more from the Society of Motor Manufacturers and Traders, the industry trade body, here
2. It’s Burns Night tonight, so to honour our Scottish readers please enjoy a piece in the Financial Times about how whisky makers have pivoted to Asia to look for new growth. You can read that here
3. Labour is hosting a sold-out conference for bosses in the financial services industry next week in which it is expected to lay-out some of its plans for the business world. Guardian story here
4. The online retailer Etsy has launched a new service that uses artificial intelligence to help customers find a gift for friends and family. Story by TechCrunch here
5. Business leaders must recognise when to slow their staff down rather than push them to go faster, according to a new book by two Stanford professors. There are eight key moments when staff should be encouraged to slow down, the authors say. This includes making irreversible big decisions, doing creative work and celebrating accomplishments. You can read more in The Wall Street Journal here
Podcast…
The latest episode of our Business Leader podcast features an interview with Suranga Chandratillake, general partner at Balderton Capital, about how he reached the top of the venture capital industry and why he swapped being the chief executive and founder of a promising technology company for investing in them instead. The episode covers the rise and fall of Autonomy, what venture capital investors look for in a promising business, and why chief executives need to change their approach to work to avoid burning out.
You can listen to the episode via Substack here, Apple here or Spotify here
Thanks for reading. If you enjoy Off to Lunch then please share it with others and spread the word. If this newsletter was shared with you then please sign-up below to get Off to Lunch sent directly to your inbox
Best
Graham