Blain’s Morning Porridge – Good Friday April 7th 2023 – A Porridge from 2033: 10-years of Future Economic History in 1500 words..
“We face being forced to the margins – sidelined within a UK that is, itself, increasingly sidelined on the international stage.”
A few months ago the editor of The Property Chronicle – which I strongly suggest is well worth reading – asked me to write about my expectations of how the City of London might look in 10-years time. I decided to have a bit of fun with the piece. This morning I’ve given it a light edit as this morning’s Good Friday Porridge. (I was up early for the BBC Radio 4 programme talking about Shadow Banking this morning..)
Since I wrote the article the SNP has self-combusted. There is no talk of Nicola Sturgeon or her husband being victims of a politically inspired Trumpesque witch-hunt, but lots of questions about how much she knew about police investigations into SNP funding ahead of her “tearful” resignation.
Funnily enough I was in Edinburgh as it all happened.
This iteration of the SNP might be imploding, but the likelihood of an independent Scotland is not over yet. A new axis of separation seems to be rising – a growing strand of support spanning “Tartan Tories” “Socialist Scots” and “Liberal Elites” (yes, there are such folk in Embra’s new town). Opinion is Scotland remains shocked and offended by Conservative sleaze south of the Wall, and many believe we could do much better ourselves (ahem…) Scottish politicians see an opportunity to undo the damage done by the SNP to the Scottish Economy and create a successful and manageable Scottish state outside the UK.
This Morning: By some freakish temporal rift, a Morning Porridge from 10-years in the future was delivered into my email box last week – describing the monumental political and economic events of the last decade… Freaky eh? Who would expect such a thing…? It happens…
Blain’s Morning Porridge – April 1st 2033 – The Virtual City of London Resurgent?
This morning, April 1st 2033, UK CPI (Consumer Price Inflation) finally edged below 6% for the first time in more than a decade. City analysts see no immediate reason why The Bank of Britain (“BOB”) should consider an early rate cut – expecting The Bank will keep the base rate at 8% for the foreseeable future on the basis England and Scotland’s continuing trade surpluses and full employment remain positive, although continued Scottish threats to abandon the dual currency have the potential to undermine confidence in the shared Sterling.
Who would have thought I’d be writing about the UK’s economic success a decade ago?
While the last 10-years has seen some wild swings, and more than a few moments of doubt, today the City of London – what is now the decentralised centre of the Western World’s Financial system – is busier than ever financing private enterprise and growth. Most large financial firms maintain some form of office in London’s policed Zone A, but I’m far more likely to meet colleagues and clients in one of our offices dotted across the South of England’s commuter belt or our Edinburgh HQ.
10-years ago I feared for the future of the Britain’s financial markets. Headlines railed about Brexit benefits failure, and the collapse of the UK’s “Virtuous Sovereign Trinity” of gilt market sustainability, sterling strength and political competency. What was then The “United Kingdom” government looked on the verge of fracture as the nation was riven by recession, strikes, and a hostile relationship with Europe.
Remarkably, the much feted “night of the long-knifes” when Premier Sunak successfully purged his party of right-wing Brexiteer extremists proved an economic gateway. Although Sunak lost the subsequent election his reputation as diligent, competent and hard-working leader remains intact. Sunak’s his re-engagement deal with Europe, supported by the Labour Party, turned around the negative growth narrative. From exile in North Korea, Boris Johnson and Jacob Rees-Mogg still rail against the injustice of it all – and the charges in the international arrest warrants against them.
Following Sunak’s coup, years of chronic underinvestment by foreign businesses into the old UK was reversed. From almost zero battery and chip industries, the Island of Britain is among the largest and most efficient of the European producers. In 2024 Premier Starmer’s government committed the UK to growth – and delivered. While England and Scotland remain (respectively more and less) outside Europe but very much re-engaged within, Britain re-joined science and industrial European agencies.
In Defence, the military resurgence of Britain is evident. General MacBeth of the Regiment of Scotland commands Europe’s forces the length of the East Wall, while Europe’s strike force flagship in Singapore is HMS King Charles, although the Admiral is a Spaniard. The RAF’s Tempest drone swarm tech shares commonality across ENATO and are more than a match for anything the Ruskies, Chinese or Americans might send our way.
Surprisingly to an apologetic Brexit voter like myself, the UK’s future turned out to be more closely linked to Europe than we’d thought. Many of the emerged economies of Asia, South Africa, South America and the Gulf realigned themselves against the West and the US during the Ukraine war. What no one expected was how a power vacuum would develop as both China and the US pulled off the centre stage in the 2020s.
The long 10-year correction in US stock prices since 2022, as the nation sank into political gridlock, polarisation and outright conflict in some states, triggered depression across US business activity and the dollar’s slide following the series of self-imposed debt-ceiling defaults has boosted Europe. Microsoft’s global HQ relocated to Silicon Glen in Livingston, while Apple’s campus in Cornwall is among the most modern buildings in Europe. America’s increasingly domestic focus and isolationism opened opportunities and investment into Britain to develop into new markets even as common cause in Europe drove growth.
The last 10-years have not been with crisis. Europe taking over responsibility for its’ defence has been expensive but a critical game changer. It’s driven a boom as the European economy internalised and Europe re-armed.
The 2023 decision by what was then called NATO to take the Ukraine War to Russia had profound consequences. The stunning success of Ukrainian, French, US and UK special forces silently and bloodlessly taking out all Russia’s energy distribution nodes on a single summer evening, not only ended Putin, but caused shock and re-engagement in Saudi, triggering the great energy recession and unrest in China which remains unstable today. Russia was bust in months. Crimea is now a European tourist hotspot festooned in the Blue/Yellow flags of Ukraine. The decapitation of Russian Energy proved the great game changer with Taiwan now controlling much of the divided Chinese stock exchanges member companies.
The world had certainly changed, and the two kingdom Island of Britain found itself well placed to exploit it. After wasted years fretting about Brexit, suddenly opportunity was visible, spawning commercial innovation. Among the notable successes has been the launch of Anglo-Dutch Avro-Fokker Aviation and the success of the new AFA200 composite regional jet on the back of Boeing’s collapse as US military spending tumbled. Europe’s increased defence spending, and Britain’s world leading position in climate mitigation and renewables technology, have boosted the whole Island economy.
While climate change, and chaotic weather events have caused devastation across large swathes of the global economy, the Islands of Britain and Ireland have found themselves blessed with relatively more stable conditions avoiding the drought that has impacted so many. Flooding is an issue, but the building of the Water Grid is helping.
The fly in the ointment is, as usual, the Scots. Following the closer than expected 2024 general election, the SNP held the balance of power. The Tartan Hordes demanded a hefty price from Labour – greater devolution and Scotland’s own treasury. Following the 2028 referendum Scotland became independent, yet closely linked with (not to) England. Political instability has been to the daily reality in Caledonia since as the SNP dissembled into various factions, (more than a few Scots politicians learnt the art of mailbag stitching at His Majesty’s Pleasure), while voters returned to their previous left/right/centre political affiliations.
Today the minority government led by Socialist Scotland (SS) is trying to deflect the chronic underperformance of state services by pressing for repudiation of the BOB agreement (under which the old Bank of England found itself with a second home on Edinburgh’s Mound as The BOB), and for Scotland to join the Euro.
The Scottish Conservative and Liberal Party (SCLP) remain committed to the pound and closer alignment with England – correctly arguing it would be a disaster for Scotland’s exports to England to do otherwise (where else are we going to ship our abundant clean water?) and would close Scotland’s funding line from BOB. Analysts expect the wobbly SS coalition will come to crashing finale in the near future, leaving the SCLP struggling to build a majority in the proportional representation Holyrood Parliament. Again.
The UK’s success has come on the back of a raft of successful initiatives which would require a novel to explain in detail, but these include:
- Successful monetary policy – living with inflation (albeit high, but predictable). Higher rates have forced business discipline, but wages and productivity growth have largely kept track. Rising prices have adjusted and resolved many of the imbalances left by QE during the early part of the Century.
- Savers have struggled, but the effect has been redistributive. Many retirees with gold plated pensions were forced back into the work force. Declining real house values have largely removed some of the income inequality embedded in the UK. Govt schemes to create affordable, good housing have created real growth dividends.
- Slashing local bureaucracy – primarily by making the planning process simple with the legal principal of benefitting local people over corporate greed or individual wealth – has enabled a massive reduction in regional staff who have moved into higher paid private sector growth businesses.
- Trebling the defence budget, and subsidies to Green industry have triggered new business creation.
- Denationalising and empowering the NHS via insurance remains a project ongoing.
However, there remain critical crises – repairing and replace the UK’s ailing infrastructure always seems a tomorrow project. Division and injustice within society is apparent. The exit of the middle classes from London remains a challenge. Much of the Metropolitan London area is no-go Zone B where the The Peoples Socialist Soviet Republic of London has left King William in no doubt that he is unwelcome to return to Buckingham Palace. Many expect the Soviet will declare independence, much as Paris did back in 2030. Plans remain in place to move England’s Parliament to Oxford. Scotland has offered to host both The Bank and the Ministry of Defence – which will be resisted by Premier Scargill.
I wonder if I’ll still be writing my morning porridge comments in 2043.. I’ll be getting on a bit… and that little bit closer to retirement!
Strategist – Shard Capital