Notes from the CEO – December 2019

BAB CEO Duncan Edwards

With the UK General Election just a week away we can be certain that, whoever wins, there will be loosening of fiscal constraints and a significant amount of money will be pumped into the UK economy by the new government. But the scale in which this will happen will be dramatically different depending which party, if any, wins a majority of seats.

Whilst this election was called because of an impasse on Brexit, the differences between the two leading parties on issues relating to business, tax and the size of the state are stark. The Conservative Manifesto is certainly not radical; more spending on health, education and police; no meaningful changes to taxation; an immigration plan to attract global talent; some help for entrepreneurs and industries of the future; and of course, a commitment to leaving the EU on January 31st and negotiating a new Trade Agreement with the EU by the end of the year.  This Manifesto, with the exception of Brexit, looks like a continuation of the broad social democratic consensus that has been dominant in the UK for the last 30 years.

In contrast, the Labour Manifesto sets out a radically different vision for the UK. Nationalization of rail, mail, water, energy and the free provision of broadband; a transfer of equity in large companies to government and employees; a roll back of labor relations legislation; all services in public organizations, like the Health Service, to be provided by State employees; a publicly owned pharma company to make generic drugs for the UK market and a raft of other spending commitments. All of this will be financed by a massive increase in government debt and tax burden on companies and individuals. On Brexit, Labour continues to sit on the fence; they propose a renegotiation of the Withdrawal Agreement followed by a referendum.

Recent history suggests that commitments in Manifestos don’t necessarily make it into legislation, but the direction of travel is clear. Much of the vision of Labour is popular amongst a frustrated UK population but the impact on business, and especially on foreign investors choosing where to allocate capital would, be entirely negative.

This election is not just a two-horse race; the Liberal Democrats, Scottish Nationalists, Brexit Party and Greens will all have an impact but will not be forming the next government. Polls are suggesting a Conservative win but nothing will be certain until Friday 13th!

In the USA the impeachment process and Democratic candidate selection continue to dominate national news but for business, the trade disputes and the arm wrestling between the US, China and the EU that are the root cause of these, should be a major cause for concern. That Scotch should be subject to a new tariff as a legitimate response to EU state aid for Airbus is just nuts but, as I have said in previous notes, the underlying issue, that the US administration feels it has been dealt an unfair hand in trade (whether it’s China or tariff ceilings) has to be taken seriously by counter parties whether in China or the EU or the risk of escalation is real. A multilateral solution is desperately needed but where are the voices willing to lead this with the commitment to compromise that will be required?

Our program at BAB continues throughout December with events in New York and London and I hope to see many of you over the next few weeks. For those I don’t, thanks for your support for BAB in 2019 and our very best wishes for the season and a happy and prosperous New Year.