30/10/2024
Whatever happened to The Balance of Trade?
You know, it’s amazing. I, like many, have just spent a couple of hours listening to the Budget presentation by the Chancellor and a ‘robust’ response by Rishi Sunak. Very interesting though ultimately depressing. Much talk about Growth but very little understanding of how it should be achieved!
One very perceptive comment was made by Sunak, which echoes what many of us have said for a long time. He pointed out that neither Starmer, Reeves, nor many of the Cabinet have any real experience or understanding of Industry/Business in general.
Self-evident from much of what came out of the Budget. Sure, there was announcement of major funding for major projects (electric vehicles, Green Hydrogen, transport etc.). All well and good for the long-term but little to help SMEs and Start-ups that are essential now and into the future for the growth of our Economy.
What is more worrying, is that No-one made the slightest reference to the importance of Exports and improving our ‘Balance of Trade’ performance. I get the sinking feeling that none of our politicians and mighty few of our Media really know what it is and how important it is.
Reeves is going to be borrowing £multi-billions to ‘invest’ in projects to grow the economy, some of which will be used on boosting industry, as referred to above, but a fair proportion will be on non-revenue generating (though important) projects such as the NHS etc.
If we look at things in the cold light of day, growing the economy by simply borrowing money that ends up in people’s pockets so that they can then spend more, is not the ideal way to economic growth. The better answer has to be to increase productivity, thereby generating more goods & services that can be exported. This then generates more revenue for circulation in the economy without the debt burden that issuing Government Bonds impose.
There is another alternative which is to encourage investment either from UK-based or overseas entities. The former of these have received today a distinctly high level of discouragement. The danger with investment form overseas is dependent on the level that it achieves. The higher is it the more danger that the business being invested in comes under overseas control (as we have seen many times over recent years). In extreme cases, where that investment is into high-tech businesses with market leading innovations, that technology is moved out of the UK for manufacture & sale.
Improving our Balance of Trade is not something that can be achieved quickly or easily. It is, however, something that our Government (of whatever colour) needs to work on as a matter of urgent priority if we are ever to get out from under the burden of excessive borrowing that is coming down the line!!
