Can Rachel Reeves boost the UK’s weak economic growth?

The Chancellor will announce Wednesday that the UK’s low growth is “not our destiny” by promising to strengthen the country’s economic potential in a speech.

Rachel Reeves In addition to the plans for the new rail projects and reservoirs, the high-profit areas of Oxford and Cambridge will include a scheme to better connect areas.

However, the background of his speech is a decision -making dark, the economy has become flat in the second half of 2021 and the business confidence in the budget of October is reduced.

What has become ill in the UK economy since the election?

The UK is believed to have failed to grow in the second half of last year after a relatively strong start in 2024. The output may probably undertake the office for the budget responsibility for 2025, the percentage of the IMF forecasts of 1.6 per percentage in its latest view.

One of the reasons for growth towards growth is the “very poor international trade performance” in the UK, Berrenberg economist Andrew Wishirt says the total exports have decreased while standing in other major economies. He also added that the UK’s high production costs in the export sector, as companies face most electricity in the developed world as well as abnormal growth in labor expenditure.

At the same time, the top service sector has stopped contributing to the overall growth. Services have increased the growth of 2024 with the expansion of 0.9 percent in the first quarter, but no growth has been registered from September three months to November and from November to November, the latest available information.

Alan Taylor, a member of the Financial Policy Committee of the Bank of England To warn about “confidence” Due to the “cash flow scwiz” by both business and family, in the form of tax increase and high mortgage spending.

What was the impact of the first budget of Labor?

Business parties say that the components are Labor budget This irrelevant picture did worse in October.

The employer’s decision to increase the national insurance contribution to the contribution of $ £ 25 billion has increased with intense growth in national living wages, increased employment costs and dragged it into business feelings.

There are increasing signs that traders will run as soon as they try to control the cost. S&P Global Flash purchase managers’ The survey showed last Friday that the net share of the business that reduced the number of staff in January and December was the highest in January and December, excluding the start of the epidemic in 2021.

Former England bank rate-setter Sushil Wadhawani says that the reeves partially “lost the details of growth” as a result of tax growth on the business, added that the decision also wounds the Labor Bazaar as well as it has weight. How fast to cut interest ratesThe

“It’s a lot about the spirits of the animal and he damaged the animal’s soul,” said Wadhawani.

What are long -term problems?

All of this comes into the context of a weak long -term picture in the UK, especially in Moribond productivity. According to the onS, the output per hour worked for April to June 2024, a year ago, the same marginalized by 0.9 percent.

By comparing it with Q4 2019, before the epidemic, the output of the hour has only increased by 0.8 percent, according to the latest statistics, below 2 percent of the previously estimated statistics. It is especially vulnerable to the United States, where the productivity of the labor has increased by 8.3 percent in the same period, encouraged by reasons including strong corporate investment and a booming tech sector.

Business investment has been unnecessary, especially during the long -term stagnation after the Brexit referendum in 20 2016.

According to formal data, business investment in September from September 2021 to September has increased by 5.7 percent compared to the same period of the previous year. However, it was the same amount in the early eight years in the early 20 2016, reflecting the lack of growth after the EU vote and the contraction during the epidemic.

This is a much weaker rate than the United States, where private non -residential investment has increased by 5 percent since the 2016 2016. And in the eight years of the Brexit referendum, the UK business investment has increased by about 26 percent.

How do Reeves try to change the narrative?

Reeves promises to radical change in the UK’s planning system as well as house construction as well as house construction Tap into the pension storageThe

He is hinting at his support Third runway at Heathrow Airport To raise connections as well as a so -called support Oxford-Campbridge Arc It will encourage output in a rich region of science.

An industrial strategy that focuses on the main sectors, including creative industries and financial services, including advanced production, film and financial services, will follow in the spring.

Donald Trump promises to control slash in the United States, the UK government is also promising that it will hack the Red tape with the restriction of the mortgage and the change in the regulator of the competition.

A new national infrastructure and service conversion authority has been announced to get grips with local project delay.

Former Treasury Minister and Goldman Shutch economist Jim O’Neill said the Chancellor’s private sector is important to explain that the UK’s trend rate can be increased and it means explaining its value to increase investment.

The weak growth rate reflects weak investment and productivity, O’Neill said. “In principle its structure is designed to address it but they have to be serious about it and make sure that anyone who is co-employer he believes it believes.”

Will it work?

Wadhawani said that he suspected that short -term image would improve unless the reeves had to be raised again due to the weak conditions of the public money.

He also said that the progress to reduce trade barriers with the UK largest market EU will push the sensation positively, he added.

Michael Sanders of Oxford Economics said many Reeve’s policies on public and private investment have been understandable, but not enough. He said that the government needs to concentrate on strengthening investment not only physical, but also in the wealth.

And it was probably the possibility of fighting the shortage of construction workers at the width of his infrastructure and housing ambition, which means that the labor force development plan is an scenario.

“Possible growth requires a broad strategy,” he said. This means “making cases for supply-level policies that spend more than 10 to 20 years”.

Visualization of data by Keith Fray