Sport and politics have dominated the headlines in recent weeks, with the best of human achievement at the Olympics vying for media attention against the uglier side of humanity seen in the wave of right-wing riots across the UK in the last few weeks.
The US attracts much of my attention from an investment perspective, but I think it timely to examine the outlook for the UK, in light of the change in government.
Be it 30% of children growing up below the poverty line or the prevalence of more food banks than McDonald’s restaurants or indeed the overburdened NHS, there is much to address.
Both Liz Truss and Rachel Reeves agree on the solution: grow the economy. This leads to more wealth, more tax and a rising standard of living.
The UK is the world's 6th largest economy and its 4th largest exporter. We are generally also very tech savvy, evidenced by the fact that we have one of the highest propensities to shop online. I've previously discussed artificial intelligence, and its enthusiastic adoption would catapult us forward.
Opportunities abound to grow. I will briefly identify three: finance, wind power and healthcare.
The City of London and finance, more generally, represents about 8% of the UK's GDP. Investment, insurance and foreign exchange are amongst many financial activities where we are global heavyweights. Plaudits accrue to politicians in hi-vis jackets opening widget manufacturers, but financial services involve much less physical capital and can attract much higher profit margins.
Wind power, in particular offshore turbines, provide about a third of the UK's electricity. Geography helps. A very long coastline, shallow waters and the North Sea being one of the windiest places on Earth. One turn of a typical turbine can power a home for a day.
A myriad of global companies make this happen – creating jobs in places such as Grimsby, Hull and Teesside.
Turning to healthcare, we could be the Silicon Valley equivalent. The golden triangle of Oxford, Cambridge and London comprises three of the top global medical scientific universities. The NHS has the best quality, largest and most accessible health data for scientists to utilise. Drug discovery, personalised medicine and early diagnosis could play to our strengths with the infusion of artificial intelligence.
The new government has daunting challenges but also huge opportunities. It is counterintuitive to note, on this crowded isle, that only about 6% of British land is actually built on! Planning reform could unleash lots of growth without affecting any bucolic sensibilities.
The UK stock market is very cheap. Investors in recent years have voted with their feet (The MPs’ pension scheme has just 1.7% invested in UK companies). There are reasons for optimism in the UK; regardless of coach or PM, we do have all the right ingredients for future success!
Please note that the value of securities may go down as well as up and you may not receive back all the money you invest. Past performance is not a reliable indicator of future results. The views expressed are those of the authors and should not be considered a recommendation or solicitation to buy or sell any securities.
