02 Sep 2022

View from Chancery Lane: Michael Moore on the new PM's in-tray

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There was a time when prime ministerial contests in the UK were rarer than heatwaves. But that may no longer be the case, even after this summer. Next week we will learn the results of the third such election in 6 years, making this the right time to look at the challenges in the new PM’s inbox.

Item one is the economy. It always is, but with the outlook as weak as it has been in years, there is no escaping it. Employment is one of the few areas on the dashboard not blinking red (so far). Otherwise, the immediate questions include how quickly low growth turns negative and how long a recession could last? The Bank of England said in August that it expected Q4 to be the entry point to a year long recession. Others are less sanguine.

Meanwhile, US investment banks estimate UK inflation in 2023 will be close to or above 20%. But at 9%, the inflation pain is already here with fast-rising prices for consumers and businesses. And that’s before sharply increased energy costs and the prospect of a conveyor belt of interest rate increases.

Items two and onwards in the Downing Street inbox are a varied and complex lot - what trajectory will public spending take, especially in core areas like the post-pandemic NHS? Whither ‘levelling up’? Will leadership on climate change action remain important? What about future industrial relations? How are financial services to be regulated? Is reform of the Bank of England afoot?

And in this post-Brexit era the key choices will be made against a backdrop of how the new Prime Minister deals with the EU (not least on the Northern Ireland Protocol), China and even the United States. Not forgetting the Ukraine war, either. The UK’s stance on these international matters will be in sharper focus now than it has been for a decade or more.

All told, that’s a long list. It’s bad enough returning to your inbox after a summer holiday, but after a couple of months when decisions have been put on hold, it is longer and more pressing than ever. The new PM will have to make big calls quickly to make their mark – not really helped by a lack of detail in the contest so far and the apparent absence of internal (never mind cross party) consensus.

The ‘so what?’ question looms. Of course, private equity and venture capital will not be distracted from the focus on portfolio companies and wider investment plans – based on previous efforts, we know there will be active management and support through the expected downturn. However we also recognise there will be increased scrutiny on the industry’s responses.

Meanwhile, we have to (and will) be highly engaged on the new agenda at No10 (and the response of the opposition parties). For private capital, the UK investment climate is fundamental, especially in terms of its international competitiveness. The big picture stance on international economic relationships therefore matters. So, too, the balance and focus of tax and spend policies. And while the wiring of the UK’s macro economic machinery and related financial services regulation may not grab the media headlines, it can’t (and won’t) be ignored by the industry.

In short, as the heatwaves disappear into collective memory, and we enter the autumn, we will continue to monitor the key debates very actively, and to engage appropriately – conscious of the tough choices being made by policymakers but continuing to shape the conversations so that the public value created by the industry is properly recognised.
 

Michael Moore
Director General, BVCA

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