March 2033…a resurgent, virtual City of London

This morning, March 19th 2033, UK CPI (Consumer Price Inflation) finally edged below 6% for the first time in more than a decade. By Bill Blain

 
City analysts see no immediate reason why The Bank of Britain (“BOB”) should consider an early rate cut – expecting The Bank will keep the base rate at 8% for the foreseeable future on the basis England and Scotland’s continuing trade surpluses and full employment are positives, although continued Scottish threats to abandon the dual currency have the potential to undermine confidence in Sterling.
 

Who would have thought I’d be writing about the UK’s economic success a decade ago?

 
While the last 10-years has seen some wild swings, and more than a few moments of doubt, today the City – well, what is now the decentralised centre of the Western World’s Financial system – is busier than ever financing private enterprise and growth. We are like most large financial firms, maintaining an office in London’s policed Zone A, but we’re far more likely to meet colleagues and clients in our regional offices across the South of England’s commuter belt. My own office window overlooks the Cathedral in Winchester. Direct Flights across Europe and to the Gulf are 20 mins away at Southampton International.

10-years ago I feared for the future of Britain’s financial markets. Then my headlines were about Brexit failure, and the collapse of the UK’s “Virtuous Sovereign Trinity” of gilt market sustainability, sterling strength and political competency. The unified United Kingdom government looked on the verge of fracture as the nation was riven by recession, strikes, and a hostile relationship with Europe.

Remarkably, following the much feted “night of the long knives” Premier Sunak successfully purged his own party of right-wing Brexiteer extremists, the turn-around was swift. Although Sunak lost the subsequent election, his re-engagement deal with Europe, supported by the Labour Party, turned around the negative growth narrative. From their exile in North Korea, Boris Johnson and Jacob Rees-Mogg still rail against the injustice of it all.

Following Sunak’s coup, years of chronic underinvestment by foreign businesses into the old UK was reversed. From almost zero battery and chip industries, the UK is now among the largest and most efficient of the European producers. In 2024 Premier Starmer’s government committed the UK to growth. While remaining resolutely outside Europe but very much re-engaged within, the UK re-joined science and industrial European agencies.

In Defence, the military resurgence of Britain is evident. General MacBeth of the Regiment of Scotland commands Europe’s forces the length of the East Wall, while Europe’s maritime strike force flagship in Singapore is HMS King Charles, albeit the Admiral is a Spaniard. The RAF’s Tempests share commonality across ENATO and are the match for anything the Ruskies might be still be able to get off the ground.

Surprisingly to a Brexit voter like myself, the UK’s future turned out to be more closely linked to Europe than we’d thought. Many of the emerged economies of Asia, South Africa, South America and the Gulf realigned themselves against the West and the US during the Ukraine war. What no one expected was how a power vacuum would develop as both China and the US pulled off the centre stage in the 2020s.

The long 10-year correction in US stock prices since 2022, the sink into political gridlock and polarisation, then the subsequent depression across US business activity and the dollar’s slide following the series of self-imposed debt-ceiling defaults has boosted Europe. America’s increasing domestic focus and isolationism opened opportunities and investment into Britain to develop into new markets even as common cause in Europe drove growth.

The last 10-years have not been without crisis. Europe taking over responsibility for its defence has been expensive but a critical game changer. It’s driven a boom as the economy internalised and Europe re-armed. The 2023 decision by what was then called NATO to take the Ukraine War to Russia had profound consequences. It’s now clear it was French, US and UK special forces that silently and bloodlessly took out all Russia’s energy distribution nodes on a single summer evening, triggering the great energy recession in China which remains unstable today. Russia was bust in months. Crimea is now a European tourist hotspot festooned in Blue/Yellow flags. The decapitation of Russian Energy proved the great game changer with Taiwan now controlling much of the divided Chinese stock exchanges member companies.

The world had certainly changed, and the two kingdom Island of Britain found itself well placed to exploit it. After wasted years fretting about Brexit, suddenly opportunity was visible, spawning commercial innovation. Among the notable successes has been the launch of Anglo-Dutch Avro-Fokker Aviation and the success of the new AFA200 composite regional jet on the back of Boeing’s collapse as US military spending tumbled. Europe’s increased defence spending, and Britain’s world leading position in climate mitigation and renewables technology, have boosted the whole Island economy.

While climate change, and chaotic weather events have caused devastation across large swathes of the global economy, the UK has found itself blessed with relatively more stable conditions avoiding the drought that has impacted so many. Flooding is an issue, but the building of the Water Grid is helping.

The fly in the ointment is, as usual, the Scots. Following the closer than expected 2024 general election, the SNP held the balance of power. The Tartan Horde demanded a hefty price from Labour – greater devolution and its own treasury. Following the 2028 referendum Scotland became independent, yet closely linked with (not to) England. Political instability has been the daily reality in Caledonia ever since as the SNP dissembled into various factions, and most Scots returned to their previous left/right/centre political affiliations.

Today the minority government led by Socialist Scotland (SS) is trying to deflect the chronic under performance of state services by pressing for repudiation of the BOB agreement (under which the old Bank of England found itself with a second home on Edinburgh’s Mound as The BOB), and for Scotland to join the Euro.

The Scottish Conservative and Liberal Party (SCLP) remains committed to the pound and closer alignment with England – correctly arguing it would be a disaster for Scotland’s exports to England to do otherwise (where else are we going to ship our abundant clean water?) and would close Scotland’s funding line from BOB. Analysts expect the wobbly SS coalition will come to a crashing finale in the near future, leaving the SCLP struggling to build a majority in the proportional representation Holyrood Parliament. Again.

The UK’s success has come on the back of a raft of successful initiatives which would require a novel to explain in detail, but these include:
 

• Successful monetary policy – living with inflation (albeit high, but predictable). Higher rates have forced business discipline, but wages and productivity growth have largely kept track. Rising prices have adjusted and resolved many of the imbalances left by QE during the early part of the Century.
• Savers have struggled, but the effect has been redistributive. Many retirees with gold plated pensions were forced back into the work force. Declining real house values have largely removed some of the income inequality embedded in the UK. Govt schemes to create affordable, good housing have created real growth dividends.
• Slashing local bureaucracy – primarily by making the planning process simple with the legal principal of benefitting local people over corporate greed or individual wealth – has enabled a massive reduction in regional staff who have moved into higher paid private sector growth businesses.
• Trebling the defence budget, and subsidies to Green industry have triggered new business creation.
• Denationalising and empowering the NHS via insurance remains a project ongoing.

 
However, there remain critical crises – repairing and replace the UK’s ailing infrastructure always seems a tomorrow project. Division and injustice within society is apparent. The exit of the middle classes from London remains a challenge. Much of the Metropolitan London area is no-go Zone B. The victory of the London Soviet of The Peoples Socialist Republic of London in the last poll leaves King William knowing he is unwelcome to return to Buckingham Palace. Many expect the Soviet will declare independence, much as Paris did back in 2030. Plans remain in place to move England’s Parliament to Oxford. Scotland has offered to host both The Bank and the Ministry of Defence – which will be resisted by Premier Scargill.

I wonder if I’ll still be writing my more comments in 2043… I’ll be getting on a bit… and closer to retirement!
 

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