The UK economy's two-year under Starmer-Reeves has yielded a lacklustre growth rate of 1.2%, roughly consistent with post-2008 averages. This underwhelming performance directly contradicts the administration's boasts of strengthening the economy and restoring financial credibility, according to top investment bank Panmure Liberum.
Chief economist Simon French highlighted that despite isolated pockets of progress, new hurdles in construction and employment have negated overall improvements. The report specifically scrutinised the Starmer government's policies on energy and housing, with French pointing out that their decisions had hindered policy goals. Notably, the refusal to permit new drilling in North Sea oilfields has rationed a crucial power source and locked in higher energy costs for future generations, he argued.
On housing, Panmure Liberum stated that the previous government took 'a backwards step on private housing volumes', suggesting ideological priorities had overshadowed practical delivery. However, French did acknowledge 'more encouraging progress' in accelerating key infrastructure projects. The Starmer-Reeves era's economic legacy may have stifled broader revitalisation, with businesses facing policy-induced barriers to investment and expansion, potentially limiting job creation and output.
The Bank of England's recent interest rate decisions and inflationary pressures continue to be a significant factor for UK households and businesses, while the FTSE 100 has shown resilience at various points. Nevertheless, reports like Panmure Liberum's can influence investor confidence and future capital deployment within the UK, underscoring the need for policymakers to re-evaluate their approach.
According to French, 'luxury beliefs' have taken precedence over 'hard-nosed competitiveness', contributing to the UK economy's stagnation. With GDP per capita growing slightly faster than post-crisis trends due in part to reduced immigration numbers, the underlying economic conditions impacting daily living costs and opportunities may not have substantially shifted, despite the administration's rhetoric of improvement.
The impact on households is stark: with energy costs locked in for future generations and policy decisions failing to boost private housing volumes, it appears that the economy has made little progress over the past two years. As Panmure Liberum's assessment highlights, this stagnation may have significant consequences for investor confidence and capital deployment within the UK.