The Garrulous Jay – Relative Values

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There is no doubt that the UK has been through a period of extreme political and economic uncertainty. At such times it’s easy to become inward looking and lose sight of the context, so it can be helpful to put things into perspective.

The rather dry graphic below paints a broader picture of where the UK economy sits today and, while this may only be cold comfort, it does serve to show that the country is not an ‘outlier’ among peers.

I would concede that there is always a risk of ‘confirmation bias’ when selecting any data – the tendency to find the numbers to support the argument – but I have endeavoured to use countries and metrics which are broad and widely used as benchmarks.

It is also undoubtedly the case that taking historic data, or very near-term forecasts, may give a misleading picture of what lies ahead. Nevertheless, I am struck by the similarities in the figures in the table as much as I am by the differences.

For sure, the UK is showing weaker GDP growth, higher inflation and relatively high interest rates. But it is also displaying lower debt to GDP, lower unemployment and lower rates of corporate tax.

Perhaps I’m being unduly optimistic when I conclude from this that the challenges faced by the UK are shared by many countries, and that the solutions are therefore likely to be similar too.

We already know that some of these figures will change for the worse in the UK in the months ahead but, without having the time to study these figures in depth, I suspect the same may be true for our international peers.

The other message I think the similarities in the data conveys is the lesson the UK Government learnt under Prime Minister Truss, and that’s that the markets are in charge. If there is only modest divergence in the numbers across countries it suggests that the ideological leanings of the party in power have only a modest bearing upon economic performance.

Where governments push the ideological boundaries in their economic policies of what the markets deem to be acceptable, either policy is brought back into line by the market’s reaction and/or the government in question is replaced. QED UK.

There will undoubtedly be tough times ahead in the UK, but the country is wrestling with challenges that are shared and which will therefore require as much of a collective response as they will national policy action.

This is true of both economics and geopolitics, as well as the greatest macro challenge of the lot: tackling climate change.