UK’s post-election outlook ‘sub-optimal’

Mike Taylor

Managing Editor/Publisher, Financial Newswire

24 June 2024

Whoever wins the upcoming election in the United Kingdom the economic starting point is sub-optimal, according to Franklin Templeton Institute investment strategist, Kim Catechis.

In an analysis of the situation surrounding the UK election, Catechis said the nation seemed to be trapped in a net of weak growth, weak productivity and relatively high inequality.

“Whoever wins, the starting point is suboptimal. The economy has been barely growing, productivity has been poor since 2008, and wages have barely increased in real terms in the last 14 years,” he said.

“Energy-driven inflation has been tough to deal with, and higher interest rates have added to the squeeze on consumers. Public finances are stretched, and the United Kingdom’s cost of borrowing is higher because of the misjudged budget of September 2022.”

Catechis said that, in these circumstances, higher taxes or more borrowing will be needed to finance any investment to repair public services.

“Besides, there is an urgent need to reinvest in its defence capabilities, increasing the financing requirements further,” he said.

“The country seems trapped in a net of weak growth, weak productivity and relatively high inequality. Yet, both main parties are ignoring the obvious point—that all remedies will require financing via debt or increased taxes—or both.”