Hear ye, hear ye, all the news from Annecy! Actually there isn’t any today. It has been overcast with cloud hanging over the mountains and my mood seems to sync with the weather.
What I have been pondering on is the weakness of Sterling and what this means to people living in the UK. Harold Wilson in 1967 – after devaluing the pound by 14% – famously said that it didn’t mean the pound in your pocket would be worth any less. What you may have forgotten, I had, is that he took Sterling from 1.80 to 1.40. Now it is at 1.20. TM the PM has avoided Wilson’s mendacity but she has said that she wants to help the poorer people, yet the pound has fallen by about 20% against the US dollar. What does this portend?
Well I don’t know about bubble but certainly toil and trouble. It must feed through into higher inflation. If interest rates stay the same this will penalise, again, pensioners and people whose income from interest will fall behind prices. For the moment, richer investors have an illusion of prosperity. Shares in companies doing business outside the UK go up as Sterling weakens. The FTSE 100 was briefly below 6000 after the referendum, now it is above 7000.
The Prime Minister’s rhetoric is meaningless until concrete proposals are promulgated in the Autumn Statement next month. She has not been dealt an easy hand. At worst Brexit may mean job losses, higher unemployment and higher inflation. None of this will do anything for the poorest. The only thing we know is that weaker sterling will have undesirable consequences when the effects feed through into the economy. George Osborne’s policy of lowering Corporation Tax to attract inward investment worked a treat but if she pursues this, as she should, there will be companies reluctant to commit until they see what Brexit will mean for them. If Brexit means “business as usual” the UK is onto a winner but only if and when this is clear. So short term the good ship Britain has choppy waters to navigate and people living on fixed incomes will be worse off. It will be hard for the Prime Minister to fix this.