Five reasons to be optimistic about the British economy in 2023

The British pound fell to an all-time low. We went through four chancellors and three prime ministers. Taxes have risen to the highest level in 70 years, real wages have fallen at the fastest rate in decades, and inflation has raised the cost of a typical Christmas dinner by 10%. Oh, and to top it all off, a wave of strikes has brought the country to a standstill.

When we look back at the past twelve months, there isn’t much to cheer about. There are probably worse years for the British economy, but you’d have to spend a lot of time looking through history books to find them.

However, just as the worst rom-com on Netflix might have a funny moment or moments, or a team at the bottom of the Premier League might still have a decent center half of defense, even a full basket case for the economy can still patch some things up. So, since we’re still in the festive season, here are five reasons why we should feel optimistic about the future of the UK over the next year.

First, despite all the obstacles the government puts in their way, entrepreneurs are still setting up their businesses.

Although there was a slight net decrease in the total number of companies in 2022, the number of companies with employees – rather than individual operators – rose by 32,000, or 2.3 percent. This is the real measure, because the rest are basically self-employed people managing their own tax affairs.

Entrepreneurs even get a little extra help. Just about the only good parts that survived Kwasi Kwarteng’s car crash mini-budget were increased allowances for seed and foundation investment schemes, both of which were funneling record amounts of money into startups.

These schemes have also helped create networks of dedicated angel investors who can identify new ideas that they can support and help them through their difficult first few years. Not all of these early-stage companies will switch over to the new Dyson or Ineos — but one or two might.

Secondly, some of our largest companies work together.

GSK finally split its consumer unit into Haleon, creating two new businesses worth £60bn and £30bn respectively. They will now both be more focused.

Unilever is finally set on naming a new CEO after years of getting so involved in social activism that it forgot how to grow.

Shell has finally consolidated its London headquarters and is pushing towards green energy. And if HSBC can find a way to bring its Asian and European units into line, it may soon find a way to make its global strategy work.

For a country to do well, its biggest companies have to do well, and there are signs that the UK’s major conglomerates are turning a corner.

Third, we have more unicorns—billion-dollar-plus tech startups are known—than ever before. According to newsletter Sifted, 11 more British companies have joined this elite group over the past year, more than any other country in Europe (France is second with eight, if you’re interested, followed by Germany at six).

The increase came despite the collapse of technology stocks and the pressure on venture capital funding that inevitably followed.

Newly appointed British unicorns in 2022 included payments company SumUp and payments infrastructure provider Paddle. These are all turning out to be great businesses with a real future and the potential to generate a lot of wealth and jobs.

Fourth, the FTSE 100 is back.

Since the beginning of the century, the index of leading British companies has been the dog of world markets. With its collection of tiring energy, mining and pharmaceutical giants, and some local retailers struggling to adapt to the 21st century, it has underperformed all of its major competitors.

But this year it was different. It gained about 0.01 percent for 2022 (depending on what happens during the rest of this week), while the S&P 500 is down 20 percent, the Nasdaq is down 32 percent and the German DAX is down 12.5 percent.

As interest rates rise, investors’ attitudes toward commodities, finance, and medicines change. These are all industries in which the UK market is relatively strong. If the FTSE continues to outperform, global investors may become interested in the UK again – and perhaps invest more money in the country.

Finally, this year we started to normalize interest rates.

After slashing the cost of money to near zero in the aftermath of the 2008 financial crisis, it looked as if we might never go back to asking people to pay to borrow again—at least in anyone’s lifetime now.

However, this year we are starting to return to what would have been considered normal for most of the past 300 years, with rates rising to 3.5%. It’s funny that the sky hasn’t fallen, and while there’s been a lot of predictions of a housing market crash, it hasn’t happened yet and may not happen.

#reasons #optimistic #British #economy

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