How do you think the UK economy will perform over the next 5 years ?

[Dod101]

Comments here about the public sector make me think of a conversation I had with a friend (I'll call him Paul) a couple of nights ago.

Paul is a musician and some years ago he had a job working for his local council doing musical workshops with some of the local youths, I can't remember the exact details but I think they were 'troubled' or had been involved with low level crime, dealing cannabis, that sort of thing.

Anyway, Paul was made redundant and the council kindly offered him another part-time job. His new job, for which he had no experience, was to sit in front of a computer and answer calls and emails from social workers who needed help with processing their reports and 'paperwork'. Several years ago I was talking to Paul and he said 'I get tired and go to a 'special room' at work and have a nap'.

Since Covid, Paul 'works' from home. I said to him 'that must be nice, not having to commute' and he said 'Yes, I get up and log in at 8.30 and spend an hour and a half answering queries and sorting things out. Then I might go for a swim or up to my allotment. Then I check to see if there's any more work and carry on for a bit if it's busy'. I said something like 'That must be good, if you can get away with it' and he said 'Yes, I'm an expert with the system now and all the social workers thank me for sorting out their problems so quickly, but I missed a meeting the other day because I forgot about it and was at my allotment, I just said that I had to pick up a prescription'.

RC

In fact he may well be no less productive now than when in an office. He now knows that he can do the work in half the time and has an incentive to do so. As Northcote Parkinson said. ‘Work expands to fill the time available for its completion.’ or words to that effect.

Dod

[mc2fool]

If you think that France has a better economy than the UK BUT you prefer to invest in the UK then EITHER you do not think a "good economy" is relevant to investors OR you think it does not have a good economy at all OR you think that other factors are more important to investors.

Or, as I explained but you conveniently missed out, there are other personal factors that are important to me.

[Lootman]

If you think that France has a better economy than the UK BUT you prefer to invest in the UK then EITHER you do not think a "good economy" is relevant to investors OR you think it does not have a good economy at all OR you think that other factors are more important to investors.

Or, as I explained but you conveniently missed out, there are other personal factors that are important to me.

No, that was case 3 that I cited, again indicating that traditional measures of what is a "good economy" are not so helpful to investors. So maybe the question for investors is how much attention should be paid to such things at all?

[Watis]

people that work in the public sector also generate wealth.

Ooh, that one statement alone warrants its own topic.

Although I suppose it depends how you define "wealth". If my local authority's Director of Diversity could be said to be "creating wealth" then I suppose that everyone and everything does.

Surely 'diversity coordinators' are the 'telephone sanitisers' of the 21st century?

Watis

[Lootman]

Ooh, that one statement alone warrants its own topic.

Although I suppose it depends how you define "wealth". If my local authority's Director of Diversity could be said to be "creating wealth" then I suppose that everyone and everything does.

Surely 'diversity coordinators' are the 'telephone sanitisers' of the 21st century?

Watis

Yes the issue may not so much be that someone is paid by the government but rather that it is the government that tends to have more faux jobs, make-work positions, paper shufflers, political correctness posts and other sundry empty suits and dresses who suck up resources but produce little of value.

[scotview]

Thanks to all (44) who voted.

Well, 55% (24) voted for steady as she goes, so very reassuring. The balance overall tended slightly towards a deteriorating economy. I personally was expecting a more negative response.

Just out of interest and to show some numbers for the 2022/3, I've gone through some .gov documents and appended some numbers, best I can, to the simple economy schematic I posted earlier...........interesting.

[mc2fool]

Or, as I explained but you conveniently missed out, there are other personal factors that are important to me.

No, that was case 3 that I cited, again indicating that traditional measures of what is a "good economy" are not so helpful to investors. So maybe the question for investors is how much attention should be paid to such things at all?

We get it. The only measure of the economy that counts is £££s per Lootman.

[mc2fool]

In fact he may well be no less productive now than when in an office. He now knows that he can do the work in half the time and has an incentive to do so. As Northcote Parkinson said. ‘Work expands to fill the time available for its completion.’ or words to that effect.

Interesting comment from you there, Dod. So can we infer that you're in favour of Scottish civil servants switching to a four day week (at no loss of pay)?

[Lootman]

No, that was case 3 that I cited, again indicating that traditional measures of what is a "good economy" are not so helpful to investors. So maybe the question for investors is how much attention should be paid to such things at all?

We get it. The only measure of the economy that counts is £££s per Lootman.

Again no. But if you tell me that (say) Finland has the "best" economy according to some metric that you dredged up from somewhere, then that does not mean that it is a smart idea for anyone to invest in Finnish securities.

On an investment board such as this we are interested in actionable insights and not academic trivialities. So let me ask you again, do you see any usefully actionable correlations between so-called "good" economies and investment success?

[mc2fool]

We get it. The only measure of the economy that counts is £££s per Lootman.

Again no. But if you tell me that (say) Finland has the "best" economy according to some metric that you dredged up from somewhere, then that does not mean that it is a smart idea for anyone to invest in Finnish securities.

On an investment board such as this we are interested in actionable insights and not academic trivialities. So let me ask you again, do you see any usefully actionable correlations between so-called "good" economies and investment success?

Investment success is idiosyncratic. What may be investment success for Buffett may be investment failure for me, despite investing in the same economy. So, indeed, we can say that there can be no actionable correlations between a "good" economy, like, say, the USA, or (what in this debate you seem to be plugging as a good economy despite slapping it down pretty much everywhere else), the subject of this thread, the UK and any investor's success or not.

But, despite your attempts to turn this into a discussion about investing (or not investing) in some countries or others, and your going on about this being an investment board, that has not been what this thread is about which, may I remind you, asked folks their opinions on whether:

• The UK economy will power ahead and living standards will improve significantly.
• The UK economy will flat line and our standard of living will generally be static.
• The UK economy will deteriorate significantly, with high unemployment and increase in poverty levels.

Living standards, poverty, unemployment. Not investing.

[Lootman]

Again no. But if you tell me that (say) Finland has the "best" economy according to some metric that you dredged up from somewhere, then that does not mean that it is a smart idea for anyone to invest in Finnish securities.

On an investment board such as this we are interested in actionable insights and not academic trivialities. So let me ask you again, do you see any usefully actionable correlations between so-called "good" economies and investment success?

So, indeed, we can say that there can be no actionable correlations between a "good" economy . . and any investor's success or not.

Thank you for answering my question. I agree. High-level asset allocations should not be driven by perceptions of a nation's economy being "good". In fact insofar as "good" there means a bloated public sector and/or high taxes, then the reverse may be better for returns, in my experience.

despite your attempts to turn this into a discussion about investing . . .

This board is on Investors' Roundtable!!

If you think it should be on CAN or another non-investment board then you should report it for being off topic here. This location is only for investment discussions.

[mc2fool]

despite your attempts to turn this into a discussion about investing . . .

This board is on Investors' Roundtable!!

If you think it should be on CAN or another non-investment board then you should report it for being off topic here. This location is only for investment discussions.

I don't have a problem with this thread being not being about investing, but if you think this location is only for investment discussions then feel free to report all the posts that don't mention or refer to investing. That'd basically be almost all of them except yours.

Or maybe you could instead get into the spirit, nay, the letter indeed, of the topic and present your thoughts and ideas on how the economy and living standards, unemployment and levels of poverty will fare over the coming 5 years, as per the poll. That was, after all, the question.

[Itsallaguess]

‎
An interesting related story in the Telegraph today, with a view from across the channel -

French bank tells clients to back Britain and shun eurozone -

One of France’s biggest banks has told clients to move money out of the eurozone and back Britain.

Investment bank BNP Paribas has told clients to put their money into British stocks, arguing that a cheap pound, an attractive combination of sectors and the better-than-expected performance of the British economy makes the country attractive.

Its analysts recently changed their preferred allocation from the eurozone to the UK, encouraging investors who follow the bank’s advice to shift their money into the largest UK-listed companies.

The endorsement is a shot-in-the-arm for the beleaguered London stock market, which has been confronted by fears it is losing relevance and clout amid an exodus of listed companies.

Viktor Hjort, the head of credit research, said: “The outlook for UK equities is not bad at all. The FTSE is a value market. It has lots of energy and materials and a lot of banks. You can look at the oil price to see where energy is going.”

....

Finally, the UK economy was faring better than the eurozone. Economists at BNP Paribas expect Britain to fall into a mild recession in the first half of next year, but said that the economy had proved far more resilient than expected.

Meanwhile, the eurozone is facing the prospect of a double dip recession after quarterly growth figures were revised lower last week.

Paul Hollingsworth, chief European economist, said there had been “a lot of pessimism” about the UK, especially after Liz Truss’s premiership.

He said: “There was a lot of caution about UK assets. Things have moved on since then. As we saw, the economy did perform a lot better than people expected.

“When we speak to people they agree that there is some weakness ahead but it’s not going to be a severe downturn, partly because some of that underlying resilience is there.”

BNP Paribas is one of the biggest banks in Europe, with assets of more than €2.5 trillion.

https://archive.ph/2eMLF

Cheers,

Itsallaguess

[Lootman]

present your thoughts and ideas on how the economy and living standards, unemployment and levels of poverty will fare over the coming 5 years, as per the poll.

I voted that the economy would improve. Historically the UK economy almost always grows over a 5 year period. And unless something unpredictable like Covid comes along again, then there is no reason to think that the economy will become smaller.

That said I was not thinking about unemployment or poverty levels, as they do not interest me. Only the economy (however you define that) and the markets.

Whether that means the UK deserves to have an increased investment allocation or not is another matter, and I suspect that other areas of the world will grow faster, as they have been doing for decades. Not Europe so much, which may well do worse than the UK. But North America and Asia. So I have no plans to increase my low allocation to UK securities, nor my low exposure to sterling.

The other part of the question, I think, addresses personal finances and whether we will individually be and feel better off if the economy grows. And as previously noted, that depends on how mature and sensible the likely Labour government will be. If that growth is all in the public sector, and driven by increased taxes and borrowing, then we will have growth but we will be poorer, or at least the TLF demographic will be.

[Urbandreamer]

I voted that the economy would improve. Historically the UK economy almost always grows over a 5 year period. And unless something unpredictable like Covid comes along again, then there is no reason to think that the economy will become smaller.

That said I was not thinking about unemployment or poverty levels, as they do not interest me. Only the economy (however you define that) and the markets.

Whether that means the UK deserves to have an increased investment allocation or not is another matter, and I suspect that other areas of the world will grow faster, as they have been doing for decades.

By your measure the UK hasn't really grown over the last five years. Well according to a chart of the FTSE 100, or the FTSE all share. You did say that the economy was investment after all!

As for "investing", well there are very many who regard the UK as cheap. Not just fund managers or retail investors but those who manage overseas companies, who seem to be interested in buying UK companies. Then again it's oft pointed out that it's been cheap for quite some time.

If we do actually assume that economic growth is stock market growth, then new listings should count, shouldn't they. How do they look?

It's remarkable how often I hear financial journalists point out the disconnect between the economy and the stock market. Usually as new economic figures are reported. Others of course see macro factors affecting the profitability of companies. The unemployed having less disposable income.

I think that the real fallacy in your position is the assumption that you or I CAN invest in the economy. Sure I can buy listed companies, but can I get a return on the local plumber? You discount all such sole traders or small companies from the economy, regardless of their success or otherwise. Simply because investment is constrained.

[Nimrod103]

Seeing as the major policy on which all the large parties of the UK (and the EU) are agreed is the rush towards Net Zero, I would have thought that in 5 years time the UK and its big trading partners will be the in midst of a huge energy supply and distribution upheaval. Whether this is a good idea or not is debatable, but recent happenings in the offshore wind industry shows that energy will no longer be cheap, and Net Zero will cost everyone a great deal of money, and probably cause big changes to our lifestyles and habits. We will all be poorer and in 5 years it will be obvious to everyone that we will become even poorer.
Unless politicians cynically drop the Net Zero legislation before then.

[Urbandreamer]

Seeing as the major policy on which all the large parties of the UK (and the EU) are agreed is the rush towards Net Zero, I would have thought that in 5 years time the UK and its big trading partners will be the in midst of a huge energy supply and distribution upheaval. Whether this is a good idea or not is debatable, but recent happenings in the offshore wind industry shows that energy will no longer be cheap, and Net Zero will cost everyone a great deal of money, and probably cause big changes to our lifestyles and habits. We will all be poorer and in 5 years it will be obvious to everyone that we will become even poorer.
Unless politicians cynically drop the Net Zero legislation before then.

Ignoring the point that you are making and dealing with the facts. Recent events may lead to increased prices, because the result is a push to burning imported gas. Wind energy is actually cheaper than gas.
https://www.carbonbrief.org/analysis-re ... -than-gas/

The projects are all due to start operating within the next five years up to 2026/27 and have agreed to generate electricity for an average price of £48 per megawatt hour (MWh) in today’s money. This is nine times cheaper than the £446/MWh current cost of running gas-fired power stations.

However the government described by some as "pro-business" set the price to be paid for electricity from new wind farms below the cost of financing them.

Ensuring that any company doing so would do so at a loss.

Strangely, no company was willing to do so.

[mc2fool]

present your thoughts and ideas on how the economy and living standards, unemployment and levels of poverty will fare over the coming 5 years, as per the poll.

I voted that the economy would improve. Historically the UK economy almost always grows over a 5 year period. And unless something unpredictable like Covid comes along again, then there is no reason to think that the economy will become smaller.

That said I was not thinking about unemployment or poverty levels, as they do not interest me. Only the economy (however you define that) and the markets.

However you define it? Well, how do you define it and, more importantly, which quantitive measure do you propose should be used to know if your prediction that the economy will grow will come true or not. You've already pooh-poohed GDP/GNP/GNI, so which instead?

[Lootman]

I voted that the economy would improve. Historically the UK economy almost always grows over a 5 year period. And unless something unpredictable like Covid comes along again, then there is no reason to think that the economy will become smaller.

That said I was not thinking about unemployment or poverty levels, as they do not interest me. Only the economy (however you define that) and the markets.

Whether that means the UK deserves to have an increased investment allocation or not is another matter, and I suspect that other areas of the world will grow faster, as they have been doing for decades.

By your measure the UK hasn't really grown over the last five years. Well according to a chart of the FTSE 100, or the FTSE all share. You did say that the economy was investment after all!

For that matter the FTSE-100 is barely above where it was 24 years ago! It's a good thing people here love their dividends because that is all you have got from the UK market in almost a quarter century.

I did not so much mean that the economy was the markets, but rather that my interest in the economy is limited to investment considerations. As much as possible I have divorced my personal financial wellbeing from the UK economy.

I voted that the economy would improve. Historically the UK economy almost always grows over a 5 year period. And unless something unpredictable like Covid comes along again, then there is no reason to think that the economy will become smaller.

That said I was not thinking about unemployment or poverty levels, as they do not interest me. Only the economy (however you define that) and the markets.

However you define it? Well, how do you define it and, more importantly, which quantitative measure do you propose should be used to know if your prediction that the economy will grow will come true or not. You've already pooh-poohed GDP/GNP/GNI, so which instead?

That is really a question for the OP since he introduced the idea of the UK economy growing or not, so presumably he had a definition in mind. For the purpose of this topic I assumed he meant the headline rate of growth that is often reported in the media. In any event I am happy to go with his presumed definition for this discussion only, and I am not sure his investigation will be helped by a detailed and arcane discussion about other definitions.

[Nimrod103]

Seeing as the major policy on which all the large parties of the UK (and the EU) are agreed is the rush towards Net Zero, I would have thought that in 5 years time the UK and its big trading partners will be the in midst of a huge energy supply and distribution upheaval. Whether this is a good idea or not is debatable, but recent happenings in the offshore wind industry shows that energy will no longer be cheap, and Net Zero will cost everyone a great deal of money, and probably cause big changes to our lifestyles and habits. We will all be poorer and in 5 years it will be obvious to everyone that we will become even poorer.
Unless politicians cynically drop the Net Zero legislation before then.

Ignoring the point that you are making and dealing with the facts. Recent events may lead to increased prices, because the result is a push to burning imported gas. Wind energy is actually cheaper than gas.
https://www.carbonbrief.org/analysis-re ... -than-gas/

The projects are all due to start operating within the next five years up to 2026/27 and have agreed to generate electricity for an average price of £48 per megawatt hour (MWh) in today’s money. This is nine times cheaper than the £446/MWh current cost of running gas-fired power stations.

However the government described by some as "pro-business" set the price to be paid for electricity from new wind farms below the cost of financing them.

Ensuring that any company doing so would do so at a loss.

Strangely, no company was willing to do so.

The report you quote was written in July 2022 when gas prices were about 5x what they are now. I would have thought the most relevant price would be the cost of renewable electricity when the wind doesn’t blow and backup gas generation is banned.