Image Credit: The CBI
Boris Johnson, our new Prime Minister and self-styled Minister of the Union, has had a tricky relationship with UK industry; infamously crying "Fuck business!" when pressured on his Brexit stance in 2018. On one side of Mr Johnson’s percentile dice, the PM is a wild risk for UK firms. His desire to pursue a 'Hard Brexit' has raised serious concern among some of Britain’s largest employers including Airbus and BMW, who contribute to the UK's considerable manufacturing sector. In our service sector dominated economy, manufacturing is still a load bearer, boasting eleven percent of GDP and employing 2.7million people. 64% of UK manufacturing representatives worry that any form of Brexit will cause chaos in our manufacturing sector. No wonder then, that since his appointment as Prime Minister, the pound has slumped to its lowest level against the Euro since the single currency was launched in 1999, and to a 50-year low against the Dollar. Good news for those firms wishing to export abroad; not so good for those manufacturing industries which rely on imports of raw materials from abroad for production.
On the other side of the blonde-haired dice, Johnson is classically Tory. His desire for tax cuts frames neatly into Conservative assumptions about our behaviour, especially in how we spend our money. The PM has already pledged a massive overhaul in income tax and national insurance, promising to raise the threshold for the higher rate of income tax from £50,000 per annum to £80,000. According to IFS estimations, this will free up a sum to the tune of £9billion for 4 million of us, about £2,500 per person per year. This is money Mr Johnson hopes will be spent and redistributed in a post-Brexit economy. Johnson’s tax overhaul will extend to lower earners too, and he hopes to free up disposable income for below-average incomes via raising the National Insurance threshold. Plans for this have yet to be given in detail, but by allowing individuals to take home more of their pay, Johnson wishes to reinvigorate our struggling commercial sector in the hopes people will spend, and not save their newly spare disposable income.
Johnson is fully committed to pursuing a No-Deal Brexit if he has to; his cabinet appointments are all signed up to leaving on the 31st of October come what may. Despite his policy of unalloyed bliss for the United Kingdom regardless of whatever our relationship with Europe maybe after Halloween, Johnson knows the immense risk a No-Deal will bring to the economy of the fifth richest nation on Earth. His investment strategy could well be that of a moderate Labour Party manifesto, promising rail, road, and telecoms regeneration, along with reversing the cuts made to important public sectors such as the police, health, and education.
Mr Johnson's diversion from the typical Tory approach of private sector investment indicates his desire to shore up the economy to cope with the structural changes Brexit will bring. In making Britain as attractive as possible a place to do business, the PM hopes to offset the opportunity costs of leaving the EU. His commitment to providing full-fibre broadband to every household by 2025, while extremely ambitious, will be a big job creator, giving us the edge over other economies through ensuring our businesses can rely on high-speed communications and transactional exchange, as well as bringing rural areas of the UK up to the standard of thriving urban centres such as Manchester and London.
The puzzle largely remains as to how and when the PM can ease the uncertainty that businesses are facing in today’s irregular political climate. The sooner UK industry can be sure of our future relationship with Europe after the 31st of October, the sooner they can adequately prepare for what Brexit will truly mean.
The new Prime Minister could well be taking advice from the late John Maynard Keynes, arguably the father of consumer-led economics. Johnson is not an unwise individual, his investment plans are indicative of the challenges Brexit will present to the UK economy, deal or no deal. Through offering healthy tax cuts to both rich and poor, as well as being the first Prime Minister with an explicit investment and job creation strategy for the UK since the Blair-Brown era, Johnson is foreseeing the economic shock Brexit will bring, while betting on making Britain a productive powerhouse too good for foreign firms to resist.