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Roula Khalaf, editor -in -chief of the FT, selects her favorite stories in this weekly newsletter.
The most important economic problem with which the United Kingdom is confronted is long-term stagnation in productivity. It was the theme of My column two weeks ago. Yes, the turmoil of the moment cannot be ignored. But the urgency is not necessarily the important. Without a disaster (a world war or a world depression, for example, on which the United Kingdom can do little), the main determinant of our prosperity and our stability will be the decisions taken by – and inside – of this country. The economy must be withdrawn from almost two decades of crisis.
This does not mean that Donald Trump's war against the open world economy is not relevant. How can it be? It lifts enormous obstacles and unpredictable to world trade and, at the same time, destroying the institutional architecture that its wiser predecessors have created more than eight decades. However, it is unlikely that it is in itself the end of the economic world, at least for the United Kingdom.
According to the Office for National Statistics, the United Kingdom has exported 59 billion pounds to the United States in 2024, or 16.2% of total goods exports. Its 137 billion pounds sterling of services in the United States, 27% of total service exports, were much larger. The details of British exports to the United States highlight the contrast. The category of services with the largest exports to the United States was “other commercial services”. These amounted to 61 billion pounds sterling in 2024, or 33% of all exports from other commercial services. Remarkably, exports from other commercial services to the United States were worth more than all of all combined goods. The largest category of exports of goods to the United States was machine equipment, with a modest 29 billion pounds sterling. In addition, only 19% of exports in this category went to the United States.
It is a good position for the United Kingdom. Trump – In this regard very similar to local Brexiters – does not seem to worry much about services. This is not what Maga's “real men” do: they make steel or coal mine. In addition, prices cannot apply to services.
The indirect effects of Trump policies, both economic and wider, are much more difficult to analyze. As Megan Greene Noted on April 25, uncertainties are multiplying in all directions. It is certainly difficult to see an advantage for the United Kingdom, apart from the opportunity to attract high-level people to work in a country that always clings to the idea of the rule of law.
However, the main involvement of Trump's shock is that a good policy becomes even more important: it always does it in difficult times. In general, the objective should be to make the budgetary position and the financial system more resilient, improve the flexibility of the economy and considerably increase investments in human, physical and intangible – public and private capital.
Unfortunately, there are no ways that such things can be done in a country with slow growth in productivity and a large current account deficit, without suppression of consumption. It is a truth that no government wishes to face. But, According to the IMFThe average national savings rate of the United Kingdom between 2021 and 2024 was 15.6% of GDP, which put it 35th on 37 high-income countries, ahead of Cyprus and Greece. This must increase if the low investment in the United Kingdom is also to do so.
However, the ability to finance higher investments is only a necessary condition for faster growth. There must also be opportunities to invest. Some of them will be produced by appropriate deregulation, such as relaxation of planning controls and the elimination of more absurd environmental restrictions and excessive borders on flexibility of employment. But others will need efforts. In particular, growth means change and therefore requires innovation. It is a risky and expensive process with many positive externalities: a new successful activity will almost always share the advantages of its pioneers with others.
This is why there is a good case for government support for innovation. The question is how to proceed. David Willetts, a former conservative minister, has just published a short brochure for the Resolution Foundation on “How to make an industrial strategy“, Who explores the possibilities. My opinion is that the costs of not taking the risk of failure exceed the costs of taking them. It is quite clear, as Alexander Hamilton believed, that the government can and should act as a catalyst for change. There will be many failures.
The big point that I have hammered at home for some time is that the more the world is perilous and the more economic performance, the more the United Kingdom's reflexive conservatism is worse. Fortune promotes courageous.
