{"id":148,"date":"2020-07-02T04:52:00","date_gmt":"2020-07-02T08:52:00","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/london\/?p=148"},"modified":"2023-04-06T12:54:33","modified_gmt":"2023-04-06T16:54:33","slug":"the-prime-ministers-new-deal-invest-more-and-invest-quickly","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/london\/2020\/07\/02\/the-prime-ministers-new-deal-invest-more-and-invest-quickly\/","title":{"rendered":"The Prime Minister\u2019s New Deal: Invest More and Invest Quickly"},"content":{"rendered":"

By Steve Nichol<\/a><\/strong><\/em><\/p>\n

As my colleague Vijay Bange<\/a> commented in his blog post<\/a> on Tuesday, Boris Johnson has announced \u00a35bn of new funding for building and infrastructure projects in the UK.<\/p>\n

This sounds like a lot of money, but in real terms it is not anything like enough to restart the economy in the manner suggested by the Government. In the heady days before COVID-19, Chancellor Rishi Sunak announced new investment into infrastructure in the UK totaling \u00a3600bn between now and 2025. By comparison, \u00a35bn is nothing like what is required to \u201clevel up\u201d the economy in the way promised by the Chancellor. In his Dudley address, the Prime Minister confirmed that the \u00a35bn promised was an accelerated release of those funds promised by the Chancellor, but it remains to be seen whether that \u00a3600bn will ultimately be released.<\/p>\n

Nor is it the \u201cNew Deal\u201d of which the Prime Minister spoke. As a percentage of GDP, the Government\u2019s investment pales into insignificance compared to the cash injected into the US economy by Roosevelt\u2019s Democratic administration during the Great Depression. Moreover, Roosevelt\u2019s New Deal ultimately saw six years of continuous, heavy investment into the US economy prior to World War II; for the Prime Minister to make those comparisons he must have the same ambitions.<\/p>\n

It may be said that the US economy of the 1930s is very different to the UK economy of the 2020s, and that is true. For example, prior to the Great Depression, the US national debt was 29% of GDP; in contrast, as has been well-publicised, the UK\u2019s debt currently exceeds 100% of GDP \u2013 the first time it has done so since the post-war period. In addition, much of Roosevelt\u2019s investment was aimed at providing a substitute for the kind of financial support that the UK government has been providing to businesses and individuals since the lockdown hit \u2013 support which has contributed significantly to the UK\u2019s increased borrowings.<\/p>\n

On the other hand, there is no question that the UK economy needs the kind of investment that Roosevelt\u2019s New Deal provided to the US economy. The UK\u2019s double-digit drop in output risks heralding a post-coronavirus recession comparable to the situation faced by the US in the 1930s unless drastic steps are taken now to address the situation.<\/p>\n

Equally, the UK has the tools available to it to do so. Rarely has borrowing money been so cheap for a UK Government, to the extent that the Government has been able to sell bonds at negative interest rates; investors are literally paying the Government to lend the UK money at the moment.<\/p>\n

In addition, the UK currently has a relatively strong and stable construction industry that is well-placed to respond to any demands placed upon it by the Government. The general feeling is that UK construction has been able to weather the COVID-19 storm more effectively than was perhaps initially predicted.<\/p>\n

However, if the Government delays, it is likely to find that the cost of borrowing will increase. In addition, as time continues to pass the construction industry is likely to feel the effects of the post-coronavirus recession, to the extent that it may struggle to be able to rebuild Britain in the way the Government envisages \u2013 particularly if Brexit creates or contributes to skills and materials shortages in the way some have predicted.<\/p>\n

In those circumstances, the\u00a0 \u00a35bn promised by the Government must only be the first drops in what will need to become a flood of public spending.<\/p>\n

In contrast, the USA\u2019s own economic rescue package \u2013 the aptly named Moving Forward Act \u2013 promises $1.5trn of investment over 5 years into roads, bridges, transit, rail, schools, housing, broadband, water, clean energy, healthcare and more besides. It is, by any measure, a far bolder and more comprehensive portfolio of investment into the US economy than anything the UK Government has yet announced, and should offer a valuable prompt to the UK Government as to its next steps.<\/p>\n

The message to the Government, then, must be to strike whilst the iron is hot. If the Government is bold enough to invest now and invest heavily, Boris Johnson may be able to achieve his dream of \u201clevelling up\u201d Britain. If the Government dithers, the opportunity may be lost and the country may slide into a new depression.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Steve Nichol As my colleague Vijay Bange commented in his blog post on Tuesday, Boris Johnson has announced \u00a35bn of new funding for building and infrastructure projects in the UK. This sounds like a lot of money, but in real terms it is not anything like enough to restart the economy in the manner … <\/p>\n

Continue reading “The Prime Minister\u2019s New Deal: Invest More and Invest Quickly”<\/span><\/a><\/p>\n","protected":false},"author":439,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[56,5,117,116,54,118],"ppma_author":[163],"class_list":["post-148","post","type-post","status-publish","format-standard","hentry","category-general","tag-construction","tag-covid-19","tag-economy","tag-engineering","tag-steve-nichol","tag-uk"],"authors":[{"term_id":163,"user_id":439,"is_guest":0,"slug":"snichol","display_name":"Steve Nichol","avatar_url":"https:\/\/blogs.duanemorris.com\/london\/wp-content\/uploads\/sites\/52\/2020\/04\/nicholsteve-125x150.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/posts\/148","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/users\/439"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/comments?post=148"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/posts\/148\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/media?parent=148"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/categories?post=148"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/tags?post=148"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/ppma_author?post=148"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}