Interview
Is Britain the world’s best bargain?
- British assets are anticipated to remain attractive to investors due to perceived cheap valuation, though the government must demonstrate that low prices reflect real risks rather than mere mispricing.
- The British economy is projected to expand by slightly over 10% since the 2016 Brexit referendum, while services exports to the United States are expected to rise by approximately 70% in real terms over the same period.
- Wage levels are forecast to remain suppressed with low growth, rendering British private sector workers roughly 30% less expensive than American counterparts from a dollar-focused perspective.
- Sterling is expected to have partially recovered from post-Brexit lows but will remain cheaper than pre-referendum levels for a prolonged duration, maintaining a competitive export environment.
- British government bonds (gilts) are projected to continue offering high yields among wealthy nations, reflecting underlying fiscal risks such as potential runaway inflation and loss of debt control.
- Current fiscal risks are considered largely priced into asset valuations, yet the government faces challenges in proving this pricing is appropriate given the persistent reality of economic underperformance.
- A gradual economic correction is expected to create new opportunities in the services export sector, although the government's aspiration for a world-beating, highly productive services industry currently remains unfulfilled.
- JPMorgan Chase is expected to continue expanding its digital operations in Glasgow, leveraging the location's cost profile situated midway between American and Indian office expenses.
- Fiscal stress is anticipated to persist through intermittent episodes of political instability, including parliamentary rebellions over welfare cuts as seen in January and the previous October.
- Investors are expected to find British assets more appealing than American ones in specific instances, driven by significantly higher valuations in the United States.