Reading the annual economic report of the Bank for International Settlements while lying beside a pool with an Aperol spritz in hand is a challenge I accepted on your behalf. Based in Basel as a hub for the world\u2019s central banks, BIS is always careful in its prose for fear of setting cats among global pigeons. But this year\u2019s bulletin is a serious storm warning, based on four factors that in a worst-case combination could trigger market mayhem.<\/p>\n
First, inflation driven by Middle East conflict has left oil market imbalances that will take \u2018several quarters to purge\u2019, with the risk of further volatility; BIS doesn\u2019t actually say \u2018If Trump goes batshit crazier\u2019, but that\u2019s the subtext. Second, beware of competitive overinvestment in AI projects, \u2018increasing the risk of a sharp reversal if AI payoffs disappoint\u2019.<\/p>\n
Third, and here the language is less guarded, financial markets could \u2018unwind abruptly\u2019 as a result of \u2018increasingly opaque financing of AI activities, high leverage\u2026 and the growing footprint of private credit\u2019. Finally, governments with already strained debt levels face rising demands for more spending \u2013 not least on defence \u2013 while \u2018the financial structure of sovereign bond markets has become more fragile\u2019. In short, Andy Burnham please note, any whiff of fiscal irresponsibility and your borrowing cost will rocket or investors will shun your debt altogether.<\/p>\n
Too gloomy for high summer? The AI boom is the hardest part to assess: opinions about the technology\u2019s rapid advance are so cacophonous that what happens next is literally anyone\u2019s guess. On the other hand, the dangers of embedded inflation, excessive risk-taking and profligate public spending are so familiar that we hardly need a forecast from Basel\u2019s weathermen. As my wise predecessor Christopher Fildes once wrote: \u2018Hold tight and watch the wheel come round.\u2019<\/p>\n
Mr Nice Guy<\/p>\n
A Mancunian who worked alongside Burnham calls him \u2018a retail politician who speaks human\u2019. The nice-guy style was well displayed in Monday\u2019s speech about \u2018good growth in every postcode\u2019, with its quivers of emotion about better housing and working-class opportunity. But the truth of good growth \u2013 indeed, any growth that isn\u2019t generated purely by Keynesian public works \u2013 is that it can only come from entrepreneurship and private-sector investment. For businesses large or small, the PM-in-waiting offered no more than a paragraph of platitudes that sounded like a speechwriter\u2019s late insertion.<\/p>\n
His big idea for industrial revival was about directing state procurement towards UK firms. But \u2018imagine if we could bring down the cost of energy\u2019, his nod to the prime reason our factories are so uncompetitive, was the vaguest of aspirations, far short of commitment. Likewise, his embrace of business rates reform will be too late to save pubs or make high streets \u2018the new symbol of Britain\u2019s renaissance\u2019 unless he\u2019s also prepared to reverse last year\u2019s NIC hike, slash red tape and allow micro-businesses to thrive.<\/p>\n
Above all, this performance reminded us that Burnham is a socialist who values \u2018public control\u2019 above private flourishing. But business leaders can take some comfort from the fact that their peers in Manchester, as I reported recently, found him to be a good listener and a more pragmatic operator than his rhetoric suggests. And let\u2019s be frank, can he really be worse than Sir Keir Starmer?<\/p>\n
Reality hits home<\/p>\n
What of Burnham\u2019s headline pledge to launch \u2018the biggest council house building programme since the postwar period\u2019, based on the anti-Thatcherite assertion that to be a tenant of the state, rather than a homeowner, is a worthy working-class ambition? He referred to 1.5 million council houses lost since the mid-1980s and the same number of people on housing waiting lists today \u2013 but wisely did not recite Labour\u2019s doomed manifesto pledge to deliver 1.5 million new homes (public or private) within this parliament.<\/p>\n
Even by using vacant public land, permitting higher-density development and giving himself ten years to fulfil whatever his actual promise turns out to be, he is about to be thwarted by multiple problems besetting housebuilders: cost inflation, shortage of skilled labour, draconian safety rules and a broken planning system. As an industry spokesman put it, reform will need to be \u2018supercharged and wholesale\u2019. And if slow delivery of new housing is combined with shrinkage of the private rental market thanks to the recent Renters\u2019 Rights Act \u2013 plus even stronger measures from Manchester\u2019s former champion against \u2018rogue landlords\u2019 \u2013 then waiting lists will grow ever longer.<\/p>\n
Meanwhile, his threat of a \u2018land value tax\u2019 is one more factor contributing to a moribund house sales market, following Rachel Reeves\u2019s removal of stamp-duty discounts in April. And mortgage rates will rise if bond markets don\u2019t like the new regime\u2019s broader spending plans. So whether you aspire to be a tenant for life or to climb the ladder of home ownership, nice-guy Andy probably won\u2019t be your new best friend.<\/p>\n
French fried<\/p>\n
In France, the national weather map was the colour of a livid bruise as the mercury topped 40\u00baC day after day \u2013 and the high productivity I praised last week wilted faster than my potted geraniums. The joiner who came to fit new shutters started at 7 a.m. and brought his wife to mop his brow, but our un-airconditioned village bistro was one of many businesses that gave up the struggle and closed until the canicule receded.<\/p>\n
Hence I must disappoint those who expect new restaurant tips each time I travel, though perhaps not the reader who tells me he spent one of the worst nights of his life at a hotel in Normandy recommended here in January. The best I can do is suggest an authentic outpost of Frenchness in slightly cooler (in this context) London: the best moules-frites and boudin noir I\u2019ve found lately on this side of the Channel are at Gazette, inside South Kensington\u2019s Institut Fran\u00e7ais.<\/p>\n","protected":false},"excerpt":{"rendered":"Reading the annual economic report of the Bank for International Settlements while lying beside a pool with an…\n","protected":false},"author":2,"featured_media":670142,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[19306,84,1294,819,172451,56,54,55],"class_list":["post-670141","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-andy-burnham","tag-business","tag-economy","tag-france","tag-housebuilding","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/670141","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=670141"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/670141\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/670142"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=670141"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=670141"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=670141"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}