Jobs and growth figures won’t be steady and resilient without a Brexit deal

Taken at face value the latest employment figures and last year’s GDP growth defied the doomsayers. They were better than the City expected and, for those sitting inside the Treasury, supported the view that Britain’s economy remains, in the finance ministry’s parlance, steady and resilient.

The number of people in employment hit a record high and the percentage of those aged 16 to 64 in the workforce was at its joint highest since 1971. Job vacancies were at an all-time high and wages growth ticked higher to 2.4%.

Philip Hammond may be waiting nervously for the end of the month to arrive and for HMRC to declare how much the self-employed have paid in tax, but the sheer number of people in work means he can count on tax receipts rolling into the Treasury’s coffers regardless.

There are other reasons to be cheerful. The credit boom has played only a marginal role in supporting high street sales. So an imminent crackdown by the City regulators on reckless lending by the banks should itself have only a marginal effect on consumer spending. There is a social cost to thousands of families being plunged into shocking levels of debt. Yet for those sitting inside the Treasury, that’s a separate matter.

December’s deal with Brussels provided another fillip to the economy. If no agreement to move beyond the first stage of Brexit talks had been reached, business and consumer confidence would probably have plummeted.

The deal to move to the second stage of talks came too late to influence the GDP growth figures for the last quarter of 2017. Nevertheless, the 0.5% registered by the Office for National Statistics meant the economy had expanded at a steady pace.

That brings us to the end of the good news. On a more downbeat note, for some time Britain’s economy has sailed along on a wave of consumer spending and without it, the economy will suffer. High street stores have already reported dramatic falls in takings as workers struggle to make their pay packets stretch when inflation is at 3%.

The ONS said last week that the underlying picture was of “slower and uneven growth across the economy” as it pointed out that the better-than-expected figures had been driven in part by recruitment and lettings agencies responding to soaring vacancies and to the shortage of rental properties. That’s not the kind of growth Britain needs.

In truth Britain has relied for too long on people buying stuff and a booming property market to push up GDP. There needs to be a greater emphasis on investment to build a sustainable economic future.

However, in the short term, this causes a huge amount of pain, not least because investment takes a long time to feed through into measurable economic activity.

A sensible government would ease the transition with its own investment. Will this happen? Not in an era of austerity that the chancellor says must continue until the middle of the next decade. Hammond has shifted the dial a little in favour of transport projects, though not ageing schools, hospitals and council amenities, which continue to decay.

That leaves the economy trundling along and vulnerable to shocks. And these could come in many guises. The first is the March deadline for securing a Brexit transition deal. When a small army of Tory MPs objects strongly to a close relationship with Brussels, arguing that Leave should mean Leave after March 2019, it is not clear there will be one.

If the worst should happen and Theresa May is forced to abandon a transition deal, business confidence will evaporate. And that would spell the end of the recovery.

May must avoid this doomsday scenario at all costs. Especially when there are plenty of other risks, from a stuttering property market to booming stock and bond markets that betray their fragility. Without a beneficial deal with Brussels, it will be curtains for Britain’s steady and resilient economy.

Presidents Club diners: take a long look in the mirror!

The Presidents Club has closed, disbanded in shame after the revolting nature of its annual dinner at the Dorchester was exposed by the Financial Times. The prime minister was appalled by reports that female “hostesses” at the dinner were groped, harassed and propositioned. Charities don’t want the club’s tainted money. The Charities Commission is investigating.

Not every diner behaved badly, of course, but none claim that the Presidents Club misrepresented the nature of its fundraiser. This was a men-only affair and the auction lots include a night at a strip club and a course of plastic surgery to “spice up your wife”. Those rich and privileged businessmen who attended will know that in future their staff – male and female – will regard them differently.

Such behaviour does not arise out of thin air, of course. Sexism and the objectification of women are a wider problem for society. But the chorus of condemnation was so loud on this occasion because the outside world expects those at the top of the business world – if their claims to be a force for good mean anything – to operate to higher standards.

The diners should ask themselves now whether they are abusing their power in other ways. Do their workers – unlike the women obliged to sign non-disclosure agreements at the Presidents Club – have sufficient rights of complaint? Are their companies really committed to equality of opportunity, a process that means more than signing the usual charters? Is their corporate culture really up to the mark?

Some, one suspects, are beyond reform. Others, one hopes, will look at themselves honestly in the mirror and ask whether they could do more. If they couldn’t spot the neon-lit warning signs about the Presidents Club, they should wonder what else they’ve missed.

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Davos thinkers must be careful what they wish for

What a difference six months can make. Last summer President Emmanuel Macron was struggling with a sluggish economy and falling approval ratings. In the US, president Donald Trump, unable to grasp how Congress needed a degree of bipartisanship to smooth the path of legislation, had no laws to his name and was under the same ratings pressure.

In Davos, while continuing to face domestic political pressures, both men have found themselves swept along the World Economic Forum’s red carpets on a wave of economic good news.

Upgrades to the global outlook for growth are so common they hardly rank as news. The International Monetary Fund was the latest to say that 2018 and 2019 will see higher growth than previously forecast. This year that means 3.9%; in 2016 global growth was 3.1%.

Macron is benefiting from the eurozone recovery after years of crises. Trump has found a way to pass a tax bill that will boost the US economy for a year or two, albeit with a hangover that will push the US national debt to new heights.

There are plenty of analysts who predict that this improvement will profit most of the world’s developed economies and give workers the confidence to bargain up wages in a way they haven’t managed since the early 00s.

The well-paid thinkers at the Davos forum are not so simple as to take this at face value. They can foresee risks to the rosy outlook from a range of developments, some of them, indeed spawned by Trump’s tax bill. In particular, they fear the intense speculation on global financial markets that inevitably comes with a trillion-dollar tax cut.

That is why attendees wonder whether cryptocurrencies such as Bitcoin will be their nemesis. Or will it be their own complacency, which allows growth today to become so unequal that it is unsustainable?