Confidence or confidence trick?

If there’s one word to ensure the success of an economy, it is confidence. Confidence makes companies invest and grow their business. There needs to be confidence in the investment market, both domestically and from overseas and most importantly, confidence in consumers, be they private clients or corporates. This is vital for the service sector of an economy, especially for Britain, where roughly two-thirds of the economy is based on consumer and corporate services, as opposed to manufacturing.

By Justin Urquhart-Stewart

So the key item for our new Chancellor was to ensure that no matter how bitter the economic medicines that she had to prescribe, it was done so in a manner that ensured the confidence of everyone in the country in order to boost the economy, grow profits and increase the returns for investors.

The task for Rachel Reeves was never going to be easy, holding an economic stick in one hand while proffering a dynamic carrot in the other. Any politician in this position should have taken into account the financial and economic quagmire that was left so recently by the fiasco that was the short, sharp and painful political regime under Liz Truss. Whether it was through pride or arrogance, she failed to garner that vital confidence of all those stakeholders from citizens to corporate entities.

With the recent memory of a disastrous Budget that spooked the markets, the Chancellor should have taken these issues into account when delivering her first Budget. However, the result was the highest level of government debt in living memory and was inevitably going to cause shockwaves. If ever there was a Budget that seemed to reflect the nervousness of Hallowe’en, this was it. And it gave the opportunity for the financial witches and warlocks to show their nervousness and yes – lack of confidence.

This was a wasted opportunity as it failed to provide that key element of economic confidence. A far more constructive way of going about this would have been to focus on the exciting and successful areas of our economy. For example, we are seen internationally as one of the most dynamic economies for technological innovation and development in the world.

These companies are the ones which should have the confidence to grow their value, their profits and in doing so, the amount of tax they pay to the Government. Focusing on the areas of greater potential is far more encouraging for investors in the UK, both domestically and internationally. Any Chancellor therefore could put the economic focus of Britain on to these sectors without any major amounts of government investment.

The Chancellor should offer generous incentives by way of tax breaks such as EIS (Enterprise Investment Scheme) which could be further expanded to companies of any size and in any area, creating not just another EIS scheme – but providing greater regional investment incentives to create an REIS (Regional EIS). The result would have been a far more dynamic economy which would encourage investors’ confidence - and to prove that this was no confidence trick.

This was a wasted opportunity as it failed to provide that key element of economic confidence. A far more constructive way of going about this would have been to focus on the exciting and successful areas of our economy. For example, we are seen internationally as one of the most dynamic economies for technological innovation and development in the world.