Bbc
It was a wild January for Rachel Reeves and frankly for the economy in the United Kingdom and in the world.
When the Labor Party postponed victory last summer, Reeves is committed to being an “iron” chancellor, in reintegration into public spending and improving the lives of workers thanks to the growth of the economy. Without solid public finances, she argued, the government could not achieve any of its other objectives.
This month tested this plan.
It started with a global bond marketing crisis – borrowing costs in the United Kingdom have reached their highest level for several years and the book has dropped sharply.
Some have argued that the budgetary decisions of Reeves had made the United Kingdom more vulnerable to such shocks. The Prime Minister was forced to confirm that Reeves had his support after political opponents called for his resignation.
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Rachel Reeves delivered a discourse on growth in January 2025
The turbulence of the market aroused concerns that a verdict was sort of done on the chancellor.
Reeves is committed not to borrow to finance daily expenses and to lower the debt as a national income by the end of this Parliament. This meant that the increase in interest costs in global and British debt would require certain drops in spending.
The message was sent that the government, with its massive majority, could do and do what it takes to respect the self-imposed rules, which, according to her, were “non-negotiable”.
The markets have now recovered all their negative movements. The government’s loan costs in the short and long term are all lower than at the beginning of the year.
While the hyperbole of the “golden crisis” was exaggerated, there have been consequences.
From fate to the promises of a boom
The chancellor accelerated an “beat of beat” already planned with pro-growth measures, leading to this week’s speech. Doom lawyer and Reeves warnings on black holes and pain have been replaced by a promise of an investment boom.
She promised a new track in Heathrow, visas for those who have skills in AI and Life Sciences and declared that it would facilitate the non -domestic prohibition to allow a more generous study of tax advantages.
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Heathrow’s boss Thomas Woldbye sounded a little shy after plans for a third track were confirmed
At the same time, it is planned to facilitate construction, delays in the new rules on banks and the eviction of the boss of the competition regulator, which shows that it is serious about growth. As meat bread could have scripted it for her: “I would do anything for growth”.
But Reeves’ plans are not yet a full -fledged growth plan. Her announcements report that she is ready to take a series of political blows to promote long -term growth.
The Chancellor will deploy the almost total executive power of the majority of the common goods of her party to flatten the type of opposition which has critically prevented or delayed this type of plans in the past.
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The Prime Minister was forced to confirm that Reeves had his support
Some external advisers who support the chancellor say that stability is not enough, and planning is not either, and is not deregulation either.
Reeves did not promise any public money benefits to these major projects.
Heathrow’s boss, Thomas Woldbye, was a little shy after plans for a third track were confirmed, saying that they would not spend more money unless they really believe that it was going to happen.
“It will take years, it will take what I will call Churchillian Resolve and a lot of ingenuity, but we can trust a government that will be with us for many years to deliver this,” he told the BBC.
British growth mission of Reeves
Reeves focuses on a very specific type of growth – increasing the supply of goods and services. She thinks that the absence of this growth in the offer has retained the United Kingdom, and its mission is to withdraw the barriers and to open new markets.
For example, Reeves is very concerned about the small businesses who told him that they had given up export to the EU, because post-Brexit, it is now easier to export to the United States.
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Reeves focuses on the increase in the supply of goods and services
During a meeting last week, a company told the Chancellor that exports to Europe intended for Christmas, had just arrived.
The problem is that if the chancellor awaits a long -term growth thrust, it has prioritized public finance stabilization thanks to significant tax increases.
In April, employers will be struck by an increase in national insurance payments and a higher minimum wage. These costs could be passed on on price increases, which means that inflation – already greater than the 2.5%target, could remain sticky.
Reeves would have preferred employers to be remuneration regulations rather than increasing prices or reducing staff.
Reuters
Going to growth will require very delicate navigation
Retail and hotel sales activities using low-wage work will be the most affected by the increase in bumper in the minimum wage. Downing Street Insiders recognizes that many national commercial patterns are “grumpy” as they say.
The concern is whether the impact will appear in higher unemployment. In the budget last October, the government’s independent forecaster, the Budget Responsibility Office (OBR), predicted that additional public spending would help stimulate the economy and bring unemployment to 4% this year. Some external forecasters now think that this will exceed 5%.
It is essential for a few months for animal spirits to the economy to redirect themselves.
How far will it go?
But to what extent is Rachel Reeves ready to push this pro-growth program?
Will it follow the United States of the decarbonization route to benefit from cheaper hydrocarbon prices promised by President Trump? Will it access the requests of the construction industry to import foreign workers to reach the objective to build 1.5 million houses?
Will it push the reset of Brexit to eliminate all obstacles to the United Kingdom trade in food and agricultural products, as well as many products? Will it offer Great Britain to world technological and pharmaceutical industries as a deregulative paradise for the EU and the United States respectively?
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Reeves photo while she was going to present the last budget last fall
Taken at nominal value, it will make most of this, with great political consequences. Take the reset of Brexit. The ministers of the World Economic Forum were delighted with the tone of the new EU trade head, Maros Sefcovic, in his interview with me, saying that he was open to Great Britain joining the Pan-Euro-Mediterranean Convention (PEM ).
The arrangement allows a trade without a price of certain goods from dozens of countries in Europe, North Africa and the Middle East.
But if the United Kingdom required effective treatment on the single market in certain sectors, it should follow the EU rules book in these areas. There would be counter requests, such as the extension of EU fishing provisions in British waters, and a sort of cultural exchange plan for young people.
The need for delicate diplomacy
Push arrives on these questions, and the question is whether the Chancellor’s professional growth program is the overwhelming factor in decision -making. I suspect it is.
However, this approach will require delicate diplomacy in the midst of a potential goods war of goods. If Trump follows his threat from a universal rate, the G7 could decide to coordinate reprisal rates. Does the United Kingdom join?
What if the United States decides to want its allies to help contain the technological ascendant of China? What if Trump wants to dissuade the United Kingdom from rebuilding fluid trade with the EU?
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The government knows that China is a rival in the development of AI
The sudden emergence of the expertise of Chinese AI via Deepseek underlines how important it is to be agile. There was only one mention of China in the great document of the government of the government earlier this month-in the foreword of the Secretary of the Sciences Peter Kyle.
The pharmaceutical industry is pressure on the government to quietly open the door to the relocation of key talents in the United Kingdom, concerned about the Trump / Robert F Kennedy JR approach for medication regulation. Our major universities say that for the first time from Brexit, it is easier to recruit some of the best international scientists who do not wish to mention their family in Trump America.
Trump’s decision to abandon the green subsidies of Biden Nivelle also the rules of the game for zero net investment here.
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How far is Rachel Reeves ready to push the pro-corporate agenda?
After a tumultuous start of the year, the American administration threatening different prices almost every day, and the giant shares of technology falling on the concerns they were overvalued in light of the application of Chinese AI Deepseek, the United Kingdom remains a safe refuge for investors.
The self-declared iron chancellor remains very attached to stability. But zero growth is also a form of stability. In the agitated world seas, going for growth will require very delicate navigation – and this will also make large national political waves.
Top image credit: Reuters
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