It would be easy to fall into the trap of thinking that nothing is happening except You Know What, even if You Know What has delivered the lowest interest rate in our history, just 0.25%, and a sharp initial downturn in the economy. It would be a mistake to do so, not only because we will get very bored very quickly if we obsess only about the consequences of what we decided on June 23rd, but also because the process of extracting ourselves from our existing relationship with the rest of Europe will take many years.
In the meantime, we have a new prime minister, with a new ministerial team and, possibly a new direction for business and economic policy. Theresa May has already chaired the first meeting of her new cabinet committee on the economy, suggesting that she intends to be in the driving seat in her self-declared drive to spread the proceeds of growth more evenly across the country and raise productivity levels to those of Britain’s international competitors.
Whitehall’s business department has been rebranded again; it is now the Department for Business, Energy and Industrial Strategy, under a new secretary of state, Greg Clark. Its expanded role, together with a new department responsible for negotiating trade deals with the rest of the world (under Liam Fox, when recruits some trade negotiators), will take some power away from the Treasury.
Comparisons have been drawn between Mrs May and Margaret Thatcher, not least by the new prime minister herself, in which case Philip Hammond, the new chancellor, may be taking on the Sir Geoffrey Howe role; influential but with no doubt about who is in charge.
What we don’t know about Mrs May’s business and industrial strategy so far greatly exceeds what we know. She has given the impression of being more interventionist – on boardroom pay, and even the composition of boards (favouring worker representation) – than any of her recent predecessors, Conservative or Labour. She thinks people who run businesses, particularly big businesses, have become too disconnected from the people who work for them and, indeed, their customers. More generally, she has dumped on George Osborne’s Northern Powerhouse, which she thinks had too narrow a focus, and on his ambition of achieving a budget surplus by the time of the next election. This may be just bowing to the inevitable, though Hammond has also talked about a “reset” of policy, which some have interpreted as borrowing more at current very low interest rates to fund additional spending on infrastructure.
So, we did not have a general election in June, but we appear to have acquired a new government anyway. Of course, some of what we have seen from Mrs May and her team may simply be an attempt to convey the impression of a new broom, and the actual changes may be less than meets the eye. Even so, business should be watching what comes out of the government with rather more interest, and the potential for greater surprises, than has been the case for a while.
That also applies to relations with other countries. The government’s decision not to proceed immediately with the £18 billion (plus financing costs) Hinkley Point C nuclear power station once it had been approved by EDF, the French power company, surprised just about everybody. It surprised the French, who put a brave face on it. It surprised the Chinese, who are part-funding the project, even more. Hinkley C was hailed by Xi Jinping, the Chinese president, on his state visit to Britain last year. It signalled, he said, a new “golden era” of UK-Chinese relations. One thing the Chinese do not like is what looks like a snub, which implies a loss of face. There are suggestions that £100 billion of proposed Chinese investment in Britain could be at stake.