Unlocking growth: Vicky Pryce on the UK budget, investment, innovation and female founders

Nov 10, 2024

Summary of The Purse Podcast episode with Vicky Pryce

In this #130 episode, Vicky Pryce returns to The Purse Podcast, a leading economist and adviser, to analyse the recent UK budget presented by the Chancellor, Rachel Reeves—the UK’s first female Chancellor (in 800 years).

The discussion covers the budget’s potential impacts on business, investment, inflation, Brexit, digital currencies, technology, and the possible influence of the U.S. election on UK markets.

Key Takeaways:

1. The UK budget and economic outlook

“This is one of the biggest tax-raising budgets we’ve seen in the UK,” Pryce observes, highlighting its unprecedented levels of borrowing and spending.
While Reeves aims to balance immediate fiscal needs with growth, Pryce notes the budget’s focus on “better housekeeping” over transformative change, which could limit its impact on long-term economic growth.
Inflation control is crucial, with Pryce predicting possible interest rate cuts by the Bank of England. Inflation fell to 1.7% in September.

2. Impact on businesses and startups

Pryce raises concerns over the increased tax burden on businesses, especially larger ones, which may result in slower wage growth or even job cuts. However, support for R&D and technology sectors could positively impact productivity.
Pryce warns that new tax measures could discourage growth in smaller firms, emphasising the importance of balanced business taxation to sustain economic vitality.

3. Technology and productivity

Pryce discusses the critical role of AI and technology in enhancing productivity but notes that offshoring and insufficient workforce training create a gap between potential and actual productivity gains.
“Businesses may need to rethink workforce strategies with AI, but this requires a re-evaluation of training and productivity measurements.”

4. Brexit’s lingering impact

Brexit continues to impose substantial costs on UK businesses, with government estimates suggesting a total cost of £40 billion. Pryce criticises the government’s lack of transparency regarding Brexit’s economic impact, particularly around trade and labour costs.
“The bureaucracy around trading with Europe is a massive cost that impacts productivity.”

5. Crypto, bitcoin and CBDCs

The conversation turns to the UK’s limited regulatory clarity on digital currencies compared to the U.S.
Jana Hlistova suggests a more proactive stance is needed and, “..in an era of fiat currency devaluation, bitcoin offers an alternative way to preserve purchasing power.”
They discuss the central bank digital currency (CBDCs) but privacy is key for individuals.
They also discuss Donald Trump’s recent proposal for a Strategic Bitcoin Reserve, sparking a debate on whether the UK could benefit from a similar approach to digital assets as a safeguard against inflation and currency devaluation.

6. Support for female founders

Pryce commends government’s alignment with the Invest in Women Taskforce which aims to raise £250 million investment in female founders. Female founders can add £250 billion to the UK economy. Pryce highlights the positive impact of empowering women entrepreneurs.
“The more we support women entrepreneurs, the closer we get to gender parity in economic leadership.”

7. Investment in UK equities and pension funds

The budget encourages UK pension funds to invest in British equities and venture capital to stimulate domestic growth. While this shows confidence in UK businesses, Pryce remains cautious, questioning its long-term benefits for both the economy and pension holders.
Pryce suggests that government guarantees or interventions might be required to secure desirable returns, yet this could ultimately increase costs for consumers.

8. Impact of the U.S. election on UK markets

Pryce highlights the potential volatility in UK markets due to the U.S. election outcome, with increased uncertainty if tariffs or trade tensions arise under a protectionist administration.
“If the U.S. becomes more protectionist, it will inevitably affect UK growth and inflation, underscoring the need for closer European trade ties.” Pryce warns that a Trump administration could further polarise the global economy if protectionist policies increase.

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🔗 Catch the full episode for more on navigating these challenges and building a resilient economy 🎧 #Podcast #Economy

We’d love to hear from you. Get in touch with Jana via the The Purse website or tweet @jointhepurse and janicka. We do no provide investment advice. Please do your own research or speak to a financial adviser.

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