Growing the economy is of utmost importance in enhancing people’s quality of life, according to Rachel Reeves. Addressing a gathering of business leaders in Saudi Arabia, the Chancellor emphasized the need for government intervention to bolster the UK’s declining productivity levels, prompted by reports of a significant shortfall in public finances.
The Office for Budget Responsibility is expected to revise down its productivity forecast, indicating a potential £20 billion hit to public finances. This development has raised concerns about potential budget cuts and tax increases in the upcoming Budget announcement.
During her speech at the Future Investment Initiative event in Riyadh, dubbed the “Davos in the Desert,” Ms. Reeves highlighted the role of artificial intelligence in solving productivity challenges both in the public and private sectors. She reiterated the government’s firm commitment to prioritizing economic growth.
Ms. Reeves stressed the importance of public support, noting that enhancing living standards is directly tied to economic growth through increased productivity. She emphasized the critical need for investments in infrastructure and technology at both business and governmental levels to drive sustainable growth.
While acknowledging the expected downgrade in productivity outlook by the OBR, Ms. Reeves clarified that it was not attributed to government actions but rather historical factors such as Brexit and past financial crises. She affirmed that the Budget decisions would be geared towards maximizing economic growth opportunities.
Ms. Reeves also used the platform to encourage international business leaders to consider investing in the UK. She expressed optimism about swiftly reaching a trade agreement with the Gulf Cooperation Council countries, following successful negotiations with the EU, US, and India.
However, she raised concerns about the high inflation rate in the UK, linking it to increased trade costs with neighboring countries and partners, largely influenced by Brexit-related factors. She praised the UK’s trade deal with the EU and highlighted the successful response received post-negotiations.
Recent reports suggest that the OBR is set to downgrade the UK’s productivity outlook by 0.3% in the Budget announcement, surpassing analysts’ expectations. On a positive note, separate figures released indicated a pickup in private sector activity, particularly in manufacturing, attributed to the resumption of production at Jaguar Land Rover post a cyber attack-induced shutdown.
The S&P Global flash UK composite purchasing managers’ index (PMI) for October showed a reading of 51.1, reflecting growth from the previous month’s 50.1. The stronger-than-expected reading indicates expanding economic activity, surpassing economists’ predictions of 50.7.
