Britain’s problems are going to take a long time to fix, with the public being warned by the Labour Prime Minister to prepare for “painful” times ahead.
In his first major speech since his election last month, Keir Starmer drew a bleak picture of a country ravaged by riots and scarred by economic inertia.
Britain's problems were such, he suggested, that it would take at least a decade to fix, laying the foundation for unpalatable choices in the near term to win the next election in five years.
Worse before better
By painting the Conservative’s 14 years in power as “a decade of decline” and highlighting an apparent £22 billion black hole in government finances, Mr Starmer is attempting to embed in the public’s mind the chaos of Tory rule.
That claim was made more emblematic in the flowered surroundings of Downing Street’s Rose Garden which became notorious for hosting lockdown parties under Boris Johnson’s rule.
That demonstrated “how far we have fallen” as a country with the fault lines shown not only by the financial shortfalls, he said, but also by the “societal black hole” exposed by the anti-immigration riots across Britain earlier this month. “Things are worse than we ever imagined,” he said.
He did not shy away from telling the British public that their lives are about to be challenged in the coming months as “things are going to get worse before they get better”.
Taxpayers will have to prepare themselves for a “painful” budget at the end of October when it’s expected that taxes will rise and benefits cut.
The new Labour government looks like it is taking a leaf out of former Conservative chancellor George Osborne’s playbook when commencing government in 2010 with a host of painful public spending cuts that heralded the austerity era.
Labour’s plan appears to be similar in making the difficult decisions in its first years before reaping the benefits in the run-up to the next election.
“We will not shy away from unpopular decisions if they are right for the country in the long term,” Mr Starmer said.
Budget pains
Preparing the country for a probable budget of tax rises, public spending cuts and benefits curtailment to balance the budget, he argued that “we have no other choice, given the situation that we’re in”.
“Those with the broadest shoulders should bear the heavier burden,” he warned adding that was “why we’re cracking down on non-doms”, referring to Britons whose homes for tax purposes are outside the UK.
Referencing the economic hardships already suffered after the Covid-19 lockdowns and ensuing economic woe, he pleaded for a “big ask” of the country “to accept short-term pain for long-term good”.
Mr Starmer also defended the decision to give generous pay increases to doctors and rail unions to end their strikes, stating that the economy would not grow if people could not get to work or see a doctor
Riots and prisons
Most commentators agree that Mr Starmer showed strong leadership in tackling the unrest that swept the UK this month by rapidly moving to arrest and jail rioters.
That swift action, alongside big counter-racism demonstrations, largely curtailed the disturbances but Mr Starmer was again keen to emphasise his predecessor Rishi Sunak’s government’s failings that had allowed prisons to become almost full.
Mr Starmer spoke of his “shock” of sitting in the daily Cobra national emergency meetings with a list of where there were prison places across the country “trying to work out with how we deal with the disorder” with the deterrence of rapid imprisonments.
He added that the riots, which saw asylum seeker hotels set on fire, “didn’t happen in a vacuum” and had exposed “a deeply unhealthy society”.
Britain built to last
With his words sparsely offering optimism, Mr Starmer strove to end with some uplifting language.
While change would not happen “overnight” and issues had to be tackled at their “root” once the reforms had been made, Britain would be a country “built to last”.
The government would focus on growing the economy, which would be helped by fixing Britain’s beleaguered transport system and National Health Service.
However, there is some criticism that Mr Starmer did not highlight Britain’s apparent dire state and the likelihood of greater taxation during the general election campaign.
Although he has a substantial majority, MPs will now have to explain to their constituents why things have to be bad before they become good.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
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“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
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