Finance industry leaders are looking for an uplift from UK Chancellor Rachel Reeves as she unveils a mini-budget on March 26 against the backdrop of a global trade war started by the US.
Chris Hayward, the policy director of the City of London, which is home to the financial services industry, advised Ms Reeves that with a focus on better investment conditions and relative UK stability the financial statement could be hailed as a success.
"The City of London is being seen as a safe haven for investment at the moment, and it's helped, of course, by having a stable government, the government that's got a large majority for four or five years," Mr Hayward told The National in the run-up to the Chancellor's signature spring statement. "The conditions to invest and the language of the government around it are actually an attraction."
The Labour government is less than a year old, and while proclaiming economic growth as a priority, it has been trapped with a flatlining economy and deteriorating public finances. To Mr Hayward, a necessary message of recovery would go a long way to stop the slide.
"We tend to always be a nation that spends a lot of time apologising or explaining why things can't happen. What we've got to do is take a much more proactively positive approach when we're talking about the opportunities," he said.
One initiative that Ms Reeves is expected to bring forward in a statement that is overtly pro-foreign investment is joining up with the City of London's expertise for a new approach to cultivating foreign investment in the UK.
"She's confirmed that the government is going to tackle foreign direct investment in a much more positive way," he said. "The Treasury is to develop a concierge service for inward investment so that investors have an investment hub."
The move would emulate the efforts of leading rivals for global funds, including Dubai, Ireland and Singapore, in demonstrating the UK is ready to work harder to secure and promote direct foreign investment. "I think we've allowed our competitors to get ahead of us in this area, we haven't made it easy to invest in the United Kingdom."
One of the new government's early ideas was that home-grown pension funds could be encouraged to invest much more in the domestic economy. So far, the efforts to forge consensus with the City fund managers has run up against investment rules and established codes governing investment decisions.
"I'd like to know a little bit more about where they're going to go with pension reforms," Mr Hayward said. "This is a challenging area and I think she needs to be clear about where the government's going to move on that front."
After a summer in which the new government paraded a £20 billion budget black hole as its legacy from the Conservatives, the Reeves budget in October was a belt-tightening exercise that foreshadowed grim winter economic statistics.
"It was a tax-increase budget that has given her a lot of challenges and put a lot of cost on business," Mr Hayward said. "She has made clear there will be no more tax increases and I hope very much she's going stay with that position. If you're trying to talk about economic growth on the one hand and then raise your taxes on the other, it's a bit of a contradiction in terms."
The UK could escape the worst of US President Donald Trump's planned April 2 reciprocal tariff regime with a bilateral trade agreement. For Mr Hayward, the UK's position in the global economy could benefit from the change in US policies.
"The US is a massive growth economy but bringing in these tariffs will be very inflationary for America," he said. "The City of London is in a bit of a sweet spot with appetite from global investors for coming to the City really, really strong."
The Chancellor is set to use announcements on more defence spending, including laser weapons for warships, in a £2.2 billion boost to the military build-up in the UK. Overall, Ms Reeves is expected to announce cuts to public spending as she trims to meet the UK's debt rules.
The government has already announced plans to cut £5 billion with lower support for disabled people and those declared unable to work. Some Labour MPs worry that the government is returning to austerity policies last seen after 2010.
Debt trap
One of the reasons for the tight finances is a jump in interest payments on the national debt, which is now 100 per cent of GDP. The yield on 10-year bonds – effectively the cost of government borrowing – has risen from 4 per cent a year ago to 4.7 per cent, with some blaming domestic factors as well as the global trend.
Forecasts that £105 billion – around 8 per cent of total spending – would be spent on debt interest payments this year, have now risen sharply. The £9.9 billion gap Ms Reeves had in reserve in October has now been eliminated.
