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Starmer will enjoy the briefest of honeymoons with his in-tray full of problems to fix


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July 05, 2024

The British Labour Party’s landslide victory is historic. “Change begins now,” the new prime minister Keir Starmer said, capturing the public mood – and the hunger for a better Britain. His parliamentary majority is enormous, and so is Labour’s mandate for “change”.

The catch is that the problems facing the new government have built up over 14 years and are also enormous. However impatient voters – and new Labour MPs – may be, Mr Starmer has an in-tray that no one will envy. It’s a list of problems that voters want fixed immediately but which have been years in the making and will take more than a five-year parliament to fix.

The lack of affordable housing, for example, is so severe that many young British people feel they may never own their own home. The fix doesn’t just involve building the homes, which itself takes time.

What’s needed includes changing planning laws, improving the economy, paying good wages and cutting the cost of borrowing. Then, how does Mr Starmer’s new team – a party out of government for almost a decade and a half – fix record waiting lists for National Health Service appointments?

Where do we find and train new medical teams? How does he fix the problem of many people unable to find an NHS dentist? What – despite all the hot air, promises and senseless ideas of sending migrants to Rwanda – is a realistic solution to the problem of migrant boats in the English Channel? And how do you fix the underfunding of the great British cultural assets including universities?

A historic vote of no confidence in the Conservative party is not evidence of long-term enthusiasm for Labour

The problems facing the best and the brightest among us are enormous. British students right now leave university with debts averaging around £45,000. According to the Student Loans Company one (anonymous) student who pursued advanced degrees has accrued student loan debts of more than £200,000. In another case, a newly qualified doctor, Dr Luke Amos, told the BBC that his student debt "became almost a joke when I saw the outstanding balance break the £100,000 barrier".

And then, although it will not be presented by Mr Starmer in exactly this way, what does the triumphant new Labour government do about Britain’s image abroad? Can we reverse our decline in hard power? The British army has been under-resourced to the point where even the former Conservative Defence Secretary Ben Wallace suggested it was only good for “tootling around” at home.

As a result of Brexit, Britain has made itself much less significant within Europe. The knock-on effect recognised by diplomats is that the UK is now also less important to its indispensable ally, the US.

The New York Times graphically illustrated the UK’s difficulties for its politically savvy and internationally minded readers this week. They reported that in the UK food bank use has increased by 5000 per cent in the 14 years the Conservatives were in power. Graduate debt is up 210 per cent. Homelessness is up 120 per cent. The asylum backlog is up 1,300 per cent. Hospital waiting lists are up 210 per cent. And while cutting migration was a cornerstone Conservative policy – net migration is, in fact, up 170 per cent.

That list of problems and failures sunk the Conservative party to a truly historic, inevitable and – many commentators might conclude – deserved defeat. But that same list has now become the Keir Starmer in-tray. Starmer has therefore been extremely cautious about promising immediate improvements.

But the key takeaway from this election is an extraordinary hunger and mandate for change. Big names in the Conservative party have been punished and humiliated for their years of failure.

The Conservatives will head into bitter in-fighting (no change there) and are split between traditional moderate right-wing policies and some radical far-right ideas. They have lost seats in every direction including to the troublesome Reform party of Nigel Farage.

Nigel Farage has won his first seat in parliament. Reuters
Nigel Farage has won his first seat in parliament. Reuters

Mr Farage, after seven previous failed attempts is now – eighth time lucky – at last an MP. His well-financed right-wing Reform party is now a force to be reckoned with and more trouble for the Conservatives. But Labour are the clear winners. They have plenty of ideas, even if the scale of change they believe is necessary will take a decade.

Labour has even succeeded in turning back the tide of Scottish nationalism, winning back many seats from the Scottish National Party. They have helped wipe out the Conservatives in Wales, and the Conservative allies in Northern Ireland, the Democratic Unionist Party have suffered setbacks. Sinn Fein has done well. The Conservatives are therefore essentially an English – rather than British – political party now.

But the election – and the future – belongs to Labour. The British people have shown their impatience with failure and a suspicion of the promises of governments and politicians of all types.

One of the little-discussed but interesting statistics about the UK is that British people tend to trust each other much more than citizens of comparable OECD countries. But we trust our governments less than other comparable countries. That means the Keir Starmer honeymoon is likely to be brief.

He will, however, be helped for a time by his political enemies. The Conservative party for years has been having a kind of nervous breakdown. The bitterness on the right of British politics is based on grudges, personal ambitions and loathing, and that will undoubtedly continue.

Mr Starmer will enjoy the briefest of honeymoons because the real problem he faces is not that anyone doubts his victory. It is that in terms of seats the Labour Party has won a landslide but in terms of votes, under the peculiar British system of First Past The Post, Labour has not received a vastly different share of the votes from its big historic loss in the 2019 general election.

Mr Starmer has begun to climb the mountain of power. He talks well of the politics of public service, saying that “it is now time for us to deliver.” Well, that’s true. But when your vote share is the same as in 2019 – one of Labour’s worst defeats in almost a century – and in 2024 that same vote share produces one of your best results, Mr Starmer has to be humble in victory not triumphant.

A historic vote of no confidence in the Conservative party is not evidence of long-term enthusiasm for Labour. The Labour project has an enormous parliamentary mandate and for now a great deal of good will. But – as a former British prime minister once said of his opponent – “you were the future once.”

Follow the UK General Election results

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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.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“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.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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