This phrase, used by a UK Minister of State in a recent “leading” podcast applies not only to the UK, but equally to Germany. In the UK, the honeymoon of the new British government seems to have come to an end as, despite some reemerging economic growth, calls for a vision and a clear plan for the future have grown louder. However, Britain is not alone as the German government also appears to lack a clear strategy to overcome economic stagnation and the fragmentation of its electorate.
Whilst the UK Government commands a strong majority in the House of Commons, its vote share was the lowest of any post-war majority government, indicating a growing fragmentation of the British electorate as well. With living standards stagnating in many countries, voters are increasingly losing trust in the traditional parties, which may result in politics becoming even more volatile in the long run. The ensuing uncertainty will have profound effects on investment and future economic growth.
Therefore, bold action is required and James Carville’s famous words, “It’s the economy stupid,” appear to be as valid today as they were 30 years ago. For the UK, the biggest boost to economic growth would be a proper reset of economic relations with the EU, massive investment in skills, and a significant increase in capital expenditure to boost productivity – a pre-requisite for wealth creation.
To some extent, Germany suffers from similar problems, especially in terms of a shortage of technical skills. Furthermore, its green transition has led to significant cost increases for many businesses with corresponding effects on output. Interestingly, when we look at the energy transition, the UK offers an example for Germany, as it has managed to close its last coal-fired power station this week.
Germany’s government, despite its green credentials, still has a long way to go to reach this milestone. In other words, we can all learn from each other, but bold actions are needed on both sides of the channel to properly revive our economies and help us master the manifold global challenges ahead.
Dr Ulrich Hoppe
Hauptgeschäftsführer
Deutsch-Britische Industrie- und Handelskammer
