The UK economy looks fundamentally different now from its image even as recently as thirty years ago, it is simply un-recognisable. And for the better, even in these momentarily unhealthy times.
Indeed,from a practically sclerotic housing market, the UK can now boast a large and growing private rental sector, standing alongside but not in the shadow of a sizeable healthy owner-occupancy market.
Where the latter was once plagued by flexible fast moving mortgage rates and high loan to values, it is now filled with fixed-rates, householders moreover enjoying greater equity in their homes than at any time in history.
In their turn, UK interest rates are no longer prone to politically-opportunistic moves than once was so sadly the case.
In relation to the UK’s retail banking sector - to which I will return - where once banks would swiftly foreclose and make housing matters so much unnecessarily worse, they now sensibly forebear, helped in doing so because they behave in a macro-prudential way, their oversight also back in professional hands.
Professional Bank of England hands too, holding the tiller of UK interest rates. And whilst these are historically low, in part because of ‘the crises’ of 2008 and the one we find ourselves in, that is far from the entire picture.
An important reason why inflation is so low is that the UK has moved to an entirely new pricing architecture, one brought about by the building out of e-commerce so we can buy ever more from disruptive technologies; technologies whose pervasive nature seems to grow ever faster and in which the UK is a world leader.
And whilst these technologies have destructively egressed into old sectors and “de-manned” them, they have created entirely new hiring demands, which if one reflected honestly, have actually involvednet new job creation.
After all, buying from the clouds still demands very much feet-on-the-ground to deliver on customer hunger and thirst for all manner of goods and services.
I write this with confidence because it is precisely what we witnessed ahead of this crisis.
Where our universities were once small-hallowed grounds occupied by ivory towers and filled with our privileged young adults – albeit often living in damp garret bedsits – the UK’s Higher Education Institutions (HEI’s) are now all-pervasive across every region and in many ways repopulating towns and cities beyond London.
Our ever-expanding universities have created an HEI sector that has occupied ever more real well-appointed commercial and residential real estate, recruited ever more skilled and general labour, and been ever more rewarded with lucrative fee-paying foreign students keen to be awarded prestigious degrees. Indeed, this crisis has thrust the UK’s HEI’s to the fore and made their business and science parks all the busier for our vaccinated health.
Where once stood regionally monolithic ‘smoke-stack’ industries whose ebbs and flows brought plenty or poverty to their immediate surroundings, the UK now boasts a landscape where no single industry can be accused of holding any part of our nation hostage to its fortune or misfortune.
This is not to claim all these changes were easy or quick to make, merely to point to their arrival for our better. Let me paraphrase from Orwell and stand on that giant’s shoulders with“What can the England of 2021 have in common with the England of 1991? Nothing, except it happens to be the same nation, but now grown up and strapping”.
The British banking landscape has seen the disruptive arrival of a raft of virtual banks - Monza, Revolut, Atom, Starling and others - all vying to win over depositors from the old high street ‘stale-warts’ rivals. I have no doubt these tech savvy “newcos” will in turn face competition from fresh e-finance arrivals. I am no less sure that to keep ahead of the game the early entrants will move forward.
The disruptors named above will, I have no doubt, very quickly grow their currently extremely modest presence in the UK residential mortgage market. They will achieve this by acquiring/merging with existing non-banking mortgage-offering platforms.
What this all means for the UK residential market is easy enough to predict: ever more competition for UK mortgage custom, can only be good news for UK borrowers in terms of availability and affordability of debt.
As to whether there comes the risk that disruptors fuel a ‘housing bubble’ which ultimately bursts I will say only this. Sound demographic fundamentals - not least the increasing arrival of students from Asia and upturn in births from 2000 - alongside attentive regulatory oversight, should provide protection. Protection yes, but no cast iron guarantee. Back to the present.
Ahead of this crisis the UK had scaled to its highest ever number employed, 33 million and its lowest jobless rate, 3.8%. Yes, these figures included jobs which were laborious and far from fulfilling. However, one has to qualify (sic) it included the highest ever figure in UK history of skilled non-manual workers; a record 12 million in professional roles.
To repeat the upwards job journey cannot fail to involve an ever increasing number of workers involved in the extensive supply-chains that see goods and services journey to us at home, as well as be delivered to our traditional workplaces, when that is, we return to a post-coronavirus normal. This normal will be old in the sense WFH will be deemed an aberration.
Let me close with the UK’s ‘labour productivity problem’. It is simple enough to understand, for there is no doubt a problem. The problem is that in our ‘post smoke-stack’ service-based employment form, we have yet to master how best to measure our very real and rising productivity. Let’s just say, this problem is work in progress.