Michael Moore's Outlook: Still on the growth agenda
By keeping it simple (I find that a good lesson for life), or vague (if you are being a bit more challenging) my prediction in this column a year ago that 2024 would be ‘lively’ was well borne out.
Especially in politics. Yes, President (-elect) Trump has grabbed the headlines (confident prediction for 2025 – he will grab a few more) and we saw a big change in the UK. But pretty well anywhere there was an election (and there were about 50 affecting 2 billion people, you may recall), there was change. Even in India, where the Prime Minister held on, he did so while losing a majority in the lower house of the parliament.
This is an increasingly familiar feeling, of course, especially closer to home. By the end of 2024 France was on its fourth prime minister of the year. And Germany was anticipating the possibility of a new Chancellor early in 2025 after the collapse of the coalition.
Angry voters are not a new phenomenon. And ‘change elections’ are the essence of democracy. So, awkward as it is for those who lose out (been there, seen it, done it), there are usually good reasons. Like inflation being too high and growth being anaemic.
Indeed, when you dial out the bluster and noise from the cacophonous US election, it really did filter down to ‘the economy, stupid’ (to quote Bill Clinton’s election strategist, James Carville).
Zoom out to the orbit from which the OECD, World Bank, IMF and others view the world economy and you see an unappealing, dull mosaic. At least for most of the developed countries.
Late in the year, the OECD estimates for 2024 growth in Europe had the UK (1.1%) and France (1.1%) leading the pack of the original ‘big 4’, with Italy (0.8%) and Germany (0.1%) barely grinding out anything positive at all. They were all well off the G20 economy average of 3.2%.
And a look at their projections for 2025 is only for the stout-hearted: 1.2% for the UK, France 1.2%, Italy 1.1%, Germany 1.0% - versus the G20 average of 3.1%. I did warn you.
This means that voters being concerned about their economic prospects is not unreasonable. Nor is it a surprise that they retain scepticism for new governments until they deliver greater prosperity.
In the UK the ‘growth debate’ retains real salience. Not least because the tax-raising detail of the Budget in late October has taken a while to absorb.
Set aside the private capital industry’s understandable focus on the carried interest tax changes ( – only temporarily, as I will return to the topic next month as the government consultation ends). The broader point is that investment is such a key driver of growth that creating the right conditions and frameworks to deliver it remains the top priority.
On the positive side, many international investors are encouraged by the prospect of a sustained period of political and economic stability in the UK. And they see a lot of senior policy makers busily fleshing out the details of the industrial strategy, planning reforms, the pensions overhaul and a new energy infrastructure.
But there can be no doubt that the huge tax hit (in particular, on employers through big increases in national insurance tax) has unsettled many and recalibrated expectations. And since confidence is the first thing invested in any project or business, this is not helpful in the short term.
Add to that the fact that the multi year spending review, which will put money where the government’s priorities lie (for instance in terms of education and skills), will not be completed until early summer and the confidence pause may last longer than anybody really wants.
One thing is clear, however – the reality of the need for growth is unchanged, and the role of private capital on delivering it is well understood. And there is no shortage of opportunity to keep the focus on this symbiosis in the year ahead.
This will be centred on the competitiveness agenda – making sure the UK retains its global position in private capital by ensuring we have a regulatory system which attracts global capital, a tax system which attracts and retains global talent and an investment environment which provides the framework for investing in the wider economy.
Reviews of the regulation which impacts the industry (such as on AIFMD and MIFID), closer engagement with senior regulators (such as the Bank of England, FCA and CMA) and detailed conversations about priority investment areas (through the Industrial Strategy process) create an opportunity set for everyone and a route to that, so far elusive, growth.
So 2025 will also be lively, if for different reasons than the year just passed.
Michael Moore
Chief Executive, BVCA
This article was originally published on 14 January 2025 on the Private Equity News website here.
