Boris Johnson exudes optimism and promises post Brexit innovation

WHAT a difference a majority makes.

Boris Johnson not only achieved a huge victory in the December election but hopes to achieve a swift trade deal with the European Union.

As behaviourist Robert Shiller says, the British prime minister is “a motivational speaker who knows how to create animal spirits”. Indeed a firmer London stock market illustrates renewed confidence in a Parliament that has been dysfunctional for three years. Businesses and investors who have been wracked with uncertainty now appear to be much more relaxed. Renewed confidence and firmer property prices illustrate that local and global funds are starting to move into British assets.

Stanley Druckenmiller is an example. The long-time hedge fund manager, who once managed money for George Soros, said on Bloomberg that he had been buying UK stocks.

Despite worries about a Johnson spending spree and easy money, the pound has defied the bears. It is well above mid-2019 lows. The reason is pent-up foreign inflows. Sterling, however, has devalued substantially since the 2016 referendum.

Johnson promises to deliver

People who know and have worked with Mr Johnson have long said that both opposition MPs and the media have underestimated him. Indeed, he has the skill to appoint and delegate to intelligent and competent people. They include left-field lateral thinkers such as his chief of staff, Dominic Cummings.

Mr Johnson has stated that the process of delivery will shortly begin. His aim is for a stable “one nation” Conservative government to be in charge during the coming decade. In the weeks following the January 31 Brexit date, there will be a Cabinet reshuffle followed by a Budget in March.

Free trade the objective

On the international front, Mr Johnson will rebrand his Brexit negotiating team, “Taskforce Europe”. The aim is to have an ambitious EU free trade agreement, similar to Canada, by the end of 2020. The UK will remain on close, friendly terms with the EU. The Union contends that it will be exceedingly difficult to complete the negotiations to meet the tight deadline. The EU also requires regulatory “equalisation”. This would enable the UK and EU financial institutions to freely trade bonds, equities, currencies and commodities in Europe and London.

The British government, however, wants more relaxed regulations. In the meantime, Mr Johnson will be visiting Washington. The UK and US intend extending trade. Also Singapore, India, Australia, South Africa and other
Commonwealth nations wish to raise trade and two-way investment with the UK.

Regional Keynesian pump-priming and innovation

On the local front, austerity is over. Mr Johnson aims to redevelop depressed north England, Midlands and Welsh towns and villages. Several former Labour constituencies switched votes to the Tories and Mr Johnson wishes to fulfil promises to boost funding and improve the National Health Service, schools and infrastructure. The intention is to pursue regional Keynesian “multiplier” policies to boost income, output and employment. Mr Johnson has promised major East-to-West rail construction and to build and renovate homes, hospitals and schools.

Ideas coming from a physics professor instead of an economist

Downing Street is keen on the ideas of Richard Jones, professor of physics for research and innovation at the University of Sheffield. Prof Jones has written a paper on boosting productivity and innovation in the depressed regions. The goal is to drive up productivity across the region and help them break out of the low innovation, low skills and low productivity trap. The primary mechanism will be the establishment of new centres of research such as science parks to create clusters of innovation and skills to raise productivity and attract businesses.
These centres would draw on the experience of the most successful overseas models, such as Taiwan’s ITRI and Germany’s Fraunhofer network.

The bigger task at hand, though, must surely be to kickstart economic growth across the UK as the economy has stagnated over much of the past year. These are a few of the more immediate items on Mr Johnson’s agenda. He still faces political challenges in Scotland and Northern Ireland.

© Copyright Neil Behrmann

For entertainment and investment ideas, try out Neil’s books. They can easily be found via his author page on Amazon  

Neil’s financial thrillers Trader Jack- The Story of Jack Miner and its sequel Jack of Diamonds have had good reviews. They include scenes involving gold and gold share trading, coffee and diamond markets and financial bubbles and crashes. Children 8 to 12 have also enjoyed the anti-war fantasy, Butterfly Battle- The Story of the Great Insect War which had exceptional reviews.

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