When the Conservative coalition government came into power in 2010, the country was in dire straits. The Global Financial Crisis still stung like a fresh wound on the British economy, and the solution appeared to lie with the cost-cutting austerity measures outlined in the Conservative party manifesto. Fiscal consolidation and reduced public spending became the orders of the day as everyone prepared to collectively combat recession armed only with the bare essentials.
So why are we somehow in a less tenable position after 14 years of Conservative rule than we were when they first came into power? How could 14 years of cutbacks still leave the entire country coming up short? And why has investor involvement in the UK economy notably stagnated?
Whichever way you approach the issue, the bottom line is clear: under Conservative rule, the UK has endured failure after failure with no apparent end in sight. And, with the recently elected Labour Party now citing a £22 billion hole in public finances as the damning legacy of the Conservatives’ disastrous decade of leadership, the question of how the country can steer itself towards prosperity is a difficult one.
At Concept Capital Group, we harness the financial power of private investors to bring about lasting social impact. As such, we believe that investors are instrumental in pushing the economy towards recovery. To accomplish this, we must understand and break down the impact the past 14 years of Conservative rule have had on the UK.
3 Key Ways the Conservatives Failed the UK Economy
In broad terms, the Conservative Party has presided over one of the worst economic periods in UK history. While certain global events such as the COVID-19 pandemic and the Russian-Ukraine War played a part in the economic downturn the country is currently wading through, Conservative policymaking and strategy are arguably more responsible. While the UK economy has struggled across many axes in the past 14 years, there are three key areas in which investors especially were negatively impacted by the Conservative government.
1. How Conservatives Fell Short on Housing and Homelessness
Following the Global Financial Crisis, the UK housing market was far from functional. 2008 saw the biggest annual drop in house values since 1991, as the average price fell by 15.9%. As such, it may be unfair to lay the blame for the current state of the housing market solely at the feet of the Conservative government. Still, despite austerity measures and an ongoing commitment to building 300,000 homes per year, the Conservatives consistently failed to meet the challenges of the worsening UK housing crisis, eventually scrapping the targets outlined in the Conservative manifesto altogether. By the time of this year’s general election, mortgages for first-time buyers had hit a 10-year low, the rate of homeownership in England had stagnated since 2003 and the average house price had risen from 5.92 times average earnings in 2003 to 8.3 times average earnings in 2024.
Although proposed by the Conservatives as a solution to inequality in the housing market, the Renters Reform Bill became another of the party’s housing shortfalls when it stalled in parliament thanks to opposition from Conservative MPs. Though it has since been reintroduced to the House of Commons by the Labour government, the Conservative Renters Reform Bill became a sore point during the general election. Rents had risen by 45% since the previous election and no-fault evictions hit a six-year high amid a cost of living and mortgage crisis.
Worse still, an inability to meet housebuilding targets under the Conservative government (coupled with the decentralisation of responsibility to local governments) meant that temporary accommodation had become increasingly central to social housing policy. This year, local councils spent a record £1 billion on temporary accommodation for households experiencing statutory homelessness – a 50% increase since 2022-23. At the same time, rough sleeping increased in every region of England in 2023, signalling general nationwide problems with housing affordability.
Currently, there are 30,000 fewer socially rented homes being built each year than there were before 2010, a dearth it will fall to Labour and its private industry partners to fill.
2. How Conservatives Stymied Trade and Productivity with Brexit
Productivity – a measure of performance that weighs the output of a product with the input, or resources, required to produce it – has fallen significantly in the past 14 years. A recent speech by the Mayor of London, Sadiq Khan, highlighted Brexit as a key contributor to the current cost of living and productivity crisis, with London alone having 290,000 fewer jobs than if Brexit had never taken place. Indeed, one of the more notable immediate impacts of Brexit was the pound plummeting to a record 31-year-low against the dollar after the vote.
As an article by Bloomberg notes, London was the greatest beneficiary of the European Union (EU) prior to Brexit, beating out the other 27 countries on gross domestic product and employment. Since the Conservative government passed the controversial vote, the country has experienced a shortfall of 330,000 workers and increased unemployment rates.
Likewise, trade in the UK failed to bounce back from the COVID-19 pandemic as it has in other European and G7 countries, arguably as a result of Brexit discouraging investment and severing pre-referendum trade deals. Research by the Centre for Economic Policy Research (CEPR) confirms that Brexit has caused a reduction in productivity and output of just over 1% of the Gross Domestic Product. A further study by the London School of Economics also found that Brexit was responsible for roughly a third of UK food price inflation since 2019, adding an estimated £7 billion to the country’s collective food spending.
There has also been a gradually widening productivity gap between London and the rest of the UK due to a reduction in Gross Value Added in the rest of the UK compared to the capital. This gap is exacerbated by Resolution Foundation forecasts that propose the traditionally productive manufacturing sectors of the UK economy will shrink over the next few years. This will likely cause an even greater fall in productivity in the wake of the Conservative government.
According to projections by the Cambridge Econometrics think tank, the UK will ultimately have 3 million fewer jobs by 2035 than if it had stayed in the European Union, with 32% lower investment, 15.8% fewer imports and 4.6% fewer exports.
3. How Conservative Policies Cut Spending and Growth
Under the Conservative government, the UK’s economic stability and power have taken several lasting blows. Discounting the previously mentioned impact of Brexit on trade, productivity and the value of the pound, the past 14 years have also caused the country to experience dramatic falls in public spending and economic growth.
When the Conservative government announced its austerity measures back in its 2013 budget update, public spending was expected to hit lows that had not been seen since the Second World War. What no one could have predicted, however, was that those cuts would be extended and intensified into 2023, with a hidden £28 billion in stealth cuts to public services becoming one of the more controversial talking points towards the end of Rishi Sunak’s government. The subsequent pressure on social housing, the NHS and the British electorate is arguably one of the chief proponents of the crushing defeat the Conservatives ultimately suffered in this year’s general election. Overall, real-term funding by the central government has fallen by over 40% since the Conservatives came into power back in 2010. Absolute poverty also fell five times faster in the 13 years to 2009 than it has in any year since 2010.
According to a report by global news organisation CNN, the UK economy has stagnated in the past few years. In 2023, it experienced limited growth. Most Britons are no better off now than they were when the Conservative coalition government stepped into power back in 2010. So severe is this economic stagnation that the traditional post-election economic bounce-back seen in previous years failed to materialise this year, even as Labour gears up to rebuild the British economy.
Additionally, there has been an unprecedented lack of real wage growth since 2010. According to the Institute for Fiscal Studies (IFS), there has been no longer period without real wage growth since the Napoleonic Wars, with the size of national debt relative to national income increasing dramatically. Though macroeconomic events compounded the UK’s economic slowdown, the UK’s economy was already experiencing slow growth prior to even the COVID lockdown and government debt has floated at above 90% of national income since the Global Financial Crisis.
Where Do Investors Fit In?
For investors, the current economic climate within the UK might seem intimidating, but the opportunity presents itself in the form of the Labour government’s commitment to course correction. The economy exited recession earlier this year and, since the election, the new Labour government has been outspoken about its focus on kickstarting economic growth.
To accomplish this, the government will be partnering with businesses, centralising economic power, and building a National Wealth Fund aimed at creating jobs and attracting new investors. Further to this, the Labour government will continue pushing for foreign direct investment as a source of economic stability, investment and reform.
A global investment summit will take place on 14th October 2024. During this event, Prime Minister Keir Starmer will bring together up to 300 industry leaders to discuss plans to spur investment in the UK. Following the summit, a surge in opportunities for private investors may crop up, signalling the start of what we can only hope is the end to over a decade of economic failures.
How Concept Capital Group Supports Alternative Investors
At Concept Capital Group, we specialise in alternative real asset investment opportunities designed to hedge against mainstream fluctuations within the market. Our buy-to-let modular homes offer a unique and fixed alternative to traditional rental property investment, allowing our clients to rest easy knowing their monthly rental income will not be subject to hidden fees, rising interest rates and extreme variances in regulation.
For more information on our investment opportunities, book a call with our team today.
