Jim Rogers, the man who co-started the quantum fund with George Soros, the man who famously drove the UK from the exchange rate mechanism and brought down the Major government, has been appearing on media outlets around the world with a stark message for the British public.
Rogers believes that the economy is doomed for decades. He says this with great sadness because he was educated in the UK and he loves it here. His reasoning is quite simple.
The twin drivers of the UK economy for the last 20 years have been North Sea oil and financial services. London was a global financial centre for a number of niche markets including gold, currencies, mining and several commodity markets.
The reality today is that these markets have either imploded or the exchanges which handle these markets in the future will not be located in London. The loss to the gross domestic product from our standard of living from this business loss should not be underestimated.
Financial services accounted for over 10% of GDP in 2007. This was one of our greatest exports for raising foreign revenues. The other large contributor to GDP was North Sea oil. While not as big as financial services, North Sea oil has been in decline for almost a decade. In the near future, the UK will become a net importer which will add a further drag on the economy.
The housing crash is also put extreme pressure on the economy since mortgage withdrawals provided a lot of the income to spend on shops, restaurants, bars and many other businesses.
This section of the economy will also deteriorate rapidly in the current environment. The good news is that the UK is a resilient and entrepreneurial economy. A move towards green solutions and more efficient technologies could help to transform the economy once again.
However, people like Jim Rogers are predicting that this will take upwards of 20 years.
The need to re-train the workforce, re-tool industry and re-energise and replenish our infrastructure are all urgent challenges.
Once these challenges have been met, the UK economy will be able to continue its upward trajectory. For almost 2 centuries, has been one of the best places in the world to live. It’s hard to see this changing any time soon, despite the odd blip along the way.
