By William Schomberg
LONDON (Reuters) – British finance minister Rachel Reeves will say on Wednesday that she is ready for a fight to push forward her plans to speed up the country’s slow-moving economy that have grown in urgency after this month’s bond market slump.
Reeves and Prime Minister Keir Starmer promised voters before last July’s election that they would turn Britain into the fastest-growing Group of Seven (G7) economy.
But since their Labour Party took power, the economy has lost momentum, with many employers blaming Reeves’ first budget plan which included a big increase in the tax burden on businesses.
A surge in global government borrowing costs earlier this month ahead of the inauguration of U.S. President Donald Trump – which hit the UK particularly hard – only increased the pressure on Reeves to get the economy moving again.
Reeves will use her speech on Wednesday to claim that home-building and new transport links for a “growth corridor” between the university cities of Oxford and Cambridge could help to create “Europe’s Silicon Valley”.
She will point to nearly 8 billion pounds ($9.95 billion) of investment over five years by water companies, including the building of nine reservoirs as an example of faster investment in Britain.
Reeves is also expected to announce on Wednesday a decision on expanding London’s Heathrow Airport.
“Low growth is not our destiny. But growth will not come without a fight,” she will say in her speech near Oxford, according to excerpts.
Starmer and his top officials have previously said they will not allow opponents of infrastructure and big construction projects to use the planning system to block development.
UPBEAT TONE
Switching to a more upbeat tone after being criticised last year for focusing too much on the problems inherited by Labour, Reeves will say Britain’s strengths – with its history, language and legal system – mean it can compete in the global economy.
“For too long, we have accepted low expectations, accepted stagnation and accepted the risk of decline. We can do so much better,” she will say.
The Bank of England has forecast that Britain’s economy did not grow at all in the second half of 2024. The bank said in November it expected growth of 1.5% in 2025, largely due to higher government spending.
Morgan Stanley, Goldman Sachs and J.P. Morgan have more recently forecast growth of under 1% this year, although the International Monetary Fund has said Britain will outpace its even more sluggish European peers.
The slow economy – along with higher public borrowing and stubborn inflation – was a factor behind the heavy selloff of British government bonds this month.
Gilt prices have since recovered but any resumption of the spike in borrowing costs could force Reeves into spending cuts that would further complicate her growth agenda.
On Tuesday, Starmer and Reeves unveiled plans to allow corporate pension surpluses that are worth around 160 billion pounds to be released and reinvested. Last week, the government announced a new approach to promote regional economic growth.
($1 = 0.8039 pounds)
(Writing by William Schomberg; Editing by Gareth Jones)
