During the election campaign, Boris Johnson promised ambitious plans for an infrastructure boom to rebalance the economy. Yet since his landslide victory, the prime minister could be accused of dither and delay.
Uncertainty about major projects such as HS2 remains, as a battle rages at the heart of government about how the prime minister might fulfil his levelling-up agenda, and how much money he might spend.
A decision on the project, which could cost as much as £106bn, is expected to arrive as early as this week, in an opportunity for Johnson to underscore the extent of his ambition. Is the levelling-up prime minister serious about closing regional productivity gaps? Will the funds be made available to ensure the promises he made at the election are more than just soundbites?
If Johnson is serious about narrowing the divide between London and the rest of the country, he must invest with a regional focus.
The north of England has spent too long as the poor relation to London in terms of infrastructure investment. The Conservative-led austerity agenda since 2010 only compounded the problem, in a bitter irony that ought not be forgotten as Johnson parades a renewed zeal for infrastructure spending.
According to the IPPR North thinktank, the transport spending divide between north and south has widened over the past 10 years of Tory rule. Average annual spending on transport projects rose by about £409 per person in London, where Crossrail is slowly being built at great expense, compared with a rise of just £162 per head in the north, where Pacer trains from the 80s still rattle along the rails.
If northern England had received the same amount as London, then £66bn more would have been spent: a damning shortfall that goes some way to explaining the regional divisions in modern Britain.
Rail infrastructure will play a major role in shifting freight and passenger travel from road to rail and cutting the UK’s carbon emissions
Transport investment is crucial for economic prosperity. Regional mayors across the north and Midlands estimate HS2 could generate 500,000 additional jobs. The National Audit Office believes all phases of HS2 would create around £1.40 in benefits for every £1 invested. The use of UK steel would support more than 2,000 jobs in an industry struggling for good news.
Better infrastructure can drive up the productivity of the economy. According to economic historians, the Victorian railway boom fuelled growth in the population and economy of Britain, with most benefits felt immediately next to stations and in medium-sized towns.
There will be costs for natural habitats along the routes of major railway projects, but rail infrastructure will also play a major role in shifting freight and passenger travel from road to rail and cutting the UK’s carbon emissions.
In the past week, the government has tried to underscore its green credentials by sounding serious about decarbonising transport, bringing forward the ban on the sale of new petrol and diesel cars to 2035. The prime minister is also looking for the first town with an all-electric bus network.
But that rhetoric must be matched by a detailed roadmap and money to spend. Although it spoke with vested interests at heart, the car industry had a serious point when it warned the government had put forward a “date without a plan”. Electric cars will only become commonplace with adequate infrastructure in place.
The National Institute of Economic and Social Research (NIESR) believes it would take more than a decade for the benefits of “levelling up” to be felt. According to Britain’s oldest economics thinktank, Johnson’s plans as they stand would only boost GDP by about 0.4% in the long run. Such gains pale in comparison to the impact of Brexit of about -4% on GDP, according to NIESR’s expectations.
However, it could still be an early shot in the arm for the regions. Britain’s construction industry is effectively in recession, with civil engineering bearing the brunt as political chaos clouds the outlook.
Failure to invest in infrastructure has held Britain back in the past decade and contributed to heightened regional divisions. It is time for the prime minister to act.
Credit Suisse scandal disgraces banking again
The departure of Tidjane Thiam as chief executive of Credit Suisse is another reputational blow to a banking industry seemingly unable to escape from the cloud of the 2008 financial crisis.
Thiam departed following a scandal that involved the bank spying on two former members of staff, which revealed the secretive world of Swiss banking to be a transparently hostile place for some executives.
The highly regarded Thiam said in his resignation statement that he had no knowledge of the bank’s spying on its former head of wealth management and former HR boss. But the fact that a leading financial institution would hire a corporate espionage firm to track senior figures will underscore the image of banking as a rogue sector that operates outside conventional norms.
There are even more sinister undertones to the story: Thiam’s most influential supporter – the bank’s largest shareholder, Harris Associates – hinted that racism might have played a role in the ousting the Ivory Coast-born executive. Credit Suisse’s chairman, Urs Rohner, said the appointment of a Swiss national – Thomas Gottstein – to succeed Thiam had nothing to do with “the colour of his passport”. Even so, appointing an insider is a stark and symbolic contrast with the international perspective that Thiam brought.
Only last week, a senior Goldman Sachs employee was barred from working in the banking industry for failing to raise red flags over the 1MDB scandal, where billions of dollars were looted from a Malaysian sovereign wealth fund. The Credit Suisse affair adds another chapter to the industry’s shameful history.
And despite the headlines, the one figure likely to dust himself down and walk into another good job is Thiam. Credit Suisse, on the other hand, might take longer to recover.
Few Super Bowl Sundays for an embattled TV industry
The week started well for the embattled TV industry, as the Super Bowl provided its annual super-sized reminder of the power of must-watch TV.
Almost 100 million American football fans tuned in, with 30-second commercials going for $5.6m (£4.3m) apiece – a reminder that the Netflix effect is far from terminal for traditional broadcasters. Appointment-to-view TV, from live sport to hit shows such as Love Island and Bodyguard, continue to pull in audiences and create the kind of shared moments that are lost in an on-demand world.
Nevertheless, traditional “linear” viewing is in decline overall, especially among younger audiences, and competition for attention has never been greater. A quarter of British children watched no broadcast TV last year, while twice as many watched streaming content compared with five years ago, according to a new Ofcom report.
Last week Disney+, touting its hit Star Wars spinoff The Mandalorian, revealed it had amassed 28.6 million subscribers in just three months – a new superpower in the streaming wars (Netflix took six years to reach 30 million). And Disney has yet to roll out the service to most of the world – including the UK, where it launches on 24 March.
Google also revealed YouTube’s annual global ad revenues for the first time– $15bn, having grown 36% year-on-year, and 86% on 2017, highlighting the increased focus of ad budgets on digital media. Children spend more time watching YouTube videos than they spend with Netflix, Amazon, the BBC or ITV, according to Ofcom.
Broadcasters’ catch-up TV services are doing a good job of bolstering viewing, but they are still struggling to keep up with the pace of change. ITV saw total viewing hours fall by half a billion in the first half of last year, while watching on its online service grew by just 27 million hours. Netflix, Disney and YouTube aren’t out to supplant broadcasters as the home of “live” TV, but the lure of on-demand is making it that much harder to deliver the mass audiences that were once taken for granted.