Written by the Government and delivered by the Monarch, the speech typically sets out bills that the Government intends to introduce to Parliament in the session ahead and other policy priorities that do not require legislation. On this occasion, interest in the speech was particularly high, marking the first King’s Speech of the new Labour Government and setting the tone for its plans.
Economic growth was at the heart of the speech for the forthcoming parliamentary session. Thirty-five bills and draft plans were announced, including plans to speed up the building of houses and infrastructure, create more jobs, improve transport, bring train operators under public ownership, and secure clean, green energy.
There were no great surprises; these had all been well trailed, and financial markets reacted in a predictable, steady manner. This stability has been at the heart of the Labour Party’s communications, in opposition and now in government, and it is serving them well, often because they and hopefully the UK can benefit from a broader, albeit slow, worldwide economic improvement, and the lack of stability elsewhere.
The tide for the UK economy has been turning for some time. Inflation held steady at the Bank of England’s target rate of 2% in June, according to the latest data from the Office for National Statistics (ONS). While it may be hoped this will mean interest rates can drop, core inflation – which excludes the price of fuel and food – remained at 3.5%, while inflation in the services sector stayed at 5.7%. The net result is that analysts say an August interest rate cut is now less likely. Such a ‘steady as we go’ approach by the Bank of England supports a focus on stability.
Stability is also emerging in business. According to Lloyds Bank’s latest UK Sector Tracker, Eight of fourteen UK sectors saw output growth in June. It marks the first time since 2022 that over half of UK sectors have grown for six consecutive months. June also saw eight sectors with rising demand, led by food and drink manufacturing. Manufacturing outpaced service sector growth, with the greatest lead since January 2021.
The markets and economic forecasters like stability. As recently as April, the highly influential International Monetary Fund (IMF) was downgrading the UK’s GDP outlook. However, on June 16th, it changed direction, forecasting an increased GDP outlook for the UK, with GDP now expected to rise to 0.7%. In 2025, it expects the UK to outstrip every other major European economy, with a GDP of more than 1.5% in 2025, ahead of the 1.3% growth projected for Germany and France.
This GDP development is likely to have been influenced, at least to some extent, by the political changes in France and Germany and the instability created by the emergence of far-right politics.
The focus on stability was clear for businesses, consumers, and financial markets. There will be no dramatic actions or changes and no significant government spending that would risk increasing already high government borrowing. The Prime Minister made this clear when he urged patience. He said the change would require “determined, patient work and serious solutions.”
After the events of recent years globally and in the UK, and while it will not address the cost of living crisis issues still impacting many people, this stability does at least promise some certainty.
