It seems that the doyen of US investment banks, Goldman Sachs (GS), has more faith in the economic potential of the UK than we have ourselves. The proviso is that the forthcoming General Election – only days away as I write – produces a clear winner with a working majority, which can end the blight of uncertainty and give us all a clear sense of direction.
Predictably, GS’s preferred victor is the Tory Party – hence its talk of a ‘Brexit breakthrough’, followed by a ‘Boris boom’ that, fuelled by pent-up demand (‘back-loaded acceleration’, to those in the know), will propel the UK economy to faster growth through the early 2020s than a sluggish Eurozone, Germany et al. Put that way, it all sounds very exciting.
Whatever your personal views of Goldman Sachs and its relentless enthusiasm, there is no doubt the bank’s economists have worked hard on their sums and rationale. This is an institution that doesn’t countenance losers and it would take a brave person to argue against its predictions if Boris does get to keep the keys to Number 10.
The latest opinion polls are leading us to believe that a decisive Tory victory is very much on the cards, but we all know that such indicators are notoriously unreliable. We will simply have to wait and see.
What is more certain is that, if such a boom were to materialise, the corporate sector (SMEs included) would have not only a clear direction but a buoyant and business-friendly environment in which to operate. Such circumstances may lead to a stronger pound and a rise in interest rates further down the line, but companies that hitherto have been reluctant to borrow may regain the confidence to invest for the future. I certainly hope so.
How our domestic banks respond to a sudden increase in demand for debt finance will be interesting. Will they react quickly to seize the opportunity or will they do what they usually do, which is sit back and wait to see what happens? If they do that, they will be handing the P2P sector – which stands willing and able to fill any gap – a golden opportunity to consolidate its foothold on the financial landscape. The world has moved on. The trick will be to ensure that credit processes are not only swift, but robust.