Cardiff business chiefs digest impact of Monetary policy, Brexit, and the future of the UK Economy

Bruton Knowles Cardiff Team led Mike Rees (centre front) in their new Fitzalan Road offices. Picture by Antony Thompson - Thousand Word Media

Cardiff commercial property agents Bruton Knowles hosted the first in a series of high powered business lunches to mark their recent move from Fitzalan Court to Oddfellows House.

Bankers, lawyers and representatives from the public and development sector, were treated to a radical overview of the state of the regional, national and World economies by leading Macroeconomist Professor Patrick Minford CBE.

Patrick Minford is former advisor to HM Treasury and currently Professor of Applied Economics at Cardiff University. He is a well-known and leading commentator on both the World and UK economy

His speech centred around current uncertainty in the global market, monetary policy, the economic implications of Brexit and the likely political outcome following the referendum.

Professor Minford said one result of current political and economic upheaval would be a significant change in Tory Party leadership and direction.

“The Conservative Party is changing shape as the vast majority of the party are in favour of Brexit, creating enormous tensions for the Government.”

He predicted the party would be re-configured slightly right of centre while the modest economic recovery continued.

“Employment is growing along with real incomes, which are growing around two per cent with taxes – in the shape of fuel prices – dropping.”

Growth rates of around 2.3-2.5 per cent were weaker than in the United States but stronger than the rest of Europe.

Professor Minford continued: “The US and UK will grow and keep on growing. Looking ahead we should welcome low commodity prices because essentially this is a tax cut. The long term prospect for the World economy would have to be robust.”

But monetary policies were not helping growth and businesses were struggling with a lack of liquidity.

“Now there is a great drought of credit for SMEs, which make up 50 per cent of the economy.

“If the banks get their Mojo back we are likely to  see more credit becoming available in the same way as the  American banks have come out of the regulatory phase and are looking at expanding their balance sheets.  The UK is somewhere between the US and the rest of Europe on this issue and as such, soon likely to follow the US lead.”

He said: “We need to get back to a saner world with monetary policy.  In the end this story will get out and there will be a gradual improvement in monetary policy which will lead to growth.”

Turning to the prospect of a UK exit from Europe, Professor Minford said the Brexit question had helped prompt the fall in the value of Sterling, but this could also be good for exports.

“Furthermore foreign companies are more likely to invest in the UK  in the sectors not currently protected by the EU  where they will get a better return and argued that while some jobs could be at risk in the short term in protected sectors following Brexit, more jobs would be created in other sectors; overall growth and employment would be boosted both in the short and the longer term.

Challenged on whether the UK should leave the EU or not, he said the fundamental gut issue was whether we were able to run our own democracy or not.

“If you don’t like their policies you can throw the Government out. But you can’t do that in the EU. We are   repeatedly over-ruled and have no power to stop what is coming out of Brussels.

“People fear there is going to be a Brussels Super State.”

Professor Minford said that once the Brexit camp had fully engaged with the public and made its case clearer, he tipped the vote would go in favour of an exit from Europe.

Mike Rees, Partner at Bruton Knowles Cardiff office, said Professor Minford’s observations provided a more encouraging prospect of the UK economy , particularly given concerns over the collapse of Chinese and Asian markets, the fall in oil prices and world stock markets and the uncertainty created by the current EU debate.”