Uncertainty is the greatest enemy of economic confidence and growth as Labour should have learned by now.

The lengthy build-ups to Rachel Reeves’ two full Budgets in October 2024 and November 2025 were disastrous for business.

The endless speculation about targets for new revenue saw companies holding fire on investment, entrepreneurs fleeing the country and consumers nervy about spending. But the Chancellor never learns.

Speeding up the timetable for an end to the ‘de minimis’ exemption to VAT for small parcels entering the UK by bringing it forward to October 2028 is hailed by the Treasury as a boost to British retailers.

The opposite is true. It advantages Chinese interlopers Shein and Temu for another two years and punishes ‘no-frills’ UK High Street stalwarts. Primark boss George Weston labels it ‘dispiriting’.

Keir Starmer’s departure from Downing Street means unpredictability for commerce. 

In a brief conversation with a venture capitalist yesterday, he volunteered that the firms he supports, which range from tech and software to hospitality, would be pulling up the drawbridge until Labour sorts itself out. 

The dangers of hurried action by the Government were exemplified by Reeves’ first major public appearance at the Treasury way back on July 30, 2024, with her ‘fixing the foundations’ statement.

The seeds of Starmer’s downfall were sown with the abolition of the winter fuel payment to Britain’s pensioners (since partly reversed) and generous pay settlements for public sector unions with no productivity deals attached.

Business will be forced to navigate the unknown whether there is a short transition to new leadership in Downing Street or a lengthy process over the summer.

Reeves has been an ineffectual, tax-raising Chancellor. But at least she became a known quantity. The thinking of her successor (whoever it may be), and how to build Manchesterism into the national agenda, is a mystery.

Ideally, a new Chancellor would produce an early fiscal statement before the August break, lifting the cloud of speculation. One fears, however, if that were to happen, flawed Treasury thinking might swamp the new incumbent.

The saving grace for Britain throughout Labour’s period in office has been the resilience of the service and creative sectors, which have continued to grow since the 2016 Brexit referendum, providing a safety net for international trade and jobs.

The urgent need for the next incumbents of Number 10 and 11 to pull the levers of expansion is illustrated by the latest data from the S&P Global services index, which tumbled to their lowest level since January 2023 this month. 

A CBI survey shows manufacturing is slumping. Without early bold efforts to mitigate growth-destroying taxes, recession is looming.

Bubble trouble

It is fitting that the whistle is being blown on ‘irrational exuberance’ in the AI sector in the week of Alan Greenspan’s death, three decades after the former Federal Reserve chairman popularised the phrase. 

So far this year some $239billion of debt has been raised to finance AI and data centres and Morgan Stanley forecasts the number could reach $570billion by the end of this year.

Big tech firms such as Google and Amazon, which previously funded expansion from cash flows, have been piling into the corporate bond markets so as not to be left behind.

Andrew Bailey, governor of the Bank of England, is among those who have questioned whether AI enthusiasm has gone too far. 

Fears have sent the Nasdaq sharply lower and the gloss is peeling off SpaceX shares very quickly with $1 trillion wiped off its value in a week before a slight rebound. A twin threat of higher US borrowing costs and ballooning, opaque debt raisings is taking its toll.

Wall Street thrives on volatility, but current gyrations look threatening.

New broom

The choice by the Chancellor of Jonathan Haskel to be the next chair of the Office for Budget Responsibility is sound.

The Imperial professor’s credentials are impeccable and his work on AI, productivity, and the online economy is up there with the zeitgeist. 

Research on the cost to investment of Brexit is less crowd-pleasing. We all have our faults.