QNB Discusses Priorities of New UK Government, Impact on Economic Growth

QNB

QNB said the plans of the new UK government could boost the country's economic growth in the long run.

In its weekly report, QNB discussed three priorities for the new government in its mission to achieve stronger economic growth rates in the long term. First, there were several proposals to enhance the countrys housing infrastructure, support new investments, reduce bureaucracy, and reduce project costs.

The report said that the UK's construction planning system is widely considered costly and overly stringent due to unpredictable and lengthy planning permissions which increase development costs significantly, hindering residential and commercial construction, as well as infrastructure projects. The system has been extremely costly for the economy according to QNB, with no increase in the amount of built-up land per capita since 1990, which is in stark contrast to other G7 economies. It said that this also contributed to a depressed rate of business investment relative to peers with less stringent planning regimes. Chancellor of the Exchequer Rachel Reeves vowed to overhaul the National Planning Policy Framework and to "get Britain building again," proposing a target of 1.5 million homes in the next 5 years. QNB said that such a plan would boost economic growth in the UK.

QNB also discussed the potential that a newly created National Wealth Fund that will be established could have on mobilizing capital and increasing investments in priority sectors. Since 2000, both public and private investment as a share of the economy in the UK have remained persistently below the average for the G7.

"Therefore, it is not surprising that the new administration is taking measures to increase investment," the report said.

Though the mandate and organizational structure of the new fund are still to be defined, it is expected to cooperate closely with private financial institutions to channel resources to key economic sectors such as ports, steel, carbon capture and green hydrogen, and factories. The government has made a commitment of GBP 7.3 Bn ($9.7 billion) to this project, and expects to "crowd in" investment from the private sector, by attracting three pounds for every one pound invested by the government.

QNB said that, by leveraging private sector resources, the National Wealth Fund would be able to circumvent fiscal limitations, and increase investment to levels consistent with higher economic growth rates.

Third, QNB said that the new government plans to boost trade as a central part of the strategy to deliver stronger growth, highlighting new legislation that is set to facilitate the alignment of product standards with the EU. This regulatory alignment will reduce the uncertainty and the additional costs for firms of adapting to EU rules. The UK has also restarted talks with several countries to establish new trade agreements.

All in all the report concluded that the new government's three priorities discussed will boost economic growth.

(QNA)