Britain is a small, open economy. ‘Small’ may sound a bit strange when by GDP, the UK is the fifth-largest country in the world. But, in fact, we only contribute 2% of global GDP, which means that we aren’t big enough to unilaterally influence global prices, interest rates, or the global economy at all. We are a small economy and we have some big problems, but a Brexit wobble won’t derail the whole global economy.
Productivity growth is falling around the world, but the slowdown is more acute in the UK. This deceleration could be lessened – and even reversed – by investment in research and development (R&D), which kickstarts new technologies and, ultimately, increases growth and productivity. However, the UK’s spending in this area is falling behind other developed economies at a time when we need to be leading the way.
Foreign companies and governments are simply not investing in British assets as they used to. This is worrying because modern economic growth relies on technological transfer, or learning from others and improving on it. The benefits of this transfer are clear from the productivity data - firms with inward investment from overseas are almost twice as productive as firms without any link to foreign investment. So, a slowdown in this area means a slowdown in productivity; a big worry.
Copper is all around us: in our houses, our cars, our hairdryers and it’s even one of the most intensively used raw materials in the green energy revolution. Its wide use in everyday products should make copper prices a good indicator of economic health. But there are other factors at play, and we found that the price of copper seems to respond to economic growth with a six-month delay. Perhaps we shouldn’t rely too heavily on Dr Copper’s reputation for giving us an early diagnosis.
Traditional defensives have kept pace with economically sensitive sectors through the long and fitful post-crisis recovery. Some ‘defensives’ are decidedly expensive, and investors may need to broaden their search for safe havens.