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The transcript for ICAEW Insights In Focus podcast episode 41: 'Untangling the events and impacts of 2022'.

Philippa Lamb: Hello, and welcome to the ICAEW Insights In Focus Podcast. I’m Philippa Lamb, and for our last podcast of 2022 we’re reviewing the year and the economic and political upheavals that have made it so very turbulent. Back in January, with the worst of the pandemic behind us, hopes were high that 2022 would see a return to normality, or at least stability. But no. February saw the Russian invasion of Ukraine, and by the end of the year we’d seen inflation at a 40-year high, cycled through no less than three prime ministers and capped it all off with so called Big Bang 2.0, the government’s proposed post-Brexit reforms to the financial services sector. With me to look back at this extraordinary year I’m joined by Frances Haque, Chief Economist at Santander UK; Iain Wright, ICAEW Managing Director, Reputation and Influence; and David Williamson, political editor at the Sunday Express. Frances, David, thanks so much for coming in. Iain, is it snowing where you are yet?

Iain Wright: I’m in Northumberland Philippa. I’m in God’s own country. And yes, it is. It’s snowing quite heavily.

PL: The coldest day of the year, I fear, isn’t it?

IW: It is, and believe me, I can absolutely vouch for that.

PL: Well, thanks for joining remotely. I’m glad you didn’t have to get on a train. Now look, in classic financial style, we’re going to take the year quarter by quarter. So, looking at Q1, Frances, should we start with the state of the economy at the start of the year?

Frances Haque: I had to, funnily enough, look back at Q1 because so much has happened over this year. So, I was looking back at the numbers, and the interesting thing is, I think we’d all forgotten about the fact that inflation was already on the rise. So, by December, it had already reached 5.5%. And that was partly because energy prices were rising. Ofgem had increased the cap back in October, and that had started the ball rolling.

PL: Yeah, interesting. I had forgotten that.

FH: Food prices, also, were rising at that point as well. So, I think while we were all expecting higher inflation for 2022, probably not quite where we ended up.

PL: No. Now Iain, you track business sentiment. Where was it back in January? What were the expectations for the year ahead?

IW: There was a huge amount of optimism. People were starting the year with a great degree of confidence. It wasn’t as high as in Quarter 3 2021. So, as you say, we’ve plotted for quite some time – the best part of 20 years – what does confidence look like amongst our members in business in practice? The highest we’d ever seen in 20 years of the business confidence monitor was in Quarter 3 of 2021. It had come off its peak, but actually people were thinking – as you were suggesting in your opening remarks – we’re returning to normal, we’re actually going to have a good year based upon domestic sales growth. Because people who had been lucky enough to be in work had probably saved an awful lot because they weren’t commuting, they weren’t having the opportunities to spend, and they thought that would have been spent throughout 2022. And that links in I also think with very much what Frances was saying, that pent-up demand was starting to trail through in respect of higher inflation.

PL: Yeah, we were excited weren’t we? And then February 24th happened, David,

David Williamson: As you say, people in the previous year had been talking about, ‘Are we now finally going to see the roaring Twenties?’ There had been so much optimism. And really, I think Boris Johnson’s election in 2019 had created this situation where it was almost like a new party, and people were talking about how it’s very rare a party gets a chance to renew itself while in office, and there was lots of young blood that we’re seeing. And people were talking optimistically in Tory circles of at least a decade in power. And then suddenly history returns and just bites people with a vengeance, with the invasion of Ukraine. And suddenly, it wasn’t even a return to Cold War politics. It was like the worst of what we’d seen in Yugoslavia combined with great power politics, and Boris Johnson’s remaining admirers, of which there are ardent cohorts, say that, actually, this is one of the key areas alongside the vaccine rollout, the rescuing of the Brexit projects, that he’ll be judged for because suddenly it’s Boris who, to be fair, even before the invasion had been saying that Europe was facing potentially its greatest security crisis in decades.

PL: Frances, what was the initial economic response to that event?

FH: Well, it was really the markets. So obviously energy prices went through the roof, and oil as well of course, so they were probably the biggest in terms of the market. Otherwise, fiscally we waited until the Budget for announcements about how the government were going to help people. And there was an MPC meeting, that’s the Monetary Policy Committee that sets bank rate. There was also a meeting of them in March, and at that point they raised the rates yet again.

PL: First time in a long time.

FH: The first one was actually December 2021. That lifted it from 10 basis points to 25 basis points, it was a very small increment. But equally, the Bank of England were the first to go. They went before the Fed in terms of raising rates.

PL: Which is interesting, isn’t it? And in March, it was 75, wasn’t it? Interesting. Iain, the business response?

IW: It’s really interesting, because if you look back now, at the time it felt significant. And of course, it was a massive geopolitical event. But actually, in business, that confidence was still there. Uncertainty is never good for business confidence, it’s never good for investing decisions. But actually, I think looking back now, business was taking the events in Ukraine in its stride. It was a bit of a slow burner, the impact that it had on confidence. And Philippa, if I could just maybe respond to David’s political points as well, we’re recording this in early December, and today marks the first anniversary of when Partygate was leaked. And I think the Conservative Party, the popularity of Boris Johnson as Prime Minister throughout the COVID crisis, you saw a very marked shift the moment Partygate was announced. That’s when the shine started coming off the Boris Johnson administration.

PL: And we should remember we’re still dealing with Brexit fallout, aren’t we, at that point?

DW: That’s it, and it was almost as if a strange type of nostalgia which gripped Westminster for a while, we were back to on a more comfortable ground if we’re having a row with Brussels. Certainly, however, the protocol was a fascinating issue because it was one of the moments where actually people in Northern Ireland were starting to see concrete effects of this new arrangement. I grew up in in Northern Ireland, and friends were telling me that they couldn’t import baby clothes that they were ordering on the internet. I was trying to send a picture frame to my sister who still lives there. And it was like, sorry, we don’t do things to Northern Ireland. And it was this sort of thing: ‘Hang on, surely this can’t be right.’ Everyone remembers the video that’s regularly shared on Twitter of Boris Johnson addressing a group of businesspeople from Northern Ireland, telling them if anyone asked for some paperwork to crumple it up and throw that in the bin. There was this sense that something isn’t working quite right. And the fact that this came, as we will see later in the year, at a time when incredible demographic changes and political changes were happening, that created the sense that this is a decisive moment in Northern Irish and southern Irish history.

PL: Iain, as you say, it may be the business hadn’t quite got its head around what the fallout from the invasion of Ukraine was, but they certainly were dealing with supply chain issues because of Brexit weren’t they?

IW: Slightly because of Brexit. I don’t think that was the full reason. A lot of it was the logistical problems that were emerging, for a variety of different reasons, not least the pandemic, container ships were in the wrong place and therefore that had an impact. You heard about pile-ups in the Suez Canal. Brexit probably had some degree about the long tailbacks from the port of Dover. So this was all in the mix, and it was difficult. And again, going back to Frances’s point, that had an impact upon inflation, because demand and supply were not matched at all.

PL: OK, let’s move on to Q2, because by April we’ve got energy bills up 54%, we’ve got a further 80% hike predicted for September. Now, that was a huge shock for business wasn’t it, Iain?

IW: I think you’re on a trend now. But there are longstanding factors that are still concerning business. Businesses thought, ‘We can still stay confident, that latent demand is about to come through.’ But I think what you do see is an emergence even more – and I said it’s a longstanding factor – of skills shortages. We can’t get the staff in order to optimise our business potential, and cost pressures were starting to really flow through. So, you do start to see a very discernible drop-off in confidence, still very much in positive territory, but very much of its peak of Quarter 3 2021.

PL: So Frances, sentiment in the City at that point is where?

FH: I think it would be fair to say that they all felt inflation was going to be a much bigger issue by this point. You actually saw expectations for bank rate, in terms of the markets, increasing immeasurably, they were up at 3% by June. And obviously, you’ve got to compare 3% to the 10 basis points – so 0.10% that we had been seeing in the previous year. That’s a huge jump given that an awful lot of people would have never seen it above 1%. I think there was this feeling that inflation was going to be a real problem, and something that the Bank of England had to focus on strongly. Now, obviously, a lot of that was to do with energy prices, a lot of it was do with food prices, which, in all fairness, the Bank of England can do very little about. Raising interest rates actually doesn’t make any difference to the commodity markets. But what they were worried about, and this goes back to Iain’s point, was that wages were starting to rise, because people were starting to get to the cost-of-living crisis. And also labour markets were very tight, and continue to be very tight. And so this was driving up wage growth, and that’s what the Bank of England was – and still is – extremely concerned about, because that can fuel inflation expectations and you get that horrible upward spiral.

PL: And we had some structural change starting to really show through in the labour market then, because we had long COVID as a significant issue, we had mental-health related absence post-pandemic, all those sort of things, big numbers of people. And then this change maybe it wasn’t about them, we started to understand this structural change. It was structural change in the way people would work. You were telling me before we started recording that your team were in two days a week. That started to become not a thing we did post-pandemic, but real and forever, didn’t it?

FH: And you felt that, certainly from my own experience of working with the team, you’re trying then to find how we work best. We want to be productive, of course, we’ve got all this work to do. And obviously, for a team that has to forecast what’s going to happen to the economy this year, has been incredibly busy. So you want to be as productive as possible, but how do you do that in an environment that’s quite different? It is still the same, but when we’re in the office together, it is a lot quicker. Obviously, we can get together on calls and Teams and Zoom and all the rest of it, it’s great. But it’s not quite the same as being able to turn your chair around and go: ‘What’s the answer? What do you think? How does this work?’

PL: How do you work David? Do you work remotely?

DW: That era has pretty much come to an end because so much of working in political journalism is just bumping into people in Portcullis House and things. Then we’re back in the in the newsroom on a Saturday as we get the Sunday Express ready. It is actually a joy to see people in the flesh again, you realise what you’ve been missing. It’s always interesting to see how tall people are, which you can’t see on Zoom.

PL: And as you say in a newsroom it’s that quick interaction, isn’t it? The analysis, the calling on people’s knowledge base?

DW: Precisely.

PL: So we shouldn’t forget, David, other consequences of the Russian invasion, we had sanctions, we had the Economic Crime Bill.

DW: For years, there had been this sense that some money laundering was a massive problem in London, in particular. For decades that’s been a source of real concern, that there has been unbridled ability to come to the United Kingdom, if you happen to be an oligarch from another country, and hide your spoils. And finally, there’s now a political will, against the backdrop of Ukraine, that this must come to an immediate end.

PL: Just thinking globally about that moment. China is obviously still closed at that point. The US, South America, what’s happening?

DW: Because if people haven’t been going through the normal summit process, bumping into each other and having the conversations in kitchens and corridors at hotels, there was this sense that the international community wasn’t quite wired together in the ways that it sometimes had been. The personal rapport hasn’t been there. And again, fans of Boris would say that he was someone who was able to jumpstart the circuitry on the G7 and the G20. And saying, look, this is a crisis where we actually do have to come together. Now, there are people on the other side of the channel who firmly argue against that and say that Britain has been very successful in selling itself as being the prime mover on that. But I think the very fact that Boris was so quick to be in Kiev, and then the response that we later saw from Zelenskiy whenever his political career was on the sharp decline, there was a rapport. We have 24/7 news channels around the world. The sight have this blond-haired character, one of the most recognisable and idiosyncratic figures that Western democracy has ever seen, there on the streets of a capital that Russia has been trying to conquer, that was soft power in the midst of hard power. And it was a reminder that actually that type of thing does matter.

PL: Personality politics, charisma.

DW: Exactly. And from Alexander the Great onwards, people have understood the importance of it.

PL: Yeah, charismatic leadership. We always talk about it going out of fashion, but it seems to seems to stay doesn’t it? Q3, though, July 7th, events catch up with Boris.

DW: Yes, they finally do. And it’s fascinating to see, as we describe it here today, that we’re talking about massive economic challenges, and one of the greatest security challenges since the Second World War. And yet what actually brings him down are people who were not household names getting involved in scandals, and it was the drip, drip, drip. I think what’s sometimes forgotten is the economics were actually a major source of frustration within the Conservative Party, and the number of people on the centre-right of the Conservative Party onwards, who were intensely infuriated by the National Insurance rises that were put in, that was just something that would come up in conversation all the time. Though, there was this sense of, OK, there’s Ukraine, yes, we had to get through COVID-19. But here we are, with a majority that many people in the Conservative tribe never thought they would see again in their lifetimes. You remember the excitement that was in 2015 about that slender majority? Well, here’s what was initially an 80-seat majority, and they’re thinking, why aren’t we remaking Britain? And everyone looks in their rearview mirror, and they see Tony Blair, and they think of how he hit the ground running – independence of the Bank of England, minimum wage, all of those things…

PL: He’d had a long time.

DW: Well, yes, that’s very true. And there was this sense of, what’s not working here? And I think we can see how that perhaps fed into the scale of the revolution, that Mr Johnson’s successor then tried to trigger.

PL: Indeed. So, Frances, that’s July 7th, Boris Johnson resigns. What was the city hoping for at that moment?

FH: I think to be fair, they all assumed it would be Rishi Sunak who became Prime Minister, I think we were all taken slightly by surprise when Liz Truss came through.

PL: This is September 5, isn’t it?

FH: Yeah. So very strange. But of course, it is small majority of people voting, it’s party members who have a particular bent or view, who don’t necessarily represent the whole of the UK. So, perhaps it shouldn’t have been such a shock to all of us. But I think it would be fair to say that everybody assumed it would be Rishi.

PL: And then it’s Kwasi Kwarteng as Chancellor, another surprise. So the city’s nervous at that point?

FH: Eyebrows were raised, but that doesn’t necessarily mean that they’re going to be bad at their job, it’s going to be a wait and see what happens. But obviously, other events took over. In the end, I have never experienced it the markets been so volatile, and just watching everyday interest rate expectations rise and rise and rise along with swap rates. And the reason swap rates are so important is because that’s how you set your mortgage rates, and just watching it go and go, and you’re thinking, ‘When’s this going to stop?’ But the one thing that really highlighted it to me was, the same time that bank rate peaked above 6% ­– that’s where the markets thought bank rate might just peak at over 6% – was the same time that the Prudential Regulatory Authority, which does all the stress testing – the banks are required to do a stress test every year – they put out their scenario. And in their stress test, they had bank rate peaking at 6%. And I looked at it went, ‘But we already seem to be in this stress.’

PL: So that was supposed to be the outside margin?

FH: Yeah. So that was scary.

PL: When was that? Because September 23 was the mini-Budget, wasn’t it?

FH: Yes. So it was a bit after that that came out.

PL: Iain, what did your members say about it at the time?

IW: This was the quarter where it really started to hit home that we’re in a bad situation that’s gonna get worse for a variety of different reasons. The energy prices and the energy cap were starting to really concern people. There was a real lack of understanding about where will this be? I remember speaking to somebody who ran their business, it was late summer, and their average energy bill was £6,000 a year. They were quoting for the following 12 months £42,000 a year. So that brings it home, and he said to me, ‘I’m just going to shut up shop. I’m going to hand the keys back.’ You can’t go on like that, and there was a general sense It’s amongst businesses that at a time when you really need absolute laser-like focus from the government, they’ve gone away and had a Conservative leadership contest. They’re talking to a small number of people rather than what are the issues of the country. So, this is the quarter, Philippa, where you see that business confidence monitor that we’ve had for the best part of 20 years plunged into negative territory. This is the time in the late summer where people think this is really bad. And interestingly, those long-term factors, the business challenges, what keeps you awake at night as a CEO, as a CFO or whatever, it’s always regulatory stuff. It’s that red tape, without being able to define really what red tape is. It’s skill shortages: I can’t get the staff I need. But for the first time, in a very, very long time, tax burdens started to emerge. And I think that links in with what David was saying about National Insurance contributions, it’s a case of ‘What is going to happen to tax rates here?’

PL: So David, in the newsroom, when the mini-Budget happened, what was it like? What was the response in the room?

DW: It was a fascinating. I was in Westminster, and there was a sense amongst people who were not fans of Liz Truss – there was an interesting contingent – one person said to me, ‘This is going to be the experiment which will finally get out of the system the big desire for neoliberal shock therapy.’ Or words that effect. That at last, this will be tested to the nth degree. And there was a sense that in that quarter that this is not going to work, but it will fail so spectacularly that we will then move on very speedily. But amongst other people, there was a great sense that, well, let’s not get carried away, there’s no reason to get spooked because of the printed statistics about how few people pay the top rate of tax, for example. A lot of the things that made headlines were quite symbolic things like ending the moratorium on fracking. But again, that’s not something that you would expect to cause a panic in the markets. So the majority of people were just stressing that we need stability right now. But I think, in hindsight, the unfortunate thing is that these are policies that have actually been well trailed in think tanks for a long time. And both Liz and Kwasi, to be fair to them, had actually put their names to these ideas long ago. And there was this great, big worry, which they were taking very seriously – and there was concern that other people weren’t taking it seriously ­– that the UK’s growth rate, was it ever going to get up again? And certainly the long-term fear, this still does exist, with an ageing population and welfare state that’s getting more expensive and the NHS, you need a step-change in growth to pay for that. That would be a revolution at any time. But to do it at a time when so many of the indicator lights were flashing red panic, I think that’s the unfortunate convergence. But there are people still today who will happily turn up at any debating society and argue that we shouldn’t decide that the experiments or the ideas behind it should be put under 40 feet of lead.

PL: So it’s a timing issue from their point of view?

DW: Indeed.

PL: So, just to remind ourselves, the mini-Budget’s September 23. And moving into Q4 now, by October 14th, Kwasi Kwarteng is sacked, and Jeremy Hunt becomes Chancellor.

DW: And if that was intended to restore political calm, in the press conference, which followed very, very shortly in Downing Street, person after person stood up and said, ‘Well, Prime Minister, if the Chancellor is going because of these decisions, which you take responsibility for, why are you still here?’ And it was incredibly awkward. It was one of the shortest Prime Ministerial press conferences.

PL: Every journalist asked the same question, didn’t they?

DW: They did. When we left the room, there was a great sense that a very serious situation had become possibly unrescuable.

PL: Liz Truss, she holds on until October 20, and then she goes. And then very rapidly, October 24, Rishi Sunak is elected, unopposed.

DW: Yes. And the Conservative grassroots really do cling to the concept of party democracy, which is a relatively new thing. And the sense of their leader being taken away, it still does rankle quite a few people. I think the debate about how leaders are chosen in the Conservative Party is something which we will see a lot more of in the next 12 months, especially.

PL: Frances, Jeremy Hunt stays as Chancellor. The City liked that, didn’t they?

FH: Yes, some calm came back, I think from that perspective, at least having someone who was focused on the fiscal outlook, and more importantly, wasn’t going to not have the OBR do their report. And I think that’s one of the things that probably didn’t help Liz.

PL: That’s a key point. You’re absolutely right.

FH: Because they are there to provide fiscal oversight, and I think the markets got quite concerned when that didn’t happen for the mini-Budget. So, the fact that obviously, Jeremy Hunt said, no, we’ll do this with input from the OBR, I think that helped to calm.

PL: Yes, it was almost the first phrase out of his mouth.

FH: Pretty much, yeah.

PL: So two seasoned finance professionals at the helm, everything’s feeling slightly better. Iain, what are the members saying at that point?

IW: In Quarter 4, we’ve got the lowest confidence level from our members since the pandemic, and they think that things are going to get a lot worse.

PL: And Frances, at this point, we have inflation at a 40-year high. It’s 11.1%. And I think everyone at that point is trying to assess what the lasting damage of that brief administration is going to be. Is there a number?

FH: There isn’t a number. Interestingly, from the perspective of the markets, and rate expectations and swap rates, they have all fallen back. The increases that we saw have gone away. Having said that, I think the damage that was done, that will always be there. To be fair, as an economist, I totally agreed with the fact that we should be looking at growth and trying to increase productivity. But when I looked at it, when you’re not going to do this through tax cuts – and doing tax cuts, when we’re already in an inflationary environment really does seem to be a silly thing to be suggesting at this point in time – but certainly some of the other growth measures that they were talking about that weren’t part of the mini-Budget, things around immigration had actually come out. Now you thought, yes, I understand why that would be helpful given how tight the labour market is and how difficult it was for businesses to hire people. So it was quite interesting. Some of the things just didn’t seem to quite marry up. Right sentiment…

PL: But the timing? David, life doesn’t stand still overseas, while all this happening here. In the US, we had the midterms, and Trump confirming he would run again.

DW: That’s right. And again, it was a situation where the Republicans had created the narrative of this red wave that was coming. And there was a great sense that even amongst President Biden’s supporters in left-leaning periodicals, there’s a sense of, oh dear, the communications haven’t been great. And the economic circumstances certainly aren’t great for the average American. So, it did seem very plausible. We’ve only just very recently had the last results, and it hasn’t been anything like the revolution that was expected. The House of Representatives is in Republican hands as expected, but the Democrats keep control of the Senate. You could see the jubilation, and astonishment, in Biden’s eyes that this has happened. And it’s transformed the debate about his own future enormously, because prior to that, you opened any op ed pages from an American newspaper, and it was just full of people weighing in on the possible candidates who could run and see off the terrible troubles. So, in a way, that debate hasn’t gone away. I think both Trump and Biden really need to actually make in the next year a very serious decision, because the although they’re giving the public message that they’re definitely running, if they do that is putting both of their parties in a very clear position that will be perhaps a sense – especially if the economy does start to recover a little bit – that maybe this is time for new generations breaking through. But having said that, it’s very hard to dislodge someone who was at the pinnacle of their party and enjoys the spectacular powers of patronage.

PL: We’re recording this in early December. But November, Frances, we did have that collapse, didn’t we, of FTX, this giant company? The first one really to fall over. How significant is that?

FH: It’s quite difficult, because to be fair, it is not something from my perspective as an economist looking at the UK economy, I don’t think it will impact that particularly. But it’s just interesting to see what happened. And perhaps more interesting from a regulatory perspective of what sort of oversight then does there need to be here in the UK, but also globally? That will be quite interesting, to see what the fallout from that might be. Banks are already heavily regulated in terms of the retail banks, but the shadow banking market, less so.

PL: And then we did have that oddity in November, Paris overtaking London as the biggest stock exchange? Does it matter, really?

FH: Yes. And no, I suppose, although there is a debate as to whether that is actually true. I know there’s been various articles written as to whether that that is actually true.

PL: You would think that was something that could be established.

FH: You would, wouldn’t you? But I suspect there’ll be a renewed focus in terms of trying to get the UK back to position number one, because I’m sure, from a political perspective, they would certainly want that.

PL: Iain, then mid-December, we got so called Big Bang 2.0, this big overhaul of financial regulation.

IW: There are a number of nuances there. First and foremost, it is a big package, if you think about it in a comprehensive manner. But it’s not a comprehensive manner, because some of the 30 or so areas that are going to be reformed are in various stages of development. So if we maybe look back in a couple of years and said, ‘What’s had the most impact?’, it’s the changes that we’ll have in respect of investment from the insurance sector, through reform of Solvency II. Now that was announced sometime in November, so we knew that was coming. And although it’s often been pitched as a break from the EU, a good dividend from Brexit, actually, the EU are going through their own reforms of Solvency II as well. But actually that could free up hundreds of billions of pounds, Philippa, in terms of investments into the real economy, through improved infrastructure, through the green and net zero transition, through levelling up, that could be the Big Bang.

PL: Are you concerned about this? There’s been a lot of column inches devoted to this potential to go back to dividing retail banking from investment operations.

IW: That has received a lot of media attention. And of course, we’re 15 years away from the great financial crash where a lot of that was caused by insufficient risk management from banks. And you always have to tread that line between how can you stay competitive, entrepreneurial risk-taking, while safeguarding people’s money. And we’re 15 years out, that’s half a generation away from the global recession caused by this banking crash. So, we do have to be mindful, I hope memories haven’t forgotten what went on. That said, it’s received a lot of attention. But actually, it’s quite minor relatively, it doesn’t apply to those retail banks with any meaningful investment banking arm. Those are the safeguards that governments have put in place. It might act as a barrier to growth at the moment for midsize banks. Let’s see if it drives forward growth, given what’s been said.

PL: The other thing that caught my eye was this idea of relaxing barriers to bringing in senior staff from overseas. Is that a good thing?

IW: I do think that’s a big thing. Again, what’s the balance to strike between risk-taking and appropriate prudential regulation? So let’s see what happens with that. We’re quite new to all of this, Philippa, and I hate to say this, but the devil will be in the detail. You mentioned Big Bang, it isn’t just like a flash and immediate implementation. What we’ll see over the next 12 to 18 months is a series of consultations on a number of these 30 or so areas of reform, and ICAEW, on behalf of members and on behalf of the public interest, will be contributing comprehensively to these consultations to make sure that they are the appropriate balance.

PL: So it’s too early to ask you about implications members, isn’t it?

IW: Well, what’s in the public interest, and of course, the Financial Services is a huge part of the UK economy. We derive a lot of income, we derive a lot of soft power because we are a global industry based not just in London. I think it was very significant and telling that the Chancellor wanted to carry out his speech and announced these reforms in Edinburgh, which is a major centre for the financial services. The UK, not just London, is a major global player when it comes to financial services. We rely a lot as an economy, and in the future, with growing competition, with new players entering the market. We quite rightly have to stay ahead of the game, we have to stay ahead of the competition, but doing so while safeguarding the global financial system. And that balance is something when we respond on behalf of members and on behalf of the wider economy, that’s what we’ll be looking at.

PL: OK, well I’m going to wrap this up now but I am going to put you all on the spot, In a word or two, David, would you say politics are in a calmer place now?

DW: Yes, absolutely. Well, certainly Westminster is in a calmer place. People are wandering around with a state of bemusement that that doesn’t feel as if there’s going to be a series of resignations, potentially, by the end of the afternoon. One Tory said to me, ‘I can’t believe it, what we’re arguing about wind farms again, normality is back.’ There’s also the awareness that there were so many purple patches for past Prime Ministers where things look like things are back on track, and then things explode.

PL: Iain, what is business sentiment now, compared to January?

IW: Bleak, but the nature of business leaders, entrepreneurs, people who want to make a positive difference is their resilience. They’re inherently optimistic, that’s what gets them up in the morning is to be able to solve solutions. And so it is bleak, but there’s a latent optimism that their business will do well, they will push through and be able to deal with customers in a good and positive way. So yeah, bleak, but resilient.

PL: Frances – the economy now versus January?

FH: Unfortunately, worse. We are heading for recession, and most of 2023 is probably going to look that way too. But on the point about resilience, I would say that humans are incredible in our ability to problem-solve. There should be optimism going forward that we can deal with some of these issues and come out stronger the other side.

PL: Frances, Iain, David, thank you very much indeed. I’m delighted to say you have all, perhaps foolishly, agreed to come back and be with us for our first podcast in 2023, with predictions for the year ahead. Always a much more dangerous game. I don’t suppose you’d care to give us a little round of mini-predictions now?

DW: There will be drama from aspects of the stage where no one’s looking.

PL: Yes. From left field.

FH: Yes, I’m just waiting to see what’s the next crisis. I’ve gone through trying to forecast Brexit, trying to forecast pandemic, trying to forecast cost-of-living crisis. What’s the next one around the corner?

IW: I agree with Frances in terms of recession, we’re probably in recession already. Energy prices being what they are, people don’t have the disposable income in order to go out and sell, and that was the factor that was providing so much confidence in January 2022. That’s been taken away from us, so it’s going to be a bleak time.

PL: Thanks for that Iain. You’re right though, bringing us back to earth with a bump. Thanks to everyone listening for being with us this year. We are always glad to have your company. Have a fabulous but relaxing Christmas break. If 2023 is anything like this year, we’re all going to need to be at the top of our game in January.