S5E3: The hidden equities crisis killing the UK economy - and how we could fix it
Nov 4, 2024
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Join Andrew Craig, author and founder of Plain English Finance, as he unveils the hidden crises in the UK economy. He discusses the alarming decline in stock market value and the need for financial literacy to support local businesses. Explore the promising future of biotechnology and its potential to reshape industries while addressing pressing global challenges. Craig also highlights the struggle of small businesses with cash management and urges a focus on investing in undervalued biotech firms to revitalize the economy.
The UK economy has suffered drastic declines, with the stock market losing over a trillion pounds in value and impacting per capita income.
A significant reduction in smaller companies listed on the stock market has hindered innovation and job creation, crucial for economic growth.
The biotechnology sector is projected to drive economic recovery in the UK by leveraging historical strengths to address global challenges and foster investment.
Deep dives
The Efficiency of Outsourcing Compliance
Outsourcing compliance can significantly reduce the administrative burden in both personal and business contexts, particularly regarding necessary regulations like GDPR, SOC 2, and ISO 27001. Compliance with these standards is essential for securing business deals, even though they aren’t the main focus of building a business. Automation tools, such as those offered by Vanta, can handle a substantial portion of the compliance workload, streamlining the process and preparing businesses for audits in a fraction of the time it usually takes. This outsourcing not only saves valuable time and resources but also allows business owners to concentrate on growth and innovation.
The Decline of the UK Economy
The economic trajectory of the UK has been alarming, with the stock market losing over a trillion pounds in value over the past 30 years, correlating with a drastic reduction in the number of companies listed on the London Stock Exchange. The podcast discusses the stagnation in per capita income compared to developed nations, highlighting that while countries like Singapore have advanced significantly, the UK has lagged behind, resulting in a cost-of-living crisis. This decline can be traced back to failures in economic policy and a refusal to acknowledge ongoing issues by those in power. The lack of understanding regarding the state of the economy among political leaders has exacerbated the situation, leading to unaddressed economic challenges.
The Importance of Small Companies for Economic Growth
Small companies listed on the stock market are crucial for economic growth, providing a significant portion of jobs and generating substantial turnover in the UK. A decline in the number of smaller companies has negatively impacted the economy by limiting innovation and the potential for job creation. The conversation emphasizes that many successful large companies, such as Apple and NVIDIA, started as smaller firms that grew through effective capital allocation and support from the investment community. This highlights the essential role that a robust small business ecosystem plays in fueling economic development and wealth generation.
The Impact of Regulatory Changes on Investment Culture
Changes in regulation over the past several decades have severely weakened the UK's equity culture, leading to a significant outflow of pension funds from British equities into bonds or foreign shares. These regulatory shifts have resulted in a disconnection between British pension assets and domestic stock investments, reducing overall capital investment in local businesses and stifling economic growth. The podcast argues that the belief that equities are too risky has led to a predominance of passive investment strategies, further eroding the potential for generating wealth from small and mid-cap companies. This systemic issue hampers Britain’s ability to create successful innovative firms and stunts overall economic progress.
Biotech as the Future of Economic Recovery
Biotechnology is poised to be a key player in the recovery of the UK economy and is expected to drive significant advancements in multiple sectors, including healthcare and agriculture. The podcast highlights Britain's historical strengths in various scientific fields and suggests that harnessing these capabilities in biotechnology could lead to the development of groundbreaking companies that transform the economy. With the development of transformative treatments and technologies, biotech could potentially address pressing global issues, such as environmental degradation and diseases, creating valuable economic activity. The flourishing of biotech firms could also restore interest in investing within the UK market, leading to wider recognition and financial support for innovative research and companies.
If you purchase a product or service using one of the links above, we may receive a commission. There will be no additional charge for you. Remember investments can fall and rise - and past performance is no guarantee of future results. Other fees may apply. Your money is at risk.
This is not financial advice. The reason it’s not financial advice is because it’s not tailored to you. We explain the principles of building wealth but if you want personalised advice, it’s worth speaking to a financial advisor. As with everything financial, please do your own research. We really encourage that because no one cares more about your money than you and if you learn the basics then it will change your life.
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