Wobbly growth, troubled trade and rising debt: UK plc is in a fix

The chancellor is searching for a brighter narrative but the economy faces a string of difficulties, writes

- Barney Macintyre, business news editor

Britain is a country of contradictions. Last Thursday, the FTSE 100 index of the UK's most valuable companies hit an all-time high. On Friday, data revealed the economy contracted 0.1% in May.

As a services-led economy, the UK should be well positioned to succeed in an era of trade wars that usually impact goods. And yet, as new research from the London School of Economics shows, that advantage has been bludgeoned by Brexit, with services exports in the following five years 4 to 5% lower than they would have been without added trade frictions.

For professional services, which account for 8% of the UK economy, artificial intelligence disruption poses an added threat.

Another glaring mismatch: Britain is governed by a party with a commanding majority that names growth as its top priority but has shown it will cave to other ideological considerations when pushed. As one executive said last week: “The video doesn't match the audio.”

Ahead of the chancellor's Mansion House speech on Tuesday, a marquee opportunity to pitch her growth plan to the City, Rachel Reeves is grasping for a narrative that paints a better picture of the UK's finances.

The original centrepiece of her speech a plan to reduce the annual limit for cash ISAs in order to direct some of the UK's £300bn of savings into investing in domestic companies - has been shelved following stiff opposition from banks and building societies.

Reeves will focus instead on a growth plan for the financial sector that includes a "concierge service" for foreign firms setting up shop in the UK, and a digital overhaul for capital markets.