Britain: Back from the Dead
Underhill, William, Newsweek International
Byline: William Underhill
Why the gloomy forecasts are wrong.
Only a year ago foreigners were ready to write off Britain. American financial guru Jim Rogers, cofounderwith George Soros of the Quantum Fund, advised the world not to put any more money in Britain. Sterling was "finished." The oilfields of the North Sea were running dry, and the economic crisis had destroyed London's reputation as a global financial center. What else did the country have to offer? For Rogers and his fellow doomsayers, Britain was a definite "sell."
That was then. If Britain is truly finished, no one has told rating agency Moody's, which last week confirmed Britain's gold-plated triple "A" rating, praising a "vibrant and flexible economy." Or the World Economic Forum, which earlier this month ranked Britain 12th in its global competitiveness report, up one place from 2009 and ahead of most of Europe. For that matter, the European Commission now reckons the British economy will grow 1.7 percent this year, faster than France and matching the euro-zone average. Indeed, in the third quarter of this year, Britain's growth is likely to outpace any other G7 economy, according to the Organization for Economic Cooperation and Development.
Britain still boasts most of the qualities that generated 13 years of unbroken growth before the credit crisis. It's a large--population 60 million--and open economy that offers foreign capital the kind of welcome not often found in mainland Europe. It's still the favorite of American companies looking to invest in Europe, and of Indian businesses looking for a base on the continent. Small wonder: as a place to do business, Britain ranks fifth worldwide according to a World Bank index. A little humility helps too. "One thing you won't find in Britain is European jingoism, the idea that Europe has all the answers," says Simon Tilford, economist at the Centre for European Reform in London.
OK, there's still plenty to worry outsiders. Moody's talks of "serious challenges." Britain is still living with the consequences of the grand spending splurge--private and public--that ended with the financial crisis. Next month, the government will detail spending cuts of a depth unprecedented since World War II--25 percent for most departments--intended to clear one of the largest budget deficits in the developed world. …