Boris’s advisor insists Western economies must embrace change | Video

Transcript

The EU and UK economies are said to be improving, but much change is still needed in order to cement a stable future, says Gerard Lyons, the Mayor of London’s chief economic advisor.

World Finance: Well Gerard, what do you look for to gauge the strength of the economy?

Gerard Lyons: There’s a whole host of different factors, the quantitative measures are very important, we have economic statistics about the current state of play. But also you need to actually dig a bit deeper and look at the underlying structure of the economy, because we not only want an economy to do well in terms of the near-term, the cyclical factors, we very importantly want the economy to be resilient and sound for the future.

[We] want the economy to be resilient and sound for the future

What this crisis did highlight is the disparities both within cities and across economies. So you have people who are still unemployed, you have people on zero hour contracts, you have people in part time work, so it’s important that you actually don’t just look at those people that are doing well, you actually create an enabling environment, an environment to basically serve the needs of everyone. It’s important to take, in my view, a top-down approach to what’s happening to the global economy.

What we’ve seen is how interlinked the global economy has become. The emerging economies – China, India, Brazil – maybe five, 10, 15, 20 years ago, they would have been seen as remote for many people here in the west. But now what we’ve seen, not just because of the crisis, but in terms of what you, or I, or indeed everyone buys, the brands and everything, we now very much live in the global economy. And it’s interesting to note that despite the financial crisis in the west, the world economy had continued to grow, so the important thing is for us in the west, in the UK and in London, is to continue to position ourselves to succeed in this changing and growing global economy.

World Finance: Looking to the improving EU and UK economy now, and have you seen other economic policies or stimulus that countries have implemented that could also be applied here to aid recover?

Gerard Lyons: Whichever economy one looks at, the outcome depends on the interaction between the fundamentals, policy and confidence, and when one looks at the UK the fundamentals did really take a big hit as a result of the crisis, but the economic fundamentals appear to be improving. The policy environment has been very much geared to initially addressing the crisis; that has, in the last 12 months or so, focused more on ensuring recovery gathers momentum. And monetary policy in some respects has acted as the shock absorber, interest rates remaining low, liquidity being added, and the fiscal situation is starting to be brought under control.

As a result, if thinking about fundamentals, policy, and the last thing, confidence, because of that on the fundamentals and policy side, confidence now is finally starting to really improve here in the United Kingdom. It’s initially consumer confidence, as demands picks up it’s now feeding into business confidence as well, banks are also lending a lot more, particularly in terms of the south-east of England, but also in terms of clusters across the country as well.

World Finance: How do you see the future of the UK as a financial capital?

Gerard Lyons: There was a very interesting report that came out from Deloitte this year, talking about international cities, and looking at the type of high skilled jobs that you need, and what was staggering was how London really was well ahead of the competition. According to that survey, 1.5m high skilled jobs are here in London. The next closest city was New York at 1.2m, then it was Los Angeles I think just under 800,000, then Hong Kong about 650,000.

So what we have here in London is high skilled jobs not just in the banking sector. Even though we had a financial crisis, the reality is that when you look outside the banking sector here in London, at the business, professional, legal, consultancy services, they all did pretty well.

World Finance: Well finally, you recently suggested during an event at the Pattison Institute of International Economics that you foresee a huge upturn in economic prosperity. Where is this stimulus coming from?

Gerard Lyons: There is already an upturn in prosperity, but the prosperity has been seen in terms of the last few years very much across the emerging world. The western economies were hit hard by the financial crisis. But the important thing about globalisation and the fact that more people across the world are being brought into the global economy, is that the net result is that the world economy gets bigger.

But in moving from where we are now to where the world economy will be in the future, there are some winners and there some losers. So the important thing is for economies and different sectors in the west to adapt and change, so when you look at the world economy there are certain industries, certain creative industries, sporting industries, financial sectors, that might appear to be better positioned, so it’s very important to bear in mind that in terms of looking at the winners and losers, economies in the west not only play to their strengths, but try to actually make sure that their people have the right skill sets to be able to adapt.

The challenge is that many people don’t like change, so what we have to bear in mind is that we have to embrace change, but in embracing change we don’t only play to our strengths, but we actually create the skill sets that allow economies to be able cope not only with shocks, but seize the opportunities as well.

World Finance: Gerard, thank you.

Gerard Lyons: Pleasure.