‘There is no sense that we are due a recession’
Education: PHD in Economics, University College London Family: Married with two children Career: portfolio manager at Blackrock (2015 – present), Chief of Staff to Chancellor George Osborne and chairman of the Council of Economic Advisers (2010-2015), chief economic adviser to George Osborne and David Cameron (2006-2010), senior research economist at the Institute for Fiscal Studies (2002-2006)
Interests: enjoying the countryside with his children, tennis, skiing, politics who are constantly willing to call the end of the bull market, the end of the cycle. I think that if you aren’t bringing proper fundamentals to that, when you look at the economics, rather than just calendar time elapsed, there is no sense that we are due a recession soon.”
The calm clarity of speech, an attribute of Harrison’s likeable coolness, is lost when the discussion turns to the UK’S productivity woes. He slips into speaking as the government – clearly old habits die hard when he hits a point of passionate interest.
“The problem is we don’t really know how to measure it well and we don’t understand the time lag on policy for it. We’re overestimating inflation and underestimating real growth because we’re not measuring some of these new technologies properly. There are good news stories,” he says. He launches into an explanation of how new teaching methods – phonics in primary schools – have dramatically changed reading
abilities. Workforces will be upskilled, metrics will change to encompass technology, the productivity problem is as much outdated attitudes as a real economic crisis, he explains adding that other factors might be skewing the data.
Output from the UK has seemingly stuttered as easily measurable industries such as North Sea oil have declined, and banks’ balance sheets have deflated – making the productivity of financial services seem poorer than they really are.
The UK economy, in short, still has a bright future, according to Harrison. A passionate Remainer, but a patriotic pragmatist, Harrison is highly optimistic about a deal. “The consensus view on negotiations is at every stage too pessimistic,” he says. Though he fails not to twitch his lips at the mention of the sectoral analysis saga, but he does not succumb to temptation lightly.
Much more concerning, according to his sources across the markets who have interests in UK assets, is a Corbyn government. People are far more concerned by the “extent to which there would be a radical change in the way we are governed” with Corbyn at the helm. But this is a long-term risk, as far as Harrison is concerned. Not for him the late 2018 prediction of US bank Morgan Stanley that could see Corbyn holding the reins by Christmas. In fact, the notion annoys him.
“One of the few things you can be certain of in British politics is that there won’t be another election for a very long time. The issue is that you’ve got to understand how the fixed term
‘In 2006, I heard George Osborne at an event, I went up and gave him my card. Three months later I was working for him’
It would have been extremely embarrassing to fail the exams. Great exams. Fascinating subject matter
parliament act works,” he says.
There is “absolutely no incentive” for the DUP and Conservative MPS to explicitly vote for an election or to hold a vote of no confidence in their own government, he explains, adding that it would be a bold individual who, feels confident enough to call a snap election with a 20 point lead in the polls anytime soon.
Beyond the UK, economic worries are led by a lack of inflationary pressure in the eurozone, Harrison “can’t see any” and is therefore disturbed that political influence may be leading the European Central Bank to taper its programme of quantitative easing – bond buying – before the economic weather is right.
“They managed to get expectations in the right place for the announcement but that’s the central bank I’m most worried about,” he says.
Looking back at 2017, Harrison’s ideal trade was to hold EU equities unhedged due to a combination of a strong currency and strong corporate earnings, and in 2018 he believes an interesting parallel has emerged.
Japan has been a fixed point on economic landscape, but recent statements from Bank of Japan officials suggesting that negative interest rates might be doing harm to some parts of the economy means there may be a shift in policy to come. Elsewhere in Asia, there’s very little risk of a Chinese crash, Harrison says, but markets have yet to price in the six-month slowdown that he thinks is due.
Business-like and engaged as he may be when looking at the global economic horizon there’s still a sense that Harrison is a frustrated policymaker, and such barely concealed irritation with the Westminster state of play means questions of a return to the political front line will never be far away for him. When Harrison first quit politics in 2015, whispers of a Conservative leadership bid took a serious tone. It is not hard to see why; he will turn forty this year with an extraordinary CV and friends in the right places.
Taking a sanguine attitude to a Tory cabinet riddled with Remainer versus Leaver tension is one thing, but a socialist overthrowing of Harrison’s economic vision, however, quite another.
Rupert Harrison, former chief of staff to George Osborne, believes there are still years worth of road in the recovery and that there won’t be another election for a very long time