The consultants’ opening line was a bit of a showstopper. It did not really matter who won, they said, because the UK economy was in dire trouble and this was unlikely to change in the long term, whichever party was in power.
Short term, however, it might be a different story, depending on how markets react.
Two things matter. One is whether the election outcome will change the odds on whether we leave the EU by, for example, the new government offering a second referendum.
The second and even bigger issue is whether the new government does anything meaningful to tackle the long-run productivity shortfall of the UK economy. Everything else is fairly irrelevant.
Why are they so depressed? Because they see an economy saddled with a colossal amount of debt, both public and private, undermined by deteriorating demographics which restrictions on migration will make even worse.
They see an economy which has been twisted out of shape by years of ultra-low interest rates, where money is available to support businesses which in truth should have gone to the knacker’s yard years ago.
All this contributes to a productivity performance — the holy grail of macroeconomic policy because that is where the wealth is created — which is worse now than at any time in the UK’s peacetime history and significantly worse also than in any of those EU peers we are so superior towards.
They add that the vote to leave the EU has undermined the economic outlook even further though, perhaps in an effort to cheer us up, they add that even if it is bad, the likely impact will be small in comparison to the productivity shortfall which is already upon us.
Put all this together and unless something changes dramatically the UK is on course to be the new Japan; slow or non-existent growth for a generation, low or negative yields, low or negative inflation and ever increasing debt.
But they do not see any political party sensibly facing up to this issue, let alone thinking through its implications in terms of collapsing public service and stagnation.
Interestingly, however, Fathom says Labour’s programme could be better than the Conservative approach at arresting this decline.
They say that the sharp increase in government spending which the Labour programme implies, especially if financed by borrowing, will cause a surge in growth followed by a jump in inflation which will trigger a rise in interest rates.
And this rise they see as a good thing because it would finally kill off those zombie companies which have been hanging on for years choking the system.
Clearing these weeds away would allow new plants to grow. In short, in the current environment, a splurge of spending could be just what the economy needs.
The Conservative austerity programme of public spending cuts and the likely tax rises they do not talk about, will offer no such boost.
Corbyn’s challenge is that the financial markets may not give him time to deliver. The tax-and-spend philosophy of socialism gets quickly punished by financial markets.
It gets punished even harder if government borrowing rises, and the antagonism goes beyond the pale if inflation ticks up as well. No matter that the programme may be what the economy needs; markets are conservative with a big and a small C. They react, they don’t think.
The problem then would be that the turmoil in markets would affect business confidence. Companies would cut back their spending and investment plans so, instead of getting inflation plus higher interest rates plus growth, we would get the inflation and the higher rates but we would also get stagnation and rising unemployment.
And in those circumstances, there is almost no way the sums can be made to add up.
