Training, transport need to be at heart of devolution

Bill O’Neill, the head of UK investment office, at UBS Wealth Management, also predicted that Britons would vote to stay in the European Union, in a referendum that could take place as early as June next year.

Mr O’Neill provided forecasts for 2016 when he met The Yorkshire Post during a visit to Zurich-based UBS’s Leeds office, which was established four years ago.

He acknowledged that many people in Yorkshire had concerns about the quality of public transport, and skills shortages.

He said: “Transport infrastructure along with training is extremely important. It’s a necessary element of any regional policy.

“It should be the heart of this stage of regional devolution and decentralisation. You’ve got all these various growth deals and city deals that are going on, that are incentivising local authorities to actually focus on employment growth and training.

“But again and again you’ve got the call for spending on infrastructure... Infrastructure, education and training are the key areas.”

Mr O’Neill said the UK was showing signs of sustainable growth, with a strong domestic economy and an improvement in real earnings.

There is also “a better story” on the eurozone and a low inflation environment, he said.

He predicted that UK interest rates would finally start to rise next year, with a very gradual tightening cycle.

“We’ve got 2.5 per cent growth this year, 2.25 per cent next year and another 2.25 per cent in 2017,’’ he said.

“It’s an economy that is on a cruise path, but clearly now beginning to necessitate a normalisation of interest rates. The level of interest rates we have at the moment are not compatible with where the economy is going.”

He said there was no evidence that the planned referendum over EU membership had affected confidence, “but clearly the longer it’s delayed, the more likely the effect will be a material one”.

“The clear emphasis now is on getting it done and out of the way as quickly as possible,’’ he added. “Our base case at this stage...is that it will be held probably in September or October next year. The fear is that anything more prolonged would actually be damaging.”

Earlier this month, the Chancellor George Osborne indicated that the timetable for renegotiating the UK’s membership of the European Union and holding an in/out referendum could go down to the wire, with a public vote not held until the end of 2017. The Chancellor said if a deal could be done on reforming the relationship with Brussels he would like the vote held as soon as possible.

But there was nothing to stop it being held in the second half of 2017 even though the UK would be holding the rotating presidency of the European Council.

David Cameron has vowed to hold the referendum by the end of 2017, but it had been expected that the vote would not occur while the UK held the presidency.

Mr O’Neill said: “I think the package will return from Brussels in February or March and within six months we will have the referendum. I wouldn’t necessarily exclude a June referendum.

“Our sense is that the referendum will be passed by a solid majority, on the basis of a Government recommendation.”

Mr O’Neill said the UK seemed to be reaching a point of transition in its relationship with Europe – “where a one-size policy can actually be adopted to issues and challenges that are singular”.

He added: “Britain’s own issues around immigration, around asylum policy, around fiscal policy – all of these have a need for a single European policy that necessitates some form of co-operation.

“We are quickly reaching that point.”

TERRORIST attacks are random events with limited economic impact, according to Bill O’Neill, the head of UK investment office at UBS Wealth Management.

He added: “They (attacks) have an effect for a period. Consumer spending patterns are fairly resilient. It tends to be very much around what the economic conditions are at the time...It can act to buffet spending, but only for a period.

“I would allow though, that if there were to be an extended campaign of violence, that might have an affect on particular spending, say on restaurants versus online activities.”

Mr O’Neill leads the UBS investment office in the UK.

He holds masters’ degrees in Quantitative Economics from the University of London and Political Economy from University College, Dublin.