Will the lights go off this winter?

Between 1992 and 2002, the UK experienced a period of benign economic growth. Known as the Nice (non-inflationary constant expansion) decade, it feels like a very long time ago. According to the Bank of England’s latest forecast, Britain today faces the opposite: high inflation and a recession. This grim prediction is why the Tory leadership contest is so grouchy; in these circumstances, there are no good fiscal options, only least-worst ones.

The world economy veers from one emergency to another, with the frequency of crises having intensified since 2008 and, particularly, since Covid. Lockdowns and pandemic disruption were rapidly followed by the Russian invasion of Ukraine, which is causing havoc in energy markets.

Added to this is the growing concern that the Russian invasion may make the Chinese more inclined to attempt a blockade of Taiwan. This would cause even more disruption than the Russia-Ukraine war, given that the island produces the majority of the world’s most advanced microchips, and it would hugely increase the risk of direct conflict between China and the US.

One of the foundations of the Nice decade was globalisation. Today, however, we are living through a period of de-globalisation. Covid has left countries keener for shorter supply chains and self-sufficiency in medical supplies. The current energy crisis is having a similar effect; even once the war is over, no democracy will want to continue relying on Russian oil and gas and there will be a far greater push for domestically generated energy. At the same time, the US Congress has just passed a bill allocating $280 billion (£231 billion) in support of the domestic production of semiconductors and scientific research, as the country tries to ensure it can out-compete China technologically.

Yet the Tory leadership contest has barely addressed the question of how the UK economy should respond to these global trends.