- The UK's role in the world is inextricably linked to its economic strength and prosperity. Maintaining a vibrant economy and financial stability is vital to enable the UK to benefit from global growth and pursue its ambitions at home and abroad.
- Britain's international influence, in turn, complements and supports its comparative advantages in global services and investment. Such support would be less important for economies dependent on consumer-brand businesses and commodity trade.
- Leveraging global growth will be a critical determinant of the UK's economic prospects, along with management of fiscal adjustment. Out of the wide range of forecasts for future growth, the final outcome will be dictated by the interaction between these two key drivers.
- In the best-case scenario, New Vigour, successful consolidation of public finances, combined with a return to robust growth, should ensure a broad continuation of Britain's influence in international economic affairs. The UK can remain one of the top-ten largest economies, a strong performer among advanced countries for many years to come.
- Failure to manage fiscal adjustment and leverage global growth, however, will lead to the worst-case scenario, A Lost Decade: policy-makers would be forced to adopt ever tougher budgets, including cuts in protected areas of public services. A poor economic performance would also risk a precipitate loss in global standing and influence.
- The UK must prepare for such contingencies as a prolonged slump in the Eurozone or a global sovereign debt crisis by acting swiftly to boost confidence in both its ability to manage the public sector and its aspirations for future, sustainable growth.
This paper forms part of the project Rethinking the UK's International Ambitions and Choices.