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Podcasts from Confluence Investment Management LLC, featuring the periodic Confluence of Ideas series, two bi-weekly series: the Asset Allocation Bi-Weekly and the Bi-Weekly Geopolitical Report (new episodes posted on alternating Mondays), and a new monthly Q&A format called the Confluence Mailbag.
Welcome to the Confluence Investment Management Bi-Weekly Geopolitical Report for 08/10/2026. I'm Phil Adler. Great Britain's economic regression the past few years is notable and well documented. So is the long parade of failed prime ministers. Can the newest one make a difference in a way that will matter for investors?
Phil Adler:Confluence chief market strategist Patrick Fearon Hernandez joins us today to discuss what we can expect from new prime minister Andy Burnham. First, Patrick, paint us a picture of Great Britain's economy today compared to, say, twenty years ago.
Patrick Fearon-Hernandez:Yeah. To answer your question, twenty years ago, Britain was widely viewed as one of the most dynamic economies in Europe. London was the unquestioned financial capital of the continent. Productivity growth was reasonably healthy, and the country was benefiting from globalization and relatively open trade. Today, the picture is very different.
Patrick Fearon-Hernandez:Economic growth has been persistently weak, productivity growth has slowed dramatically, regional inequalities have widened, and public finances are under considerable strain. London and Southeastern England continue to outperform, but many regions in Northern England and The Midlands have struggled to keep pace. Official data still show London's productivity far above the national average, highlighting how uneven Britain's growth model has become. So the result is a widespread sense among voters that the benefits of economic growth have become concentrated in a relatively small part of the country.
Phil Adler:And what are the main reasons for this economic decline?
Patrick Fearon-Hernandez:Well, there isn't a single cause. Rather, several long term trends have reinforced one another. First, Britain underwent substantial deindustrialization over several decades, reducing the economic importance of manufacturing and increasing dependence on services, especially financial services concentrated in London. Second, productivity growth has stagnated since the global financial crisis. Productivity is ultimately what drives rising living standards, and Britain's performance has been disappointing compared with its historical norms.
Patrick Fearon-Hernandez:Third, Brexit introduced new frictions into Britain's trade relationship with its largest export market. While Brexit has delivered greater policy autonomy, many economists argue that increased trade costs have weighed on growth and productivity. And then finally, chronic underinvestment in infrastructure and housing and regional economic development has left many parts of the country feeling disconnected from national prosperity.
Phil Adler:Several prime ministers, Patrick, have tried to institute policies to bring Britain back. Why did these policies fail?
Patrick Fearon-Hernandez:Well, most previous governments focused on symptoms rather than the underlying structural issues. Some emphasized fiscal austerity, others pursued tax changes or targeted spending initiatives. But very few seriously challenged the basic economic model that concentrated decision making, power, investment, and opportunity in London. Many reforms were also constrained by political realities. Prime ministers often had short tenures and limited political capital.
Patrick Fearon-Hernandez:It's difficult to execute long term economic restructuring when governments change every few years and voters become increasingly impatient. So in many ways, Burnham's rise reflects public frustration with that cycle of temporary fixes and unmet promises.
Phil Adler:Is there something about Andy Burnham's background and political success so far that stands out to you suggesting hope?
Patrick Fearon-Hernandez:Well, yes. What stands out most is that he spent nearly a decade outside London or outside Westminster. After leaving parliament, he became the elected mayor of Greater Manchester and built a reputation solving practical local problems. Under his leadership, Greater Manchester pursued transportation reforms, homelessness initiatives, and broader regional development efforts. That experience gives him a level of executive credibility many recent British leaders lacked.
Patrick Fearon-Hernandez:He isn't simply promising change. He can point to a governing record outside London's political bubble. Whether that translates into national success or not remains to be seen, but it certainly distinguishes him from several recent prime ministers.
Phil Adler:So you think one reason for his rise is a populist attitude of distrust which demands freedom from central government control?
Patrick Fearon-Hernandez:Absolutely. Burnham's message taps into a broader populist trend we've seen across much of the developed world. Many voters increasingly distrust distant institutions that seem disconnected from their daily lives. What's interesting is that Burnham channels this sentiment from the center left rather than the political right. His argument is that power should move away from Westminster and closer to local communities.
Patrick Fearon-Hernandez:That message resonates with voters who feel overlooked by traditional national politics.
Phil Adler:Where does populism appear in the policies that Burnham supports?
Patrick Fearon-Hernandez:Well, it appears most clearly in his commitment to devolution. Burnham argues that local communities are better positioned to identify their economic priorities than national bureaucracies. His proposals would grant regional governments more authority over transportation, housing, infrastructure, workforce development, and economic planning. He also emphasizes local identity, civic pride, and place based economic development. Those themes appeal to voters who believe national elites have ignored regional concerns.
Phil Adler:And what about the role of the central government?
Patrick Fearon-Hernandez:Burnham isn't advocating a weak central government. Rather, he's proposing a different distribution of authority. The national government would still oversee defense, foreign policy, macroeconomic policy, and important national programs. But it would delegate substantially more decision making authority over local economic issues. So Burnham's vision is somewhat paradoxical.
Patrick Fearon-Hernandez:He wants a stronger state in some areas, particularly industrial policy and public services, while simultaneously giving local governments far more autonomy.
Phil Adler:Patrick, one of our recent discussions covered the transition in The United States toward a corporatist state where the central government plays a stronger role in shaping the economy with greater influence on both business and labor. Is there an element of that in Burnham's vision for Great Britain?
Patrick Fearon-Hernandez:I think there is. Burnham clearly supports a more active government role in guiding economic outcomes. His emphasis on strategic industries, domestic manufacturing, infrastructure investment, and public influence over key services fits within a broader trend occurring across many western economies. What we're seeing isn't traditional socialism. It's more of a hybrid model where markets remain important, but government takes a more active role in promoting national resilience, domestic production, and strategic objectives.
Patrick Fearon-Hernandez:And the stronger state would be more active in trying to keep the interests of business and workers in balance. In that sense, Burnham's agenda resembles developments occurring not only in The United Kingdom, but also in The US, Continental Europe, and Japan.
Phil Adler:Well, Burnham can't escape one key challenge, and that is how can he fund failing social services without raising taxes and slowing the economy even further?
Patrick Fearon-Hernandez:Well, that's probably the biggest question facing his government. His optimistic scenario is that investments in housing, transportation, infrastructure, and regional development eventually improve productivity and expand the tax base. However, Britain's public finances are already stretched. Public debt is approaching the size of the entire economy, and debt servicing costs remain substantial. As a result, Burnham will have limited room for error.
Patrick Fearon-Hernandez:If growth improves, financing his agenda becomes easier. If growth disappoints, pressure for tax increases or additional borrowing could emerge quickly.
Phil Adler:Patrick, in your report, you suggest there are similarities between Burnham and New York mayor Zoran Mamdani. What are they?
Patrick Fearon-Hernandez:Both politicians demonstrate that modern populism is not exclusively a right wing phenomenon. Each presents himself as an outsider challenging established institutions. Each emphasizes economic inequality, stronger public services, and greater government involvement in achieving social goals. Of course, Burnham may prove considerably more pragmatic and moderate than Mamdani. Nevertheless, both suggest that left leaning populist politics may be developing greater electoral appeal in advanced democracies.
Phil Adler:Well, do you see greater potential for the rise of similar politicians elsewhere in the world?
Patrick Fearon-Hernandez:Yeah. I do. The underlying drivers are appearing across much of the developed world. Slow productivity growth, housing affordability problems, regional inequality, distrust of centralized institutions, dissatisfaction with traditional political parties. Whenever large groups of voters believe the current system no longer serves them effectively, opportunities arise for politicians who promise a new economic model and a redistribution of political power.
Patrick Fearon-Hernandez:So I wouldn't be surprised to see similar figures emerge elsewhere in Europe and North America.
Phil Adler:Patrick, there must be some support within Britain for rejoining the European Union. What stands out to you about Burnham's foreign policy?
Patrick Fearon-Hernandez:Burnham supported remaining in the European Union, but he recognizes that rejoining is not politically realistic in the near term. Instead, he appears focused on improving trade relations, regulatory cooperation, and security coordination while respecting the reality of Brexit. At the same time, he's indicated continued support for NATO in Ukraine, suggesting considerable continuity in Britain's broader strategic orientation. His foreign policy is therefore less ideological and more focused on supporting domestic economic priorities.
Phil Adler:So what investment opportunities do you see possibly arising in Great Britain because of Burnham's policies?
Patrick Fearon-Hernandez:If Burnham successfully implements his agenda, several areas could benefit. For example, construction and engineering firms may benefit from increased infrastructure spending and housing development. Manufacturers involved in strategic industries could benefit from re industrialization initiatives. Defense firms may see opportunities due to continued support for domestic production and NATO commitments. Meanwhile, regional transportation providers and companies tied to local economic development could also perform well if devolution accelerates outside London.
Patrick Fearon-Hernandez:The biggest beneficiaries would likely be firms positioned to support Britain's effort to rebuild productive capacity and strengthen economic resilience.
Phil Adler:Patrick, one more question. In the West, we grew up paying great respect to Great Britain's role as an economic and political power even though that status had somewhat declined in the twentieth century. Lately, the view, I think, has swung sharply in the other direction. Are we now underestimating Britain's potential as an economic influence and a profitable destination for investments?
Patrick Fearon-Hernandez:I think that's a possibility. Britain still possesses substantial advantages. It remains one of the world's leading financial centers. It has strong universities, deep capital markets, respected legal institutions, advanced research capabilities, and significant geopolitical influence. The pessimism surrounding Britain is understandable given recent economic struggles and political instability.
Patrick Fearon-Hernandez:However, markets often become most interesting when expectations are low. If Burnham's reforms successfully successfully improve improve productivity, encourage regional investment, and revive economic dynamism, Britain could surprise investors on the upside. Of course, that's not guaranteed. The structural challenges are still formidable. But I would argue that many observers today focus almost exclusively on Britain's problems while overlooking its enduring strengths and potential capacity for renewal.
Phil Adler:Thank you, Patrick. The title of this week's report is meet Andy Burnham, and you can find a link to the written report on the Confluence webpage, confluenceinvestment.com. Our discussion today is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Phil Adler:Our audio engineer is Dane Stole. I'm Phil Adler.