This interview first appeared in The Irish Times – 07th May 2024.
The son of Irish immigrants, Gerard Lyons was a contender for governor of the Bank of England. Now he wants it overhauled.
Britain needs a “shake up” of institutions such as the Bank of England, according to Gerard Lyons, a son of Irish immigrants to London, who was Boris Johnson’s chief economic adviser when he was mayor of the City.
Lyons, who was a front-runner to become governor of the Bank of England in 2019 before the job went to Andrew Bailey says the bank lacks “credibility” and needs an overhaul. Britain also needs to jolt its economy out of stubborn low-growth.
The former chief economist at Standard Chartered bank, who now sits on the board of the Bank of China (UK), was also one of the biggest economic cheerleaders for Brexit in advance of the 2016 vote. Britain’s exit from the European Union was, he says, primarily a “political event.”
“In financial and economic terms, it is a process” he says, warning that a future Labour government would be unwise to economically tether the UK closer to the EU.
Lyons believes the EU is a low-growth “Titanic”, and that Britain can be nimble on its own in “choppy waters”. He also says that post-Brexit Britain should target future growth through trade with significant mid-tier powers, such as Brazil and Nigeria, as well as behemoths such as the United States.
“I argued that the best to think about the economic impact of Brexit is like a Nike swoosh – there is an [initial] economic shock, [but] in time the benefits accrue with sensible policies. Economically our problems would not necessarily be solve by going back into the EU or [even] by having a close association with it.”
Lyons, who grew up in an Irish family of six in a one-bedroom flat in Kilburn, believes a shake-up is needed in Britain’s institutions to make them more representative of the country, more “fit for purpose.”
“There is an Oxbridge [Oxford and Cambridge universities] bias in the UK”, says Lyons, who attended Liverpool and Warwick before doing his PhD at the University of London.
“You can [still] make inroads if you don’t have an Oxbridge background. A lot of institutions say they want diversity, but it comes in many different formats. They still want uniformity of thought. But what you actually need is diversity of views.”
Lyons’s father came from near Ennis Co Clare, while his mother hailed from near Tang in rural Westmeath in the geographical centre of Ireland. As a child, he visited Ireland and, especially, Tang regularly because the family was entitled to cheap travel as his father worked for London Transport.
“I always remember the Three Jolly Pigeons pub in Westmeath”.
The family moved out of their cramped conditions in Kilburn, then the heart of Irish London, and got a council flat when Lyons was aged 11 or 12. After school, he made the lead to university and began a career in the City of London.
Lyons held senior economic and management roles in institutions such as Swiss Bank Corp and Dai-Ichi Kangyo Bank, the Japanese bank that was then one of the largest banks in the world. From the late 1990s, he was chief economist at Standard Chartered, where he developed a reputation as one of the leading forecasters on the British economy, correctly predicting the deep recession of 2008.
“I was in talks to move to another city bank, but by then I was travelling five months of the year. The children were young and I thought it would be nice to be based in the UK for a while.”
Tory mayor of London:
Lyons jokes that somehow, “for his sins”, he was offered a role in 2012 as Johnson’s full-time economic adviser when he was in his second term as the Tory mayor of London. Lyons had previously advised other senior politicians, including Gordon Brown, sitting on his Business Council for Britain.
“In theory, it was meant to be a non-political role but I was there 10 minutes when I realised there was no such thing. What you see is what you get with Boris.”
Johnson’s second term as London mayor ended in 2016 and three year later, when he was prime minister, his old adviser Lyons emerged as a favourite for the Bank of England – where contenders were asked to complete rounds of psychometric testing.
He argues that many of the UK economy’s problems, such as rampant inflation, are due to the Bank’s past over-reliance on cheap money policies such as quantitative easing. He also criticises its forecasting, which was castigated this month in a review led by former US Federal Reserve chairman Ben Bernanke.
Lyons believes the Bank needs to act as a “cheerleader” for the City of London, where he says he had “fantastic support” for his governor bid.
Britain’s economy, he says, is now stuck in “low-growth, low-wage, low-productivity” mode. “In recent years it has also become a high government-spending and high-taxation economy.”
Part of the solution, he argues, is to widen the Bank of England’s focus from curbing inflation to also ensuring the City of London services the UK domestic economy properly and that policies are aimed at keeping the financial sector competitive.
He says the UK also needs to scale back its national debt, while finding a way to boost investment and addressing other weaknesses in the economy.
“Would a change of government help? There is always a honeymoon period with a change of government. But what you need to see is a real attempt to address the structural issues.”
Although fixing the UK economy would be a hard ask, Lyons says he also encountered an even more difficult task while attempted to keep in touch with his Irish roots.
“I enrolled in an Irish language course at City Lit [adult education college] … it was incredibly difficult.”