Kill the cat, wag-the-dog

As the dust settles after a truly extraordinary result in the US midterms, there is one question on everyone’s lips – what next?   

On the one hand, this is a man who lives by the maxim that “attack is the best form of defence”. On the other, he was given a kicking because he came to power promising to cut the cost-of-living, then launched a bombing campaign that sent gas prices spiralling.  

In an ‘America First’ theory of governing, that attack is often directed abroad, both because it appeals to the Republican base, and now because it is one that can be enacted by sidestepping the now Democrat-dominated Congress. 

Of particular concern is that the delicate peace process with Iran could fracture, or that the already fraught relationship between the EU, NATO and the US will fray further. Much will be written about what today’s results mean for the US, and its leading role in the global order, but what does it mean for the UK?  

Dire straits

A protracted Iranian peace process – or worse, a re-ignited conflict – would spell disaster for Burnham’s focus on the cost-of-living. Continued closure of the Strait of Hormuz alongside attacks on the region’s energy and fertiliser infrastructure will continue to drive up prices for fuel, food and practically everything else besides. 

Burnham’s efforts to create ‘breathing space’ will deliver diminishing returns for voters, alongside its damage to the UK economy. A prolonged Iran conflict will continue to sap UK growth, and quite possibly spark a full-blown recession. And this comes after a Budget that showed the Chancellor has very little fiscal headroom, while committing Treasury reserves to fund defence spending.  

Trump’s speculated next steps in the Middle East will place a political premium on those businesses able to provide for UK energy and food security, as well as those able to protect consumers from price shocks.   

Leaving the table

Another consideration is the likelihood of yet more American isolationism. With these results his ability to do very much at home is constrained, but an isolated America is not positive for the UK or its place in the geopolitical order. It emboldens hostile nations and destabilises our allies. For businesses, the focus will be on firms that contribute to the UK’s domestic defence and security, and that are resilient in their own operations and supply chains.  

Manchesterism and Mid-Atlanticism

Where Starmer was relatively successful in managing the ‘special relationship’ while remaining a critical friend of the US, Burnham is a politician more interested in the domestic. His course for ever-closer EU ties may make the balance of blocs even more difficult, and on top of that, he will have to justify any action – or indeed, inaction – regarding Trump to his softer-left base, and Labour backbenches. The cosy Burnham vision of domestic rewiring may look inappropriate and ill-judged in the face of increasingly chaotic international disorder.  

In navigating this challenge, the experienced foreign policy brahmins around No 10 will become more influential and important to guiding the PM’s approach.  

Events, dear Burnham, events

In the medium term, today is a reminder that when America sneezes, the whole world catches a cold. Britain is already mired in debt, beset by rows over welfare spending and facing low growth and spiralling inflation. The last thing the country needs right now is even higher energy prices, greater uncertainty and a cornered global leader sharing late night angry thoughts.  

Now, more than ever, both politicians and UK companies need to be up to speed with US events and be prepared to communicate why painful economic changes could be coming down the track. Grayling’s award-winning public affairs team can help clients navigate complex geopolitical challenges every day, and our US team obsessively follows White House developments. Do get in touch for a wider briefing on what today’s ‘Orange Crush’ could mean for your sector.