Universal Basic Income (UBI) has become an increasingly popular topic, and the UK is set to put the trendy socioeconomic theory to the test.
The trial is to be steered by think tank Autonomy and it will see £1,600 paid per participant per month over a two-year period.
Participants will be selected from Jarrow, n north-east England, and East Finchley, in north London. Costing less than £2mln, the trial will remain limited in scope but it marks a curious step towards what has long been hailed as a revolutionary economic idea.
It's early days as far as a potential country-wide roll-out is concerned, but, the very idea triggers an intrigue into UBI would mean for the UK (ultimately an ageing and increasingly marginal economy that's quite short of fresh ideas).
And, perhaps more pertinently, for Proactive, what it could ultimately mean for investors.
Understanding the basics of ‘UBI’
It's pitched as a universally available periodic, no-strings-attached financial support. Paid out to everyone, all individuals, irrespective of their income, wealth, or employment status.
In its ideal, it aims to provide every citizen with a basic financial safety net.
The apparent appeal of UBI lies in several factors.
Amid fears of a job-ocalypse driven by artificial intelligence and the maturing economy, UBI could provide financial stability, helping transition the population from proverbial worker bees into a consumerist class (where an individual’s primary economic function is simply spending and consuming).
UBI could also, in theory, balance political disparities arising from increased reliance on social welfare.
Some say that universally distributing money is more politically palatable than perpetually pitting the less affluent against the wealthy.
Besides that, on a more personal level, UBI aligns with an increasing societal desire for individuals to enjoy more fulfilling work and a balanced lifestyle, as opposed to gruelling labour merely for survival.
Almost all business sectors will be impacted, and some will be significant beneficiaries.
Its perhaps obvious that a scheme which guarantees a baseline income will help spur spending by consumers, and, would promise to ‘transform’ the economy.
Perhaps it is also as simplistic as it is obvious. Nevertheless, among the most obvious beneficiaries would be property, consumer staples, and household utilities.
More specifically, were likely talking about mortgage providers, housebuilders, residential REITs, supermarkets, energy companies, and travel and leisure businesses.
Perhaps significantly, the finance and investing sector could spark an increase in retail investing and the so-called 'meme-stocks' and cryptocurrencies could also see an upswing.
Such a trend was evident in the United States during the Covid-19 lockdowns, where a number of financially-comfortable individuals used their ‘stimy’ (Covid-19 stimulus) cheques to fund speculative trading ideas sourced from the internet.
Mortgage providers and Housebuilders
Should UBI be introduced, a guaranteed income could instil confidence in mortgage affordability, possibly encouraging the return of 100% mortgages and more real estate risk-taking.
This would likely boost the housing market, creating a favourable environment for housebuilders and residential REITs.
The stimulus may also reduce risk on residential rents, and potentially further stimulate (or indeed, inflate) house prices.
Supermarkets and energy companies
Supermarkets could enjoy increased profit margins, as guaranteed household budgets enable consistent expenditure on essentials.
Similarly, energy companies could experience significant relief. Following the Russian war in Ukraine, the UK government subsidised the energy market heavily in 2022/23.
If households have a stable income to cover their rising energy bills, companies can breathe easier - or, indeed, billpayers can perhaps stomach paying out more for longer.
Travel and Leisure
The introduction of UBI might stimulate a shift towards a more leisure-oriented culture.
With financial security and potentially flexible working arrangements, spending on trips away, staycations, or even just additional visits to the cinema, restaurant, or pub could surge.
Retail Investing
The recent trend of retail investing in the US, driven in part by stimulus cheques, saw a boom in 'meme-stock' trading and cryptocurrencies.
A similar pattern could emerge in the UK, with UBI serving as an investment resource for those still in employment.
For those already with material incomes, there's the promise of low to no risk investment should they choose to invest their government bunce.
Utopia or dystopia
Despite the rosy picture, there are sobering realities to consider.
Is it going to be extra ‘free’ money? Probably not.
Potentially, it may be pitched as a replacement of other existing welfare supports. Perhaps even provisions under the National Health Service.
The devil will likely be in the detail, if or when UBI arrives.
Moreover, the financing of a widespread UBI implementation is also yet to be explored, and, would probably also see significant increases in taxes.
Furthermore, such a ‘free money’ stimulus could further fuel inflation.
Let's wait 'n' see
Undoubtedly, the advent of UBI in the UK would present some compelling investment opportunities across a diverse set of sectors.
But, any actual changes likely remain a long way away – and at this stage we’re only guessing what the real-world implementation would look like.
Momentum appears to be with UBI as just a surface analysis suggests it could solve a number of problems, even if only superficially.
Investors will need to follow closely and watch keenly for details as any future policies to emerge before any more tangible forecasting or financial soothsaying can be done.