The Great Debate UK

Tough year ahead for UK plc – but longer term future sound

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Peter Hemington is a Corporate Finance Partner at BDO Stoy Hayward. The views expressed are his own.

peterhemingtonbdo-stoy-haywardOver the past few weeks several business surveys, including our own BDO Business Trends report, have painted a very gloomy picture of the UK economy. Short and medium term business confidence continues to plummet as the credit crunch takes its toll on unemployment figures, the housing market, the ability or desire that banks have to lend and consumer spending.

But despite this, the UK has some short term positives that we should not forget – low interest rates and inflation, plus a relatively flexible labour market. Additionally, although public sector borrowing is clearly running at too high a level, the ratio of national debt to GDP ranks somewhere in the middle amongst high income countries. So perhaps the UK’s credit is better quality than some commentators have suggested. And despite an equally gloomy outlook for the employment market – highlighted by this week’s announcements about two big names from the high street, Woolworths and MFI, going into administration – the unemployment figure is considerably lower than it was at the onset of the last recession.

Low interest rates and inflation, relatively low unemployment, not such a bad fiscal position – perhaps overall we could be in a stronger position than we were in 1991.

from UK News:

Boosting the economy: lower taxes, higher spending or both?

Prime Minister Gordon Brown has suggested he will push expansionary fiscal policies to help boost the economy. Brown's comments were the latest in a series from him and Chancellor Alistair Darling stressing the importance of boosting the economy, which shrank in the third quarter of 2008 for the first time in 16 years and is expected to contract more sharply next year.

Bank of England Governor Mervyn King has also put his weight behind "some fiscal stimulus", just as the Bank predicted in its quarterly inflation report that the economy would shrink sharply next year.

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