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Wednesday, 6 October 2010

Where is the economy heading?

There appear to be so many conflicting statistics, surveys, press releases, not to mention the pronouncements of the coalition, one could be forgiven for finding it hard to predict where the economy will be in 2011.

Here are some examples of good news;

Bonuses in the City better than expected ( a few find this very good news, others not at all )
Tesco profits up. This even surprised the Chief Executive himself!
Activity in the construction sector is up slightly.
Confidence on the high street is still bouyant.

Interest rates likely to stay low for some time.
Air travel and global trade increasing slowly.
Services sector in surprise expansion

Here are some examples of bad news;

House prices continue to fall.
Money supply is down.
Lending to small business is still very low.
Confidence in the construction sector down ( see above good news)
Jobs market growth 'slows again' according to survey of recruitment firms.
Government to start spending cuts ( already having an impact )
Inflation stubbonly high

So are we heading for a double dip? The expression "double dippers" has come about for the pessimists and the rest are undecided, or would rather not say!

In our view the most important thing that is keeping the UK relatively stable are low interest rates, flexible working, and the support of HMRC for businesses that cannot pay their tax on the TTP programme. The world economy is a competitive place and if we are leaner and fitter than our competitors then we will benefit. As such, in the long term, companies will have to face up to the fact that they are not lean and fit if they cannot pay tax owed. The government is aware that the budget deficit is also not conducive to a lean and fit country.

In the end it will be a combination of external factors ( US economy, commodities prices, Eurozone health) and good UK government that will be the deciding factor.

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