10 things you don’t know about the UK economy

Today I attended a Chamber meeting in which HSBC’s chief economist Mark Berrisford-Smith was talking. He said the following:-

  • The UK recovery is going to be LONG, SLOW & PAINFUL
  • UK interest rates will rise because the UK is borrowing £200bn pa and our lenders will dictate rate rises particularly if the B of E refuse to react to rising rates of inflation
  • Double dip is irrelevant because UKplc has too much debt and too much household debt and until this is under control (predicted 2015) expect more PAIN and HARDSHIP
  • Global recovery is looking positive because most of the world is doing well -China (10%), India (8%), Brazil (5%) with average global growth at 4%
  • Stock levels ebb and flow at end of recession which is causing the ups and downs we are currently experiencing
  • It is not the banks that are not lending it is business that is not investing 
  • Cashflows are very strong in corporates but they are refusing to invest
  • American and European economies are faltering and are considering additional quantitive easing
  • The debt crisis is not going to go away and we could see ugly riots on the streets
  • US has the highest deficit of all representing 10% of GDP but with mid term elections looming the US Government is unlikely to keep Governement spending under control  

UK plc will have to compete with the rest of the world for funds and if the US refuse to tighten their belts then the cost of money will rise forcing interest rates up. The UK is like a sick patient which is full of drugs which have not been tested before.  With interest rates at an all time low to help “pump prime” the economy the Government has run out of drugs to prescribe.

My advice to business owners is:-

  • repay debt as quickly as possible
  • turn  fixed costs into variable costs – outsource non core functions and encourage home working
  • avoid  unnecessary expenditure
  • Drop all loss making customers/clients and only work for profitable ones

Failing all of the above then consider emigrating to resource rich countries like Canada and Australia that have not felt the global financial crisis.

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