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.

5 comments on “10 things you don’t know about the UK economy

  1. Great to see the presentation re-published to a wider audience……
    Can you also also add to your list of advice …… as growth is higher in other parts of the world and the £ is ‘low’ at the moment, export markets are the great opportunity for UK buisinesses.
    As a cloud provider for businesses with 5-100 staff our growth is being driven by people who want professional IT facilities to drive their businesses but as an expense, not as an investment

  2. Mike Smith says:

    Some great if not painful points Paul

    I live in Spain where the ‘crisis’ as they call it has hit hard. However the banks having come through the less than thorough ‘Stress Test’ are now actually lending once again. In fact the property market is relatively buoyant.

    The big difference here however is the overall attitude. On the one hand there is the socialists urging strikes even to the point where they’re suggesting that grandparents should not babysit kids thus stopping parents from working. And on the other hand and by far the majority are those who say it’s a crisis but it will pass so lets get on with our stress free existence.

    We could probably learn a thing or two from these guys

    Regards

    Mike

  3. Hi Paul,
    Interesting and informative piece!
    It will be quite interesting to see how everything will pan out in the next coming years.
    I was surprised you did not mention anything about Gold in comparison to our devauling currency. What are you thoughts on this?
    Best,
    Lavinia

  4. Bob Beattie says:

    Interesting article Paul but you are falling in to the banking myths, smoke and mirrors that has been out there for the last two years.

    Failure of businesses to invest! What planet is that guy on?
    One assumes that the corporates he is talking about includes the banking ones? they are, it is very true, not investing in UKplc or indeed the SME’s that are supposed to fund and bring about the change.

    How can this guy have the gall to pontificate from his ivory, bonus enhanced tower and look down at us in the cheap seats and tell us we are not investing!

    UK Plc has debt and the prime source of that debt is the banking rescues and lax regulation (frankly I don’t care whose fault it now is, just correect it and NOW!).

    The other source of this debt is the lax fiscal management of Tax collection, MOD procurement and the Welfare system (etc).

    This is not about the ethos of cheating that the coalition goes on about, it is about the system that is totally flawed and allows this to happen. Correct that and then chase the so called cheats. One persons cheat is anothers ‘avoider/evader’.

    I am involved in the Construction industry and note that this had been bouncing back for the last two quarters. Who funded this? Certainly not the banks. Despite this the naysayers have been ‘blaming’ this on the delay because of a harsh winter etc, etc. yet it is still happening. There does seem a determination to keep us down now we are down and the boot firmly on the neck.

    If double dip is irrelevant, why does everyone keep dragging it up on short news days?

    The Coalition is prescribing new drugs, to use Beresford-Smiths analogies, and unfortunately is using them on the wrong patients or at least not on those who have private healthcare but on those that cannot squeal or pull influence (nice one Vodafone). Some are more equal than others.

    It disgusts me when banking analysts talk about pain and hardship when their lack of accuracy and fiscal stupidity brought us to this and highlights problems with our internal financial management as a country. Belt tightening, sick patients the cliches keep on coming. The arrogance is there for all to see.

    The thinly veiled threat of moving elsewhere or moving us elsewhere or working from home, getting rid of loss making clients (who are probably in this position because they cannot get funds from the banks anyway), doesn’t it make you warm and cosy knowing that you have these sort of people behind you when you get out of the trench every day to get business?

    No mention of what we do when we move the staff to work from home. Sublet the offices, sell them off in a depressed market, no cars on the road, no tube or commuting. Look at this Chris Huhne a green policy from a banker!

    In answer to the premise and your question Paul is that I think we do know these things about the UK economy as we have heard nothing but from the Coalition since the election and the fact that it is labours fault.

    As to Mr Beresford-Smith’s take on it I would suggest that there is a smell coming from it and it isn’t of money! More from the farmyard I would suggest.

  5. ■It is not the banks that are not lending it is business that is not investing

    To quote Christine Keeler, well he would say that wouldnt he!?

    I do a fair amount of broking for business finance and could comment further, but maybe another time!

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