Economic Trends, a copy of the presentation delivered by Andrew Johnson, Senior Economist at EEF from the CIM East of England Summer Marketing Conference held on 9 June 2011 at ARU, Chelmsford
1. CIM Summer Marketing Conference
UK economic trends and prospects
Andrew Johnson – Senior Economist
2. OVERVIEW
• Recent UK economic history
• Fiscal challenge
• Growth challenge
• Prospects for 2011
• Looking ahead to 2012
• Key risks
3. Recent economic history
In 2008/09 the UK suffered its worst recession in 80 years
• Output declined by 6% (2009q3)
• Between 2008 and 2009 exports declined by
8.6% and imports by 9.1%
• Unemployment increased by 2.8pp to 7.9%
(2010q1)
• The financial system was brought to the brink
of collapse
Sources:
ONS, OECD
10. Fiscal Challenge
Fiscal Mandate
• Achieve cyclically-adjusted (structural) balance
by the end of the forecast period (2015/16)
• Public Sector Net Debt (PSND) falling by
2015/16
• OBR to independently judge whether each
budget means >50% chance of meeting targets
11. Growth Challenge
Rebalancing the economy, contributions to growth annual % change
6
4
2
0
-2
-4
-6
-8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Households Government Investment Inventories Net Trade GDP
Source: ONS
13. Growth Challenge
Accumulation of barriers to growth
• Level and complexity of tax system
• Stock and flow of regulations
• Atrophy and distortion of financial sector outside of
banks
• Poor supply and reliability of skills
• Uncertainty on climate and energy policy
14. Growth Challenge
What has the government done?
• Bringing down corp tax, canceled Labour’s NI
rise, introduced Office of Tax Simplification
• Red tape challenge
• Business Growth Fund, Project Merlin
• Demand-led skills system
• Climate change and electricity market reforms
15. Growth Challenge
Plan B?
• Shaky growth is leading to
calls, from some, to move to a
‘Plan B’
• Others endorse govt’s fiscal
plans (IMF)
• Even if fiscal plans
unchanged, plenty of room for
action
16. Prospects for 2011
Domestic side of the economy weak, components of GDP q/q % chg
Households Government Inventories
2.5 Investment Trade GDP
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
2010q2 2010q3 2010q4 2011q1
Source: ONS
19. Prospects for 2011
% change in annual output
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2010 2011 2012
Manufacturing Rest of economy GDP
Source: ONS
20. Looking ahead to 2012
Economy still expected to recover
2.5
2
1.5
1
0.5
0
2011 2012
March April May
Source: HM Treasury survey of independent forecasters