Forecasts of the UK economy from 2012 - 2015 available as a free slide pack from the Saturday Economist.

1. GDP
The UK Economy in Black and White
Inflation CPI
Earnings - whole economy
Unemployment - claimant count
Unemployment - LFS basis
Base Rates
Ten Year Gilts
2007 - 2015 Forecasts
Oil Price - Brent crude
PSNBR £
PSNBR %
Manufacturing
Retail Sales
On line sales
Trade in Goods
Trade in Services
Overall Balance
House Prices
Exchange Rates
John Ashcroft is the Saturday Economist, CEO
of pro.manchester, a director of Marketing
Manchester, the AGMA Business Leadership
Council and a visiting professor at MMU
Business School in Economics and Corporate John Ashcroft .co.uk
Strategy.
Educated at the London School of Economics
and London Business School with a PhD in
macro economics from MMU
Exogenous Assumptions : Growth in China - USA recovery - no Euro collapse June 2012
Saturday, 23 June 12

2. UK GDP
UK GDP growth was 0.7% in 2011 and is
expected to be more around 0.2% in 2012.
Thereafter the economy will recover slowly
towards a trend rate of growth (2.4%) over a
period of five years assuming some stimulus to
growth from HMG.
5.0
3.6
3.8
2.5 2.1 2.2
1.5
1.2
1.3 0.7
0.2
0
-1.3 -0.9
-2.5
-3.8
-4.3
-5.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
% change year on year
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

3. UK Inflation CPI
UK inflation CPI basis is expected to fall back in
the first half of 2012 as the VAT hike drops out
of the index and the oil price increases in 2011
fall out in the second quarter. We anticipate
some difficulty in achieving the 2% inflation
target by the end of the year with 2.5% - 3% as
the main forecast outcome.
5.0
4.5
3.8 3.6
3.3
3.1
2.5 2.5 2.6
2.5 2.4
2.2
1.3
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
% change year on year
The UK Economy in Black and White JKA May 2012
Saturday, 23 June 12

4. UK Earnings - whole economy
Earnings data is a little confusing but a negative
real rate of growth of over 2% created
problems for households in 2011.
Inflation will ease back and earnings may
increase slightly into the year but it will still be a
tough year for households.
4.0 3.9
3.5
3.0 2.9
2.7
2.5
2.1 2.2
2.0 1.9
1.5
1.0
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
% change year on year
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

5. UK Unemployment - claimant count
Unemployment claimant count is expected to
increase slightly in 2012 before falling back
modestly over the following three years.
1700.0 1,633.1 1,600.0
1,529.1 1,532.3 1,550.0 1,525.0
1,497.1
1275.0
863.3 906.0
850.0
425.0
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
000s
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

6. UK Unemployment - LFS basis 000
Unemployment using the Labour Force Survey
data is expected to rise to 2.7 million in 2012
before easing back.
Forecasts of 3 million unemployed in 2012 may
to be too pessimistic.
3000.0
2,687.0 2,655.0
2,479.0 2,547.0 2,544.0
2,394.0 2,381.0
2250.0
1,783.0
1,654.0
1500.0
750.0
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
000s
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

7. UK Unemployment - LFS basis %
The headline unemployment rate will average
around 8.5% in the year.
Unemployment claimant count is expected to
increase slightly in 2012 before falling back
modestly over the following three years.
9.0 8.4 8.3
7.9 8.0 7.9
7.6 7.4
6.8
5.7
5.4
4.5
2.3
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

8. Interest Rates - UK Base rate
Base rates are expected to rise by the end of
2012. Rates averaged 5% in 2007 and 2008. The
current 50 basis point strategy is without
parallel in post war history. Weakness in
achieving the inflation target as growth
recovers, will push rates higher.
6.0
5.51
4.68
4.5
3.0
1.50
1.5 1.25
1.00
0.65 0.75
0.50 0.50
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

9. Interest Rates - Ten Year Gilt Rates
We model ten year gilts as a function of
inflation and a real rate “risk” premium. The par
rate for gilts assuming a 2% inflation target is
around 4% - 4.5% compared to a long run
average of 4.5%.
QE forces up gilt prices and pushes down yields
to an unrealistic level. Ten year gilt rates of 2%
signal a distortion along the yield curve.
6.0
5.01
4.59
4.5
3.65 3.61
3.10 3.00
3.0
2.50
2.20
2.00
1.5
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

10. Oil Prices - Brent Crude $
Oil prices are expected to increase over the
forecast horizon towards $130 per barrel Brent
Crude basis adding to domestic inflationary
pressures.
The fall in 2009 was a correction to the
speculative peak in 2008 rather than a function
of market fundamentals 128.00
130.0 120.00
125.00
115.00
111.23
98.98
97.5
79.87
72.49
65.0 60.93
32.5
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

11. Government Borrowing PSNBR £
Government Borrowing figures are expected to
fall to around £126 billion in 2011/12 slightly
ahead of the forecasts from the Office for
Budget Responsibility. With sluggish growth but
with only a moderate rise in unemployment the
reduction in borrowing should move to target
in 2012/13 with help from the Post Office
Pension fund.
200,000
156,396
150,000 136,129
126,000
96,493 95,000
100,000 92,000
80,000
60,000
50,000
34,038
0
2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
£000
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

12. Government Borrowing PSNBR % GDP
As a percentage of GDP borrowing will fall to
around 8% of GDP in the current financial year
from a peak of over 11% in 2009/10
12.0 11.1
9.2
9.0
8.0
6.8
6.4
6.0
4.9
3.5
3.0 2.4 2.2
0
2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
% GDP
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

13. Manufacturing %
Manufacturing growth in the second half of
2011 averaged just 2% growth year on year.
The long term average growth is around 1.5%
consistent with a continuous fall in
manufacturing as a percentage of GDP. There
will be no dramatic turn round in UK
manufacturing.
7.5
3.7
3.8 2.9
1.2 1.5 1.6 1.7
0.5
0
-3.8 -2.9
-7.5
-11.3 -10.7
-15.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
% change year on year
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

14. Retail Sales
Retail sales volume growth has averaged over
4% since 2000 prior to the slow down in 2008.
Volumes continue to be squeezed as household
incomes remain under pressure and more
transactions switch on line.
Retail will be tough in the years ahead.
4.0 3.7
3.0
2.2
2.0
2.0 1.7 1.8
1.5
1.0
1.0
0.6
0
-0.1
-1.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
% change year on year
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

15. Retail Sales - online
On line sales accounted for 12.5% of total retail
sales by the end of 2011 and by the end of the
forecast horizon almost a quarter of total sales
will be online.
The market is racing way ahead of earlier trade
expectations placing greater pressure on high
street trade.
30.0
23.1
22.5 21.1
18.5
15.1
15.0
10.2
7.6
7.5 6.5
5.3
3.7
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
% of total retail sales
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

16. Trade in Goods Deficit £ billions
The trade in goods deficit increased in 2011
from £97.2 billion to just under £104 billion.
The trend deterioration is expected to
continue, sterling weakness is of little value to
offset the structural weakness.
0
-30.0
-60.0
-90.0 -82.4
-89.8
-93.1
-97.2
-103.5 -106.1 -109.1 -112.1
-120.0 -115.1
2007 2008 2009 2010 2011 2012 2013 2014 2015
£ billions chain linked series
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

17. Trade in Services Surplus £ billions
The service sector surplus increased to £69
billion in 2011 from £51 billion in 2010.
A more modest improvement is forecast into
2012 and beyond.
90.0
90.0 84.1
79.1
74.0
69.1
67.5
55.4
52.7 50.8
46.8
45.0
22.5
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
£ billions chain linked series
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

18. Trade in Goods and Services £ billions
The overall deficit trade in goods and services
improved significantly in 2012 due to the
service sector improvement.
A more modest trend improvement is in
prospect in the years ahead but welcome news
none the less.
0
-12.5
-25.0
-25.0
-28.0
-29.7 -30.0
-32.9 -32.1
-37.5
-37.8
-43.0
-46.4
-50.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
£ billions chain linked series
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

19. House Prices - UK
House prices are expected to trade sideways
over the forecast horizon with some potential
modest recovery towards the end of the
period.
Buy to let will support market action as first
time buyer action will be muted.
9.0
9.0
6.8 5.8
4.5
2.3 1.0
1.5
0.1 0.1
0
-0.2
-2.3
-4.5
-6.8
-6.7 -7.1
-9.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
% change on prior year
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

20. Exchange Rates
Sterling is expected to hold against the dollar
and appreciate slightly against the Euro as
interest rate spreads narrow and Euroland
worries persist
Further dollar weakness against the Renminbi is
expected.
2007 2008 2009 2010 2011 2012 2013 2014 2015
£:$ 2.00 1.85 1.57 1.55 1.61 1.56 1.56 1.56 1.56
£:€ 1.46 1.26 1.12 1.17 1.15 1.25 1.26 1.28 1.28
£: ¥ 235.6 191.3 146.9 136.1 128.6 117.0 112.3 107.6 103.1
$: € 1.37 1.47 1.40 1.32 1.39 1.28 1.25 1.22 1.22
¥:$ 117.8 103.4 93.6 87.8 79.9 75.0 72.0 69.0 66.1
Yuan:$ 7.61 6.95 6.83 6.77 6.47 6.47 6.25 6.00 5.75
¥:Yuan 15.48 14.88 13.70 12.96 12.35 11.59 11.52 11.50 11.49
The UK Economy in Black and White JKA June 2012
Saturday, 23 June 12

21. GDP
Inflation CPI
Earnings - whole economy
Unemployment - claimant count
Unemployment - LFS basis
Base Rates
Ten Year Gilts
Oil Price - Brent crude
PSNBR £
PSNBR %
Manufacturing
The UK Economy in Black and White
Retail Sales
On line sales
Trade in Goods
Trade in Services
Overall Balance 2007 - 2015 Forecasts
House Prices
Exchange Rates
The material is based upon information which we
consider to be reliable but we do not represent
that it is accurate or complete and it should not be
John Ashcroft is Chief Executive of relied upon as such. We accept no liability for
pro.manchester, a director of Marketing errors, or omissions of opinion or fact.
Manchester and a visiting professor at MMU
Business School specialising in Macro In particular, no reliance should be placed on the
Economics and Corporate Strategy. comments or trends in financial markets. The
publication of this document should not be
Educated at the London School of Economics construed as the giving of investment advice.
and London Business School with a PhD in
macro economics from MMU.
www.johnashcroft.co.uk
Exogenous Assumptions : Growth in China - USA recovery - no Euro collapse June 2012
Saturday, 23 June 12