Post Budget RBS Economic Forum of 25th March
Venue: Dorney Lake, Eton College Rowing Centre. A review of likely economic growth in the remainder of 2010 (Tony Thornby)
Bank Forecasts of 2010 UK Business Activity
I have to admit that my main reason for accepting the invitation for Living Streams to attend this event was the business networking. But what came out of it and some related facts that I have discovered since are well worth sharing, the initial fact being that the UK’s GDP (gross domestic product dropped more in 2009 quarter 1 than in the whole of the 1980’s recession.
Then there is the normal distribution of spending which starts to give us a clue about the likely speed and strenght of an economic recovery. Traditionally, UK GDP splits 50% consumer spending, 15% government spending, 15% investment and 20% export.
Consumer behaviour is therefore key:
Figures are per £100 of income
Long term (i.e. historically)
Q3 2009 (latest figures available)
4 year plan
Hence, even without increased unemployment and people taking salary cuts, consumer spending was down 10% and we know that government spending will drop by about 10% from its current. The best hope for a recovery is exports, due to the worsened currency exchange rate, but UK has much less industry able to take advantage of this than in past.
In terms of recovery, expected performance across industries :
Mining / quarrying
Retail and Wholesale
Hotel / Travel
Overall it is thought that it will take 5 years to get back to the same GDP as we had in Q4 2008. The recovery will sluggish – subject to a possible second dip – and cost control will remain critical.
I was amazed how closely what the RBS Economist said aligned with Living Streams’ own thinking – as reflected in our current lead article.
One of the best ways that companies can reduce costs is to look at ways of increasing the effectiveness of their advertising / marketing spend by making more and better use of what the web offers. This is coincidentally also one way that companies can steal a march on their competitors and hence grab a bigger share of the overall market. Traditionally, recessions are the best time to make progress.
Gordon Brown Postscript:
– In 1999 he, defying market advice, sold off half of the UK’s gold reserves at about $256 per ounce when gold is now around $1,100 per ounce
– When he became chancellor, the gap between annual tax revenues and spend was £6bn per year, it’s now £167bn
– When he became chancellor, the UK was the 4th most competiitvely taces economy in the world, it si now the 84th
– UK national income has grown by £27bn since mid-2009, but £25bn of this has gone into higher company profits rather than wages
– The banks ‘bailed out to prevent them suffering for their failures’ have seen a rapid return to profitability. The recession is hitting the normal workers, many of whom are on short time working or have accepted cuts in wages, pensions etc