Turning The Corner?

1
Turning The Corner?
UK ECONOMY 2013 AND BEYOND

• Dennis Turner

Chilworth Partnership Conference Chilworth Manor
Hotel, Southampton 2nd May 2013
2
THE RECESSION IS OVER
3
A deep recession
4
The growth shortfall
Annual GDP growth forecasts in each Budget
5
means more borrowing
Public sector net borrowing (bn)
6
and higher debt levels
Public sector net debt
7
A FRAGILE RECOVERY
8
Legacy issues
9
Consumers were the driving force
10
But underpinned by borrowing
11
The big household squeeze
Inflation
12
The big household squeeze
Inflation
Earnings
13
The big household squeeze
Inflation
Earnings
14
Unemployment stubbornly high
Unemployment rate (R axis)
Number 000s
15
A difficult consumer environment
16
Surge in public sector borrowing
17
Government finances weakened
18
So net debt (as a of GDP) soared
Budget Statement, March 2013
Sustainable Investment Rule
19
Govt receipts and spending
Budget Statement, March 2013
20
NEW ISSUES
21
Eurozone fragility
22
In the wrong places
Share of UK exports (goods services)
23
Getting the debt down
24
Getting the debt down
25
Imbalances the key to debt
Current account balances
26
ECB now behaving like a central bank
27
All sticks and no carrots
GDP growth
28
OUTLOOK
29
Inflation above target
Target Range
30
Inflation likely to ease
Forecast
Target Range
31
Interest rates to stay low
Forecast
32
So sterling to remain competitive
US / (L axis)
Forecast
euro / (R axis)
Sterling weaker
33
Where is growth coming from?
GDP (100) Consumer spending (64)
34
Real earnings growing again
35
Debt repayment underway
Household debtincome ratios
36
A slow consumer recovery
Forecast
37
Where is growth coming from?
GDP (100) Consumer spending (64)
Investment (15)
38
Corporate sector in good shape
Operating surplus and profitability of UK private
non-financial companies
Profitability
39
but not spending
Private Non-financial Corporations
Investment by
Level of investment (R axis)
40
Investment to pick upat last
Business Investment
Forecast OBR 2013
41
Where is growth coming from?
GDP (100) Consumer spending (64)
Investment (15) Government spending
(23)
42
Getting the deficit down
43
Where is growth coming from?
GDP (100) Consumer spending (64)
Govt consumption (23) Investment
(15) Net trade (-2) (Exports 30
Imports 32)
44
Trade becomes a plus for growth
Annual export growth ( RHS)
Annual import growth ( RHS)
45
Turning the corner
46
Sluggish growth as good as it gets
Forecast
47
THANK YOU