Turning The Corner? Dennis Turner UK ECONOMY : 2013 AND BEYOND Chilworth Partnership Conference Chilworth Manor Hotel, Southampton 2 nd May 2013 2 nd May.

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Presentation transcript:

Turning The Corner? Dennis Turner UK ECONOMY : 2013 AND BEYOND Chilworth Partnership Conference Chilworth Manor Hotel, Southampton 2 nd May nd May 2013

THE RECESSION IS OVER

A deep recession

The growth shortfall Annual GDP growth forecasts in each Budget

…means more borrowing Public sector net borrowing (£bn)

…and higher debt levels Public sector net debt:

A FRAGILE RECOVERY

Legacy issues Legacy issues

Consumers were the driving force

But underpinned by borrowing

The big household squeeze Inflation

The big household squeeze Inflation Earnings

The big household squeeze Inflation Earnings

Unemployment stubbornly high Unemployment rate (R axis) Number 000s

A difficult consumer environment

Surge in public sector borrowing Surge in public sector borrowing

Government finances weakened

So net debt (as a % of GDP) soared Sustainable Investment Rule Budget Statement, March 2013

Govt receipts and spending Budget Statement, March 2013

NEW ISSUES

Eurozone fragility Eurozone fragility

In the wrong places Share of UK exports (goods & services):

Getting the debt down

Imbalances: the key to debt Current account balances

ECB now behaving like a central bank

All sticks and no carrots GDP growth

OUTLOOK

Inflation – above target Target Range

Inflation – likely to ease Forecast Target Range

Interest rates to stay low Forecast

So sterling to remain competitive Sterling weaker US$ / £ (L axis) euro / £ (R axis ) Forecast

GDP (100%) = Consumer spending (64%) Where is growth coming from?

Real earnings growing again

Debt repayment underway Household debt:income ratios

A slow consumer recovery Forecast

GDP (100%) = Consumer spending (64%) + Investment (15%) Where is growth coming from?

Corporate sector in good shape Profitability Operating surplus and profitability of UK private non-financial companies

…but not spending Level of investment (R axis) Investment by Private Non-financial Corporations

Investment to pick up……at last Business Investment Forecast – OBR 2013

GDP (100%) = Consumer spending (64%) + Investment (15%) + Government spending (23%) Where is growth coming from?

Getting the deficit down

GDP (100%) = Consumer spending (64%) + Govt consumption (23%) + Investment (15%) + Net trade (-2%) (Exports 30% – Imports 32%) Where is growth coming from?

Trade becomes a plus for growth Annual export growth (% RHS) Annual import growth (% RHS)

Turning the corner

Sluggish growth as good as it gets Forecast

THANK YOU