1. Turning The Corner? Dennis Turner UK ECONOMY : 2013 AND BEYOND Chilworth Partnership Conference Chilworth Manor Hotel, Southampton 2 nd May 2013 2 nd 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 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 Surge in public sector borrowing

17. Government finances weakened

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

19. Govt receipts and spending Budget Statement, March 2013

20. NEW ISSUES

21. Eurozone fragility Eurozone fragility

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

23. 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 Sterling weaker US$ / £ (L axis) euro / £ (R axis ) Forecast

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

34. Real earnings growing again

35. Debt repayment underway Household debt:income ratios

36. A slow consumer recovery Forecast

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

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

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

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

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

42. Getting the deficit down

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

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