Is the UK economic milk bottle half full or half empty?

Last Friday night my stockbroker pal was in great form. The FTSE 100 share index had surged past 6,000 and at +3.79% in 2013 had reached 6,121.58. His New Year earnings budget was way over target. “The private investor is, at long last, sniffing again” he said.

As I drove home I listened to the business news. The Receivers announced that they were going to close all of the 187 stores operated by camera retailer Jessops with the loss of 1,370 jobs.

So what is the outlook for the UK economy?

The milk bottle is half full

Followers of the Austrian born economist Friedrich Hayek will argue that the economic cycle must now be turning upwards. The period of US-led sub-prime excess (2001 – 2008) has been counter balanced by the years of austerity (2008 – the collapse of Lehman Bros – to the present day). The value of money has been re-established.

Markets worldwide are showing upward trends. China is projecting growth of 8%. The US has weathered its fiscal cliff. The eurozone is stable, Greece is still there and the European Central Bank will support Spain and Italy. Angela Merkel should be re-elected in September.

The UK jobs market is better than projected and the Coalition Government believes its ‘Funding for Lending’ scheme will improve credit flow for SMEs. The ‘Fixed Term Parliaments Act 2011’ means that the next General Election is on 7 May 2015 and so the Coalition will survive.


The milk bottle is half empty

Britain is about to post its worst balance of payments statistics for nearly twenty years. The current account deficit for 2012 will be around £54 billion (3.5% of GDP). The fall in the value of the pound might help exporters but it will add to inflationary pressures. The CPI will be 2.8% when announced and will surge past 3% in the coming months. This will require the Governor of the Bank of England to write to the Chancellor and will put pressure on our AAA rating. The UK may experience a triple-  dip recession.

The Coalition Government is in total chaos over its relationship with the EU. The CBI’s Christmas message to stop the nonsense and work within Europe to improve our trading performance appears to have fallen on deaf ears.

There are further Government spending and benefits cuts coming and consumer ‘confidence’ is expected to confirm the dismal results of the Christmas trading period.

Halfway through the coming year the new Governor of the Bank of England arrives.

Perhaps Mr. Carney should abstain from the bottle and remain rather sober. He has a challenging time ahead of him.

I am holding the first of two meetings with the Treasury on Tuesday (15 January) to discuss the recommendations for SMEs contained in ‘The Drury Report’. This can be downloaded on   The second presentation is a week later (with all the Report Group members) on Tuesday 22 January. I’ll report to you further on the outcome of our discussions.

1 comment for “Is the UK economic milk bottle half full or half empty?

  1. Richard Hoblyn from Enterprise Britain
    18 January, 2013 at 15:37

    I’m not sure that Austrian’s would all argue that the bottle is 1/2 full. It seems to me that there’s a case for saying that the UK bottle is nearly depleted. Sterling crisis very soon (AAA slashed) with Coalition on the rack. UKIP in the ascendency.

    Liked the Drury Report but I think something could have been commented on regarding the RDR debacle and the market equity disillusionment that is occurring due to wealth management issues etc.

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