The UK’s next economic shock could be just around the corner

On Friday 7 November, new business radio station Share Radio interviewed me on the topics of interest rates, the problems in the eurozone and the broader business environment.

Presenter Sandra Kilhof asked lots of challenging questions about the economic outlook for both the UK and the wider global economy.

I explained that while the UK economy has performed strongly in 2014, there are signs that the economy is slowing as we reach the end of the year. This is particularly evident in the services and construction sectors. Wages have also been growing slowly and there are  concerns that the UK’s employment situation is not quite as healthy as the figures suggest. Furthermore, inflation is falling, which is good in one way because it makes our goods and services cheaper, but potentially hazardous because we don’t want to be on the verge of deflation in the way that the eurozone is.

In addition, the wider global outlook is very uncertain. The eurozone, which is our main trading partner, appears to be on the edge of a triple-dip recession. Growth is slowing in China and attempts to stimulate the Japanese economy don’t seem to have come to much. There is also a lot of political uncertainty, for example, in the Middle East and Ukraine.

The fact that the Bank of England is so reluctant to lift interest rates, despite predicting that our growth rate will be around 3.5% this year, shows that it is not confident that our economic recovery is on a sustained footing.

And it is right to think this – there is too much uncertainty within the world’s major markets and there are also clear indicators of asset bubbles within the housing markets and stock markets.

So it is very important that we are not fooled into thinking that the UK economy is home and dry right now. We need to be very cautious about the recovery and make sure that we don’t take it for granted. Who knows, the next economic shock could be just around the corner.


Comments are closed.