Should we be concerned about the UK’s economic future in 2016
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I am not going to engage in the ‘art’ of prediction. However, what I can say is that the immediate future will be dependent on a number of things that, cumulatively, create a great deal of uncertainty and, therefore, potential for negativity in economic terms.
For starters the data coming out of China is not good. The economic ‘miracle’ that occurred there over the last 15 years – and which create cheap goods that ensure low inflation throughout the world – is now at an end. We can expect lower demand from China and, as anyone who has analysed their stock market will tell you, there is a significant problem of too much money piling into overvalued companies.
Though the Chinese government believes it can prop up the market by intervention, there is a strong likelihood that this will cease. Should the Chinese economy go into serious decline this year there would be inevitable consequences internally and throughout the world that would affect us here in the UK.
Increasingly likely is so called ‘Brexit’ by which the referendum results in the UK leaving the EU. Leaving the EU appears to be a vista that people believe will benefit us. The fact that the EU is our biggest export market seems to be considered irrelevant in the desire to become an ‘Island nation’ once again.
Many big businesses and interested organisations are genuinely worried about the impact of leaving the EU will have; especially inward investors who are based here for a variety of reasons but may consider relocation to mainland Europe. Any loss of jobs that would result from large companies relocating would be truly disastrous.
More immediately we have continuing hostility in the Middle East. Though conflict between Saudi Arabia and Iran is unlikely, the sabre-rattling will create a dreadful environment in which any prospect of peace in Syria fades. Normally such hostility would cause oil to spike in price. However, we are in a world where oil is plentiful primarily due to fracking in America and severe decline from Chinese industry. In other times, cheap oil should be virtuous.
Currently, though, there is the prospect of ‘petro-economies’ going bust which would potentially engender civil disorder and create internal conflict.
Domestically we have problems in terms of individual borrowing reaching alarming levels and lack of affordability of housing. In the longer term we need a better foundation for economic development based on innovation and creativity that produces products made in factories using workers with skills.
So, in overall terms the immediate prospects for the UK economy are, at best mixed. Unfortunately many events may create headwinds that push the UK economy in directions that are not going to be good.
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