UK’s New Year’s Resolution. By Alex Brownbridge
Another year, another new year’s resolution we will never keep to. My resolution; cutting down on doughnuts and working on the love-handles in time for beach-season. The UK economy’s resolution; a similar one involving cutting down on inflation and working on the deficit in time for Olympics-season.
Unfortunately 2011’s strong expectations of GDP, to support the economic turnaround, were unfounded and we recorded a disappointing 1% increase in national output. Instrumental to the UK’s poor performance was and still is the Eurozone’s debt crisis, which no one anticipated to grip the headlines and Mr Cameron’s nightmares to the extent it did. Of course the Eurozone debt crisis has not only left the most indebted economies, Greece, Portugal and Italy, scrabbling around for the fiver they left down the back of the sofa for emergencies, it has also hit surrounding countries with decreased trade and depressed investment confidence. Mix that with employment, retail sales and consumer confidence all decreasing in the final quarter of 2011 and it is clear to see why the PM had a not so festive headache in the lead up to Christmas.
2012 signals a fresh start, a tightening of belts and what the British do the best, a stiff upper lip. UK inflation, the continual rising of price levels, consistently stood at 5% (encouraged by fuel costs rising by 20%) last year, over double the Bank of England’s target of 2%. Getting this figure down is playing on the mind of Mervyn King, Bank of England, whom will endeavour to dampen inflation, lowering UK prices relative to overseas and hence improving international competitiveness and trade revenues. In the wake of the Eurozone disaster strengthening trade links with other countries is pinnacle in avoidance of contagion and future success.
Most notably though there is 200 days until the London Olympics and besides making me feel guilty for eating that last doughnut, it is estimated to generate £10bn of revenue for the British economy. The project will have created 2.8m jobs in construction, a sector recently suffering, and creating an infrastructure that will encourage the stars of tomorrow. With an estimated 4bn viewers for the opening ceremony, London will be distinguished as meaning business in 2012.
Despite a seemingly positive outlook and supposedly having learnt from our mistakes last year, predictions for 2012 are cautious. The British Chambers of Commerce expect unemployment to reach peaks of 2.62m and public borrowing to rise to £127bn, some £5bn higher than previously anticipated. However, GDP growth should rise to 2.1% showing positive beginnings, based on increased consumer spending and improved lending availability from banks.
But will this actually occur? Understandably no one knows, if the last four years has taught us anything it is that there is no crystal ball, no one can envisage hidden eventualities such as the Eurozone crisis and ultimately no one knows if they will keep their new year’s resolution.