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Turning The Corner?

Turning The Corner?. UK ECONOMY : 2013 AND BEYOND. Chilworth Partnership Conference Chilworth Manor Hotel, Southampton 2 nd May 2013. Dennis Turner. THE RECESSION IS OVER. A deep recession. The growth shortfall. Annual GDP growth forecasts in each Budget. …means more borrowing.

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Turning The Corner?

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  1. Turning The Corner? UK ECONOMY : 2013 AND BEYOND ChilworthPartnership Conference Chilworth Manor Hotel, Southampton 2nd May 2013 Dennis Turner

  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

  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

  17. Government finances weakened

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

  19. Govt receipts and spending Budget Statement, March 2013

  20. NEW ISSUES

  21. Eurozone fragility

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

  23. Getting the debt down

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

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

  34. Real earnings growing again

  35. Debt repayment underway Household debt:income ratios

  36. A slow consumer recovery Forecast

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

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

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

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

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

  42. Getting the deficit down

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

  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

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