news opinion Mind the gap … it’s moved
Last time I looked it was neatly wedged between rich and poor. Now, double- take, and it appears to have lodged between ‘young’ and ‘old’.
The greatest social divide in the UK today is in fact the generation gap, and in the workplace huge employment challenges face those at either end.
Interestingly there are twice as many over 50s currently unemployed in parts of the UK than under 24s. But while school leavers – who clearly need help with job creation and skills development – are the focus of government support and funding, support is clearly also needed to help mature workers back into employment– something we hear very little about. The good news is that this is now being recognised, and an event was recently held – the first of its kind in the South East – specifically aimed at this sector.
On reflection, The Business Magazine’s employee age-span covers six decades. Not only do our ages range, but we are also gender balanced. Neither of these are by design – it’s just how it is, but we believe our differences – of ideas, methods, interests and abilities – make for a strong team.
While the wealth gap is being overshadowed by the generation gap, the Budget gap is also losing ground in the media.
For years ‘how to eliminate the deficit’ has been the key question in politics. Now, another double-take, and issues there was little need to discuss as a member of the EU have suddenly become relevant. Post Brexit everything’s back up in the air and open to debate, a topic which features strongly in the Manufacturing 100 roundtable discussion (see pages 36 to 39), which is filled with insights from leaders of the region’s top manufacturers.
While we’re minding the gaps – and by way of safety warnings – we’ve also needed to mind exploding phones this past month. In terms of headline-grabbing news it’s difficult to match Galaxies going up in smoke, however in this issue you’ll find a glossy eight-page feature announcing and celebrating the winners of the Solent Business Awards, which we hope you’ll agree is a more-than-worthy contestant for the spotlight.
Carry de la Harpe Editor
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businessmag.co.uk
EY Item Club anticipates weaker economy growth
The EY ITEM Club autumn forecast expects GDP growth of 1.9% in this year’s UK economy, supported by strong consumer spending (up by 2.5%) and very low inflation (0.8%). But though the economy has shown greater resilience than many had anticipated since the EU referendum vote, EY anticipates a slowdown in consumer spending on the back of higher inflation and falling business investment. This will result in much slower growth rates over the next couple of years.
Inflation is forecast to accelerate to 2.6% in 2017, before easing back to 1.8% in 2018. Consumer spending is expected to slow to 0.5% and 0.9% respectively. At the same time, uncertainty around the UK’s future relationship with the EU is likely to weigh on corporate confidence, knocking business investment back by more than 2% in 2017, after a fall of 1.5% this year. As the UK’s trading relationship with the EU becomes clearer, growth in capital spending is forecast to slowly recover to 0.3% in 2018. As a result, the EY ITEM Club forecasts GDP growth of 0.8% in 2017 and 1.4% in 2018.
The EY ITEM Club analysis points towards the UK’s exit from the EU being a relatively ‘hard’ one, with the UK post-Article 50 trading with the EU under the World Trade Organisation’s rules. In this scenario, offsetting the cost of losing unfettered access to the European single market will depend crucially on accessing cheaper world markets in food and manufactures. This will provide some compensation while the UK negotiates with the EU over the longer term.
Peter Spencer, chief economic adviser to the EY ITEM Club, commented: “So far it might look like the economy is taking Brexit in its stride, but this picture is deceptive. Sterling’s shaky performance this month provides a timely reminder that challenges lie ahead. As inflation returns over the winter it will squeeze household incomes and spending. The pressure on consumers and the cautious approach to spending by businesses mean that the UK is facing a period of relatively low growth.”
Richard Baker, office managing partner at EY across the Thames Valley and South Coast, added: “The holidays are over and businesses are now looking hard at plans
and budgets. Both investment and hiring plans are likely to be squeezed in the current environment.”
The EY ITEM Club, however, expects exports,supported by a weak pound, to increase by 4.5% in 2017 and 5.6% in 2018. Net exports are forecast to add 0.8% to GDP next year, accounting for almost all of the economy’s expected growth.
Once the UK has left the EU, the EY ITEM Club says that making use of the UK’s new-found freedoms to access cheaper international markets in food and manufactures will benefit consumers. However, competition from cheap imports are likely to impact UK manufacturers and farmers, and their exports to the EU will face tariffs and other barriers.
The slowdown in EU growth has reduced the EU’s share of UK exports from 60% in the late 1990s to around 45% currently. The EY ITEM Club expects growth in non- EU markets to continue to outpace the EU, lowering the EU share of UK exports further. Nevertheless, the EY ITEM Club expects that a WTO-based Brexit is likely to take about 4% off UK GDP by 2030 compared to a scenario in which the UK remained in the EU.
Spencer commented further: “With activity in the domestic market flat, GDP growth will become heavily dependent upon exports next year. But once the UK has left the EU certain sectors, such as aerospace, automotive, and chemicals which trade extensively with the EU will be a lot more vulnerable and may need to be supported by subsidies and more robust industrial policies. The plus side is that the weaker pound and access to cheaper world markets will release labour and other resources and allow the economy to gradually re-balance towards non-EU exports, particularly of branded consumer goods and financial services, to emerging markets.”
He concluded: “Trade performance in 2020 and beyond will depend critically upon the terms that can be agreed with the EU27 and other countries. If the UK is not going to get unfettered access to the EU market, it is vital that we get unfettered access to cheap world markets in food and manufactures.’
THE BUSINESS MAGAZINE – SOLENT & SOUTH COAST – NOVEMBER 2016
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