Making sense of our current economic landscape with Vistage Economist Roger Martin-Fagg.

As I write this the reality of the referendum decision is beginning to take shape. And it is regrettably as was forecast by us, the much maligned ‘experts’! The headline is that for the next five years the UK’s trend growth rate is downgraded from 2.3% to 1.5%. This is significant. 

  • The Industrial Strategy
    Through our Industrial Strategy, the country’s economic geography will be transformed by a surge of infrastructure investment heralding a new technological era. The document proposes increased R&D spend, more maths and technical education, and an improved digital infrastructure. It notes that demographics will result in a loss of workers and that 1.8 million engineers and technicians will be required by 2025..
  • The Budget and Brexit
    Providing there is no political backlash by March 2018, the Cabinet should provide a vision document to give a broad indication of the desired future state for the UK. When we get this we can begin to make some (positive) forecasts for the UK, but not yet. One forecast we can make is that a big stumbling block over the next few years will be fish. It is the one natural resource which humans still feel the need to hunt and as we know from the cod wars etc., it is extremely difficult to obtain agreement because it goes to the core of a firmly embedded human right.
  • The Outlook for 2018
    We are still in the EU, which is growing at more than 2.5% in real terms. The USA will grow at 3%, and Asia Pacific at 5%. The World as a whole will grow by nearly 4% in real terms. Our export volumes and value should grow strongly (assuming we have the capacity to supply). This will be welcome as domestic demand is likely to be subdued. A year ago I assumed wage growth would respond to tight labour supply. It has not. So at best in 2018 household real incomes will show no growth at all, unless they are pensioners, who will get a 1% real increase in April 2018.

It is reasonable to assume we are two years from a peak in the business cycle. Peaks are only followed by troughs if the peak occurs well above potential output. Thanks to Brexit we are slowing before the peak, and given full alignment we will not experience a recession. However the interplay of politics and the media could change the outcome.


Economic Update December 2017