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Stephen Archer is a speaker with great charisma. By using illustrations and personal experiences and not being afraid to share his own point of view of the current situation and who is to blame for it, he engages the whole audience, at the same time helping us all to understand the credit crunch a little better.

— Warwick Business School

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2015: A complex year already

We are hearing of a healthy UK economy in 2015, but is it another false dawn? There are many good indicators but fewer are the result of government action than George Osborne would have you believe.  Let’s take some key points:

Growth: it will be good for the UK but it will not have any measurable effect on the psyche of the consumer. It’s not significant enough at the 2-2.5% level and I expect it to dip as the knock on effect of the contraction of the oil and energy industry bites plus the effect of the Eurozone on the UK will start to feed through in the second half. I expect growth in the low 2% range in 2015. The general election if leading to a coalition or hung parliament (which is likely) will not help growth. Unlike 2010 there is no crisis to manage so policies will be more ideologically driven. But any new government has to be careful since our deficit is still very large and the debt continues to grow.

Employment: We look and marvel at the statistics of growing employment. But only 1 in 40 new jobs is full time. Part time work, self-employment and zero hour contracts have all helped to lower the unemployment number but this is low quality and often low paid full employment. We have a long way to go to the UK feeling as prosperous as it did in 2007 but the population is adapting and fending for itself.

Deflation: (or very low inflation); we are set to enjoy this in 2015 but only in so far as this is caused by falling commodity prices as global demand slows. Oil is the biggest single factor and this really is leaving significant money in a lot of pockets. Thanks to the impact of Saudi oversupply (to try to deter the US from becoming self sufficient in energy), US fracking and slowing Asian demand, the oil price fall is likely to be felt for a long time and will feed through to almost everything we buy. In 2015 this will cause a bigger ‘feel good’ amongst consumers than wage rises do. This will be a worldwide phenomenon. If deflation persists beyond the half year then we have an oversupply and under demand problem. I do not expect this in the UK or USA but it could continue in the Eurozone.

Eurozone: Writing this a few days after Greece votes in an anti austerity government makes this harder to call. Pragmatism will rule day and doubtless debt holders will pay some kind of price but its probably too late now for Greek to leave the Eurozone even though in the long run that would be for the best in my view. If it Greek does exit the Euro then the Euro will in time appreciate, though the currency will be hugely discredited until the last exit takes place e.g. Spain or Portugal. The Eurozone will remain sluggish for the whole of 2015 and beyond since it is still saddled with regiona debt and structural weaknesses. The lower currency value in 2015 may help some bounce back in the second half through greater exports.

Despite the negative sentiments here I remain optimistic for the UK and US economies. Though geo-political instability is something of a dark cloud. Just don’t mention the sovereign debts! So make hay and “: drink it while its fizzy”.


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