When it comes to the economy, it feels like rays of sunshine are breaking out from behind the clouds that have been parked over the United Kingdom ever since the financial crisis of 2008. As the British Chamber of Commerce (BCC) brand-new Q3 forecast suggests, growth is likely to be higher than anticipated over each of the next three years. Recent economic releases, from net trade to retail sales, show an uptick in our national performance. Barring business investment, nearly every indicator monitored in the latest Bank of England agents’ report is trending positive – mirroring the trends the Chamber Network first spotted in the Quarterly Economic Survey this spring.
So there are real, and increasing, reasons for Norfolk business to be cheerful. It’s not just a long spell of warm and summery weather, but a recovery in real world conditions, that underlies the latest trends in the economy. But we’re not completely out of the woods yet. There are a number of factors that we at the Chamber will continue to keep an eye on that could affect the scale and pace of our economic resurgence. As John Longworth Director General at the BCC has said, recovery is precisely the time when the political class must be most alert and attentive, because any slackening of their focus on growth could hurt our prospects of moving the economy from good to truly great. Some of the factors we’ll be watching carefully:
- International shocks. With the potential for conflict in Syria, German elections, and the never-ending Eurozone drama, events overseas could impact us here – from inflation and energy price spikes through to impacts on demand in our key export markets.}
- The UK’s public finances. Don’t believe the political rhetoric on either side; at best, we’re treading water. The markets have been benign and accommodating to date, but there’s no guarantee this will continue over the medium-term.
- Monetary policy. Mark Carney, the new Bank of England governor, chose to make his first major public speech at Derbyshire and Nottinghamshire Chamber this week, and highlighted his commitment to forward guidance on interest rates and stability in monetary policy. Yet interest rates could rise faster than predicted if the recovery continues to gather strength. What’s more, there is an eventual reckoning to be had as quantitative easing is unwound and withdrawn from the market.
- Business investment. As both our QES and the Bank of England’s figures show, businesses remain reluctant to undertake major investments. Amongst the new and growing, this may reflect tight credit conditions and discouragement. Amongst established and larger companies, though, this is continued conservatism at a time of perceived uncertainty. Unless investment picks up, rebalancing may be some way behind.
- Public investment. Our Westminster politicians have an innate ability to wobble at precisely the worst time, as behaviour over HS2 has demonstrated this week. Indecision and uncertainty on road, rail, energy and aviation projects could hurt our medium-term recovery prospects.
- And finally, the UK’s trade balance. While Chamber exporters continue to power ahead in many markets across the world, particularly in services, we’re not seeing the kind of shift in the UK’s trade performance that meets market expectations (to say nothing of pushing the UK’s dire balance-of-payments track record into the black).
The fine balance between opportunities and threats makes our job at the Chamber complex, to say the least. But I am confident in saying that I feel better about the prospects for Norfolk businesses than for a considerable time. As a very wise person once said, “you can’t stop the waves, but you can learn how to surf”. Norfolk businesses are starting to hone their surfing skills – and we’re here to help.
