Showing a suitably festive spirit, employer’s organisation the CBI is spreading a bit of Christmas cheer by predicting that the recession in the UK will have ended by the end of the year. Only 10 days to go till the longest downturn in UK economic history is over, then – whoopee.
And yet at the same time, shadow chancellor George Osborne has cautioned that the UK’s burgeoning national debt threatens to crush any prospect of recovery unless we start seriously paying it off. Something which he reckons Alastair Darling’s PBR of a couple of weeks ago totally failed to address. Anyone would think there was an election in the offing.
So who’s right? Well, unfortunately they may both be. According to the CBI’s latest quarterly survey, UK GDP will grow by a modest 0.5% in the last quarter of 2009, bringing to an end a record-breaking six consecutive quarters of what many politicians prefer to call ‘negative growth’.
Now half a percent may not be much but it is growth and very welcome, too. So by the time you’ve got yourself outside all that turkey and Christmas pud, sent the rellies packing after the obligatory three days and seen the New Year in with a rousingly boozy chorus of Auld Lang Syne, the worst should all be over, right?
Technically, perhaps. Whether 2010 is actually going to feel like a recovery is another matter. This is where Osborne’s point about debt comes in.
Under normal circumstances, national governments can borrow pretty much what they like from banks and the markets, and at rates which the rest of us would find extremely attractive, too.
But these are far from normal circumstances, and our national debt is huge – heading for £900bn. As the events in Iceland, Ireland, and now Greece demonstrate, even when they don’t go bust countries can still get into an awful lot of financial trouble.
Set against this is the fact that, as even the CBI admits, any recovery will be modest, slow and hard won. So how we deal with our debt position will be critical. We probably can’t afford, as Alastair Darling wants to, to wait any longer - certainly not until the upswing has properly arrived - to tackle it.
Here at MT, we all really hope that 2010 will be the year when the UK turns the corner and starts down the road to economic recovery. But we also realise that it may take a while for that recovery to rally start making a difference. It’s being so cheerful that keeps us going - Merry Christmas!
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