And thanks to the ‘paralysed’ recovery and investment jitters as a result of euro woes, prospects for the rest of the year aren’t too rosy either. Expect growth of just 0.2% for 2012 as a whole, whilst unemployment will hit three million. And that’s assuming that our EU chums can find a way to solve the euro crisis, by no means a done deal as Friday’s French downgrade and the growing chances of Greek default indicate. Even so we’ll have to wait until at least 2014 for a return to ‘normal’ levels of growth of around 2.8%.
Next up is the Centre for Economics and Business Research, founded by former IBM and CBI chief economist Doug McWilliams in 1993. Its prognosis is even worse - not only are we currently in recession, reckons the CEBR, but it will continue with GDP shrinking during 2012 by 0.4%. And that’s a best-case scenario - should the euro go west (should that be south?) then the economy may shrink by up to 1.1%. What’s more, growth - when it returns - will be feeble and very slow to gather pace, running at less than 1% for another four years or so, forcing the Bank of England to keep interest rates at their record low of 0.5% until 2016.
McWilliams reckons that this is part of a global rebalancing effect, that some of the growth being seen in emerging economies is coming at the expense of established economies in the West, particularly in Europe. So at least someone is seeing the benefit…
Still, cheer up. It may never happen. As legendary US baseball player turned coach Yogi Berra once noted, ‘It’s tough to make predictions, especially about the future.’ Economic predictions even more so.
And there is some good news, from both the City and the housing market. For starters the government has announced its intention to make the Square Mile the major western centre for trading in the Chinese Renminbi, by working on a closer and deeper partnership with the Hong Kong Monetary Authority. This could be a serious money-spinner for London banks, as the historical barriers to a global trade in Chinese-denominated financial products are slowly being removed by the authorities in Beijing. Ker-ching!
And mortgage lending was up slightly in November says the CML, while Kent-based housebuilder Bovis reckons that profits will hit £31m in 2012, up 68% on last year, thanks to forward sales up 35% so far.
So every cloud has a silver lining, although perhaps not if you are dual NY/London listed cruise operator Carnival. The capsizing of its Costa Concordia cruise ship off Tuscany on Friday has not only cost six lives so far and a untold amount of reputational damage, but it may be faced with a $95m bill to boot. That one’s going to run and run…