ACTIVE PRACTICE UPDATES                                                              AUGUST 2012Economic updateWith the UK...
Economic update                                                                                                   are not ...
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Active Business Series - Economic Update Aug 2012


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Active Business Series - Economic Update Aug 2012

  1. 1. ACTIVE PRACTICE UPDATES AUGUST 2012Economic updateWith the UK economy now in a deeper double dip recession than mostexpected coupled with the ongoing challenges around the Eurozone,it is evident that while we enjoy the peak performances of athletesin the Olympics and Paralympics, our economy is far from growingor healthy. Against this background we take a look back at how oureconomy has struggled this year, what factors we might expect toimpact our marketplace in the future, and what the uncertainty inEurope could mean for us. We also explore the ways in which you can Economic UPDATEprotect and boost your business during these unstable times. Finally, we cannot ignore the uncertainty thatLooking back has been hanging over the Eurozone. The Meanwhile, the Euro crisis remains unpredictable, and while the drop in recent news of Germany’s rating evidences inlation is expected to continue andA lot has happened in the last six months, the severe strain being placed on one of ease pressure on households, consumerand since our last update the UK economy the strongest of the Eurozone members. Will spending remains stunted.has experienced some major challenges. Greece bow out of the Euro? And if it does,Most notable was the country’s return to what impact will this have on us? What Preparation is key right now, and whilerecession, after preliminary GDP igures will be the ramiications of Spain’s inancial forecasts for the following metrics willshrank further in the irst three months of dilemma? The next six months will certainly be undoubtedly change throughout the second2012, and continued to contract by an interesting, as we wait to see what fate awaits half of 2012, here are some key economicalarming 0.7 per cent in the second quarter. the Eurozone. indicators, how they are faring now, and common predictions over the next fewOn a positive note, inlation has been fallingsteadily from its peak of 5.2 per cent in Looking forward months.September last year and CPI now stands at2.4 per cent – the lowest it has been since If we are to take away anything from the last Key metrics six months then it would be just how slow2009. This ‘pleasant surprise’ could provide the road to economic recovery will be, and Jobs and unemploymentsome small respite for household budgets, that we must adjust our medium and longwhile the Bank of England continues to term planning and expectations. As the UK’s 2012 was ushered in with unemploymentextend its quantitative easing programme, economy continues to falter, we must stress test peaking at a 17 year high in the threewhich at the end of July stood at £375 our plans against the realistic backdrop of a months leading to December 2011.billion. prolonged recession. Figures from the Ofice for National Statistics (ONS) showed that 8.4 perMarch’s Budget saw the Chancellor deliver The latest ONS preliminary igures for UK GDP cent of the population were out of work.a series of measures in a bid to placate have shocked households and economists Since then, and against predictions,both households and businesses alike. Most alike, as a drop of 0.7 per cent between unemployment has gradually slowed withpopular measures included a rise in the April and June suggests that the recession the latest igures for the three months topersonal allowance, which will increase is much deeper than originally thought. A May indicating it had fallen to 8.1 perfrom £8,105 this year to £9,205 in April recent comparison of UK economic forecasts cent of the population – 2.58 million2013; and an accelerated corporation tax by HM Treasury put the average GDP growth people. Youth unemployment, which alsocut to 24 per cent, which was welcomed by predictions for 2012 at 0.1 per cent, unlikely peaked last year, similarly fell to just overbusinesses. given the latest update. one million. 18 Hyde Gardens Eastbourne BN21 4PT 01323 431 200
  2. 2. Economic update are not willing to cut back on. If aGross Domestic Product (GDP) Eurozone update marketing budget isn’t an option, you may wish to explore the different andThe Ofice for Budget Responsibility (OBR) Last year, problems within the Eurozone cost effective approaches that digitaldid not predict the technical recession (two continued to weigh on the UK economy. marketing offers - social media sites to indconsecutive quarters of negative growth). This year, the situation in Greece and new customers, and blogs to make yourIn March, it forecast that GDP would beyond continues to create testing business unique, for instance.grow sluggishly by 0.8 per cent this year. conditions. Even the sturdiest economiesIn reality, four months later, forecasters are being affected as Moody’s has warnedhave been left reeling by the ONS’s latest that Germany, the Netherlands and Contact us to ind out how we canpreliminary igures, which reported a Luxembourg are in danger of losing their help you to mitigate damage done toshock contraction of 0.7 per cent between AAA ratings. you and your business.April and June. All previous forecasts arenow expected to be revised down, as the Greece continues to struggle after it wasGovernment is urged to revise its austerity granted a second €130 billion bailout instrategy. March this year – an original €110 billion Business opportunities was made in May 2010 – to cover theInlation country’s debts from years of Government In addition to protecting your business, overspending. Recent general elections in the next few months open up someSince its record peak of 5.2 per cent in the country have failed to fully abate fears opportunities you may want to takeSeptember 2011, inlation has gradually that Greece could exit the euro. advantage of too:been falling. The Consumer Price Index(CPI) fell to 2.4 per cent in June; an Spain is the latest country to be bailed out The Olympicsunexpected drop due to a lowering of food by the Eurozone – it is estimated they willand fuel prices and its lowest level since receive up to €100 billion, although it New marketing tactics, longer openingNovember 2009. However, it still remains edges closer to requiring a full-scale rescue hours for larger shops on Sundays,above the Bank of England’s two per cent as its banks continue to lail. It is the fourth increased sales and a boost for stafftarget. and largest country within the Eurozone morale; the Olympics could offer new and to receive help with a debt crisis, and exciting business opportunities. Plan howEconomists speculate that the rate will now although Britain will not contribute to its you can use the games to your advantage.fall further as a result of cheaper energy bailout, it adds to increasing uncertainty.bills this summer. Elsewhere, the ONS is Government schemesalso undertaking a consultation into the Protecting your business The Government has launched variouscreation of a new CPI measure that would These are just some of the measures you schemes geared towards SMEs duringinclude housing costs. The new measure is can take to ensure your business is in the the last six months, including a £200being proposed to offset criticisms that the best possible position: million coaching programme addressingcurrent CPI does not take into account costs issues such as securing inance, ways ofsuch as mortgage repayments, which make Review your business plans spurring innovation, and leadership andup 10 per cent of a household’s spending. management skills. Another has been Whether starting out in business, or designed to help aspiring entrepreneursInterest rates and quantitative easing an established irm, the current climate set up business. Are you or your businessThe Bank of England’s Monetary Policy necessitates reviewing your business plans eligible for support?Committee (MPC) voted to reduce the base on a regular basis. Plans you had at therate to a record low of 0.5 per cent in start of the year may no longer be valid Look for the positivesMarch 2009; and it has remained there and you may be able to take advantage of new allowances and schemes. The recession may encourage you toever since. At a recent meeting, the MPC streamline your business, ind ways ofjudged that lowering the bank rate would Finance reducing costs and utilise your resourcessqueeze some lenders’ ability to extend more effectively than before, whichcredit even further, but that it would keep The Bank of England recently reported that otherwise may have been overlooked.its position ‘under review’. The base rate the number of small business loans being A downturn may have the advantageis expected to remain low until the end of approved has risen. Businesses can also of forcing you to take a step back and2013. take advantage of a new appeals process evaluate your business performance. for rejected loan applications. Now couldIn terms of the Bank’s quantitative easing be the time to review and strengthen your(QE) scheme, falling inlation opens up application, reapply for inance and boost We can help you to identify andmore leeway for it to continue with further your business. grasp any opportunities that couldmonetary stimulus. Since QE was irstintroduced in March 2009, a total of help you to prosper over the Marketing£375 billion has been injected into the coming months. Please contact useconomy – with the last round worth £50 Business marketing budgets were revised to ind out how.billion implemented in July. up for the last three quarters to March 2012, proving this is one area businesses All igures correct at time of going to press on 25.07.2012.