Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

2014: The year of salvation for business

by
27th Nov 2013
Save content
Have you found this content useful? Use the button above to save it to your profile.

Next year may be the ‘year of salvation’ for the economy, head of economics at RBS, Stephen Boyle speculated, but businesses should expect slow growth rather than the rapid acceleration seen after previous recessions. 

Speaking at the recent UK200 annual conference in Edinburgh, Boyle said that even as the economy recovers, those with average earnings may fall foul to the impact of globalisation and technology advancements.

The good news Boyle brought to the conference was that next year, “everything is going to get better”, and that there are deep lying, structural changes occurring in within the UK economy.

He compared the current economic situation with retail giant Tesco’s recent publication of their half-year results. Tesco reported a 23.5% drop in its half-year profits in October, which it blamed on the changing retail behaviour in Europe.

Its competitiors, on the other hand, the less costly Aldi and more costly Waitrose, reported surges in profits.

Boyle said this was significant, as the backdrop in which Tesco reported the results was against the recovery of the UK economy, and even signs of recovery in the Eurozone - which the ONS said was down to an increase in consumer spending.  

And like Tesco’s sales, growth in the economy will remain steady but relatively unremarkable, Boyle predicted.

“Steady progress will continue into next year, and we should see decent, rather than very rapid growth. The economy can grow for a while yet and interest rates will remain low for some time,” Boyle said. “Rates will remain low compared to historical standards for some years to come.”

Tesco’s response to their ailing profits contained two elements - globalisation and technology changes - both of which could be factors that lead to issues for the average income client and their business, he warned.

The retail giant said that it would look at both increasing their use of technology in the UK, and revealed that they source more than 60% of all clothing and 40% of other non-food items through their global sourcing office in Hong Kong.

This may cause issues for the 60% of households in the UK that earn less than an average of £31,000, Boyle said.

Globalisation pushes wages down as it increases the supply of labour and allows other countries to compete with businesses here, and technology is increasingly being used to replace humans in certain roles.

“The challenge is, that regardless of what happens, some of your clients and their businesses will be under pressure and you need to respond to this,” he said.

Potential issues that could upset the steady growth in the economy include the unrest in the Eurozone, which Boyle said had just been quietened this year but has not gone away.

In addition, high levels of public and private debt could be another upset to the apple cart of steady growth - but on the whole, Boyle remains optimistic about the coming year.

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.