Yesterday the Institute of Chartered Accountants in England and Wales (ICAEW) launched a report to mark 10 years of the Business Confidence Monitor (BCM), their survey of UK business confidence carried out in partnership with Cebr. As well as reflecting on the insights offered by the Business Confidence Monitor over the last decade, “Shifting Economic Sands – Perspectives on the next decade” offers analysis of what the next 10 years could hold for the UK economy.
Each quarter the ICAEW/Grant Thornton UK Business Confidence Monitor offers a snapshot of the state of the UK economy – levels of business confidence, investment and hiring intentions, financial indicators and spare capacity. Notably, the Monitor provided clear signals of the start of the downturn in 2008 and the revival in 2013, as the diagram below shows:
Figure 1: Key events for the UK economy, 2004-2014
While the BCM has recently reached record high readings, concerns remain over the shape of the recovery, including relatively weak export growth, rising income inequality and lack of long-term planning for business investment.
Using BCM data, Cebr has analysed how the UK economy could perform over the next 10 years. Three scenarios are considered:
- the base case scenario, assuming that the long-run trend seen in reported outcomes over the business indicators prevails over the next 10 years
- the downside scenario assumes that the post-crisis trend performance continues over the medium term; and
- the upside scenario envisages the impact of a return to pre-crisis growth performance
We find that the UK is highly unlikely to make the Chancellor’s target of exporting goods worth £1 trillion a year by 2020, and that an acceleration in business investment will be needed to make up for years of weakness. A sharp uptick in productivity growth will also be needed to provide a significant boost to living standards.
For more detail on the long-term outlook for the UK, please download the report from ICAEW’s website.