Economic Update 25th January 2012
UK GDP shrinks by 0.2%
The final quarter of 2011 saw UK economic output contact by 0.2% meaning that the recovery has stalled. The drop in economic activity is slightly worse than many commentators had predicted.
Transport, storage and communication output shrank by 0.1% in the final quarter of 2011, compared with a 0.3% increase in the previous quarter. Land transport made one of the largest contributions to the overall decrease in the sector.
Industrial production shrank by 1.2% in the last quarter of 2011, compared with an increase of 0.2%in the previous quarter. While the construction decreased by 0.5% in the last three months of last year, compared with an increase of 0.3% in the previous quarter.
http://www.ons.gov.uk/ons/dcp171778_254088.pdf
http://www.bbc.co.uk/news/business-16715080
Business confidence plummets in transport
Plunging confidence in transport and the motor vehicle related sectors is a big contributor to a sharp drop in business confidence according to the Federation of Small Businesses (FSB) ‘Voice of Small Business' Index.
The Index has just recorded the lowest levels of optimism since it started in 2010.
Along with transport those sectors dependent on consumer spending as well as those affected by high fuel prices seem to have fared worst the fourth quarter of 2011.
The FBS identified high inflation, rising utilities bills and reduced consumer spending power as factors feeding into the depressed outlook. It also commented it was likely that more small companies would be cutting jobs in the coming months.
Business services, the financial sector and the computing and related industries were sectors where confidence levels were positive.
http://www.fsb.org.uk/News.aspx?loc=pressroom&rec=7515
Red Flag Alert points to more company failures
UK businesses are facing much choppier financial waters according to a new report citing a 24% increase in the number of companies close to insolvency, winding-up or debt recovery court action in the last three months of 2011, compared to the same period in 2010.
Financial and insolvency group BegbiesTraynor’s Red Flag Alert report suggested that the financial outlook will get worse across almost every sector and region. Even businesses in London and the South East where the trading environment has been relatively benign, are likely to face greater financial distress.
Companies that have just been keeping afloat face failure in the hostile economic climate.
Begbies reports that the number of companies with critical problems rose by 61% in professional services, 56% in travel and tourism, 30% in telecommunications and IT.
http://news.sky.com/home/business/article/16152247
http://www.ft.com/cms/s/0/57cde7e8-42b7-11e1-b756-00144feab49a.html#axzz1kIEFdMx9
International calls to boost growth and slow cuts
The leaders of the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the World Trade Organisation and the World Bank have issued a joint statement warning that in the current economic climate, the emphasis of governments worldwide should move from deficit reduction towards promotion of economic growth and the creation of employment.
The joint statement contained warnings about the risks of reducing budget deficits too fast and also expressed concern about growing inequality and reducing social cohesion.
Very low growth or even a return to recession is expected in the UK in 2012, so the question is whether the change in tone coming from these high profile figures will influence UK government policy.
http://www.newstatesman.com/blogs/the-staggers/2012/01/austerity-british-sector