business-in-london.biz
 
 
New records

London news

Britain: a case study in low-growth economic mediocrity

0000-00-00

ALLISTER HEATH

BRITAIN is stuck in a rut. No wonder that investors and credit rating agencies are losing patience: the coalition doesn’t have the guts or decisiveness needed to jolt the UK out of its present mediocrity, while the opposition is busy dreaming up new taxes, thinks that a slightly looser fiscal policy would transform our prospects and has no real understanding of the extent of our fiscal crisis.

Britain’s tax receipts confirm that the economy continues to do poorly, albeit not disastrously. So far this fiscal year, receipts from Vat are up 2.2 per cent, less than the rate of inflation. Income and capital gains tax receipts are down 0.2 per cent and corporation taxes are down 8.4 per cent: while in both cases there have been tax cuts (a higher personal allowance and lower corporation tax rates) these don’t explain such shockingly bad numbers. Very limited pay rises, a drop in reported income from the highest earners and weak profits are among the answers. National insurance contributions are up a healthier 3.4 per cent, though this not anything worth shouting about.

What all of this suggests is an economy that is either stagnating or growing a little, but by no more than a few tenths of a per cent. At best, the situation looks only marginally rosier than the official GDP figures; at worst, there is no difference. Mediocrity undoubtedly rules OK.

While revenues are poor, any progress the government is making in trimming overall expenditure on wages, benefits and other current spending is being more than cancelled out by increased interest on the growing national debt. During April 2012-January 2013, central government current expenditure hit ?525.7bn, 2.7 per cent higher than in the same period of 2011-12.

Depending on which measure of inflation one uses, real current spending was therefore either up or down slightly. The real cuts are happening in capex, the one area where state spending can be useful for long-term growth (though the private sector, if it were allowed to, could take over many projects). So far this year, central government net investment was minus ?6.4bn – with depreciation overwhelming gross investment – a massive ?27.7bn lower than in the same period of the previous year. So we are still seeing the wrong kinds of cuts, stagnant growth and weak tax receipts. Unless something drastic changes soon, it is not just credit rating agencies that will be running out of patience with the government.

LOW RETURNS
One of this column’s themes is that we are now facing a world of low real returns across financial assets, with high inflation gobbling up nominal gains, and that the bond markets, after years of astonishing returns, are set for a crash. There is lots of evidence to back up this thesis in Barclays’ latest annual equity-gilt study. The conclusions are stark. Over the next five years, Barclays expects cash to provide negative inflation-adjusted returns of about -1.5 per cent per year (with compounding effects, that means a very sharp drop in value), “safe haven” government bonds -2 per cent – in other words, even worse than cash – and equities annual growth of 3-4 per cent. The authors believe that the bull market in government bonds – which peaked last year – will end in a whimper, rather than in a 1994-style crash. I suspect the authors may be too optimistic, but their case is that a shortage of “safe” assets, combined with a decision by the authorities to keep the monetary floodgates open, will do the trick. One thing is clear: savers are going to suffer.


Follow me on Twitter: @allisterheath

To comment on this topic please see our guidelines in the

CATEGORY: Dry Cleaning and Alterations


Pages: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

1ST Class Cleaners A & P Dry Cleaners A R Tailors A Touch Of Class V
A.R. Tailors & Dry Cleaners Limited Ace Quality Dry Cleaners Alev Dry Cleaners Alice Dry Cleaners
Amigos Dry Cleaning Amwell Dry Cleaners Andrew Bunney Andys Dry Cleaners
Anthonys Dry Cleaners B P K Dry Cleaners Bertie Wooster Betta Press
Bettaclean Better Clean Blossom & Brownes Sycamore Brian Adams
Bright Cleaners Broadway Dry Cleaners Butler Services C & A Dry Cleaners
C C S Carl Sutherland Champer's Dry Cleaners Chopdat,Y,
City of London Dry Cleaners City of London Dry Cleaning Co. City Style Dry Cleaners Cityclean
Cityclean Quality Clothes Care Classic Clean Classic Cleaners Classic Dry Cleaners
Clean Inn Centre Clean Tidy & Well Heeled Clothes Care Clothing Care Drycleaners
Colour Care Dry Cleaning Coronation Dry Cleaners Dallas Dry Cleaners Darr,A,
Dirty Harrys Laundry E R A Eclipse Emerald Express
Era Cleaners Estate Dry Cleaners Ltd. Farah Dry Cleaners Farnaz,Adila,
Feniks Cleaners Five Star Five Star Dry Cleaners Florence Egbulefu
Fontaine Dry Cleaners Foremost Dry Cleaners French Gold Star Drycleaning
Golden Dry Cleaners H H Dry Cleaners Hangers Drycleaning Holloway Dry Cleaners
Hussain,S, Jeeves Internati0nal Ltd Jones,Carol, K K Launderette
K.K Launderette Kemps Cleaners Knellers Dry Cleaners Letap Suede Ltd.
Lewis of London Leyton One Hour Cleaners Lowes Dry Cleaners Lynn's Alterations & Repairs
M & L Trading Mahoney,P, Master Cleaners Matthew Daniels
Micheal Leigh Morris Dry Cleaner's Mount Dry Cleaners Mr Kleen
Nazal Neville Cleaners Ltd. Nu-Fit-U Ocean Dry Cleaning Centre
P Mahoney Panache Dry Cleaners Panache Quality Dry Cleaners Penpost Ltd.
Perry's Dry Cleaners Personal Touch Dry Cleaners Peter Pan Cleaners Peters Dry Cleaners
Press Express Pressing Dry Cleaners & Laundry Service Prestiege Cleaners Quality & Care