Active Business Series - Economic Update Aug 2012

1. ACTIVE PRACTICE UPDATES AUGUST 2012
Economic update
With the UK economy now in a deeper double dip recession than most
expected coupled with the ongoing challenges around the Eurozone,
it is evident that while we enjoy the peak performances of athletes
in the Olympics and Paralympics, our economy is far from growing
or healthy. Against this background we take a look back at how our
economy has struggled this year, what factors we might expect to
impact our marketplace in the future, and what the uncertainty in
Europe could mean for us. We also explore the ways in which you can
Economic UPDATE
protect and boost your business during these unstable times.
Finally, we cannot ignore the uncertainty that
Looking 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 and
A lot has happened in the last six months,
the severe strain being placed on one of ease pressure on households, consumer
and 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 while
recession, after preliminary GDP igures
will be the ramiications of Spain’s inancial forecasts for the following metrics will
shrank further in the irst three months of
dilemma? The next six months will certainly be undoubtedly change throughout the second
2012, and continued to contract by an
interesting, as we wait to see what fate awaits half of 2012, here are some key economic
alarming 0.7 per cent in the second quarter.
the Eurozone. indicators, how they are faring now, and
common predictions over the next few
On a positive note, inlation has been falling
steadily from its peak of 5.2 per cent in
Looking forward months.
September last year and CPI now stands at
2.4 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 slow
2009. This ‘pleasant surprise’ could provide the road to economic recovery will be, and Jobs and unemployment
some small respite for household budgets, that we must adjust our medium and long
while the Bank of England continues to term planning and expectations. As the UK’s 2012 was ushered in with unemployment
extend its quantitative easing programme, economy continues to falter, we must stress test peaking at a 17 year high in the three
which 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 per
March’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 with
popular measures included a rise in the April and June suggests that the recession the latest igures for the three months to
personal allowance, which will increase is much deeper than originally thought. A May indicating it had fallen to 8.1 per
from £8,105 this year to £9,205 in April recent comparison of UK economic forecasts cent of the population – 2.58 million
2013; and an accelerated corporation tax by HM Treasury put the average GDP growth people. Youth unemployment, which also
cut to 24 per cent, which was welcomed by predictions for 2012 at 0.1 per cent, unlikely peaked last year, similarly fell to just over
businesses. given the latest update. one million.
18 Hyde Gardens www.plummer-parsons.co.uk
Eastbourne BN21 4PT
01323 431 200 eastbourne@plummer-parsons.co.uk

2. Economic update
are not willing to cut back on. If a
Gross Domestic Product (GDP) Eurozone update marketing budget isn’t an option, you
may wish to explore the different and
The Ofice for Budget Responsibility (OBR) Last year, problems within the Eurozone cost effective approaches that digital
did not predict the technical recession (two continued to weigh on the UK economy. marketing offers - social media sites to ind
consecutive quarters of negative growth). This year, the situation in Greece and new customers, and blogs to make your
In 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 economies
In reality, four months later, forecasters are being affected as Moody’s has warned
have been left reeling by the ONS’s latest that Germany, the Netherlands and Contact us to ind out how we can
preliminary igures, which reported a Luxembourg are in danger of losing their help you to mitigate damage done to
shock contraction of 0.7 per cent between AAA ratings. you and your business.
April and June. All previous forecasts are
now expected to be revised down, as the Greece continues to struggle after it was
Government is urged to revise its austerity granted a second €130 billion bailout in
strategy. March this year – an original €110 billion Business opportunities
was made in May 2010 – to cover the
Inlation country’s debts from years of Government In addition to protecting your business,
overspending. Recent general elections in the next few months open up some
Since its record peak of 5.2 per cent in the country have failed to fully abate fears opportunities you may want to take
September 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 Olympics
unexpected drop due to a lowering of food by the Eurozone – it is estimated they will
and fuel prices and its lowest level since receive up to €100 billion, although it New marketing tactics, longer opening
November 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 staff
target. 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 how
Economists 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 schemes
also undertaking a consultation into the Protecting your business The Government has launched various
creation of a new CPI measure that would
These are just some of the measures you schemes geared towards SMEs during
include housing costs. The new measure is
can take to ensure your business is in the the last six months, including a £200
being proposed to offset criticisms that the
best possible position: million coaching programme addressing
current CPI does not take into account costs
issues such as securing inance, ways of
such as mortgage repayments, which make
Review your business plans spurring innovation, and leadership and
up 10 per cent of a household’s spending.
management skills. Another has been
Whether starting out in business, or designed to help aspiring entrepreneurs
Interest rates and quantitative easing
an established irm, the current climate set up business. Are you or your business
The 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 the
rate to a record low of 0.5 per cent in start of the year may no longer be valid Look for the positives
March 2009; and it has remained there and you may be able to take advantage of
new allowances and schemes. The recession may encourage you to
ever since. At a recent meeting, the MPC
streamline your business, ind ways of
judged that lowering the bank rate would
Finance reducing costs and utilise your resources
squeeze some lenders’ ability to extend
more effectively than before, which
credit 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 advantage
is expected to remain low until the end of approved has risen. Businesses can also of forcing you to take a step back and
2013. take advantage of a new appeals process evaluate your business performance.
for rejected loan applications. Now could
In 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 and
more leeway for it to continue with further
your business. grasp any opportunities that could
monetary stimulus. Since QE was irst
introduced in March 2009, a total of help you to prosper over the
Marketing
£375 billion has been injected into the coming months. Please contact us
economy – 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.