A “difficult economic year” has been predicted for British business by the director-general of the CBI Richard Lambert, but there are reasons to remain positive, his New Year message said.
Lambert recognised that the “domestic economy appears to have started a cyclical slowdown of uncertain depth and duration”, but said those in business must be resolute and not exaggerate risks as it will only damage the economy further.
On the back of the global credit crunch and rising prices in energy, food and other commodities squeezing profit margins, Lambert has nevertheless predicted a “soft landing”, which supports recent CBI forecasts that the UK economy would grow by 2% in 2008 and approximately the same again in 2009.
Business owners have at least five reasons to remain optimistic, Lambert added. He pointed to the Bank of England survey which found 60% of mortgage borrowers have more than £100,000 of equity tied up in their homes compared to less than 10% in 1993. This represents a cushion to fall back on in tougher times.
For employers, Lambert said the flexible labour market will allow companies to expand and contract more easily without having to resort to redundancies if business conditions turn.
He also said a lower pound could help rebalance the economy and that the Bank of England has left room for manoeuvre by managing inflation expectations well. Finally, he noted that the fast-growing economies in China and India and expansion into them by British businesses will help support the country’s own export markets.
© Crimson Business Ltd. 2008
